Opportunity to invest with an experienced manager in the credit markets and a leader in the direct lending space.
The Ares European Strategic Income Fund (AESIF) is a private credit strategy focused on European companies operating in the middle markets. AESIF seeks to primarily self-originate investments and provide debt capital to European mid-market companies with a target EBITDA of EUR 10m +. The primary focus is on investing in senior secured loans with an emphasis on capital preservation and low return volatility.
Why consider Ares European Strategic Income Fund?
|Access Fund Details
|• Ares European Credit Solutions Fund SICAV (AECS) will be the umbrella structure with Ares European Strategic Income Fund (AESIF) as the first sub fund that is launched. The intention is to launch further sub funds under AECS as strategic opportunities present themselves.
• Perpetual life Luxembourg Part II UCI
|• Leverage up to 70% LTV on eligible gross asset value
|• Share classes to be available in EUR, USD and other currencies (subject to investor demand)
• FX hedging policy to be determined
|Offering Price / NAV Frequency
|• Equal to the most recently published net asset value (NAV) per share for each share class
• Calculated monthly and in line with monthly valuation cycle
|• Monthly with shares issued at NAV per Share as of the end of the immediately preceding month
|• Expected monthly as of the last calendar day of each month for distributing share classes
|• Redemptions are expected to be offered each month at the NAV per Share as of the last calendar day of the preceding month
• Shares not held for at least 18 months will be redeemed at 95% of that month's transaction price
• Under normal circumstances, overall limit on net redemptions equal to 2% per month and 5% per quarter of aggregate NAV
|Minimum Initial Investment
|• €25,000 (or as required under local jurisdiction distribution requirements)
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Note: The use of leverage magnifies the potential for gain or loss on the amount invested and may increase the risk of investment. Diversification does not assure profit or protect against market loss. There is no guarantee that the target pricing or returns will be achieved or that there will be any current income component. Actual results may differ materially.
Interests in the Fund have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “Securities Act”), or the applicable securities laws of any United States state or any non-United States jurisdiction. The interests in the Fund may not be offered, sold or delivered directly or indirectly in the United States or to or for the account or benefit of any “U.S. Person” except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and any applicable state laws. As such, any “U.S. Person” may not receive and should not act or rely on this website or any other materials related to the Fund.
Diversification does not assure profit or protect against market loss.
The Fund seeks to invest primarily in first lien senior secured loans, second lien senior secured loans, subordinated secured and unsecured loans, subordinated debt, and other types of credit instruments.
Distributions are not guaranteed. Distributions are calculated by annualizing the current month’s declared distribution per share and dividing by the prior month’s net asset value (“NAV”). Distributions may be funded from cash flow from operations, as well as other sources including the sale of assets, borrowings, return of capital or offering proceeds. Distributions may be funded, directly or indirectly, from temporary waivers or from expense reimbursements borne by the Fund’s investment adviser that may be subject to reimbursement. The Fund has not yet established limits on the amounts it may distribute from such sources. Yield is an attribute of underlying investments and does not represent a return to investors.
As of September 30, 2023. The above briefly summarizes certain material indicative terms and conditions and does not contain all terms and conditions that will be included in any definitive documentation for the proposed investment vehicle and is subject to change. The above summary does not constitute a commitment, a contract to provide a commitment, or an offer to make a commitment to Ares on these or any other terms. No legally binding terms shall be created until definitive documentation is executed and delivered.
In the UK, this communication (and any document to which it is attached or with which it is supplied, together the "communication") is issued by Ares Management UK Limited ("AMUKL") and/or Ares Management Limited ("AML") of 10 New Burlington Street, 6th Floor, London W1S 3BE, United Kingdom, which is authorized and regulated in the United Kingdom by the Financial Conduct Authority ("FCA") with firm reference numbers 613497 and 455547, respectively. In the European Economic Area (“EEA”) this communication is prepared by Ares Management Luxembourg (“AMLux”) of 14-16 Avenue Pasteur, L-2310 Luxembourg, which is authorized in Luxembourg by the Commission de Surveillance du Secteur Financier (“CSSF”) with reference number A00002345 and is issued and made available by an appropriately licenced EEA distributor. AMLux additionally has MiFID permissions under Reg ID S00001060 on the CSSF register.
