Apollo Warning on PE Realisations: Weak For GS

Apollo warning of lower PE realisations; weak indication for Goldman primarily but also halo impacts on all the equity-exposed investment banks (MS, JPM and UBS in the main). Not an immediate credit event but “one to watch” in terms of high-yield refi events, too.

• Scott Kleinman of Apollo, talking at the SuperReturn conference, stating “everything is not going to be OK”, according to BBG. Noting the lack of markdowns taken on PE investments during the recent hike in rates, he feels realisations will be lower, returns weaker and holding periods elongated.
• Aside from the direct impact on the PE industry, this is certainly part of the reason for the dirth of equity offerings over the last year or two. The most exposed here is clearly Goldman (GS: A2/BBB+/A) which has a very significant PE exposure on-balance sheet via its Investing business. We feel it has form in market its public equities to market and seeing rather different returns in its private business, something of which the market is already relatively cognisant.
• More widely, this does highlight the weak volumes seen from equity businesses (incl. Morgan Stanley, JPM, UBS) in recent years and that the recovery, which we do see coming, may be rather slower than some hope for.

https://blinks.bloomberg.com/news/stories/SENA5XDWX2PS