Stock prices for giant high-yield alternative asset managers have generally been under pressure this year, directly triggered by market concerns over bad debts stemming from a series of high-profile bankruptcies. However, Goldman Sachs believes that this very pessimism may have created a strategic “buy the dip” opportunity for Apollo Global Management (APO.US), Ares Management (ARES.US), and Blue Owl Capital (OBDC.US).
Recent market turbulence originated from the successive bankruptcies of automotive industry-related borrowers First Brands and Tricolor, further intensifying nervousness in the bond market. Adding to investor jitters, JPMorgan Chase CEO Jamie Dimon issued a warning, “When you see one cockroach, it usually means there are more,” a remark widely interpreted as a metaphor suggesting bad debt risks could be contagious. Dragged down by this negative sentiment, the aforementioned companies have performed weakly in the capital market. Year-to-date, Apollo Global Management’s stock price has fallen approximately 13%, Ares is down about 18%, while Blue Owl’s stock price has plummeted nearly 30%.
But Goldman Sachs analysis points out that after this pullback, the risk-reward ratio for these three companies has become “increasingly attractive.” The firm maintains a “Buy” rating on Apollo Global Management and Ares, while rating Blue Owl as “Neutral.” Goldman Sachs emphasizes that the major default cases currently capturing market attention remain concentrated in the traditional bank-led syndicated loan sector, not the private credit sector. Even if an economic slowdown leads to a rise in default rates for private borrowers in the future, the current proportion of non-performing loans in this sector is only about 1%. This figure remains well below the peak levels of 3%-4% seen during past market downturns and is significantly lower compared to the 7%-8% seen during the financial crisis.
Regarding funding liquidity, Goldman Sachs believes concerns may be exaggerated. Even if defaults ultimately prove manageable, asset managers’ stock prices could still be affected by investor redemption pressure, as a shrinking asset base directly erodes their management fee revenue foundation. On this point, Goldman Sachs notes that institutional private credit funds mostly have long-term lock-up periods, limiting short-term redemptions; while funds targeting retail investors also typically cap single-quarter redemptions within 5% of the fund’s net asset value. Historical experience shows that even during periods of volatile market returns or widening credit spreads, management fee revenue in private credit has maintained a trajectory of continuous growth, albeit at a slower pace.
Goldman Sachs further analyzes that the private credit investment theme had become overhyped due to its past success over the last three years. Driven by grand narratives like “banks deleveraging, private capital taking over credit creation,” and expectations during the Trump administration that private assets might be included in 401(k) retirement investment plans, the stock prices of related asset managers were previously pushed significantly higher, along with their valuations. Although facing pressure in 2025, the cumulative gains of these three companies over the past three years have still substantially outperformed the S&P 500 index.
Currently, as valuations have corrected from their highs, the market’s “tolerance for error” has been significantly compressed, and any sign of risk is enough to trigger a rapid shift in investor sentiment. However, it is precisely under this combination of factors – controllable bad debts, protective redemption mechanisms, a relatively stable fee revenue base, and deeply corrected valuations – that Goldman Sachs judges the current price pullback is more likely to constitute an opportunity worth watching for long-term allocators, rather than a signal of the industry’s demise.
