Five insights on private markets – in conversation with Michael Arougheti

Here are five key takeaways for investors thinking about the future of private markets.

1. A multi-decade growth story

The expansion of private markets sometimes appears to be a recent trend, but it has a history that goes back decades. Mr. Arougheti traces the trajectory from early middle-market lending and equity co-investments inside banks to today's scaled, multi-asset platforms.

This is, in his view, a secular growth trend happening "for all the right reasons." As private equity matured, demand for tailored financing outpaced what traditional banks –constrained by regulation and balance-sheet limits – could provide. That gap has created a lasting opportunity.

2. The global financial crisis reshaped allocation thinking

For years, institutions sorted investments into neat boxes: liquid fixed income, public equities, and "alternatives" for everything else. The 2008 crisis broke that framework.

Investors discovered that liquid securities could freeze and that uncorrelated assets often moved together. In response, pension funds, sovereign wealth funds, and insurers began rethinking equity and credit risk, combining public and private exposures in a single conversation. This shift gave private markets their own clear place in portfolio construction.

3. Scale and origination are a real barrier to entry

What creates competitive advantage in private markets? For Mr. Arougheti, the answer is scaled capital paired with origination capability. Investors pay asset managers for access to companies and assets they cannot find elsewhere, and that requires real resources in local markets and deep, trust-based relationships built over time.

Early movers build up transaction history and credibility, and their relationship networks compound over time, widening the gap. Yet newcomers can follow fast, which puts a premium on being first.

In short, the incumbency that is built through experience across both good and bad cycles is hard to replicate.

4. Wealth channels are widening access

For decades, the excess returns of private markets reached individuals only indirectly through pension and retirement plans. Mr. Arougheti sees the wealth channel changing that.

As capital shifts from defined-benefit to defined-contribution structures, trillions of dollars now sit with individual investors. Packaging institutional-quality products for this audience is, he suggests, both "exciting and liberating."

The wealth market is still at its early stages. Education and advisor understanding are still evolving, so the demand will continue to evolve.

“When I think about folks such as HSBC who are really putting the appropriate amount of time, energy, resources behind education and access, wealth channels are accelerating and should continue to accelerate,” he said.

5. New frontiers: infrastructure, sports, and Asia

When growth seems to reach a boundary, new categories open. Ares initially began investing in sports, media & entertainment back in 2007 and then pushed further during 2020, offering creative liquidity solutions to owners in search of growth capital and liquidity and bringing institutional capital into leagues for the first time.

Infrastructure assets, including data centres, are gaining recognition among individual investors.

On Asia, he described how exciting the region is for private markets given patterns seen previously in the US and Europe – such as growing private equity activity and maturing fixed-income markets – making it a growth market with strong potential going forward.