(Bloomberg) — The rise of private credit exchange-traded funds, including a recent launch from Apollo Global Management Inc. and State Street Corp., comes as no surprise to Ares Management Corp.’s newly appointed co-president, Kipp deVeer.
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Retail investors have long sought ways to engage with private credit more easily, often to take advantage of higher yields. While publicly traded business development companies and ETFs have provided daily liquidity options in equity markets, the demand for private debt exposure has only grown louder.
Private credit products at large “seem to offer premium returns” and “are not beta-driven, they are alpha-driven,” deVeer said in an interview with Bloomberg Television on Thursday.
While other asset managers are actively building out liquidity-driven products, Ares is instead finding ways to diversify its distribution through wealth channels. The firm has pursued these opportunities most notably through non-traded real estate investment trusts and BDCs, deVeer said.
When asked about the viability of Ares pursuing an ETF dedicated to private credit, deVeer was clear: “We don’t have anything in the works right now.”
Ares raised a record $92.7 billion in new capital last year, a 25% increase from 2023, with commitments to direct lending and opportunistic credit driving growth.
While investors have balked at the Trump administration’s threat of tariffs, deVeer remained confident that capital is still interested in domestic markets.
“The question I’m getting a lot from investors is about US exceptionalism,” he said. “Everybody actually wants to be invested in the US but it’s not quite as busy as folks would like.”
Across the Atlantic, investor sentiment is shifting. Following recent elections in the UK, France and Germany, many see a bullish case in Europe. Blair Jacobson, Ares’ other co-president and a member of the firm’s European direct lending committee, thinks the region has vast room for growth. Ares amassed nearly €30 billion ($31.2 billion) for a European direct lending fund last month, the largest of its kind in the region to date.
Europe is somewhere between “five or 10 years behind the US market when you look at penetration of private credit,” Jacobson said. “That, in and of itself, provides an inherent tailwind.”
