Apollo’s US$26 billion private credit fund imposes 5% cap on requests to pull 17%

[NEW YORK] Apollo Global’s US$26 billion private credit fund, Apollo Debt Solutions (ADS), said on Monday (Jun 22) it was curbing redemptions at 5 per cent of its shares after ​investors sought to withdraw approximately 16.8 per cent of the total.

Paying out those investors will bring gross outflows from the fund to US$700 million, outpacing inflows of US$300 million, based on preliminary data, the fund said in a filing. That leaves net outflows worth about 3 per cent of the fund’s asset value so far this year.

Redemption requests rose from about 11.2 per cent in the previous quarter at the fund, which is mainly aimed at wealthy individuals and typically provides an opportunity to withdraw some money once every three months.

Vehicles of this type, structured as business development companies (BDCs), have seen a surge in withdrawal requests this year amid rising concerns about transparency, lending discipline and exposure to software among funds that lend directly to companies outside the traditional banking system.

ADS said in the filing that institutional investors were continuing to show strong demand for private credit, adding it expects “institutional fundraising for our direct lending strategies will exceed that of the wealth channel this year”.

There was a “notable regional split” among investors, the filing went on, specifying that requests to redeem from the onshore US “moderated sequentially to approximately 4.3 per cent, while redemptions from offshore investors increased to 12.5 per cent”.

Most similar private credit funds opted to return no more than the customary 5 per cent to their shareholders in the first quarter, after some let clients pull out more than that earlier this year.

Apollo president Jim Zelter said last month he expected continued withdrawals, and that the “turbulence” was not over.

ADS said it had returned 1.5 per cent this year through May 31, which compares with a 1.2 per cent gain in the Morningstar ​LSTA index of publicly traded leveraged loans.

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The fund’s annualised returns since it launched in January 2022 were 8.13 per cent through the end of May. It had previously reported returns since inception of 8.34 per cent through February. REUTERS