Ares plots H2 closings for credit and infra secondaries funds

Secondaries Infrastructure Solutions III will target an 11-14% net internal rate of return, according to documents prepared for a US public pension.

Ares Management expects to hold closes across at least two secondaries strategies this year, around two years after it closed the acquisition of Landmark Partners.

“In the second half of the year, we expect closings in our inaugural credit secondaries fund [and] our third infrastructure secondaries fund,” co-founder Michael Arougheti said on the firm’s second quarter earnings call on Tuesday.

The Los Angeles-headquartered firm is seeking $2 billion for Secondaries Infrastructure Solutions III, according to documents prepared for the Boston Retirement System‘s 21 June board meeting. The documents show the target final close is the fourth quarter of this year.

Secondaries Infrastructure Solutions III will target an 11-14 percent net internal rate of return, according to the documents, which shows the vehicle will acquire interests in infrastructure funds, partnerships and other structured investment vehicles that own infrastructure and real assets related assets.

Target sectors are utilities, transportation, communication, renewables, energy and commodities.

If it hits its $2 billion target, SIS III will be more than double the size of its predecessor, Landmark Infrastructure Partners II, which closed on $915 million in 2021 below a $1.5 billion target, according to Secondaries Investor data.

Stakes in infrastructure funds attracted high pricing in the first half of this year at 89 percent on average of net asset value, according to PJT Partners’ H1 2023 Secondary Market Insights report. This was sandwiched between buyouts funds’ 88 percent of NAV and private credit funds’ 90 percent of NAV.

There was between $2 billion and $4 billion of infrastructure secondaries transactions that closed in the first half of this year, with $30 billion expected by 2030, PJT’s report noted.

The firm launched its first credit secondaries commingled fund this year, Arougheti said in May. The fund follows the official launch of its debt secondaries business in March via a joint venture with Gulf giant Mubadala Investment Company. Ares will initially deploy a roughly $1 billion pool of capital to buy LP stakes in credit funds and invest in credit-focused GP-led processes, it said in a statement at that time.