Ares Management flagship private credit fund slammed with withdrawal requests
Ares Management was plagued by investors attempting to pull out over $1.5bn from one its flagship private credit funds in the second financial quarter, as wealthy individuals continue to flee the asset class.
The firm’s Ares Strategic Income fund, which holds roughly $11bn (£8.3bn), said it has received redemption requests worth 14.4 per cent of the vehicle, up from 11.6 per cent the prior quarter.
The fund, which manages an investment portfolio worth roughly $22bn, honoured just a third of the withdrawal requests, capping redemptions at a five per cent limit built into the vehicle.
Ares indicated that outflows predominantly came from investors outside the US, stating that “a limited number of smaller, primarily non-US institutions and family offices” sought to exit the fund.
Other investment giants, including Apollo, have also pointed toward this cohort as redemption requests have boomed over the last nine months.
Ares wrote in a letter to shareholders: “We have made this decision, as with all capital allocation decisions, aligned with what we believe are the best interests of the fund and all of our stakeholders, including the significant majority of shareholders who remain invested as well as our lenders and bondholders.”
The vehicle has returned 8.2 per cent over the past year.
Halting requests
The latest withdrawal scramble comes after Morgan Stanley said earlier this week that it would continue to gate its North Haven private income fund as redemption requests soared to 11.6 per cent.
Meanwhile, Apollo Global noted that withdrawal requests from one of its funds swelled to nearly 17 per cent.
The exodus comes as private credit shifts away from being dominated by institutional investors, including insurers and private credit funds, opening their doors and courting wealthy retail investors.
In particular, the industry has relied on semi-liquid funds as part of the push, as they have no formal end date, with the promise of regular withdrawals. They also give retail investors access to vehicles that rarely or never trade with quarterly opportunities to liquidity.
But as withdrawal requests rise and surpass promised thresholds. cracks in the limits to liquidity are showing.
Ares shares are down 30.1 per cent since January, trading at $116.1.