(Bloomberg) — Apollo International Administration Inc. Chief Government Officer Marc Rowan rejected the notion that including personal belongings to retirement and insurance coverage portfolios can pose a systemic threat, calling considerations about such holdings overblown.
Most personal credit score held by insurers and pension fund patrons is rated funding grade, the CEO instructed buyers Monday, pushing again on the concept that the asset class is much less clear than conventional loans. Lenders can get direct entry to debtors’ administration, he mentioned.
And Apollo’s exchange-traded personal credit score fund with State Road Corp., for instance, supplies value updates every day. Elsewhere at Apollo, he mentioned, the agency has traded $6 billion in its investment-grade personal credit score enterprise.
“Folks have actually simply misplaced their minds, and the headlines get increasingly more hysterical and have virtually nothing to do with the substance,” Rowan mentioned as a part of a presentation on Apollo’s retirement providers enterprise.
Different asset managers have been snapping up insurers lately, having access to a secure supply of long-term capital to gas their investments. Apollo pioneered the mannequin, with its insurance coverage arm, Athene, investing in monetary merchandise created by its asset-management division. Rowan identified Monday that Apollo has a first-mover benefit on this space.
Lately, although, the shut ties between personal fairness and insurers have drawn scrutinybecause the latter had historically put their cash in essentially the most liquid components of the market like high-grade bonds and shares. The current blow-ups of auto-parts agency First Manufacturers Group and subprime auto lender Tricolor Holdings have exacerbated fears about credit score losses throughout the monetary trade.
Final month, economists on the Financial institution for Worldwide Settlements took a broad have a look at how practices have modified inside the trade and estimated that publicly traded North American life insurers would face a capital shortfall of about $150 billion within the occasion of a extreme financial downturn. That’s greater than triple the determine 20 years in the past.
“If we have a look at the insurance coverage enterprise, to me, there’s a looming systemic threat coming by way of,” UBS Group AG Chairman Colm Kelleher mentioned at a worldwide summit in Hong Kong earlier this month.
Rowan addressed these feedback throughout Apollo’s third-quarter earnings name, telling analysts that Athene doesn’t use Egan-Jones Scores Co., whose enterprise practices are being scrutinized by the US Securities and Trade Fee.
“Colm is simply mistaken,” he mentioned earlier this month, referring to the UBS chair’s feedback.
