Key Takeaways

  • Scale functions differently in private debt than in public equities; larger platforms gain direct pricing power, execution certainty, and proprietary market intelligence.
  • Ares began pivoting eight to ten years ago from pure sponsor coverage toward direct-to-company origination, targeting corporate leadership directly.
  • Dedicated sector teams in power, renewables, healthcare, software, and financial services allow lenders to underwrite enterprise risk before meeting management.
  • Managing credit across primary, secondary, and real asset strategies creates an information flywheel that tightens spread pricing and filters deal quality.

Moving Past Pure Sponsor Coverage

For years, private credit originations ran on a single playbook: build relationships with private equity sponsors, wait for buyout auctions, and submit financing packages. That model created commoditized pricing where lenders competed primarily on leverage multiples and covenants.

About eight to ten years ago, Ares shifted its origination engine. As Co-President Kipp deVeer explains, the firm deliberately expanded its footprint to source deals directly with corporate executives rather than relying exclusively on sponsor pipelines. “Something like eight or ten years ago, we said we really need to add more capabilities to go direct-to-company,” deVeer notes.

To execute that strategy, Ares established specialized industry groups covering power, renewables, healthcare, software, and financial services. Sponsoring dedicated vertical teams requires massive capital commitments that mid-sized lenders cannot support. The payoff comes in borrower conversations. When lenders enter discussions with pre-existing vertical knowledge, they evaluate balance sheets faster and structure tailor-made debt packages that regional shops cannot replicate.

“What that allows you to do is it makes you better, it makes you smarter on the LBO financings that you're doing,” deVeer points out. “It also puts you into the room going direct-to-company with CEOs with really differentiated industry knowledge, so when you step into the room, you're not learning about a company.”

The Multi-Strategy Information Flywheel

In public equities, running vast sums of capital can dilute performance. In private debt, balance sheet size combined with strategy breadth creates an information advantage. Large platforms track live operating metrics, debt service health, and liquidity constraints across thousands of portfolio companies across North America, Europe, and Asia.

This continuous data stream sharpens credit underwriting. A platform managing primary originations alongside secondary debt and real asset portfolios spots distress, margin compression, and sector-specific pricing trends months before public rating agencies adjust their views.

DeVeer summarizes the dynamic plainly: “Credit is a business where as you get bigger, you get better. In credit in particular, but also in some of the real assets businesses that we've developed, there are real scale advantages from playing in these markets day to day across geographies, across asset classes, both primary, secondary, et cetera.”

Bain & Company's Hugh MacArthur agrees with that assessment: “Scale actually can be a big competitive advantage, certainly in asset classes like credit and some other real asset classes.” When market volatility hits sectors like enterprise software, large platforms rely on structural seniority and real-time operational data across their wider portfolio to manage downside exposure.

Why It Matters

Consolidation in private credit is accelerating because small and mid-sized direct lenders face structural disadvantages in deal access, sector expertise, and capital deployment speed. Institutional LPs increasingly concentrate allocations with mega-platforms capable of writing entire debt tranches without syndication risk. For private equity sponsors and corporate borrowers, this shifts bargaining power toward a handful of multi-strategy managers who control private debt liquidity.