Rowan dismisses redemption concerns, saying Apollo handled $750 million in first quarter outflows easily.
“And so for us, $750,000,000 in the first quarter, dollars $750,000,000 out in the first quarter, this is not of any moment.”
Rowan argues public and private markets both contain risk; the key difference is liquidity, not safety.
“What if private is safe and risky, and public is safe and risky, and we're talking about differing degrees of liquidity in different markets? I think that's what we're seeing.”
Rowan challenges the perception that public markets are safe and private markets risky.
“We have a perception that what's public is safe and what's private is risky. But what if we're wrong?”
Rowan states that selling an investment grade public corporate bond now takes five days due to liquidity issues.
“By recent measures, it would take you five days to sell an investment grade public corporate bond today because there is no liquidity.”
Rowan states that trading capital in fixed income markets has declined to just 10% of 2008 levels.
“We're just finding out, for instance, that there's no liquidity in fixed income markets. That trading capital in the world is 10% today of what it was in 2008.”
Rowan questions why $12-13 trillion in 401k plans are daily liquid for fifty-year investments.
“What are these people invested in? They don't know. Well, I'll tell you, on the whole, they're invested in daily liquid mutual funds and ETFs for fifty years.”
Rowan argues retirement systems know their liquidity needs for ten years and should get paid for illiquidity.
“Liquidity liquidity is a risk to everyone but in differing degrees. So if you are a retirement plan or a retirement system, you know your liquidity requirements for the next ten years.”
Rowan says Apollo has no daily or quarterly liquid money, structured to exploit illiquid assets.
“There is no daily liquid, quarterly liquid money at Apollo. We are ideally situated to take advantage of less liquid assets. We've structured ourselves that way.”
Rowan reframes public versus private markets as fundamentally about liquidity rather than risk.
“We now know public can be risky as well. We now have found out that private can be both safe and risky. What we're talking about is differing degrees of liquidity.”
Rowan argues institutions should get paid for liquidity risk rather than equity or credit risk.
“I often say you can take equity risk. You can take credit risk. The risk these institutions should always get paid for is liquidity risk.”