Higher interest rates for longer can translate into higher yields in private credit, especially for newer vintages as investors seek potential substitution for on-the-run bonds (which, given tight spreads, are trading at lofty valuations), according to Apollo in its 2025 outlook. That said, given the risks on the horizon, Apollo believes it is paramount to seek first-lien, first-dollar, senior-secured, good covenants, top-of-the-capital-structure opportunities. Middle-market opportunities are still plentiful. The firm also sees opportunity in direct lending and origination, especially in the asset-backed finance world.
While leveraged-buyout (LBO) activity has picked up in the public markets —third quarter 2024 saw the highest level of LBO volume since first quarter 2022 — LBO volume in the private markets was 50 percent greater than in the public markets during the first nine months of 2024. There are a lot of opportunities to lend. A high wall
of maturities in
