Say your fund statement shows $10 a share. Now say the market will only pay $6 for it. That's about where holders of one income fund sat this fall. The fund is MidCap Financial Investment Corp. (MFIC), a $2.5 billion loan fund run by Apollo Global Management (APO). Its shares traded at a nearly 40% discount to the value Apollo put on the loans. Now a rival is buying it.
The Journal's Matt Wirz reported the deal on Monday, Nov. 2. The buyer is Ares Capital (ARCC), the public fund of Ares Management, one of the biggest names in private credit. Private credit means loans made by investment funds instead of banks. Apollo is Ares's old rival and, oddly, the firm it grew out of. The price is $10.88 a share. That's 30% above where MFIC closed on Monday, Oct. 26. It's also 15% under the value the fund put on its own shares as of Sept. 30. So MFIC holders get a nice bump and still less than the statement said they had. If the deal closes in the first half of 2027, they'll own about 5% of the combined fund.
Why the fund was for sale
Apollo put MFIC up for auction earlier this year. Worry about defaults had set off selling in private-credit funds that mostly belong to individual investors. People buy these funds, called business-development companies, for steady income. They pay out most of their earnings as dividends. MFIC's results had been so-so, and its shares slid to that nearly 40% discount. Ares Capital, the buyer, is a giant. With about $29 billion, it ranks among the biggest private-credit funds anywhere. One note for our readers who avoid interest income. These funds earn interest on loans, so they sit outside a halal portfolio from the start.
Now the other end of the pipe. Buyout firm TPG told investors on Thursday, Oct. 29, that it expects a record fundraising year. It lifted its target to more than $55 billion, from more than $50 billion. Through September it had raised nearly $42 billion. It sits on about $86 billion of money not yet invested. The Journal's Maria Armental reports the other numbers. Cash from selling investments fell 15% to about $6.6 billion. New investing fell about 23%. Fee-related earnings rose 43% to $321 million. Money is coming in faster than it goes out or comes back.
Our read
Consumer Protection · M11 and Fixed Income · IN02. The stated value of a fund is the manager's estimate. The market price is what someone will pay you today. For MFIC the gap reached about 40%. When you hold a fund that doesn't trade, you only ever see the first number. This deal shows how far the second one can sit below it. And the TPG story shows why the money keeps coming. Fees rose 43% while cash from selling investments fell 15%. The manager gets paid either way. Our stance is avoid, and it's about the structure. We mean income funds you can't price or sell on your own. Ares Capital itself is held at weight in one of our model books. Nothing added.
Here's the check for your plan. If you own a non-traded REIT (a real estate fund that doesn't trade on an exchange), a private-credit fund or a BDC, pull up the statement this week. Find the value it shows. Then find out two things. Can you sell this month, and at what price? If the answer is a redemption window or a waiting list, the statement value isn't your money yet. Write the gap down and bring it to your next review. You test the exit before you need it, the way you check the umbrella before the rain.