When Dan Morehead—who is the featured guest on the latest episode of Fortune’s Crypto Playbook podcast—first started digging into Bitcoin in 2013, he decided to leave behind his long career in traditional finance and throw all his chips into the world of cryptocurrencies. A former trader at Goldman Sachs and Tiger Management, Morehead felt that Bitcoin represented a financial revolution—and his bet paid off. Since Morehead first purchased Bitcoin for under $100, the price has erupted to well over $100,000—thanks in part to all of his former colleagues on Wall Street piling into the once-renegade asset.
But unlike many of those who came to the currency early, Morehead is not a “Bitcoin maxi” who shuns other coins. Rather, he has used his investment firm, Pantera, to back many other crypto projects, including prominent ones like Ripple Labs and Solana. In doing so, Morehead has ridden the industry’s success to over $4 billion in assets under management.
In his interview on Crypto Playbook, Morehead made the case for investing in other blockchains and projects. “There isn’t just one internet company, right?” he said. “That’s the way I think of blockchain.”
Bitcoin vs. the rest
Among cryptocurrencies, Bitcoin still remains king, with a market cap of over $2 trillion. Ethereum, the second largest, has a market cap of just $435 billion. But investors like Morehead argue that, despite its dominance, Bitcoin’s use cases remain more limited, especially as proponents continue to push for decentralized financial applications like payments and lending. Other blockchains, such as Ethereum and Solana, offer advantages that Bitcoin does not, including speed, programmability, and lower transaction fees.
While other crypto assets may not have Bitcoin’s “escape velocity,” as Morehead puts it, they do have upside as different use cases continue to evolve. “I think it is very important for people to be invested in this space, but do it sensibly,” he said. “Don’t do more than you could afford to lose, and as long as you can hold it.”
“In 20 years, everybody will have crypto,” he added.
Despite the explosion in crypto prices, few projects have been able to achieve the mainstream success of Bitcoin, which is still mostly limited to a store of speculative value. While Pantera has invested in a variety of fields, like on-chain gaming, none have achieved the status of “killer app,” or widespread adoption.
Morehead pointed to stablecoins, a type of dollar-backed cryptocurrency, as a potential breakthrough for the broader industry, especially as banks and Big Tech companies explore the field. “They’re essentially the Trojan horse of crypto,” he said. “As more and more corporations start including stablecoins, it’ll just bring more people into the blockchain ecosystem.”
Ron Zori’s first brush with venture capital came during his freshman year at Columbia University, when he went to the Mercer Hotel in SoHo for coffee. As Zori tells it, he just happened to strike up a conversation with someone at a table nearby, who just happened to be Lukasz Gadowski, one of the founders of the brand-new startup Delivery Hero. Gadowski ended up introducing Zori to his lead investor, Kite Ventures’ Edward Shenderovich, who hired Zori out of college to support him in investing in companies like Dataminr, Lyft, and Plated.
That turned into leadership roles at Knotel and Public, side quests as an a16z scout and angel investor, and now Zori’s new gig—the first senior venture hire at the venerated New York firm Lerer Hippeau. “Serendipity,” as Zori describes it. His new boss, Ben Lerer, disagrees. “I’ve never met anybody in my life like that,” Lerer tells me from his firm’s headquarters overlooking the Hudson River, about a 10-minute walk from the Mercer Hotel. “I feel like Ron meets people like this twice a week.”
Known for its seed-stage investments in the New York consumer space into companies like Warby Parker and Casper, Lerer Hippeau recently announced its ninth fund, a $200 million vehicle that will look to capitalize on the growing buzz in sectors like AI and fintech. And despite the firm’s 15-year history, Lerer says that Zori’s hire marks the first time they’ve brought on a senior venture partner.
Zori, a pro soccer player in Israel before going to Columbia, has always had an eye on growth. He worked as the head of revenue at Knotel, a WeWork competitor that eventually filed for bankruptcy during the pandemic, joining the company in its infancy and helping take it to $370 million in recurring revenue. While at Knotel, he would meet with startups renting office space and occasionally write angel checks. His first was into a small fintech company called Public, which would gain unicorn status just a couple of years later. Zori joined in 2020 to work on business development. It was his second time experiencing a startup’s rocketship moment, as Public went from a few thousand users to a few million. “That was the rush,” he tells me. “That’s what I’m here for.”
