00:00Akilah Graywall partner and global head of the institutional client group at Apollo Global Management. Akilah great to see you.
00:06Thanks for joining. Of course happy to be here. We can talk about those regulate regulatory fears in just a
00:10moment. But I would love to hear from you because you see oversee the institutions. You're constantly talking with sovereign
00:15wealth funds with pensions. What are you hearing from them right now. What kind of questions are they asking you.
00:21Do they want to allocate more. Are they nervous. What's the sense you're getting. It's a great question. And I
00:25think you know talking around the globe you get a little bit of different answer. That being said I think
00:29that
00:29investors are generally cautiously optimistic. I think if you have the dry powder if you've been patient in terms of
00:36your deployment this actually could turn out to be an amazing vintage because you are going to see more dispersion.
00:41You are going to see more dislocations. So if you have the ability to capitalize on that investors are looking
00:46for how to do that and what's the best place to do that. I get why because people are going
00:51to tighten you know credit standards and rates are more attractive than they were in previous vintages.
00:59But is there no knock on effect from the problems in the in the older funds. I mean the maturity
01:08wall coming do the refinancing risk. Does that not hurt these these these companies raising new funds. I think it
01:16will to some extent. So I think a big part like I have the storm and what we're talking about
01:20in private credit is AI and software. But if you take a big step back the private credit universe the
01:26way that we think about it is a 40 trillion dollar addressable universe of which
01:29two trillion is sub investment grade of which 400 billion is BDCs of which 30 percent is software. So you're
01:37talking about a relatively small piece of a bigger puzzle doesn't mean that there's not going to be defaults or
01:41there's not going to be stress in the system. And I think people are going to look through to what
01:46type of software exposure what type of AI exposure that I unwillingly
01:50unwillingly have taken. And what's that going to look like in my portfolio. But also understanding they still have deployment
01:56needs. And what's that going to look like in the future.
01:57Are your institutional clients also asking about your retail exposure because we've had people come on and I'm going to
02:02be 100 percent off. They tend to be people who don't have retail exposure.
02:05And they're like oh our LPs love us because we don't have retail exposure. And they're moving more to the
02:11types of funds that are just concentrating on them.
02:13Do you ever get that kind of pushback from your institutional clients. I would say we have been very specific
02:19in the type of strategies that we brought to the broader wealth ecosystem.
02:23And I think private credit and BDCs are actually a the structure of BDC is actually quite prudent if you
02:29think about it. It's allowing investors to get access to private assets in a structure
02:33that can give you liquidity up to a limit. And so I think by the way that the BDC is
02:38ultimately structured that asset in that structure actually makes a lot of sense for wealth investors.
02:43I you know your colleague Jim Zelter was speaking at a the Asia Pacific Financial Innovation Symposium.
02:51I thought he said something interesting. Certain distribution channels in parts of the globe may have not fully communicated the
02:56risks inherent to the asset class.
02:58Do you think that's kind of what's going on in this moment that maybe some of these wealth advisors didn't
03:02fully tell some of their their clients that yes there's some liquidity to your point
03:07but not as liquid as public asset classes.
03:10I think that there is always a education that needs to be happened when you think about including private assets
03:16in structures that do offer liquidity.
03:18And so there might be some of that. But equally I think the way that you respond is just as
03:23important.
03:24And I think from our perspective given the portfolio that we have given the low leverage the high quality it's
03:29first lean our ability to meet the redemption standards
03:33while also still having the amount of the appropriate amount of dry powder to deploy should this vintage as we're
03:38talking about be really interesting is actually going to work out really well.
03:42You are seeing a ton of money still going into private credit. I mean regardless of all the headlines that
03:49we've been all the cockroaches we've been talking about. Right.
03:52And as you as you mentioned right that's only a small subset of a small subset of loans. But is
03:59there a point at which so much capital coming in compresses risks further compressing returns.
04:06I think that what we've seen if you take a step back and you look at the last few years.
04:10Right. There has been a lot of capital that has been formed and a lot of capital
04:13that entered the market driving very competitive terms to your point. I think if there ends up being a little
04:18bit less supply so to speak because of the act the BDCs
04:23or other areas where there might be a pullback that's actually going to allow us to have better credit standards
04:27and be much more thoughtful in terms of the exposure
04:30that we do take. But it seems like better credit standards plus you're moving into more investment grade debt like
04:36smaller returns less risk but smaller
04:39returns. Is that I think that our view is that it depends on where you are in the risk curve.
04:44Certainly investment grade is going to yield lower than high
04:47yields or high yields equivalent risk on average. That being said our view is that private assets actually have a
04:52place across the entire portfolio versus
04:55is just a small all sub investment grade portion.
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