Interview, Fireside Chat, Other
Apollo's Jim Zelter on the Future of Private Credit
- The firm projects ending the current quarter with assets between $950 billion and $970 billion, with targets to reach $1 trillion by the end of this year and $1.5 trillion by the end of 2029.
- A massive capital need of $5 trillion to $6 trillion is anticipated over the next five years specifically for U.S. data center funding, driven by an unprecedented global surge in capital expenditures.
- Private credit is expected to see increased adoption alongside investment grade debt structures, though a challenging year or two is forecasted with a "very flat, open" cycle impacting public high yield, investment grade debt, leveraged loans, and direct lending.
- The market is predicted to address liquidity and structural issues by 2035, with the view that avoiding narrow definitions of private credit will cause investors to miss a significant opportunity to fund major global companies.
- Future capital solutions will be required for European nations facing energy transition and infrastructure challenges due to their fiscal state, while the aging population faces new retirement challenges.
- Primary strategic drivers for 2026 include fixed income replacement and a focus on retirement solutions, with the firm intending to continue targeting market dislocations once they fully materialize.
- The firm maintains a strategy focused on three or four Asian locations, including Japan, Hong Kong, Korea, and Australia, explicitly excluding significant investment in China.
- Corporate culture will be preserved through a flat organizational structure relying on casual collision and senior partner visibility despite growth, while AI is viewed as a potential equalizer for talent and insight.
- Key risks identified include the potential underestimation of AI's return on invested capital and the possibility that the economic owners may not harvest appropriate returns from current AI and infrastructure investments.