MPMF Fund Management (Ireland) Limited, an Irish law private company limited by shares (the “AIFM”), has been appointed as the external alternative investment fund manager of AECS. The AIFM is in charge inter alia of the risk management function of AECS Feeder SICAV.
Ares Management Limited, (the “Investment Manager”) is an affiliate of Ares and is authorized and regulated by the FCA. The Investment Manager is responsible for initiating, structuring and negotiating AESIF Feeder’s Investments.
AMUKL, AML, and AMLux are wholly owned subsidiaries of Ares Management LLC (together with AMUKL, AML and AMLux, "we", or "Ares Management"). Ares Management is wholly owned by Ares Management Corp ("Ares Corp") (together, "Ares").
Certain Ares Funds may be offered through the Ares affiliate Ares Management Capital Markets LLC (a broker dealer registered with the SEC, and a member of FINRA and SIPC).
This is a marketing communication. Please refer to the legal documentation of the Fund before making any final investment decisions. This is not an offer to sell, or a solicitation to purchase, any security or other financial instrument, or a solicitation of interest in any fund, account or investment strategy.
Contents of the communication
Any offer or solicitation with respect to any securities that may be issued by any investment vehicle managed or sponsored by Ares Management or one of its affiliated entities (each an "Ares Fund") will be made only by means of a definitive Prospectus (as modified or supplemented from time to time, a "Prospectus"). You should refer to the Prospectus and constitutional documents and any other subscription documents relating to the relevant Ares Fund before making any investment decision.
The Prospectus, constitutional documents and subscription documents will contain complete information concerning the rights, privileges and obligations of investors in the relevant Ares Fund. The information contained in any such Prospectus, constitutional documents or subscription documents will supersede this communication and any other marketing materials (in whatever form) issued or communicated by Ares Management.
This communication contains information about Ares and certain of its personnel and affiliates and the historical performance of certain Ares Funds and/or investment vehicles whose portfolios are managed by Ares. This information is supplied to provide information as to Ares’ general portfolio management experience. Neither Ares nor any third party makes any representation or warranty (express or implied) with respect to the information contained herein (including, without limitation, information obtained from third parties) and Ares expressly disclaims any and all liability based on or relating to the information contained in, or errors or omissions from, this communication; or based on or relating to your use of the communication; or any other written or oral communications transmitted to you in the course of your evaluation of Ares or a potential investment in any Ares Fund.
The content of this communication should not be construed as legal, tax, or investment advice. Regarding sustainability-related aspects of the investment included herein the decision to invest in the Fund should take into account all the characteristics or objectives as described in the legal documentation of the Fund.
This communication is intended only for the person(s) to whom it has been sent, is strictly confidential, and must not be forwarded without the prior consent of Ares Management.
By acceptance of this communication (whether received directly from Ares Management or otherwise) you hereby acknowledge and agree that:
- its content includes confidential and proprietary information (“Confidential Information”) that is not publicly available or otherwise prepared for public dissemination;
- Confidential Information may include information received and held in confidence by Ares Management from third parties (for example, Ares Fund portfolio companies) (a "Third-Party"); and
- you must hold all Confidential Information in the strictest confidence, and will not use it or disclose it other than in accordance with this disclaimer.
You further acknowledge and agree that:
- your obligations under this confidentiality requirement (and any other confidentiality requirement which otherwise applies to the communication) are owed to Ares Management and any Third-Party;
- damages would not be an adequate remedy for breach of such obligations; and
- in the event of a breach, Ares Management, the relevant Ares Fund and any Third-Party shall be entitled to seek the remedies of injunctive relief, specific performance and any other equitable relief.
