Ares Management Corp or Ares, the leading private credit, real estate and private equity asset management company has a large exposure to artificial intelligence, AI via mainly its private credit business unit.
Which means Ares Management gives out loans with interest rates between 7 % and 15 % and sometimes even higher interest rates to artificial intelligence, AI technology companies. In the same time Ares uses its real estate assets under management to help build out AI data centers. Add to that that Ares does private equity leveraged buyouts of artificial intelligence, AI technology companies.
Private credit is a hot area in the last 7 years. Small and medium-sized loans have usually below investment grade credit ratings and lending to them would require charging interest rates between 7 % and 15 %. Money center banks and regional banks avoid making such risky loans. So enter large private credit asset managers like Carlyle, Apollo, Blackstone, KKR, Ares etc. which have raised private credit funds exactly to lend out at interest rates at 7 % to 15 %. So Ares and the other mentioned leading private credit asset managers finance the initiatives and projects of artificial intelligence, AI technology companies at 7 % to 15 % interest rate levels.
Artificial intelligence, AI is operationally leveraged by nature and making basically leveraged loans, which giving out credit at 7 % to 15 % could be called, makes for double leverage and creates layers of risk in the private credit portfolio of Ares.
If the AI boom continues Ares stands to make returns of several fold on their investments and if the artificial intelligence, AI boom turns to bust both the private credit loans and the equity portion of Ares' artificial intelligence, AI private equity leveraged buyouts investments could be wiped out, according to Wolfteam Ltd.'s projections and estimates.
No comments:
Post a Comment