Hi, good morning, everyone, welcome to the RBC Capital Markets Global Financial Institutions Conference. My name is Kenneth Lee, I am the senior equity analyst covering the U.S. asset manager sector. Welcome to our panel, The Future of Asset Management. Here with us to share their view on what's ahead are our three panelists. I'm very pleased to have with us Michael McFerran, CFO and COO of Ares Management Corporation. Mr. McFerran also serves on the Ares Executive Management Committee and has been with Ares since 2015. Next, we have Brian Gildea, Head of Investments at Hamilton Lane. Mr. Gildea is responsible for oversight and management of all the firm's investment activities, and he has been with Hamilton Lane since 2009. Last but not least, we have Michael Policarpo, President and CFO of Victory Capital.
Mr. Policarpo also supports the firm's inorganic growth sourcing, valuation and execution, and business platform integration. He has been with Victory since 2005. Welcome, everyone. Before we dive in, perhaps each of you could give a brief overview of your company. We'll start with Mr. McFerran and then move on to Brian, and then end it with Michael Policarpo.
Thanks, Ken. Hello, everyone. I'm Mike McFerran with Ares Management. Ares is a global alternative asset manager, operating integrated businesses across credit, real estate, private equity, and strategic initiatives. We have over 1,400 employees, including over 500 investment professionals, and we operate in, today, over 25 offices across North America, Europe, and the Asia Pacific region.
All right. Hello, everyone. Good to be here, Ken. Thanks for having me. I'm Brian Gildea with Hamilton Lane. Hamilton Lane is a leading global private markets investment firm. We are dedicated exclusively to investing in the private markets. We are approaching our 30th anniversary as a firm. We have over 400 employees in 17 global offices, as well as $76 billion of AUM and about $580 billion of assets under advisement, which makes us one of the largest investors globally in the private markets. We specialize in building flexible investment programs for our clients to access all parts of the private markets. We provide tailored access to the private markets that can range anywhere from full discretion to back office, to portfolio monitoring, to data and analytics and really everything in between in the private markets.
Great. Thanks, Brian. Good morning, Ken. Good morning, everyone. I'm Mike Policarpo. I'm President and CFO for Victory Capital. Victory Capital is an integrated multi-boutique asset management business. We have $150 billion in assets under management across 10 distinct investment franchises and a solutions platform. Our model really provides the investment autonomy of a boutique for our investment franchises, independent brands, as well as pure investment autonomy and independence with respect to their investment philosophy, and the benefit of a scaled, integrated operating platform, administration platform, as well as the depth of a centralized distribution network that really allows us to distribute all of the products through three distinct investment distribution channels, institutional, intermediary, and a direct-to-investor business as well.
Our model allows our investment professionals to focus 100% of their time on managing money and takes the administrative burdens, if you will, off of their plate so they can focus on delivering alpha to our clients. We have a broad set of products that range from equities to fixed income, global non-U.S., as well as products. Our model really allows us to grow organically and inorganically. Since our MBO in 2013, we've done five acquisitions as well as two minority investments to add product distribution capabilities across the business to really garner assets from $20 billion to over $150 billion today. Happy to be here and talk a little bit about the Victory story.
Great. We're going to keep this discussion relatively interactive. For those of you who are participating on our webcast, you may submit questions at any time, and we will try to address them throughout the session. Let's start off broadly. Now that we have vaccines being distributed and seeing the gradual recovery in the economy, can you talk about any potential structural changes to your respective businesses that you foresee in a post-COVID world? Why don't we start with you, Mike McFerran, and then we can open it up to any of the other panelists for additional comments.
Sure, Ken. Look, I think at Ares, probably it'd be no surprise to anybody, the silver lining, if there's one to be found over the last 12 months of this extraordinary and tragic set of circumstances we've all lived through, is we've had to pivot quickly to work in a different manner. It was a challenge ourselves, to be virtual as we are talking to each other today. There have been some great learnings from this. Above all else, for me at least personally, unbelievably surprised and impressed at how well our people responded to it, how productive, how collaborative, and I think that's probably not unique to Ares. I think when the whole playing field moves to a different field, which was virtual for most people, adaptability was quite extraordinary. From a structural standpoint, I don't foresee true structural changes.
I do think this has been a catalyst to probably evolve how people think about working, where they work, flexibility, location-wise, et cetera, and embracing technology in various channels. It's probably giving you 10 years of progress in 12 months. I think I'll look at Ares and say pre-COVID, we had access to all types of various tools, things like Zoom and Teams and various video capabilities. Obviously doing business and meeting people in person was first and foremost always our objective. While you had access to all that, you probably didn't fully leverage it to the full extent. I think the positives are, again, if I was trying to find silver linings here, I think this is going to change not just temporarily, but long term, how people work and where they work.
