Ares Management readies third senior direct lending fund

Ares Management is raising a third senior direct lending fund, for which it has already received commitments from at least three public pension plans.

The Teachers’ Retirement System of Louisiana, with AUM of $24.2 billion, has committed $200 million to the Ares Senior Direct Lending Strategy Fund III, according to Private Debt Investor research.

An email from a spokesperson for TRSL confirmed that its board has approved a commitment of as much as $200 million for ASDLS III “subject to final term negotiations”. The TRSL statement said nothing about a closing target for the fund. But according to a story in The Wall Street Journal, it will target a $10 billion final close.

Ares, a Los Angeles-based asset manager with total AUM above $352 billion, declined to comment  on ASDLS III or the WSJ story. According to PDI data, the new fund will focus on North America senior corporates.

The first fund in the series, ASDLS I, closed in 2018 with $3 billion. Three years later, ASDLS II closed at $8 billion, according to a PDI story in December 2021. The second vintage was two and two-thirds larger than the first fund.

According to PDI data, TRSL, which did invest in the two precursor funds, is not the only pension fund to commit to the third Ares fund. Merced County Employees Retirement Association and the Maine Public Employees Retirement System have each also committed funds to ASDLS III (of $20 million and $100 million, respectively).

WSJ broke the news that Ares was launching a new such fund, with a $10 billion target, as banks continue to “step back from financing leveraged buyouts”.

Forward on several fronts

Ares Management has taken a very bullish stance of late, in a number of directions. In March it launched its debt secondaries business, in a joint venture with UAE sovereign wealth fund Mubadala Investment Company.

In April, on its Q1 earnings call, Ares’ chief executive, Michael Arougheti, spoke optimistically about LP-led secondaries. Arougheti said: “I would expect that 2023 will likely be a record year for LP-led secondaries just based on what we’re seeing year-to-date and the way the pipeline is developing.”

Also, Ares has said that it expects to announce an initial close of its Pathfinder Fund II later this month, at $3.5 billion. The Pathfinder funds combine a focus on collateralized investments with a social impact component, donating a share of profits to health and education charities.

Pathfinder Fund II has commitments from the New Mexico State Investment Council and the Virginia Retirement System, of $300 million and $250 million, respectively