Private credit has long been pitched as a steady, higher-yielding alternative to public bonds. But when investors want their money back, the process can get complicated. This week, two of the biggest names in the industry—Apollo Global and Ares Management—offered a glimpse of how that exit door is working, and the picture is mixed.
Apollo said redemption requests in its Apollo Debt Solutions fund have fallen to about half of what they were at the last tender offer. That follows a surge in June, when requests exceeded the fund's usual 5% quarterly redemption cap. Ares, meanwhile, scaled back a continuation fund after investors pushed back on the values assigned to the loans being transferred.
Together, the two developments underscore a key tension in private credit: the asset class can look smooth and steady on the surface, but when investors test the exits, pricing and liquidity become the real test.
What is private credit?
Private credit refers to lending done outside traditional public markets—typically by specialized funds rather than banks. Companies that can't easily access public bond markets or bank loans often turn to private lenders for financing. In return, investors in these funds receive interest payments that are usually higher than what comparable public bonds offer.
Because the loans are not traded on an exchange, they are harder to value and harder to sell. That's why private credit funds typically allow redemptions only at certain times, often quarterly, and may impose caps on how much can be withdrawn at once. Apollo's 5% quarterly cap is a common feature.
When a fund receives more redemption requests than the cap allows, it can choose to conduct a "tender offer"—a process where the fund buys back shares from investors, sometimes at a discount to net asset value. Apollo's comment that requests have halved since its last tender suggests that the initial wave of redemption pressure may be easing.
Ares and the continuation fund
Ares' situation is slightly different. The firm was reportedly looking to move a portfolio of loans into a continuation fund—a vehicle that allows a manager to hold assets longer by transferring them from one fund to another. This is a common way for private equity and credit managers to provide liquidity to investors who want out, while keeping the assets under management.
But the process requires agreement on the value of the loans. If investors believe the assets are worth less than the manager's valuation, they may push back. According to reports, that's exactly what happened: buyers balked at the loan prices, and Ares had to scale the fund down.
The episode highlights a broader concern in the private credit market: valuations are often set by the manager, not by an active public market. When investors disagree, the exit can become contentious.
What it means for investors
For everyday investors, the takeaway is not about Apollo or Ares specifically, but about the nature of private credit as an asset class. It offers higher yields, but those yields come with less liquidity and more uncertainty about pricing.
If you hold private credit through a fund—whether directly or via a retirement account—it's worth understanding the redemption terms. How often can you withdraw? Is there a cap? What happens if requests exceed the cap? These details matter more in times of stress.
The cooling of Apollo's redemption requests could be a sign that investor panic is subsiding, but it could also mean that those who wanted out have already left. The Ares situation shows that when investors do push back, managers may have to adjust their plans.
For the broader market, these events are a reminder that private credit is not a bank account. It's a long-term investment with real constraints on when and how you can get your money back. As the sector has grown—now a multi-trillion-dollar industry—regulators and investors alike are paying closer attention to how these funds handle liquidity.
In the coming months, watch for how Apollo and Ares manage their next tender offers or continuation vehicles. If redemption requests stay low and valuations hold up, it could reassure investors. But if more funds face pushback on pricing, it might signal that the private credit market is becoming more discerning.
For now, the message is clear: private credit can be a valuable part of a diversified portfolio, but it's not for those who might need quick access to their cash. As always, know what you're investing in and how you can get out.
