--- title: "Ares’s levered and unlevered credit returns: compare the LP exposure | Altss Blog" description: "Ares’s June 30, 2026 ACE IV and V disclosures distinguish levered and unlevered Euro IRRs and explain financing, currency and feeder boundaries." canonical: "https://altss.com/blog/ares-ace-levered-unlevered-credit-returns" --- [Altss Research](https://www.linkedin.com/company/altss) 4 min read Updated Oct 22, 2026 Share # Ares’s levered and unlevered credit returns: compare the LP exposure Ares’s June 30, 2026 ACE IV and V disclosures distinguish levered and unlevered Euro IRRs and explain financing, currency and feeder boundaries. [Back to blog](https://altss.com/blog) Share [LinkedIn](https://www.linkedin.com/sharing/share-offsite/?url=) [X](https://x.com/intent/tweet?url=&text=Ares%E2%80%99s%20levered%20and%20unlevered%20credit%20returns%3A%20compare%20the%20LP%20exposure) Copy link In its [July 31 SEC disclosure](https://www.sec.gov/Archives/edgar/data/1176948/000162828026051191/0001628280-26-051191-index.htm), Ares reported a 7.4% net since-inception IRR for the levered Euro version of Ares Capital Europe IV at June 30, 2026, compared with 5.5% for its unlevered Euro version. The difference is 1.9 percentage points. Before using either figure in a manager comparison, an allocator needs to identify the fund version and the LP cash flows behind it. The distinction goes beyond choosing a gross or net column. Ares’s definitions retain credit-facility interest in gross IRR, while its fund notes distinguish Euro parallel funds from GBP versions and a US-dollar feeder. The programme name alone leaves several economically different reporting choices unresolved. ## Two Euro comparisons, with defined boundaries The credit tables in Ares’s [second-quarter 2026 earnings presentation, slide 30 and endnotes 39–40](https://www.sec.gov/Archives/edgar/data/1176948/000162828026051191/a2026q2-ex992earningspre.htm) show: - ACE IV, with 2018 listed as its inception year: net IRR of 5.5% unlevered and 7.4% levered for the selected Euro parallel funds. - ACE V, with 2020 listed as its inception year: net IRR of 7.0% unlevered and 9.7% levered for the selected Euro parallel funds. The ACE V difference is 2.7 percentage points. Both comparisons use the June 30 measurement date and annualized since-inception IRRs. They are not returns earned during the second quarter alone. Ares defines the calculation around fund cash flows and residual value, with actual cash-flow dates and the interests of fee-paying limited partners. These are useful observations about the disclosed fund versions. They do not isolate how much return borrowing produced. The figures alone cannot establish identical portfolios, contribution dates or financing terms across the versions, which would matter to that attribution. ## Gross IRR still reflects financing Ares calculates gross IRR before management fees, carried interest and other expenses, as applicable, but after credit-facility interest expenses. Net IRR also reflects management fees, carry and other expenses. Selecting gross therefore does not reconstruct the return on an unfinanced loan portfolio. The timing of LP contributions matters alongside interest cost. The presentation says funds may use credit facilities during the investment period and for cash management. It explains that fund-level IRRs would generally have been lower if capital had instead been called from limited partners. That is a reason to retain the financing treatment when comparing track records, rather than treating the gross/net distinction as a complete leverage adjustment. The general definition does not quantify borrowing used by a particular ACE version. An allocator seeking to measure the effect would need dated contributions and distributions, financing balances and costs, and the relevant investment exposures. Subtracting the two published IRRs supplies none of those inputs. ## Currency and feeder scope change the selected return ACE IV consists of four parallel funds, divided between Euro and GBP levered and unlevered versions, plus a US-dollar levered feeder. The headline table’s return metrics cover the Euro versions; the levered Euro metrics exclude the dollar feeder. The same footnote reports an 8.4% net IRR for the GBP levered version and 8.7% for the dollar levered feeder, alongside the Euro version’s 7.4%. Those are separately identified fund or feeder observations, not permission to assign one return to the entire ACE IV programme or attribute every difference to currency translation. ACE V’s Euro levered metrics exclude the D levered feeder; its Euro unlevered metrics exclude the Y unlevered feeder. The notes also specify separate conversion conventions for capital amounts. A table’s dollar presentation of capital cannot determine which currency population its IRR column represents. For manager diligence, the request can be specific: identify the parallel fund or feeder, investor currency, financing version, measurement date and gross/net calculation that produced the proposed track record. The [capital reported for a fund and affiliated vehicles](https://altss.com/blog/october-2026-private-credit-fundraising-capital-definitions) is useful fundraising context; it does not identify which return line a prospective LP allocation would follow. 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