For recipients in the UK, this communication is directed solely at recipients who fall into both of the following categories:
- "Professional Clients" as defined in the Glossary to the FCA Handbook;
- one or more of: (a) investment professionals falling within Article 14(5) of the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001 (the “CIS Promotion Order”) and/or (as applicable) article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Financial Promotion Order”); (b) persons who are high net worth companies, unincorporated associations, partnerships or trusts falling within any of the categories of persons described in Article 22 of the CIS Promotion Order and/or (as applicable) Article 49 of the Financial Promotion Order; or (c) any other person to whom it may otherwise be lawfully directed in accordance with the CIS Promotion Order, the General Promotion Order or COBS 4 of the FCA Handbook of Rules and Guidance.
For recipients within the EEA, this communication is only made to (i) persons who are “Professional Clients” for the purposes of the European Union Markets in Financial Instruments Directive (Directive 2014/65/EU) or (ii) certain non-professional investors who meet the thresholds and/or conditions as applicable in a given member state.
Investment in any related fund will be restricted accordingly.
Persons of any other description may not receive and should not rely on these materials or any other materials relating to an Ares Fund.
These Materials are not intended for distribution to, or use by, any person in any jurisdiction or country where such distribution or use would be contrary to law or regulation.
This communication may contain “forward‐looking” statements that are not purely historical in nature. Any such statements are based upon estimates, projections, plans and assumptions about future events or conditions (not all of which will be specified herein). They are intended only as illustrations and by their nature are uncertain. No representations are made as to the accuracy of such statements. Not all relevant events or conditions may have been considered in developing such statements and assumptions. The achievement of results and objectives is dependent upon a multitude of factors, many of which are beyond the control of Ares and/or any referenced portfolio company. The statements may not consider or address all aspects of a referenced portfolio investment, including aspects that might be material or important. You must not rely upon any forward-looking statement contained in this communication, and you acknowledge and agree that you shall have no claim at law or in equity by virtue of anything contained in or omitted from any such statement. Past performance is not indicative of future results. There is no assurance that an Ares Fund will be able to generate returns for its investors (as stated herein or otherwise).
Certain information contained in this communication has been obtained from sources outside Ares, which in certain cases have not been updated through the date hereof. While such information is believed to be reliable for purposes used herein, no representations are made as to the accuracy or completeness thereof and none of Ares, its funds, nor any of their affiliates takes any responsibility for, and has not independently verified, any such information.
Summary Risk Factors
An investment in the relevant Ares Fund (for the purposes of these Risk Factors, the “Fund”) entails a significant degree of risk and, therefore, should be undertaken only by investors capable of evaluating the risks of the Fund and bearing the risks it represents. The Prospectus provides a non-exhaustive list of risk factors and conflicts of interest that should be considered in evaluating an investment in the Fund. The following list is not a complete list of all risks described in the Prospectus or involved in connection with an investment in the Fund, and prospective investors should carefully review the Prospectus for additional information about these and other risks associated with an investment in the Fund, including the sections entitled “Risk Factors and Other Considerations”. As a result of these factors, as well as other risks inherent in such an investment and/or as set forth in the Prospectus, there can be no assurance that the Fund will meet its investment objectives or otherwise be able to successfully carry out its investment program. There can be no assurance that an investor will receive a return on its capital, and therefore, an investor should only invest in the Fund if such investor is able to withstand a total loss of its investment. Capitalized terms below are as defined in the Prospectus.
No assurance of investment return or return of capital contributions
None of the Fund, the General Partner, the AIFM, the Investment Manager, any of their respective affiliates or any other person can provide any assurance that the Fund will be able to choose, make or realize any particular investment or the investment strategy of the Fund in general. Further, there can be no assurance that the Fund will be able to generate returns for the Investors or that such returns will be commensurate with the risks of investing in the types of companies and transactions described herein or that such returns will be comparable to the Fund’s targeted returns. The marketability and value of any such investment will depend upon many factors beyond the control of the Fund, the General Partner and the AIFM. The Fund will bear the expenses of transactions that are not consummated, including any break-up fees. As a result, the Fund could incur a substantial cost with no opportunity for a return.
