Welcome to the Ares Management Corporation's First Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded on Thursday, May 2, 2024. I would now like to turn the call over to Greg Mason, Co-Head of Public Markets Investor Relations for Ares Management. Please go ahead, sir.

Good morning, and thank you for joining us today for our first quarter conference call. I'm joined today by Michael Arougheti, our Chief Executive Officer; and Jarrod Phillips, our Chief Financial Officer. We also have a number of executives with us today who will be available during the Q&A session. Before we begin, I want to remind you that comments made during this call contain forward-looking statements and are subject to risks and uncertainties, including those identified in our risk factors in our SEC filings. Our actual results could differ materially, and we undertake no obligation to update any such forward-looking statements. Please also note that past performance is not a guarantee of future results, and nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any Ares fund. During this call, we will refer to certain non-GAAP financial measures, which should not be considered in isolation from or as a substitute for measures prepared in accordance with generally accepted accounting principles. Please refer to our first quarter earnings presentation available on the Investor Resources section of our website for reconciliations of the measures to the most directly comparable GAAP measures. Note that we plan to file our Form 10-Q later this month. This morning, we announced that we declared our second quarter common dividend of $0.93 per share on the company's Class A and nonvoting common stock, representing an increase of 21% over our dividend for the same quarter a year ago. The dividend will be paid on June 28, 2024, to holders of record on June 14. Now I'll turn the call over to Michael Arougheti, who will start with some quarterly financial and business highlights.

Thanks, Greg, and good morning, everyone. We hope everybody is doing well. We generated strong first quarter results with double-digit year-over-year growth across our key financial metrics, including 19% growth in AUM, 18% growth in fee-related earnings, over $17 billion in gross capital raised, a 21% increase in our deployment from drawdown funds and strong investment performance across our investment strategies. Our AUM increased to $428 billion, which is well ahead of the growth trajectory that we outlined for our year-end 2025 goal of $500 billion and our available capital and AUM not yet paying fees, both reached new records up more than 27% year-over-year. In our opinion, we're very well positioned for strong future growth as the transaction environment improves. As we had expected, our first quarter realizations were seasonally light, leading our realized income to be comprised entirely of higher quality, more stable fee-related earnings. Yet, our future performance income potential continues to build as our incentive-generating AUM increased by 26% year-over-year, and our net accrued performance income balance increased by more than $55 million year-over-year despite realizing $136 million in net performance income over the past 12 months. As we stated previously, we expect most of the realizations from our European-style funds this year to occur in the second and fourth quarters, with the largest quarterly amount anticipated in the fourth quarter. The economy is proving to be remarkably resilient in the face of higher interest rates and companies in our portfolios are, on the whole, consistently generating strong cash flow and earnings growth. Aggregate default levels in our credit portfolios continue to be well below historical levels, while key fundamental credit indicators remain healthy. In the first quarter and continuing into Q2, we are seeing a significant number of upsizing opportunities with our existing borrowers. With…

Thanks, Mike. Hello, everyone. Thank you for joining us today. We continue to deliver strong results in the first quarter with mid- to high-teens growth in AUM, management fees, fee-related earnings and realized income along with stronger growth of 28% in our AUM not yet paying fees, which we view as a leading indicator of our capacity for future growth. With the current geopolitical risks, sustained inflationary data and high interest rates, our high-quality FRE-based earnings stream provides strong visibility because it's less dependent on the uncertainty arising from the timing of realization activity. As Mike stated, we're off to a solid start in fundraising, raising over $17 billion in the first quarter, and our available capital has reached a new high, positioning us well for future growth and taking advantage of a return to higher levels of M&A activity. Starting with revenues. Our management fees totaled over $693 million in the quarter, an increase of 15% compared to the same period last year, primarily driven by the deployment of our available capital. As expected, fee-related performance revenues were also modest in the quarter as the vast majority of FRPR is crystallized in the fourth quarter. In our credit segment, our credit FRPR should benefit from the higher for longer interest rate environment, assuming no significant changes to spreads or asset valuations. FRE totaled $302 million, up 18% from the first quarter of 2023, driven by higher management fees and a margin improvement of roughly 150 basis points to 42.1%. We expect continued FRE growth during the rest of 2024 as deployment activity gains momentum throughout the year. As Mike mentioned, seasonality, continued rate uncertainty and bid-ask spread differentials on values constrained our realization activity in the first quarter. As a result, we generated $10 million of realized net performance…

