Episode summary
Apollo's Private Credit Exposure: Chris Edson Weighs In | The Real Eisman Playbook Ep 57
The Real Eisman Playbook
· · 46 min · Hosts: Steve Eisman · Guests: Chris Edson
Summary
Steve Eisman presses Chris Edson on the surge of negative press around private credit, especially direct lending to software-heavy private equity buyouts and the wave of redemption requests at open-end credit funds. Edson argues that the headlines focus on only a narrow slice of a much larger market, and that Apollo’s own exposure to software is only a couple percent, in part because Apollo’s underwriting is built around value, collateral, and cash flow rather than fast-growing software multiples.
Edson says Apollo’s real edge is its origination machine: 16 platforms, thousands of people sourcing and underwriting assets, and a broad mix of businesses such as warehouse lending, vehicle fleet leasing, and aircraft lending. He says Apollo’s model grew out of the post-GFC search for stable yield in retirement services, where public-market credit offered too little spread for the risk.
The discussion also tackles cycle risk, liquidity risk, and transparency. Edson says Apollo stress-tests every platform for a world with no new funding, and argues that Apollo is aligned because it keeps meaningful capital on its own balance sheet through Athene. Eisman’s bottom line is that Apollo is diversified, lowly exposed to software, and more transparent than critics imply, even if a credit cycle is still likely ahead.
Key takeaways
- Edson says Apollo’s software exposure is only “a couple percent” of AUM, and some businesses have effectively zero exposure.
- Apollo’s business is mostly lending and origination, not traditional private equity; Eisman says private equity is less than 10% of the firm.
- Edson argues Apollo’s edge comes from scale and breadth, saying it originated $300 billion of assets last year and screened 10 to 20 times more.
- Edson says the biggest systemic risk in a credit downturn is liquidity mismatch, not just credit losses.
- Eisman concludes that Apollo’s Athene structure makes it more aligned than a typical asset-light manager because Apollo keeps meaningful capital at risk.
Notable quotes
“This is a 1 to2 trillion dollar market”
“we do think our exposure is is one of the lowest in in the industry. It's a couple percent”
“In order to generate stable returns at a reasonable risk profile in that zip code, we needed to build our own origination ecosystem”
“We originated $300 billion of assets last year”
“the overwhelming majority of that 300 billion that we did last year, 70 plus% of that's investment grade”
How the episode opens
Hi, Steve Eisman here. I'm excited to share that in a few weeks, we'll be announcing an additional feature to the real Eisman playbook alongside our existing Monday and Friday episodes. This is something we've been building behind the scenes, and it's going to take things in a really exciting new direction.
We'll be revealing more soon. Signing up for the mailing list grants access to a special founders offer when the new project goes live. A deep dive into private credit will be coming soon.
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Hey, this is Steve Eisman. It's another episode of the Real Eman. And today we're going to have very interesting conversation with the co-head of originations at Apollo, Chris Edson.
As we've been talking about private credit now for months upon months upon months, most of the news has been bad. The news has been largely focused on private credit's exposure to software. Plus the fact that a lot of these private credit funds have gotten redemption notices way above their 5% cap and they've only been honoring the 5% cap and that's created very bad publicity.
This has been in the press for weeks and months and I thought it'd be a good idea to talk to someone who's really in the weeds on the ground who has a real bird's eye view of what's being originated and get his impressions. And I'll be back afterwards to talk about lessons learned. Hi, this is Steve Eisman and this is another episode of The Real Eisman Playbook.
Not a week, not a day goes by without some news about private credit. Usually bad, once in a while good. It's a complicated story.
It's something we've been talking about now for weeks if not months.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- private credit
- apollo origination platform
- software exposure
- credit cycle
- credit funds
Companies and tickers mentioned
- Apollo
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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