Why Ares Thinks Secondaries Is the Best-Positioned Corner of the Alternatives Market
Every major alternative asset manager that reported earnings this season had something to say about secondaries. But none made the case for the asset class as directly, as structurally, or as confidently as Ares Management. CEO Michael Arougheti did not just update investors on fund performance and deployment numbers — he laid out a considered argument for why secondaries, right now, represents the single most attractive corner of the entire alternatives landscape. Here is that argument, piece by piece.
The Setup: A Thesis Six Years in the Making
Ares’s conviction in secondaries did not begin this quarter. It began nearly six years ago with the acquisition of Landmark Partners — a bet built on three structural convictions that, at the time, the broader market had not yet fully priced in.
The first conviction was that the secondary market was about to shift fundamentally from LP-led to GP-led. When Landmark was acquired, the market was still dominated by institutional investors selling portfolio stakes. The thesis was that GPs would increasingly turn to the secondary market for creative liquidity — continuation funds, NAV loans, minority stake sales — and that this structural evolution would transform the size and character of the opportunity. That shift has now happened. On this call, Arougheti confirmed it plainly: the GP-led market now represents half, if not more, of total secondary deployment opportunity, and that share is not going back down.
The second conviction was that the rapid growth of private markets across real estate, infrastructure, and credit would eventually require a secondary market of equivalent depth. As those primary markets scaled into the hundreds of billions, the need for secondary liquidity solutions would scale alongside them. Ares now runs secondaries across four asset classes — private equity, real estate, infrastructure, and credit — a level of diversification that very few platforms globally can match.
The third conviction was that the emergence of the wealth channel would create a new source of demand for broad-based, diversified private equity exposure — exactly the kind of exposure that secondaries funds deliver by design. That channel has now opened, and Ares has scaled wealth products anchored in part by its secondaries capabilities.
All three convictions have materialized. The question Arougheti answered on this call is not whether the thesis was right — it clearly was — but why the opportunity is actually getting better from here, not worse.
The Core Argument: Secondaries Is the Least Well-Capitalized Segment in Alternatives
The sharpest insight on this call — and arguably one of the most important observations made across any alternatives earnings call this season — came when Arougheti was asked directly about the acceleration of the secondary market opportunity. His answer was precise and structural.
Annual deployment in secondaries tracks at approximately a one-to-one relationship with total industry dry powder. In plain terms: the entire stock of available secondaries capital is deployed in roughly one year. No other major alternatives asset class operates at that ratio. Private equity, private credit, real estate, and infrastructure have all seen enormous capital formation over the past decade. Fundraising in those asset classes has far outpaced deployment. Secondaries has not kept pace with the growth in demand for its solutions. The result, in Arougheti’s words, is that secondaries is “probably the least well-capitalized segment of the alternative asset space.”
That imbalance is not a problem to be solved. It is the source of the return premium. When capital supply is tight relative to deal flow, buyers have pricing power, deal terms improve, and returns are structurally enhanced. Platforms that scaled early — and built across multiple asset classes before the broader market recognized the opportunity — sit in the strongest position to capture that premium.
Credit Secondaries: From Pioneering Bet to Growth Engine
If the GP-led shift is the headline story in secondaries, credit secondaries is the underappreciated chapter. On this call, Arougheti described it as something Ares effectively pioneered — and what began as a thesis has now grown into what he called “a meaningful growth engine for the firm.”
The logic is compelling. Private credit has undergone a multi-decade structural expansion. Direct lending, alternative credit, infrastructure debt, and asset-backed finance now collectively represent hundreds of billions of dollars in LP commitments across hundreds of fund vintages. As those vintages mature, LPs need liquidity options. As GPs managing multi-vintage credit platforms look to manage portfolio exposures, they need capital solutions. The secondary market for credit assets is still in early innings relative to the size of the primary market it serves.
Ares, with over $100 billion in credit dry powder and a platform spanning every major credit strategy, is positioned to participate in that market from multiple angles — as a buyer of secondary credit positions, as a provider of GP-led liquidity solutions, and as a primary credit manager whose own funds will eventually generate secondary market supply. The performance track record supports the conviction: Ares’s secondaries strategy has generated a since-inception net return of over 14%.
The Counter-Cyclical Case: Volatility as Fuel
Beyond the structural argument, Arougheti made a more immediate and tactically important point about secondaries and the current market environment. When asked about deployment pipelines in Q1 — a quarter slowed by geopolitical uncertainty and shifting rate expectations — he specifically called out “liquidity-generated opportunity” as one of the most compelling near-term drivers across the entire Ares platform.
The mechanism is straightforward. When primary market activity slows, secondary market activity does not slow with it. It accelerates. LPs under pressure to manage portfolio exposures become motivated sellers. GPs unable to exit through traditional M&A channels turn to continuation funds and GP-led structures for liquidity. Companies needing creative capital solutions approach opportunistic credit and secondaries platforms. The exact conditions that suppress primary deal flow generate secondary deal flow.
This counter-cyclical characteristic is one of secondaries’ most underappreciated features. The secondary market does not need a bull market to perform. It needs a large installed base of private assets and LPs and GPs who need solutions. That installed base has never been larger. And the conditions that drive them to seek solutions — uncertainty, rate volatility, compressed exit multiples — are precisely what the current environment is delivering.
The Wealth Channel: A Bright Spot in a Noisy Quarter
Ares’s non-traded BDC saw some redemption pressure in Q1, primarily from a limited number of family offices and smaller institutions in select regions. But the secondaries wealth product told a different story entirely. When management was asked about retail appetite for strategies outside of U.S. private credit, secondaries and infrastructure were specifically cited as the two wealth channel strategies where flows have been “much more resilient” and in some cases “beginning to accelerate.”
This matters beyond Ares’s own numbers. It confirms a rotation that is visible across multiple firms this earnings season: wealth channel investors are moving away from direct lending and toward more diversified alternative strategies. Secondaries funds — which offer built-in diversification across managers, vintages, geographies, and asset classes — are structurally well suited to capture that rotation. They deliver the exposure investors want without the concentration risk they are increasingly wary of.
The Operational Proof Point: A Third Real Estate Secondaries Fund in Market
Ares confirmed on this call that it is back in market with its third real estate secondaries fund, with a first close expected in the second half of 2026. Real estate secondaries — both LP portfolio sales and GP-led structures — remain an active area as global real estate markets continue to navigate a complex recovery. The launch of a third vintage, following the performance of prior funds, is a concrete signal of institutional demand for real estate secondary solutions.
It also illustrates the virtuous cycle that runs through Ares’s integrated platform. As primary real estate funds — like the 11th U.S. value-add fund that closed at its increased hard cap of $3.1 billion in Q1 — mature over time, they generate the LP positions that eventually flow into secondary market transactions. Firms that manage both primary and secondary strategies are positioned to benefit on both sides of that cycle.
The Bottom Line
Ares’s Q1 2026 earnings call made a case for secondaries that went well beyond quarterly updates and fund metrics. Taken together, the arguments Arougheti laid out add up to something more consequential: a systematic explanation of why secondaries is structurally better positioned than any other corner of the alternatives market right now.
The supply-demand imbalance is real and persistent. The GP-led market has structurally transformed the opportunity set. Credit secondaries is a growth engine in its early innings. Volatility drives deal flow rather than suppressing it. The wealth channel is rotating toward exactly the kind of diversified exposure secondaries provides. And the platforms that built early, across multiple asset classes, with the performance track records to back it up, are the ones that will define the next decade of this market.
Ares built for this. The market is arriving.
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