Welcome to Lender Lens, our series for profiling leaders in the Lender community.
With private credit playing an increasingly important role in the financial system, we wanted to find out how lenders are navigating the evolving landscape and how they assess the market in the coming years.
Ares Management has long been a key player in the European private credit landscape, but the recent close of Ares Capital Europe VI at €17.1 billion marks a new chapter. As the largest direct lending fund ever raised in Europe, it signals both the scale of investor appetite and the depth of Ares’ reach across the continent.
For Michael Dennis, Partner and Co-Head of European Credit, the focus isn’t just on raising capital, it’s on deploying it with precision. With a 95-person investment team on the ground, a stronghold in the core mid-market, and a growing presence in regions like Italy, Ares is doubling down on local expertise and selective origination.
In this interview, Dennis discusses the strategy behind maintaining discipline at scale, the firm’s outlook on Europe’s evolving credit markets, and the value of being a trusted partner beyond the capital.
With Ares Capital Europe VI closing at €17.1 billion, how do you maintain investment discipline with such scale?
“Despite raising what we believe to be the largest European Direct Lending fund, we are retaining our focus on the core middle market, in which we’ve specialized since the launch of our European business in 2007. We also remain highly selective in our allocation, making commitments to between 2-5% of the roughly 1,400 opportunities we typically evaluate each year, so we’re highly selective in how and where we deploy capital. Notably, this underpins the work of our 95 investment professionals focused on, among other things, portfolio management to ensure we maintain discipline across the life cycle of each investment.”
How would you describe Ares’ long-term vision for European credit markets, particularly in the mid-market space?
“We believe the European direct lending market still has a long runway owing to secular tailwinds – including the continued retrenchment of banks and the growing acceptance of private credit as a source of capital in less mature markets like Italy. While there are markets in which 50-70% of transaction financing comes from private credit, there are still many areas in which that figure is in the 20-40% region, leaving plenty of room for firms like Ares, which have the necessary scale and experience of pan-European investing.”
Are there specific sectors or regions in Europe that you believe are particularly ripe for direct lending activity right now?
“We recently opened an office in Milan, our seventh principal investment hub in Europe, in large part because we believe its direct lending market will continue benefitting from significant secular tailwinds in the years to come. Italy is home to many family-owned businesses in fragmented sectors potentially ripe for consolidation which, paired with an uptick in mid-market buyouts, makes it an appealing market right now. While we are sector-agnostic, we typically invest in defensive, resilient sectors less likely to be affected by exogenous shocks – such as software, financial services, and so on.”
With a 95-strong team in Europe, what advantages does that scale give you in such a competitive market?
“The main advantage of having a team of 95 investment professionals is the ability to originate our own deals – particularly in markets where a local presence is critical – instead of depending on intermediaries. Our teams are on the ground, building and strengthening relationships of trust with management teams, sponsors, and advisors, which has given us a competitive edge since 2009, when we opened our first Continental European offices in Paris, Frankfurt, and Stockholm. This highly localized investment approach also enables us to move with greater speed and be a more flexible capital solutions provider – especially because we are often a sole or lead lender. Additionally, we have built a strong portfolio management team whose main responsibility is to closely monitor our portfolio, respond to and mitigate risk, and provide hands-on support to management teams where needed. Our scale means we are more than just a lender – we are a partner to the businesses we invest in.”
Ares recently opened an office in Milan, so I imagine you’ll be spending time there for business. But if you were choosing a destination in Italy purely for personal travel or a holiday, where would you go and why?
“It would have to be Tuscany, where the food and wine – paired with such a scenic backdrop – is fabulous. The cities of Sienna and Florence are also spectacular.”
Stay in touch with all of our latest updates and articles. Sign up now.