Apollo: Risky Private Credit is a Mere 'Sprinkle' on the Cupcake

Leading alternative asset manager Apollo Global Management is employing a new confectionery-based metaphor to underscore its long-standing argument that the overwhelming majority of the private credit market is investment-grade, with the perceived 'risky' portion representing merely a small 'sprinkle' on a much larger cupcake. The firm asserts that investors are significantly underestimating the actual size and quality of the assets within this burgeoning market.

Apollo Global Management CEO Marc Rowan and Asset Management Co-President John Zito have consistently highlighted that private credit is frequently misunderstood, often conflated with the smaller, more volatile leveraged lending segment. Rowan has rejected concerns that adding private assets to retirement and insurance portfolios poses a systemic risk, calling such fears overblown. They contend that most private credit held by insurers and pension fund buyers is rated investment grade.

According to Apollo's own data, approximately 80% of the over $280 billion in credit it originated in 2025 was investment-grade rated, boasting an average rating of A. The firm primarily operates within the $38 trillion investment-grade segment of the private credit market, which it states constitutes about 95% of the roughly $40 trillion total private credit market. This perspective aims to clarify that the $2 trillion leveraged lending market, often mistakenly equated with all of 'private credit,' is a minor component of a much broader and higher-quality landscape.

These statements come as the private credit market continues its rapid expansion, having grown into a $3 trillion industry by March 2026, with projections to reach $3.4 trillion by 2030. This growth has naturally drawn increased scrutiny from regulators and insurers regarding lending standards, risk management practices, and transparency. Marc Rowan has also cautioned about an impending 'shakeout' in the broader alternative investment sphere, driven by factors such as geopolitical instability, inflation, technological change, and defaults within the software sector. He believes this shakeout will primarily affect weaker managers, while well-managed firms with diversified portfolios will find opportunities.

The expansion of the private credit market largely filled a funding gap that emerged after the 2008 financial crisis, as banks tightened lending due to stricter capital requirements. This shift is often presented as a mechanism to transfer credit risk from bank balance sheets to private markets, thereby enhancing the overall safety of the financial system. Apollo is actively working to enhance transparency and liquidity in the market, exemplified by its exchange-traded private credit fund with State Street Corp., which provides daily price updates.

While many analysts and market observers generally agree that private credit does not pose a systemic risk, some institutions, such as UBS Group AG Chairman Colm Kelleher, have voiced concerns about potential systemic risks emanating from private assets within retirement and insurance portfolios. Apollo executives, however, assert that given its scale and diversification, investment-grade private credit offers an attractive alternative to public fixed income markets, providing potential for enhanced yield while maintaining robust credit quality and downside protection.