Why Private Markets Are Today's Best Diversifier

Summary

In a financial landscape where the top ten US stocks now represent nearly half of the S&P 500 and similar concentration is emerging in global fixed income, Apollo's Mark Weinberg argues that private markets are the sole remaining avenue for genuine diversification. He highlights the rise of immensely valuable private companies like Anthropic and OpenAI, noting that most investors have zero exposure. Weinberg traces Apollo's origins back to the challenging environment of 1990, a period of global recession and banking crises, and emphasizes the firm's foundational principles of understanding businesses fundamentally, embracing clean-sheet thinking, and rigorous credit assessment. He contrasts this with firms prone to funding risk or accumulating bad assets. Today, Apollo manages over a trillion dollars in assets, primarily in investment-grade credit and retirement services, serving as a major provider of retirement income and financing for industrial growth. Weinberg points out that public markets are becoming increasingly concentrated, making private markets essential for investors seeking to avoid this risk. He also discusses the trend of companies staying private longer and the growing demand for transparency in private markets, with Apollo pioneering daily marking-to-market for its investment-grade private products. Weinberg also touches on the challenges of AI's impact on enterprise software, the importance of merit-based hiring, and maintaining a culture of continuous innovation and risk-taking to avoid mediocrity.