Morning, everybody. I'm Kort Schnabel, Co-President of Ares Capital Corporation. I've been with Ares about 23 years, dating back to the founding, actually, before the founding, of our direct lending business at Ares, based out in Los Angeles. And thrilled to be here today to talk to you a little bit about Ares Capital Corporation. I'm going to start off just very simply and explain what we do for a living every day at Ares Capital Corporation. So we go out and we find what we believe are the best middle-market companies in the United States. We make loans to these companies. We collect interest on the loans, and we pass that interest on to our shareholders in the form of a very stable and recurring dividend. We source most of these loans from the private equity channel.
So about 85%-90% of our loans are sourced from private equity and the businesses that they own. We also provide financing to non-sponsored-owned companies as well through various industry verticals. We've been doing this for a very long time. We had our IPO back in 2004, so it's about 20 years now. We have a 20-year public track record out there. And we built the largest publicly traded business development company by assets in the world. We have, along our journey, acquired many of our competitors when they've had missteps through more volatile periods. And we've been able to outperform. And we've generated industry-leading results for our shareholders. We have some examples of those results up here toward the bottom of the page. We've invested over $91 billion since our inception with a realized asset level gross IRR of 13% on an annualized basis over that 20-year period.
We've generated a 1% net realized gain in excess of loss ratio. So what does that mean? Obviously, most lenders have a loss ratio. You do lose money on some loans. We do as well. But what we've been able to do is offset those losses with gains. And we'll get to how we've generated some of those gains such that we actually have essentially a positive loss ratio of 1%. And we've generated a 75% higher stock-based performance than the S&P 500 since our IPO in 2004. So those are some of the key statistics that we're obviously proud of. But I want to spend the bulk of the time today talking about how we've been able to generate those results and what we do differently from other direct lenders. We've obviously grown a lot. Our asset base started at $150 million back in 2004.
We've grown to $22 billion today. But the key ingredients of our business model have really stayed extremely consistent since the beginning. And those key ingredients would have enabled a lot of our success. Hopefully, be able to communicate some of those to you all today. So first, we are managed by Ares Management. This gives us a huge advantage. Ares is one of the largest alternative asset managers in the world. Has about $420 billion of AUM today. Operates multiple complementary lines of business. You can see there on the bottom right, we sit within the credit group. But there are these other lines of business as well that are quite large. And it's important that these businesses do not run in silos. So they collaborate with each other. We're always communicating and sharing information. There are incentives in place to facilitate and incentivize that collaboration.
And so that gives us lots of advantages. First and foremost, the sourcing and execution and diligence capabilities that we're able to utilize with this platform are really exceptional. So outside of just the direct lending team that's sourcing deals for us for Ares Capital Corporation, deals are coming into the platform from all different places all around the world. They're being shared, right? So an opportunity for us might come into a real estate person given a relationship. We might get a private equity opportunity. We're passing those opportunities to each other. It's expanding our funnel of deal flow. We're able to utilize relationships across the platform when we're doing due diligence on companies to gain insights into industries that we otherwise wouldn't. Makes us better investors. What it also does for us at Ares is provides us a lens into lots of different markets, right?
So not only are we the largest direct lending manager in the world, we also are one of the largest broadly syndicated loan managers in the world. Means we have a very high-functioning and active capital markets desk that's trading leveraged loans at high-yield bank debt all the time or high-yield loans all the time. And that is able to give us insights into all these different kinds of market dynamics. Allows us to make smart relative value decisions across markets. And so instead of just being head down at our desk in credits, we're also head up, looking around at the world, looking at different markets, and making those relative value decisions all the time. Next, I want to talk about our investment team. I'll probably spend the most time on this slide. Obviously, we're a people business, so the team is everything.
I think maybe the most important point to start with is just the structure of the team and the way that we've designed it to operate is different than other direct lending institutions and certainly different than banks in the fact that we don't separate the origination function from the underwriting function or from the portfolio management function. So what we like to say is everyone is an investor at Ares. So we've got a 180-person investment professional team. All 180 of those people are investment professionals. They think like investors first. We train our people to be good investors, underwriting credit for 10-15 years. Once they've proven they are an exceptional credit investor, we then give them the opportunity, if we think they have the skills to do so, to go out into the market and originate business.
So we've got people in the market that are originating business that are also leading the credit underwriting with a team of people below them that they're training. And so you've got people that are interfacing with the sponsor community or directly to companies that are making decisions. They're actually decision makers. Versus a lot of our competitors, certainly banks, have individuals that are more origination or sales-oriented then they get a deal and they kick it to their underwriting team. They close the deal. They kick it to their portfolio management team. We have more of a cradle-to-grave strategy where our teams are sticking with these investments for the full life cycle of the investment. Creates a better experience for our clients, the private equity firms. Allows for great accountability and training internally.
