Shadows of 2008? The Brutal Truth About Private Credit Valuations
the staff of the Ridgewood blog
Wall Street NY, The private credit market has long been the “darling” of Wall Street—a $1.7 trillion powerhouse that promised stability while public markets fluctuated. But a stunningly blunt admission from one of the industry’s most powerful players suggests that the foundation may be cracking.
In a recent private discussion reported by the Wall Street Journal, John Zito, Co-President of Apollo Global Management’s asset-management arm, issued a warning that is sending shivers through the financial sector: The valuations (or “marks”) on private equity-backed assets are fundamentally disconnected from reality.
“All the Marks Are Wrong”
Zito’s critique targets the core of how private firms report their worth. Unlike public stocks, which are valued by the market every second, private assets are “marked” by the firms themselves. According to Zito, these numbers have stayed artificially high despite a cooling economy.
“I literally think all the marks are wrong… I think private-equity marks are wrong,” Zito stated, arguing that firms are refusing to write down assets to avoid spooking investors.
The danger, he warns, is a total loss of trust. If firms don’t “mark their books” honestly, the next downturn won’t just be a financial crisis—it will be a credibility crisis for the entire private market.
The Software Trap: 20 Cents on the Dollar?
The specific area of concern? Mid-sized software companies purchased by private equity firms between 2018 and 2022. Zito points out several red flags:
-
Overpayment: These firms were often bought at much higher valuations than comparable public companies.
-
Lower Quality: Many were smaller, “lower-quality” businesses that are highly vulnerable to an economic slowdown.
-
The Recovery Gap: Zito predicted that if these leveraged software companies fail, lenders might only recover 20 to 40 cents on the dollar.
Liquidity Pressure: The Redemptions Are Coming
We are already seeing the first signs of structural strain. The “canary in the coal mine” isn’t a wave of defaults (yet), but rather liquidity pressure.
In a move reminiscent of the early days of the 2008 financial crisis, several major funds have begun “gating” their investors—limiting how much money can be withdrawn. In recent weeks, funds tied to BlackRock, Morgan Stanley, and Cliffwater LLC have all had to cap redemptions after investor withdrawal requests exceeded quarterly limits.
Why This Matters for 2026
If the industry leaders at Apollo are calling out their peers for “fake” valuations, it suggests we are approaching a “reckoning moment.” For years, private credit was seen as a safe haven. Today, it looks increasingly like a bubble where the air is starting to hiss out through redemption caps and overstated asset values.
As Zito noted, Apollo intends to be a “market leader” in actually marking their books to reflect reality. The question remains: Will the rest of the industry follow suit, or will they wait for the bubble to burst?
Take the Wall Street Walking Tour https://www.facebook.com/unofficialwallstreet #WallStreetTours,#FinancialDistrictExploration, #ExploreWallStreet, #FinancialHistoryTour, #StockMarketExperience, #FinancialDistrictDiscovery, #NYCFinanceTour,#WallStreetAdventure
- Tags: #PrivateCredit #FinanceNews #MarketCrash #ApolloGlobal #Economy2026 #InvestmentRisk
