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, one of two 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.
Michael Cyprys: Great. Thank you.
Operator: Our next question comes from Brennan Hawken with UBS.
Brennan Hawken: Good morning. Thanks for taking my question. 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?
Michael Arougheti: 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.
Brennan Hawken: And do you have a view on a good balance between the different channels?
Michael Arougheti: 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 two to four 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.
Brennan Hawken: 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?
Michael Arougheti: 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 zero 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.
Brennan Hawken: Okay. Thanks for taking my questions.
Operator: 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.
Michael Arougheti: 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.
Operator: 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.
