Carnage In Private Credit Just Got Worse

While headlines are fixated on the Iran war and today’s “feel good” market rally, it is worth noting that beneath the surface, hours ago credit markets just got worse.

The latest example comes from Apollo, which has been forced to put the brakes on investor withdrawals from one of its largest retail focused funds, according to Bloomberg. Its $25 billion Apollo Debt Solutions vehicle is the latest private credit flaming bag of shit that has hit redemption limits after investors tried to pull more than double what the structure allows.

In other words, investors want out and are being treated like the old ladies on line at the South Philly Acme trying to buy liverwurst and chicken salad at the deli counter. That is, to say, they’re being told to take a number.

As I’ve been documenting, BlackRock recently hit similar limits in its own fund, and Morgan Stanley has been dealing with pro rated withdrawals at roughly the same levels. The difference now is scale and urgency. Apollo investors tried to redeem over 11% of the fund in one window. That’s a quintessential “race for the exits”.

And it was an Apollo executive himself who said just days ago that “all” marks in private credit are “wrong”. Oh, the irony.

The size with these funds is not trivial. These are not obscure niche strategies. These are $25 to $30 billion vehicles seeing real redemption pressure. That is large enough to matter, even if people would prefer to pretend otherwise. Combined, we’re already talking about stress on nearly $100 billion in assets.

It is worth remembering what these funds actually own. They are not sitting on piles of cash waiting to hand it back. They hold loans that are illiquid, often priced off internal models, and extended to...(READ THIS FULL ARTICLE HERE).

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