Great. Thanks, Jarrod. We believe our first quarter highlights not only our significant momentum, but also the future growth potential across our business lines. Over the past several years, we've made investments in building out new investment platforms and distribution in significant new growth segments that are now coming online and contributing to our growth profile. These areas include alternative credit, infrastructure, real estate debt, APAC credit, secondaries, wealth management and insurance. We hope to capitalize on these segments secular drivers in the years ahead. We've also continued to heavily invest in our more scaled investing strategies, which positions us to outperform when markets get more competitive. As you can see from our first quarter's results, our fundraising momentum remains robust, and we're positioned for growth with a record amount of dry powder and 28% growth in our AUM not yet paying fees. We believe our asset-light business model provides consistent and substantial earnings growth, while limiting our exposure to the volatility of the financial markets. And as Jarrod stated, we have great visibility into the future earnings streams from our European waterfall style funds in the years to come. We look forward to providing a deep dive into our business and discussing our promising long-term outlook with you at our Investor Day in a few weeks. And as always, I'm grateful for our team's hard work and dedication, and I appreciate our investors' ongoing support of our company. And operator, with that, I think we can now open up the line for questions.

[Operator Instructions] The first question comes from Craig Siegenthaler, Bank of America.

So we wanted your perspective on the current deployment backdrop in direct lending and how the demand supply dynamics are evolving. So first on the demand side, what are you seeing from other asset managers, bank syndications? And how is this translating into spread?

Sure. So if you look at the ARCC performance and obviously, look at what we're doing elsewhere in our private credit businesses, I think you're going to see high quarter-over-quarter and year-over-year gross deployment. I do think that we continue to not just hold market share, but gain share, and I'll come back to that in a second. And right now, given that transaction activity has been muted, you could see it in the syndicated loan and high-yield market too, that the transaction activity is skewing more towards refis than new issue activity. We've been able to defend the portfolio from that and grow, which I think is very differentiated just given our portfolio size and incumbency. And so I do think both on a gross and net deployment basis, we're outperforming. I would say that spreads have tightened and until we see new activity accelerate, you could expect they may tighten a little bit more from here. They've been stabilized over the last couple of weeks, the pipeline would indicate that they get hold here. But I feel really good about the fundraising and the supply of capital versus the demand, particularly for us. One other differentiator, I think, too, is, some of the peer set, I think, are overly relying on the wealth channel for the growth in their private credit capital. And that's, frankly, just a much harder part of equation to manage in terms of the flows versus the deployment, particularly when you get into market back up like this. So I do feel one of the ways that we've been able to outperform in this context is the diversity of the funds that we have in terms of drawdown and nontraded just gives us a little bit of a capital advantage through cycles.

Mike, just a follow-up on the new issue side, what is the outlook from private equity sponsors and also independent private companies, which I know is part of the business. Some of your peers are looking for a pickup in private equity transactions. So that could certainly help on the sponsor side.

Yes, I think we would -- we're looking for a pickup as well. One of the benefits of being in the private market is you see that pipeline developing before the M&A numbers become public. We talked about this in our year-end call. We are seeing the ingredients for a pickup in M&A activity, both within the sponsored and nonsponsored part of the world. That's a combination of stabilized rates, putting aside whether rates will go down to stabilized rates, by definition should spur transaction activity in the private equity part of the market. Obviously, there is a pretty significant demand from the LP community to see a return of capital, and that should accelerate transaction activity as well. One flip side to the technicals and the loan and high-yield market right now is as that machine turns on, it, by definition, spurs transaction activity. And I would also think that, that would be an accelerant. So everything we're seeing would indicate that deal flow will pick up as we move through the year. Obviously, if you look at the advisory community and you talk to the sell side, I think they'll tell you that the shadow pipeline is picking up as well. And we're also optimistic and we're seeing this too in the real estate side of the business, that transaction activity is beginning to unfreeze there as well.

Our next question comes from Alex Blostein with Goldman Sachs.

I wanted to start maybe with some opportunities you talked about with respect to third-party insurance space and the momentum you've seen through sort of building up there. Can you maybe help us kind of frame what that business looks like for Ares today in terms of either fee-paying AUM or however you want to frame that? And maybe talk a little bit about the fee rates and the fee structures in that business. So is it just straight up management fee? Or does that include fee-related performance revenue attached to that? Just was hoping to get a little more granularity there.

