Key Takeaways
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- Apollo’s Q3 origination: $75 billion, second-highest on record.
- Capital-solutions unit fees: +33% year-over-year growth.
- Private credit market: Forecast to hit $3 trillion by 2028 (Moody’s).
- Fraud incidents: Isolated, not indicative of systemic weakness.
- Investor sentiment: Shift from equities toward high-yield private credit.
Shares of leading private-credit firms rebounded as earnings results defused investor anxiety about the sector’s health.
Apollo Global Management (NYSE: APO) jumped 5% after reporting better-than-expected third-quarter profits, while Ares Management (NYSE: ARES) gained over 4% following similar results. The market response marks a reversal from the selloff that followed Blackstone’s (BX) October report, which initially sparked fears about loan defaults and declining credit quality.
Earnings Rebound at Apollo and Ares
Apollo reported $75 billion in deal origination during Q3, second only to last quarter’s record. The firm’s capital-solutions division, responsible for structuring credit across industries, saw fees rise 33% year-over-year.
Ares also exceeded expectations, signaling strong origination pipelines and steady demand for private-debt products despite Fed rate cuts.
The results suggest private lenders are maintaining profitability and deal flow, even as competition from bank-syndicated loans resurges.
Fraud Cases and Fed Policy Pressure
Investor concern had been amplified by two corporate frauds—Tricolor Holdings and First Brands—that triggered write-downs for some credit funds. However, Rowan dismissed these as isolated events unrelated to broader private-credit underwriting standards.
He noted that 16 distinct Apollo lending platforms maintain rigorous risk frameworks across industries, mitigating systemic contagion.
Meanwhile, Federal Reserve rate cuts and a rebound in traditional syndicated loan markets have slightly compressed spreads, reducing returns for private-credit investors. Still, most managers view this as a normalization rather than a deterioration of fundamentals.
Marc Rowan: Private Credit Still Outperforms Equities
Rowan told analysts, “Credit is credit—whether it’s originated by a bank or an asset manager makes almost no difference. There are fundamentally good and less good underwriters.”
He argued that despite narrowing spreads, private credit remains a superior option to public equities, particularly for wealthy investors seeking yield with lower volatility.
“The rotation into private credit is a rotation out of equity,” Rowan said, echoing Blackstone President Jonathan Gray, who highlighted the strategy’s ability to deliver premium returns relative to base rates.
Market Outlook and Systemic Risk Debate
While some economists warn that defaults in private lending could pose systemic risk, Rowan rejected that notion.
He said, “I don’t think we’re talking about systemic risk. We’re talking about late-cycle behavior—and bad actors will be called out.”
With Moody’s Ratings forecasting the private-credit market to reach $3 trillion by 2028, institutional investors continue to view the sector as a structural growth story.
Analysts note that lower interest rates could also revitalize private equity and real estate, indirectly supporting credit markets through increased deal activity and refinancing demand.
