Apollo Global Management Inc. plans to provide its investors with daily pricing across its public and private credit platform by September 30 in a bid to bring greater transparency to the asset class, CEO Mark Rowan said during the asset manager’s first quarter earnings call last week.
By June 30, the asset manager seeks to provide daily pricing for all of its corporate investment-grade fixed-income assets. By September 30, Rowan said it aims to provide daily pricing for its direct lending and asset-based finance assets.
Apollo managed $834 billion in credit assets as of March 31 and $1.03 trillion in assets in total, the firm reported on May 6.
“Trust and reputation, now more than ever, necessitate greater transparency on fund pricing for fund investors,” Rowan said on the call. “New buyers, particularly, want more transparency around private assets.”
Intercontinental Exchange Partnership
In March, Apollo announced a partnership with Intercontinental Exchange to bring enhanced transparency to private credit. Rowan said this partnership would begin standardizing private asset data for the market as a whole.
The partnership would create private credit data infrastructure consistent with the experience of public credit markets, according to Apollo’s March statement. The partnership would provide “secure, permissioned data sharing utilizing a standardized reference data set that enables the flow of deal-level information with authorized counterparties without exposing proprietary data broadly,” the statement said.
“On top of that, our venture with [Intercontinental Exchange] will bring greater transparency and consistency of data to this market. Every private asset in the Apollo portfolio, going forward, will have an ICE ID, possibly in addition to a CUSIP [security identifier],” Rowan said. “This is the beginning of standardization across this marketplace. It also gives us a tremendous amount of information on real-time pricing and helps inform our estimated daily values across our credit portfolio, in particular.”
Rowan, on the earnings call, added that Apollo launched an estimated daily value pilot program for its investment-grade fixed-income products last year and that the firm had validated its asset-pricing methodology.
“As private credit continues to scale, the next phase of the market’s evolution will require stronger infrastructure and more standardized data that enables market participants to own and transact in private credit in a way that mirrors the public credit experience,” said Eric Needleman, head of Apollo Capital Solutions, in a statement in March.
Heightened Scrutiny
The push for price transparency comes as the private credit asset class has come under scrutiny due to an increase in redemption demands from investors in business development companies and increased concerns about underwriting standards, liquidity and credit quality.
“Private credit is at an inflection point as it becomes more widely adopted across a broader set of investors,” says Jun Li, the global and Americas wealth and asset management leader at EY. “With that growth comes heightened expectations around transparency, standardization and price discovery. More frequent valuation practices can enhance visibility, but they also highlight the structural characteristics of the asset class, particularly around liquidity and how prices are derived in less actively traded markets.”
In March, Rowan warned of a prolonged shakeout in the private credit market. In particular, stress has been elevated among lenders to software companies, whose business models have been under scrutiny following disruptions from artificial intelligence companies, such as Anthropic.
On May 6, the Financial Stability Board, a Basel, Switzerland-based international monitoring body, issued a report on vulnerabilities in private credit, including complex interlinkages with banks, the credit quality concerns of borrowers, and the opacity of asset valuation.
Market Evolution
Rowan, at Apollo’s 2024 Investor Day presentation, said he believed that “everything that exists in the public market for investment grade is going to exist in the private market for investment grade.”
Rowan also said at the time that he believes a new form of private equity—private equity not held in fund and without leverage—could become a replacement for public market equities.
Derek Ladgenski, a partner in Katten Muchin Rosenman LLP’s private credit practice, noted in an email “Beyond the immediate headlines around its technical implementation, Apollo’s move to daily valuations is—most importantly—yet another signal to the investing world that these asset classes, especially private credit, are going to continue their ascent in total volume and have cemented themselves as go-to destinations for even the most sophisticated institutional dollars.”
Some service providers such as Venn—formerly Venn by Two Sigma—are offering products that aim to provide daily pricing for illiquid assets daily. Daily asset pricing has been introduced by some investors—for example, plan sponsor Lockheed Martin provides daily pricing for alternative investments in the company’s target-date funds in partnership with Neuberger.
“While daily valuations, on what have been traditionally seen as relatively illiquid assets, will not directly or magically create liquidity out of thin air, they do help evolve the market in that direction,” Ladgenski wrote. “The rising institutional investor bases for these asset classes will see a meaningful upside in their ability to tap their own inflows that may require the additional reporting themselves—leading to even more dollars flooding into private credit. … If and when any substantial new regulation comes into play down the road, a framework will have been established on how to quickly assuage much of the potential regulatory agita.”
Tags: Apollo, Private Credit