Requests to exit a large private-credit fund at Ares Management increased this quarter from the March level. The fund's loans continue to perform well, however, and Ares hopes to work down its redemption backlog by year-end.

A Thursday morning letter to shareholders of the $23 billion Ares Strategic Income Fund said that investors holding 14.4% of its shares sought to redeem in the June quarter. That's up from 11.6% in March.

Like its peers at Apollo Global Management and Blackstone, Ares will limit its share repurchases to 5% of all shares -- honoring 35% of the $1.5 billion worth of requested redemptions. The nontraded Ares fund had a net asset value of $10.8 billion at the start of June, with the rest of its portfolio funded by borrowings.

This quarter is the second in a row that exit requests exceeded the 5% redemption limit at many leading nontraded credit funds. The funds enjoyed popularity in 2023 and 2024, when high interest rates revved returns on the loans they make to below-investment-grade companies. Their popularity has cooled since rates dropped and new artificial intelligence tools pose potential challenges to the software businesses among their borrowers.

Ares reassured investors that the fund's 831 borrowers are doing well, with just two loans not paying interest. From January through May, total returns for the fund's class I common shareholders were 2.2%. For shareholders that paid upfront placement fees and brokerage commissions, returns would be 0.2%. Ares said it will maintain its payout level, which amounts to 9.5% of net asset value.

The exit rush seems to be cresting. Only 15% of this quarter's redemption requests came from wealthy individuals in the U.S., said Ares, while nearly half came from foreign institutions and family offices. Redemption requests from wealthy U.S. investors were a third lower than they'd been in the March quarter.

Two-thirds of this quarter's redemption requests came from investors who'd tried to cash out in March. Even keeping to the 5% quarterly limit, Ares expects to satisfy the unfulfilled requests by year-end.

Credit funds across the industry chose to gate their exits this quarter. Redemptions were sought by investors holding 10% of the $79 billion Blackstone Private Credit Fund -- also known as BCRED. The fund repurchased 5%. Back in March, Blackstone had chosen to buy all of the 7.9% of shares that wanted out.

Some 17% of shares sought redemption at the Apollo Debt Solutions BDC this quarter, while 11.6% requested redemption at Morgan Stanley's North Haven Private Income Fund. Each limited their repurchases to 5% of shares. An exception to this quarter's exit overflows is Brookfield Asset Management's Oaktree Strategic Credit Fund. Only 4.5% of shares at the $7 billion pool sought redemption, and the fund will honor the requests.

For the quarter, inflows to the nontraded fund industry have lagged behind redemption outflows. But each of the funds said they had ample liquidity to handle the payouts, with cash coming from loan repayments, fund borrowings, and new investment inflows.

Private credit players may no longer rate as Most Popular in investors' yearbooks, but they'll still be there next year.

Write to Bill Alpert at william.alpert@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

June 25, 2026 12:12 ET (16:12 GMT)

Copyright (c) 2026 Dow Jones & Company, Inc.