Gulf SWFs caught in the middle as Pimco and Apollo split on private credit valuation

A proper turf war is brewing between Pimco and Apollo over a simple question with big implications for the LPs of the world, GCC sovereign wealth funds — is the USD 1.8 tn private credit space essentially marking its own homework? Pimco strategist Lotfi Karoui says yes in a note to clients, arguing that the push toward more frequent marks does little to “address the market’s inherent structural constraints, including a lack of true price discovery.”

Apollo is all for standardizing the opaque: This comes a week after Apollo CEO Marc Rowan committed on a 1Q earnings call (pdf) to provide daily mark-to-market valuations across roughly USD 830 bn of its credit assets by the end of September. “We have never seen a market where enhanced liquidity and enhanced transparency does not result in tremendous growth for the asset class,” Rowan said, framing it as a land grab dressed as reform.

What’s daily marking again? It updates the estimated value of private loans every day rather than quarterly. Because these assets don’t trade, the marks come from internal models, comparable transactions, company performance, and credit spreads — and those valuations flow directly into the portfolio values investors see.

That’s where Pimco says the cracks start to show. Karoui’s point is that if three different managers are holding the exact same loan and arriving at three different valuations — averaging five points apart by year-end 2025 — then the issue isn’t how often you refresh the number. It’s that there’s no real price discovery underneath it in the first place. “They only increase the perception of liquidity without truly improving liquidity,” he wrote, adding that “at best, [daily marks] add marginal transparency and some reputational pressure that may rein in the most extreme mark outliers.”

Why we think Apollo still comes out ahead: Private credit didn’t grow into a USD 1.8 tn market because investors demanded perfect price discovery, it grew because LPs were willing to tolerate imperfect marks in exchange for yield and illiquidity premium. As the asset class grows, daily pricing can start to look less like a transparency exercise and more like the infrastructure layer needed to institutionalize the market — which naturally favors firms like Apollo who have the scale to make daily marks the industry norm, and the consolidation that follows.

Regional SWFs have real skin in the game here. Some of the world’s largest sovereign allocators (think PIF, Mubadala, Adia, QIA, and ADQ) are heavily exposed to the same private credit complex now debating how these assets should actually be valued, making this more than a technical fight between two US asset managers. The methodology Apollo and Pimco are arguing over today will ultimately shape how Gulf LPs measure returns and assess risk tied to some of the largest private credit plays in the market.

REMEMBER- PIF’s revised 2026-2030 strategy cuts international allocations to 20% from 30%, which means Gulf SWFs are simultaneously reducing international exposure and concentrating their remaining exposure into fewer mega-managers — at exactly the moment those managers’ valuation methodology is being publicly contested.

MARKETS THIS MORNING-

Asian stocks opened in the red this morning, mirroring losses on Wall Street after hotter-than-expected US inflation data. Analysts are bracing for a volatile couple of days as the market awaits ceasefire developments and the outcome of US President Donald Trump’s summit with his Chinese counterpart.

THE CLOSING BELL-

The EGX30 fell 0.8% at yesterday’s close on turnover of EGP 12.1 bn (58.7% above the 90-day average). Local investors were the sole net buyers. The index is up 29.2% YTD.

In the green: Kima (+5.9%), Orascom Construction (+5.0%), and Egypt Aluminum (+4.6%).

In the red: Raya Holding (-2.5%), Palm Hills Developments (-2.4%), and CIB (-2.1%).