Sure. So maybe just zooming out, obviously, the insurance opportunity is an important one for someone like us, obviously, with a market-leading position in private credit. We have chosen to build our insurance solutions practice here to support a pretty large and significant amount of third-party insurance clients as well as our own affiliated insurance business, both of which continue to be fast growing. With regard to our affiliated insurance platform, Aspida, if you go back to our Investor Day in the summer of 2021, we laid out an expectation that, that business would approach $25 billion AUM by the end of 2025 on $500 million of guidance. We are on track for that, if not pacing ahead of that. And you could see that in the numbers. We continue to raise third-party capital to grow that business. AUM is up to $14 billion and a very healthy combination of organic annuities distribution and reinsurance relationships would have us growing quite nicely there. The fundraising momentum for the affiliated insurance company is very strong right now. And as we talked about in the prepared remarks, our expectation is as we make our way through the second quarter that the equity that we'll raise there would be ample to meet or exceed the growth objectives of that business. In terms of the fees there, the structure is probably what you're used to seeing. We do get an administrative fee on the entirety of the affiliated balance sheet for the services that we provide on capital markets, investment advisory, actuarial, et cetera, and then arm's length fees on the sub-advised strategies as well. Those fees -- the sub-advise fees in terms of our financial presentation are showing up in the underlying business lines, not in the Insurance Solutions P&L. So when you go to the segment reporting, a lot of the financial benefit of that is showing up in our alternative credit business and our secondaries business. But we have been pretty vocal that our goal is to continue to pursue an asset-light approach to this opportunity that we will continue to grow and nurture our third-party insurance clients, which now represent over $50 billion with close to 150 separate insurance relationships. And so I think you'll continue to see the third-party business grow alongside the rapid growth of the affiliate.

Got you. Okay. And then my second question is around kind of things outside of credit, and you guys have demonstrated tremendous amount of success in credit over the years and the outlook, obviously continues to be pretty strong there. But can you spend maybe a minute on what are the biggest sort of sources of management fee growth you expect in other parts of the business? So whether it's real estate, private equity secondaries, just maybe spend a couple of minutes on the growth outlook there.

Sure. Look, I think the good news is, and we've said this before, while the market, I think, has come to appreciate the leadership position that we stake out in credit, they may underappreciate the leadership position that we've staked out in other parts of our business. If you were to look at our real assets platform, our real estate business continues to grow and diversify, both in the U.S. and in Europe. And I would expect continued management fee growth across that platform. If you look at our infrastructure business, obviously, we have a meaningful climate infrastructure and energy transaction -- transition practice that's growing. We are one of the market leaders on the infrastructure debt space. We believe that, that is a significant global addressable market that is meaningfully undercapitalized, and we'd expect, as we continue to lean into the fundraise for our sixth infrastructure debt fund that will be able to drive pretty meaningful management fee growth there. We talked about insurance, that's going to be a meaningful growth engine for us. So most, if not all, of the businesses across the platform are growing at trend. Some will grow faster given the secular backdrop. But I think the diversity of the strategies you'll see are continuing to mature and a lot of the competitive advantages that we've created in credit around scale and origination and information are now starting to show up in real assets and secondaries and PE, et cetera. So I -- without going into every line of business, I think you should come to expect with some episodic growth. But if you smooth it that you're going to see trend growth from almost every business here.

Our next question comes from Steven Chubak with Wolfe Research.

So wanted to start out with a question just on opportunistic credit. Recognized that it's only about 5% of aggregate credit AUM. But just given a high number of levered corporates grappling with growing interest burden, nearly deteriorating cash flow positions, how do you see the opportunity and opportunistic credit unfolding, especially in a prolonged hire for longer ride backdrop?

Sure. Thank you for asking that question because Alex asked for noncredit growth areas. And so you just teed up, I think, one of the most exciting areas within credit, which is what we would broadly call opportunistic credit, obviously, alternative credit as well. And you hit the nail on the head. In a higher for longer rate environment where asset values have if not come down are difficult to transact on and debt service becomes tight. The nature of conversations that we are having with institutional owners of real assets and companies is largely the same, which is I have a high-performing asset that I paid a full price for and a different discount rate and interest rate environment. I need to own it longer in order to realize on my investment thesis, while I'm performing a disproportionate amount of my EBITDA and cash flow and NOI is going to debt service and I need a way to create a runway to execute on my business plan, and that's where most of the businesses here are turning on. And so we're calling on private equity sponsors and institutional real asset owners with a full complement of liquidity solutions, ranging from an opportunistic credit solution that could be structured debt and equity to deleverage and reduce cash burden. We're calling on them with plain vanilla refis. We're calling on them with secondary solutions at the portfolio company level. We're calling on them with NAV loans and fund finance solutions. But most of the origination here is trained on that singular issue, which is high-quality assets with "bad balance sheets" that need some form of resolution. And I think opportunistic credit is going to be a big beneficiary of that. The issue is particularly acute in private equity because if you…

