v3.26.1
INVESTMENTS
 6 Months Ended
Jun. 30, 2026
Investments, Debt and Equity Securities [Abstract]  
INVESTMENTS
4. INVESTMENTS

As of June 30, 2026 and December 31, 2025, investments consisted of the following:

 As of
June 30, 2026December 31, 2025
Amortized Cost(1)Fair ValueAmortized Cost(1)Fair Value
First lien senior secured loans(2)$17,859 $17,333 $18,103 $17,858 
Second lien senior secured loans1,495 1,293 1,558 1,487 
Subordinated certificates of the SDLP(3)1,140 1,154 1,103 1,117 
Senior subordinated loans1,888 1,822 1,690 1,585 
Preferred equity2,605 2,348 2,597 2,475 
Ivy Hill Asset Management, L.P.(4)2,646 2,843 2,231 2,434 
Other equity2,042 2,556 1,968 2,529 
Total$29,675 $29,349 $29,250 $29,485 
________________________________________

(1)The amortized cost represents the original cost adjusted for any accretion of discounts, amortization of premiums and PIK interest or dividends.
    
(2)First lien senior secured loans include certain loans that the Company classifies as “unitranche” loans. The total amortized cost and fair value of the loans that the Company classified as “unitranche” loans were $13,092 and $12,818 respectively, as of June 30, 2026, and $11,349 and $11,239, respectively, as of December 31, 2025.

(3)The proceeds from these certificates were applied to co-investments with Varagon Capital Partners (“Varagon”) and its clients to fund first lien senior secured loans to 72 and 39 different borrowers as of June 30, 2026 and December 31, 2025, respectively.

(4)Includes the Company’s subordinated loan to and equity investments in IHAM (as defined below), as applicable.
The Company uses the Global Industry Classification Standard for classifying the industry groupings of its portfolio companies. The industrial and geographic compositions of the Company’s portfolio at fair value as of June 30, 2026 and December 31, 2025 were as follows:

 As of
June 30, 2026December 31, 2025
Industry
Software and Services22.0 %23.8 %
Financial Services(1)13.4 12.4 
Health Care Equipment and Services9.9 11.3 
Commercial and Professional Services9.6 9.4 
Consumer Services6.7 5.6 
Insurance5.4 5.2 
Capital Goods4.9 4.6 
Consumer Distribution and Retail4.7 4.8 
Investment Funds and Vehicles(2)4.0 3.9 
Sports, Media and Entertainment3.8 4.0 
Pharmaceuticals, Biotechnology and Life Sciences2.8 2.7 
Materials2.3 2.2 
Consumer Durables and Apparel1.9 2.0 
Independent Power and Renewable Electricity Producers1.5 2.2 
Automobiles and Components1.3 1.3 
Other5.8 4.6 
Total100.0 %100.0 %
________________________________________

(1)Includes the Company’s investment in IHAM.

(2)Includes the Company’s investment in the SDLP (as defined below), which made first lien senior secured loans to 72 and 39 different borrowers as of June 30, 2026 and December 31, 2025, respectively. The portfolio companies in the SDLP are in industries similar to the companies in the Company’s portfolio.

 As of
June 30, 2026December 31, 2025
Geographic Region
Midwest23.3 %22.9 %
West(1)21.3 20.3 
Southeast17.3 18.8 
Northeast(2)17.1 15.1 
Mid-Atlantic15.0 16.3 
International6.0 6.6 
Total100.0 %100.0 %
________________________________________

(1)Includes the Company’s investment in the SDLP, which represented 3.9% and 3.8% of the total investment portfolio at fair value as of June 30, 2026 and December 31, 2025, respectively.

(2)Includes the Company’s investment in IHAM, which represented 9.7% and 8.3% of the total investment portfolio at fair value as of June 30, 2026 and December 31, 2025, respectively.

As of June 30, 2026 and December 31, 2025, loans on non-accrual status represented 2.4% of the total investments at amortized cost (or 1.4% at fair value) and 1.8% at amortized cost (or 1.2% at fair value), respectively.
Ivy Hill Asset Management, L.P.

