The credit markets are facing excesses as investors chase yield, Apollo Global Management LLC co-founder Leon Black said.
“The credit markets, unlike the equity markets, have gone to bubble status,” Black said Wednesday at the Goldman Sachs Financial Services Conference. “The amount of covenant-less debt is more than 2007. You have a thirst for yield that exists on a global basis. So there is true excess.”
Black said that in this environment his private equity business tries to get as much covenant-lite as possible, and fixed rate debt. Apollo takes the opposite approach in its credit business where the firm makes sure to have covenants.
“We try to play a more conservative, cautious role in a bubble environment,” said Black, who’s also chairman and chief executive of Apollo.
Black said the firm’s credit and insurance operations offer the most growth potential.