Ares Management and Apollo Global Management, two major players in private credit, have restricted investor withdrawals from their funds. This action signals increasing pressure in the $US1.8 trillion ($2.6 trillion) private credit market. Ares Strategic Income Fund, managing $US10.7 billion, capped withdrawals at 5 per cent after redemption requests reached 11.6 per cent of shares. Similarly, Apollo Debt Solutions, a $US15.1 billion business development company, imposed the same limit following 11.2 per cent redemption requests. Ares Management is a global alternative investment manager providing primary and secondary investment solutions. Apollo Global Management is a high-growth alternative asset manager.
The redemption requests, exceeding earlier requests from Blackstone and BlackRock, suggest mounting investor anxiety regarding liquidity in the illiquid private credit market. These firms, which have driven the private credit boom for years, now face investors wary of lending practices and exposure to businesses vulnerable to artificial intelligence. The rapid pace of these requests has raised questions about the suitability of direct lending for investors seeking liquidity. The moves come as inflows into the asset class have slowed.
Funds are responding to negative sentiment in various ways. Some, like Blue Owl Capital, are selling assets, while Blackstone injected employee cash to meet redemption requests. Generally, managers have limited redemptions, emphasising the benefits of this approach. Ares stated that the decision to limit withdrawals was aligned with the best interests of the fund and its stakeholders, noting that most requests came from a small number of family offices and institutions representing less than 1 per cent of their 20,000 shareholders.
Ares anticipates granted redemptions to total approximately $US524.5 million and highlighted the fund’s $US5 billion in undrawn capacity. Despite the current strain, Ares remains optimistic, citing its experience investing through multiple cycles and viewing market dislocations as potential opportunities. Apollo Debt Solutions and Ares Strategic Income Fund both indicated they will offer withdrawals of up to 5 per cent of shares again next quarter.
