Ares Fund Faces Significant Monthly Drop
Ares Management Corp’s Ares Strategic Income Fund, a non-traded business development company launched in December 2022 and managing close to $23 billion in assets, suffered its largest monthly decline since inception in February, dropping 0.68% that month and leaving the fund down 0.7% year-to-date, according to a report by Bloomberg as cited in Private Equity Wire. This decline reflects broader pressures in the $1.8 trillion private credit market, where selloffs in public debt markets have impacted asset valuations used by Ares. The fund, which became available to retail investors via Ares’ wealth management platform in April 2023, had previously generated annualized gains of 10.6% through January.
Performance in Context of Private Credit Trends
The February performance of Ares Strategic Income Fund aligns with similar challenges in the sector, as Blackstone Inc.’s comparable fund also recorded its worst monthly performance in over three years, driven by widening spreads and unrealized losses across public and private positions. Both Ares and Blackstone funds continue to outperform the broader leveraged loan market, where the S&P UBS Leveraged Loan Index posted a -0.82% return for February and -1.08% year-to-date. These trends highlight the pressures affecting the private credit market, though the funds have maintained relative strength in their benchmarks.
Redemption Pressures and Fund Resilience
Heightened redemption requests have added to the challenges for managers like Ares, which recently limited withdrawals from the Ares Strategic Income Fund to 5% of net assets after investors sought to withdraw 11.2%. Despite these short-term setbacks, the fund has confirmed it will maintain its dividend through June, indicating a level of resilience amid market turbulence. This approach underscores the fund’s ongoing operations in a volatile environment, as detailed in the Private Equity Wire report.
Implications Within the Private Credit Landscape
In the context of the growing $1.8 trillion private credit market, such events illustrate the sector’s exposure to public market fluctuations, even for funds focused on private investments. According to Private Equity Wire, sources familiar with the matter attributed the drop primarily to wider selloffs rather than specific investment losses, providing a broader view of how external factors influence private credit performance.
