Apollo Global Management President Jim Zelter has dismissed fears surrounding the $US1.8 trillion private credit market as greatly exaggerated. This statement comes after Apollo capped withdrawals from one of its funds following redemption requests equivalent to 11.2 per cent of its loan book. Rival firm Ares Management also implemented withdrawal limits, contributing to broader anxieties. Apollo Global Management is a leading global alternative investment manager. The company specialises in credit, private equity, and real assets funds.
Concerns about risky loans issued by private credit firms have spurred investors to withdraw funds from firms like Blue Owl, Morgan Stanley, and BlackRock. These firms typically charge higher interest rates than traditional banks due to the elevated risk profiles of their borrowers. Speaking at a conference in Melbourne, Zelter echoed sentiments from BlackRock and Blackstone in an effort to alleviate concerns. He stated that the perception of systemic risk in private credit is far from reality, noting that spreads have not widened to the extent suggested by recent headlines.
Macquarie chief executive Shemara Wikramanayake acknowledged that while concerns largely stem from retail investors seeking to exit an inherently illiquid asset class, there is a risk of spillover effects. Wikramanayake stated that while the markets are deep and credit placement remains possible, a liquidity issue could arise if panic selling persists. BlackRock president Robert Kapito also asserted there is no ‘private credit crisis,’ while Blackstone global co-investment chief Kenneth Caplan reported low default levels.
Zelter cautioned that concerns about private credit should extend to equity valuations, private equity valuations, and secondary valuations, given that private debt is senior to these asset classes. Caplan reinforced this view, highlighting a significant disconnect between the negative headlines and the actual performance observed within portfolios. The recent market volatility has seen Blackstone, Blue Owl, Apollo, KKR and Ares Management experience an average sharemarket value decline of about a third over the past six months.
