(Bloomberg) — Apollo Global Management Inc.’s John Zito said the turmoil facing private credit could endure well into next year, but downplayed the idea that the wave of withdrawals in some funds are a problem.
The next 12 to 18 months will probably be more difficult, the co-president of Apollo’s asset management arm said Wednesday at the Bloomberg Invest conference in New York.
“I’ve been surprised by the isolation of just private credit,” Zito said during a panel discussion. “There’s still a complete misunderstanding of what that represents in the economy.”
Zito added that investors can protect themselves by being more diversified and senior in the capital structure. He also took a more nuanced stance on a recent note from UBS Group AG, which predicted a 15% default rate for private credit. The report — which Ares Management Corp. Chief Executive Officer Michael Arougheti derided on Tuesday — was “taken out of context” and was presented as a “severe bear case,” Zito said.
“If the private credit market goes through, as UBS said, a 15% default rate, the idea that the public high-yield market, the public equity market, all these public markets would be completely fine, while the entire private debt market melts, the likelihood of that is extremely, extremely low,” he said.
Zito pushed back on the framing of withdrawals from business development companies as a problem, adding that managers are making decisions on how to meet client needs.
On Tuesday, Apollo CEO Marc Rowan warned of a shakeout in the $1.8 trillion private credit industry as it grapples with redemptions and concerns about rising defaults on loans to software companies.
“There will be clear dispersion coming,” Zito said. “It will be interesting to see.”
More stories like this are available on bloomberg.com