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June 25, 2026
Partner, Chief Economist
Higher rates since 2022 raised the pressure on leveraged borrowers, and that pressure is landing hardest on smaller funds because they lend to smaller, weaker companies and hold less diversified portfolios, leaving little cushion when individual credits deteriorate, see the first chart below with data from MSCI.
The negative effect of higher costs of capital is particularly pronounced for funds investing in software companies, because they have higher leverage and lower coverage ratios, see the second chart below.
For more discussion, see the MSCI outlook for private markets here.
Sources: The State of Private Markets 2026 | MSCI, Apollo Chief Economist
**RR = Recurring Revenue. Sources: S&P Ratings, Apollo Chief Economist
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