Key Moments
- Ares Management (NYSE:ARES) stock declined 4% after it restricted withdrawals from its $10.7 billion Ares Strategic Income Fund.
- Redemption requests reached 11.6% of fund assets in the first quarter, triggering a 5% quarterly cap on outflows embedded in the fund’s structure.
- The fund processed $524 million of $1.2 billion in requested withdrawals in the first quarter, after fully honoring all redemptions in the fourth quarter of 2024 despite breaching the same limit.
Redemption Cap Triggers Market Reaction
Ares Management (NYSE:ARES) saw its share price fall 4% on Tuesday after a Financial Times report revealed that the firm had moved to restrict withdrawals from its Ares Strategic Income Fund, a private credit vehicle with assets of $10.7 billion.
The $623 billion asset manager activated a built-in feature of the fund that restricts redemptions to 5% of net assets in any given quarter. The threshold was reached after investors sought to pull out more capital, amid heightened outflows from the private credit space.
Details of First-Quarter Redemption Activity
During the first quarter, investors submitted $1.2 billion in redemption requests from the Ares Strategic Income Fund. Ares honored $524 million of those requests, which amounted to slightly more than two-fifths of the total redemption volume.
Overall, withdrawal requests equaled 11.6% of the fund’s assets in the period, more than double the 5% ceiling specified in the fund’s governance for any single quarter. By enforcing the cap, Ares limited the actual cash outflow to the maximum allowed level.
In contrast, the fund had met all investor redemption requests in the fourth quarter of 2024, even though outflows at that time also exceeded the 5% limit. The shift in approach underscores a change in how Ares is applying its structural safeguards as redemption pressures increase.
Fund Metrics and Redemption Flows
| Item | Value |
|---|---|
| Fund name | Ares Strategic Income Fund |
| Fund size | $10.7 billion |
| Parent firm AUM | $623 billion |
| Quarterly redemption cap | 5% |
| First-quarter redemption requests | $1.2 billion |
| First-quarter redemptions paid | $524 million |
| First-quarter redemption requests as % of fund | 11.6% |
Ares Explains Rationale to Investors
In a letter to investors, Ares said the decision to limit withdrawals was made in line with its broader portfolio management priorities and its obligations to all stakeholders.
“We have made this decision, as with all capital allocation decisions, aligned with what we believe are the best interests of the fund and all of our stakeholders, including the overwhelming majority of shareholders who remain invested,” the company said in its letter.
Impact on Private Wealth Investors and Industry Context
The Ares Strategic Income Fund targets high-net-worth individuals and is one of Ares’ flagship offerings in private credit. The move to enforce withdrawal limits comes at a time when the asset class has been facing increased redemption activity.
According to the article, similar redemption restrictions have been put in place by other managers operating private credit funds. Competitors such as Apollo Global Management and BlackRock’s HPS Investment Partners unit have also applied withdrawal limitations on their private credit vehicles as redemption pressures have risen.
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