Ares formalises credit secondaries business via $1bn JV with Mubadala

Michael Arougheti, Ares' chief executive and president, has previously said the secondaries industry is at an 'inflection point'.

Ares Management, the biggest firm in private credit by fundraising, according to the PDI 100, has officially launched its debt secondaries business via a joint venture with Gulf giant Mubadala Investment Company.

The Los Angeles-headquartered firm will initially deploy roughly $1 billion pool of capital to buy LP stakes in credit funds and invest in credit-focused GP-led processes, according to a statement.

Abu Dhabi-based sovereign wealth fund Mubadala has anchored the JV. A spokesperson for Ares declined to comment on how much of the $1 billion is backed by Mubadala and on whether the firm has plans to raise third-party capital from other investors for its credit secondaries strategy.

It is unclear over what time period Ares plans to deploy the capital.

Private credit secondaries “offer a compelling opportunity for investors seeking diversified exposure to the attractive return profile of private credit assets”, Michael Arougheti, Ares’ chief executive and president, said in the statement.

Credit secondaries deal volume has grown in recent years, accounting for 4 percent or around $4.4 billion of total secondaries volume last year, according to data from Greenhill. Five years prior, when the adviser published its volume report for 2017, it did not include deal volume data for private credit funds.

Dave Schwartz, most recently co-head of Ares’ US direct lending strategy, will serve as partner and head of Ares’ credit secondaries strategy and as a member of the Ares Secondaries Executive Committee. According to Schwartz, Ares sees a “meaningful supply-demand imbalance” that requires dedicated capital to meet the liquidity needs of both GPs and LPs.

Sebastien Burdel and Luca Salvato, who joined from Spring Bridge Partners when Ares acquired the firm in a deal that closed last year, are now partners in the Ares secondaries group and are part of the senior leadership team. Nate Walton is partner and head of Ares’ private equity secondaries business, according to the statement.

On the firm’s fourth quarter and full-year earnings call last month, Arougheti said Ares was in market with both infrastructure and real estate secondaries funds. On private equity secondaries, he said: “We’ll be coming back into the market at some point with kind of the Ares version of what that strategy is going to be going forward.”

Ares entered the secondaries industry via its purchase of Landmark Partners in 2021. The firm is raising capital for its real estate and infrastructure secondaries business, according to Secondaries Investor data.

In October, the firm held the final close on its latest private equity secondaries fund, Landmark Equity Partners XVII, collecting $2.4 billion, below a $6 billion target.