And really does, I think, set us apart as a key contributor to how we've been able to perform. We've invested in local offices also. This is important. And it sort of ties in with the first point. But we have full deal teams in lots of different locations around the US, around the world, frankly. For Ares Capital, we're mainly US focused. We've got full deal teams staffed in Chicago, in Los Angeles, obviously New York, Atlanta, Dallas. Again, not just salespeople building relationships, but full deal teams executing deals in these local markets. We made that commitment from the beginning. And that's different than other direct lenders and other lending institutions. The scale and tenure of the team maybe is the last point I'll make. I mentioned 180 people. We do believe we're the largest investment team in the direct lending space.
The scale is really important when you think about the funnel that we're able to generate in terms of deal flow, right? We've got all these people out that are long-time people at Ares. I mentioned I've been at Ares 23 years. My partner, Scott, and our CFO have been almost as long at Ares. There's lots of people at Ares like us that have been here working together for a long time with lots of relationships externally. It creates this very, very wide funnel. Lots of deals coming into the system. That enables us to be very, very selective on the deals that we're choosing to invest in. Ultimately, enables us to be better credit investors. We see about 1,500 deals per year coming into Ares Capital Corporation. It's about $0.5 trillion of deal flow coming in.
We only close on about 4% of the opportunities that we're seeing in. So it all starts with that very broad funnel of deal flow. In addition to the investment team, we do have a portfolio management team. Again, this doesn't replace the investment team post-closing at Ares. But it supplements the team with tools and technologies to track performance of our loans and monitor, create red flags if there are aberrations in performance. And then, probably most importantly, if there is underperformance in a loan, happens to the best of us, they come in and start supplementing the deal team and helping think with a fresh set of eyes on where we should go from here, right? And then, in the worst-case scenario, if there needs to be restructuring, about half of the 45-person portfolio management team has restructuring expertise.
The people that lead the portfolio management group have long histories in restructuring. So we know how to restructure these loans, how to take over these companies if we need to. Absolutely not the plan for us. But it's very important to have the know-how and the stomach to take over the company if you need to. If our sponsor or the owner of the business is not putting in capital, we are not afraid to put in capital and own these companies. It's actually been one of the contributors to our gained performance over the 20-year history. Rounding out just a few of the last differentiators that, I think, set us apart. So relationships, talked about it a little bit already, relationships, mainly with the private equity channel, is one of the key differentiators. We've got relationships with over 650 sponsors, 3,300 portfolio companies.
This comes with the history that we have, right? The almost 20-year history. These relationships, especially with private equity firms, they can't be built overnight. So you can go out and raise and amass a lot of capital in a quick period, maybe, if you're a large blue-chip manager. You want to get into direct lending. But you cannot build the kind of relationships that we have without executing time and time and time again through all different kinds of market environments for these private equity firms and then being there for them when things don't go according to plan or being there for them with extra capital to follow on for acquisitions when the markets are volatile. Doing that over and over and over, decade after decade, gets us last looks on transactions, gets us premiums sometimes on transactions.
And it just embeds us with our clients, the private equity firms, with these kinds of relationships. Creates better outcomes when things aren't going according to plan, when you have these kinds of deep relationships and you're invested across lots of companies together. Incumbency. So we talk about this a lot. Refers to our existing portfolio. So I mentioned we have $22 billion of assets in our portfolio at Ares Capital. But direct lending at Ares, we've got over $120 billion. These companies are dynamic. They're always changing. They're looking for more capital. They're doing acquisitions, sometimes trading to new owners. And so their first choice is to come to us, their incumbent lender, for more capital.
It's difficult for our competitors to come in and provide capital to the $120 billion of assets that we already have in the ground to those companies when they have to maybe pay new fees to refinance us. They don't know that new lender. So there's a moat around that existing incumbent portfolio of $120 billion that we have a first look at all those opportunities. This benefit of scale, again, really can't be replicated overnight. And in any given year, we're putting about half, about 50% of our new commitments into the existing portfolio. Also allows us, by the way, when things slow down a little bit in the M&A environment, like we saw in the last 18 months or so, we can then provide capital into that incumbent portfolio. Creates ballast in our origination system. We talked about the scale already.
