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Recently, we hosted an internal capital markets call with Apollo Global Management, a global alternative asset manager with investment strategies across credit, private equity, and real assets. During the discussion, Torsten Slok, Chief Economist at Apollo Global Management, outlined a macroeconomic regime defined by elevated inflation and slowing growth – stagflation.¹
Drawing on market signals, Slok estimated low odds of recession but emphasized that inflation may remain persistent even as GDP softens. He believes this creates a complex landscape for asset allocators, where traditional diversification may no longer be sufficient. Slok discussed three high-conviction areas that can be focused on during stagflation:
- Prioritize high-quality credit exposure,
- Consider private market secondaries, and
- Allocate to resilient thematic investments.¹
Understanding the Stagflation Challenge
Stagflation, a combination of slowing GDP growth and elevated inflation, presents one of the most difficult asset allocation backdrops for ultra-high-net-worth (UHNW) investors. Equity risk premia has compressed, while fixed income yields may fail to provide satisfactory “real” yields.²
Slok noted several macro pressures are converging to increase this risk: U.S. trade tensions, immigration restrictions, resumption of student loan payments, a recent credit rating downgrade, and a weakening dollar that may amplify inflation.¹ ³
In this environment, he believes the next 12 to 18 months might therefore remain volatile. As such, IEQ agrees that a differentiated approach to portfolio construction is required, one that draws on lessons from institutional investing.
Prioritize High-Quality Credit
In periods of weak growth and high inflation, credit quality becomes paramount. We believe investors should prioritize senior secured, first-lien credit instruments that sit higher in the capital structure and offer improved recovery potential.
Private credit, with strong covenants, conservative underwriting, and experienced sponsors, can provide attractive yields while offering downside protection.⁴
Smaller borrowers with limited cash flow visibility are more exposed to credit stress under these conditions. For allocators, staying “up in quality” in both public and private fixed income is an essential defensive posture.¹
Lean into Private Market Secondaries
Private credit and private equity secondaries may present attractive opportunities in the current market environment. As liquidity constraints emerge across LP portfolios, investors may be able to acquire assets at discounts to net asset value.⁴
In our view, secondaries may offer:
- More visibility into existing portfolios.
- A shorter duration to exit than primary commitments.
- The ability to capitalize on forced selling and price dislocations at discounted pricing.
Torsten Slok discussed that this environment, marked by sticky inflation and declining growth, creates divergences in pricing power, favoring selective and value-oriented strategies.¹ We believe secondaries generally align with these characteristics, particularly in credit and late-stage private equity.
Focus on Inflation-Resilient Themes
In a stagflationary backdrop, thematic investments grounded in structural trends may provide a more stable return path. Slok discussed Infrastructure and Energy Transition as one of the key themes duration Stagflation. He believes these sectors can benefit from long-term cash flow commitments and often have inflation-linked contracts. They are less dependent on consumer behavior or cyclical earnings and may provide broader portfolio diversification.
“Stagflation requires investors to be both more defensive and more selective. We are not relying on traditional playbooks. Instead, our research team is focused on strategies that can preserve real value, extract liquidity premiums, and align with structural tailwinds. Alternative credit, secondaries, and thematic allocations are central to our approach right now.” — Mike McIntosh, Chief Market Strategist, IEQ Capital
Why It Matters
We believe the traditional “60/40” portfolio structure may face headwinds in stagflation, as both equities and fixed income correlations may rise. This reinforces the importance of differentiated research-backed allocations in private markets with relatively resilient characteristics.
Each of the three strategies presented here, high-quality credit, secondaries, and long-duration themes, provides a differentiated lever to adapt portfolios for real-world economic pressures while maintaining exposure to long-term return drivers.
Conclusion
The current macro environment is defined by uncertainty, policy constraints, and divergent economic signals. For UHNW investors and family offices, this requires a thoughtful reevaluation of both risk and opportunity.