The past performance of the Investment Manager, its affiliates and their respective investment professionals with respect to other portfolios, investment vehicles or accounts is not indicative of the results that the Fund will achieve. The Investment Manager (and not any of its affiliates or their respective investment professionals) will be responsible for its obligations under the alternative investment management agreement in respect of the Fund and, thus, the results obtained by such affiliates or investment professionals with respect to other portfolios, investment vehicles or accounts is not relevant to the Interests. Similarly, the past performance of the Investment Manager, its affiliates and their respective investment professionals over a particular period is not indicative of the results that may be expected in future periods.
The Fund’s assets will generally be illiquid
An investment in the Fund should be viewed as a semi-illiquid investment. The Fund’s assets will generally have no, or only a limited, trading market. The Fund’s investment in illiquid assets may restrict its ability to dispose of investments in a timely fashion or for a fair price. Illiquid assets may trade at a discount from comparable, more liquid assets. The prices realized from the sale of any of the Fund’s assets could be less than the cost of such assets to the Fund or less than what may be considered the fair value of such assets. The Fund is subject to the available supply and market competition in its ability to originate or purchase assets on advantageous terms or at all.
Shares in the Fund will have reduced liquidity
An investment in the Fund requires a commitment, with no certainty of return on investment or return of advances. There is no public trading market for the Interests, and none is expected to develop. Withdrawal of the investment by the Investors is allowed but subject to certain terms and conditions.
Although the Prospectus restricts the amount that the Fund may invest in any single portfolio company, diversification is not an objective of the Fund. The Fund’s portfolio may include a small number of large positions or may be concentrated in a small number of industries, countries, and sectors. If the Fund’s investments are concentrated in a few issuers or industries, any adverse change in one or more of such issuers or industries could have a material adverse effect on the Fund’s investments. Therefore, while this portfolio concentration may enhance total returns to Investors, if any large position has a material loss, returns to the Investors may be lower than if they had invested in a more diversified portfolio.
General Risks of Debt Securities
Debt securities in general are subject to various risk, including: (i) limited liquidity and secondary market support, (ii) the possibility that earnings of the relevant obligor may be insufficient to meet its debt service, (iii) the declining creditworthiness and potential for (or actual) insolvency of the relevant obligor of such debt during period of economic downturn, (iv) that the relevant obligor may be a company serving only local or regional interests, (v) spread compression over the reference interest rate available for reinvestment during any period in which prepayments are received and/or (vi) subordination to the prior claims of other debt or senior lenders. Debt instruments are generally subject to market value volatility that may not be apparent from historical volatility studies and that could be significant at times. An economic downturn could severely disrupt the market for debt instruments and adversely affect the value of outstanding debt and the ability of the borrowers thereof to repay principal and interest. It is expected that the Fund’s assets will consist primarily of non-investment grade middle market loans, which are considered to be speculative in nature and are expected to be subject to greater risks than investment grade corporate obligations.
Credit Risk and Interest Rate Risks of Debt Securities
Debt securities are subject to general market and credit and interest rate risks. Credit risk refers to the likelihood that an obligor will default on the payment of principal, interest or other amounts owed on an instrument. Certain investments may have an interest-only payment schedule with the principal amount remaining outstanding and at risk until the maturity of the investment. Financial strength and solvency of an obligor are the primary factors influencing credit risk, but other factors, including, but not limited to, an obligor’s failure to meet its business plan, a downturn in its industry or negative economic conditions may also contribute to credit risk. In addition, lack of, inadequacy of, or a deterioration in value of, collateral or other assets expected to be the source of repayment or credit enhancement for a debt instrument may affect its credit risk. Credit risk may change over the life of an instrument and debt instruments that are rated by rating agencies are subject to downgrade at a later date. There can be no assurance that the AIFM will be successful in assessing the credit risk of the different portfolio investments or mitigating the impact of credit risk changes on the Fund. Interest rate risk refers to the risks associated with market changes in interest rates. Interest rate changes may affect the value of a debt security indirectly (especially in the case of fixed rate obligations) or directly (especially in the case of instruments whose rates are adjustable). In general, rising interest rates will negatively affect the price of a fixed rate debt instrument and falling interest rates will have a positive effect on the price of a fixed rate debt instrument. Adjustable-rate instruments also react to interest rate changes in a similar manner although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules. In addition, interest rate increases generally will increase the interest carrying cost to the Fund of borrowed securities.