I think that's a long-term change, and I think it's going to be evolving a lot. I think technology's going to be fascinating to watch over the next couple of years as different solutions come forward. I think for employees and for interactions, it's made us far more flexible and more nimble. Selfishly, Ken, your conference would have been me flying from Los Angeles a year ago, or this was actually virtual a year ago, two years ago, and traveling to the hotel and doing the meetings one-on-one, and then getting on a plane back to Los Angeles. Now I find we're able to actually talk to more stakeholders and investors on a single day than I would have covered in a week before. I think there's been a lot of benefits.
Clearly, at the end of the day, especially when you're forging new relationships, nothing replaces face-to-face interaction. I think this is an unbelievable complement that I think is here to stay.
Yep. I would echo some of what Michael just said. I think first of all, it's amazing to be able to operate fully remote as quickly as many firms did, and we were fortunate. I think having strong infrastructure really makes a difference in a world like this. The firms that had invested in their infrastructure were able to pivot pretty quickly. For us, the local footprint in the markets we operate in has really mattered with travel off the table. For example, today, our colleagues in Australia are operating very differently than we are here in the U.S. I think that's an advantage. The interesting thing from our perspective is that historically, our asset class had a huge element of face-to-face interaction throughout. Managers would meet with companies to decide which to invest in. We would meet with managers in person.
We would go out and meet with clients and prospects for fundraising. I think when the pandemic started, everyone wondered how that would work, and would it work. I think what we found is that the market adjusted. Now everyone gravitated towards known quantities. I think it is definitely harder to build new relationships. The market has adjusted, much as Michael said, as we are doing here today. I'm not sure that our crystal ball is any better than anyone else's on how much of a balancing we have between those two things. I think we've all realized that some things may be done better remotely, and we'll all have a bit more flexibility going forward.
Yeah, I would echo what Brian and Michael said. I think from Victory's perspective, we too were able to operate pretty seamlessly from a remote environment pretty quickly. We actually did see the benefit from virtual with respect to clients, and really took that from our sales professionals and marketing professionals, and let them run with that, and they've been able to develop really a new way to touch new and existing clients. I think someone had mentioned that it's hard to forge new relationships, but it is a great opportunity to continue to leverage technology where we can, to continue to get in front of our clients, to get in front of our employees. We've done that. I actually think we won't see any structural changes going forward in our business. I do think a lot of the meetings that we have can be done virtually.
We've done finals presentations, we've done client updates, investor meetings such as this virtually, and I think that we'll continue to look to do that going forward. Maybe there is some silver lining in some of this as we go forward, and it'll also become a much more flexible workplace for our employees.
Got you. Those were great comments. I'm going to address the next topic to Mike Policarpo first. Currently, there seems to be a lot more optimism across the markets. Can you talk about what you're seeing in terms of institutional investor sentiment more recently?
Sure, Ken. I think the current market environment definitely supports active management and active asset allocation. I think we've seen really through the middle part of 2020 through today. A significant uptick in demand and activity in client searches, as well as decision-making in some of the asset classes that we have. What we're seeing and what we're hearing with respect to the business that Victory Capital has, we're seeing our outcome-oriented solution products from an investment perspective, institutionally getting some demand and some inquiries. We're also seeing non-traditional fixed income products that we offer. We've got an Alternative Income product, a floating rate product, and we have a depth of and a number of traditional equity products, public equity products, that are capacity constrained, both domestic, international, and global products that have strong performance and some capacity limitations that we're seeing resonate with institutional buyers.
The last element I think that we're seeing from our product set, that is alternatives. We recently made an acquisition in a private equity firm called Alderwood Capital. That is resonating as well from an institutional perspective, just getting access to non-public equities. That's kind of our foray into that. The last thing I would say is I think, ESG products are continuing to gain momentum in the U.S. They're obviously very active from a global perspective, and we're seeing demand through the institutional space for ESG products. We recently did an acquisition in that space as well, with THB Asset Management. Feel like it's getting back to where it was maybe pre-COVID pandemic with respect to activity, at least with respect to what we're seeing at Victory.
Okay. That's great color there. Great color. For the next one, and similar question, and this one I'll address to you, Mike McFerran, first, and then to you, Brian. Let's talk about the current environment for fundraising. How has the various travel restrictions impacted fundraising over the past year or so, and how would you characterize the current investor sentiment for alternatives fundraising?
Sure can. This year was extraordinary, obviously going into this remote working model, and as Brian Michael talked about, there's clearly a lot of uncertainty of how people were going to react and how effective ongoing execution of business was going to be. It was amazing, again, going back to, I think everyone being on the same level playing field created a lot of ease there. If you were the only organization that worked remote and everyone else was still in person, that I think would've been a very different outcome. From a fundraising standpoint, I think this was an extraordinary year for us. We ended the year, our AUM increasing 32% year-over-year. We ended with $197 billion. 2020 was our single best fundraising year in our firm's history. We raised about $41 billion.
