The tariff-related storms that hit world investment markets in April showed that, on bad days, publicly traded bonds are not very liquid, according to Apollo Global Management CEO Marc Rowan.
Rowan talked about the days when the public bond markets gummed up during a conference call the asset manager held Friday to go over first-quarter results with securities analysts.
In early April, when the world's investors were reacting to President Donald Trump's tariff announcements, public bond markets "exhibited what we expect to see going forward: limited liquidity," Rowan said. "The equity market pretty much at all times has liquidity, but investors are discovering what we have been saying for years: There just is no liquidity in publicly traded fixed income markets."
Apollo — the parent of Athene, a big reinsurer and annuity issuer — provided much of the liquidity that was available, buying about $25 billion in assets after April 2, Rowan said.
What it means: If Apollo can make more money by profiting from weakness in the public bond markets, that can help Athene write annuities that offer more benefits per client dollar.
But, for financial advisors and clients worrying about the stability of the financial system, Rowan's views could lead to more difficulty sleeping at night.
Apollo: Apollo reported $938 million in net income for the first quarter on $5.5 billion in revenue and $785 billion in assets under management, compared with $1.8 billion in net income on $7 billion in revenue and $671 billion in assets under management in the first quarter of 2024.
Adjusted net income, which excludes some items that don't affect how much cash Apollo has, increased 5.2%, to $1.1 billion.
Athene generated about $10 billion in retail annuity sales. Sales of multi-year guaranteed annuities and fixed indexed annuities were especially strong, according to Jim Zelter, Apollo's president.
Bond market liquidity: Traditionally, businesses obtained most of their financing through banks or through bonds registered for sale to the public with the U.S. Securities and Exchange Commission.
Since the 2007-2009 financial crisis, tougher bank capital rules have caused banks to cut down on lending.
SEC rules for public bonds have made the private credit markets more attractive to many borrowers and credit providers.
Critics have often asked how liquid, or easy to sell, pools of private credit assets would be in a crisis.
In February, for example, the SEC questioned efforts by Apollo and State Street to offer an exchange-traded fund backed by private credit assets. SEC officials asked how liquid the ETF would be.
Apollo has helped expand the market for private credit assets. Rowan has argued that the private credit market could prove to be more stable than investment options tied to the performance of the S&P 500 index, because private credit securities have a much more diverse base.
Private credit providers work with many different companies, at a time when the S&P 500 index gets about 30% of its value from just seven companies, Rowan said during a 2023 analyst call.
Now, the public bond market is three times bigger than it was in 2008, and, because of constraints on banks and other financial services companies, the amount of fixed income trading capital is only 10% of what it was in 2008, Rowan said during Friday's call.
The numbers mean that the public markets have only 3% of the level of liquidity that they had in 2008, Rowan said.
"I expect that, in every risk-off moment, we are going to see significant movements in trading prices and fixed income because there is just no market," Rowan said. "We are discovering that public is both liquid and illiquid, and private is liquid and illiquid, just to differing degrees."
In some cases, Rowan said, because of the public market illiquidity, the public bonds are paying more on a risk-adjusted basis than the private credit markets.
"In recent months, when public markets went 'no bid,' we brought our own bid," Zelter said. "This wasn't just liquidity; it was leadership."
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