Ares Management has raised $8 billion dollars for a fund making direct loans to small and midsize companies, escalating a fight between alternative-asset managers for market share
Investors often hold direct loans as substitutes for traditional fixed income, which has delivered dwindling returns as central banks have held interest rates low to spur economic growth and cushion market shocks.
“More than anything, it’s about low interest rates,” said Kipp deVeer, head of Ares Credit Group. “A lot of investors are frustrated by the low yield in fixed income they’ve traditionally allocated to, whether it’s loans or government bonds or high-grade corporates.” The new fund, which invests in senior secured corporate loans, will also raise debt, allowing it to make up to $14 billion in new loans over three years. Los Angeles-based Ares closed this year a European direct-lending fund that could invest up to €15 billion, equivalent to $17 billion, and in October a private-credit fund that will make junior, or riskier, loans of up to approximately $5 billion. The company reported $181 billion in credit assets under management as of Sept. 30.
Ares’s diverse investment strategies allow it to have multiple flagship funds raising capital in any given year, the firm’s chief executive officer, Michael Arougheti, told Wall Street analysts at a presentation in early December.The newest direct-lending fund primarily makes loans to back corporate buyouts by private-equity funds, and their growing size allows them to win larger deals traditionally backed by Wall Street banks. Ares, Blackstone and others lent $2.
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