Through the senior fund, Ares provides directly originated senior secured loans to middle-market U.S. companies. More than 2.6 times the size of its 2018 predecessor fund of $3 billion, the senior fund was significantly oversubscribed relative to its initial target of $4.5 billion. According to a company statement Monday, total equity commitments were approximately $8 billion.
Combined with the $5.1 billion final closing of its junior direct lending fund in October, the total commingled capital raised in 2021 by Ares’ lending team totals $19 billion, including expected leverage.
Ares said it stuck to the same strategy in both funds, investing in companies of $10 million to more than $150 million of EBIDTA, most often serving as lead investor. Mitch Goldstein, a partner and co-head of the Ares Credit Group, said in a statement on the closing Dec. 13 that Ares’ established approach “emphasizes direct origination and lending to businesses with high-quality management teams and strong sponsorship.”
Company officials said that, in the current market, Ares’ funds are an increasingly appealing alternative to banks and traditional lenders.
“As investors continue their hunt for yield, we believe directly originated senior secured loans … offer attractive relative value in a low interest rate environment while also providing investors with opportunities for attractive current income with reduced volatility,” said Mark Affolter, partner and co-head of U.S direct lending at Ares.
Financial analysts have attributed the persistently low yield of traditional investments in the current market to the success of alternative investment lending managers like Ares, Apollo Global Management Inc., and Blackstone Group. However, Ares noted in its Q-10 report to the Securities and Exchange Commission in November that damages associated with Covid-19 and a failure to develop “herd immunity” still poses risks to its business.
In November, Ares led the arrangement and funding of a $400 million loan facility for the fast-growing alternative mortgage lender CrossCountry Mortgage in Ohio. In July, the company completed its acquisition of the real estate investment advisory and distribution business Black Creek Group; the joined company holds assets in excess of $238 billion.