At the end of 2022, Zori left to focus on his own investments, raising capital for special-purpose vehicles and deciding whether to start his own fund. He’d kept up a friendship with Lerer over the years, often feeding him deal flow. They also co-invested, including in Duet, a health tech startup led by former Knotel executive Jonathan Goldberg that helps nurse practitioners launch their own practices. “Ron was existing in my head as something between an emerging manager and a super angel,” Lerer tells me. He thought that Zori could have the most impact on startups by joining a platform with capital and resources like Lerer Hippeau. “It feels like a real value to get to work with somebody who you have an existing, trusted relationship with,” Lerer says.
Zori started at the firm two weeks ago and will have a hefty portfolio during this critical juncture for the venture industry. One priority will be looking at sectors where Zori has been in the trenches of “zero-to-one,” namely fintech and consumer, and figuring out where they’re headed. Another will be building Lerer Hippeau’s pipeline to Israeli and European startups, with Zori planning to spend about two months of the year out of Israel. “This marriage with Lerer Hippeau, I think, provides us the opportunity to actually give these founders the best platform as they expand to the US market,” Zori says.
In early 2024, Michael Arougheti bought a stake in the MLB’s Baltimore Orioles with two of his colleagues at Ares Management. The move let him join the ultra-exclusive ranks of pro sports owners—but he realized there would be downsides. For one, he would have to give up his fantasy baseball league and his lifelong identity as a Yankees fan. But he didn’t think twice, and nor did his new co-owners, Mitchell Goldstein and Michael Smith. After signing the paperwork, Goldstein promptly went into his closet and filled three garbage bags with Yankees clothes and memorabilia, though he did hold onto his signed Derek Jeter jersey.
The three seized on the rare opportunity to get a piece of a pro sports team by becoming part of a new ownership group for the O’s that included high-profile names like David Rubenstein, cofounder of the private equity giant Carlyle Group, Orioles legend Cal Ripken Jr., and Michael Bloomberg.
The Orioles purchase came as the latest signal of Ares’ rapid ascendance in the alternative asset sector, alongside familiar giants Carlyle, KKR, and Apollo. Like its rivals, Ares deals in “alt” investments like real estate and corporate reorganizations. But the firm’s arrival in the big leagues came about thanks to its dominance of one of the sector’s hottest categories: private credit.
The rise of Ares
A global company with outposts from Los Angeles to Jakarta, Ares’ spiritual headquarters is in Manhattan, where it occupies four of the top floors in the sleek 245 Park Avenue tower. Arougheti, who has served as CEO since 2018, has his office alongside Goldstein and Smith, who run the credit group, and Kipp deVeer, who the firm elevated to co-president earlier this year. DeVeer’s counterpart, Blair Jacobson, works out of Ares’ London office.
“What we are trying to create is any company around the globe that has a need for capital, with one call to Ares, we can be a solution provider,” Goldstein tells Fortune. “We have a long way to go to get there, but that’s our goal.”
Private equity is known for its sharp elbows and ruthless dealmaking, so the cohort of decades-long friends running Ares seems improbable. Also unusual is Ares’ distributed leadership structure, which entails Arougheti serving as CEO alongside newly minted co-presidents de Veer, who he has known since college, and Jacobson. One layer down is Arougheti’s Orioles co-owners, Goldstein and Michael Smith.
From the outside, the arrangement would seem unwieldy, at best. But it’s not an uncommon structure in private equity. KKR has a long history of joint leadership, with Joe Bae and Scott Nuttall serving as co-CEOs (and an ambition to reach $1 trillion in assets by 2030).
In the case of Ares, Arougheti serves as the face of the franchise, while de Veer and Jacobson lead the firm’s aggressive expansion plans, and Goldstein and Smith focus on core operations. The five insist that they function as a single braintrust, with everyone besides the Europe-based Jacobson working out of the side-by-side offices in New York.
They are, as Tom Wolfe put it in his 1987 Wall Street classic The Bonfires of the Vanities, the “masters of the universe”—the often hidden forces playing with ungodly sums of money to shape the world around us. But they seem like old college buddies, reminiscing on their days running around New York as 20-year-olds and butting into each other’s sentences. The only difference from any other pack of aging male friends is that instead of bonding over fantasy sports, they could afford to buy an actual team.
“I was in Kipp’s wedding. Our kids grew up together,” says Arougheti. “There’s a psychological benefit that helps us culturally.”