Drawing on insights from our recent capital markets dialogue with Apollo’s Torsten Slok, we believe that private credit, secondaries, and thematic allocations offer the clearest path forward in a stagflationary cycle.
1. Apollo Global Management, Internal Capital Markets Update, July 17, 2025.
2. S. Bureau of Economic Analysis, 2025 Economic Growth Forecasts.
3. Moody’s Investors Service, Sovereign Credit Outlook, Q3 2025.
4. Federal Reserve Economic Data (FRED), U.S. Inflation and Interest Rate Trends, July 2025.
Credit – Senior Secured RE Lending
- Competitive Risk: Real estate lending is a crowded space with lenders competing on price and weaker covenants.
- Credit Risk: Private loans are usually unrated or below investment grade and may be more susceptible to default.
- Liquidity Risk: There is no guarantee that any fund’s liquidity mechanisms will be reliable, and the managers are under no obligation to provide liquidity.
- Mark to Market Risk: Certain portfolios may own liquid loans or mark to liquid markets, resulting in fund volatility.
- Tax Risk: Lending is generally tax-inefficient and post-tax returns may be materially lower than pre-tax returns.
Equities
- Interest Rate Risk: Higher interest rates may adversely impact equity valuations.
- Macro Risk: Macro factors including interest rates, inflation, or economic growth may lead to materially different return outcomes for the sector, particularly if there is a material impact to earnings outlooks.
- Mark to Market Risk: Equities are relatively volatile securities and may be especially volatile in a poor macro backdrop.
Industrial Real Estate
- Tenant Credit Risk: There is risk that the tenants of the underlying properties could fail on their rent payments which would ultimately negatively impact cashflows, yield, and return.
- Execution Risk: Value-add can involve significant execution risk specific to renovation and lease-up to drive returns.
- Competitive Risk: There are many market participants in the industrial real estate space, and heightened competition may limit deal flow or ability to source attractive deals.
- Liquidity Risk: Exit strategies are typically contingent on capital markets and prevailing appetite for risk, which may ebb and flow with the cycle.
Secondaries
- Concentration Risk: Strategies pursuing GP-led deals may have more concentration risk than a traditional secondaries fund.
- Liquidity Risk: Exit strategies are typically contingent on capital markets and prevailing appetite for risk, which may ebb and flow with the cycle.
- Macro Risk: Macro factors including interest rates, inflation, or economic growth may lead to materially different return outcomes for the sector, particularly if there is a material impact to earnings outlooks.
- Mark to Market Risk: Portfolios may contain liquid securities which are typically more volatile than private investments.
Venture / PE / Growth Equity
- Execution Risk: Private equity and venture capital investments often rely on operational expertise to add value to portfolio companies. There is risk that the operational team cannot deliver as expected.
- J-curve Risk: PE and VC funds typically experience a more severe j-curve than other alternative investment strategies due to longer timelines to appreciation and lack of early distributable cash flow.
- Macro Risk: Multiple contraction, erosion of consumer demand, and increased costs of leverage could negatively impact the fund.
IEQ Capital, LLC has a business relationship with Apollo Global Management.
This material is as of the date indicated, not complete, and subject to change. Additional information is available upon request. No representation is made with respect to the accuracy, completeness, or timeliness of information, and IEQ assumes no obligation to update or revise such information. The information set forth herein has been developed internally and/or obtained or derived from sources believed by IEQ Capital, LLC (“IEQ Capital”) to be reliable. However, IEQ Capital does not make any representation or warranty, express or implied, as to the information’s accuracy or completeness, nor does IEQ Capital recommend that the attached information serve as the basis of any investment decision. This document has been provided to you solely for information purposes and does not constitute an offer or solicitation of an offer, or any advice or recommendation, to purchase any securities or other financial instruments, and may not be construed as such. It is not intended to be, nor should it be construed or used as investment, tax, accounting, legal or financial advice. IEQ provides no assurance or guarantee that any investment will be successful or that any returns will be achieved. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.