Ivy Hill Asset Management, L.P. (“IHAM”), a wholly owned portfolio company of the Company, is an asset manager and an SEC-registered investment adviser. As of June 30, 2026, IHAM had assets under management of approximately $16.3 billion. As of June 30, 2026, IHAM managed 24 vehicles (the “IHAM Vehicles”). IHAM earns fee income from managing the IHAM Vehicles and has also invested in certain of these vehicles as part of its business strategy. The amortized cost of IHAM’s total investments as of June 30, 2026 and December 31, 2025 was $3,628 and $3,190, respectively. For the three and six months ended June 30, 2026, IHAM had management and incentive fee income of $15 and $30, respectively, and investment-related income of $100 and $198, respectively, which included net realized gains or losses on investments and other transactions. For the three and six months ended June 30, 2025, IHAM had management and incentive fee income of $12 and $24, respectively, and investment-related income of $55 and $113, respectively, which included net realized gains or losses on investments and other transactions.

 The amortized cost and fair value of the Company’s investment in IHAM as of June 30, 2026 and December 31, 2025 were as follows:
As of
June 30, 2026December 31, 2025
Amortized CostFair ValueAmortized CostFair Value
Subordinated loan(1)
$946 $946 $531 $531 
Equity
1,700 1,897 1,700 1,903 
Total investment in IHAM$2,646 $2,843 $2,231 $2,434 
_______________________________________________________________________________

(1)The Company has provided a commitment to fund up to $1,000 and $750, as of June 30, 2026 and December 31, 2025, respectively, to IHAM, with availability of funding solely at the Company’s discretion.

The interest income and dividend income that the Company earned from IHAM for the three and six months ended June 30, 2026 and 2025 were as follows:

For the Three Months Ended June 30,For the Six Months Ended June 30,
2026202520262025
Interest income
$19 $1 $36 $1 
Dividend income
$76 $73 $154 $146 

From time to time, IHAM or certain IHAM Vehicles may purchase investments from, or sell investments to, the Company. For any such sales or purchases by the IHAM Vehicles to or from the Company, the IHAM Vehicle must obtain approval from third parties unaffiliated with the Company or IHAM, as applicable. During the six months ended June 30, 2026 and 2025, IHAM or certain of the IHAM Vehicles purchased $2,128 and $1,371, respectively, of loans from the Company. For the six months ended June 30, 2026 and 2025, the Company recognized approximately $2 and $0 of net realized gains, respectively, from these sales. During the six months ended June 30, 2026 and 2025, neither IHAM nor any IHAM Vehicles sold any investments to the Company.

The yields at amortized cost and fair value of the Company’s investments in IHAM as of June 30, 2026 and December 31, 2025 were as follows:
 As of
June 30, 2026December 31, 2025
 Amortized CostFair ValueAmortized CostFair Value
Subordinated loan
10.2 %10.2 %10.3 %10.3 %
Equity(1)
17.9 %16.0 %17.2 %15.3 %
_______________________________________________________________________________

(1)Represents the yield on the Company’s equity investment in IHAM, which is computed as (a) the annualized amount of the regular dividend received by the Company related to the Company’s equity investment in IHAM during the
most recent quarter end, divided by (b) the amortized cost or fair value of the Company’s equity investment in IHAM, as applicable.

IHAM is party to an administration agreement, referred to herein as the “IHAM administration agreement,” with Ares Operations. Pursuant to the IHAM administration agreement, Ares Operations provides IHAM with, among other things, office facilities, equipment, clerical, bookkeeping and record keeping services, services relating to the marketing and sale of interests in vehicles managed by IHAM, services of, and oversight of, custodians, depositories, accountants, attorneys, underwriters and such other persons in any other capacity deemed to be necessary. Under the IHAM administration agreement, IHAM reimburses Ares Operations for all of the actual costs associated with such services, including Ares Operations’ allocable portion of the compensation, rent and other expenses of its officers, employees and respective staff in performing its obligations under the IHAM administration agreement.

Selected Financial Information

Pursuant to Rule 4-08(g) of Regulation S-X, selected financial information of IHAM, in conformity with GAAP, as of June 30, 2026 and December 31, 2025 and for the three and six months ended June 30, 2026 and 2025 are presented below.

In conformity with GAAP, IHAM is required to consolidate entities in which IHAM has a direct or indirect controlling financial interest based on either a variable interest model or voting interest model, which include certain of the IHAM Vehicles (the “Consolidated IHAM Vehicles”). As such, for GAAP purposes only, IHAM consolidates (a) entities in which it holds a majority voting interest or has majority ownership and control over the operational, financial and investing decisions of that entity and (b) entities that it concludes are variable interest entities in which IHAM has more than insignificant economic interest and power to direct the activities that most significantly impact the entities, and for which IHAM is deemed to be the primary beneficiary.

