Global alternative investment manager Ares Management Corporation has partnered with Mubadala Investment Company, Abu Dhabi’s global sovereign wealth investor, to form a joint venture that will invest around $1 billion in global credit secondaries opportunities, targeting both LP- and GP-led deals.

The allocation will be increased as the credit secondaries market expands.

The newly established strategy is a natural extension of Ares’ credit and secondaries platforms, which had approximately $214 billion and $22 billion, respectively, in assets under management as of the end of last year.

Mubadala, which is at the center of the UAE’s efforts to diversify its economy, manages more than $284 billion in assets globally. In recent years, it has stepped up its investment in health care, technology, mobility, clean energy and life sciences.

“We are pleased to announce this joint venture with Mubadala, which underscores our view that private credit secondaries offer a compelling opportunity for investors seeking diversified exposure to the attractive return profile of private credit assets,” said Michael Arougheti, CEO and President of Ares Management.

Dave Schwartz, most recently the co-head of Ares’ US direct lending business, will lead the venture’s credit secondaries strategy and serve on the firm’s secondaries executive committee.

Last year’s market downturn prompted more LPs and GPs to pursue portfolio sales in the secondary market to free up liquidity and rebalance portfolios, further accelerating deal activity.

“Private credit has become a relevant and important part of institutional portfolios which has led to the growth and development of the private credit secondaries industry,” said Fabrizio Bocciardi, head of credit investments at Mubadala.

In January, Ares announced a $5 billion raise for an infrastructure debt fund; it’s first since acquiring the infrastructure debt business of Sydney, AU-based investment firm AMP Capital last February.