Ares says private credit withdrawals came mostly from overseas investors

Withdrawal requests on Ares Management’s private credit fund did not amount to a broad run by U.S. institutions. Michael Arougheti said most of the pressure came from outside the United States, concentrated among smaller institutions and family offices, after the fund received redemption requests equal to 11% of investor holdings from less than 5% of its investors.

That matters because private credit has been sold as a steadier corner of finance, a market built on lending that avoids the daily mark-to-market swings of public markets. Ares’ experience instead highlights the central risk that critics have been pressing on for months: when investors want out, the promised stability can collide with the practical limits of liquidity.

The company had already signaled the scale of the pressure in a March 24 filing for Ares Strategic Income Fund, which said investors sought to redeem about 11.6% of outstanding shares. The fund, which had more than 20,000 shareholders at the time, said it would honor only 5% of those requests in that quarter. Ares said then that the withdrawal requests came from a limited number of family offices and smaller institutions in select geographies, accounting for less than 1% of shareholders.

Arougheti’s latest comments narrowed that picture further by pointing to overseas investors as the main source of the redemptions. That distinction is important because it suggests the pressure may be more localized than systemic, with sentiment among smaller, geographically concentrated investors driving the outflows rather than a wholesale retreat from U.S. institutional allocators.

Even so, the episode has landed at a sensitive moment for the private credit industry. Shares of U.S. alternative asset managers fell June 3 as investors braced for second-quarter updates on redemptions from non-traded private credit funds. The market is watching whether the withdrawals are an isolated adjustment or the first sign that investor enthusiasm for the asset class is being tested by its liquidity structure.

Arougheti also argued that greater regulatory scrutiny would ultimately help the industry, and said private credit plays an important role for insurance companies that need returns to meet future payments. Moody’s has said the rise of private credit has already altered the competitive landscape for U.S. banks, which have ceded substantial lending ground to alternative asset managers since post-2008 regulation tightened.

For Ares, the message was clear: redemption pressure has not turned into a companywide panic. But the fact that a marquee fund had to ration withdrawals at all is a reminder that private credit’s promise of resilience will keep facing its hardest test where liquidity is least visible.