Apollo Global Management Inc. Co-President Jim Zelter said that while the overall US economy and consumer remain relatively strong, he sees pockets of stress among corporate borrowers.

In the context of a broad economy with “massive fundamental strength,” some companies still have a poor business plan, too much debt, or haven’t recovered from Covid, he said on Tuesday in an interview on Bloomberg Television.

“You’re seeing some signs of challenge and weakness, but there’s been a tremendous amount of private equity activity and financing activity the last five to seven years,” he said. “You’re going to have some stray challenges around the edges.”

The strength of the US economy, with equity markets up 20% at the end of last year at a time when defaults approached 5%, has “befuddled” economists, he said. There are signs of “hardening of economic conditions” coming up, Zelter said.

As dealmaking has slowed amid higher rates, private equity firms have been growing their businesses outside of traditional buyouts, emphasizing strategies such as private credit and wealth management in an effort to increase assets. Apollo’s recent deal with PGA Tour golfer Patrick Cantlay is its first such partnership as the firm thinks about how it can bring the Apollo brand to a wider audience, Zelter said.

The New York-based alternative asset manager reported earnings last week that beat Wall Street expectations on the strength of its credit and insurance businesses. Putting the brand in front of more consumers is central to its growth strategy for Athene, its life insurance unit that sells annuities to retirees.

Apollo shares have gained more than 50% over the past year and are up 16.8% year to date.

This article was provided by Bloomberg News.