Look! A (Shadow) Bank Run!

That's a bank run When redemption requests from a private credit fund exceed 15% in a quarter, that's a bank run.

Apollo, and I would assume Cliffwater, and probably HPS and Blackstone are experiencing a run on their assets. (See graph)

To the degree that anyone is saying that it is not a bank run, particularly since Apollo is restricting redemptions, they are lying.

Investor redemption requests at Apollo’s flagship retail private credit fund surged to 17 per cent of the vehicle’s value in the second quarter, underscoring fears of falling returns and rising stress in debt markets.

The firm’s $15bn Apollo Debt Solutions fund pitched to wealthy individual investors reported roughly $2.4bn of withdrawal requests in the most recent period. The fund met less than 30 per cent of the withdrawals it faced in the quarter, capping redemptions at 5 per cent of the value of the vehicle.

The Apollo fund, which has an investment portfolio worth nearly $26bn, had been hit with withdrawal requests of 11 per cent in the first quarter.

The rising withdrawal requests at the fund signal that the broader investor exodus from private credit has not abated, even as public markets have rallied and a sell-off in loans to private equity-backed software companies has moderated.

The funds have been a significant fundraising source for private investment groups, offering lucrative fees for the asset managers. However, private credit has faced scrutiny over its lending to the software industry, given the risks companies face from advances in AI.

Investors have sought to pull nearly $15bn from nine major funds tracked by the FT in the second quarter. The funds, which manage roughly $200bn across their investment portfolios, have met less than 40 per cent of the withdrawal requests.

………

The Apollo fund, like most of the vehicles operated by its competitors, is relying on a gating mechanism that allows the investment manager to restrict redemptions when they eclipse a 5 per cent threshold.

I'm waiting for lawsuits from the investors in these funds, sooner rather than later.

This sounds a lot like 2008, or 1929.