And for my follow-up, just on the gross versus origination dynamic that you were discussing earlier, can certainly appreciate the areas of differentiation, some of the sources of relative outperformance you cited for Ares. But just given expectations for continued strong gross origination activity, how do you see the gross versus net origination ratio trajecting over the next few quarters, whether there's any sort of historical period or paradigm that we could anchor to where a sponsor M&A was active in building the syndicated markets were also wide open?

Yes. I mean if you go back and look at the history of our deployment, you'll be able to get a really good look for that. And I think we are in an anomalous quarter where the gross to net is probably tighter than it has been historically. To put it in perspective, if you were to look at our gross deployment of $18.6 billion, roughly $14 billion or so of it was in our private credit businesses. And then we had obviously strong gross deployment in the U.S., strong gross deployment in all credit and strong gross deployment in European credit. Interestingly in European credit, and this is a little episodic, we had two very large positions that came out of the book, one of which then got refinanced into the book in Q2. And we basically, on that gross deployment of $13.6 billion in private credit, had net deployment about $3.5 billion. That is a very high gross to net adjustment. I would say historically, and we can follow up with the exact if I were to think about private credit generally over multiple decades and cycles, we've typically experienced a 25% gross to net, meaning 75% of the gross typically finds its way into net deployment. And so I think as you start to see transaction activity pick up, we would expect to see the gross to net improve from what we saw in Q1. It's still early, but we did talk about on the ARCC earnings call, the backlog and pipeline building through April. And even though it's only one month, you will begin to see that the backlog and pipeline there gross to net is already improving in April, and we hope it would continue through the quarter.

Our next question comes from Ben Budish, Barclays.

I apologize I had the mute hit. I wanted to ask about some of the management fee trends we saw, especially outside the credit business, private equity, real assets, secondaries, it looks there was some movement from Q4. Just curious if there's anything to highlight there or anything we should be keeping in mind?

No, I don't think so. I mean -- go ahead, Jarrod.

You got that Mike, either way. Yes, there's nothing really that we talked about it in the fourth quarter. We did have some catch-up fees in both secondaries and real assets. That was about $14.5 million in those two different segments. So what you saw is the effect of those catch-up fees now just being part of our annual run rate. And there and in private equity, it's just regular way of occasionally, there's pay downs within the portfolio and then your fees go down a little bit when you have some aged funds in there. So there's nothing really kind of noteworthy. We still saw -- if you adjust for those catch-up fees, you still saw management fees grow quarter-over-quarter.

Makes enough sense.

I was just going to add one thing, Ben, if I may because I didn't know if you're asking about the management fee line item or fee rates. I think it's important. If you look historically, we've been maintaining a fee rate between 100 and 110 basis points pretty consistently. If you were to go strategy by strategy, you'll actually see that the management fee rate quarter-over-quarter has been flat and in certain strategies is slightly up. So putting aside the quarter-over-quarter narrative that Jarrod highlighted, I think it's important in a given quarter, you may see a slight mix shift that will show a little bit of variability in the management fee, but the headline fee rates are holding.

Got it. I was asking about the fee rate, so that's helpful. I appreciate that, Mike. And maybe for my follow-up, just on the wealth side, it sounds like you're seeing some good momentum. Can you just kind of give us an update in terms of your distribution expansion in terms of product parity, how much of the future growth comes from more wires versus penetrating existing partners more deeply, things like that?

