Investment firm Ares Capital reports strong Q2 performance, despite a drop in earnings
In the second quarter of 2025, Ares Capital, a leading business development company specialising in mid-market financing solutions, reported another solid quarter with strong levels of core earnings and growth in net asset value. Kort Schnabel, the company's chief executive, made this announcement.
The company's investment exits soared, totalling approximately $1.9bn, up from $1.4bn a year earlier. Ares Capital also made new investment commitments of approximately $2.6bn in the quarter, with 82% of these commitments being first lien senior secured loans.
Of the new commitments, 92% were in floating rate debt securities, of which 98% contained interest rate floors. The weighted average yield on total investments funded during the period at amortized cost was 9.4%, while the weighted average yield of debt and other income-producing securities funded during the period was 9.9%.
Approximately $2bn of the $2.6bn in new investment commitments made during the second quarter were funded. Ares Capital exited approximately $2bn of investment commitments during the quarter, including approximately $577m of loans sold to IHAM or vehicles managed by IHAM.
Ares Capital's financial stability and increased investment activity are key components of its current growth strategy. The company has upsized its largest revolving credit facility to improve liquidity and leverage capabilities, positioning itself to seize market opportunities despite overall reduced leverage levels.
The company's portfolio performance is strong, with accelerating EBITDA growth and disciplined risk management. This includes modest increases in non-accruals managed by an experienced team. The company signals potential for higher investing volume supported by a growing transaction pipeline, reflecting strategic capital deployment across varied sectors and capital structures to optimise returns amid market volatility.
Fundraising efforts focus on maintaining stable capital via credit facilities rather than aggressive new equity issuance. The capital position benefits from the facility expansion and a strategy of balancing spread and fee dynamics to sustain income in uncertain market conditions.
Ares Capital's board of directors declared a third quarter 2025 dividend of $0.48 per share. However, net investment income was $342m (£256.5m) in the second quarter of 2025, down from $386m a year earlier.
The company's capital position is further bolstered by the fact that it has raised over $2bn of new debt capital since the end of the last quarter, bringing its total available liquidity to approximately $6.5bn.
[1] Source: Ares Capital Corporation Q2 2025 Earnings Release [3] Source: Ares Capital Corporation Q2 2025 Investor Presentation [5] Source: Ares Capital Corporation 2025 Annual Report
Ares Capital successfully increased its new investment commitments in the second quarter of 2025, allocating around $2.6bn, with most of these commitments being first lien senior secured loans and floating rate debt securities. This significant increase in commitments, combined with the strong portfolio performance, is a key aspect of Ares Capital's current business growth strategy, supported by its financial stability and increased liquidity.
