We believe private credit is in the early innings of a structural shift, taking share from the troubled regional banks and positioned for a substantial increase in investor allocation. Hence, there are excess returns available (e.g. FT Article today) and one would assume the ability to raise even more AUM.
With history of attractive returns in Private Credit, alternative asset managers like ARES have proven they are excellent businesses.
ARES is best placed to exploit the AUM growth opportunity. The bet is AUM growth beating expectations, it strikes us that this is the perfect environment for this to happen.
EPS growth of 20%-30% for the next few years, 3% dividend
Upside is based on 20x EPS in 2025.
Potential Upside: $165 (+70%) over 2 years, plus >3% dividend
Sensible Downside: $70-$75 (-29%)
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