The fourth quarter was our single best quarter in our firm's history of capital raising. We ended the year with our fastest growth in AUM in over a decade. It's extraordinary to think all that happened during a remote environment versus being on planes, trains, and automobiles nonstop. I do think it's reflective of secular changes we've seen in our industry that I think have probably accelerated a bit during the COVID environment. I'll touch on a couple. One, investor allocations to alternatives continue to grow. There was a recent Preqin study that talked about how over 80% of institutional investors are planning to increase their allocations to alternatives over the next five years. I think that same study suggested that allocations will increase about 12% annually from $7.2 trillion today to almost $13 trillion by the end of 2025. That's one.
Second trend we have seen in recent years, but it's accelerating, is consolidation and consolidation of relationships. More and more, we're seeing institutional investors wanting to do more with fewer GPs. Again, I think the COVID backdrop in the last year definitely accelerated that because what you didn't see was probably, if you didn't have a lot of relationships and a strong LP base, this probably would've been a challenging year to raise capital in. At the end of the day, you had to look to a lot of relationships that you've either initiated prior to this remote model or existing LP relationships. I think when I looked at our capital raise, while we added a lot of LPs to our platform this year, clearly those were LPs that we would've touched for the most part or have had initial interactions with them prior to all this.
I think this resulted, again, in you see LPs talking about concentrating how many firms they do business with. I think this accelerated that. There's a lot of reasons for that. I think as the larger firms get larger, their capabilities continue to get broader, us LPs have more things they can do with individual firms. Second, I think, and there's been some pension funds that have been very open talking about this. I think it was a wake-up call a few years back for a lot of institutions that were kind of focusing on how much they were spending to manage so many GP relationships. In our industry, you look at fund performance. We think about the gross return of a portfolio, think about the net return after expenses.
I think a lot of LPs became appropriately very focused on what I would call the net return, which is what's your investment return back to the institution after taking into account all of your internal costs of operational due diligence, data management, risk management of all the GPs you have stakes with? If you're trying to navigate several hundred GP relationships, that's quite costly. Third, not to state the obvious, if you do more with fewer, you're probably going to get better economics off it. This trend of, I think, consolidation, doing more with fewer players, seems to be accelerating. I think that combined with increased allocations to alternatives, definitely set up a backdrop for a strong year for Ares. I think these trends are continuing and probably accelerating.
Yeah. I would echo a lot of what Michael has said, which is just that, in terms of the private markets overall, the tailwinds that were supporting a lot of the interest prior to the pandemic really all remain intact. Investors have liked the performance, both at an absolute level and compared to the public markets. They like the investment choice available in the private markets. It's expanding versus the number of public companies historically has been shrinking. Investors have liked the lower volatility and the diversification that comes with the private market. Overall, we see strong demand there. I think in terms of the fundraising elements, as Michael said, none of us knew what to expect last spring. I think we were all surprised by how quickly everything bounced back and went to known and trusted relationships.
Similarly, at Hamilton Lane, I'd point to our latest secondary fund as an example of that. We announced that we've raised about $3.9 billion for our most recent secondary vintage, most of that fundraising was completed during the pandemic in 2000. That fund was twice the size of our previous fund. I think there it points to interest in secondaries, which we'll probably talk about later. Also the fact that investors want access to the private market, they want to go to trusted relationships to get that access.
Okay. That was a great overview. Let's dive into more of the credit-oriented strategies. This is certainly an area where we have seen a lot of demand across the industry. I'm just curious, what specific strategies are you seeing that's getting very strong demand from clients? Consequently, which strategies will have the best growth opportunities, in your view? Let's start with you, Brian, and then maybe follow up with Mike McFerran.
Sure. If you went back not too long ago in the private markets, people used to think of credit really being as mezzanine investing and distressed debt investing. I think since the GFC, that has really expanded and exploded as banks stepped back as a traditional source of capital for small and mid-sized companies, and private credit stepped in. We've seen that investors like the risk and the return in private credit. Investors are having trouble finding yield in other places, given low interest rates. Private credit is a very good place to come for that. I'd say in terms of overall strategies, there was a rush of excitement for distressed debt earlier this year, that opportunity went past pretty quickly, just given the recovery in the capital markets.
Today, I would say that at Hamilton Lane, we just see regular way private lending strategies as the largest part of the market, given those underlying trends and that attractive risk-return dynamic.
