Apollo followed Morgan Stanley in restricting withdrawals from the private credit fund

Investment giant Apollo Global Management has restricted withdrawals from one of its flagship private credit funds for retail investors, Bloomberg writes . The company became the next player in the alternative investment market to face a surge in redemption demands.

The $25 billion Apollo Debt Solutions fund on Monday, March 23, reported a withdrawal limit of 5% of the total number of shares outstanding. This follows from the documents of the fund in the database of the U.S. Securities and Exchange Commission (SEC).

In March, the fund's clients tried to withdraw 11.2% of funds, but Apollo decided to meet less than half of the limit. Apollo Debt Solutions returns less cash to clients than some competitors, which also imposed restrictions, Bloomberg notes. For example, BlackRock, with a similar limit of 5%, approved applications in greater volume, as the total request of clients there was lower (9.3%). The North Haven fund, owned by Morgan Stanley, also limited returns to 5% with a request volume of 10.9%.

Apollo Debt Solutions intends to stick to the same limit next quarter, balancing "the interests of shareholders seeking liquidity and those who prefer to remain invested." The letter notes that tough times may benefit investors in the long run.

"Periods of complexity and uncertainty can create the most attractive investment opportunities, but only for those with the flexibility to act decisively," the company added.

Apollo Debt Solutions has returned 1% over the past three months, while its net asset value has declined 1.2%, Bloomberg writes.

The company expects approved repurchase requests to account for about $730 million in gross outflows in the first quarter, almost entirely offset by $724 million in inflows. To strengthen its position, last month Apollo Debt Solutions doubled one of its credit facilities (to $1 billion) and opened a new one for $500 million.

Business development companies are facing a wave of withdrawal requests due to growing anxiety around the $1.8 trillion private lending market, Bloomberg points out. Investors are worried about lending practices and reliance on businesses vulnerable to the introduction of artificial intelligence.

Private credit funds managed by large investment firms - Blackstone, BlackRock, Cliffwater, Morgan Stanley and Monroe Capital - have agreed to return to investors about 70% of the $10.1 billion they requested during the current quarter, the Financial Times estimated in mid-March. The funds, which have already reported outflows, manage about $166 billion in assets - a small fraction of the roughly $1.5 trillion invested in direct lending funds.

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