Apollo's flagship private credit fund restricts redemptions for the third consecutive quarter
Apollo Debt Solutions BDC, the flagship private credit fund of Apollo Global Management, one of the world's largest alternative asset management firms, has restricted investor redemptions for the third consecutive quarter: in the third quarter, redemption requests accounted for 14.7% of issued shares, with Apollo only repurchasing at a 5% cap, while the funds investors wanted to withdraw were nearly three times the redeemable amount.
Redemption pressure remains high into 2026. In the first quarter, redemption requests were approximately $1.6 billion, accounting for 11.2% of the then $14.7 billion net assets, with only about 45% paid out, totaling approximately $722.6 million; in the second quarter, requests rose to 16.8%, about $2.4 billion, with a payout ratio dropping to 29.8%; in the third quarter, requests fell back to 14.7%. Apollo acknowledged that most of the third-quarter requests were from previous quarters that had not been fulfilled and were resubmitted, rather than new withdrawals.
New funding is clearly shrinking. The fund's total assets are approximately $25.9 billion, with net assets of $14.2 billion as of August 31, and a net asset value of $23.84 per share. New subscriptions were about $724 million in the first quarter, dropping to $300 million in the second quarter, and only $200 million by September 1 in the third quarter; total inflows for the year are about $1.3 billion, equivalent to 9% of net assets. Apollo expects a net outflow of about $500 million in the third quarter, approximately 3% of net assets. After completing third-quarter repurchase payments, investors who applied for redemptions in 2026 are expected to recover about 75% of their requested funds.
Apollo backs the fund with performance and asset quality. As of August 31, the fund has invested in 386 companies across 57 industries, with 99% being first lien loans and 96% floating rate, yielding a weighted average return of 8.63%. The fund has a leverage ratio of 0.83 times and available liquidity of about $4.8 billion. As of June 30, non-accrual loans accounted for 0.8% at cost and 0.4% at fair value. Class I shares have an annualized return of 8.2% since inception, outperforming the leveraged loan market by 177 basis points and the high-yield bond market by 377 basis points, with a year-to-date return of 3.7% and a September dividend of $0.18 per share.
Redemption restrictions have become the norm across the industry. Blackstone's flagship fund BCRED, with a scale of $77.2 billion, received about $4.3 billion in redemption requests in the third quarter, accounting for about 10% of shares, also only paying out at 5%, with about $2.3 billion in redemption requests still pending from the second quarter. Ares Strategic Income Fund had a 11.6% redemption request in the first quarter, with a payout of 43.1%. Blue Owl's OTIC had a redemption request ratio as high as 40.7% in the first quarter, while Blue Owl Capital Corporation II suspended its tender offer and initiated liquidation, selling about 30% of its assets to CalPERS and OMERS at a price of 99.7% of face value. BlackRock's HPS and Morgan Stanley have also restricted redemptions in related funds.
In market mechanisms, sellers are high-net-worth individual investors entering through wealth management channels. They surged into non-listed BDCs in 2025, but concentrated their withdrawals in 2026 due to concerns about relaxed lending standards and the impact of AI on the debt repayment ability of software industry borrowers. This is a sustained outflow driven by credit concerns, rather than a single event. Funds are flowing out of non-listed private credit products into publicly traded credit and money market funds. The recipients are secondary market funds and long-term institutions like pensions, such as CalPERS, which are acquiring Blue Owl's asset packages at close to face value. Beneficiaries are secondary funds holding cash that can buy shares at a discount, and large banks still committed to lending, such as Bank of America, which has pledged $25 billion for private credit transactions. The pressured parties are alternative asset management firms that rely on retail fundraising to expand their scale, facing obstacles in both management fee growth and new fund raising.
Supplementary data: 44 U.S. BDCs held a total fair value of $92.88 billion in the first half of 2026, down from a cost of $95.19 billion, while the fair value at the end of 2025 was $95.82 billion, with a cost of $96.54 billion, indicating an expanding paper loss. Bank of America expects that redemption requests from major non-listed BDCs will remain above 5% throughout 2026, only beginning to decline in the fourth quarter.
Source: Public information
ABAB AI Insight
Apollo's background is "buying in a crisis, starting with high-leverage credit." In 1990, Leon Black founded Apollo with the original team from Drexel Burnham Lambert's junk bond group, starting by acquiring a portfolio of junk bond assets at low prices from the bankrupt Executive Life. In 2021, Black resigned as CEO after his $158 million payment relationship with Jeffrey Epstein was exposed, with Marc Rowan succeeding him. Rowan then completed a full stock merger with insurance company Athene in January 2022, transforming Apollo from a "PE that collects management fees" into a "credit machine that lends using insurance liabilities": Athene's annuity liabilities have a long duration and slow withdrawals, making them a natural fit for illiquid assets like private credit.
In terms of capital pathways, Apollo has been focusing on permanent capital while also tapping retail channels in recent years. In 2023, Apollo acquired the securitized business Atlas SP Partners divested by Credit Suisse, gaining the ability to initiate asset-backed financing; in 2025, it acquired Bridge Investment Group for about $1.5 billion, expanding into real estate credit. On the retail side, Apollo collaborates with retirement platforms like Empower to push private assets into the 401(k) system, betting on an executive order in August 2025 that will allow alternative assets in 401(k) allocations. Apollo Debt Solutions is the flagship product of this "retailization of private assets" route: it raises funds from individual investors with a semi-liquid structure of quarterly redemptions and monthly dividends, then invests in illiquid first lien corporate loans.
The most direct historical comparison is Blackstone's real estate fund BREIT. At the end of 2022, BREIT saw a surge in redemption requests, limiting payouts at the cap for several consecutive months, ultimately stabilizing confidence with a $4 billion investment from the University of California. Earlier examples include the 2019 Woodford Equity Income fund in the UK, which suspended redemptions due to liquidity mismatches and ultimately liquidated, and the 2007 collapse of two credit hedge funds under Bear Stearns due to redemption runs. Currently, private credit is transitioning from "brutal expansion" to "stress testing": fundraising speeds have reversed, valuations are beginning to align with fair value, Blue Owl has products heading towards liquidation, and leading institutions are relying on the 5% cap and asset quality to endure.
Structural judgment: This represents a transfer of pricing power, specifically the liquidity pricing power shifting from investors to managers. Semi-liquid funds promise "conditional liquidity": redeemable at 5% each quarter, seemingly no different from public market products; however, once a majority of investors want to exit simultaneously, gate provisions come into effect, determining when, how much, and at what net value investors can redeem, all decided by the manager. The root of the problem lies in the mismatch of durations: the underlying loans have terms of 3 to 7 years, with no public quotes, and net values estimated by managers using models, while the liability side consists of individual funds that can submit redemption requests at any time. When AI impacts the debt repayment ability of software companies and the market begins to question whether valuations are too high, early redeemers can exit at "undiscounted" net values, while later redeemers must bear discounts, which can trigger a run on redemptions. The 5% gate essentially locks the risk of a run within the fund, protecting the scale and management fees of the manager, while the cost is borne by investors wanting to exit.
ABAB News · Cognitive Laws
- Liquidity is a promise in fair weather, a privilege in stormy weather.
- Returns = liquidity premium + the gate you can't see.
- You think you're buying assets, but you're actually buying someone else's exit rules.