Apollo’s co-president said it is one of the few private equity firms to accept higher rates

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Apollo's Scott Kleinman on his contrarian call

In December 2023, when the market was pricing in a half-dozen rate cuts, Scott Kleinman, co-president of Apollo Asset Management, had even more. contrarianView: He said he would bet against any rate cuts in 2024

That call has paid off so far. But higher interest rates haven’t necessarily been a boost for the private equity sector because they keep financing costs higher.

The number of buyout deals in the period through May 15 is down 4% year-on-year globally, compared with already subdued activity from 2023, a research firm said. Report a from Bain & Co. And the lack of investment has left a pile of dry powder worth $1.1 trillion in buyout funds that will eventually need to be deployed.

However, Apollo’s Kleinman said he feels “very comfortable” with the rates as they are now

“We are probably the only private equity firm that has been hoping for higher rates for many, many years,” Kleinman said in an interview for the Delivering Alpha Newsletter from the SuperReturn conference in Berlin. Interest rates force more value discipline on company valuations, which just means there are more companies worth buying and valuations are more reasonable.”

As for Kleinman’s current view on rates? He said: “It is possible that one cut could be introduced, perhaps for political reasons perhaps, but certainly the data we are looking at would not require a rate cut.”

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