Ares Direct Lending Fund raises USD 8.7bn
The Ares Direct Lending Fund has received an investment of USD 8.7 billion. It was launched in 2022 and reached its first close in June 2023. Passing this milestone means that the organisation will now include equity in its work. At the same time, the process of attracting third-party investment will continue.
The Direct Loan Fund, set up by Ares Financial Corporation, works exclusively with investments from Europe. It is developing dynamically, supported by growing interest in the market itself. The private credit segment is estimated at USD 1.5 trillion, and its growth dynamics exceed the growth of traditional lenders, i.e. banks. This is due to the policy of financial institutions to underwrite loans only as a last resort. Banks are wary of the difficulties in selling leveraged debt. The financial sector is also facing challenges from rising inflation and interest rates. Geopolitical tensions are also exacerbating the situation. In addition, increased volatility in the equity market is making it extremely difficult to attract investment.
What are direct lending funds?
Banks set strict conditions for loans that are almost impossible for small and medium-sized businesses to meet. This is why direct loan funds, which target unlisted companies, are the best solution for small and medium-sized enterprises. By using such organisations, you can increase the market value of your business and, if necessary, reduce the amount of your debt.
Benefits of direct loan funds:
– the opportunity to take the product to an international level;
– support for small businesses;
– attracting a partner who is interested in developing the company.
– the possibility of attracting major investors.
The funds select objects for investment on the basis of their profitability and development forecasts. They also assess the industry and its long-term prospects. The funds tend to favour the financial services, healthcare, retail and consumer niche sectors.
In most cases, the fund is not expected to take full control of the company, but this is not an option. They prefer to enter into temporary partnerships with companies for about 3-5 years, after which they exit the management of the business by selling shares.
The US firm Ares is one of the leaders in the global alternative investment market. It was founded in California in 1997. It operates through 4 independent divisions:
– Ares Credit operates in the liquid and illiquid credit sectors;
– Private Equity – investments in the energy and infrastructure sectors through majority ownership or joint asset management arrangements;
– Real Estate – real estate investments in the US and Europe;
– Ares SSG – a division operating in the Asia-Pacific region.
As of 2021, the company managed about USD 295 billion in assets.
