© Reuters. Apollo's Matt Nord signals caution on private market valuations
Quiver Quantitative – Matt Nord, co-head of private equity at Apollo Global (APO), has expressed concerns about inflated valuations in the private market, hinting at a cautious approach to asset acquisitions. In a Bloomberg TV interview, Nord highlighted that many investors have overpaid for assets, which can create challenges in realizing returns, especially in an environment characterized by higher interest rates and tighter financial conditions.
Nord emphasized Apollo's conservative strategy, stating that the company typically acquires assets at six to seven times their value, using prudent underwriting assumptions. This approach, he suggests, positions Apollo to navigate current market dynamics more effectively than others that may have overleveraged or overvalued their acquisitions. “The air is coming out of that balloon very slowly,” commented Nord, alluding to the gradual correction of private market valuations.
The broader private equity sector has witnessed a significant decline in transaction and exit activity over the past year. PitchBook data indicates a 43% drop in median private equity realizations for the largest publicly traded US companies as of June 30 over the past 12 months. This decline underscores the challenges facing the industry amid rising interest rates and a shift in market sentiment.
Looking ahead, Nord expressed optimism about the IPO market in 2024, suggesting it could see a modest improvement. Apollo, he noted, is actively engaged in discussions about potential asset sales, indicating a proactive stance in navigating the changing market landscape. This outlook offers insight into Apollo's strategic considerations and broader sentiment in the private equity sector amid changing economic conditions.
This article was originally published on Quiver Quantitative
