Earlier this month, Apollo Global Management wrote a letter to its shareholders in a New York conference room outlining the reasons it had prevented them from withdrawing their funds. The language was measured and cautious, the kind of writing that legal teams go over several times before it is sent out. However, the meaning was fairly obvious. Apollo rejected investors’ attempts to withdraw $1.6 billion from a single fund in just three months, which is more than twice the quarterly redemption cap the fund permits. Regardless of the official framing, it’s difficult not to interpret that as a stress signal.
Apollo is not a remote area of the financial industry. It oversees about $700 billion in private loans given to businesses in a variety of sectors, including software and nuclear energy. After clients attempted to redeem more than 11% of the fund’s assets at once, its rival Ares, which manages a $10.7 billion private credit fund, took similar action within days. These are not minor choices. The atmosphere of a room is quickly altered when businesses of this size begin restricting exits.
| Name / Entity | Role | Key Detail | Notable Development (2025–2026) |
|---|---|---|---|
| Apollo Global Management | Private credit giant / shadow bank | ~$700bn in private loans; $15bn flagship fund | Capped withdrawals after $1.6bn redemption requests in 3 months (Mar 2026) |
| Ares Management | Private credit fund manager | $10.7bn Strategic Income Fund | Limited redemptions to 5% cap after 11.6% withdrawal requests (Mar 2026) |
| Marc Rowan | CEO, Apollo Global Management | One of Wall Street’s most prominent private credit voices | Warned of a coming “shake-out” in private credit at a New York conference |
| Andrew Bailey | Governor, Bank of England | UK’s top banking regulator | Warned of parallels between private credit boom and pre-2008 subprime debt crisis |
| Jamie Dimon | CEO, JPMorgan Chase | Most influential traditional banker in the US | Warned more “cockroaches” would emerge from the private credit system |
| First Brands / Tricolor | US corporate borrowers (collapsed) | Subprime auto lender and car parts firm | Failures in late 2025 triggered major losses for shadow banking creditors |
| Shadow Banking Sector (Global) | Non-bank financial intermediaries | $250 trillion / 49% of global financial assets (FSB) | Hedge funds manage 15× more assets than in 2008; loans to shadow banks surpassed $1.2tn |
| Long-Term Capital Management (LTCM) | Historical reference: hedge fund | Held ~5% of world’s fixed-income assets | Required $3.6bn government-orchestrated bailout in 1998 after Russia debt default |
| Reference: Fortune — “Hedge funds are the new ‘shadow banks'” (April 2025) | |||
This is the initial appearance of a shadow banking crisis. There was a gradual build-up of blocked doors and silent warnings rather than a dramatic collapse or a single instance of obvious failure. Economist Paul McCulley first used the term “shadow banking” in 2007, a few months before Lehman Brothers brought the idea to a worldwide audience. According to the Financial Stability Board, the industry has now expanded to approximately $250 trillion, or roughly 49% of all financial assets worldwide, after nearly 20 years. The amount of assets managed by hedge funds alone has increased fifteenfold since 2008. Following the previous crisis, the industry did not contract. It grew.
Due in large part to traditional banks’ increased caution following the 2008 crisis, the private credit sector flourished. Banks withdrew from some types of lending, capital requirements tightened, and regulators clamped down. That made room. Specialty lenders, hedge funds, and private equity firms entered the market, providing credit to companies that were no longer able to obtain it through traditional channels. Theoretically, this was beneficial to the system since risk was dispersed among investors who were aware of what they were purchasing. What actually occurred may have been somewhat different in practice.
The collapse of Tricolor and First Brands in late 2025 provided an unsettlingly clear illustration of the issue. The failure of First Brands, a car parts company, and Tricolor, a subprime auto lender, resulted in large losses for the shadow banks that had provided funding. Conventional banks that were exposed to the private credit industry were subsequently affected by those losses. Not one for understatement, Jamie Dimon predicted that more “cockroaches” would appear. It was implied that what was visible did not represent everything that was present.
The network of connections involved is what sets this moment apart from a normal cycle of defaults. Initially, shadow banking institutions were defined as a parallel track that was distinct from the regulated system. However, that description has always been a little deceptive, and it gets more deceptive each year. According to Federal Reserve data, loans from conventional Wall Street banks to credit firms, hedge funds, and private equity have now exceeded $1.2 trillion. The distinction between regulated and unregulated systems is not always clear. If you examine the balance sheets closely enough, you can see that they never were.
According to Andrew Bailey of the Bank of England, there are unsettling parallels between the private credit boom and the expansion of subprime debt prior to 2008. It’s worth pondering that comparison. Shadow banks grew quickly in the run-up to that crisis thanks to structured credit products that rating agencies approved of. The losses shifted in ways that the official models had not predicted when the underlying loans failed. Shadow bank liabilities in the US increased from about 100 percent of GDP in the late 1990s to over 200 percent by 2008, according to Jesper Rangvid, an economist who chaired Denmark’s financial crisis commission and has been closely monitoring the current parallels. Prior to 2026, the trajectory appears to be familiar.
It would be unjust to ignore the real differences that exist between now and then. This time, the businesses making the loans are mostly well-capitalized organizations rather than flimsy entities put together just to transfer risk. Instead of households, corporations make up the majority of the borrowers. Furthermore, Stanford and Wharton finance professors, who are by no means supporters of Wall Street, have taken seriously the academic claim that moving risky lending outside of traditional banks can increase systemic resilience.
Resilience, however, has a limit. Investors at major private credit funds, such as Apollo, Ares, and BlackRock’s HPS corporate lending fund, are not exhibiting irrational panic when they simultaneously attempt to withdraw their money. They are expressing uncertainty about liquidity, which has a propensity to come true on its own. Seeing this unfold in real time gives the impression that the industry is being put to the test in a way that has never been done before, under circumstances that no one could have predicted when the private credit boom was picking up speed, such as rising oil prices, AI disruption to software-heavy loan books, and geopolitical unrest.
Whether this turns into a 2008-style reckoning or something more restrained is still up in the air. The individuals who are most aware of the risk appear to be the ones discreetly limiting withdrawals, the exposures are huge, and there is little regulatory visibility.
