Mubadala and Ares form joint venture to invest in secondary private credit market deals

The new company, anchored by Mubadala, will initially aim to invest about $1 billion

The New York Stock Exchange-listed Ares says its partnership with Mubadala will enable it to scale its offering significantly. Bloomberg
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Ares Management Corporation, an alternative investment company that manages $352 billion in assets, and Abu Dhabi’s sovereign investor Mubadala Investment Company have formed a joint venture that will invest in global secondary market private credit opportunities.

The joint venture, anchored by Mubadala, will initially aim to invest about $1 billion as it seeks to capitalise on the anticipated growth and substantial demand from private equity companies and investors that commit capital to them for "customised liquidity solutions for the credit secondaries asset class", the two companies said in a statement on Wednesday.

The joint venture represents a key milestone for both partners and will enhance Mubadala’s positioning within the secondaries credit market. It will also enable New York-listed Ares to significantly scale its offering.

The partnership is a natural extension of Ares’s leading credit and secondaries platforms, which respectively, had approximately $214 billion and $22 billion in assets under management at the end of last year, the statement said.

The joint venture with Mubadala “underscores our view that private credit secondaries offer a compelling opportunity for investors seeking diversified exposure to the attractive return profile of private credit assets”, said Michael Arougheti, chief executive and president of Ares Management.

"Building on our position as a leading global direct lender and a secondaries market pioneer, we believe the expansion of the Credit Secondaries strategy alongside Mubadala helps to further differentiate Ares in the market as a comprehensive solutions provider.”

Mubadala, which is at the centre of the UAE's efforts to diversify its economy, manages more than $284 billion in assets globally.

In recent years, it has stepped up its investment in health care, technology, mobility, clean energy and life sciences and has partnered with the private equity companies and other investors to invest in alternative asset classes as it expands its portfolio.

In December, Mubadala Capital, the asset management subsidiary of Mubadala, announced a $2.1 billion private equity partnership transaction with France's private investment house Ardian.

In October, Mubadala and private equity firm KKR also forged an alliance to jointly invest across performing private credit opportunities in the Asia-Pacific region to address a shortage of capital and support the long-term growth plans of businesses.

Private credit has become a relevant and important part of institutional portfolios, which has led to the growth and development of the private credit secondaries industry
Fabrizio Bocciardi, head of Credit Investments at Mubadala

Dave Schwartz will serve as partner and head of the Credit Secondaries strategy of the new entity. The senior leadership team also includes Sebastien Burdel and Luca Salvato, partners in the Ares Secondaries Group, as well as Nate Walton, partner and head of the Private Equity Secondaries strategy.

By leveraging Ares's and Mubadala’s global footprint, the venture will benefit from access to a broader network, differentiated market intelligence and new transaction opportunities, the companies said.

“Private credit has become a relevant and important part of institutional portfolios, which has led to the growth and development of the private credit secondaries industry,” said Fabrizio Bocciardi, head of Credit Investments at Mubadala.

“We believe that Ares is particularly well-positioned as a global leader to capitalise on the growing demand for diversified credit secondaries opportunities.”

There has been a substantial increase in credit secondaries transaction volume as the primary private credit market grew over the years, Mr Schwartz said.

“Against this market backdrop, we see a meaningful supply-demand imbalance requiring dedicated capital to meet the liquidity needs of General [private equity companies] and Limited [PE investors] Partners,” he said.

“We believe that our partnership with Mubadala, combined with the scale, underwriting capabilities and experience of our private credit and secondaries businesses, will allow us to take advantage of these attractive market dynamics.”

Updated: March 22, 2023, 1:32 PM