Apollo (APO) Joins JPMorgan (JPM) and Goldman Sachs (GS) to Boost Private Credit Trading

Apollo Global Management (APO)is joining forces with JPMorgan Chase (JPM) and Goldman Sachs (GS) to introduce greater liquidity into the rapidly expanding private credit market, signaling a major shift toward transparency and trading efficiency. This collaboration aims to syndicate and trade investment-grade private debt more actively, with Wall Street banks serving as broker-dealers—either acquiring Apollo's loans directly or facilitating their sale to third parties. This innovative approach marks an important evolution for private credit, historically known for limited secondary trading and opaque pricing.

By partnering with major banks, Apollo is set to significantly expand its capacity to originate larger loans more swiftly. This arrangement will also enable Apollo to tap into the individual investor market, where the demand for liquidity and flexibility is typically higher compared to institutional investors. Apollo has been proactively positioning itself for this move, recently hiring industry veterans and developing platforms designed to provide real-time pricing and increased transparency in private credit transactions.

• Apollo teams up with JPMorgan and Goldman Sachs to enhance private credit trading.
• Wall Street banks to act as broker-dealers, providing liquidity to the traditionally illiquid market.
• Collaboration aims to facilitate greater transparency and accessibility for a broader investor base.

• The private credit market has surged to around $1.7 trillion, drawing increased investor attention.
• Apollo’s strategic initiative aims to blend the benefits of private markets with tradable liquidity.
• The move includes launching innovative investment products such as a private credit ETF.

• Increased liquidity in private credit markets may attract more institutional and individual investors.
• Potential market disruptions could emerge from greater transparency and regular secondary trading.
• The initiative may prompt further industry-wide shifts in the structure of private credit investments.

• The collaboration between Apollo, JPMorgan, and Goldman Sachs aims to introduce significant liquidity into the traditionally illiquid private credit market, allowing for more active syndication and trading of investment-grade private debt.
• This initiative is expected to enable Apollo to originate larger loans more swiftly and expand its reach to individual investors who typically require greater liquidity.
• Efforts to establish platforms with real-time pricing and increased transparency could redefine how the approximately $1.7 trillion private credit market operates, making it more efficient.
• The move towards greater tradability, including the launch of innovative products like private credit ETFs, could democratize access to the asset class for a broader investor base.
• Enhanced liquidity and accessibility may attract more institutional and individual capital to the private credit market, fueling its continued growth.
• Apollo is a major player with significant ambitions to grow its assets under management and loan origination volume, seeing private markets as increasingly competitive with traditional banking.

• Increased trading and transparency could erode some of the traditional benefits of private credit, such as bespoke terms, privacy, and the perceived stability that comes from less frequent mark-to-market valuations.
• Some prominent private credit firms, like Blue Owl Capital, oppose making the market more like publicly traded debt, preferring the existing model that emphasizes stability and lower volatility.
• New financial products aiming to bring liquidity to private credit, such as ETFs, are already facing regulatory scrutiny regarding their structure, liquidity mechanisms, and potential risks to investors.
• The very nature of private credit involves illiquid assets; ensuring true, consistent liquidity in a publicly traded format remains a complex challenge, potentially leading to mismatches during times of stress.
• The rapid growth of the private credit market, much of which has occurred in a relatively benign economic environment, has led to concerns about potential systemic risks if a severe downturn occurs, as the market's resilience at its current scale is largely untested.
• Greater liquidity and more frequent pricing could diminish the "illiquidity premium" that has historically attracted investors to private credit, potentially making returns more comparable to public markets but with higher fees.
• Increased transparency and more active secondary trading could expose the private credit market to greater volatility and potential disruptions, altering its traditionally stable characteristics.

However, this initiative is not without controversy. Firms such as Blue Owl Capital (OWL) have voiced opposition to the transformation of private debt into a more publicly traded market, citing the stability and lower volatility traditionally associated with private credit investments. Apollo's efforts highlight a growing divide among industry leaders regarding the ideal structure and future direction of private credit markets.

Apollo's bold strategy could reshape private credit investment, blurring the distinction between public and private markets. While increased trading could appeal to a broader investor demographic, it remains uncertain whether the market will fully embrace these changes, or whether traditionalists will succeed in preserving private credit's more exclusive, stable nature.