Maybe not too much more to mention there. I guess just the ability to commit to large transactions allows us to have power in the marketplace over documentation terms, over pricing, right? We're standing up for north of $500 million, sometimes up to $1 billion per deal. That gives us a lot of power in the market. It gives us access to the capital markets. Scott's going to talk about that in terms of our balance sheet, our access to the debt capital markets. Just want to talk a little bit about what we look for when we're underwriting credits. Again, this is something that hasn't changed. We get asked a lot, "This is going with given what's going on in the economy, are you changing the way you look at credits or the types of businesses you're looking at?
Or given rates, are you doing more in this sector?" The answer is always no. We're not changing that much what we're doing. We're sticking to what works from an underwriting standpoint in all environments. That's been important to our success. What are we looking for? We're looking for leading market share businesses, companies that have dominant market shares and barriers to those market shares, nice defensible moats around their market share, high free cash flow generation. We're running lots of sensitivities on these businesses when we underwrite in all different rate environments and economic environments, making sure that the cash flow is going to be there to service our loan. Diversified business models. We're huge on diversification at Ares Capital, not only in our companies but in our portfolios.
But we're looking for companies that have these diverse business lines so that they can maybe weather shocks that occur in one end market. And then we're looking to invest in attractive and defensive industries, right? Weighing toward industries that work well for credit investing and away from industries that are more cyclical. I'm going to start breezing through a few of these final slides, just some statistics on the portfolio. So you can see here, this is a breakdown of our assets. On the left-hand side, it's the asset mix. We're about 60% senior secured debt. It's about 45% first lien, 15% second lien. We then round that out with some exposure to preferred equity, about 10%, 10% common equity. And then we have some joint venture lending programs with some other partners that round out the rest of the capital structure there.
So it's a diversified mix of assets, right? We're about 2/3 floating rate, 1/3 fixed rate, by the way. This is different than our peers also. So when rates were going up, we heard a lot of people pounding their chest about, "We're 100% senior secured floating rate." Well, that was great. We didn't feel quite as good when rates were going up. But now we're looking at maybe the possibility rates going down feels a little better, right? So we're always looking to build this diversified portfolio so we have that ballast, we have that all-weather strategy so that we can perform in all different market environments, economic rate, etc. Issuer concentration on the right-hand side, extremely diversified. So largest single-name investment, 2% of the portfolio. Average position size, 0.2%. So we've got over 500 companies in our portfolio.
You're going to see this is much more diversified than our peer group. This next slide shows some comparisons. Average hold, I mentioned, 0.2% on the top left. The peer group average is 0.6%. The number of industries we're exposed to, 34 different industries. Our peer group average is 27. Largest exposure at fair value, I mentioned, 2%. Peer group average, 4.3%. So we are much more diversified. Industry selection. I mentioned weighing toward favorable industries. It's one of the benefits of managing a BDC. You don't have to be a benchmark investor. And so we are diversified by industry. But you can see we lean into certain industries. Software is our biggest industry, 23%. Healthcare, 12%. And then it gets much more diversified from there. But those two industries in particular, very defensive, very highly recurring business models.
And then, on the right-hand side, we are underweight the more cyclical industries. So you can see the high-yield and leveraged loan indexes are the two bars on the right side of us, where the red bar has much lower exposure to these cyclical industries like hotel, gaming, oil and gas, transportation. And we have a, oh, I think I hit the, there we go. So our loss rates. Talked a little bit about this.
This shows our First Lien loss rates and our Second Lien loss rates. We get asked a lot, "Why do you guys do this Second Lien? Maybe you should just do First Lien." We'll tell you why. The loss rates on our First Lien book over our history back to 2004, we invested $65 billion. The realized loss performance is less than 10 basis points per year. And then on the Second Lien book, we invested $16 billion.
The realized loss performance is less than 20 basis points per year. So it's a little more. But not needle-moving relative to the return performance we can get from that asset class, which is usually 300 basis points or so more on the second lien than the first lien, way, way greater than the extra loss rate. If you know how to invest in second lien securities and subdebt, it makes sense. Maybe it's not for everyone. But we're investing in much larger businesses in the second lien strategy. We're being very careful about the industry selection. There's a much higher bar for that second lien investment. And then, again, it comes back to knowing how to work out those investments if they don't go according to plan and having the stomach to own those businesses. And that is what results in that loss performance on the second lien book.
The bottom of the page, you can see loss rates relative to the indexes. We are much lower on the loss rates. Last page for me before I bring Scott up here is our gained performance. Talked about it a little bit. So this is what outweighs those losses that I just showed on the prior page. The bottom of the page here builds up to our gains. So you can see there's 4 categories that have contributed to the gained performance: restructuring gains, talked about that, being able to take over companies and come out the other side with a gain, acquired portfolio gains when we've acquired some of our competitors along the way, our equity net gains. We're taking small common equity co-investments alongside our private equity firms. That's been a meaningful contributor to our gains, $800 million or so. And then the other category, various other ways.
