Wall Street’s private credit crisis has spread further as another asset management giant blocked withdrawals from a flagship fund.
Apollo Global Management became the latest shadow bank to cap redemptions from one its biggest private credit funds after investors tried to pull $1.6bn (£1.1bn) over the last three months, as investor worries over the $3 trillion sector grow.
The asset manager said the withdrawal requests totalled 11.2 per cent of the fund’s $15bn in net assets, which was more than double the five per cent quarterly cap on redemptions that the fund allows.
Apollo confirmed it would maintain the five per cent cap.
Its move to cap withdrawals follow similar decisions from other firms, such as Blackrock which limited withdrawals from a $26bn debt fund.
Blackstone, Blue Owl, JP Morgan and Clearwater have also been rocked by the crisis.
Apollo’s shares are down 24.6 per cent this year to date, trading at $110.4.
Thrown into turmoil
Sentiment surrounding private credit, which has been one of the fastest-growing financial sectors, has soured over recent months causing investors to increasingly demand their money from funds, throwing the industry into turmoil.
Trouble for the industry began in September 2025, following the back to back bankruptcies of auto lender Tricolor and car-part maker Firstbrands, as fears grew that AI could knock out traditional software as well as lending standards in some areas of the market.
Attitudes worsened as investors became increasingly fearful that the software and technology firms that make up a large portion of the industry’s loan portfolios were uniquely vulnerable to being replaced or disrupted by AI.
The ongoing Middle Eastern conflict has also raised worries, with rocketing oil prices threatening to feed into inflation, piling pressure on central banks to keep interest rates higher which in turn increases debt servicing costs, reducing their ability to repay.
Many investors are retreating back to the safety of liquid assets, such as stocks and bonds, but others are eyeing the European private credit market which is yet to see the “same scale of redemption pressure” as parts of the US, or emerging markets.
Others are becoming even more cautious, opting to flee the investment market altogether for the safety of cash or fixed-income products.
Financial crisis parallels
The dynamic has caused debate among industry figures, with former Goldman Sachs’ boss Lloyd Blankfein warning he “smells” signs of another financial crisis, while others expressed perplexity at people’s actions.
Meanwhile, Bank of England governor Andrew Bailey also warned of the parallels between the private credit boom and subprime debt boom that led to the 2008 global financial crisis.
Marc Rowan, Apollo’s chief executive, followed suit, warning that a “shakeout” was coming for private credit firms.
Speaking at a conference earlier this month, he said: “I don’t think it is going to be short term.”
Investor jitters pose a dangerous risk to the financial system, because of the scale of private credit lending, which extends across a range of sectors, including technology and energy.
Technology links
Apollo, which manages $938bn in assets, took out a short position from First Brands and was one of the few firms to profit from its downfall, but it is now exposed to software, which is plaguing investors who are fearful of its future amid expanding AI capabilities.
Software companies account for around a fifth of all private credit loans, leaving companies worrying their business models could be damaged by AI.
Roughly 12.3 per cent of the loans in the Apollo Debt Solutions fund are to software companies and In February, it recorded its first monthly loss in more than three years.
Apollo said in a letter to shareholders: “As long-term stewards of capital, we have a fiduciary duty to act in the best interests of all Fund investors, balancing the interests of shareholders seeking liquidity with those who choose to remain invested.”
It added: “We also believe we are entering the current period of technological disruption from a position of strength. Apollo has consciously chosen to create portfolios that are underweight software exposure relative to the broader private credit markets, guided by our commitment to cash-flow-based underwriting.”
