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Apollo aims to be credit secondaries ‘category killer’

Apollo's deep knowledge of underlying credit investments is the 'real secret sauce' in a secondaries business, CEO Marc Rowan says on the firm's latest earnings call.

Apollo Global Management‘s chief executive is bullish on the prospects for its new credit secondaries business.

Speaking on the firm’s first-quarter earnings call, Marc Rowan said that Apollo would be the “category killer” in the market, a reference to retailers that use their size and broad product offering to drive out competitors.

“The real secret sauce in a secondaries business is having knowledge of the underlying investments to be able to move rapidly and thoughtfully around making investment decisions,” he said. “Because Apollo is the largest alternative credit lender, we have views and visibility on essentially every credit product, every underlying security in the market.”

Apollo has identified an uptick in demand from pension funds seeking liquidity for their credit fund positions, indicative of the same portfolio rebalancing trend that has occurred in private equity over the past 10 years, he added.

Speaking of the secondaries market more broadly, Rowan described third-party demand as “pretty enormous” and said that Apollo expects to raise “substantial additional money” as it builds out its GP-led capabilities.

Apollo launched its credit secondaries business at the end of April. The unit has $1 billion to deploy and is co-led by Earl Hunt, an incoming partner from Goldman Sachs. The other co-lead is yet to be appointed.

This follows the entry into the market of Ares Management in March with its $1.08 billion acquisition of Landmark Partners. Ares chief executive Michael Arougheti said that the credit secondaries market would be a key area of growth for Landmark, in addition to its existing PE and real estate businesses.

Other buyers in the credit secondaries market have described the entry of Ares and Apollo as a “net positive” that will help make up a shortfall in capital dedicated to the strategy, though doubts have been raised about how they will be perceived by other fund managers.

“If you’re a direct lending sponsor, you have to decide if you want Apollo as the ultimate source of your capital,” a senior managing director told Secondaries Investor.