Ares Capital

Ares Capital helps medium-sized American businesses grow by lending them money. These businesses often cannot get loans from traditional banks and use this cash to build factories or buy other companies. By providing these loans, the company earns interest and helps the economy grow.

What is in the Portfolio?

• First Lien Loans: Senior secured debt that sits at the top of a company's repayment priority; includes unitranche loans which combine senior and subordinated debt into one package.
• Second Lien Loans: Secured debt that ranks behind first lien loans in priority; typically offers higher interest rates to compensate for increased risk.
• Subordinated Debt: Unsecured loans that rank below senior debt but above equity; often includes opportunities to participate in the borrower's capital appreciation.
• Preferred and Common Equity: Direct ownership stakes in businesses; usually held alongside debt investments to provide extra returns through company growth.
• Ivy Hill Asset Management: Wholly owned manager of 23 investment vehicles; held $14.6 billion in assets under management as of December 31, 2025.

Strategic Moves and Partnerships

• Established a joint venture with Varagon Capital Partners called the Senior Direct Lending Program to provide specialized loans to middle-market firms.
• Acquired Allied Capital Corporation in April 2010, which contributed to a long-term realized gain of $1 billion over the original investment costs.
• Secured an exemptive order from the SEC to co-invest alongside other Ares Management funds, allowing for larger and more diverse deal participation.

What Makes the Company Different?

Ares Capital benefits from the global reach of its parent, Ares Management, which operates over 55 offices across more than 25 countries. The company uses its large scale to lead complex financing deals, providing a single source of capital for businesses that might otherwise need multiple lenders.

Performance by the Numbers

• Total assets reached $31.2 billion by December 31, 2025, making it the largest publicly traded business development company by market capitalization.
• Operating income rose to $529 million in Q4 2025, representing a 43% increase from the $370 million reported in Q4 2024.
• Revenue grew to $635 million in Q4 2025, up 12% from $567 million in the same period of 2024.
• Net income dropped to $293 million in Q4 2025, down 17.9% from $357 million in Q4 2024.
• The company maintained a 189% asset coverage ratio as of December 31, 2025, well above the 150% regulatory requirement.

The Bottom Line

Ares Capital has transitioned from a small lender into the largest player in the public business development space. Its steady focus on senior secured debt and middle-market companies provides a foundation for consistent income and capital preservation.