Jim Zelter, president of Apollo Global Management, has pushed back against concerns that the rapid expansion of private credit represents a financial bubble, arguing that the sector is resilient even in the face of economic slowdowns. Speaking at HSBC’s investment conference in Hong Kong, Zelter emphasized that while private credit has been “long in the tooth in the cycle,” it does not exhibit the hallmarks of irrational exuberance seen in past financial crises.
According to the Financial Times, Zelter stated, “The biggest question I get from everybody around the globe is, is private credit a bubble? And I would say it’s not a bubble. While some players might be taking a more aggressive portfolio approach than I would, we’re not looking at the kind of massive losses seen in previous market crashes.”
Private credit—where investment firms raise capital from institutional investors to make direct loans to businesses—has experienced explosive growth as higher interest rates have made it a more attractive asset class. Traditionally dominated by mid-market lending, the industry is now increasingly providing capital to some of the world’s largest companies, with firms like Apollo playing a major role.
The International Monetary Fund (IMF) highlighted in its Global Financial Stability Report last year that private credit assets had ballooned to $2.1 trillion. While the sector has the potential to offer economic benefits, the IMF also warned that it had never experienced a major downturn at its current scale. A severe economic shock, the report cautioned, could lead to “a delayed realisation of losses followed by a spike in defaults and large valuation markdowns.”
Zelter, however, dismissed concerns of systemic risk, noting that Apollo’s private credit portfolio primarily consists of investment-grade assets. He described the overall private credit market as “a $40 trillion ocean,” with Apollo’s credit business representing approximately $600 billion—six times the size of its private equity arm.
Beyond private credit, Zelter also commented on the broader macroeconomic environment, highlighting a “tug of war” between inflationary pressures and the deflationary impact of artificial intelligence and technology.
“It’s our view that the inflationary forces are going to be taking the headline over the next six to 12, 18 months before the real deflationary impact of AI comes into play,” he stated.
His remarks align with ongoing concerns among investors and policymakers regarding persistent inflation, even as technological advancements promise long-term cost reductions across industries.
As private credit continues to reshape corporate lending, Zelter’s confidence in the sector’s stability signals that major players like Apollo remain bullish, despite external economic uncertainties. However, with regulators and financial institutions closely monitoring the industry’s growth, the debate over potential risks in private credit is far from over.
