Apollo Global Management President Jim Zelter Talks Investment Grade Private Credit
08:15 Share

This is an iHeart Podcast. Did you know that 92% of U.S. hiring decision makers expect to face challenges?

Finding qualified candidates this year? The costs of recruiting, advertising, interviewing, and onboarding can add up quickly. But Express Employment Professionals is your hiring solution. Go to expresspros.com today. Express streamlines your hiring process, saving both time and money. Whether you need contract staff or your core team member, visit expresspros.com.

Bloomberg Audio Studios. Podcasts, radio, news. I think you'd agree that this is the place to be in Europe today. I've been to Berlin many times, but my first time at Super Return, and it's wonderful to be here. And it is ironic how the breadth of players here at Super Return used to be really a private equity conference.

And now it really is a conference of all players in the credit markets, in the capital markets, and in the equity markets. So thank you. Of course, we're thrilled to hear what you have to say. Now, this is fascinating as well, because we talk about this from an asset class perspective. We'll get to that in a moment. Let's talk about the overarching trade. We're based in London. You're based in the U.S. as well. We're talking a lot about whether or not this kind of exit, perhaps, or at least this moment that Europe has had in the sun actually lasts. Give us the bull case for Europe here.

Well, we've been in Europe for 20, 25 years. We probably have 100 billion of our 800 billion here in Europe today. And whether it's a pull domestically or a push from the current administration, there's certainly a revitalized enthusiasm about investing in Europe. I had a dinner last night with 20 financial players, and the amount of U.S. investors that are looking to invest in Europe is very real and palpable. You know, for us, with our

our financing toolbox and our high-grade capital solutions. In reality, most of our transactions over the last two years have been in Europe. Intel in Ireland, Venovia here in Germany, Air France.

So you know we've seen it for the last few years where on the global stage the leaders the national leaders in industry and energy transition in utilities and manufacturing they want to be competitive globally and they're looking for more tools to be able to play in a bigger game.

How much of that though is a structural bull case for Europe as opposed to a reaction function to perhaps the volatility emanating out of the United States? We don't spend as much time thinking about whether it's a pull or a push. On the ground when we see activity from national champions in industry, and we see it with industrial players, and we see it with financial players,

and we see it with government entities. Certainly in Germany you're seeing it right now with this current administration, a real pull.

But we see palpable signs, lots of green shoots of great enthusiasm. And certainly there's a variety of things you'd like to change. But for our perspective right now, it's a wonderful place to do business. How much of that, though, gets a stamp of approval or a little bit of backing because of the fiscal spend from governments? I mean, it feels like Germany's bull case has been a big piece of that. But is it just Germany that's kind of holding Europe afloat at the moment?

Well, I think in Germany it's very easy. This is a $4 trillion economy. Their goal is to get to be a $6 trillion economy over the next 10 to 12 years. We're prepared to put in over $100 billion of capital from our financing tools. And I really say that in terms of capital, mostly investment-grade financing and a variety of other financing tools.

Germany, because of the size and scale and their prominence in the European marketplace, they are a leader. But we're seeing enthusiasm happening right now in the Nordics. We're seeing enthusiasm happening in France to a certain degree. Obviously, different industries. But it's a palpable change that we want to be part of. And I think that for our perspective, we are a large player here. But in the world of private capital and the private credit,

It's a it's a it's an opportunity that we see is one of the brighter ones around the globe right now. You mentioned private credit. You took me right there. There's a lot of concern in this market right now because of the optimism in private markets generally, but also the financing and the deals that are coming from the credit space specifically. So maybe it's gone a little bit too far. You've heard warnings echoed from some of the giants of finance. Walk us through what a red flag might look like in that space.

Well, we've been fortunate. We've not had a real recession in the U.S. for several years, a very long period of time. I will point out that a place like Australia really hasn't had a recession since the early 90s. But certainly there's been a tremendous growth of a variety of credit markets, whether it's investment grade, high yield, direct lending. And I think we have to differentiate between

a credit cycle and industries where there may be an overabundance or an overenthusiasm. So certainly what's going on right now in DC with reimbursement, the whole area of healthcare and medical reimbursement, you want to make sure that you are not overly concentrated to any one player or any one provider.

in the enterprise software business, a lot of concern about technology change and technology innovation in light of AI, and certainly also you want to make sure you don't have a concentrated business. So those are really red flags that would be the case in any credit cycle, but certainly as we are a bit long in the tooth in the cycle, you have to be more focused on it at this point in time.

You mentioned the risk out of Washington, D.C. specifically. Connect the dots for us in terms of those deficit concerns out of D.C. to the private credit space. How quickly do you see an effect?

Well, you know, right now, while the tariffs and Liberation Day got a lot of the headlines, the market forces, the so-called Bob Vigilantes, have woken up those to the concern about the growing deficit in the United States. So in the marketplace right now, with a little bit slower growth and some concern, a lot of hand-wringing, the deficit issue has taken the main stage versus the impact of the tariffs.

Now, this administration, we can't get too comfortable. There can be a headline in the next few minutes to change that. But right now, the big focus is on rates and the deficit, obviously, as the current administration is focusing on their big, beautiful bill. When it comes to kind of the folks you're speaking to here in Berlin or around the world,

How does that sentiment you just laid out affect perhaps the nervousness in terms of credit lending, but also kind of in the equity space as well? Are you seeing some of that nervousness rise to the top? Well, I think there, you know, we've been very clear about the role that we play as a broad-based capital provider. And I think that when you see the macro headlines right now, your calibration of risk on levered equity needs to be a bit higher.

But at the same token, you have real rates, 4%, 4% plus on nominal rates in the US right now. And for our perspective, as a credit lender, you're getting paid for the first time in the last 15 years. So it's a wonderful time to be a player in credit. But at the same time, I do think there's appropriate caution with buying equity at the bottom of a levered capital structure. So in the public markets, there's a conversation here about

holding onto cash, holding onto capital, being on the front end of the curve to kind of have that liquidity. Private markets offer the opposite. It's fairly illiquid. It's not as easily tradable. It's a more long duration asset with the deficit concerns. A lot of folks are pulling out of that

Are you telling me that that's not bubbling to the surface? Well, I think, again, private credit is a much broader ocean of opportunities where a lot of the issues you mentioned, they're really focused on the non-investment grade side, which is a $1.5 trillion marketplace of direct lending. The larger opportunity, when we're more focused as a firm and

three quarters of our assets are on the investment grade side. So a different setup with regard to the underlying credit metrics, mostly investment grade, mostly top of the capital structure, and with rates where they are right now,

Again, people don't typically buy spreads, but they buy yields, and yields are quite strong right now. So appropriate commentary and concern about the non-investment grade marketplace, and certainly a lot of concern about levered capital structures, subordinated paper, pick payments and things of that nature, which we've avoided. We're clearly leaning massively into the investment grade side of the world of private capital. And I would say also in the past,

a lot of the issues you brought up, in the past, historically, private has been risky and illiquid, and public has been safe and liquid. We would really challenge that convention, and we're seeing it more and more on these investment-grade opportunities that we've been a leader and owner of.

Thank you.

Ready to bring your visions to life? Learn how at AmazonBusiness.com. This is an iHeart Podcast.