Ares Management (NYSE:ARES) announced it would limit withdrawals from its Ares Strategic Income Fund after facing a significant increase in redemption requests. The decision comes as the fund, which targets affluent investors, saw redemptions rise to 11.6% in the first quarter, prompting the firm to cap outflows at 5%.

The Financial Times reported that the $10.7 billion fund received $1.2 billion in redemption requests during this period, fulfilling $524 million, which is slightly over 40% of the total requests. 

Ares explained that the redemptions were primarily initiated by a small group of family offices  and smaller investors, collectively representing less than 1% of the fund’s more than 20,000 investors. The fund’s assets, bolstered by leverage, comprise loans and securities valued at $20.8 billion, FT stated.

Despite these constraints, the fund managed to grow its asset base, securing $708 million in new commitments from investors.

As reported by FT, Ares is optimistic about the fund’s future, stating it is positioned to capitalize on market volatility while ensuring liquidity within its defined limits. 

The fund maintains access to approximately $5 billion in liquidity and reports no loans with interest payments overdue by more than 30 days.

The company emphasized its strategy of leveraging market disruptions to uncover attractive investment opportunities, drawing on its extensive experience navigating various economic cycles. 

The private equity firm remains committed to aligning its decisions with the best interests of the fund and its stakeholders, as highlighted in its communication to investors.

Ares stock is down 0.62%; the stock is down 36% on the year. Competitors such as Blackstone down 1.84%, KKR is down 1.11% and Apollo is down 1.61%.

This is the latest private credit firm to cap redemptions following turmoil in the market. Recently, banks and asset managers have issued warnings or restricted lending in their private credit portfolios during ripples in the market.

JPMorgan Chase & Co. (NYSE:JPM) has started restricting lending to loans associated with software companies in its private credit funds, while Morgan Stanley (NYSE:MS) curbed redemptions after investors sought to withdraw nearly 11% of shares from its North Haven Private Income Fund.

BlackRock Inc (NYSE:BLK) limited withdrawals from its $26 billion HPS Corporate Lending Fund after redemption requests surged to 9.3% of the fund's net asset value.

Photo: Shutterstock