Ares closes second senior direct lending fund at $8bn

The oversubscribed fund nearly doubled its initial target of $4.5bn.

Global alternative investment manager Ares Management Corporation has closed its second senior direct lending fund at $8 billion, according to a news release.

Ares Senior Direct Lending Fund II nearly doubled its initial target of $4.5 billion and almost tripled the size of its 2018 predecessor fund of $3 billion. With anticipated leverage, the total capital base for Ares’ fund is expected to be $14 billion, with a majority of investors selecting the leverage option, according to Ares.

“Middle market companies remain underserved by banks and other traditional lending sources and are in need of reliable, flexible capital from direct providers such as Ares,” Kipp deVeer, partner and head of the Ares Credit Group, told Private Debt Investor in an email. “Through SDL II, we seek to take advantage of this attractive market opportunity.”

Ares’ second senior direct lending fund will provide senior secured loans to North American middle market companies with $10 million to $150 million in EBITDA. The fund has already committed more than 30 percent of its investable capital in a diverse portfolio of more than 70 companies, Ares said.

“This fundraise highlights that investor demand remains strong as directly originated senior secured loans in North American middle market companies offer attractive value relative to investment alternatives in the liquid markets,” said Mitch Goldstein, partner and co-head of the Ares Credit Group, to PDI in an email.

Investors in Ares’ new fund included pension funds, sovereign wealth funds, insurance companies, high-net-worth individuals, family offices, funds of funds, endowments and foundations from North America, Europe, Asia, Africa and the Middle East.

Including the latest fund, Ares in the past two months has held final closes in both junior and senior direct lending funds totaling $19 billion, including expected leverage. Its most recent private credit solutions fund closed in October at $5.1 billion.

Ares’ predecessor senior secured lending fund had a 9.9 percent gross internal rate of return, a 7.3 percent net IRR unlevered, and a 19.2 gross IRR, 14.1 net IRR levered, according to the firm.

Ares’ US direct lending team, which sits within its credit group, managed $181 billion in global assets as of 30 September. The Ares Credit Group has investments in more than 2,900 companies across 210 funds.

The Los Angeles-based Ares is a global alternative investment manager that invests across credit, private equity, real estate and infrastructure asset classes. The manager had $282 billion in assets under management as of 30 September.