Ares Strategic Income Fund's third-quarter tender drew requests well above its 5% cap for a third straight quarter, though demand eased from 14.4% in the second quarter.
Investors in Ares Strategic Income Fund tried to redeem more than 50 million shares this quarter. The fund will buy back about 19 million.
According to its tender filing with the Securities and Exchange Commission, 50,400,325 shares were submitted by the Sept. 18 deadline, equal to 13.1% of shares outstanding as of July 31. The fund caps quarterly repurchases at 5%, or 19,264,139 shares, so each tendering investor will receive about 38.2% of what they asked for.
At the fund's Aug. 31 net asset value of $26.74 a share, the requests total about $1.35 billion and the payout about $515 million.
Three quarters of proration
This is the third straight quarter the fund has hit its cap. In the second quarter, investors tendered 56,891,917 shares, or 14.4%, and received 34.7%. Demand eased, but the fund is still being asked for more than two and a half times what it will pay.
Ares has said much of the queue is repeat demand. The fund put net new withdrawal demand at about 3% of net asset value, and said investors who have re-tendered since the first quarter are expected to have received about 80% of their original requests.
That pattern matches what other large managers reported this week. Apollo Debt Solutions received requests for 14.7% of shares, down from 16.8%, and said most were re-tenders. Morgan Stanley's North Haven private credit fund received requests for 11.4%, and BlackRock's HPS Corporate Lending Fund about 11.5%. All are easing from the second quarter. All remain well above their 5% limits.
The inflow side
Redemption queues clear faster when new money comes in. The fund sold only about $8 million of its Class I shares in September, a small figure against a fund of this size. The fund carries leverage of about 1.15 times equity.
The semi-liquid structure is working as designed, since the cap keeps the fund from selling loans at distressed prices. The question is how long a backlog can last before it affects fundraising. Blue Owl's third-quarter tender results, due in the coming weeks, are the next data point. For Ares, the fourth-quarter tender will show whether the share of requests keeps falling as re-tendering investors are paid down, or whether new sellers keep joining the line.