Market Instability Creates Private Credit Opportunity, Apollo's CEO Says

In Brief:

Bloomberg's Sonali Basak interviewed Jim Zelter (President, Apollo Global Management) and Ryan Tolkin (CEO & CIO, Schonfeld) about navigating market volatility from public and private investment perspectives. Zelter emphasized that recent market turbulence creates prime conditions for private credit as companies seek reliable capital sources amid uncertainty.

Big Picture Drivers:

• Political uncertainty: New administration creating market volatility through multiple executive actions

• Credit evolution: Private credit expanding beyond traditional leveraged lending into broader markets

• Capital formation shifts: Companies increasingly looking to private markets when public access becomes constrained

• Market dispersion: Moving away from concentrated tech-heavy markets toward broader opportunity sets

Key Topics Covered:

• Private credit growth: Evolution from niche $2 trillion sponsor-backed lending to $40 trillion opportunity

• Market concentration: Risks of overexposure to a small group of tech stocks and need for diversification

• Liquidity tradeoffs: Contrasting approaches to liquidity between multi-strategy and private market players

• Systemic risk concerns: How risk has shifted from banks to private capital providers

Key Insights:

• Origination advantage: Apollo focuses on proprietary deal sourcing rather than capital raising as competitive edge

• Bank partnerships: Private credit firms positioning as complementary to banks, not competitors

• Market transformation: Previously illiquid asset classes gradually becoming more tradable over time

• Strategic acquisitions: Both firms using targeted acquisitions to enter new markets and expand capabilities

By The Numbers:

• Asset class evolution: Private credit expanding from $2 trillion to potential $40 trillion opportunity set

• Interest rates: Base rates in low-to-mid 4% range creating attractive private credit opportunities

• Acquisition strategy: Apollo spent $9 billion on 16 origination platforms employing 4,000 people

Memorable Quotes:

• "We've been very vocal that the opportunity set is much bigger in the $40 trillion asset class." - Jim Zelter

• "Base rates right now, low fours, mid fours, high fours, when you can look at where you can be a lender... it's a very provocative asset class." - Jim Zelter

The Wrap: As market volatility increases amid economic and political uncertainty, private credit providers like Apollo see unprecedented opportunities to provide capital when public markets become less accessible. The evolution of private credit from a niche investment strategy to a mainstream asset class reflects broader structural changes in capital markets, with firms that have built robust origination platforms positioned to benefit most in challenging environments.