Apollo's $26 Billion Private Credit Fund Imposes 5% Cap On Requests To Pull 17%

Apollo Global's $26 billion private credit fund, Apollo Debt Solutions (ADS), said on Monday it was curbing redemptions at 5% of its shares after ​investors sought to withdraw approximately 16.8% of the total.

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

Redemption requests rose from about 11.2% 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 United States "moderated sequentially to approximately 4.3%, while redemptions from offshore investors increased to 12.5%".

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Most similar private credit funds opted to return no more than the customary 5% 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% this year through May 31, which compares with a 1.2% gain in the Morningstar ​LSTA index of publicly traded leveraged loans.

The fund's annualized returns since it launched in January 2022 were 8.13% through the end of May. It had previously reported returns since inception of 8.34% through February.