So you add all those 4 up, and it's $2.3 billion of gains over our 20-year history relative to $1.3 billion of losses. So we have about a net $1 billion gain performance over our 20-year history. And then the top right, you can see this compares to banks and to our BDC peers. We're in the positive, and our peers are in the negative on the net loss rate performance. So with that, I'll have our CFO, Scott Lem, come up. Let's click here right there. Thanks.
Hi, everyone. Like Kort mentioned, I've been here over 20 years. So, yeah, Kort and I were teenagers when we started at Ares. But, yeah, when we think about capital and liquidity on this page here, our strong market-leading long-term track record on the asset side of the balance sheet has continued to set us up well on the right-hand side.
Some of the key themes of our capital structure clearly mirror how we think about our investment portfolio. Much like we're very focused on having a diverse investment portfolio, we are very equally as focused on the diversity of financing sources we employ. Having lived through the GFC and other market dislocations in our 20-year history has taught us a number of valuable lessons, including that generally never good to just have one debt financing source or one type of financing source. Prior to the GFC, we had predominantly been financed by secured bank facilities with roughly three-year terms. That in mid-GFC shrunk to 364 days, which suffice to say, when you start thinking about your debt capital in terms of days, is not really a good feeling.
On the heels of our strong portfolio construction and active management, we were able to ultimately navigate the other side of the GFC. We were very committed to diversifying our debt capital. As such, we were one of the first externally managed BDCs to strategically focus on getting our investment-grade rating from the agencies. The market we felt at the time, and we still feel strongly today, remains one of the deepest pools of debt capital available to help support our long-term growth. It's also importantly an opportunity that better matches up the term of our liabilities with the weighted average life of our assets. In the core high-grade debt market, which we tend to issue the most in, we've gone as short as three years, as long as 10 years.
But the sweet spot has been the most frequent issuance has been our five-year market, which lines up nicely with the weighted average life of our assets, which tend to be between 3.5-four years. Since our first issuance in 2010, we've accessed unsecured debt markets 32 different times and have now become one of the most regular issuers in the high-grade debt market, establishing ourselves as one of the leading issuers in terms of pricing, liquidity, and access in the BDC sector. Overall, in our history, we have accessed seven distinct types of debt financing sources to date. That includes 43 distinct banks in our various credit facilities and over 240 different investors in our unsecured and convertible notes issuances.
Circling back to our IG ratings, while we ultimately always try to maximize the pricing of our debt capital and generally receive market-leading execution on almost all of our deals, we are also cognizant of how strategically important it is to not only maintain our IG rating but hopefully further distinguish ourselves among the agencies as the industry continues to grow. We already are one of only two BDCs to have a BBB rating by Fitch. Most recently, the only BDC that we're aware of to be put on positive outlook by S&P to go along with our BBB rating from S&P and one of only a handful with a positive outlook from Moody's, along with our current Baa3 Moody's rating.
As we continue to outperform on the asset side, our expectation is that we are one of the best BDCs positioned to hopefully get notched up by S&P and Moody's, which will further cement our standing in the debt capital markets. One of the other key tenets to our capital structure is that size and scale clearly matter as well. One of the most crucial factors in our successful track record has been this ability to, one, always be open to our sponsor clients and portfolio companies and, two, the ability to support our companies as they continue to grow. In order to accomplish those things, we will always tend to take the capital opportunistically and not just waiting around until we absolutely need it.
As such, we tend to carry what may seem like to some as an excessive amount of unfunded debt capital, especially to the disagreement of many of our banking partners. But having such significant liquidity not only helps us sleep at night, it gives us the ability to invest meaningfully when we see the opportunities to deploy at attractive terms. One of the key phrases we at Ares like to mention over and over again, which Kort tried to avoid, is the power of the platform. And this clearly also carries through to how we approach our liabilities. Given the structural protection of BDCs being lower leverage versus other specialty finance companies or even banks and the significant unsecured debt capital we have in our structure, our banking partners really have little to no consternation from a credit perspective.
As such, on a standalone basis, even if Ares BDC was not part of the Ares platform, we like to think we could still finance ourselves as effectively as we do today. But thankfully, we don't have to worry about that. And given how deep our relationships are with many of our banking partners, not only through Ares DC but the multiple touchpoints across Ares platform help to solidify those relationships, which clearly matter as many of these banks are currently consolidating relationships across the industry today.
