Marc Rowan, chief executive officer of Apollo Global Management, has aired rather contentious statements on the state of investing, declaring on CNBC that old-style public markets investing is “broken”.
“We had this notion 40 years ago that private was risky and public was safe. What if that’s just fundamentally wrong?” he asked.
Clearly the head of a firm like Apollo that’s overwhelmingly dedicated to alternative assets with US$840 billion of assets under management as of 2024 has an interest in talking up the fortunes of non-mainstream investments versus stocks and bonds. But that doesn’t necessarily mean his thesis is wrong.
According to Rowan, fundamental factors are reshaping and growing private markets. He noted that just ten stocks now account for about 40% of the S&P 500 index. “We have lost the ability to really invest in a way that reflects the strength of the US market, or, quite frankly, the strength of any market,” he said.
But if traditional public markets are bad, it doesn’t automatically mean private markets are good. Enthusiasm for passive investing, exchange-traded funds and indexes, and the halving of the number of US publicly-traded companies since the 1990s, may all reflect bad policy and bad management rather than the merits of private markets.
Private equity is now struggling to raise new funds and to exit its existing investments at reasonable valuations while pension funds and others have enjoyed strong returns lately from public markets. That doesn’t look like a very appealing test case for private markets versus public.
In the circumstances, Rowan and his peers may well talk up the potential of private credit instead, the new go-to private asset class that has grabbed the spotlight from big buyouts.
But private credit is partly enjoying such a good run because traditional bank lending was curtailed after the global financial crisis.
Apollo itself has been publicly traded on the New York Stock Exchange since 2004. It appears very unlikely that Rowan’s critique of the traditional investment model means the company will seek to delist.