Yes, we -- I can't really give you a linear view on where the drivers of growth are going to come from. And maybe just to give people a sense for what our wealth management business looks like today, we have about 150 wealth professionals that are singularly focused on distributing and servicing our family of wealth product. We continue to build out the number of products on our platform as well as the number of distribution partners that we have. Today, we have 2 non-traded REITs, a private equity fund, a nontraded BDC, a European credit fund, a credit interval fund, and we are in the process of introducing new funds into the market as well. The existing fund family, as we talked about in the prepared remarks, raised about $3.2 billion in the first quarter. That was up from $2 billion in Q4 and $900 million a year ago. So roughly 2.5 plus times growth year-over-year and 50% growth quarter-over-quarter. And April, on the equity side alone, we raised $800 million. So if you assume roughly the same 1:1 leverage, that would be roughly a levered amount. So there's a lot of growth that we're experiencing, and it's a combination of increasing distribution partnerships, building out the fund platform. And I think a real bright spot for us has been the very rapid results that we're seeing in our international distribution. We highlighted AESIF, which is our European credit fund, and they had a very strong inaugural quarter, and we continue to see a lot of international demand for that as well. So we have a road map, obviously, to continue to add distribution partners and new products. And so I think these numbers will both diversify and grow.

Our next question comes from Ken Worthington, JPMorgan.

You highlighted the strength of fundraising this quarter, particularly in credit. Preqin came out recently with private market fundraising data which indicated that fundraise and private credit hit a peak in 2Q last year and has been sort of falling ever since with 1Q '24 levels, the lowest since 2020. And is the backdrop for private credit fundraising changing at all? And if so, what may be contributing to this sort of industry slowdown. And again, you highlighted how strong yours is, is the dialogue you're having with your LPs changing at all in any way sort of reflecting more modest enthusiasm?

That has not been our experience. We have talked for quite some time with all of you just about the opportunity that we see given our leadership position and scale. And one of the things that we have talked about is that as these markets consolidate, the larger LPs are doing more business with fewer scale managers that can need a broad base of needs. And so private credit, and there's some pretty good data putting aside the frequent report from private debt and other publications that just show the concentration of fundraising and deployment in the hands of the largest managers with us near or at the top of the list. So I think, thankfully, we're not having that experience. We talked about the very positive experience we've seen in our third senior loan fund, which has already exceeded the prior vintage, our 6 European fund, which has already exceeded the prior vintage. We're seeing good momentum in our real estate credit fund. As I mentioned, obviously, we are working through our sixth infrastructure private credit fund. And if the BDC and interval funds that we have in the wealth channel or any indication, I think our brand continues to resonate there. So that has not been our experience, but we're watching the industry data as well. If you could attribute it to one thing and frequent hint of this, I do think given the rate environment, you are beginning to see dispersion of performance. And I think that there are many people who think that being great in direct lending is maybe easier than it really is. And you're beginning to see certain managers underperforming, and there could be a little bit of a cautionary moment here where people want to see the credit performance work through their portfolios with certain managers. But no, we're seeing continued demand, and we would expect that to continue.

Our next question comes from Michael Cyprys with Morgan Stanley.

I was hoping to drill down a bit on the infrastructure and real estate debt side. It seems like a significant opportunity for you that you've alluded to in the prepared remarks. I was hoping maybe you could elaborate on that, particularly with AI driving demand for data centers and power generation that will need finance. I'm just curious how you see that opportunity evolving for Ares to meaningfully participate there as well as the steps that you're taking to enhance the origination and sourcing funnel. I'm just curious how you see -- how you're looking to build that out?

Sure. Thanks, Mike. So maybe we'll handle them separately because they're both benefiting from different opportunities and different trends covering maybe infrastructure debt first. There are two things I would highlight. One of them you pointed to, which is just the significant amount of capital that is needed to hasten the transition in digital infrastructure to support the hyperscale data center rollout. That is roughly by our estimation, a $5 trillion capital opportunity and the market is woefully undercapitalized to take advantage of it. We are one of the leading debt providers in that market and continue to add people and capital against that opportunity. The second I would highlight, which is as the markets are forming capital to support the digital transformation, there have been a disproportionate number of dollars raised on the equity side of the ledger versus the debt. And so if you look at the private equity dry powder that has been raised by the largest infra equity managers to support the evolution of that market, the debt markets have not kept pace. This is one of the main reasons why we went out and acquired the AMP infrastructure debt business, which has been the leading participant in that market for some time. And I think their growth opportunities accelerating under our ownership and our watch. So that was very intentional seeing the secular opportunity developing the way that it is. And I think the debt market is undersupplied relative to the private equity market. In real estate, I think the big issue there is going to be what I articulated around opportunistic credit, which is in this rate environment, you have high-quality assets that are owned by high-quality institutional owners, that are upside down on their debt service and need some form of opportunistic credit solution to ultimately realize value on their real estate holdings. And so we're seeing a significant amount of what I would call opportunistic debt opportunities in both the U.S. and Europe to support that investment thesis. And then I think given some of the challenges that exist on U.S. bank balance sheets, particularly regional banks, 1 of 2 things will happen, if not both, you'll begin to see primary market share concessions from the banks to nonbank lenders like ourselves. And I think that we can be a much larger participant in new issue volumes as those markets heal. And two, given the size of the installed base of real estate loans, sitting on bank balance sheets and given some of the regulatory capital challenges that they're going through. And then you can also expect that there would be some portfolio acquisitions and opportunistic deals that are going to be coming off bank balance sheets as well that we expect to capitalize on.

