Ares CEO Says UBS Call on 15% Private Debt Default ‘Absolutely Wrong’

(Bloomberg) — A forecast last week from UBS Group AG analysts that private credit default rates could reach 15% was “absolutely wrong,” Ares Management Corp.’s Chief Executive Officer Mike Arougheti said.

“It was actually irresponsible,” he said in an interview Tuesday at the Bloomberg Invest conference. “This is part of the problem when you have someone who’s actually never been in a segment of the market making commentaries” about default outlooks.

The 15% rate represents the UBS analysts’ worst-case scenario, which would only take place if artificial intelligence triggers an “aggressive” disruption among corporate borrowers. Otherwise, they generally expect defaults to rise by about 5% before the broader credit market stabilizes in late 2026.

A UBS representative declined to comment.

Fears of defaults in the $1.8 trillion private credit industry have intensified in recent weeks over its exposure to software firms that are vulnerable to artificial-intelligence disruption.

But Arougheti suggested the UBS call was overblown. Even during the 2008 financial crisis, private credit portfolios had a one-year default rate of 8% to 10%, he said.

“If you’re talking about 15% default rates in private credit, which again I think is not possible, but if you’re there, everything else in your portfolio, I assure you, is going to be completely torched,” he said.

Concerns over private credit have been particularly acute in the retail market. Blue Owl Capital Inc. restricted withdrawals from one of its retail-focused private credit funds last month, and Blackstone Inc.’s flagship private credit fund has been hit by record redemptions.

The heightened redemptions reflect that those retail products are misunderstood, according to Arougheti, who added that they were never meant to be liquid.

(Updates with details on UBS forecast in third paragraph and firm declining to comment in fourth.)

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