I echo much of what Brian said. I think, in the private markets, private debt has been and remains probably the hottest asset class. LP demand remains very strong for it. I think will continue to be for quite some time. For some of the reasons Brian touched on. Global thirst for yield is real. I think clearly, what we saw with rates exacerbated that. I think even in the, before you saw the rate compression happened in the last 12 months, that was the case. When you look at relative risk-adjusted performance, to be frankly, top of the capital structure in senior private debt, it's really attractive to LPs as the income profile is appealing. The capital protection position of being at the top of the capital structure, the opportunity set remains extraordinary.
I talked about some of the structural changes that we've seen for a while, but you're definitely coming out of the financial crisis. You'll hear us say a lot of it, especially in the U.S., goes back to kind of the consolidation of the banks that's happened in the '90s, and really the removal of, or disappearance, for lack of a better term, of what you thought of as super regional banks. That kind of, I think, fundamentally changed the industry of C&I lending. That in the last 15 years, been quite pronounced. We've seen that now evolved and more up in Asia. It wasn't long ago that we opened our London office in the mid-2000s, and we had a strong conviction about us being able to leverage our capabilities as a direct lender in the U.S. to Europe. Started that business.
We didn't have assets, we didn't have revenue, people around us. A lot of them we got out of both banks, then boots on the ground strategy across Europe. 15 years later, this is a very meaningful business for us. $35 billion to $40 billion of AUM. We have the largest platform in Europe. I think, again, it's a testament to the strong demand, not just in the U.S., but globally, for private debt, at least from LPs, and a great opportunity for the asset class. I will say, a good example for us has been when I talk about effective fundraising. Our largest fund we've raised to date of private fund in our firm history is our fifth year European direct fund. At year-end, we were still in fundraise mode.
We'd raised [audio distortion] against a target of nine. We were expecting to quickly get more hard capital, EUR 11 billion. I think that illustrates the demand of this. We're also seeing demand for complementary products. At Ares, we launched our inaugural alternative credit fund in 2020. This is a fund that where we had put a $2 billion target out there or more, which again, I think first-time inaugural flagship fund. It's kind of a modest ambition. You don't get too bullish when you're going out with an inaugural fund. The end of the year, when we talked about our earnings call, well north of that $2 billion target, and my conviction we were going to hit similar to our hard cap for the other fund of $3.6 billion. I think interest in credit's never been stronger. Look, it makes sense.
I think when people look at the relative return opportunities or capital structure needs, a lot of LPs are really appreciate and understand this. The loss profile of being top of the capital structure is very attractive, and the returns based on the yield orientation of the strategy. Frankly now since today we're seeing volatility in rates, keep in mind this is a strategy where a floating rate business, but you actually have very de minimis to no duration risk. I think that's going to persist and I think continue to grow and continue to see LP appetite grow.
Those are great comments. Just perhaps a quick follow-up for Mike McFerran, and this is going to be somewhat credit related as well. Wondering if you could just talk a little bit more about your Aspida platform. Certainly, this is an area where you're continuing to build out. Wonder if you could just talk a little bit more about some of the opportunities you see there over time. Thanks.
Sure. I'll start by saying I don't know who in our firm came up with the name Aspida. I like it. It's a Greek shield. The Ares, we assign out Greek naming conventions to lots of things we do, but I give kudos to whoever in our firm came up with that. It's a great name. Aspida, I think represents an evolution of our insurance strategy. Several years back, we formed what was called Ares Insurance Solutions, which was really a group of people in our firm with deep investment experience, but also great insurance industry insight that were very focused on ensuring we were being optimal in marrying what we do to the needs of insurance businesses. Being thoughtful and collaborative with insurance enterprises on their specific needs, but also restrictions, especially our regulatory capital.
That's culminated in insurance being one of the two fastest institutional bases in our firm the last several years. I think our AUM from insurance on average has grown over 28% over the last five years. It's been quite meaningful for us. Aspida represents, again, for us, I think the evolution of that strategy, which was to complement what we do with external limited partners by having our own insurance platform. Different firms in our industry have taken different approaches to this, that everyone's well aware. Probably the news yesterday would follow. Thinking Ares transaction, what Blackstone has done. I think everyone sees the insurance opportunity but has different ideas of how to approach it. For Ares, we did see the benefit of having virtual, like captive insurance platform. We weren't looking to go out and buy a multi-billion dollar business.
Instead, we felt we wanted to build a business under Aspida combination of inorganic acquisition opportunities and organic growth. Be able to support it and grow it for the long term. The first acquisition we did was the F&G Reinsurance platform. This required about $2.3 billion of assets. This happened in late 2020. I think as time passes through the course of 2021, we're going to be able to complement this organically and possibly do other inorganic transaction. I see what we're trying to do with Aspida as being something, again, that's not to replace our third party institutional LP base with insurance clients. It's really meant to be complementary to it. If anything, make even more effective. We're excited about this. I think this is something that's going to be evolving interestingly in the years ahead.
It's an exciting time for us to close down the three institutional transactions.
