Ares private credit fund records worst monthly performance in history

A non-public private credit fund managed by alternative investment specialist Ares Management - Ares Strategic Income Fund (ASIF) - recorded its largest monthly loss ever in February, indicating deterioration in the roughly $1.8 trillion private credit market.

The Ares fund recorded its biggest monthly loss ever, losing 0.68%, according to Bloomberg calculations based on the company's regulatory filings. Including a small decline in January, the Ares Strategic Income Fund has lost a total of 0.7% since the beginning of the year. ASIF has nearly $23 billion in assets under management, Bloomberg points out.

The decline in the fund's value is not due to losses on individual investments, but to a general sell-off in the bond market, which Ares uses as a benchmark to value its assets, an agency source familiar with the situation said.

An Ares spokesman declined to comment.

Ares Management officially launched the ASIF fund on its wealth management platform and through investment advisors in April 2023, seeking to expand its presence among private investors, Bloomberg reports.

For the broader leveraged loan market - a segment close to private credit - February was the worst month since September 2022, Bloomberg states.

The Ares fund's results are not the first such performance in the industry in recent months. In February, the private credit fund managed by Blackstone also posted its worst monthly result in more than three years, Bloomberg writes. Blackstone attributed this to widening credit spreads in the public and private markets, as well as unrealized losses on certain assets.

In addition, Blackstone in March was among the management companies that faced increased investor requests for withdrawals from private credit funds and were forced to partially restrict such payments (among such managers are Apollo Global Management and Morgan Stanley, among others). Private investors are withdrawing funds from a number of private credit funds amid concerns about asset valuations and the impact of AI on software companies, to which many managers have made a significant portion of loans.

Ares Management, $10.7 billion, last week also capped withdrawals from the ASIF fund at 5% of net assets after investors submitted withdrawal requests of 11.2%. In a letter to investors, the company noted that the fund has delivered an average annualized return of 10.6% since launch, as of the end of January. The company also confirmed dividend payments through June, reports said.

Both the Ares Strategic Income Fund and the fund managed by Blackstone are outperforming the overall leveraged loan market, which was down 0.82% in February and 1.08% YTD, according to data from the S&P UBS Leveraged Loan Index.

In practice, however, the performance of companies in the portfolios of private credit fund managers remains solid, Doug Ostrover, co-chairman of Blue Owl Capital management company, said in late March. He was quoted by Bloomberg as saying, "We're not seeing an increase in defaults. We're not seeing signs of trouble," he said, noting that he remains "cautiously optimistic" about the short-term outlook.

This article was AI-translated and verified by a human editor