Apollo Global Management Inc.’s John Zito said now is one of the best times to invest in credit in at least the past two decades.
“We’re pinching ourselves a little bit where yields are today globally,” Zito, Apollo’s deputy chief investment officer for credit, said in an interview Wednesday at the Bloomberg Invest conference in New York. “We’ve been building our credit business for the last 20 years, and effectively a majority of that time we built it with rates at zero.”
Credit is Apollo’s biggest business unit, with $376 billion of assets under management at midyear. Zito said the firm is looking to put money to work daily as yields rise, with the Federal Reserve hiking interest rates and recession risks growing.
The alternative-asset manager has been focused on investing in senior debt -- first in line to be repaid in the event of a bankruptcy -- and stepping in as banks pull back. Apollo’s suite of 25 companies that originate loans backed by assets such as aircraft and mortgages are seeing more opportunities as banks retrench, he said.
“Everybody is looking for safe yield,” Zito said, citing robust demand from annuities providers and retirement businesses for investment-grade debt.
Markets should start to see the impact from higher interest rates next year, although risk is starting to be priced in, Zito said. Investment-grade credit now yields about the same that CCC rated bonds, the riskiest debt, did last year, presenting a buying opportunity, he said.
It’s unnatural “for a bond investor, a credit guy, to actually be excited about the markets, and the times that you get excited about the markets are frankly when everybody hates the world,” Zito said. “So it is a weird spot to be in.”
This article was provided by Bloomberg News.