Apollo CEO calls out private-credit shakeout

Core Viewpoint - The private-credit industry, valued at $1.8 trillion, is facing a prolonged shakeout, with Apollo Global Management's CEO acknowledging the challenges and emphasizing the importance of sound underwriting and risk management [1]. Group 1: Industry Challenges - The private credit market has been significantly impacted, with Apollo's shares down 30% as of 2026, reflecting broader market punishment of major asset managers [2]. - Apollo's losses are primarily linked to its software companies within its loan portfolio, highlighting the risks associated with sector concentration [3][4]. - The U.S. private credit default rate reached 5.8% as of January 2026, the highest since the index's inception, with February 2026 recording 11 default events, nearly double the monthly average of 2025 [6]. Group 2: Sector Concentration Risks - Approximately 86% of Apollo's fee-earning assets are in private credit, with a significant portion being private investment-grade credit, which is prioritized in restructuring scenarios [4][8]. - The concentration in software loans has been identified as a key risk factor, with junior unsecured paper facing covenant violations and steep haircuts during market downturns [5]. Group 3: Future Outlook - In the event of severe AI disruption, UBS warns that the private credit default rate could escalate to 13%, indicating heightened risk for sectors heavily reliant on software and financial intermediaries [7].