Ares Shrinks a €1 Billion Private Credit Vehicle After Investors Rejected Its Pricing

Ares Management scaled back a continuation fund it had sized at about €1 billion after failing to win investor agreement on the price of the assets being moved into it. A continuation fund buys loans or companies from an existing fund run by the same manager, which means the manager sets the valuation of its own holdings and then asks new investors to accept it. Investors declined.

That refusal is the substance of the matter. Private credit valuations are not struck in a public market, so a rejected transfer price is one of the few observable signals about whether reported valuations match what buyers will pay. Ares already capped redemptions from one private credit fund for a second consecutive quarter in June, after requests to exit reached 14.4 percent.

Jamie Dimon, chief executive of JPMorgan Chase, made a related point in a television interview reported by the Israeli daily Globes. He said heavy leverage raises the chance that a single investor or fund sets off broader volatility and that people then panic.

Both items describe the same structure. Credit extended during a decade of cheap funding sits in vehicles that promise periodic liquidity against assets that trade rarely. When the valuations are tested, the gap between the reported value and the transaction value becomes visible one deal at a time.