Ares | 2026 mid-year investment outlook: Private credit

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[Ares 2026 investment outlook: Private credit] CIBC Ares Strategic Income Fund]

[Featuring Mike Zugay, Partner, Ares Credit Group]

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My name is Mike Zugay. I'm a partner in the Private Credit Group. I’ve been at Ares since 2004. Today, I'm Co-head of Origination. I’m on our investment committee, and I co-run our LA office.

The recap for Ares in the year-to-date 2026 period, is that our portfolio is performing very well. It's incredibly diversified, and we're hitting our target returns of high single-digit to low double-digit returns, with the vast majority of that return coming from income generation.

In what seems like ages ago, there was noise around software and AI disruption. Equity valuations took the brunt of the impact, which increased the loan to values, which still remain comfortably below 40%. In general, our software credits saw a modest decline in mark-to-market valuations, directionally down one to two points. As we move forward, we continue to feel good about our software exposure, given our low loan-to-values and the key attributes of the underlying credit quality of the investments.

The software headlines impacted flows to many of the retail BDCs in the market. However, Ares continues to see strong interest from both retail and institutional investors.

More recently, we've seen volatility in oil prices and supply chain disruptions due to ongoing conflict in the Middle East. Our portfolios are diversified and defensive in nature, so despite this, we continue to see stable performance across the portfolio with little to no impact in the year-to-date period. And finally, more recently, over the past several weeks, we've started to see dispersion in manager performance, which is something we expect will continue.

Our funds continue to be among the top-performing funds in the private credit markets. We continue to originate differentiated deal flow that allows us to be highly selective on credit quality, and we remain highly diversified from a portfolio construction standpoint. In summary, despite the uncertainty and volatility that the year-to-date 2026 has thrown at us, we continue to deliver for our investors.

The expectations for the rest of 2026. It's always difficult to predict what challenges will come up, but our investment process is cycle-tested, and we are in a strong position to continue to deliver consistent results.

Key areas we pay attention are the overall M&A environment, which partially drives new deal activity, and the interest rate outlook, which is one of the components that affects our returns. I don’t think the robust M&A activity has materialized the way that many expected in 2026. Having said that, we continue to see good investment opportunities and activity from our existing borrowers, which provides a very stable deployment environment in times of a more muted M&A environment.

Our base rate, which is SOFR, is expected to remain stable in the 3.6% range through the end of the year, about 25 to 50 basis points higher than where it was forecasted to be four or five months ago. It certainly feels like we're in a higher-for-longer environment.

We have significant dry powder as we approach the second half of the year and we are patiently deploying it. We're seeing a pullback in the competitive set, and that puts us in an even better position to drive more favourable economics and non-economic, documentation-oriented terms. Spreads have widened 25 to 50 basis points, and upfront fees have also increased 25 to 50 basis points. These factors are positive inputs to our returns.

We continue to build highly diversified portfolios that generate durable income streams. As mentioned in our last update, our positioning is really an output of our investment strategy. Our goal is to provide consistent results in all market conditions, and we continue to be in a position of strength to do that.

[The information contained in this material are the views of Ares and compiled by CIBC Global Asset Management, as of July 14, 2026 and are subject to change at any time. CIBC Global Asset Management does not undertake any obligation or responsibility to update such opinions. This material is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice, it should not be relied upon in that regard or be considered predictive of any future market performance, nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this material should consult with their advisor. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the simplified prospectus before investing. To obtain a copy of the simplified prospectus, call 1-888-888-FUND (3863).

Alternatively, you may obtain a copy from your advisor. Any information or discussion about the current characteristics of this mutual fund or how the portfolio manager is managing the mutual fund that is supplementary to information in the prospectus is not a discussion about material investment objectives or strategies, but solely a discussion of the current characteristics or manner of fulfilling the investment objectives and strategies, and is subject to change without notice. Mutual fund securities are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer, nor are they guaranteed. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects", "anticipates", "intends", "plans", "believes", "estimates", or other similar wording. In addition, any statements that may be made concerning future performance, strategies, or prospects and possible future actions taken by the fund, are also forward-looking statements. Forward-looking statements are not guarantees of future performance. These statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results and achievements of the fund to differ materially from those expressed or implied by such statements. Such factors include, but are not limited to: general economic, market, and business conditions; fluctuations in securities prices, interest rates, and foreign currency exchange rates; changes in government regulations; and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. CIBC Global Asset Management does not undertake, and specifically disclaims, any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise prior to the release of the next management report of fund performance.

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[The views expressed herein are those of Mike Zugay, as of June 2026, and do not necessarily reflect the views of Ares Management Corporation ("Ares Corp," together with Ares Management LLC or any of its affiliated entities "Ares"). The views are provided for informational purposes only, are not meant as investment advice, and are subject to change. Moreover, while this material expresses views as to certain investment opportunities and asset classes, Ares may undertake investment activities on behalf of one or more investment mandates inconsistent with such views subject to the requirements and objectives of the particular mandate. The data, investments, and asset classes mentioned in this material may not be suitable for all investors.

This material does not provide tailored investment advice. Such investments can be highly illiquid, are speculative, and may not be suitable for all investors. Investing in such investments is only intended for experienced and sophisticated investors who are willing to bear the high economic risks associated with such an investment. Investors should carefully review and consider potential risks as well as their specific investment objectives and experience, time horizon, risk tolerance, and financial situation before making any investment decisions. Nothing contained herein constitutes investment, legal, tax, or other advice, nor is it to be relied on in making an investment or other decision. Ares makes no representation or warranty (express or implied) with respect to the information contained herein (including, without limitation, information obtained from third parties) and expressly disclaims any and all liability based on or relating to the information contained in, or errors or omissions from, these materials; or based on or relating to the recipient’s use (or the use by any of its affiliates or representatives) of these materials. Ares undertakes no duty or obligation to update or revise the information contained herein. This material may contain "forward-looking" statements. These are based upon a number of assumptions concerning future conditions that ultimately may prove to be inaccurate. Such forward-looking statements are subject to risks and uncertainties and may be affected by various factors that may cause actual results to differ materially from those in the forward-looking statements.

Any forward-looking statements speak only as of the date they are made, and Ares assumes no duty to and does not undertake to update forward-looking statements or any other information contained herein. The success or achievement of various results and objectives is dependent upon a multitude of factors, many of which are beyond the control of Ares. Certain information contained herein concerning economic trends is or may be based on or derived from information provided by independent third-party sources. Ares believes that such information is accurate and that the sources from which it has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. Moreover, any independent third-party sources cited herein are not making any representations or warranties regarding any information attributed to them and shall have no liability in connection with the use of such information herein. This is not an offer to sell, or the solicitation of an offer to purchase, any security or management services, the offer and/ or sale of which can only be made by definitive offering documentation, which will contain material information with respect to any such security, including risk factors relating to any such investment.]

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