Apollo Investment Chief Warns of Prolonged Private Credit Market Turbulence

Private Credit Market Outlook: Turmoil May Endure into 2027

Apollo Global Management Inc.'s John Zito, co-president of Apollo's asset management arm, forecasted a challenging period for the private credit market, spanning 12 to 18 months. In a panel discussion at the Bloomberg Invest conference in New York, Zito expressed surprise at the isolation of private credit and highlighted a "complete misunderstanding of what that represents in the economy."

To mitigate risks, investors can prioritize diversification and seniority in the capital structure, according to Zito. He also disputed a recent UBS Group AG report predicting a 15% default rate for private credit, labeling it a "severe bear case" taken out of context.

Zito countered that if private credit defaults were to reach the predicted rate, it would be unlikely for public markets, such as public high-yield and public equity, to remain unaffected. He emphasized that withdrawals from business development companies are not necessarily a problem, as managers are making decisions to meet client needs.

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A recent warning from Apollo CEO Marc Rowan about a shakeout in the $1.8 trillion private credit industry due to redemptions and concerns about rising defaults on loans to software companies was echoed by Zito, who noted that a clear dispersion in the market is expected.