3 Questions with Kevin Early, Partner, European CFO at Ares Management

Ahead of the upcoming SuperReturn CFO/COO 2023 event taking place next week, we spoke Kevin Early, Partner, European CFO at Ares Management. Read on to get his expert insight into current investment strategies, mitigating risks and conducting due diligence in private capital markets and future growth sectors.

What steps are most important for investors to conduct due diligence over investments and mitigate risks in this volatile landscape?

The steps and importance of due diligence is ultimately driven by the individual investor, their investment decisioning criteria and internal risk criteria. One significant development in recent fundraising cycles is the increased importance and focus on Operational Due Diligence. LPs continue to analyse investment strategy, historical track record, competitive analysis and forecasted return profiles as a means of identifying attractive and viable investment strategies. Sophisticated investors are also adding to this a detailed Operational Due Diligence framework to analyse the controls, oversights and policies/procedures governing the fund. Provision of quarterly financial statements and general performance metrics are now no longer sufficient. Instead, LPs are analysing the full investing, monitoring and reporting workflows, identifying all relevant parties and risks to ensure adequate care and oversight is being managed.

What are the current investment trends? Are there any specific strategies and regions you're investing in or where you're seeing growth?

I struggle describing any investment strategy as a trend, but do recognise that in evolving, volatile or cyclical markets, certain strategies are more prevalent. For example, private credit has garnered increased attention from GPs, investors, and the financial media in the last 12 months, despite it being a product in which Ares has invested for 15+ years in Europe, and even longer in the US. The reality is that we continue to see an increasing investor appetite; understanding for private credit, general market conditions and macro trends have increased the overall addressable market, creating opportunities for growth. Similarly, we are seeing increased interest in secondary strategies across all asset classes. While credit secondaries is definitely a newer and underdeveloped asset class, we are seeing opportunities across all secondary strategies (private equity, real estate, infrastructure). Ares has also invested significantly in Asia, where we are hoping to grow our business across strategies.

What challenges in the private capital landscape are most prominent at the moment, and how can managers aim to mitigate this?

Fortunately (or unfortunately), I think the private capital landscape faces a multitude of challenges, all of which are certainly manageable. Several of the more pressing issues for managers today are the ever-increasing complexity of products/funds and the demand for greater transparency from both LPs/investors and regulators. The SEC has just introduced new rules for private asset managers, which candidly, align with feedback we have seen from key investors and stakeholders. The regulatory landscape will continue to evolve as these products become more ubiquitous, and is the challenge for CFOs and COOs to manage and adapt to these changing requirements.

Want to get more insights from Kevin Early? Secure your spot at SuperReturn CFO/COO and join his session!