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00:00When you have a higher for a longer environment. Akila you're looking at from the beginning of December to the end of December, a drastic change of expectations already for rate cuts heading into 2025. Less than two really expected this year alone and not one expected till later in the year in a higher for a longer environment. What does that mean for borrowers? Do you have to start to recalibrate how much debt they could take on given that you have rates elevated? Right. I think that to your point, it's been a recalibration of where people are expecting rate rate cuts to go. And we were kind of in the bank of we thinking that the long term rates were going to settle around 4%, which it seems is pretty consensus at this point in time. That being said, to your point, that will be an elevated rate environment. And so borrowers are going to have to think about the type of debt that they're willing to take on. That being said, for credit markets, we think particularly private credit will benefit from a longer environment for higher rates. And so we're looking forward to being able to deploy that in the current environment when we're thinking about some of these distressed or even just deteriorating opportunities that are entering the market, that could be good for some investors who want to really capitalize on that. But are there types of deterioration that Apollo is completely looking away from right now, especially given you see some real weaknesses in places like consumer or auto? I think it's a great question and where we're spending a lot of our time, I think our expectation for 2025 is that there's going to be meaningful dispersion across the credit markets. And that will mean when I was in losers. And so to your point, there likely will be more stress and distress. We'll probably see more LME and distressed type of activity. And for us, we and our credit business, as you know, spend a lot of our time on top of the capital structure, first lien, both an investment grade and non-investment grade type risk. And so we are really focused on continuing that trend versus focusing on second lien. And then secondly, when you think about our asset back business, to your point, you know, it's a tale of two cities, right? In terms of consumers that are homeowners versus consumers that aren't. And so we are really making a lot of effort to focus on those that have higher quality backing behind them in terms of the types of asset based opportunities that we are focusing on. If we sat here talking a year ago, I think what we would talk about Akila is okay, leveraged loan markets, to what extent are they going to make private credit a little bit more difficult? But Apollo has really been pioneering a way to make public or private assets more like public assets, a little more liquid. How far does that theme go, especially because there are some naysayers out there about it? Absolutely. I think, as Enjin mentioned, we do believe that there is a convergence between public and private credit. And to your point, we've been talking about that for a long time. And we also think that there has been a theme of public markets being liquid and safe in private, markets being illiquid and not safe. And so our view is that private can be just as safe, if not more safe, given the public markets are heavily concentrated and also not as liquid as they seem to be, particularly during periods of volatility. And our view is that private markets can provide some sort of liquidity, particularly when you're focusing on the higher end and higher quality end of the spectrum. I want to also ask you a little bit about a popular trade from last year that I'm wondering how much it will spill over time this year, especially with the expectations that lighter regulations might hit the banks, this synthetic risk transfer trade. There was a sense I heard from Goldman Tree's founder just a couple of months ago saying that those spreads would start to compress. Do you think that this will still be an attractive trade from here? We do think it will be an attractive trade, but it will be about, like anything, picking your spots and making sure that you have when we do participate in as our two years as an example, we don't really like the blind pool risk. We want to understand everything that's going in the portfolio and understand the constituent pieces and the risk associated with it. So it may not be it will all be one size fits all, but we do think they'll be interesting opportunities. One part of the market we were talking about high yield a little bit earlier, but also leveraged loans have been expected to come back in a big way. Private credit is also waiting for that opportunity for M & A to come back. Akila, how big is that opportunity this year? How do you wrap your head around what's possible in terms of leverage, finance or private credit in terms of M & A coming back? It's a great point because with the upcoming administration, we do expect there to be a lot more flexibility as it relates to M & A, which should allow for more event driven and event opportunities for us to participate both in the public and the private credit market. So we think it's going to be a higher dispersion environment, but also one that's event rich. And so we're going to be pretty agnostic as it relates to private versus public, depending on what makes the most sense for the underlying issuer. But it should be a pretty big opportunity set for 25. Certainly an alphabet soup of opportunities out there for credit markets.

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Likely More Stress in 2025: Apollo Global Management's Grewal

Apollo Global Management Partner and Global Head of Credit Product Akila Grewal gives her outlook for 2025. She discusses how borrowers are looking at the current rate hike cycle, the convergence of private and credit markets, and expects more flexibility in M&A. (Source: Bloomberg)

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