Ares readies first close for fourth opportunistic RE fund

Ares Management, the Los Angeles-based alternative investment manager, is optimistic about its ability to fundraise despite myriad market challenges facing alternatives managers currently.

The manager is eyeing a first close for its fourth US real estate opportunistic fund in Q4 2022, Ares US Real Estate Opportunity Fund IV, despite having only launched fundraising for the vehicle in October, per PERE data. The fund has already attracted “significant interest,” Michael Arougheti, co-founder, chief executive officer and president of Ares, told investors during the manager’s Q3 2022 earnings call.

“With a $3 billion target, we anticipate that the early closings will equal or exceed the size of the predecessor fund,” Arougheti said. The predecessor fund, Ares US Real Estate Opportunity Fund III, closed in 2021 with $1.7 billion in commitments, according to PERE data.

Ares US Real Estate Opportunity Fund IV will be part of a larger pipeline of fundraises with which Ares is targeting up to $45 billion across its business lines. Other business lines that have launched or are planning to launch new vehicles include direct lending, alternative credit, private equity and infrastructure.

The first close for the opportunistic fund will follow an oversubscribed final close of Ares’ 10th US value-added fund, Ares US Real Estate Fund X. The firm garnered $1.8 billion for that vehicle, which closed in October. It was 75 percent larger than its predecessor.

The value-added fundraise was part of a third quarter where Ares raised $14.2 billion across the firm’s suite of products, Arougheti said. More than 90 percent of the capital was raised from Ares’ existing investor base, he added. In the firm’s value-added real estate fund, 35 percent of the capital was new, David Roth, partner and co-head of Ares US real estate, told PERE last month.

Despite Ares’ recent success, overall real estate fundraising activity has slowed due to market volatility. This was reflected in PERE’s Q3 2022 fundraising report, which was published on Monday and showed Q1-Q3 fundraising volume at its lowest level since 2013.

Arougheti acknowledged that fundraising has become more challenging but said Ares itself has not been as affected. “There’s been a lot of discussion in the market about the denominator effect in slowing allocations to alternatives by investors,” he said. “Through the end of the third quarter, we have not experienced this to the same degree and we understand others have.”