Investing.com -- Apollo Global Management Inc. President Jim Zelter defended private credit on Thursday, characterizing recent investor concerns as "growing pains" and describing headlines about retail investor withdrawals as overemphasizing a "skirmish on the sidelines" of the direct lending industry.

Speaking in an interview on Bloomberg Television, Zelter said redemption caps were clearly outlined and functioning as intended. He noted that fund documents explicitly state a 5% redemption structure designed to protect all investors.

At a conference in Asia last week, Zelter suggested that certain distribution channels may not have fully communicated private credit risks to retail investors, creating a mismatch in shorter term redemptions.

Business development companies, private credit funds for retail investors, have faced increased redemption requests amid concerns about the $1.8 trillion market's lending practices and exposure to businesses vulnerable to artificial intelligence disruption.

Last month, Apollo capped withdrawals from its $25 billion Apollo Debt Solutions fund at 5% of outstanding shares after clients sought to redeem 11.2%, according to a shareholder letter. BlackRock Inc., Blue Owl Capital Inc. and Ares Management Corp. have also limited withdrawals from similar funds.

The redemption requests have raised questions about whether direct lending, an illiquid form of leveraged finance, suits investors seeking liquidity.

Regarding Middle East conflict disruption, Zelter said Gulf sovereign wealth funds may focus more on domestic capital expenditures when the conflict ends, though he has not observed anything deterring their broader investment objectives.