Our next question comes from Brennan Hawken with UBS.

Mike, you indicated the desire to not be too reliant on the wealth management channel for fundraising. I just wanted to have a couple of follow-ups about that. Is that because that channel can be a bit pro-cyclical? And what do you see as a good balance as far as fundraising between the channels?

Yes, I think you're right. It is procyclical. And one of the easiest ways to drive value as an alternative management, in our opinion, is to be countercyclical. We learned I think, earlier than most having run ARCC, the way that we have since 2004 that sometimes those markets are not wanting to grow when the investment opportunity is the best. And so relying on the retail investor to know when the time to allocate is challenging sometimes. So that's point number one. So we learned early running commingled funds with drawdown capacity next to ARCC for over a decade served us well because oftentimes, the institutional investor will turn on when the retail investor is turning off, and that just allows you to be much more consistent in the way that you're investing in deploying through market cycles, and it gives you the luxury of sitting markets out. And there are certain windows in the market where market avoidance is actually a way to generate outperformance. The challenge of procyclical capital raising in the retail market is when you get $1 in a traded or non-traded vehicle, just in order to support the continued growth in the dividend, that dollar needs to be put into the market. And so by definition, you are putting capital into the market regardless of the overarching market view. And so we love the channel. We have high expectations for growth in the channel, but we are very focused on making sure that as we grow in that channel, it's alongside prudent growth in the commingled fund families as well, just so that we can make sure that we are investing in these markets when and as we want to. And it's going to be interesting to see, obviously, how this plays out over time and whether or not the retail investor changes in semiliquid vehicles, but it's just something, I think, that's been informed by our experience with the traded BDC market for now 20 years.

And do you have a view on a good balance between the different channels?

No. It's -- I can't give you a number because a lot of it just has to do with a constant evaluation that we go through here in terms of what is the deployment capacity that we have in any given strategy, what the pacing of we think that deployment capacity would be and then how we ultimately want to fund it and then not to get into too much of the weeds here, but then you have to look at where you are in the evolution of your drawdown capacity as well because when somebody gives you a dollar and a drawdown fund, there's an expectation for vintage diversification and that you would invest that over 2 to 4 years. So it's a constantly evolving formula when you're looking at the mix of capital and the capacity to deploy. But at the end of the day, it starts with what's the deployment capacity and what do we think the pacing of that is going to be and make sure that we keep the right tension with our capital base.

Okay. Follow-up. Expectations have been changing a lot around rates, but higher for longer seems to be taking hold. And curious whether or not you have heard or whether or not you would expect here from LPs on a desire to take up hurdle rates given that risk-free rates are higher at this point?

It's a very good question, and it has not come up. I don't want to say it doesn't come up ever, but it comes up infrequently because as interesting of an idea that may sound we never went and asked for a change in hurdle rates when we were expected to generate significant excess return in the 0 interest rate environment. And so the structure of the market is the structure of the market. We all operate within it. From time to time, someone would academically ask the question whether floating rate hurdles is the way to do it, but the reality is there's downside to that as well. And so I think for the most part, people have agreed that the current construct has worked for 30-plus years and we'll continue to work. So we're not feeling that pressure or not seeing any kind of meaningful move in the market to floating rate hurdles.

We have no further questions at this time. I would now like to turn the call back over to Michael Arougheti for any closing remarks.

We don't have any other than to thank everybody for their participation today, and I hope you all have a wonderful quarter, and we look forward to speaking to you again next quarter. Thank you.

Ladies and gentlemen, this concludes our conference call for today. If you missed any part of today's call, an archived replay of the call will be available through June 2, 2024, to domestic callers by dialing 1-800-839-5631 and to international callers by dialing 1-402-220-2558. An archived replay will also be available through June 2, 2024, on a webcast link located on the homepage of the Investor Resources section of our website. Thank you, and have a great day.