Apollo's Kleinman Says PE Needs to Start Capitulating on Valuations

Summary

Apollo Co-President Scott Kleinman discusses the private equity industry's prolonged digestion period, with firms stuck holding assets bought at high prices during the zero-rate era and unable to exit at desired valuations. He predicts that firms will eventually be forced to capitulate, leading to consolidation, while Apollo's valuation discipline has allowed it to continue selling. He also sees interest rates staying elevated and is cautious on retail private equity products.

• Private equity exit volumes remain depressed as firms hold out for higher valuations.
• Kleinman says the industry 'lost its way' during the zero-rate era by overpaying for assets.
• Apollo stayed disciplined on valuation, avoided software, and has been actively selling.
• He expects firms to capitulate on valuations over time, leading to smaller funds and some firms disappearing.
• New money PE investments are attractive because most companies trade at reasonable valuations.
• Rates are likely to stay elevated, adding pressure on overleveraged assets.
• Kleinman is cautious on semi-liquid retail private equity products due to illiquidity and redemption risks.