Apollo Flags More Turbulence Ahead For Private Credit Funds
Synopsis
Apollo President Jim Zelter says outflows from private credit funds targeting wealthy investors may continue as concerns linger around valuations, liquidity and AI-related risks.
Apollo Global Management President Jim Zelter said wealthy investors are likely to continue withdrawing money from private credit funds after months of persistent outflows from the sector. Speaking at the Bernstein Strategic Decisions Conference in New York, Zelter warned the recent wave of redemptions was unlikely to be a short-term event. “I don't think it was a one-shot,” he said, referring to the withdrawals from retail-focused private credit vehicles.
Key highlights
- Apollo expects more withdrawals from private credit funds
- Wealthy investors have been pulling money from retail-focused vehicles
- Concerns persist around loan valuations and AI disruption
- Apollo says market turbulence is not over yet
- Some investor groups remain more stable than others
Investor Anxiety Builds
The outflows have hit a category of private credit funds designed mainly for wealthy individual investors and focused on lending to midsized companies.
Private credit markets have come under increasing scrutiny this year amid concerns about loan valuations, liquidity risks and the ability of borrowers to cope with disruption linked to artificial intelligence.
Despite the pressure, Zelter said the underlying performance of the funds remained “solid” through March, April and May.
Redemption Pressure Persists
Even so, Apollo expects redemption requests to remain elevated.
Zelter said many private credit fund managers allow investors to redeem up to 5% of assets each quarter, which could encourage more withdrawals if investors attempt to maximise access to liquidity.
“There may be even a little bit of an increase if people want to game the system,” he said.
“We are not through the turbulence yet.”
‘Long-Term Friends’ Vs ‘Tourists’
Zelter also said investor behaviour varied considerably across regions and distribution channels.
Some investors were proving more loyal and patient during market volatility, while others appeared more opportunistic.
“We're learning who are our longer-term friends and who are the shorter-term tourists,” he said.
Why Private Credit Matters
Private credit has become one of the fastest-growing areas of global finance over the past decade, as asset managers increasingly stepped in to provide loans outside traditional banking systems.
The sector expanded rapidly during the low-interest-rate era, attracting wealthy investors seeking higher returns than public bond markets.
However, recent market volatility, tighter financial conditions and questions around transparency have increased pressure on the industry.
FAQs
Q1: What did Apollo say about private credit funds?
Apollo said wealthy investors are likely to continue withdrawing money from some private credit funds after recent outflows.
Q2: Why are investors pulling money out?
Concerns around loan valuations, liquidity risks and the impact of AI-related disruption on borrowers have unsettled investors.
Q3: What are private credit funds?
Private credit funds provide loans directly to companies outside traditional banks, often targeting midsized businesses.
Q4: What did Jim Zelter warn about?
Zelter said the market turbulence is not over and redemption pressures could even rise further.
Q5: Are all investors withdrawing funds?
No. Apollo said some investor groups and regions are proving more stable and committed than others.
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I write about markets, money, and the macro forces that move them. Passionate about turning complex economic trends into sharp, easy-to-understand stories. Off the clock, it’s hip hop, rock, reggae -- and a mix of cricket and basketball.
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