If you parked money in a private credit fund thinking it was a safe, yield-generating alternative to bonds, you might want to sit down for this one.
Apollo Global Management just told investors in its $15.1 billion flagship private credit fund — Apollo Debt Solutions BDC — that they can only get back 45 cents on every dollar they asked to withdraw. Redemption requests hit 11.2% of outstanding shares in Q1, more than double the fund’s 5% quarterly cap. So Apollo is returning roughly $730 million and telling the rest of the line to wait.
Apollo isn’t alone. Ares Management’s $10.7 billion Strategic Income Fund pulled the same move — capping redemptions at 5% after clients requested 11.6% back. And this follows similar moves from Blackstone and Morgan Stanley funds in recent weeks. There’s a pattern forming here, and it doesn’t look pretty.
What’s driving the stampede for the exits? Growing concern over private credit loans to software companies. When rates were near zero, private lenders piled into software deals at rich valuations. Now those loans are under pressure as growth slows and refinancing gets harder. Apollo tried to distance itself from the pack, noting it lends to “larger, more stable companies.” But the numbers tell a different story: software is the single biggest sector in the fund at 12.3% of loans.
Here’s the uncomfortable truth: private credit was sold to retail investors as a smoother, higher-yielding alternative to public markets. But “smoother” is easy when you control the exit gates. The moment everyone wants out at once, these funds reveal what they really are — illiquid pools with locked doors.
Shares of Apollo and Ares both took hits on the news. APO stock has been under pressure all month, and the growing chorus of redemption denials isn’t helping. If you’re watching the alternative asset manager space, keep your eyes on the next round of quarterly redemption disclosures. This liquidity crunch is far from over — and if oil prices from the Iran conflict come down enough for the market to refocus on credit risk, these stocks could face a much rougher ride.
