Back in December 2023, when the market was pricing in six or so rate cuts, Apollo Asset Management co-president Scott Kleinman had more contradictory Opinion: He said he would bet on any rate cuts in 2024.
The call has paid off so far. But higher rates over longer periods have not necessarily been a tailwind for the private equity industry as they keep funding costs rising.
Share buybacks fell 4% globally year-on-year in the year to May 15, compared with already muted activity since 2023, the agency said. report from Bain & Co. And the lack of investment has left buyout funds with a mountain of dry powder worth $1.1 trillion that must eventually be used.
However, Apollo’s Kleinman said he was “very comfortable” with current rates.
“We are probably the only private equity firm that has been hoping for higher rates for many, many years,” Kleinman told the Delivering Alpha Newsletter at the SuperReturn conference in Berlin. Bids require more pricing discipline in valuing companies, which simply means more interesting companies to buy and more reasonable valuations.”
As for Kleinman’s current view on betting? He said: “It is entirely possible that one cut will be added here, perhaps for political reasons, but certainly the data we are looking at does not require a rate cut.”