Ares Management closes its latest direct lending fund at record $34 billion

(Reuters) - Ares Management said on Wednesday it has closed its latest direct lending fund with a capital base of $34 billion, making it the largest in the investment manager's history.

Total equity commitments raised for the fund, which is double the size of its predecessor, stand a little over $15 billion, more than its $10-billion target.

Credit markets have recovered after the U.S. Federal Reserve paused interest rate hikes last year. Rising borrowing costs derailed deal markets, particularly for transactions underpinned by high levels of debt.

Goldman Sachs Asset Management's alternative investments platform said in May its latest fund raised more than $20 billion for senior direct lending. Banks in the syndicated loan market compete with direct lenders including private equity firms and others.

According to bankers' estimates the direct lending market is roughly half the size of the more than $1.5 trillion syndicated loan market.

Ares' direct lending funds provide secured loans to mid-sized companies in the United States.

"The middle market continues to experience significant demand for reliable capital solutions as it remains underserved by banks and other traditional lending sources," said Mark Affolter, partner and co-head of U.S. direct lending at Ares.

The fund, known as Ares Senior Direct Lending Fund III, has committed $9 billion in capital to more than 165 companies till date.

Ares managed to rope in about $6.4 billion in debt and equity for the fund in the second quarter of 2024. The company's previous fund had $14.9 billion in equity and debt commitments.

(Reporting by Pritam Biswas in Bengaluru; Editing by Shounak Dasgupta)