Ares Management has held a final close on its Ares Pathfinder Fund II at its hard-cap, well in excess of its $5 billion target.
The latest fund, which held its first close in March, was about 80 percent larger than the predecessor fund, which had total commitments of $3.7 billion, Ares said in a news release.
Pathfinder II pursues an asset-focused approach, “providing scaled solutions tailored to owners of large, diversified portfolios of assets that seek to generate resilient, contractual cashflows across market cycles,” the statement said.
According to an investor presentation dated May 5 that was viewed by Private Debt Investor, the fund seeks to deliver 11-15 percent plus returns with a 1.50-1.75 net MOIC, including a 5 percent annual yield. The assets include loans and leases, receivables and royalties and fees. The statement said that the Pathfinder strategy has pledged to donate at least 5-10 percent of the carried interest profits from the funds to global health and educational charities.
The predecessor, Ares Pathfinder Fund, closed in March of 2021, also well in excess of its $2 billion target, per PDI research. It had an internal rate of return of 16.07 percent, as of December 31, 2022, according to data from the Texas County and District Retirement System, which committed $100 million of capital to Pathfinder II.
The Pathfinder close is notable for its size and the speed with which it closed, given the current difficult fundraising environment for alternative assets, where some managers have been closing their funds well below their targets.
“Especially in these times of growing opportunity but also increasing uncertainty, we believe that our strategy benefits from diversified asset portfolios with meaningful downside protections,” Keith Ashton, partner and co-head of alternative credit, said in the statement. “As many banking participants grapple with new capital and liability paradigms, we see significant potential for the fund given its scale and flexibility,” he said.
“When investors commit to our fund, they gain access to one of the largest and most seasoned teams in alternative credit, while having the opportunity to make a difference to impoverished communities around the world,” Joel Holsinger, partner and co-head of alternative credit, said in the statement.
Since March 2021, the Ares Pathfinder funds have raised approximately $15 billion of LP commitments with a charitable tie-in, and Ares’ charitable pledge already has accrued more than $13 million of donations for charity based on performance as of June 30, 2023, the statement said.
The Pathfinder funds are part of Los Angeles-based Ares’ alternative credit strategy, which is one of the largest investors in asset-based credit managing about $27.8 billion of AUM.