Private market deals will get bigger – Ares co-head of European credit

02/21/25 • 19 min

In the latest edition of Credit Exchange podcast, Mike Dennis, co-head of European credit at Ares Management, speaks with Creditflux's managing editor Lisa Lee about Ares’s record-setting private credit fundraise for direct lending and opportunities to invest in Europe.

Investors are still excited about the opportunity set in Europe, evidenced by Ares’s EUR 30bn direct lending fund which attracted a historic EUR 17bn of equity commitment that far surpassed the previous record also set by Ares. Private credit gives good yield, low volatility and good quarterly distribution on a quarterly basis, said Dennis.

Dennis sees the private credit market easily able to provide EUR 2bn to EUR 3bn unitranche loans in Europe, which could increase if borrower tap multi-currencies across Europe and US. In the future, these deals will get even bigger. But they will done more on an opportunistic basis when public markets are shuttered – Ares core direct lending strategy is focusing on middle-market companies where the banks are continuing to retrench and there are enough deals to be very selective.

Opportunistic credit business is also an attractive space. Ares looks to provide capital to delever balance sheets or provide growth capital for deals that were inked when interest rates were zero and therefore have capital structures that may no longer make sense.

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Crosswinds in credit markets – Alan Schrager at Oak Hill Advisors

In the latest edition of Credit Exchange with Lisa Lee, Alan Schrager, senior managing partner of Oak Hill Advisors, speaks with Creditflux's managing editor Lisa Lee about the cross-currents in credit markets which is blazing hot with spreads going tighter but there’s issues of tariffs, immigration reform and defaults.

Spreads have gone tighter in many markets, not only credit or private credit, while there's a number of pressures on companies, including tariffs, which Schrager suggests means it's better to invest in higher-quality investments. The spread between “great stuff, good stuff, and bad stuff and terrible stuff” is the tightest it has ever been, he noted.

Of the headwinds, immigration reform will have a greater impact than trade protectionism, he predicts, since the industries that are impacted by tariffs will adjust.

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Carlyle’s Mark Jenkins sees USD 23 trillion opportunity in investment-grade private credit

Mark Jenkins, head of global credit at Carlyle, speaks with Creditflux's managing editor Lisa Lee in the latest edition of the Credit Exchange podcast, about the vast growth potential in asset-backed and investment-grade private credit to a roughly $23 trillion market as bank retreat from the space.

IG private credit is gaining traction with institutional investors because they are able to get a premium of 100 to 150 basis points over liquid investment-grade spreads, said Jenkins. That’s a proportionally a bigger premium than that commanded by the sub-investment grade (known as direct lending) segment because IG private credit has more complexity. Besides insurance companies, which are familiar with the asset class, pensions and sovereigns are starting to look at IG private credit from a return perspective.

Broadly, Jenkins sees three secular trends for past five years that’s caused an increase in private investment: the ramp up of geopolitical risk, which is causing more volatility, a massive onshoring of certain capabilities, and a re-orienting of supply chains. What’s changed is the uncertainly around tariffs and immigration but that too will change.

The neutral rate will be much higher than the past fourteen years, predicts Jenkins, and there'll be more competition for capital. To invest, ask where are the points where you can create value, suggest Jenkin. There are inefficiencies in certain geographies such as corporate credit in Europe where the fragmentation and volatility has made traditional financing more difficult and thus created opportunities.