Ares posts double-digit direct lending returns for 2018

The firm raised almost $32bn for its credit strategies, with leverage facilities included, the bulk of which came from Ares Capital Europe IV.

Ares Management continued to grow its credit group’s assets under management while achieving net returns in the teens for both its US and European direct lending strategies, the firm announced in its year-end earnings call.

The firm hiked its credit AUM by 34 percent year-on-year, up from $71.1 billion at the end of 2017 to $95.9 billion. Some 13 percent of the firm’s total $130.7 billion AUM is permanent capital; the bulk of the capital, or 37 percent, Ares oversees is in funds with a three- to six-year life. However, some 38 percent of its management fees come from permanent capital.

The Los Angeles-based asset manager posted a 12.2 percent net internal rate of return for direct lending for its European strategy. The firm’s main US direct lending vehicle, Ares Capital Corporation (ARCC) business development company, achieved a net IRR of 12.4 percent.

The firm raised $36.13 billion of capital in 2018, a figure inclusive of fund-level leverage. Some $31.61 billion of that total came for credit funds, with the bulk of that figure coming from Ares Capital Europe IV, which raised $7.7 billion of equity and $1.4 billion of debt.

The firm’s private equity operations raised $1.6 billion, with $756 million going Ares’ energy opportunities fund. On the fourth-quarter earnings call, chief executive Mike Arougheti said the firm would return to market with the latest vintage of its corporate private equity fund, Ares Corporate Opportunity Fund VI. Fund V is currently about 40 percent deployed. On the real estate side, Ares raised $2.92 billion, including $653 million from its core-plus debt fund.

The firm made $214.43 million in management fees for the fourth quarter and $802.50 million for the full year. For the quarter and year, credit management fees were, respectively, $158.86 million and $588.15 million.