Volatility of leveraged loan and credit markets
Significant risks for the Fund and the Investors exist as a result of the potential for disruptions in the credit markets and uncertain economic conditions. These risks include, among others, (i) the likelihood that the Fund may find it more difficult to sell any of its assets in the secondary market, thus rendering it more difficult to dispose of such assets if and when it desires to sell them, (ii) the possibility that the price at which assets can be sold by the Fund will have deteriorated from the cost of such investment to the Fund, (iii) the possibility of accelerated prepayments of attractively priced (i.e. the all-in yield), structured or performing Fund assets as a result of increased liquidity and competition in the middle-market private debt asset class driven by economic conditions, relative performance, monetary policy or other governmental action or other factors and (iv) the impact of adverse economic conditions on the obligors of the Fund’s assets. These risks may affect the returns, if any, to the Investors or the ability of the Fund to return any or all of the Investors’ contributions. Disruptions in the credit markets may reduce opportunities for the Fund to make investments and may also heighten refinancing risk in respect of maturing Fund assets. Any events that slow, delay, or reverse economic recovery or cause a deterioration in loan performance generally may affect the returns, if any, to the Investors or the ability of the Fund to return any or all of the Investors’ contributions. The bankruptcy or insolvency of a major financial institution may have a material adverse effect on the Fund, particularly if such financial institution is the administrative agent of a Fund asset or is otherwise the counterparty to a contract with the Fund (including a hedging-related contract). In addition, the bankruptcy, insolvency, or financial distress of one or more additional financial institutions, or one or more sovereigns, could trigger additional disruptions in the global credit markets or the global economy which could have a material adverse effect on the Fund and its assets.
The performance of the Fund’s investments could be adversely affected by macroeconomic factors, including general economic conditions affecting capital markets and participants therein. Such macroeconomic factors include but are not limited to the continuing uncertainties affecting economies and capital markets worldwide; incidents arising from natural disasters, extreme weather conditions, global warming endemics, epidemics, pandemics, military conflicts, political or social unrest and similar events; concerns about financial performance, accounting and other issues relating to various companies including recent and proposed changes to laws and regulations affecting the financial industry, including banking, credit default swaps and other derivatives, mortgage lending, accounting and reporting standards.
Public Health Emergencies; COVID-19
Pandemics and other widespread public health emergencies, including outbreaks of infectious diseases such as SARS, H1N1/09 flu, avian flu, Ebola and the current outbreak of COVID-19 (as defined below), have and are resulting in market volatility and disruption, and future such emergencies have the potential to materially and adversely impact economic production and activity in ways that are impossible to predict, all of which may result in significant losses to the Fund.
Inflation and Deflation
Inflation risk is the risk that the value of certain investments or income thereon will be worth less in the future as inflation decreases the value of money. As inflation increases, the real value of the Fund’s investments can decline. Deflation risk is the risk that prices decline over time – the opposite of inflation. Deflation may have an adverse effect on the creditworthiness of any companies underlying the Fund’s investments and may make defaults more likely, which may result in a decline in the value of the Fund’s investments.
It is expected that the Fund will make use of leverage by incurring or having its subsidiary holding entities incur debt to finance a portion of its investment in a portfolio company. Leverage generally magnifies the Fund’s opportunities for gain and its risk of loss from a particular investment. The cost and availability of leverage is highly dependent on the state of the broader credit markets (and such credit markets may be impacted by regulatory restrictions and guidelines), which state is difficult to accurately forecast, and at times it may be difficult to obtain or maintain the desired degree of leverage. The use of leverage by the Fund will also result in interest expense and other costs to the Fund that may not be covered by distributions made to the Fund or appreciation of its investments and is also subject to governmental and regulatory oversight, and certain governmental bodies may restrict or otherwise discourage lending that results in companies carrying large amounts of debt.
