Our Credit Group is a leading manager of credit strategies across the non-investment grade credit universe, with approximately $95.9 billion of assets under management (“AUM”) and 156 funds as of December 31, 2018. We offer a range of investment strategies across the liquid and illiquid credit spectrum. Since the firm’s founding in 1997, Ares has been a leader in providing credit solutions to investors searching for yield and for less correlated returns, particularly relevant in today’s relatively low interest rate and volatile investment environment. We are additionally one of the largest self-originating direct lenders to the U.S. and European middle markets, providing one-stop financing solutions for small-to-medium sized companies, which we believe are increasingly underserved by traditional lenders. We provide investors access to our broad credit capabilities through several vehicles, including commingled funds, separately managed accounts, publicly traded vehicles and sub-advised funds for retail investors.
We are experienced credit pickers who take a value-oriented approach, using fundamental bottom-up research to identify investments that offer attractive relative value in comparison to their fundamental credit risk profile. Our portfolio managers average approximately 22 years of relevant experience investing in liquid credit, in many cases since the inception of either the leveraged loan or high yield asset class. As a long-term, patient direct lender, we leverage our flexibility, structuring expertise and self origination capabilities to invest across capital structures and meet the full spectrum of our clients’ financing needs. Members of our direct lending investment committees average approximately 25 years of relevant middle-market lending and leveraged finance experience.
Our investment solutions help traditional fixed income investors access the syndicated loan and high yield bond markets and capitalize on opportunities across traded corporate credit. We additionally provide access to directly originated fixed and floating rate credit assets and the ability to capitalize on illiquidity premiums across the credit spectrum. Our strategies include syndicated loans, high yield bonds, institutional credit, alternative credit investments and U.S. and European direct lending.
Syndicated Loans: This strategy delivers a diversified portfolio of liquid, traded non-investment grade secured loans to corporate issuers including an allocation to syndicated middle market loans. Loans are one of the few floating rate fixed income alternatives and can be especially suitable for investors with a view of rising short term rates. Our funds include both North American and European issuers. We include a sleeve of high yield bonds (up to 25%) as an accent and typically benchmark our loan strategy against the Credit Suisse Leveraged Loan Index.
High Yield Bonds: This strategy seeks to deliver a diversified portfolio of liquid, traded non-investment grade corporate bonds. This incorporates secured, unsecured and subordinated debt instruments of issuers in both North America and Europe. We include a sleeve of syndicated corporate loans (up to 25%) which can be used to manage duration and is intended to deliver an accent to performance. We benchmark our high yield strategy against the ICE BofAML US High Yield Master II Constrained Index.
Institutional Credit: Our Institutional Credit strategy combines both syndicated loans and high yield bonds into a single portfolio and is designed to offer investors a flexible solution to credit by allowing Ares to tactically allocate between both asset classes in various market conditions. This incorporates issuers in both North America and Europe and is designed to “go anywhere” within the liquid non-investment grade corporate debt universe. We benchmark our strategy against a 50/50 blend of the Credit Suisse Leveraged Loan Index and the ICE BofA Merrill Lynch US High Yield Master II Constrained Index.
Alternative Credit: Alternative Credit is Ares' home for investment opportunities that fall outside of traditional, well-defined markets such as corporate debt, real estate and private equity. Ares believes gaps exist between traditional, well-defined markets. Ares believes these gaps exist and persist for many reasons, including: regulation, bank disintermediation, tax and accounting rules, rating agency criteria, market structure, capital inefficiencies, and transaction complexity and size. Within these gaps there are markets and sectors that are often overlooked or misunderstood, resulting in investment opportunities that can offer attractive yield premiums, current income, downside protection and low correlation to traditional markets.
Alternative Credit has a broad range of substrategies designed to be client-focused and solutions-based with three main formats: pure play, customized and flagship funds. Each format benefits from Ares' focus on asset security, covenants, cash flow velocity and other features designed to capture value and minimize risk to principal. Alternative Credit targets a level of downside protection, low correlation to traditional markets, diversification, attractive levels of current income and attractive risk-adjusted return opportunities.
Direct Lending: In the wake of banking industry consolidation over the past 20 years and institutionalization of the leveraged lending market, Ares has capitalized on the opportunity to provide financing solutions to middle market companies. With a team of approximately 180 investment professionals in offices across the U.S. and Europe, we self-originate our investment opportunities in senior secured loans, private high yield, mezzanine and select minority equity investments. We can provide creative structures, hold large and control positions and offer sponsors and management teams increased certainty of execution, which we believe gives us a competitive advantage in the market. We provide investors access to our self-originating direct lending platform through several vehicles, including commingled funds, separately managed accounts and a publicly traded vehicle.
U.S.: We are one of the largest self-originating direct lenders to the U.S. middle market. Our direct lending business in the U.S. is conducted through Ares Capital Corporation (NASDAQ: ARCC), a leading specialty finance company, and certain private funds and accounts. ARCC is the largest business development company in the United States by both market capitalization and total assets. We also manage a commercial finance business that provides asset-based and cash flow loans to small and middle-market companies, as well as asset-based facilities to specialty finance companies.
Europe: Our European direct lending platform is one of the most significant participants in the European middle-market, focusing on self-originated investments in illiquid middle-market credits. We manage multiple commingled funds and separately managed accounts.
Asset manager specializing in liquid and illiquid credit strategies investing primarily in North America and Europe.
Los Angeles, New York, Chicago, Atlanta, Dallas, San Francisco, Washington, D.C., London, Paris, Frankfurt, Stockholm, Luxembourg
Non-investment grade corporate credit and alternative credit investments across the U.S. and Europe.
Syndicated loans, high yield bonds, institutional credit, alternative credit, direct lending: corporate direct lending (non-syndicated senior debt, mezzanine debt and non-control equity to middle market companies), project finance (high yield senior and mezzanine debt to finance power generation projects) and commercial finance (asset-based and cash flow loans to small and middle-market companies, asset-based facilities to specialty finance companies).
Diversification does not assure profit or protect against market loss.