Ares Private Equity Low Returns

Read an article recently that references a 4.8% net IRR for Ares Management's $8B flagship PE fund closed in 2017. Seems low for this kind of vehicle, given how market valuations have increased much more than that since then.

Anyone know why returns are so low? Apparently they're currently in the market for an even bigger follow on fund. Why would investors give them even more money with those returns?

Article in question: https://nypost.com/2021/05/25/atlanta-hawks-owner…

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Comments (11)

Jun 7, 2021 - 8:20pm

It's hard to post excellent IRR/MOIC when you are that big is the reality. Very few firms if any do it consistently at that size. 

Jun 7, 2021 - 10:41pm

Definitely plays into it too, but if you look @ massive funds in general, they will not post some of the insane IRR you see @ small MM firms and it's just because it becomes a much harder game the bigger you get.

  • Associate 3 in PE - LBOs
Jun 7, 2021 - 10:58pm

I mean check out any of the MF returns on Calpers - it's not like those guys are consistently above a net 15% either, especially with newer vintages.  This industry has rapidly matured over the past 20 years and LPs seemed to be more concerned with pace of deployment and overall portfolio diversification between public and private markets versus chasing the absolute highest returns. 

Jun 8, 2021 - 10:49am

Part of this is what's known as the J curve (you can Google it) as the fund is still relatively young. I know nothing about the prospects of their portfolio, but return profile usually looks better with time. 

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  • Investment Analyst in RE - Comm
Jun 10, 2021 - 3:01pm

Exactly. I've seen mezz/junior debt funds returning 9-10% net, on multi-billion funds (although not quite to the size of Ares's $8B)

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