Apollo Global Management Inc. expects growth in private credit to outstrip its other businesses with the combination of high interest rates and low liquidity driving demand.
“For us, this is the single best entry point for credit because there’s been a drying up of liquidity,” Marc Rowan, chief executive officer and co-founder of Apollo, said in an interview with Bloomberg TV. The New York-based alternative asset manager is focusing mainly on “investment grade” private lending, which makes up the bulk of its $400 billion of its credit under management, he said.
The current economic environment “is creating a backup in spreads and therefore creating really interesting opportunities for firms such as ours to deploy capital and credit,” Rowan said. “The world needs safe yield. I think that’s where we’re going to grow the most.”
Speaking earlier in the week, Rowan said Apollo’s credit business is set to double in size over the next five years.
Private credit has been gaining traction globally in recent years as cash becomes scarce and businesses increasingly rely on big private equity players for funding. Investors seeking higher yields have poured money into the asset class, turning private credit into a roughly $1.4 trillion market. Private-credit firms have been grabbing market share from banks as international markets grow wary of the Federal Reserve’s aggressive monetary tightening meant to combat inflation.
Apollo in January formed a joint venture with Abu Dhabi sovereign wealth fund Mubadala Investment Co. to lend about $2.5 billion over the next five years. It also provided $750 million of senior secured private debt for Mumbai International Airport Ltd. last year.
Separately, Rowan said he expects “a significant correction particularly in the excesses of the growth sector and somewhat in the leverage sector” but said that compared to the 2008 financial crisis, this is a recession that’s going to be “borne by equity.”