Ares' largest business by AUM was credit with $214.2 billion as of Dec. 31, up 4.7% from Sept. 30 and up 11.2% as of Dec. 31, 2021.
During 2022, Ares shifted to making public market investments, Mr. Arougheti said.
"Opportunities emerged in the public markets that were frankly more attractive than what we were self-originating in the private markets," he said." As those markets start to come more in line with one another we were able to start to be more opportunistic on the private side of the house as well and that continues."
Even with a low volume of mergers and acquisition transactions, Ares executives are still able to make loans given the challenging public equity market, challenging access to capital in the loan and high-yield markets, and lower bank liquidity, Mr. Arougheti said. "Private market solutions are pretty important right now," he said.
Mr. Arougheti added that he doesn't think that M&A transactions will pick up until the end of 2023 "and everyone has a general consensus view that the (interest rate) hiking cycle is over."
"I would expect that there's a fair amount of pent-up demand and we'll see the M&A machine turn back on," he said.
Ares' second-biggest business — real assets — had $66.1 billion as of Dec. 31, up 1.7% from three months earlier and up 4.4% from a year earlier.
The bulk of Ares' global real estate portfolio was in "our highest conviction sectors of industrial and multifamily," amounting to about 77% of gross assets, Mr. Arougheti said. Another 11% are in "adjacent high-conviction sectors" including single-family rental, self-storage and life science assets. Mr. Arougheti said Ares' real estate portfolio is underweight office, representing less than an 8% of its global portfolio.
Private equity had $34.7 billion as of Dec. 31, a 1.4% increase from the end of the third quarter and up 3.9% from the end of the year-earlier quarter.
The denominator effect in which public market declines push up investors' private market portfolios is mainly impacting fundraising of "regular way private equity" and growth equity strategies, Mr. Arougheti said.
"You also have a little bit of a numerator effect in the sense that private valuations are lagging public comps (public markets)," he said.
Ares' secondary business AUM was $22 billion as of Dec. 31, down 3.5% from Sept. 30 and flat year over year. In June 2021, Ares completed the acquisition of private capital secondary markets manager Landmark Partners, which had $19.6 billion in AUM as of March 31, 2021. Ares' strategic initiatives business had $15 billion, up 8% from the end of the previous quarter and up 29% from the end of the fourth quarter of 2021.
Ares reported GAAP net income of $118 million in the fourth quarter and $168 million for all of 2022, compared with GAAP net income of $124 million for the fourth quarter of 2021 and $409 million for 2021.