Group 1 - Private credit is a key component of capital structure and will continue to exist [1] - Collaboration between banks and private credit is expected to increase further [1]

Core Viewpoint - The integration of primary and secondary markets is an inevitable trend, with a shift towards more customized financing solutions combining private credit, equity, and hybrid models due to the increasing asset weight in sectors like AI and defense [3][4]. Group 1: Changes in Credit Markets - Companies with good credit ratings are increasingly turning to private credit markets for financing, indicating that traditional financing methods are insufficient to meet their needs [3][4]. - The annual issuance of Collateralized Loan Obligations (CLOs) has reached $500 billion, reflecting a significant transformation in the credit market [6]. Group 2: Apollo's Business Model Innovation - Apollo has merged with its insurance retirement services company, Athene, creating a model where it acts as both an asset manager and a principal investor, aligning its interests with clients [9][10]. - The company manages nearly $800 billion in assets, with 65% in investment-grade securities, and has a significant focus on private credit and alternative investments [26]. Group 3: Market Dynamics and Future Trends - The U.S. maintains a dominant position in global capital markets, benefiting from a large stock market and a favorable legal environment, but there are emerging opportunities in Europe for private credit and infrastructure financing [13][14]. - The shift towards private assets is driven by the need for more liquidity and the increasing number of companies choosing to remain private rather than going public [37][41]. Group 4: Investment Strategies and Risk Management - Apollo emphasizes understanding the relationship between risk, return, and capital structure costs, allowing for a more flexible approach to investment compared to traditional fund structures [17][18]. - The company is focused on creating innovative fixed-income products that align with its long-term liabilities, particularly in the context of rising interest rates [23][24]. Group 5: The Role of AI and Infrastructure Investment - There is a growing demand for capital to upgrade computing infrastructure, with Apollo positioning itself as a leader in this space by providing flexible capital structures to hyperscalers and defense sectors [50][54]. - The company anticipates that the need for computing power will only increase, making it a key area for future growth [53][54].

Group 1: Regulatory Response to Private Markets - The Australian Securities and Investments Commission (ASIC) is expected to clarify its approach to the rapid growth of private market assets, particularly private credit, and the declining IPO market [1][3] - ASIC Commissioner Simone Constant will address these issues at an investor symposium, highlighting the importance of the health of Australia's economic and financial systems [3][4] - ASIC is balancing the need for increased transparency and disclosure obligations with the necessity of not overburdening the industry with compliance costs [3][5] Group 2: Initial Reform Measures - ASIC is anticipated to announce an early reform initiative as a "quick win" and will continue to explore other rapid reform suggestions [3][5] - A discussion paper released by ASIC in February analyzed structural issues in private and public markets, receiving around 90 feedback submissions, with over half to be disclosed this week [5] Group 3: Global Context and Systemic Risks - The International Monetary Fund (IMF) has identified the rising role of non-bank financial institutions (NBFI) in the financial system, with banks' exposure to private credit exceeding $500 billion (approximately 777 billion AUD) [5] - The IMF emphasizes the need for improved regulation of NBFIs due to their increasing influence on systemic financial stability [5] Group 4: Industry Perspectives on Regulation - Industry opinions on ASIC's regulatory approach vary, with some advocating for caution in new regulations to avoid disadvantaging private asset managers compared to banks [6] - Others argue for stronger governance and transparency standards in private credit [6] Group 5: IPO Market Reform - There is significant interest in how ASIC will revitalize the IPO process, as the number of new listings on the Australian Securities Exchange (ASX) has been low in recent years [7][8] - ASIC does not view the decline in IPO numbers as a structural issue but acknowledges that streamlining the process could attract more companies to list [8] Group 6: Ongoing Initiatives and Market Dynamics - Virgin Australia and GemLife are planning IPOs, and their pricing and market performance will influence the IPO window [9] - Investment banks, including JPMorgan, are pushing for reforms to optimize the IPO process, recognizing the need for a competitive capital market in Australia [10] - The ASX has also acknowledged the necessity for reform and has proposed several optimization suggestions for the IPO process [10]

