Apollo Outlook | Private Markets Brace for "Higher for Longer" Rate Environment in 2025
- Editor
- Jan 2
- 2 min read
What's new: Apollo Global Management's 2025 outlook reveals private markets are adapting to a new reality where interest rates will remain elevated, fundamentally reshaping investment strategies across private equity, credit, and real estate sectors.
Why it matters: This structural shift is forcing a dramatic evolution in how private capital is deployed, with investors moving down the risk spectrum toward hybrid opportunities that offer both downside protection and equity-like upside potential.
Big Picture Drivers:
Fed funds rate expected to bottom at 4% with higher terminal rates becoming the new normal, driving profound changes in deal structures and valuations
Private credit emerging as a key beneficiary, with investors earning premium yields compared to public markets
GP-led secondaries becoming the fastest-growing segment since 2018, accounting for nearly half of all secondary transactions
By the Numbers:
Global private capital AUM reached $14.5 trillion, compared to $141 trillion in global fixed income and $115 trillion in global equity markets
Private equity AUM stands at $5.4 trillion with $1.5 trillion in dry powder
Private credit fundraising hit record levels with over $333 billion available for deployment
Key Trends to Watch:
Surge in bank-alternative asset manager partnerships, with more than dozen new collaborations formed in the past 12 months
Data center infrastructure emerging as a major opportunity, typically financed through asset-backed securities and private credit
High wall of debt maturities in 2027-2028 creating significant refinancing opportunities
The Bottom Line: For investors, the higher rate environment is creating attractive opportunities in private credit and hybrid strategies, particularly those focusing on businesses with recurring revenue streams, variable cost structures, and strong cash flows. The key to success will be maintaining discipline in asset selection while prioritizing downside protection through senior-secured positions in the capital structure.
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