Credit managers rush to raise ever larger funds

ByRichard C. Sloan

Aug 9, 2021

Robert Givone, Miami-based partner and co-head of opportunistic credit at Apollo Global Management Inc., said credit funds are growing to meet “the insatiable investor demand for safe, private and non-valued credit investments. the market value ”.

“With fixed income producing less than 2% globally, more and more investors are allocating capital to private credit where one can invest in low LTV (loan-to-value) loans and still generate a significant excess spread by accepting a certain illiquidity rather than increasing the curve risk in the public markets, ”said Mr. Givone.

Arès management Corp. revealed that their new fundraising will be at least 20% larger than previous funds in the series, with significantly more than that. Ares raised $ 5.1 billion in the first close of its second U.S. senior lending fund, Ares Senior Direct Lending Fund II, which already exceeds the fund’s fundraising target and is 70% larger than the size of its predecessor, Michael Arougheti, Ares CEO and chairman, said during the company’s earnings call on July 29. With the expected leverage, the fund currently has purchasing power of around $ 8.1 billion and continues to raise capital, Arougheti said.

Ares’ second pan-Asian secured loan fund, SSG Secured Lending Opportunities III, which closed with more than $ 1.6 billion, is double the size of the previous fund.

Ares executives expect fundraising in 2021 to exceed 2020, he said. The company is benefiting from “secular strong tailwinds” in investor demand for “private and sustainable return,” Arougheti said.

When it comes to credit, scale matters, Kewsong Lee, CEO of The Carlyle Group Inc., said during the company’s July 29 earnings call.

“Funds are being raised faster than ever, and the accelerating impact of disruptive technologies and changes due to the pandemic is fueling increased demand for private capital in all sectors and regions,” Lee said. Carlyle’s 3-year-old opportunistic credit business had nearly $ 6 billion in assets under management as of June 30, up 22% year-on-year, “with further growth to come.” he declared.

Carlyle is currently raising its second opportunistic credit fund, Carlyle Credit Opportunities Fund II, with a fundraising target of $ 3.5 billion, 40% more than the first fund which closed in 2019 at $ 2.4 billion. of dollars.

In total, Carlyle’s global lending business – which includes guaranteed loan obligations, mortgages and other lending strategies – totaled $ 61 billion in assets under management as of June 30.

At the same time, the investment periods for funds are getting shorter, especially for credit funds, as transactions are executed and funded in shorter time frames, Lee said. Typically, Carlyle executives have invested a fund over a time horizon of four or five years, which has “accelerated” to four and, “in some cases three years, maybe even earlier in some classes. high-speed assets like credit, ”he said. noted.