Ares CEO sees no major default cycle in private credit despite market stress

Private credit is under pressure, but Michael Arougheti says the strain still looks more like a funding and rate problem than the start of a broad default wave. Speaking in Hong Kong on Wednesday at the HSBC Investment Summit, the Ares Management chief executive said he did not see signs in either his firm’s books or the wider market that would point to a major default cycle.

“There’s nothing that we’re seeing in our portfolios or in the market broadly that would say that we’re about to have a major default cycle,” Arougheti said.

That reassurance lands at a sensitive moment for a market that has ballooned to about $3.5 trillion and become a crucial source of financing for companies that may not want, or may not qualify, for traditional bank lending. Ares, a $622 billion alternative investment firm, has spent years building a large presence in that market. The company was founded in 1997, and its secondaries group had about $42.1 billion of assets under management as of December 31, 2025.

The debate now is not whether private credit has grown important. It is whether that growth has outpaced transparency. Arougheti said the current stress is mainly tied to liquidity and interest rates, not a broad deterioration in borrower quality. That distinction matters because investors in pensions, insurers and large funds have been drawn to the asset class by its yield, while critics argue that many of the loans are less visible, less frequently traded and harder to mark in a downturn.

Signs of strain are already visible. Blue Owl faced redemption requests higher than peers in the first quarter, and the firm later limited withdrawals to 5% at two private-credit funds after the surge in requests. The pressure follows a stretch in which managers have been forced to reprice software-sector exposure and confront concerns about AI-driven disruption to software borrowers. Wall Street banks have also been stress-testing their own private-credit exposures, a sign that the asset class is no longer being treated as a niche corner of finance.

At the same forum, BlackRock’s Rachel Lord argued that better product design and more transparency could ease investor concerns. That push for disclosure goes to the heart of the current problem: even if defaults remain contained, hidden risk can still show up first as redemption pressure, wider spreads and forced asset sales.

Ares is also adjusting its own fundraising pace. The firm has been planning a smaller next flagship U.S. direct-lending fund than its record $33.6 billion predecessor, a move intended to speed capital deployment. For an industry built on the promise of steady returns, the message from Hong Kong was clear: the damage so far may not look like a credit crisis, but the market is no longer getting the benefit of the doubt.