MarketMoodz
Apollo exec questions private-equity software valuations: 'All the marks are wrong'
John Zito, co-president of Apollo Global Management's asset-management division and head of credit, told UBS clients last month that private-equity software valuations are overstated, saying 'all the marks are wrong.' CNBC confirmed the remarks, highlighting a growing debate over how private lenders price software portfolio risk as public software equities slide.
Key Takeaways
- John Zito told UBS clients that private-equity software valuations are overstated, saying “all the marks are wrong.”
- CNBC confirmed the remarks and UBS was the audience for the comments.
- Apollo says software investments account for under 2% of AUM with zero exposure to private-equity stakes in software firms.
- Software loan valuations have been marked down amid tech-share declines, with some models projecting 20-40 cent recoveries on smaller loans.
- Retail outflows from private credit funds, about $10 billion in Q1, highlight shifting investor sentiment toward private credit.
People Involved
- John Zito Co-president, Asset-management division and head of credit, Apollo Global Management
Entities Involved
- Apollo Global Management Private markets and credit firm
- UBS News publication
- CNBC News network
- JPMorgan Chase Bank
- Financial Times News publication
- Anthropic AI safety and software company
- OpenAI AI research and deployment company
MarketMoodz Analysis
The remarks, if borne out by disclosures, could portend a repricing cycle for private-equity software lending. Even with Apollo insisting software exposure is minimal, the potential for overstated marks suggests lenders may need tighter risk budgets and higher capital costs if marks catch up with public-market realities.
Historically, private-credit cycles have shown that private valuations lag public prices, especially in fast-moving sectors like software and AI. The 2018-2022 buyouts of software firms were often funded at high multiples, leaving portfolios vulnerable to downturns in tech demand and funding conditions. A material re-evaluation could ripple through fundraising, venture debt access, and the ability of PE-backed software companies to raise new capital.
What to watch next: corroboration from Apollo’s investor materials and regulatory disclosures, scrutiny of any JPMorgan mark-downs on software loans, and updated commentary on AI-driven demand shifts. The broader market will assess whether private-credit valuations adapt quickly or remain anchored by stale marks as tech valuations move with public markets.
Source: Original Article
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