Ares scales back €1 billion private credit vehicle after investor pushback, FT reports

Aug. 6 (Reuters) - Ares Management ARES.N was forced to scale back a one billion-euro ($1.15 billion) private credit vehicle after investors pushed back against the valuation of loans being put into the so-called continuation fund, the Financial Times reported on Thursday, citing people familiar with the matter.

Here are more details:

• The private credit manager reduced the size of the vehicle to about €400 million ($461.84 million) after potential backers of the new entity sought a larger discount on the loans than Ares was prepared to accept, the report said.
• The move follows Ares' efforts last year to shift loans remaining in a 10-year-old European direct-lending fund into a newly created vehicle that it would continue to manage, the FT report added.
• While traditional private equity funds have a finite life cycle, usually about a decade, continuation vehicles allow fund managers to bring in new investors and transfer assets from older funds into a new vehicle, extending the holding period while giving existing investors the option to cash out.
• Although they have long been common in private equity, continuation vehicles have recently gained traction in private credit as fund managers seek ways to return capital to investors without selling assets outright.
• Ares Management did not immediately respond to a Reuters request for comment outside business hours.
• According to the report, the asset manager is now seeking to raise a €2.5 billion ($2.89 billion) continuation vehicle for loans from its 2018 European fund.
• Ares last week posted a record $36 billion fund raise for the second quarter, driven by continued investor appetite for private credit.

($1 = 0.8661 euros)