Advertisement
When should a housing society in Mumbai start considering re...
From GST on JDAs to SEBI’s REIT reclassification and the S...
Stay ahead in the world of real estate with our daily podcas...
Stay ahead in the world of real estate with our daily podcas...
Ares Management has limited investor withdrawals from its Ares Strategic Income Fund after redemption requests rose sharply in the first quarter. Investors sought to withdraw 11.6% of the fund, but only 5% will be honoured, in line with industry practice. The move reflects broader stress in the private credit market, where similar caps have been introduced by major firms. Despite pressure, the fund maintains that its portfolio remains stable, with no loans in distress and sufficient liquidity available. Analysts believe such limits are necessary to manage cash flow and protect long-term investor interests.
Ares Management has restricted investor withdrawals from its private credit vehicle, the Ares Strategic Income Fund (ASIF), after a sharp increase in redemption requests during the first quarter. Advertisement
Regulatory filings show that investors requested withdrawals equivalent to 11.6% of the fund's outstanding shares. However, the fund has decided to process only up to 5% of the shares, which amounts to about USD 524.5 million. This step aligns with the fund's quarterly repurchase limit and reflects a cautious approach to managing liquidity.
The decision comes at a time when the private credit market, valued at nearly USD 2 trillion, is facing increased scrutiny. Concerns around lending standards, softer market conditions, and global uncertainties such as the ongoing Iran conflict have led to rising investor caution. Similar steps have already been taken by firms like Apollo Global Management and BlackRock, which have also capped withdrawals in their respective funds. In some cases, firms like Blackstone have gone beyond the cap by buying back additional shares.
Market experts see this phase as an important test for private credit funds. Analysts indicated that while redemption requests may stay elevated in the coming quarters, setting limits on withdrawals has become a widely accepted practice to maintain stability.
In a communication to investors, ASIF stated that most withdrawal requests came from a small group of family offices and smaller institutions across select regions. These investors account for less than 1% of the fund's total base of over 20,000 shareholders. The fund explained that applying the withdrawal cap was in the best interest of all stakeholders.
ASIF, launched in 2022, focuses on less liquid private credit investments, mainly lending to mid-sized companies. The fund highlighted that none of its loans are currently under non-accrual status, which means borrowers are continuing repayments without significant delays. It also reported gross inflows of around USD 708 million during the quarter and stated that it has access to nearly USD 5 billion in unused borrowing capacity to manage liquidity needs.
Shares of Ares Management declined slightly during the latest trading session and have seen a notable drop so far this year, reflecting broader concerns in the alternative investment space.
Business Development Companies (BDCs), including non-traded funds like ASIF, typically allow investors to exit on a quarterly basis, subject to a 5% cap on total withdrawals. This structure has come under pressure recently as investor sentiment weakens. Data from RA Stanger showed that capital raised by such funds dropped significantly compared to the previous year.
Industry participants have also pointed to similarities with the redemption pressure seen earlier in non-traded real estate investment trusts, where valuation concerns triggered large withdrawal requests.
Meanwhile, other major players are facing similar situations. Apollo's private credit fund, Apollo Debt Solutions, also imposed a 5% redemption cap after receiving requests exceeding 11% of its shares. Investment firm Sixth Street recently noted that the BDC sector may go through a prolonged adjustment period as it responds to changing market conditions.
Source Reuters
5th Jun, 2025
25th May, 2023
11th May, 2023
27th Apr, 2023
Advertisement
Facebook
Whatsapp
