Ares Management: why private capital isn't afraid of AI apocalypse

While the world holds its breath waiting for the moment when generative intelligence begins to massively replace people, Michael Arugetti, head of Ares Management, maintains an Olympic calm. In a recent conversation on Bloomberg Open Interest, he voiced a thought that runs counter to popular alarmism: private capital is not just ready for change, it is reliably protected by it. This statement sounds particularly weighty given how venture capitalists are frantically shuffling money from one LLM startup to another, hoping to guess the future winner in the arms race. Arugetti looks at the situation more broadly, evaluating not only the technology itself, but also the resilience of real business models to its implementation.

To understand Ares' position, you need to remember what exactly they do. It's not just software investments; it's the management of giant portfolios in the private sector — from real estate to infrastructure and service companies. When Arugetti says that his company is "well hedged" against changes caused by AI, he means the fundamental nature of their business. Many of these enterprises provide services or own assets that cannot be replaced by a line of code. You cannot send ChatGPT to fix a burst pipe or manage a physical warehouse, at least not in the coming decades. However, you can use AI to make these processes many times more efficient.

Context plays a decisive role here. We are accustomed to evaluating the impact of AI through the lens of Silicon Valley, where success is measured by the number of parameters in a model or the speed of text generation. But for giants like Ares, AI is first and foremost a way to reduce operating costs in traditional industries. If a portfolio company in the logistics field implements algorithms to optimize routes, its value grows and risks decline. This is the "hedge": owning assets that benefit from automation while not losing their unique value to the end consumer.

Arugetti also hints at an important market shift. While public companies are forced to report to shareholders for every dollar invested in AI, private capital enjoys the luxury of long-term planning. They can afford to methodically implement technologies without fear of short-term volatility or inflated market expectations. This creates a situation where Ares-managed companies can adapt to the new reality more quietly and efficiently than their public competitors, who spend more time on PR for their AI initiatives than on their actual implementation.

Interestingly, this optimism is far from universally shared. Many analysts predict that AI will destroy entire layers of the service economy that private investment funds rely on so heavily. But Arugetti's logic rests on the idea that the "last mile" — physical interaction with customers or management of complex infrastructure — will remain with humans for a long time. AI here acts not as a replacement, but as a powerful amplifier. If you own a network of clinics, AI will help doctors diagnose faster, but it won't replace the clinics themselves or people's need for physical care. This is the very "natural defense" against a technological tsunami.

Ultimately, the Ares Management position reflects a new stage of market maturity. We are moving from the stage of "AI is magic that will change everything" to the stage of "AI is the new standard of efficiency." And in this game, those who win are not those who create the smartest neural networks, but those who know how to properly embed them in a working business with real assets. Arugetti is confident that private capital is in the best position for this transformation, and judging by the dynamics of their portfolios, he has every reason for such a claim.

The key point: private capital sees in AI not a threat of destruction, but a catalyst for margin growth in traditional sectors. Can public companies respond with the same confidence without pressure from quarterly reports?