Apollo Global Management LLC President Jim Zelter has strongly defended the private credit industry, downplaying investor concerns and characterizing recent developments in this asset class as merely "growing pains."
In an interview on Thursday, Zelter stated that news about retail investors withdrawing funds from private credit funds overemphasizes what he called "a minor skirmish on the periphery" of the direct lending industry. He pointed out that rules governing redemption restrictions are clearly documented and functioning as intended.
"On the very first page, it is explicitly stated in black and white that the portfolio includes a 5% redemption mechanism to protect all investors," he said. "As fiduciaries, we are doing the right thing. This has actually been a fairly straightforward communication."
A category of private credit funds targeting retail investors, specifically Business Development Companies (BDCs), has recently faced a significant volume of redemption requests. This comes as investors grow increasingly anxious about the lending practices within the $1.8 trillion industry and its exposure to companies vulnerable to disruption by artificial intelligence.
Shortly after Zelter's remarks, Blue Owl Capital announced it would limit redemptions from two of its private credit funds. This decision followed attempts by investors in the first three months of this year to redeem approximately 41% and 22% of the shares in these respective funds.
Last month, Apollo stated it would restrict redemptions from one of its largest non-traded private credit funds for retail investors, joining other alternative asset management firms taking action in response to a surge in redemption requests.
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