Core Viewpoint - The deepening connections between U.S. banks and private credit institutions, led by firms like Blackstone, Apollo, and Ares, may pose systemic risks to the financial system during economic downturns [1][2]. Group 1: Growth of Private Credit Market - The U.S. private credit market has experienced explosive growth, expanding from $46 billion in 2000 to approximately $1 trillion in 2023, particularly accelerating after 2019 [1]. - As of March 2023, bank loans to non-bank financial institutions, including private equity firms and private credit funds, surged to about $1.2 trillion, marking a 20% increase year-over-year [3]. Group 2: Regulatory Arbitrage - The phenomenon of banks providing funding to private credit funds is a result of regulatory arbitrage following the 2008 financial crisis, where banks were restricted from directly offering high-leverage loans [2][3]. - This shift has allowed banks to indirectly participate in high-risk lending through private credit funds, creating a regulatory arbitrage situation despite numerous financial reforms post-2008 [3]. Group 3: Systemic Risks from Credit Lines - One of the main risks identified is the reliance of private credit funds on revolving credit lines from banks, which could lead to systemic liquidity risks if multiple lenders withdraw funds simultaneously during adverse macroeconomic conditions [4]. - The financing provided by banks to private credit funds is considered safer than pre-2008 leveraged buyout loans, as it is supported by numerous smaller loans, minimizing risk exposure to any single business [4]. Group 4: Challenges in Private Equity - The head of the Kuwait Investment Authority warned that the private equity industry is facing significant challenges, particularly in returning funds to investors amid a persistent valuation gap between buyers and sellers [6]. - As of the end of 2024, private equity firms hold approximately $3.6 trillion in unrealized value across 29,000 unsold portfolio companies, with the ratio of funds allocated to net asset value dropping to a record low of 11% [6].

Group 1 - The core viewpoint is that private credit investors are actively adjusting their portfolios in response to risks posed by the U.S. market due to the tariff war [1] - Portfolio managers are increasingly seeking geographic diversification to mitigate growing uncertainties from the U.S. market [1] - The impact of new tariffs on businesses is acknowledged, making highly diversified portfolios particularly important [1] Group 2 - There is optimism regarding the Australian market, which is largely insulated from tariff turmoil [1] - Nick Jacobson from Wingate Group anticipates that the Australian private credit market will at least double in the next three years [2] - Growth in the Australian market is expected to stem from corporate leveraged loans and the real estate sector, providing optimal investment opportunities for private credit investors [2] Group 3 - Managers are also looking to strengthen transaction structures by using assets as collateral [2] - There is an observed demand for stronger covenants, stricter equity scrutiny, and more asset-backed financing in turbulent environments [2]

Core Viewpoint - The recent trend of elite universities, led by Harvard and Yale, withdrawing from private equity funds raises concerns about potential liquidity issues in the private credit market, reminiscent of the pre-2007 subprime crisis [1][2][3] Group 1: Market Conditions - Jeffrey Gundlach warns that the current state of the private credit market shows signs of stress, with widening spreads between BB-rated and CCC-rated bonds indicating that many junk assets are under pressure [1][3] - Elite universities, despite having substantial endowments (e.g., Harvard's $53 billion), are facing cash shortages, leading them to tap into the bond market for operational funds [2][11] Group 2: Private Credit Concerns - Gundlach challenges the notion that private credit is less volatile than public credit, arguing that this belief is based on infrequent market valuations and a lack of transparency in asset valuations [1][5][6] - The inconsistency in asset valuations among different managers in private credit raises concerns about the reliability of these investments [6][7] Group 3: Historical Context and Future Outlook - Gundlach draws parallels between the current private credit situation and the subprime crisis, emphasizing that past performance does not guarantee future results, particularly in a market that has not been thoroughly tested [7][9] - The potential for private credit to be marketed to the general public, which was previously considered a complex investment for professionals, could lead to significant issues if liquidity is required [3][4]

