Apollo Global Management has projected significant growth in the private credit market, with asset-based finance driving a doubling in size from $20tn to $40tn within the next five years, according to a report by Bloomberg.
The report quotes Akila Grewal, Apollo’s Global Head of Credit Product, as saying during Bloomberg Intelligence’s latest Credit Edge podcast, that: “We’re going to get there really soon,” noting that Apollo’s expansive definition of private credit includes asset-based finance – spanning areas like music royalties, infrastructure debt, and agricultural.
By Apollo’s definition, private credit also includes diverse asset classes such as inventory finance and energy infrastructure lending, a market its says already stands at $20tn. Narrower private credit definitions that focus on direct lending, distressed debt, and mezzanine financing peg the market closer to $1.6tn.
Apollo sees significant opportunities on the investment-grade side of private credit, particularly in sectors like data centres, energy infrastructure, and residential mortgages – areas traditionally dominated by banks. This reflects a broader trend in which the boundaries between public and private credit markets are blurring as private credit becomes a mainstream investment option.
Private credit’s attractiveness lies in its ability to deliver higher risk-adjusted returns. Grewal emphasised that private credit is not inherently riskier than public market investments, highlighting its relative safety in terms of issuer quality, regulation, and transparency.
Private credit’s risk-adjusted returns currently exceed those in traditional corporate debt markets by 100 to 200 basis points. However, as the asset class matures and competition intensifies, Grewal anticipates increased spread compression, which could narrow these relative advantages.
Apollo is particularly focused on tapping into retail investors, including those with retirement accounts, to drive further growth. Retail investment could play a critical role in sustaining the private credit market’s expansion as institutional appetite remains strong.
Apollo’s forecast aligns with other bullish projections in the private credit space. In October, Blackstone Inc. estimated the market could grow to $30tn, citing opportunities in infrastructure financing and energy transition projects.
