Apollo Global Management is seeking investors for a new junk-bond hedge fund it launched last year. The fund bets against junk-rated U.S. bonds.
PEU Apollo's new fund will bet against bonds issued by PEU affiliates. PEU's issued trillions in junk debt courtesy of the Federal Reserve, which prevented an interest rate reset to adequately handle risk after the 2008 financial crisis.
PEU affiliate debt used to fund "sponsor dividends" totaled $130.4 billion the last two years. How will such balance sheet stress impact corporate survivability in the next major downturn?
ValueWalk added on the Fed's role in this issue:
Bond investors have benefited from an almost uninterrupted 30-year bull market as the Fed fought secular inflation, but the next couple of years could be the short traders turn to shine.Private equity loves market dislocation, ones they anticipate or others they or their political sponsors create.
