Requests for redemption have surged to 11.2% at Apollo Debt Solutions, a private credit company run by Apollo Global, an asset management firm with a $66 billion market capitalization. Apollo Debt is limiting redemptions to 5%, so investors won’t be able to get all the money they’ve asked for out of the fund this quarter. Reuters reports:
Apollo Global’s business development company, Apollo Debt Solutions, said on Monday that it is limiting redemptions after investors sought to withdraw approximately 11.2% of shares outstanding.
The development comes at a time when non-traded BDCs such as Apollo Debt, which allow investors to redeem a portion of shares each quarter, are under pressure, with several imposing limits on withdrawals. Most of the 20 biggest BDCs in the U.S. have also seen their stock prices fall relative to asset values over the past year, and nearly all now trade at discounts.
Apollo said in a regulatory filing that it will honor redemption requests for 5% of shares outstanding, which the manager of more than $930 billion said was consistent with its objectives for liquidity, or the ability to meet its payment obligations without damaging the value of its assets. It said the withdrawals would represent about $730 million of outflows. Inflows and outflows would balance each other out in the first quarter, Apollo added.
It expects to return about 45% of the requested capital to each redeeming investor. Funds like Apollo Debt Solutions, which is structured as a business development company or BDC, often offer to buy back 5% of the fund’s shares every quarter.
Investment funds operated by major financial firms, including KKR and Blue Owl, have seen their shares fall in recent weeks amid growing investor concerns over the quality of the loans they hold.
Action Line: Investors in private equity and credit presumably know the risks going in, but with these so-called investment “products” about to hit 401(k)s across America, individual investors need to understand what they’re getting into when they put their money in private equity or credit funds. If your 401(k) is loaded up with asset choices you don’t like, consider an IRA Rollover. When you want help, email me at ejsmith@yoursurvivalguy.com. And click here to subscribe to my free monthly Survive & Thrive letter.
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