Alex: If we look at private credit, we see the growth that’s happened. We can identify the older vintage, pre-2022 loans as sort of a little bit of the troublemakers because they were done at a time when base rates were zero. Now they're under pressure. As head of corporate credit, how do you see it going forward into the rest of the year?
John: The move up until now has mostly been a highly correlated kind of systematic move. BDC equities are down similar amounts and spreads have widened similar amounts. There hasn't been a lot of nuanced understanding of the portfolios or even distinguishing of the portfolios.
Not all these BDCs are created equal. Some of them own a lot of equity. Some of them own a lot of second-lien debt. Some of them have a lot of software. Some of them tag their software differently. But you have to really get into a bottoms-up understanding of what these portfolios look like.
The move from here is going to be a lot more of distinguishing across the managers. Marks are going to matter. But for us to say private credit—is it still a good opportunity or not—it would be the same thing as saying is leveraged lending a good opportunity or not. These are companies that access both markets. So yes, it's still going to be a great opportunity. In fact, we get excited about thinking about it being a less competitive opportunity.
Diana: What else is getting you excited about this market?
John: It just seems like you already had record supply in credit happening this year, just from primary issuance, investment grade, high yield, leveraged loans. Couple that with potential secondary supply, you need liquidity. The credit markets need liquidity in big size. That's got Apollo written all over it.
For us, deploying a lot of capital at really good spreads across assets, that's the environment we're in. That's the environment we're going to be in this year. Couldn't be more excited. We're prepared for it. This is kind of what you wake up in the morning for.
Diana: Touching on that, there are moments in time when Apollo has been big buyers in public markets during periods of dislocation. That is surprising to some of our LPs.
John: We obviously have a private credit backbone, private asset backbone. We trade a ton of public debt. We traded almost $300 billion last year. When the market gets dislocated, we'll do a lot of that. We don't have to just do one or the other. It's the beauty of Apollo.
Because of that constant pulse on public, we also will move where we want to do private because of it. We'll see something happen in this market that will impact how we underwrite, how we think about it, how we price private or vice versa.
When the market gets interesting, and it's starting to get interesting, we are going to be deploying in a big way in public markets because that's probably where a lot of the dislocation is going to manifest.
Diana: You have recently done a podcast on this theme of convergence. Public BDCs, private BDCs, the trading of public and private, even borrowers who are accessing both sides of the market. What are your views on this theme of convergence between the public and the private? Where are we going with this?
John: Various shades of one corporate credit market. It goes back to creating good portfolios. The more information you have, the better.
Being narrow in one market—public or private, corporate or asset-backed—you're going to potentially miss information that would have been nice to know before you bought that instrument.
We already constructed it this way. For us, we create a system or a tool to do it better, but already we think about the full breadth of public and private opportunity out there. How does it impact what I want to buy or sell?
Others are going to join that because private credit is trading and public credit sometimes isn't. And that's OK. Public and private don't mean liquid and illiquid.
Information flow can come from different markets. Think about hyperscaler CapEx—Oracle, Google—when you issue debt that's going to come in multiple forms: public investment grade, private investment grade, commercial mortgage loans, data center builds, GPU financing. You can't price one of those in a vacuum without knowing where the others are.
That's basically what you're saying if you say I only care about public. You have to understand both because that's how the market is financed.
We're advancing as credit managers to be able to see the full scope of risk. We've underwritten a lot of credits, we know a lot of different products, and the market knows that.
Typically, when you’re managing credit, you're small and fast or you're big and slow. It becomes very hard to be big and fast. But from an execution standpoint, if you're a large bank seeing a large seller of risk, who do you call? Do you break it up and call multiple smaller buyers, or do you call someone who can move quickly?
If you can call somebody like Apollo who can put billions to work in a day because they understand the asset class, you don't have to make another phone call. And our goal is to be that call across every asset class we touch.