Great. Just sticking on the theme of credit-oriented strategies, this next one is for Mike Policarpo. The recent acquisition of the USAA Asset Management Company that Victory Capital completed has given you a nice lineup of fixed income products. Could you just talk a little bit more about some of the growth opportunities that you see over there?
Sure. Thanks, Ken. Yeah, we did acquire USAA Asset Management Company in 2019. One of the key elements of that transaction for us was the USAA Investments franchise. They are a credit-heavy oriented fixed income strategy. They have a number of taxable and tax-exempt strategies that really cover all duration from short to long term, as well as some specific credit-only focused product set. We're excited about what they have. When they were part of USAA pre-acquisition, they were really under-marketed. A lot of the money that they managed was internal with some of the general account insurance money. We know that this team has the institutional quality. They've got strong investment performance. They've got a tested process and a very long tenured team together, probably averaging close to 20 years together. It brought us really scale in the fixed income space.
They manage $35 billion+ today. They've got a pretty long runway ahead of them. We're excited really for a number of fronts. Across really all of the distribution that we have, we see tremendous institutional opportunities as credit in the public side of the market continues to see expansion. We see opportunities on the intermediary and retail aspects of our distribution. They have two active ETFs, fixed income ETFs, that have recently received their three-year track record, strong performance, top quartile across the board, as well as significant four-star Morningstar ratings. We see tremendous opportunity playing in the ETF space from a different packaging perspective. Lastly, we have our direct investor business, which again folks are looking for income, and we think that they have a great offering across the board that'll play.
We've seen success in now putting USAA Investments through the aspects of our distribution now almost 18 months post the transaction. Our products gain shelf space and assets really across all three of those channels. Are really excited for them as we continue to market them, and can demonstrate the kind of playbook that we've had on acquisition and then follow on of organic growth. Really excited about what they have, and it's a great team down in San Antonio, Texas. They're very high performers, and we're excited to have them on.
Great. Then if we just move over to more of the equity side of the area. This one I'll direct to Mike McFerran. Wondering if you could just comment on deployment opportunities that you see within the private equity side of the business of Ares. Then perhaps after that, relatedly Brian, you touched upon this the secondary side and also the co-investment areas. Wonder what kind of opportunities you see over there. Thanks.
Thanks, Ken. 2020 was a busy year for our private equity business. We saw a lot of opportunities. We were able to put a lot of capital to work. We think the opportunity set very intriguing at the moment. There's a lot of stuff that's via, I think to highlight our private equity strategy is broad. We actually call our fund an opportunities fund. Historically, this fund invests globally in a mix of everything traditional LBOs, distressed or controlled transactions. Kind of look at our historic vintages like the foundation between those two. In some sense of what we do as private equity at Ares is probably about 50/50. We complement that fund with our [audio distortion] , which is solely focused on very unique opportunities, distressed, rescue capital, stressed opportunities, and the like. The opportunities have been interesting.
It's easy to look at our screens and see what's happening in the traded market, whether that be in fixed income and see that story. I think there is a great difference in story between how value traded markets and private markets I think have made some challenges. Stress is out there. Some industries more than others. At the end of the day, a lot of damage has been done across the globe technologically. A lot of businesses were capital-driven. They have applied for things that they couldn't do with their balance sheets pre-COVID. It's not just a defensive environment as well. I do think opportunities have remained more interesting than they probably have been pre-COVID. I think as the deployment happens, it can be an interesting 2021.
All right. Well, I'll start with secondaries, Ken, because you had asked me about that. In the private markets, remember that investors are limited partners of a partnership vehicle, and the only way they can exit before maturity is to sell that investment in a secondary market in a private transaction. There are no large liquid markets for those interests. The markets are less efficient, and that can benefit skilled investors. Now, as the private markets overall grow, there are more investors, and there's more want or need for liquidity. What that means is that the secondary market grows alongside of it. At the same time, I'd say that perhaps no part of the private markets are evolving as quickly as the secondary markets are in terms of the shape and the size of the opportunity set.
Not too long ago, the secondary market would've really just been for distressed sellers that needed liquidity. Today, they allow for active portfolio management, relationship management, as Michael talked about, for non-continuing relationships. Also, they allow opportunities for general partners to come up with solutions for individual assets or for older funds. It is a very dynamic segment of the market, and investors are attracted by that today, which I referred earlier to the success we have had in that part of the market. The other question you'd asked about, Ken, was co-investment. For us, that refers to investing alongside of a manager directly into a company, frequently with lower or with no economics to the manager.
That's a way for sophisticated investors to lower their overall costs, to invest in a more targeted way in strategies or in companies, and to back managers that they like. Those are all themes that are playing out pretty heavily now in the current market. At Hamilton Lane, we benefit from having relationships with hundreds of the best managers globally, and we're a large client for many of them. That means they come to us with many of their best investment ideas, and we're able to invest alongside them into those transactions. While there was a slowdown in deal activity at the onset of the pandemic, it came back at very high levels in the back half of the year. Today, that part of the business is as active as we've ever seen.
