opinion

Apollo allows secondaries to take the spotlight

There’s a big new name in a relatively small part of the private debt universe. Investors will take note.

By
Andy Thomson
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The private debt secondaries market has been growing surely and steadily. Maybe all it needed was a bit of stardust sprinkled on it to really catch the attention. In which case, investors will no doubt have had their heads turned by the launch this week of a new credit secondaries unit at Apollo Global Management, co-headed by former Goldman Sachs partner Earl Hunt.

As reported by our colleagues on Secondaries Investor, Apollo is still looking for the other co-head and says it will hire further team members in the months ahead. In a market with relatively few players at the current time, the likes of Pantheon and Tikehau Capital among them, the symbolic significance of a firm with a $330 billion credit business joining the fray cannot be overlooked.

For a long time, the private debt secondaries market has been described as ‘nascent’, overshadowed by the more mature and much larger equivalent market in private equity. But, as our extensive coverage of the market in our soon-to-be-published May issue indicates, it has been passing some significant milestones. LP stake sales, the bedrock of secondaries, have been happening with increasing frequency. On top of this, GP-led transactions have been gathering momentum and it is this that market participants cite as especially notable in terms of taking private debt secondaries to the next level.

Up to now, investors appear to have been reticent about the space. In our LP Perspectives 2021 study, only 12 percent of LPs said they expected to make a commitment to debt secondaries in the year to September, while 48 percent were prepared to put money into private equity secondaries over the same period. It’s worth noting in this context that Apollo’s $1 billion of initial capital for its new unit comes from the firm’s insurance clients with a third-party fund slated for some point in the future.

Ultimately, though, investors can’t fail to take note of a market that appears to be characterised at present by strong dealflow and not particularly intense competition. And if it needed a big headline to give it a bit of a boost, then Apollo has just provided it.

Write to the author at andy.t@peimedia.com.