For private credit and there was an interesting article in the paper a couple of weeks ago, just talking about pension allocations, as an example, being just shy of 4% of allocations with a general commitment to see that doubling. And I would say that, that’s probably true for most of the other institutional investor segments as well. So we are not seeing any reduced demand for private credit. And in many cases, we’re actually seeing appetite increase. And I think the increased reflection, to your question, that people are going into the cycle under-allocated. Number two, it’s easier to deploy in credit in a market like this and so, for folks who are looking to capture excess return in this vintage credit is an easier way to put money in the ground.
And three, just to put it in perspective, if you look at, generally speaking, performing first lien senior secured credit across the private credit landscape, you’re generating 10% to 13% rates of return, short duration floating rate. That’s a really compelling place to be on a relative value basis, but it actually is liquidity-enhancing, because a lot of these institutional investors, whether they’re pension funds or endowments or insurance companies are probably trying to beat a bogey of 6% on the low end and 8% on the high end. So if you’re generating current short duration floating at 10 plus with rates still on the rise everything in excess of your hurdle is actually helping to refill the bucket of return that you gave up in your fixed income and equity book.
So there’s a lot at play here driving dollars into the private credit landscape and I would expect that to continue.
Benjamin Budish: Great. That’s really helpful. Maybe one quick follow-up. You mentioned the — you acquired the rest of the Asia business. It’s a smaller part of the whole. But could you kind of give us an update on the strategy there? What sort of contribution to growth are you expecting from there over the next several years?
Michael Arougheti: Sure. Just to clarify we signed, but we’re still waiting for regulatory approval. We decided to pull it forward really as an indication of the opportunity that we see there and just felt that by owning 100% versus 80% would give us just a better opportunity to align incentives along a shared vision for growth and really drive growth across the region under the unified Ares brand. So we’re super excited about it. And this acceleration I think is a good indication of what we would see there. If you look at the businesses that exist today the legacy SSG businesses we bought was a leader in private credit in two fund families one being a distressed and special sits business, and the other being a more regular way senior lending business.
And both of those families of funds have performed well and grown in our two years of ownership. We’ve been adding people and capabilities across the region. We’ve talked about on prior calls that we had a successful launch and closing of an Australian-New Zealand direct lending business. We have added senior folks in and around our real estate and infrastructure business. We’ve added secondaries professionals and raised capital to expand our secondaries business there. So I would say at a high level while a lot of those markets are still developing and don’t necessarily offer the same scale of opportunity or breadth of opportunity that the U.S. and Europe do our vision for our APAC business is that at maturity it will be of a similar size as the US and European markets and all of our strategies will be represented there in each of the markets in the region.
