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Ares Management has clinched a record-breaking $34bn private credit fund, giving the firm tremendous firepower at a time when rivals are racing to build their own war chests.
The credit-focused private investment group said it had drawn in $15.3bn of commitments from investors for its third senior direct lending fund, surpassing a $10bn target.
The $34bn figure includes billions of dollars of bank loans, which will boost Ares’ ability to lend, as well as separately managed accounts that will invest alongside the new flagship fund.
The fundraising is the latest successful capital raising within the private credit industry in recent months, as investors clamour for allocations to the asset class.
Rival HPS Investment Partners raised $14.3bn from investors for a new loan fund last month, a sum that jumped to $21bn when including leverage from banks. Goldman Sachs in May said it had topped $20bn for its latest private credit fund.
The string of successful raises underscore where pensions, endowments and sovereign wealth funds are committing to new funds.
Many buyout groups have struggled to reach fundraising targets they set for core private equity funds, as they sit on unsold companies worth a record $3.2tn.
Instead, institutional investors have more aggressively directed their commitments to infrastructure and private credit funds, particularly direct lending vehicles.
“It is a difficult fundraising market out there and what we have seen is that investors are looking to consolidate their own manager lists,” said Jana Markowicz, a partner at Ares. “We’ve benefited from that, with the size and scale Ares brings to bear on the right side of that equation.”
Private credit shops such as Ares have become the new heavyweights on Wall Street, stepping increasingly into the shoes of traditional banks since the global financial crisis more than a decade ago.
Banks have exited certain business lines and reduced some of the riskier lending they once did, blaming higher capital requirements and post-crisis regulations for the shift.
Private investment firms have filled the gap, becoming the go-to buyer of bank loan portfolios and increasingly lending directly to companies.
Mitch Goldstein, co-head of Ares’ credit business, said the fundraising was a “strong vote of confidence from our growing investor base”.
Ares, which manages $428bn across the firm, has already put $9bn of the fund to work.
The firm has become a behemoth in the private investment industry, with its growth in recent years an envy of rivals. Its shares have returned more than 300 per cent since 2020, outpacing the likes of Apollo, KKR, Blackstone and Carlyle.
The rise of the private credit industry has raised new questions for financial regulators, who have far less oversight over how these lenders write loans compared with traditional banks.
Investors are watching closely to see whether performance begins to dip given the rush of capital into the space.
Lenders, including Ares, have come under particular scrutiny for one recent corporate loan that went sour. The firm earlier this week disclosed it had marked down the value of the loan to private equity-backed company Pluralsight by more than 50 per cent.