Ares Management has collected billions for a new private debt fund tailored to high-net-worth individuals, the latest sign that private asset managers are tapping into the vast retail market for fundraising.
The Los Angeles-based firm launched a private business development company, which has lined up nearly $1.5 billion in investable capital to make direct loans to US middle-market companies, according to an SEC filing from Monday.
The BDC, dubbed Ares Strategic Income Fund, has collected $847.1 million from several investors and has secured a $625 million credit facility from JP Morgan, the filing shows.
“As high-net-worth investors seek alternative sources of income, we believe that ASIF provides investors a differentiated opportunity,” said Mitchell Goldstein, the co-head of the Ares credit group and chief executive of ASIF, in a statement.
Private debt managers have increasingly leaned on wealthy individuals for fundraising. In the 2022 Annual Global Private Debt Report, PitchBook analysts estimate the total capital raised through nonlisted BDCs and credit-oriented interval funds targeting affluent retail investors surpassed $40 billion in 2022. This marks a 47.2% increase from the previous year.
Blackstone, which runs the $24.77 billion BCRED, is among the private debt managers raising the largest retail pools in recent years. Blue Owl Capital’s direct lending platform is another, amassing $16 billion across six nontraded BDCs, according to the report.
At the same time, investors’ growing appetite for yield-oriented products have driven more capital to private debt—an asset class that stands to benefit from higher interest rates, tightened underwriting standards and banks cutting back on riskier loans.
Blackstone, which saw its private credit funds gain 3.4% in Q1, is bullish on private debt. President and COO Jonathan Gray said on a recent earnings call that he sees a “golden moment” for private credit amid widened credit spreads and the recent constraints on lending from regional banks experiencing deposit outflows due to the collapse of Silicon Valley Bank and Signature Bank.
Ares co-founder and CEO Michael Arougheti said in a February earnings call that he had noticed a rising interest in private credit.
Arougheti said that private debt funds, by and large, have ample dry powder to make new investments or support existing portfolios, which should protect their performance despite the rise in defaults and amendments to loan terms.
The firm’s newly launched BDC will be managed by Ares’ credit unit, which had more than $214 billion AUM at the end of 2022.
The primary mandate of ASIF is to make senior secured loans to companies with an EBITDA of $10 million to $250 million, yet it has the flexibility to pursue lending opportunities such as subordinated debt and other types of junior capital.
The fund can also invest in broadly syndicated loans and other liquid credit instruments such as high yield corporate bonds and collateralized loan obligations for the purpose of cash management, according to the SEC filing. ASIF may also co-invest with other Ares funds.
( This news/press release has not been altered by investment.net, apart from the headline, and has been obtained from a syndicated source:-Â https://pitchbook.com/news/articles/Ares-BDC-retail-investors-direct-lending )