Great. This next one is for Mike Policarpo. Wondering if you could just talk more about what you're seeing in terms of client demand within strategies, within specific investment franchises, INCORE, RS Global, Sophus, Trivalent. These particular investment franchises are ones that you've been reporting positive net flows in recently. Wondering if you could get a little bit more color around that. Thanks.
Sure. Absolutely. Yeah. Really across all 10 franchises in our solutions platform, we've seen success. The four you've highlighted, I'll talk a little bit about maybe a background of them and why we're seeing success there. RS Global came to us as part of the RS acquisition in 2016. That's a global product and an international product as well. That team is based in San Francisco. They have a quantitative process. They recently reached $1 billion in AUM and had fantastic long-term performance. They've really been able to market themselves through our distribution institutionally. They recently won a very sizable mandate on the institutional side of the business, really their first significant institutional mandate, really based on the longevity of the process and the numbers, and we're excited about that.
As we go forward, they've also seen success in the retail and retirement segment as well within our business. Sophus is an emerging markets equity product. They're based in Des Moines, Iowa, and they also have folks in London, Hong Kong, and Singapore. They've got folks on the ground, if you will, from an in-market perspective. They too came to us as part of the RS acquisition in 2016. They have seen really tremendous demand in their emerging markets, small cap, and their large cap product, institutionally, as well as on the retail side of our business. Trivalent is based in Boston, and they came to us as part of the Munder acquisition in 2014. They have been successful since the transaction back in 2014. They have an international small cap product that is nearing capacity, but has had tremendous growth and tremendous performance.
Now we're seeing, if you will, the brand of Trivalent flip into their large cap product, EAFE product, and start to see some growth there as well in our retail and retirement segments. Lastly, INCORE has multiple fixed income offerings. They came to us really as part of the Munder transaction as well. They're based in Birmingham, Michigan, as well as some folks here in Cleveland. They've seen success recently in two specific products. They have an Alternative Income product that has garnered success based on the environment from a yield perspective, and where they've been able to deliver that product in a mutual fund structure as well as institutional, has grown significantly, doubled really in the last year.
Then we've got a Fund for Income product, which is a Ginnie Mae seasoned as well that has seen consistent flow really for the last several years. We're excited about those products. We've got obviously a number of other franchises and products that are winning business across the different platforms that we offer. We're excited to see the continued success in these products.
Now let's just switch over to the topic of ESG and socially responsible investing. I'll start this one with you again, Mike Policarpo. Victory Capital had recently closed on the acquisition of THB Asset Management. Could you just talk a little bit more about the opportunity that you see for socially responsible investing and ESG? Perhaps afterwards, we could open it up to the rest of the panelists for any of their additional comments about the investments in general in that area. Thanks.
Sure. Thanks, Ken. Yeah, we are excited about THB. Really excited from a corporate responsibility and ESG investing overall from Victory's perspective. THB, as you mentioned, we closed that acquisition on March first, so they recently become our 10th investment franchise, their base fits. They really are, if you will, pioneers from social responsible investing in ESG. They've been practicing those disciplines in their investment process for close to three decades. They are really what we would call kind of a impactful acquisition. Low AUM. They come to us with about $600 million in assets under management, primarily focused on domestic and global small cap, micro cap, and midcap strategies. Fantastic long-term investment performance. Again, focused within ESG philosophy across those disciplines. We're excited to bring them on.
I think ESG from an investment process and investment philosophy perspective is foundational. The investments and the holdings that all of our franchises have and the investment processes that they have, high ESG companies are high quality companies. We think that resonates with THB. Beyond that, more broadly across our other franchises, in 2020 Victory hired a director of really corporate responsibility and responsible investing, Dave Alt. He's worked with all of our franchises to really hone the ESG practices that each of them have. As you know, our investment model is pure investment autonomy. Each of our franchises manages money in the way that they see fit.
However, all of them had ESG components in their investment process and philosophy, and Dave Alt is working with them really to hone that and to make sure that they have access to the data, the processes that they need to kind of continue to make sure that they're focused on their investment process, but make sure that they tap into the ESG components that they see fit. A number of teams had it prior to Dave Alt coming in, and a number of them have had it for a number of years in their process. We just think it's a important factor going forward. We believe that investors are thinking about making sure that the money that they invest is doing good. I think it's going to be an increased factor as we go forward in thinking about decision making across the board.
I think the last thing I'd say is, from a firm perspective, we think corporate responsibility is really important and some of the things that Dave Alt has done with our investment franchises have transcended really corporately as well to our employee base. We think ESG is here to stay, and we're excited to participate with THB, and look forward to kind of plugging that into our distribution and extracting some significant growth going forward. The application across the rest of our franchises as well.
