Ares seeks €4.5bn for third European direct lending fund

Ares Management is back in market with the latest iteration of its European direct lending vehicle, a fund that could be up to 80 percent larger than its predecessor.

The Los Angeles-based alternative asset manager is hoping to amass up to €4.5 billion for Ares Capital Europe (ACE) IV, according to a regulatory document submitted with the Securities and Exchange Commission. The Maine Public Employees’ Retirement System has committed €100 million to the fund. The fund series invests in senior and mezzanine debt as well as unitranche loans.

A representative for the firm could not be reached for comment.

ACE III, which surpassed its €2 billion target to hold a final close on its €2.5 billion hard-cap in June 2016, had posted gross and net internal rates of return of 17.5 percent and 13.1 percent respectively as of 31 December, Ares’ annual report filed with the SEC showed. The gross and net multiples on invested capital (MOIC), as of the same date, were 1.2x and 1.1x. At year-end, the fund had invested €1.63 billion.

ACE II raised €911 million, closing in August 2013. As of 31 December, the fund had returned a gross IRR of 10.2 percent and net IRR of 7.5 percent. Gross and net MOIC figures were 1.4x and 1.3x, respectively, according to the regulatory filing.

European direct lending vehicles have reached significant size, with four of the 10 largest private credit funds raised last year targeting mid-market companies on the continent. Alcentra, Hayfin Capital Management, Intermediate Capital Group and BlueBay Asset Management pulled in more than €16.1 billion combined for European direct lending. BlueBay is already back in market with its successor fund, looking to raise €2.5 billion.

Funds targeting Europe, across a range of strategies, collected $5.42 billion of the $37.1 billion raised in the first three months of the year, according to PDI data. Of the $242 billion sought by private debt funds globally, $56.21 billion is being raised to deploy in Europe.

ICG’s Europe Fund VII is the largest in-market vehicle targeting the region, a €4 billion junior debt fund that is oversubscribed and could hit its target on an initial close, as Private Debt Investor previously reported.

Ares recently closed a $3.4 billion junior debt fund, Ares Private Credit Solutions, which will target North American companies with EBITDA of more than $75 million. In addition to its Los Angeles headquarters, the firm, which also invests in private equity and real estate, has 20 other offices throughout the US, Europe and Australia.