Apollo Global Management (NYSE:APO) expects its wealthy clients to seek cash back from private credit products after months of net outflows.
Jim Zelter, a president at the firm, told attendees at Bernstein's Strategic Decisions Conference in New York that withdrawals earlier in the year exceeded new contributions in a category of vehicles marketed largely to individual investors that make loans to middle-market companies.
He tied the pullbacks to broader unease about private credit. Investors continue to scrutinize valuations and the resilience of borrowers facing technology-driven change, Reuters reported.
Questions remain about how lenders are pricing loans and how companies will handle AI disruption.
"I don’t think it was a one-shot," Zelter said of the redemption wave.
He said the funds' results were "solid" across March, April and May. Yet, he still does not anticipate a sharp slowdown in exit requests. Zelter pointed to common fund terms that typically cap quarterly repurchases at about 5%.
Apollo isn’t the only firm to have received a large number of withdrawal requests driven by concerns about the private credit sector.
Other firms such as Management, BlackRock, JPMorgan and Morgan Stanley have capped redemptions, as well.
Oaktree Capital Management elected to fully satisfy all redemption requests for 8.5% of its private credit fund for the first quarter. Oaktree Strategic Credit Fund (OSC) plans to repurchase approximately 13.9 million shares, representing 6.8% of its outstanding shares, Reuters reported.
While Goldman Sachs (NYSE:GS) revealed that its private credit fund saw redemption requests of just under 5% of shares in the first quarter, amid an industry-wide trend of increased redemptions.
Zelter also warned that redemption pressure could tick higher if some investors try to time the limits. There "may be even a little bit of an increase if people want to game the system," he said, adding, "we are not through the turbulence yet."
He added that investor behavior varies by geography and distribution method, with some regions holding up better than others. "We’re learning … who are our longer-term friends and who are the shorter-term tourists," Zelter said.
Photo: Image by Piotr Swat via Shutterstock
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