Apollo Global Management co-president James Zelter has said financial markets are undergoing a “massive transition” as use of private credit options begins to outstrip bank financing.

Speaking at the Asia Pacific Financial and Innovation Symposium in Melbourne, Zelter said the role of banks was not going to be “eliminated” but was going to “evolve”.

“The new paradigm in the last decade is a variety of private capital solutions. Mostly on the credit side, some degree on the equity side,” he said.

Read more: Apollo launches Mubadala-backed private credit fund

Bloomberg reported that Apollo is trying to attract capital from institutions that handle money for retirees in Asia. It is reported to have raised $35bn from the region since the start of 2022.

Zelter appeared at the symposium alongside heads of Australian pension funds. One such panellist, chief investment officer of UniSuper John Pearce, talked about the increasing appeal of private credit, particularly in Europe.

“That’s where some really attractive spreads are at the moment, where the banks aren’t willing to play,” he said.

Read more: IMF warns on ‘retailisation’ of private credit

However, Sonya Sawtell-Rickson, chief investment officer of pension fund HESTA had some concerns over the returns compared to other types of investment.

“It’s not enough for us to get a great dislocated return for 12 months which is floating rate, and then going to return to a much lower level into the future,” she said. “We’d rather lock in a really attractive return for 10 years.”

Zelter emphasised that the sector is still at an early stage. “Certainly, in the US and Europe, if you’re an institutional investor and you’re not focused on this opportunity to be able to find an incremental spread versus the public investment-grade market, you’ve made a great mistake,” he said.

Read more: Private credit doesn’t offer higher returns, says new study