From an Ares standpoint, I would just highlight, when I think about ESG investing in our minds really starts with us as a firm being Ares having a commitment to ESG principles within our own culture. As Michael mentioned, I think it's something that's important to our employees, important to our stakeholders, our private investors, our funds, our public shareholders, other people we do business with. Important to our leadership. I think setting the tone of commitment does start at the top. At Ares, our head of ESG, and also actually our head of diversity, equality, and inclusion, both report directly to our CEO, Michael Arougheti. We wanted to make sure that structurally we set it up that way to illustrate our structural commitment to this. Also ensure that we set up a framework that it takes everybody to be focused on this.
We set up designated ESG champions across our firm, and they're really in place to ensure that ESG principles are being integrated within all of our firm's processes, including our investment process. Like Mike, I think ESG's critical. It's here to stay. I think it's something to feel great about, and it's something that is a great rally call for everybody and something we can optimistically work with our employees to make progress on.
Yeah, I would echo a lot of that sentiment. For us at Hamilton Lane, responsible investing is and has long been part of our DNA. Started probably nearly 15 years ago with ESG initiatives across the firm and very similar concepts where we have a responsible investment committee, we have a head of sustainability and ESG, and we also believe it needs to be incorporated down through all of our investment activities as well as at the corporate level. It's something that we take very seriously. We also work with our managers on to understand what they're doing, and to really share some of the best practices that we're seeing in this area as well. It's a huge area of interest for investors in the asset class, and I agree that that trend will continue.
Great. Then for the next topic, and this one I'll address to Brian and Mike McFerran. Both of your respective companies have recently announced developments within the SPAC space. Could you talk more about the growth opportunities you see within this fast-growing segment? As this area could potentially be a new product line, I wonder if you could just talk a little bit more about how large this segment could be over time for your respective firms. Thanks.
Sure. Okay. Yeah, as you know, we recently completed our first SPAC raise. Our premise was that we could bring something unique to what is admittedly a crowded market. First, as a public company, we have relationships with a strong group of existing shareholders that are familiar with us, and that we believe like our approach to investing. We have, in terms of investment sourcing opportunities, as I mentioned earlier, we have relationships with hundreds of private equity managers, and we have detailed information about thousands of private companies that are owned by those managers. We have the technology and the skill set to be able to sort through those opportunities and analyze them. On top of that, we think we've come up with a deal structure that is a bit more investor-friendly than some of the current vehicles out there.
We think we have something that is unique in the SPAC market. We do believe there's an opportunity for us to turn this into a business line. First, we know that we need to do a good job with the first one, and so that is really where we're focused.
Similar to Brian's comments, I'd echo some of that. It's similar for Ares. We recently completed our first SPAC IPO. From Ares, we feel like we can bring some great differentiator to this. Our firm's culture is operating across three businesses, but we operate in an integrated fashion. Our culture is rooted in collaboration. What we think is unique to us is everything we do at Ares is drawing upon all parts of the firm, and in the most collaborative and structured way we are able to do so. We have teams that have worked together for many years. We think all that has translated into strong investor performance and a great business for the last 20 years. We think we bring that to bear in this SPAC market, where we can bring our sourcing expertise, our underwriting capabilities, and fresh idea generation to identify unique opportunity.
I think similar to Brian's comments, you have to do a great job with the first one. I think it's been a really fascinating time, seeing this resurgence of SPACs, which was something that I remembered in the early 2000s. Then here we are. I think it's an exciting opportunity, and I think if the firms do a good job with this, I think it could be exciting. I think there's a double struggle to do more. I'm hoping for Ares that certainly we do a great job with the first one, and it will be the first in a long line of them. I do think this is complementary to what we do. I think it draws upon a lot of our private equity expertise and the rest of our capabilities around our firms.
I think the overall growth in the SPAC market's good for our PE business. I think it creates another area of demand for portfolio companies. I do think it's all positive, but it's going to be exciting to see the deals that are done ahead and how different firms bring their own visions and [audio distortion] . I'm excited for it. I don't think this is something I'll call as transformational for Ares. I think it's a nice complementary and drawing partners in PE.
Great. We just have time for one more question. Let's end it on the topic of M&A. Certainly, this has been very relevant among a lot of investors for this sector. Just wondering if each of you could just share with us what you think about in terms of potential growth opportunities that you see through M&A. I'll start with you, Mike Policarpo, and then Mike McFerran and Brian, if you could just chime in with any additional comments. We'll go with that order. Thanks.
