Ares Management (NYSE:ARES) limited withdrawals at 5% from one of its private credit funds as redemption requests climbed to 14.4%.
This is the second quarter in a row that the fund, Ares Strategic Income Fund, has seen elevated redemption requests, Bloomberg reported. In the first quarter, the fund, which targets affluent investors, saw redemptions rise to 11.6% in the first quarter, prompting the firm to cap outflows at 5%.
Smaller institutions and family offices, mostly based outside of the U.S., accounted for nearly half of the redemption requests, despite representing less than 1% of the fund’s more than 20,000 shareholders. Nearly two-thirds of the requests came from investors who had also sought redemptions in the first quarter.
"Repurchase requests from investors in the US private wealth channel, the largest segment of ASIF’s investor base, represented only 2.4% of common shares outstanding," Ares said in the letter, cited by Bloomberg. "This reflects a greater than 35% decline in new repurchase requests relative to the prior quarter."
Ares also told investors that the fund expects to work through the bulk of pending second-quarter redemption requests by the end of the year, if future withdrawal demand remains consistent with current trends.
The fund reported annualized total returns of 10.3% since inception, outperforming broadly syndicated bank loans by 1.87%, Bloomberg added. Unfulfilled repurchase requests
This is the latest private credit firm to cap redemptions amid turmoil in the sector.
So far in Q2, Apollo Global Management (NYSE:APO) has limited withdrawal requests from its non-traded private credit fund Apollo Debt Solutions after investors asked to withdraw 16.8% of their shares.
The flagship private credit fund of Cliffwater LLC capped redemptions at 5% in the second quarter after investors sought to redeem approximately 17% of the fund’s shares.
Partners Group is restricting investor withdrawals from its $8.6 billion Global Value SICAV fund after redemption requests exceeded 5% of the net asset value, a move that rattled sentiment across private markets.
The firm pointed to instability across open-ended vehicles since early last year, beginning in private credit and later affecting private equity, Reuters reported.
BlackRock, Ares Management, JPMorgan and Morgan Stanley capped redemptions, in the first quarter.
JPMorgan CEO Jamie Dimon recently cautioned that periods of calm in credit markets often mask the buildup of risk, warning that performance typically deteriorates more than expected once the credit cycle turns.
"I do think when we have a credit cycle because there have been weakening standards in underwriting and transparency and marking, I do think you’ll see credit perform worse than people expect. That’s all. I don’t think it’s systemic," he said during the Reagan National Economic Forum.
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