Ares closes special opportunities fund on $3.5bn

The vehicle, which will invest in both public and private deals, is 75% larger than its initial target.

Ares Management has closed on more than $3.5 billion for its special opportunities fund, 75 percent above its initial $2 billion target.

Ares Special Opportunities Fund is the manager’s first distressed vehicle launched since January 2017, when the firm hired Scott Graves from Oaktree Capital Management to develop the Ares Private Equity Group’s special opportunities platform. The Los Angeles-based credit manager also brought on as partners Craig Snyder from Blackstone’s credit platform GSO and Aaron Rosen from Citibank. The platform has 17 professionals.

The Ares fund close comes amid explosive growth of distressed opportunities occasioned by the coronavirus pandemic and follows some recent announcements on the strategy by the likes of Apollo Global Management and KKR.

ASOF pursues a “differentiated strategy” that pivots between opportunities in both the private and public markets and seeks to partner with management teams by pursuing an “activist for good” approach, the fund said in a news release.

ASOF, which had an interim close last June on $1.02 billion, has thus far invested $1.7 billion, split almost evenly between private and public situations. Although the fund had deployed $400 million primarily focused on privately negotiated transactions going into March, it said it quickly pivoted toward more public investments, with about $1.3 billion invested and committed by the fund during the market dislocation. It declined to specify its investments.

As of 31 March, the fund had a gross rate of return of 29.2 percent, with a 1.1X multiple, sister publication

More than 70 limited partners from around the world backed the vehicle, including pension funds, sovereign wealth funds, insurance companies and endowments. About half of the investors, representing more than 80 percent of the committed capital, had previously invested in another Ares fund.

“This has proven to be a significant fundraising quarter for the Ares Private Equity Group,” Michael Arougheti, CEO and president of Ares, said in a statement. The success of the ASOF launch exemplifies Ares’ “ability to create new, differentiated strategies” by assembling top talent and giving them access to the resources of Ares’ extensive platform, he said.

Arougheti added the Private Equity Group had a “demonstrated ability to capitalise on market volatility”, which helped it attract meaningful capital from existing and new investors. Graves, who is also a partner and co-head of Ares Private Equity Group, said the company’s distressed investing expertise and leadership in direct lending and liquid credit give the fund “a significant advantage” to invest across private and public deals.

Ares Management had $149 billion of assets under management as of 31 March.