The use of leverage by a portfolio company imposes restrictive financial and operating covenants on a company, in addition to the burden of debt service, and may impair its ability to operate its business as desired and/or finance future operations and capital needs. The leveraged capital structure of portfolio companies will increase the exposure of the Fund’s investments to any deterioration in a company’s condition or industry, competitive pressures, an adverse economic environment, or rising interest rates and could accelerate and magnify declines in the value of the Fund’s investments in the leveraged portfolio companies in a down market. In the event any portfolio company cannot generate adequate cash flow to meet its debt service, the Fund may suffer a partial or total loss of capital invested in the portfolio company, which could adversely affect the returns of the Fund.
Privately Owned Companies
The obligors of the Fund’s assets will primarily be privately owned middle-market businesses. There is generally no publicly available information about these businesses. Some obligors may not meet net income, cash flow and other coverage tests typically imposed by banks and other lenders. Numerous factors may affect an obligor’s ability to repay its related obligations, including the failure to meet its business plan, a downturn in its industry or continuing negative economic conditions. A deterioration in an obligor’s financial condition and prospects may be accompanied by deterioration in the collateral securing the Fund’s assets. Such deterioration might impair the ability of such obligor to obtain refinancing or force it to seek to have the Fund’s asset restructured.
Subordinated loans are subordinate in right of payment to one or more senior secured loans and, therefore, are subject to additional risks that the cash flows of the related obligor(s) and any property securing such subordinated loan may be insufficient to make the scheduled payments after giving effect to any senior secured loans of the related obligor(s). Subordinated loans are expected to be more illiquid investments than senior secured loans, which, as discussed, are themselves illiquid investments.
Unsecured loans are unsecured obligations of the applicable obligor(s), may be subordinated to other obligations of such obligor(s) and generally have greater credit, insolvency and liquidity risk than is typically associated with secured obligations. Unsecured obligations will generally have lower rates of recovery than secured obligations following a default. Also, in the event of the insolvency of an obligor of an unsecured obligation, the holders of such unsecured obligation will be considered general, unsecured creditors of such obligor, will have fewer rights than secured creditors of such obligor and will be subordinate to the secured creditors of such obligor with respect to the related collateral.
Issuers of subordinated debt obligations may be highly leveraged and may not have available to them more traditional sources of financing. During an economic downturn or a sustained period of rising interest rates, such issuers may be more likely to experience financial stress and may be unable to meet their obligations.
Mezzanine obligations may provide that all or a part of the interest accruing thereon will not be paid on a current basis but will be deferred. Mezzanine obligations also generally involve greater credit and liquidity risks than those associated with senior secured loans. They are often entered into in connection with leveraged acquisitions or recapitalizations in which the obligors thereunder incur a substantially higher amount of indebtedness than the level at which they previously operated and such loans sit at a subordinated level in the capital structure of such company.
The Fund is permitted to invest in common and preferred stock and other equity securities in connection with providing debt financing to issuers of such equity securities. Equity securities generally involve a high degree of risk and will be subordinate to the debt securities and other liabilities of the issuers of such equity securities. Prices of equity securities generally fluctuate more than prices of debt securities and are more likely to be affected by poor economic or market conditions. In addition, these equity securities may be illiquid or trade at significant discounts to otherwise comparable investments. Equity securities may not produce current income for the Fund and may be speculative.
The Fund is denominated in Euros. The Fund has the ability to issue share classes in different currencies. Currency fluctuations may have an adverse effect on the value price or income of the product which may increase or decrease as a result of changes in exchange rates.
Prospective investors should note that the tax treatment of each investor, and of any investment, depends on individual circumstances and may be subject to change in the future.
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AccessAres is the thought-leadership and educational division of Ares Wealth Management Solutions. The materials distributed by AccessAres are for informational purposes only and do not constitute investment advice or a recommendation to buy, sell or hold any security, investment strategy or market sector. Ares Wealth Management Solutions is a global brand of Ares Management Corporation.