In this articleAPOFollow your favorite stocksCREATE FREE ACCOUNTA version of this article appeared in CNBC’s Inside Alts newsletter, a guide to the fast-growing world of alternative investments, from private equity and private credit to hedge funds and venture capital. Sign up to receive future editions, straight to your inbox.The revolution in private markets and private lending is setting the stage for a sweeping investor shift out of publicly traded stocks and into alternatives, according to Apollo Global CEO Marc Rowan.With the stock market increasingly driven by passive investing and indexing, and dominated by a handful of mega-tech stocks, investors seeking diversification will need to start turning to the rapidly expanding private markets, Rowan told CNBC.”I do think [investing] is broken,” he said. “We had this notion 40 years ago that private was risky and public was safe. What if that’s just fundamentally wrong?”Rowan and Apollo are at the forefront of a tectonic shift in the investing landscape, with the lines between public and private markets blurring and the burgeoning business of private credit funding a growing share of corporate America’s growth.Get Inside Alts directly to your inboxThe Inside Alts newsletter with Robert Frank and Leslie Picker is your guide to the fast-growing world of alternative investments.Subscribe here to get access today.A handful of private equity giants are now muscling out the banks and stock markets to make trillions of dollars of loans and open up new opportunities – and risks – for investors.Apollo, Blackstone and KKR together now have more than $2.6 trillion of assets under management, more than quadruple what they held a decade ago. Apollo alone has $840 billion in assets, up from $40 billion in 2008, Rowan said.”I’d like to attribute that to good management, but that wouldn’t be true,” Rowan said. “The answer is, there are just fundamental factors that are reshaping and growing private markets.”Those factors start with the post-financial crisis regulations that curbed bank lending and allowed the private credit market to step in and provide long-term (and in many cases riskier) loans to large corporate borrowers.Marc Rowan, chief executive officer of Apollo Global Management LLC, speaks during an interview on an episode of Bloomberg Wealth with David Rubenstein in New York, U.S., on Tuesday, April 5, 2022. Jeenah Moon/Bloomberg via Getty ImagesJeenah Moon | Bloomberg | Getty ImagesPrivate credit as an investment class expanded, first among endowments, sovereign wealth funds and pensions and later among family offices and high-net-worth investors. With returns of up to 15% or more, hundreds of billions of dollars flowed into private credit funds.At the same time, the effectiveness of the 60-40 portfolio of stocks and bonds has become outdated, Rowan said. The rise of exchange-traded funds and indexing means most investors do little research about the individual stocks they own. Even the indexes are now driven by a handful of mega-tech stocks. And as stocks and bonds have become more correlated, diversification needs to be redefined.Rowan said the decline in the number of publicly traded companies – from 8,000 in the 1990s to about 4,000 today – means investors aren’t actually getting the investment benefits of the American economy.”When we own the S&P 500, do we actually own the 500?” he …
