Private equity firm Ares Management Corp and Abu Dhabi’s state fund Mubadala have teamed up to form a joint venture that will invest around $1 billion in global credit secondaries.
Mubadala is anchoring the partnership that will initially deploy $1 billion in deals related to credit and secondaries. The allocation will be increased as the credit secondaries market expands, according to the announcement.
The newly established strategy is a natural extension of Ares’s credit and secondaries platforms, which respectively had approximately $214 billion and $22 billion in assets under management as of December 31, 2022.
It will also enhance Mubadala’s positioning within the secondaries credit market while enabling Ares to significantly scale its offering.
Since 2017, the two companies have established a long-standing relationship investing across the full spectrum of the credit sector.
Ares Management CEO Micheal Arougheti said, in a statement, the JV underscores “our view that private credit secondaries offer a compelling opportunity for investors seeking diversified exposure to the attractive return profile of private credit assets.”
2023 is expected to see heightened investor interest in private credit, infrastructure, and secondaries, according to Hamilton Lane’s 2023 Market Overview report released on Thursday.
In the secondaries market, supply has been outgrowing demand. The dynamic for buyers is likely to continue improving as more supply gradually hits the market, according to the report.
Alternative investment managers are also allocating more capital to the region, seeking to capture a new round of private debt and restructuring opportunities.
A 2021 Preqin report noted that 44 private debt funds, comprising total assets under management of about $11 billion, were focused on Asia — up from 38 in 2020.
In January, Ares Management announced raising about $5 billion for an infrastructure debt fund that invests in data centres, telecom towers, ports, and utilities.
The new fund is the first infrastructure debt fund that Ares has raised following its acquisition of the infrastructure debt business of Sydney, Australia-based investment firm AMP Capital in February last year. AMP had previously raised four such funds.
