Apollo Global Management CEO Marc Rowan: The scale of what's happening in this country is totally under appreciated
Alternative investments giant Apollo Global Management has seen its stock swoon this year as a result of fears in the private credit market. At CNBC's Invest in America Forum in Washington, D.C., on Wednesday, its billionaire CEO Marc Rowan offered the latest defense of its book of business and latest attempt to distance the firm from the riskiest edge of the private credit market.
Apollo has faced scrutiny for its decision to limit quarterly redemptions in a private credit fund to 5%—other firms in the space have relaxed their redemption limits, though 5% is a generally accepted standard in the industry. Apollo has also been vocal in saying that many software valuations, the sector at the center of the private credit default fears as a result of the potential for rapid AI disruption, are "wrong."
At the CNBC event, Rowan had even harsher words for some of Apollo's peers and investors in the private credit space as redemption requests have risen.
"We have a situation where investors do not actually know what they own. Maybe they should have known," he told CNBC's Sara Eisen. "If you discovered eight weeks ago that enterprise software was vulnerable to AI, you kinda weren't doing your job," Rowan said. "This is knowable."
Its private credit fund, which received redemption requests representing 11% of assets, has roughly 12% of loans in software, the single biggest sector in Apollo Debt Solutions BDC.
The redemption requests which Apollo did meet equaled $750 million.
"We are a trillion-dollar manager," Rowan said. With $750 billion in credit investments and $16 billion in retail investor assets, 5% quarterly redemptions of $750 million 'rounds to zero,'" Rowan added.
BlackRock drew a similar line in the sand at the stated 5% limit, with its CEO Larry Fink telling the BBC in March, "It's not like it's on Page 92 of a prospectus. It's on Page 1."
As for other lenders, Rowan added, "If you can't, as a first lien credit manager, meet 5% redemptions per quarter, I'll say it frankly: You're an idiot. This is not that hard to do."
Beaten-up software stocks are beginning to join the market rebound, and noted investor and short seller Michael Burry wrote in a new Substack post that he did not believe "the technical pressures brought on by the private credit/software debt issues are big enough to affect these stocks for much longer."
But Rowan did say that the changes taking place in the debt markets, and the role of technology companies in those changes, are going to remain significant even if he continues to say the market is overstating the fears as they relate to Apollo specifically.
"Private equity spent a decade where 30% of the activity was enterprise software," he said. "This is not a story of whether private is good or bad. It's concentration in one industry being affected by technological change. ... Enterprise software stocks are down 60-70%. It is all about selection of business. It's over-concentration; it's too much growth; too much risk," he added.
Last year, Apollo originated $310 billion in new investments, 80% of which was investment-grade financing, with the largest issuers including Intel, BP, Shell, Air France, AB InBev, AT&T and Meta.