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Private loan “is not a bubble,” said the president of the global management of Apollo Global Jim Zelter, adding that he did not think that the negative economic conditions would launch “huge losses” in the rapid growth sector in recent years.
Speaking on HSBC’s investment conference in Hong Kong on Thursday, Zelter asked how private loan He would perform in economic fall.
“The biggest question I get from all around the world is, is a private loan bubble?” said Zelter. “And I would say it’s not a bubble, but it’s certainly long in the tooth in the cycle.
“Bubble means that there are very irrational procedures, and although I think there are people who are likely to take [a] A more aggressive portfolio construction than I would take, I don’t think it’s a bubble where you’ll find the huge losses you’ve seen in other bubbles since I was around, “he added.
Apollo has been dominant in private loan and has achieved a great incentive to expand their loans not only to groups in the middle market in recent years, traditionally attracted to the market, but also to some of the world’s largest companies.
Private credit groups – which raise funds from investors and give loans directly to companies – they flourished because growing interest rates brought investors to enter more into their funds. They are increasingly playing the role that the banks, with which they face firmer regulation.
In his report on global financial stability last year, the IMF said that private credit assets had grown to around $ 2.1, and although borrowing could create economic benefits, “the sector has never experienced a serious economic decline in its current size and extent.”
“Such an unfavorable scenario could see a delayed loss realization followed by a jump in default settings and large evaluation markings,” the report said.
“If the asset class remains opaque and continues to grow exponentially under a limited bodering surveillance, the vulnerability of the private credit industry could become systemic.”
Zelter said Apollo defined a private loan as “really everything in the financial institution’s balance sheet” and added that most of the investment ratings. He described a private loan as “an ocean of $ 40 trillion.”
The loan is “about $ 600 billion” for Apollo, while the private capital, which Zelter described as a “historical expertise” of the group, “about $ 100 billion,” he said.
At the HSBC event, Zelter also said that a “war” between “inflation forces opposite the deflation forces of AI and technology” was taking place in the global economy.
“It is our opinion that the inflation forces will take over the title in the next six to 12, 18 months before the real deflation influence of AI appears,” he said.
