Apollo Global Management’s co-head of private equity, David Sambur, says the industry is moving into a more unforgiving phase, one that will separate firms generating genuine operational value from those that rode a decade of ultra-low interest rates, according to a report by Bloomberg.
Sambur argues that the long period of cheap capital fuelled a wave of deals where returns were driven largely by multiple expansion rather than fundamentals. With higher rates now firmly embedded, he says a number of managers are stuck holding assets bought at peak valuations, waiting for recoveries that may not materialise, arguing that for these funds which haven’t focused on creating value, such a limbo is “well deserved”.
Across the industry, private equity managers are reportedly sitting on about $1.2tn of dry powder, with a sizeable portion now ageing beyond four years, highlighting the difficulty of deploying capital at acceptable valuations.
Apollo’s own private equity strategy has deployed roughly $7.5bn annually over the past five years, and is preparing to raise $25bn for its next flagship fund.