When IHAM consolidates an IHAM Vehicle for GAAP purposes only, IHAM reflects the assets, liabilities, revenues and expenses of the Consolidated IHAM Vehicles on a gross basis, including the economic interests held by third-party investors in the Consolidated IHAM Vehicles as debt obligations, subordinated notes or non-controlling interests, in the consolidated IHAM financials below. All of the revenues earned by IHAM as the investment manager of the Consolidated IHAM Vehicles are eliminated in GAAP consolidation. However, because the eliminated amounts are earned from and funded by third-party investors, the GAAP consolidation of an IHAM Vehicle does not impact the net income or loss attributable to IHAM. As a result, the Company believes an assessment of IHAM’s business and the impact to the Company’s investment in IHAM is best viewed on a stand-alone basis as reflected in the first column in the tables below.
As of June 30, 2026
IHAMConsolidated IHAM Vehicles(1)EliminationsConsolidated
Selected Balance Sheet Information:
Assets
Investments at fair value(2)$3,510 $12,966 $(3,413)$13,063 
Cash and cash equivalents10 521 — 531 
Other assets72 142 (63)151 
Total assets$3,592 $13,629 $(3,476)$13,745 
Liabilities
Debt$894 $9,756 $— $10,650 
Subordinated note from ARCC946 — — 946 
Subordinated notes(3)— 2,237 (1,904)333 
Other liabilities25 325 (30)320 
Total liabilities1,865 12,318 (1,934)12,249 
Equity
Contributed capital1,700 — — 1,700 
Accumulated earnings146 — — 146 
Net unrealized gains (losses) on investments and foreign currency transactions(4)(119)— — (119)
Non-controlling interests in Consolidated IHAM Vehicles(5)
— 1,311 (1,542)(231)
Total equity1,727 1,311 (1,542)1,496 
Total liabilities and equity$3,592 $13,629 $(3,476)$13,745 

As of December 31, 2025
IHAMConsolidated IHAM Vehicles(1)EliminationsConsolidated
Selected Balance Sheet Information:
Assets
Investments at fair value(2)$3,108 $11,504 $(3,013)$11,599 
Cash and cash equivalents10 597 — 607 
Other assets93 146 (82)157 
Total assets$3,211 $12,247 $(3,095)$12,363 
Liabilities
Debt$893 $8,622 $— $9,515 
Subordinated note from ARCC531 — — 531 
Subordinated notes(3)— 1,277 (941)336 
Other liabilities21 311 (18)314 
Total liabilities1,445 10,210 (959)10,696 
Equity
Contributed capital1,700 — — 1,700 
Accumulated earnings148 — — 148 
Net unrealized losses on investments and foreign currency transactions(4)(82)— — (82)
Non-controlling interests in Consolidated IHAM Vehicles(5)
— 2,037 (2,136)(99)
Total equity1,766 2,037 (2,136)1,667 
Total liabilities and equity$3,211 $12,247 $(3,095)$12,363 
________________________________________
(1)Consolidated for GAAP purposes only.

(2)The determination of such fair value is determined in accordance with IHAM’s valuation process (separate and apart from the Company’s valuation process described elsewhere herein). The amortized cost of IHAM’s total investments as of June 30, 2026 and December 31, 2025 was $3,628 and $3,190, respectively. The amortized cost of the total investments of IHAM on a consolidated basis as of June 30, 2026 and December 31, 2025 was $13,381 and $11,766, respectively.

(3)Subordinated notes generally represent the most junior capital in certain of the Consolidated IHAM Vehicles and effectively represent equity in such vehicles.

(4)As of June 30, 2026 and December 31, 2025, net unrealized losses of $125 and $85, respectively, have been eliminated upon consolidation and the elimination is included in “non-controlling interests in Consolidated IHAM Vehicles” in the selected balance sheet information.

(5)Non-controlling interests in Consolidated IHAM Vehicles includes net unrealized depreciation in the Consolidated IHAM Vehicles of $316 and $167 as of June 30, 2026 and December 31, 2025, respectively.

