Talking point: 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.

The private debt secondaries market has been growing surely and steadily over recent years. Maybe all it needed was a little sprinkling of stardust to draw broader attention.

In which case, investors will no doubt have been interested in the launch in April 2021 of a new credit secondaries unit at Apollo Global Management, co-headed by former Goldman Sachs partner Earl Hunt.

As reported by our Secondaries Investor colleagues, 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, sector participants cannot overlook the symbolic significance of a firm with a $330 billion credit business joining the fray.

Nascent market

The private debt secondaries market has long been described as ‘nascent’, overshadowed by the more mature and much larger equivalent market in private equity.

But, as extensive coverage in our May 2021 issue indicated, it has passed some significant milestones. LP stake sales, the bedrock of secondaries, have been happening with increasing frequency. GP-led transactions have also been gathering momentum: this is what market participants cite as especially notable in terms of taking private debt secondaries to the next level.

“The private debt secondaries market has been described as ‘nascent’, overshadowed by… private equity”

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 at least for now seems characterised by strong dealflow and not particularly intense competition.

And if secondaries needed a significant headline to give it a bit of a boost, then Apollo Global Management has stepped in and provided just that.