Arougheti himself took over the mantle of Ares CEO from Tony Ressler in 2018. He admits that with any leadership change, there will be accusations of succession planning, though he notes that he, deVeer, and Jacobson are all around the same age. “I had no plans of leaving the company,” he insists. Instead, the decision was to power Ares’ aggressive expansion plans, with all three now able to focus on growth and divide day-to-day management. It also allowed Ares to promote other leaders, including Goldstein and Smith, who took over the credit investment operations.
The five all met each other starting their careers in the New York finance industry in the 1990s, with Arougheti, deVeer, and Smith working together at Indosuez Capital and then RBC on a relatively niche area of banking, at least at the time: making loans to so-called middle market companies, which are often too small to go public.
The young bankers were hungry, though, and realized their area of specialty would never be a focus for a big institution like RBC. It was, however, becoming an increasing priority for private equity firms, who were starting to build out operations to lend to middle market companies or create financing to help with their buyouts.
One such firm was Ares, initially created within the private equity behemoth Apollo by its cofounder, Tony Ressler, to focus on distressed credit. As Ares moved into private equity in the 2000s, Ressler wanted to build a credit unit that could help finance deals. He ended up hiring Arougheti, deVeer, Smith, and Goldstein, along with 8 other RBC employees, and a management contract from RBC allowed them to take their book of business. Knocking around the world of high finance, Ares’ new hotshots had picked up all the tools. But it was spotting and seizing a massive new market that would vault them into the big leagues.
Kings of credit
Traditional private equity, at its core, is a simple strategy. A firm like Apollo or KKR will find a business that it thinks could be run more efficiently. It will raise money to buy a controlling stake in the business, ideally pushing profits up and operating costs down, either keeping the returns or finding another buyer at a higher price.
Private credit is one layer more abstracted. Instead of borrowing from banks, private equity firms could borrow money from other alternative asset firms—a phenomenon that became even more prevalent with the financial crisis, as banks’ risk appetites changed, partly as a result of shifting regulation. Ares became a leader of the burgeoning practice, providing loans to the private equity portfolio companies of counterparts like Apollo and KKR rather than competing against them for buyouts, and occasionally taking a small equity stake in the deals they helped fund. “Financing for a lot of companies has become very incestuous,” says Elisabeth de Fontenay, a professor at Duke Law who studies the rise of private credit.
In recent years, the sector has exploded, roughly doubling since 2020, and is expected to grow to more than $2.5 trillion by 2029. As a first mover in the meteoric space, Ares is near the top of the pack, with nearly $360 billion of assets in private credit alone as of March, with about another $186 billion spread over private equity, real estate, and other asset classes. Last year, Ares announced that it wanted to nearly double its assets under management to surpass $750 billion by the end of 2028—an ambitious goal that would place the firm in the top ranks of the alternative assets industry.
But it wasn’t always that way. Goldstein recalls the panicked days of the financial crisis, when Ares—and private credit as a practice—began to take off. As capital from banks grew scarce, Ares would call up its clients and tell them they were open for business. “We did very well,” he says.
They also began to fill the role that banks once held. As regulations shifted in the wake of the crisis, banks’ desire and ability to lend to smaller companies decreased. Instead, they began providing financing to firms like Ares, which allowed them to reduce their own risk exposure while still benefiting from the upside. “There was even more of an incentive to try to do lending in a way that avoided bank regulation,” says de Fontenay. “That’s really when and why private credit took off.”
Ares would argue that isn’t necessarily a bad thing. Smith refers to the period as the “golden age of private equity.” More firms were starting buyout funds, existing funds were getting bigger, and they all needed a partner. Banks didn’t want to fill the role of direct lending, so Ares could fill the gap. They didn’t just want to supply money, but be a more active partner, especially because they could provide small equity stakes.
The financial crisis also exposed the vulnerability of the bank model, where deposits were tied up in long-term loans, meaning they were technically solvent, but not liquid. “That’s where you get bank runs,” de Fontenay says. “Private credit is a really nice solution to that.”
The result was a reshaping of the American economy. 20 years ago, a smaller business might have been family-owned and financed by a local bank, and a larger company would have found funding through the public markets. “Today, that company is private equity-owned by a very large private equity fund and private credit financed by a very large private credit fund,” de Fontenay tells Fortune. “We’re in a very different world now.”