For the Three Months Ended June 30, 2026
IHAMConsolidated IHAM Vehicles(1)EliminationsConsolidated
Selected Statement of Operations Information:
Revenues
Investment income$101 $266 $(97)$270 
Management fees and other income15 2 (14)3 
Total revenues116 268 (111)273 
Expenses
Interest expense36 144 — 180 
Distributions to subordinated notes— 42 (31)11 
Management fees and other expenses4 19 (14)9 
Total expenses40 205 (45)200 
Net operating income76 63 (66)73 
Net realized losses on investments, foreign currency and other transactions(1)(22)— (23)
Net unrealized losses on investments, foreign currency and other transactions (26)(19)23 (22)
Total net realized and unrealized losses on investments, foreign currency and other transactions (27)(41)23 (45)
Net income49 22 (43)28 
Less: Net income (loss) attributable to non-controlling interests in Consolidated IHAM Vehicles— 22 (43)(21)
Net income attributable to Ivy Hill Asset Management, L.P.$49 $— $— $49 
For the Six Months Ended June 30, 2026
IHAMConsolidated IHAM Vehicles(1)EliminationsConsolidated
Selected Statement of Operations Information:
Revenues
Investment income$199 $516 $(194)$521 
Management fees and other income30 4 (29)5 
Total revenues229 520 (223)526 
Expenses
Interest expense68 270 — 338 
Distributions to subordinated notes— 86 (62)24 
Management fees and other expenses9 35 (29)15 
Total expenses77 391 (91)377 
Net operating income152 129 (132)149 
Net realized losses on investments, foreign currency and other transactions(1)(16)— (17)
Net unrealized losses on investments, foreign currency and other transactions (36)(150)40 (146)
Total net realized and unrealized losses on investments, foreign currency and other transactions (37)(166)40 (163)
Net income (loss)115 (37)(92)(14)
Less: Net income (loss) attributable to non-controlling interests in Consolidated IHAM Vehicles— (37)(92)(129)
Net income attributable to Ivy Hill Asset Management, L.P.$115 $— $— $115 

For the Three Months Ended June 30, 2025
IHAMConsolidated IHAM Vehicles(1)EliminationsConsolidated
Selected Statement of Operations Information:
Revenues
Investment income$77 $232 $(76)$233 
Management fees and other income12 2 (12)2 
Total revenues89 234 (88)235 
Expenses
Interest expense14 120 — 134 
Distributions to subordinated notes— 32 (23)9 
Management fees and other expenses4 14 (12)6 
Total expenses18 166 (35)149 
Net operating income71 68 (53)86 
Net realized losses on investments and foreign currency (22)(1)21 (2)
Net realized gain on extinguishment of debt— 23 (23)— 
Net unrealized gains (losses) on investments, foreign currency and other transactions19 (32)(12)(25)
Total net realized and unrealized losses on investments, foreign currency and other transactions (3)(10)(14)(27)
Net income68 58 (67)59 
Less: Net income (loss) attributable to non-controlling interests in Consolidated IHAM Vehicles— 58 (67)(9)
Net income attributable to Ivy Hill Asset Management, L.P.$68 $— $— $68 
For the Six Months Ended June 30, 2025
IHAMConsolidated IHAM Vehicles(1)EliminationsConsolidated
Selected Statement of Operations Information:
Revenues
Investment income$144 $449 $(141)$452 
Management fees and other income24 4 (23)5 
Total revenues168 453 (164)457 
Expenses
Interest expense23 238 — 261 
Distributions to subordinated notes— 64 (46)18 
Management fees and other expenses8 28 (23)13 
Total expenses31 330 (69)292 
Net operating income137 123 (95)165 
Net realized losses on investments and foreign currency (31)(56)21 (66)
Net realized gains (losses) on extinguishment of debt— 22 (23)(1)
Net unrealized gains (losses) on investments, foreign currency and other transactions44 (19)(21)4 
Total net realized and unrealized gains (losses) on investments, foreign currency and other transactions13 (53)(23)(63)
Net income150 70 (118)102 
Less: Net income (loss) attributable to non-controlling interests in Consolidated IHAM Vehicles— 70 (118)(48)
Net income attributable to Ivy Hill Asset Management, L.P.$150 $— $— $150 
____________________________________

(1)Consolidated for GAAP purposes only.

Senior Direct Lending Program

The Company has established a joint venture with Varagon to make certain first lien senior secured loans, including certain stretch senior and unitranche loans, primarily to U.S. middle-market companies. The joint venture is called the Senior Direct Lending Program. In July 2016, the Company and Varagon and its clients completed the initial funding of the SDLP. The Company and other BDCs, registered closed-end management investment companies and other affiliated investment entities managed by the Company’s investment adviser or its affiliates may directly co-invest with the SDLP in accordance with the terms of an order from the SEC that permits the Company and other BDCs and registered closed-end management investment companies managed by the Company’s investment adviser or its affiliates to co-invest in portfolio companies with each other and with other affiliated investment entities. The SDLP is capitalized as transactions are completed and all portfolio decisions and generally all other decisions in respect of the SDLP must be approved by an investment committee of the SDLP consisting of representatives of the Company and Varagon (with approval from a representative of each required).

