Key Takeaways
- • Marc Rowan, CEO and co-founder of Apollo Global Management, warned that private equity and private credit industries face an inevitable "shakeout" as the sector confronts the end of a decade characterized by cheap debt and multiple expansion rather than genuine value creation.
- • Apollo's stock has declined approximately 30% in 2026 year-to-date, reflecting broader market skepticism about private markets valuations and mounting concerns over credit quality.
- • Private credit firms are experiencing a wave of rising defaults, signaling structural stress in the private lending sector and heightened risk of firm failures and consolidation.
- • The private equity industry, once buoyed by favorable financing conditions and valuation multiples, is reverting to fundamental value creation as cost of capital normalizes and investor scrutiny intensifies.
- • McKinsey and Bain research indicates private equity has matured as an asset class, with 2025 showing recovery in deal and exit activity, but underlying structural challenges persist into 2026.
Summary
Marc Rowan, CEO and co-founder of Apollo Global Management, has issued a stark warning that the private equity and private credit sectors face an imminent correction and industry consolidation. Speaking publicly on the challenges confronting private markets, Rowan stated that "this will be a shakeout" and emphasized that the downturn will not be short-term in nature. His warnings reflect mounting concern that the private markets industry has become structurally unsustainable without continued access to cheap leverage and expanding valuation multiples.
The timing of Rowan's remarks is significant given Apollo's own equity performance. The firm's shares have declined approximately 30% year-to-date through 2026, mirroring broader investor concern about valuations in the private markets complex. This selloff signals that institutional investors are repricing risk across the alternative asset management sector and reassessing exposure to firms heavily dependent on private equity and private credit performance.
According to Rowan and supporting industry analysis, private equity spent the prior decade relying on two primary drivers of returns: access to inexpensive debt financing and multiple expansion. With both conditions now reversing—interest rates remaining elevated and investor demand for private assets moderating—the industry must return to generating returns through operational improvements and genuine value creation. This transition represents a fundamental reset for an industry that has grown accustomed to financial engineering as a primary return driver.
Private credit has emerged as a particular pressure point. Rowan highlighted rising defaults across the private lending sector, indicating deteriorating credit quality and elevated portfolio stress. As defaults accelerate, private credit firms face mounting pressure to reserve for losses, mark portfolios to realistic valuations, and potentially exit distressed positions. This environment is likely to trigger a wave of consolidation, with weaker players failing or being forced to merge with better-capitalized competitors.
Industry research from McKinsey and Bain & Company provides context for the broader transition. While 2025 showed signs of recovery with increased deal and exit activity, both firms characterize private equity as now a "mature" industry requiring structural repositioning. Despite some megadeals capturing headlines, the underlying dynamics—higher cost of capital, demanding return hurdles, and investor scrutiny—remain fundamentally altered from the pre-2022 environment.
The timing of Rowan's remarks is significant given Apollo's own equity performance. The firm's shares have declined approximately 30% year-to-date through 2026, mirroring broader investor concern about valuations in the private markets complex. This selloff signals that institutional investors are repricing risk across the alternative asset management sector and reassessing exposure to firms heavily dependent on private equity and private credit performance.
According to Rowan and supporting industry analysis, private equity spent the prior decade relying on two primary drivers of returns: access to inexpensive debt financing and multiple expansion. With both conditions now reversing—interest rates remaining elevated and investor demand for private assets moderating—the industry must return to generating returns through operational improvements and genuine value creation. This transition represents a fundamental reset for an industry that has grown accustomed to financial engineering as a primary return driver.
Private credit has emerged as a particular pressure point. Rowan highlighted rising defaults across the private lending sector, indicating deteriorating credit quality and elevated portfolio stress. As defaults accelerate, private credit firms face mounting pressure to reserve for losses, mark portfolios to realistic valuations, and potentially exit distressed positions. This environment is likely to trigger a wave of consolidation, with weaker players failing or being forced to merge with better-capitalized competitors.
Industry research from McKinsey and Bain & Company provides context for the broader transition. While 2025 showed signs of recovery with increased deal and exit activity, both firms characterize private equity as now a "mature" industry requiring structural repositioning. Despite some megadeals capturing headlines, the underlying dynamics—higher cost of capital, demanding return hurdles, and investor scrutiny—remain fundamentally altered from the pre-2022 environment.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.