Ares Management: Why Private Capital Isn't Afraid of an AI Apocalypse

While the world holds its breath waiting for generative AI to start replacing people en masse, Michael Arougheti, head of Ares Management, is keeping an Olympian calm. In a recent conversation on Bloomberg Open Interest, he voiced a view that runs against popular alarmism: private capital is not merely ready for change, it is solidly protected from it. The claim carries extra weight at a time when venture capitalists are frantically shifting money from one LLM startup to another, hoping to pick the winner of the arms race. Arougheti takes a broader view, assessing not only the technology itself but also how resilient real business models are to its adoption.

To understand Ares's position, it helps to recall what the firm actually does. It is not simply investing in software; it manages huge private-sector portfolios, from real estate to infrastructure and service companies. When Arougheti says his companies are "well hedged" against AI-driven change, he is pointing to the fundamental nature of their businesses. Many of these companies provide services or own assets that a line of code cannot replace. You cannot send ChatGPT to fix a burst pipe or run a physical warehouse, at least not in the coming decades. You can, however, use AI to make those processes many times more efficient.

Context matters here. We are used to judging AI's impact through the lens of Silicon Valley, where success is measured in model parameters or text-generation speed. But for giants like Ares, AI is first and foremost a way to cut operating costs in traditional industries. If a logistics portfolio company deploys algorithms to optimize routes, its value rises and its risks fall. That is the "hedge": owning assets that benefit from automation without losing their unique value to the end customer.

Arougheti also hints at an important market shift. Public companies must answer to shareholders for every dollar spent on AI, while private capital has the luxury of long-term planning. It can roll out technology methodically, without fearing short-term volatility or inflated market expectations. That means Ares-managed companies may adapt to the new reality more quietly and more effectively than public competitors, who spend more time on PR for their AI initiatives than on actually implementing them.

Notably, far from everyone shares this optimism. Many analysts predict that AI will wipe out entire layers of the service economy on which private investment funds rely so heavily. But Arougheti's logic rests on the idea that the "last mile", meaning physical interaction with the customer or management of complex infrastructure, will remain in human hands for a long time. Here AI acts not as a replacement but as a powerful amplifier. If you own a chain of clinics, AI will help doctors make diagnoses faster, but it will not replace the clinics themselves or people's need for physical care. That is the "natural protection" from the technological tsunami.

Ultimately, Ares Management's stance reflects a new stage of market maturity. We are moving from "AI is magic that will change everything" to "AI is the new standard of efficiency." And in this game the winners are not those who build the smartest neural networks, but those who know how to embed them in a working business with real assets. Arougheti is convinced that private capital is best positioned for this transformation, and judging by the performance of its portfolios, he has every reason to say so.

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