The Company provides capital to the SDLP in the form of subordinated certificates (the “SDLP Certificates”), and Varagon and its clients provide capital to the SDLP in the form of senior notes, intermediate funding notes and the SDLP Certificates. As of June 30, 2026 and December 31, 2025, the Company and a client of Varagon owned 87.5% and 12.5%, respectively, of the outstanding SDLP Certificates.

As of June 30, 2026 and December 31, 2025, the Company and Varagon and its clients had agreed to make capital available to the SDLP of $6,150 and $6,150, respectively, in the aggregate, of which $1,444 and $1,444, respectively, is to be made available from the Company. The Company will continue to provide capital to the SDLP in the form of the SDLP Certificates, and Varagon and its clients will provide capital to the SDLP in the form of senior notes, intermediate funding notes and the SDLP Certificates. This capital will only be committed to the SDLP upon approval of transactions by the investment committee of the SDLP as discussed above. Below is a summary of the funded capital and unfunded capital commitments of the SDLP.
 As of
June 30, 2026December 31, 2025
Total capital funded to the SDLP(1)$4,889 $4,606 
Total capital funded to the SDLP by the Company(1)$1,322 $1,285 
Total unfunded capital commitments to the SDLP(2)$260 $259 
Total unfunded capital commitments to the SDLP by the Company(2)$60 $60 
___________________________________________________________________________
(1)At principal amount.

(2)These commitments to fund delayed draw loans have been approved by the investment committee of the SDLP and will be funded if and when conditions to funding such delayed draw loans are met.

The SDLP Certificates pay a coupon equal to Secured Overnight Financing Rate (“SOFR”) plus 8.0% and also entitle the holders thereof to receive a portion of the excess cash flow from the loan portfolio, after expenses, which may result in a return to the holders of the SDLP Certificates that is greater than the stated coupon. The SDLP Certificates are junior in right of payment to the senior notes and intermediate funding notes.

The amortized cost and fair value of the SDLP Certificates held by the Company and the Company’s yield on its investment in the SDLP Certificates at amortized cost and fair value as of June 30, 2026 and December 31, 2025 were as follows:

As of
June 30, 2026December 31, 2025
Amortized CostFair ValueAmortized CostFair Value
Investment in the SDLP Certificates$1,140 $1,154 $1,103 $1,117 
Yield on the investment in the SDLP Certificates13.2 %13.0 %13.2 %13.0 %

The interest income, capital structuring service fees and other income earned with respect to the Company’s investment in the SDLP Certificates for the three and six months ended June 30, 2026 and 2025 were as follows:

For the Three Months Ended June 30,For the Six Months Ended June 30,
2026202520262025
Interest income
$38 $38 $74 $76 
Capital structuring service fees and other income
$3 $2 $5 $5 

From time to time, the Company may sell investments to, or purchase investments from, the SDLP. During the six months ended June 30, 2026, the Company sold approximately $361 of investments to the SDLP and recognized approximately $0 of net realized losses from these sales. During the six months ended June 30, 2026, the Company purchased $68 of investments from the SDLP. There were no such sales or purchases during the comparable period in 2025.
As of June 30, 2026 and December 31, 2025, the SDLP portfolio was comprised of first lien senior secured loans to primarily U.S. middle-market companies in industries similar to the companies in the Company’s portfolio. As of June 30, 2026, one of the loans in the SDLP portfolio was on non-accrual status. As of December 31, 2025, none of the loans in the SDLP portfolio were on non-accrual status. Below is a summary of the SDLP portfolio as of June 30, 2026 and December 31, 2025.

As of
June 30, 2026December 31, 2025
Total first lien senior secured loans(1)(2)$4,470 $4,297 
Largest loan to a single borrower(1)$372 $413 
Total of five largest loans to borrowers(1)$1,634 $1,719 
Number of borrowers in the SDLP72 39 
Commitments to fund delayed draw loans(3)$260 $259 
___________________________________________________________________________

(1)At principal amount.

(2)First lien senior secured loans include certain loans that the SDLP classifies as “unitranche” loans. As of June 30, 2026 and December 31, 2025, the total principal amount of loans in the SDLP portfolio that the SDLP classified as “unitranche” loans was $2,975 and $2,844, respectively.
(3)These commitments to fund delayed draw loans have been approved by the investment committee of the SDLP and will be funded if and when conditions to funding such delayed draw loans are met.