AGT Partners on Apollo
Thesis
Negative sentiment around private credit exposure is overblown. While retail funds have seen redemptions, net flows are near zero and institutional demand remains strong. The private credit market is not large enough to pose systemic risk. At a low-teens earnings multiple, the stock offers an attractive entry point.
“While it is indeed true that many of the private credit funds tailored to wealthy individuals have seen elevated levels of redemptions, thus spurring a number of managers to limit withdrawals to 5%, what may have been under-appreciated is that these same funds are still receiving new inflows, and hence net flows are closer to zero. Importantly, institutional demand for private credit continues to be strong”
Key risks
- Negative sentiment surrounding alternative asset managers’ private credit exposure.
- Concerns over gating / redemption restrictions in private credit funds.