Rowan observes global regulators favoring investors over banks, except China, but no sudden shift expected.
“But if you look at the trend with the exception of China everywhere in the world regulators are favoring investors over banks.”
Rowan argues regulators have only two choices for credit: banking system or investment marketplace, no third option.
“And regulators have only two choices as to where credit comes from. It can come from the banking system or it can come from the investment marketplace. There's no third choice.”
Rowan says regulators worldwide except China are favoring investors over banks, though not a sudden shift.
“But if you look at the trend with the exception of China everywhere in the world regulators are favoring investors over banks. That does not mean we're gonna see a sunshift.”
Rowan states regulators have only two choices for credit: banking system or investment marketplace.
“And regulators have only two choices as to where credit comes from. It can come from the banking system or it can come from the investment marketplace.”
Rowan argues regulators have only two choices for credit: banking system or investment marketplace.
“And regulators have only two choices as to where credit comes from. It can come from the banking system or it can come from the investment marketplace.”
Rowan says regulators globally are favoring investors over banks, except in China.
“But if you look at the trend with the exception of China everywhere in the world regulators are favoring investors over banks.”
Rowan contrasts bank leverage of 12-14x with zero leverage at typical institutional investors and mutual funds.
“A bank is levered 12 to 14 times. The typical institutional investor is levered zero. The typical mutual fund levered zero. Typical BDC levered 1.5 times. Typical retirement services company levered eight times.”
Rowan predicts a change in administration will introduce illiquidity into 401(k)s, creating substantial industry demand.
“It's my belief that if we have a change in administration, we will have in a very short period of time illiquidity introduced into 04/2001 ks.”
Rowan argues European regulators told banks to do less lending but forgot to enable investor alternatives, unlike the US.
“Everywhere in the world as I suggested, regulators have two choices as to where debt capital comes from, the banking system or the investor marketplace. Everywhere they've told the banks to do less.”
Rowan predicts a new administration would quickly allow illiquid investments in 401(k)s, creating substantial industry demand.
“That will not just benefit Apollo, that will be another source of demand for the industry of a magnitude that will be quite substantial.”
Rowan argues risky lending belongs in investment markets, not government-backed banking systems.
“I always ask the provocative question, if what the activity is risky, do we want it in the government backed, government guaranteed banking system, or do we want it in the investment marketplace?”
Rowan argues private credit has de-risked the United States by moving risky lending out of the government-backed banking system.
“I would say that private credit levered lending, direct lending, has actually been a de risking for the entire United States and for investors.”
Rowan says Apollo's insurance company holds only 0.4% in levered lending due to regulatory inefficiency.
“to give you a sense for our insurance company, we round closer to zero than to 1%. It's like point 4%.”
Rowan says recent NAIC proposals require offshore jurisdictions to maintain reciprocal rules with U.S. regulatory standards.
“You have to be onshore. You have to be this. You just have to live with a set of rules that are reciprocal with The U. S.”