The rise of private equity has minted a wave of new billionaires—with four at Ares alone, including Arougheti—and the industry has become a lightning rod for critics who accuse PE firms of pillaging everything from nursing homes to newspaper chains by slashing payroll costs and selling what’s left for scraps.
Goldstein argues that layoffs are not the thesis of most of the private equity businesses in their portfolio when they’re bought. “Why do they get that rap? Is it based on fact, or is it based on it happening once or twice?” he asks. “In different periods of time, different asset classes get unfairly tarnished because they happen to be growing,” he says. “I think it is more political than it is a reality.”
The competition is nipping at Ares’ heels. Private credit continues to expand as the IPO market remains closed, with companies staying private for longer and needing more financing. “It’s very easy to start a private credit fund because they’re close to unregulated,” says de Fontenay. “There’s a ton of copycats, and more and more capital going into this market.”
That only means the risks are growing. Even though many alternatives firms, including Ares, are publicly traded, they don’t have to report the details on their loan books the same way banks would have to. She argues as a result, it’s difficult to know the actual health of the companies that private credit funds are lending to, especially as the economy teeters with the threat of tariffs.
“Scale is unbelievably powerful.”
– Ares co-president Blair Jacobson
Arougheti argues that Ares’ long history in private credit not only shields them from the competition, but also from the potential missteps that his new rivals might commit. “What is misunderstood is just how hard it is to perform consistently in this business, and how hard it is to accumulate scale,” he says. “Scale is unbelievably powerful,” adds Jacobson.
In other words, they’re arguing that building a private credit business the size of Ares takes decades: shouldering operating losses, accumulating talent, and building relationships. It’s why they hired Jacobson in Europe back in 2012, and why they’re now pushing into Asia, Latin America, as well as into new industries like infrastructure and real estate, including closing a nearly $4 billion acquisition earlier this year that doubled Ares’ real estate portfolio. “We’ve accumulated meaningful competitive advantages, and we want to press those advantages as quickly as we can,” says Arougheti.
“It’s not just a rush for growth,” adds de Veer. “It’s a belief that the larger that we get in a handful of these markets and geographies, the better we’ll be in the job.”
It explains why Ares can have such an aggressive target for expanding its footprint, even as the private equity industry as a whole struggles to fundraise. It’s also why Arougheti appears nonplussed about the new competition. “For all the talk of people getting into it and raising funds,” he boasts, “No one is really making any traction or inroads into taking share from the incumbents.”
The Last Dance
After years of building its reputation as the financial foundation for the private equity industry, sports may be where Ares gains mainstream fame. The two industries have become increasingly intermeshed, especially as figures like Apollo’s Josh Harris and Blackstone’s David Blitzer buy ownership roles in sports teams.
Apart from Arougheti’s rising status with the Orioles (Carlyle’s Rubenstein said last year that Arougheti was the “logical person” to become the team’s controlling owner), Ares made national headlines in December when it was part of the first group of private equity firms approved to buy a stake in a football team.
Sports have long been part of the firm’s DNA, including making investments in the space since 2007. Smith recalls that when they were building Ares, they would take private equity clients out to baseball games, especially if someone from their fantasy team was playing. “It was always a way to get people away from their office,” he says. “You could build a friendship away from just a business relationship.”
Arougheti says that they got the idea to move further into the space while cooped up during the pandemic, all watching the Michael Jordan documentary The Last Dance. They realized that no one would be showing up at a stadium anytime soon, so there would be a need for liquidity solutions. They formalized a standalone strategy, and after working to build relationships with leagues and team owners, finalized their first investment in December 2020. The firm announced a nearly $4 billion fund dedicated to sports and entertainment in 2022, finally gaining approval to buy a 10% stake in the Miami Dolphins late last year.
Private equity moving into professional sports conjures the same fears of merciless efficiency in an industry driven by sentimentality, but Arougheti brushes off the concerns, arguing that institutional capital will increase profitability and allow owners to invest more in their teams. “Fans want to win,” he says. “They’re going to love it.”
But as Ares’ insatiable desire for growth seems destined to eventually hit some outside bounds, Arougheti says its push into sports shows how far the firm still has to expand. “Every time you think that maybe a market that you participate in is maturing, the next thing you know, you wake up, and there’s another $2 trillion [market] that you weren’t in,” he says.
Login
