Bloomberg Businessweek's Ones to Watch at Invest 2024
As you know, private credit is sort of the it's mushroom to become one of the hottest, if not the hottest sort of alternative investment in recent years. So I'm excited to have a conversation today with someone who is I consider to be an expert in this, who is Akilah Griewal, who is a partner at Apollo and also global head of credit product there. And she was dating a partner at last year. And she is what I like to call one of the evangelists of private credit going at spreading the word about why and how this can be used as an asset class. Now, what interests me particularly about this is that private credit has sort of taken over the headlines, but I still consider it to be sort of an, a, a misty area for a lot of people. So I'm glad we had this conversation to talk about a little about it. Now, although the estimates say that, you know, we're talking about what, $1.7 trillion business now, I still think that a lot of people are, are, are, are sort of new to this. Are you finding when you're talking to companies and investors about getting involved in this that there's still an educational process? Yes, absolutely. There is definitely still investors who are, you know, getting educated on what private credit is. I think you heard earlier, you know, we when we say private credit, when we say 1.7 trillion, you know, we're really talking about mostly a, a direct lending kind of market, right. And that is sponsor backed lending to small companies. As you heard kind of in on the prior panel, you know at Apollo we think of private credit in a much broader definition. We actually think it's a $40 trillion addressable market that spans everything from investment grade fixed income through to asset based finance through to sub investment grade opportunities. And so when you talk about education, I think our mission has been really to educate investors about how private credit can actually permeate throughout your entire portfolio and really have a place across, you know, a portfolio. And that has been the education as well as the listening piece that we've been a part of. Now, when you're talking to, you know, I don't know whether it's, you know, an insurance company, whether it's a, you know, sovereign wealth fund. I mean, when you're saying, you know, you ought to have us as part or you at least ought to have private credit as part of your allocation. I mean, it is there. I mean, what's, what's the big draw for them? Is it, is it, is it yield? Is it diversification? Is it the idea that they don't want correlation to other assets in the portfolio? Or does it vary depending on who you're talking to? I think it varies, but I think generally speaking, when you're talking about there's a lot of a lot being said about private credit being a very large asset category, is it a bubble, etcetera. I think when you think about private credit, you're on the other side, you're talking about public credit or public markets. And public markets are actually much more correlated, much more concentrated and give less diversification for an investor when they're thinking about getting diverse sources of income, diverse sources of return, and diverse sources of ultimately correlation within their portfolio. One of the things that a lot of traditional investors, though, particularly like insurers that may be new to this, you know, they, one of the things that we've heard is that a lot of them worry about the lack of transparency and also the the idea that, you know, that there's a questionable secondary market for a lot of these, which makes them sort of like have to think harder about this. How do you respond to that when you're talking to people who want to consider it? I think that to your point, the lack of transparency that might exist in some pockets of private credit is not necessarily the standard. And I think it's about making sure that you're being transparent on price discovery, you're being transparent on sourcing, you're being transparent in terms of what these assets are being marked at on a frequent basis. And I think that as the private credit market continues to grow, as it becomes more and more established day by day, which we are seeing, you will see a market over time, right, You will see much more transparency, which will allow investors I think to gain additional comfort when it comes to investing in the asset class. This asset class is really sort of it's mushroom now. We're in a different environment now from a, you know, a macro standpoint and from an economic standpoint. I mean, interest rates have really changed. And does that change the attractiveness of, of, of going at this particularly? Well, I'll, I'll, I'll come to the banks next. But for for us from an interest rate standpoint, does that make people sort of reconsider at least think differently about this? I think generally speaking, you've seen a lot more interest in credit as an asset class, generally speaking, because of where interest rates are now, as mentioned previously, that doesn't mean that you can just layer on higher and higher, you know, coupons for example, for for companies people to bear. So what we try to focus on in private credit is still high quality, top of the capital structure, but you're getting paid I think significantly now given where rates are and you're getting compensated for, you know, additional risk in that regard. Another thing that's happened recently that I'm wondering how it's affecting you is, you know, banks which had gone through a period of trying to unload lots of of, of, of things on their books are, are now seem to be much more interested in lending again and, and including to some of the types of businesses that would have sought, you know, private lending. Is that more competition now? Are you seeing that and how do you combat that? Yeah, I think that listen, I think that the banks have been great partners to the to the credit market and the private credit market obviously it ebbs and flows in terms of their activity based on the markets, based on idiosyncratic events that might be they may be facing. But I think that, you know, their activity, their participation only continues to bolster the broader market. And so we view that not necessarily as competition, but as a partnership. When we think about, you know, providing these types of financings, broadly speaking to companies. And again, when we talk about private credit, not just talking about going to one company and giving them, you know, X billion dollar loan, we're talking about doing that plus providing them an investment grade financing, plus providing financing against their real estate portfolio, thinking critically about how they might do inventory finance. So having the full suite of options when it comes to providing credit, we think is going to be the better place to be so that you can pull from different diverse sources. I mean, as we, we, we hear a lot of people, as we heard in the previous session, who were saying, you know, there's been so many people who've run into private credit in recent years, but wait until we see a full cycle or is there going to be some washout? Is there some fear there? I mean, yes, I think that we haven't seen a full cycle yet as it relates to, you know, new entrance to the market who haven't been cycle tested. So I think it just again underscores the need to be very critical in terms of the managers that you invest with, as well as making sure you're very clear in terms of where you're attaching in a capital structure and the type of risk that you're taking, you know, in various market conditions.