Apollo CEO Refutes Wall Street Warnings: "Private Credit Risks Are Misunderstood"

Rowan: "Concerns Are Overblown... Driven by Public Misconceptions"

Mark Rowan, CEO of Apollo Global Management, a major U.S. private equity firm, recently argued that Wall Street's concerns over private credit are excessive.

Reuters Yonhap News

In an op-ed published by Bloomberg on December 3 (local time), CEO Rowan addressed warnings about risks in Wall Street’s private credit market, stating, “These concerns stem from misunderstandings about market risk and sources of funding, as well as a failure to distinguish between leveraged loans-which make up only a portion of the market-and private credit.”

Quoting a line from 19th-century British Enlightenment thinker Charles Mackay’s book “Extraordinary Popular Delusions and the Madness of Crowds” - “Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one” - Rowan remarked, “Given the extreme speculation from the media and others about the risks of private credit, this phrase feels particularly apt today.” He criticized recent concerns on Wall Street about the private credit market as a form of mass delusion based on public misconceptions.

Rowan assessed that, in the approximately $40 trillion private credit market, only 5%-about $2 trillion-consists of leveraged loans that fall below investment grade, while the remaining 95% is considered investment grade. Leveraged loans typically refer to loans extended to companies with high debt ratios or low credit ratings.

Rowan criticized as major misconceptions the claims that private credit is not subject to credit evaluation, lacks transparency, or is illiquid. He also countered arguments that private credit could trigger a financial system crisis, noting that institutions investing in private credit are long-term investors. “The growth of all forms of private credit has made the financial system more resilient and diversified, and has improved the soundness of banks,” he said.

Apollo Global is one of the major private equity firms leading the expansion of the private credit market on Wall Street. After the 2008 global financial crisis, as regulations on banks’ soundness were tightened, non-bank financial institutions such as investment firms and asset managers filled the “funding gap,” rapidly expanding the private credit market. Private credit, which generally refers to lending by non-bank financial intermediaries (NBFIs), is often considered a form of “shadow banking” due to its lower transparency and regulatory standards compared to bank loans. The lack of safety nets, such as deposit protection schemes or central bank intervention, has led to persistent concerns both inside and outside Wall Street that the sector is vulnerable in times of crisis.

Previously, in October, Jamie Dimon, CEO of JPMorgan, warned of risks in the credit market-including private credit-following the bankruptcies of U.S. companies First Brands and Tricolor, both of which had raised funds through private credit. He stated, “If you see one cockroach, there are probably more.” Andrew Bailey, Governor of the Bank of England, also remarked that some of the complex financial engineering used in the private credit market is reminiscent of the period just before the 2008 financial crisis. Jeffrey Gundlach, CEO of DoubleLine Capital and known on Wall Street as the “Bond King,” criticized private credit as “garbage lending,” and warned, “The next big financial crisis will originate from private credit.”

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