Ares raises $2.4b for sixth Asia special situations fund

Ares entered Asia in 2020 with the acquisition of pan-regional special situations platform SSG Capital. Its first four funds for this strategy in the region came in at USD 100m, USD 400m, USD 915m, and USD 1.7bn, respectively. Fund V closed on about USD 2.7bn in 2019. Pension funds and sovereign wealth funds have historically represented the bulk of the LP base.

Ares raised USD 400m in the region during the three months to September, USD 200m of which went to Fund VI. In an earnings call for the period, Ares CEO Michael Arougheti tied strong investor demand for alternative credit strategies globally to a pullback from traditional providers and structural changes in the banking industry.

“We're also seeing a growing need for creative liquidity solutions, recapitalizations and rescue financings, and more interest in secondaries,” Arougheti said. “With this economic backdrop, it remains a compelling time to invest across private market assets with defensive characteristics, particularly within private credit, as we see risk-reward characteristics that are as favourable as we've seen in many years.”

It comes at a time when special situations activity is expected to increase in the region. This outlook is based in part on a pullback of pandemic-related policy supports, which is normalizing market conditions in sectors already dealing with changing supply chain dynamics and labour challenges.

Ares singled out India and Australia as attractive markets due in part to robust corporate earnings growth and a perceived growing opportunity set for financing solutions for sponsor-led acquisitions. The two countries represent 60% of the firm's Asia exposure.

The broader region was flagged as a key target for continued expansion, either through organic team builds or strategic acquisitions. Traction on this front came as recently as July when Ares acquired China and Southeast Asia-focused PE firm Crescent Point Capital for an undisclosed sum. The business, which has about USD 3.8bn in assets under management (AUM), has been rebranded APAC Private Equity.

Credit accounts for 68% of Ares’ USD 395bn in AUM globally. This includes the Asia special situations business, which primarily targets restructuring-related situations, “deep value” acquisitions and last-mile financing.

Expectations of an increase in global credit players making forays into Asia have been checked by dispute settlement and deal size issues. Most deal activity is in middle-market segments below the practical reach of global players and in markets with uncertainty around legal recourse. Ares’ investments in the region start at USD 50m and extend to a range of USD 100m-USD 200m.

“Transaction activity remains slower than usual due to the higher cost of capital and valuation disparities among buyers and sellers yet there's significant pent-up demand and a large amount of ageing private equity dry powder available to be invested,” Arougheti added.

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• Topics
• South Asia
• Australasia
• Credit/Special Situations
• Fundraising
• India
• Australia
• Ares Management
• Fundraising