(Bloomberg) -- Ares Management Corp. has hauled in nearly $34 billion for its latest direct lending fund, the largest dedicated pool in the burgeoning private credit market.
Ares Senior Direct Lending Fund III raised about $15 billion in equity commitments, above its $10 billion target. The fund’s total capital is more than double that sum when including leverage and separately managed accounts, according to Mitch Goldstein, co-head of the firm’s credit group.
The fundraise is the latest in a span of large deals for Ares, and the private credit world writ-large. Goldman Sachs Group Inc. just months ago put together a more than $20 billion war chest that included $13 billion of equity capital, making it the largest-ever vehicle in the industry at the time, according to data compiled by Preqin.
The creation of such a massive fund underscores the momentum in the roughly $1.7 trillion industry, with every major alternative asset manager pushing into what’s become one of the hottest businesses on Wall Street. Direct loans have emerged as a go-to source of financing for companies while rates stay high and regulation limits bank participation in some of the riskiest loans, but that’s generated concern, as direct lenders have stepped in en masse with far less oversight.
The rankings may yet change again. HPS Investment Partners raised $21.1 billion of investable capital through the final close of its Specialty Loan Fund VI, according to a statement in late June. Bloomberg reported in January that Ares was closing in on a more than €20 billion ($21.6 billion) direct lending fund that would be tied to its European strategy. Oaktree Capital Management has been looking to raise more than $18 billion, Bloomberg reported last year.
The latest Ares fund, which is dedicated to investments in North America and provides senior secured loans, has already committed more than a quarter of its capital to over 165 borrowers. The strategy typically targets companies with between $10 million to $150 million of adjusted earnings, but can also lend to larger firms. Ares typically sources deals from existing clients — “50% of what we do comes from our existing book of business,” Goldstein said.
“It’s very humbling, the quantum and the quality of our investor base in this fund, which was global and of all types,” he said in an interview.
The Los Angeles-based firm’s newest fund is also meaningfully larger than the prior vintage of the strategy, which closed in December 2021 with $8 billion of equity commitments and nearly $15 billion of available capital including leverage.
Market watchers have questioned how so much money can be put to work when there’s been a dearth of new deals in the buyout world, a typical target of direct lending. Ares expects a pick-up in activity after a muted first quarter for lending to new mergers and acquisitions.
“I feel really good about the fundraising and the supply of capital versus the demand,” Michael Arougheti, the firm’s chief executive officer, told analysts in May. “Everything we’re seeing would indicate that deal flow will pick up as we move through the year.”
--With assistance from Elizabeth Campbell.
(Updates with HPS fundraise in the fifth paragraph.)
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