Financial Data and Key Metrics Changes - Fundings totaled $46 million, with exits and repayments at $81 million, resulting in net originations of negative $35 million [6] - Interest income remained unchanged at $21.3 million, while the weighted average portfolio yield fell to 12.6% due to a decline in SOFR rates [7][12] - Net investment income was $11.2 million, with net realized gains of $7.7 million for the quarter [8][13] - Total assets decreased to $777 million, with net assets declining to $478 million [13][14] - NAV per share fell from $21.51 to $21.41, reflecting unrealized depreciation [14] Business Line Data and Key Metrics Changes - The portfolio turnover did not materially impact the investment mix, with senior debt representing 71% of the fair value of the portfolio [8] - Non-earning asset investments remained unchanged at four companies totaling $53.7 million at cost [9] Market Data and Key Metrics Changes - The company experienced a healthy pipeline of expected fundings, with a total of $289 million in portfolio liquidity events since September [10] - The current pipeline includes 8 to 10 deals in advanced stages, potentially totaling $100 million to $150 million [39] Company Strategy and Development Direction - The company continues to focus on investing in growth-oriented lower middle market businesses with strong management [18] - The strategy includes supporting midsized private equity funds in buyouts and growth opportunities [18] - The company aims to increase leverage towards $1 billion in total assets under management while maintaining yield and leverage discipline [58] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio's resilience despite market volatility and widening credit spreads [22] - The company is optimistic about the performance of its investments in sectors like precision manufacturing and lab testing, expecting improvements over the year [46][51] - Management noted that domestic-focused businesses are benefiting from supply chain shifts due to tariffs [26][30] Other Important Information - Monthly distributions for May and June are set at $0.165 per common share, with an annual run rate of $1.98 per share, yielding approximately 7.8% [15] - The company has absorbed much of the anticipated surge in portfolio liquidity events, indicating a strong position for future growth [10] Q&A Session Summary Question: How do you see the portfolio and NAV performing with both broadly syndicated loan and private credit spreads widening in April? - Management indicated that they do not have syndicated loans and expect minimal degradation in value due to their portfolio's leverage profile and yield [21][22] Question: How do you see SeaLink and RPM freight performing as tariffs impact shipping volumes? - Management noted that domestically focused companies are adapting well to changes, with RPM's business actually up due to their responsiveness [25][26] Question: Is the EG's restructuring going to generate a realized loss for you? - Management anticipates a very small loss from the restructuring, with a significant equity investment going forward [34] Question: Can you provide an update on the pipeline and its size relative to three months ago? - Management reported a healthy backlog with 8 to 10 deals in advanced stages, potentially totaling $100 million to $150 million [39] Question: Do you have any exposure to government contracts given potential cuts? - Management stated they do not have significant exposure to government contracts, focusing instead on defense-oriented suppliers and healthcare [43][45] Question: Where do you see leverage going for the rest of the year? - Management aims to increase leverage towards 90% to 100% over the next few quarters, working to achieve $1 billion in total assets under management [58]