This page, I just want to really highlight the bottom chart to point out that we construct our term debt capital structure where we like to have our term debt maturities be well laddered each year and not having too much maturing in any given year to help mitigate refinancing risks, not so much in terms of availability for someone like us but to allow us to be very opportunistic and efficient as possible when we do ultimately decide to issue. Lastly, everything we do in spending so much time managing our capital structure coupled with our continued outperformance on our investment portfolio has helped us to generate consistently strong asset and fixed-charge cover ratios for our debt holders.
Overall, we're very proud of the capital structure we've built to date and remain committed to not only maintaining but expanding and enhancing our best-in-class structure as we look to continue growing in the future. That's the end of our prepared remarks.
Okay. Thank you. Do we have any questions? I always have a question.
Kort, maybe for you. Can you walk us through what are the characteristics you would be looking for in a business that you'd be willing to hold a 2% portfolio position versus a 0.2? 0.2, you might be willing to lend to that business, but you don't want to be in the top 10. What are the differences?
Yeah. Well, there's a few differences. It also just depends on the size of the transaction, right, in the first place. So you're going to see the larger position sizes generally going to be the larger deals, right? So there's more paper for us to be able to accumulate. But with those larger companies, usually comes a lot of the things that we're looking for. So I guess the first thing I would say is it's going to check all of those boxes that I went through in terms of our underwriting strategy. What are the things we're looking for? It's going to have all of those characteristics in spades. It's going to be not just a 30% market share business with three other competitors.
It's going to be a 70% market share business with extremely high barriers to entry and just no real way that you can see that market share position being upset. It's going to be a very large-scale business with an exceptional management team. It's going to have that diversified business model I talked about so that if you have a shock to one, maybe it's offset by others. That free cash flow is going to look really good. So it's going to be a 10 out of 10 on all of those categories. Plus, it's going to be a larger company. So there's more paper for us to get in, and that's going to create that larger position size. And it's probably going to be in one of those top five industries or so, top 10 industries that we think work really well for direct lending.
So all of those things are going to come together, and we're going to say, "Let's lean in on this one." And maybe the last thing I'll say, Robert, is it might also to get to a 2% position size, usually what's happening there is we're following on with capital down the line. So we get comfortable with that business. Maybe we start with a 1% position size. That company starts growing. There's acquisitions. We're putting more capital. We're getting to know that company better and better. It's been in our portfolio maybe five or 10 years. Then we start to grow into that kind of 2% position size. So that would be how that would occur.
Got it. Thank you. On kind of the you have the capital. You have the capital to deploy throughout this year. What do you think about the pipeline and the opportunities? Obviously, there's a lot of dynamics. The BSL market seems to be waking up. You have a lot of experience as a platform in that market as well, but it's sometimes a competitor to direct lenders. So how do you think that's going to play out over the course of the?
Yeah, it's interesting. It's what a lot of people want to talk about for sure. Look, we've competed against the banks for 20 years, and we partner with the banks, by the way, for 20 years. It's not like it's constantly a competitive dynamic. There's lots of ways we can work with them. But generally, since we started here in direct lending, banks were providing syndicated solutions even into small companies when we first started. And it's a different product, right? They're offering a syndicated product that can execute maybe at tighter terms but can have risk and be more volatile if the market changes or they get the underwrite wrong or the sale wrong. And we're offering a certain product that's buy and hold. You know who your lender is and know what the terms are going to be.
So users of capital have a choice, and that's been that way for a couple of decades. We've been able to slowly gain market share. As we've mass-scaled, we've taken market share and moved up and up. Now we're getting to the point where we're doing these really large deals. It's getting a lot of attention more than usually than it has the last couple of decades. But nothing's changing all that much. Sure. Now, with the banks, we're exited for about 18 months, and they were on the sidelines not providing capital. We knew they were going to come back. This is what happens. It kind of is a volatile sort of proposition where banks kind of go in and out. By the way, when that happens, people remember that we were there for them.
And so we keep gaining market share even when the banks come back. But I think you're just going to see a continuation of the same kind of dynamic that we saw. In 2021, we had our busiest year ever. Banks were very active in 2021. We put out more capital than we ever have in our history. We're able to as I talked about that broad funnel, right? We're providing capital to small companies, medium-sized companies, large companies. That's different than a lot of other direct lenders that maybe are just going after some large companies, especially the ones that have amassed a lot of capital. They don't have the origination. So the banks come back. We're probably going to skew a little bit more back toward that middle market, small market, and large company as well, just like we've always been doing. The volume's starting to pick up.
It's not going to the moon right now, but it's starting to pick up gradually. And I do think we feel like that trend is going to continue. We see M&A volume starting to come back. And so we're optimistic that volumes across the industry will start to recover.
Okay. Thank you. That's it. We have a breakout session inCordover downstairs. Thank you.