Bullish Ares expects to see near-record fundraising this year

Ares Management, which in October set a $45 billion-plus target for its next fundraising campaign, is feeling confident about prospects in the year ahead.

“For 2023, driven by the recent launch of several of our largest commingled fund families, we believe our aggregate fundraising will be well in excess of last year’s and will approach our record in 2021 of $77 billion,” CEO Michael Arougheti said in a year-end earnings call.

Contributing to the accelerated fundraising will be about 30 commingled and perpetual-life offerings. They will include seven of the firm’s 10 largest institutional commingled funds.

Among them, Ares reported in October, is the latest flagship corporate private equity vehicle. Other flagships come from Ares’ credit, real assets and secondaries strategies. Several, such as a sixth European direct lending fund, a third US senior direct lending fund, and a second alternative credit fund, are expected to hold first closings over Q1-Q2.

Fundraising for Ares Corporate Opportunities Fund VII was “recently launched,” Arougheti said. The firm believes it is “particularly well-suited for the current volatile market environment,” he said, because of the strategy’s “flexible approach” and ability to invest in both distressed-for-control and traditional buyout deals.

Fund VII’s target remains undisclosed. In the past, however, Ares has typically upsized successor pools by about 20 percent to 40 percent. Using this as the measure, Fund VII could shoot for roughly $7 billion to $8 billion, Buyouts reported last July.

Ares’ confidence about fundraising this year owes in part to the presently strong LP focus on re-ups with large, brand-name incumbents. “We’re observing a flight to larger, higher-quality managers as investors are consolidating their allocations with preferred managers,” Arougheti said.

This trend supported fundraising in 2022, he said, with Ares seeing more than 90 percent of inflows coming from existing LPs, either through re-ups or commitments to fresh products. The firm also brought on more than 100 new institutional investors. This despite the fact that relatively few flagships were in the market.

Ares secured nearly $57 billion last year, with more than $12 billion coming in the fourth quarter. Of the year-end total, well over half was accounted for by a range of credit vehicles. On the PE side, Ares Special Opportunities Fund II, an investor in debt and non-control equity in situations of transformational change or stress, wrapped up at $7.1 billion.

The special opportunities strategy operates as complement to the corporate PE platform, which emphasizes control investing in mid-market businesses in consumer-retail, healthcare, industrial and service-technology sectors.

Ares seems to have had less luck with its secondaries fundraising in 2022. Landmark Equity Partners XVII, for example, closed at about $2.4 billion, well below a $6 billion target, sources told Secondaries Investor. Arougheti said a successor offering will emerge “at some point” with the “Ares version of what that strategy is going to be going forward.”

Assets managed by Ares totaled $352 billion at the end of December, up 15 percent year over year.