Yeah. Thanks, Ken. Yeah, I think it's very evident that the industry is, and has been, and will continue to be in a consolidation mode. As we think about it, the need for scale, and scale beyond just size, but scale in with respect to distribution channels, operational infrastructure, as well as just kind of financial heft is going to be really important. Access to broad and differentiated distribution. Folks want to get access to new clients that they haven't had access to before, and the cost of entering some of those distribution channels may be significantly prohibitive as a standalone. Obviously, there's also product development, vehicle capabilities, and then just reinvestments that are required to stay current and get ahead with respect to data, technology, marketing, I think, will continue to force discussions with respect to consolidation.
From Victory's perspective, our model and our business is built to do M&A. As I mentioned earlier, since our MBO in 2013, we've done five acquisitions, as well as a couple of minority investments. We've done that really to make our business better, trying to get access to new clients, new capabilities, as well as driving, if you will, overall firm scale. I think we've got a pretty good blueprint to participate in the consolidation that's happening. We've done smaller, impactful strategic transactions like our entrance into the ETF business a few years ago that we started with $200 million and now we're well over $6 billion. The THB acquisition is small. We've also done what I'll call transformational acquisitions, such as the USAA transaction in 2019, where we doubled the size in AUM and were able to integrate the business onto our centralized platform.
That really afforded us incremental financial scale through synergies and cost takeout, which again, is just something that's a benefit of our business. We're excited about the opportunity and see tremendous growth going forward. Once we've done five transactions in eight years since we did the MBO, I would envision that we'll continue to do transactions going forward that'll be both transformational on the high end from a size perspective as well as impactful. We're excited that we've got a blueprint and a platform that allows investment professionals to continue to practice their craft and probably get out of some of the headaches of operations and administrative that, frankly, are a distraction to them, and get access to really three distinct distribution channels. We're excited. We're active. As we've said on all of our public calls, we're evaluating opportunities.
Our balance sheet capacity is, if you will, ready. Excited about the opportunities that we've been evaluating and hopefully we'll bring those to fruition in the short term.
For Ares, we have a dozen-person corporate strategy team, and this team has built out over the last several years and grown, talented professionals whose sole roles and responsibility are to explore strategic opportunities for the group. We've dedicated a whole group to this, realizing that it's such a key topic and area of focus that having people do it as part of their day job is challenging at times. I think it's reflective of what Michael touched on. This is a consolidating industry, has been and will continue to be. I think the winds of consolidation are going to probably continue to accelerate. There's been, in the last several months, several big transactions announced. I think whether it's small roll-up transactions or larger things like what our peers announced yesterday, it's more transformational, will continue.
For Ares, we did the acquisition of SSG, and now Ares SSG, which we did in 2020. This addressed really a key opportunity for us, which was to have a manager in Asia. We're excited about that. I touched on from the acquisition of [audio distortion] . If everyone's aware, public read about, we're working on a possible transaction with AMP Capital. I think it's an interesting time and no shortage of things to do. It does, again, I think this is an environment where we talk about LPs and talk about consolidation. There's a lot of secular changes that are happening. That said, it's going to try everything. It creates opportunities for GP consolidation. Similarly, also does have some natural issues where we are. I think a lot of these firms were founded in the 1990s. You're coming across generational transfer issues.
Wealth creation and all that has set the table for an increasing list of new opportunities. For Ares, the bar is high for M&A because we're at a site where I feel like we don't necessarily need to acquire to add new capabilities. We can organically build it. It's a team lift-out . We always think about the different trade-offs that are explored on the M&A, really accelerate an entry point to the right transaction, complement you do or do something new. For us, the bar is high. There's really a test check to be positive for us that financially makes sense. It can be our minds accretive, have the ability to be accretive over the long term. Second, it has to be strategically accretive. If buyers want it, we want to believe it's complementary.
It synergies from the investment and distribution side that make us better investors, or we're able to make them better. Third, and probably most important, it's cultural. Again, we believe by Ares, I think our secret sauce is our culture rooted [audio distortion] . As we think about M&A opportunities, we're very focused on ensuring anything we can do will be consistent and additive to that or disruptive to it. I think 2021 broadly in the asset management space, we're going to continue to see aggressive M&A transactions.
At Hamilton Lane, we run a little bit of a different spot, which is just that we've grown almost entirely organically throughout our history. We have found that M&A is hard to get right in a people business. For us, in our 30-year history, we have done three deals. Those are generally places where we're enhancing an existing team or an offering or filling a void in a service offering. Certainly something we spend a lot of time looking at and thinking about, but not a place where we've had a tremendous amount of activity in the past, nor do we expect that to change too much in the near term.
Got you. Well, we've run out of time for now. It's been a really great discussion. Once again, I'd like to take this opportunity to thank our panelists, Mike McFerran, Brian, and Mike Policarpo for joining us today. Thank you, everyone.
Thank you.
Thanks, everybody. Take care.
Thank you.