There is a principle I have followed for 30 years in this business. When the smartest credit team on the planet starts aggressively buying a beaten-down asset class they understand better than anyone alive, you do not sit on your hands and debate whether the timing is perfect.
You take notes, you do your homework, and you act.
Ares Management (NYSE:ARES) filed its Q1 2026 13F, and what it shows is worth a careful read. This is not a firm shooting in the dark. This is the firm that essentially invented modern direct lending going on a systematic shopping spree in the exact corner of the credit market where it has the deepest knowledge and the longest track record.
Here’s exactly what they bought, what they sold, and why.
Ares spent the first quarter buying Business Development Companies like the market was having a clearance sale, which frankly it was.
The biggest move by percentage was Morgan Stanley Direct Lending (NYSE:MSDL), where they added 312% to the position, nearly quadrupling their stake at an average price of $16.19, a name now trading at $15.09.
Next came Hercules Capital (NYSE:HTGC), where they added 285%, bringing the position to 776,606 shares at an average cost of $17.09 against a current price of $15.34. That is a 10% discount to where they were buying.
Eagle Point Credit (NYSE:ECC) got a 244% addition at an average of $5.36, and that name is now sitting at $4.04, down 21% year to date. Runway Growth Finance (NASDAQ:RWAY) saw a 113% addition at an average of $9.91 and trades at $6.32 today, down 22% year to date.
Nuveen Churchill Direct Lending (NYSE:NCDL) was added to by 59%. Goldman Sachs BDC (NYSE:GSBD) got a 54% addition at an average of $10.58 and is now trading at $8.86.
MSC Income Fund (NYSE:MSIF) was added to by 40% at an average of $15.05, now at $11.80.
FS KKR Capital (NYSE:FSK) saw an 18.8% addition.
Blue Owl Technology Finance (NYSE:OTF) got an 18% addition.
Ares Capital Corporation (NASDAQ:ARCC) itself got a 16% addition at an average of $19.24.
Golub Capital BDC (NASDAQ:GBDC), Oaktree Specialty Lending (NASDAQ:OCSL), Crescent Capital BDC (NASDAQ:CCAP), Oxford Lane Capital (NASDAQ:OXLC), Barings BDC (NYSE:BBDC), and Blackstone Secured Lending (NYSE:BXSL) all received additions of varying sizes as well.
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Count them up.
That is 17 separate BDC or direct lending positions where Ares either added meaningfully or initiated outright in Q1 2026. Every single one of them is trading below where Ares was buying.
The sector has gotten cheaper since the quarter ended, which means the opportunity has only improved. When the firm that built this industry buys this broadly and this aggressively across the sector, they are not guessing.
They are expressing a conviction.
Ares also opened three brand new positions in the quarter. The most interesting, and the most revealing, is a pure credit investment: $55.5 million in principal value of Integer Holdings (NYSE:ITGR) convertible notes, the 1.875% issue due March 1.
This is the Drexel-Apollo-Ares lineage doing exactly what it has always done best, finding a debt instrument it understands and sizing into it at a level that reflects real conviction. Integer is a medical device component manufacturer with a solid underlying business.
Ares looked at the capital structure and liked what they saw.
The other two new positions were Carlyle Secured Lending (NASDAQ:CGBD), purchased at an average of $12.06 and now trading at $10.68, down 11% year to date, and BlackRock TCP Capital (NASDAQ:TCPC), purchased at an average of $4.94 and now at $3.73, down 28% year to date.
Both are BDCs. Both have gotten cheaper since Ares bought them. Both are now considerably more interesting.
They sold exactly one position outright: New Mountain Finance (NASDAQ:NMFC). The entire stake, gone. NMFC has faced persistent questions about credit quality in parts of its portfolio, and Ares, which looks at middle market credit for a living, made the decision that this was not where they wanted to be.
When a firm with $407 billion in credit assets under management looks at a BDC and decides to sell every single share, that is information worth having. I would not be running to buy NMFC on the dip.
The largest position in the existing book remains Savers Value Village (NYSE:SVV), where Ares owns 75% of the company and carries it at $873 million, representing nearly 58% of the total disclosed portfolio. SVV is down 12% year to date.
This is a special situation rather than a market call, and Ares is not going anywhere on it. They have owned it since Q2 2023 and this is a controlled company situation that will play out on its own timeline.
Among the other existing positions, Global Business Travel Group (NYSE:GBTG) is the standout performer, up 23% year to date and 61% month to date.
ARKO Corp. (NASDAQ:ARKO) is up nearly 70% year to date.
Trinity Capital (NASDAQ:TRIN) is up 19%. Uniti Group (NASDAQ:UNIT) is up 57%. These are working.
On the other side, Claritev Corp (NYSE:CTEV) is down 49% year to date and Ares did not add to it. Optimum Communications (NYSE:OPTU) is down 60%. Black Rock Coffee Bar (NASDAQ:BRCB) is down 69%. Rent the Runway (NASDAQ:RENT) is down 54%.
The absence of additions in those names tells you something about the conviction level behind each one.
Ares Management is one of the most disciplined credit organizations ever assembled. They built their reputation by being right about credit quality over long periods of time through multiple cycles.
Their Q1 2026 activity is sending a clear message.
They believe BDC valuations have overshot to the downside. They believe the direct lending asset class, the one they built, remains fundamentally sound despite the pressure on book values and net asset values that the sector has seen.
And they are backing that belief with real capital across a broad enough set of names to make clear this is a thesis, not a coincidence.
Several of the names they were buying in Q1 are now trading even cheaper than where they bought them. GSBD is at $8.86 against their $10.58 average. FSK is at $10.78 against their $18.98 average. OTF is at $10.63 against their $14.40 average. RWAY is at $6.32 against their $9.91 average.
The portfolio has moved against them since quarter end, which in the language of deep value investing means the setup has improved, not deteriorated.
My framework has always been the same. Find an asset class with real fundamental value being temporarily repriced by sentiment rather than credit reality.
Confirm that the smartest operators in the space are buying rather than running.
Make sure the yield compensates you adequately while you wait for the market to come to its senses.
All three boxes are checked here. The next step is up to you.
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