Financial Data and Key Metrics Changes - Fundings totaled $46 million, with exits and repayments at $81 million, resulting in net originations of negative $35 million [5] - Interest income remained unchanged at $21.3 million, while the weighted average portfolio yield declined to 12.6% due to a 36 basis point drop in average SOFR rates [6][10] - Net investment income was $11.2 million, unchanged from the previous quarter, with net realized gains of $7.7 million [6][11] - Total assets decreased to $777 million, with net assets declining by $2.3 million to $478 million, and NAV per share fell from $21.51 to $21.41 [11][12] Business Line Data and Key Metrics Changes - The yielding debt investments decreased by $20 million compared to the prior quarter end [5] - Non-earning asset investments remained unchanged at four companies totaling $53.7 million at cost [7] - The portfolio turnover did not materially impact the investment mix, with senior debt representing 71% of the fair value of the portfolio [6] Market Data and Key Metrics Changes - The company experienced a surge in portfolio liquidity events totaling $289 million, representing approximately 36% of the portfolio exited [8] - The current pipeline of expected fundings is healthy, expected to outpace anticipated repayments [8] Company Strategy and Development Direction - The company continues to focus on investing in growth-oriented lower middle market businesses with strong management [17] - The strategy includes supporting midsized private equity funds in buyouts and growth opportunities [17] - The company aims to increase leverage towards $1 billion in total assets under management while maintaining yield and leverage discipline [56] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio's resilience despite market volatility and widening credit spreads [21] - The company is optimistic about the performance of domestically focused businesses amid tariff impacts, noting advantages for responsive domestic service providers [24][30] - Management highlighted a healthy backlog of deals and a focus on domestic manufacturing to mitigate tariff risks [52] Other Important Information - Monthly distributions for May and June will be $0.165 per common share, with an annual run rate yield of about 7.8% [12][13] - The company completed the restructuring of its investment in EG's, restoring most exposure to earning asset status [7] Q&A Session Summary Question: How do you see the portfolio and NAV performing with both broadly syndicated loan and private credit spreads widening in April? - Management noted that they do not have syndicated loans and that their portfolio spreads remain favorable compared to the market [20][21] Question: How do you see SeaLink and RPM freight performing as tariffs impact shipping volumes? - Management indicated that domestically focused companies are adapting well to changes, with some businesses experiencing growth [23][24] Question: Is the EG's restructuring going to generate a realized loss for you? - Management anticipates a very small loss from the restructuring, with significant equity investment going forward [31] Question: Can you provide an update on the pipeline and its size relative to three months ago? - Management reported a healthy backlog with 8 to 10 deals in advanced stages, totaling approximately $100 million to $150 million [37] Question: Where do you see leverage going for the rest of the year? - Management aims to increase leverage towards 90% to 100% over the next few quarters, targeting $1 billion in total assets under management [56][60]

今年，美国的对冲基金疯狂地做空私募贷款机构，而且已经赚了17亿美元。 5月4日，据媒体报道，今年以来，美国的七家最大直接贷款机构（如阿波罗全球管理公司、Ares资管公 司和Blue Owl资本公司）正面临空头投资者的强力冲击。据S3 Partners LLC的数据，空头投资者从这些 机构的押注中已经获得了17亿美元的账面收益。 "如果我们真的陷入经济衰退，另类资产管理公司的风险将非常大。如果公司收入下降，现 金流下降，这意味着杠杆率上升，自由现金流就会消失。" 有人悲观就有人乐观。穆迪评级私募信贷团队副总裁Clay Montgomery表示，商业发展公司（一种私人 贷款机构）杠杆率低，就算经济衰退要减记投资组合，也有资本缓冲。但从股价表现来看，资产管理公 司的股价今年普遍疲软。 PIK贷款的高估问题 除此之外，还有一个不容忽视的潜在风险——直接贷款的估值。国际清算银行去年指出，向美国证券交 易委员会报告数据的私募信贷基金中，只有40%使用第三方评估。 管理620亿美元资产的Adams Street的Jeffrey Diehl和Bill Sacher上周在一份报告中写道： 私募贷款机构的运作模式通常是为中小企业 ...

Core Viewpoint - Concerns about further economic deterioration have led U.S. private credit investors to sell assets at significant discounts, with some transactions occurring at half the asset's face value [1] Group 1: Discount Trading and Investor Behavior - Private credit market investors are selling fund shares at notable discounts, starting from 10% and dropping to as low as 50% [2] - The current sell-off is characterized as a proactive risk-hedging behavior by investors rather than a result of forced liquidations or severe liquidity crises [2] - There has been no significant deterioration in credit quality observed so far, but concerns about expanding discounts may arise as economic conditions worsen [2] Group 2: Credit Quality Concerns - The U.S. private credit market has rapidly expanded to a size of $1.6 trillion, raising concerns about asset quality during economic downturns due to a relatively lax regulatory environment [2] - Issues with "loose underwriting" in private credit loans could lead to high single-digit default rates for high-yield debt and potentially double-digit default rates for private credit [2] Group 3: Market Conditions and Strategic Positioning - The current situation is viewed as more severe than during the COVID-19 pandemic, primarily due to higher inflation pressures that could amplify economic shocks [4] - The potential economic downturn is compared to the bursting of the internet bubble, with expectations of a similarly severe impact [4] - Oak Tree Capital is cautiously positioning itself in the credit market, maintaining liquidity to capitalize on larger investment opportunities as they arise [4]