Apollo's Private Credit Exposure: Chris Edson Weighs In | The Real Eisman Playbook Ep 57

Direct lending is just one slice of private credit

While headlines focus on the $1-2 trillion LBO/direct lending market, private credit encompasses mortgages, commercial real estate, trade finance, equipment loans, and project finance—assets that have existed for decades.

Software dominates buyout activity

Software companies have comprised roughly one-third of all private equity buyouts over the past five years, representing hundreds of billions in total capital exposure.

AI disruption varies by moat

Software firms lacking proprietary data or regulatory barriers face immediate AI disruption risks, while those embedded in ERP systems or regulated industries (like aircraft software) enjoy stronger defenses due to high switching costs.

Minimal software exposure

Apollo maintains only ~2% exposure to software across its platforms, with some divisions like Athen effectively holding zero exposure.

Value-oriented underwriting

The firm's historical focus on cash flow multiples rather than enterprise value lending naturally avoided high-multiple software companies.

Proactive AI caution

Management identified AI uncertainty years ago and deliberately avoided underwriting software risks they couldn't properly quantify, choosing to 'wonder what the question is' rather than guess at answers.

Manufacturing alpha through scale

Apollo originated $300 billion in assets last year by reviewing 10-20x that volume to select optimal risk/reward opportunities across 16 specialized platforms.

Comprehensive market visibility

With 4,000 employees sourcing deals globally, the firm benchmarks pricing across mortgages, CRE, project finance, and aircraft leases to identify the best relative value.

Shift from private equity to lending

Apollo has transformed over 20 years so that private equity now represents less than 10% of the firm, with the majority focused on lending and retirement services.

Public markets offer no alpha

Investment-grade bonds trade at spreads of only 75-100bps over Treasuries, priced to perfection with minimal risk premium for single-point-of-failure risks.

Illiquidity premium capture

By providing custom solutions like equipment loans and inventory financing to investment-grade companies, Apollo earns 25-50bps spreads above liquid bonds while targeting 5-8% yields.

Insurance company alignment

Retirement services clients require stable, long-duration income, making illiquid lending strategies with collateral backing a natural fit for insurance company balance sheets.