Private equity firm,

the assets and generating a return big enough to cover the lifetime payments.

As Athene’s assets grow, Apollo charges larger fees for investing them in a suite of credit products that encompasses senior loans, collateralized loan obligations, and high-yield bonds sold by companies with poor credit ratings.

Apollo’s insurance land-grab has placed $97 billion on its books. That is more than triple the size of the entire credit portfolio that Apollo managed a decade ago, and more than one-third of all the assets it manages today. It has also given the firm significant influence over a regulated insurance business that is responsible for the incomes of thousands of retired workers, increasing the stakes if investments go wrong.

“The seven worst words in the world are: Too much money chasing too few deals,” says Oaktree’s Mr. Marks. “You can raise a lot of money if you’re a credit manager today. But then you have to put it to work, or sit on it and have people complain that you didn’t do what you said you were going to do. So people are competing to make loans.”

One result of such fierce competition could be increased risk-taking. Strong covenants were attached to fewer than 30% of the leveraged loans written in the US last year, according to a tally by the IMF, leaving creditors with little power to intervene if management teams behave recklessly or a company’s profit heads south.

With interest rates expected to rise, that could be in prospect for a sizeable number of businesses whose cash flow offers little headroom above their interest payments. McKinsey calculates that 6% of US corporate bonds have been issued by companies which need to spend two-thirds of their earnings before interest, tax, depreciation and amortization in order to meet their interest payments — leaving them in a perilous position when they are forced to refinance at higher rates.

Those that have taken out variable-rate loans could face a more immediate threat, compounded by changes in the ways companies calculate profit that may make their debt riskier than it looks. One-quarter of last year’s buyouts involved “adjusted” ebitda, which inflates profits by adding back some costs that are usually deducted, flattering a borrower’s stated leverage ratios.

“Real leverage is actually significantly higher today,” Mr. Patterson reckons, even though the difference does not always register in reported profit numbers. “We will see a series of unanticipated bankruptcies, because the reported numbers are historically inconsistent. I’m not calling the time; I have no idea.”

If that forecast is correct, it will mean losses for at least some of the asset management firms gathering assets — and fees — in sections of the credit system where banks now fear to tread. Optimists, including McKinsey’s Ms. Lund, say the asset managers now responsible for an outsized share of risky lending are neither as indebted nor as important as the banks. “It’s not to say nobody loses,” she says. “People do, and that’s painful, but it doesn’t have the systemic widespread effects, as those losers aren’t the bank themselves.”

But the differences between banks and asset managers are subtle. Funds that raise their money from public pension funds are capable of inflicting losses on powerful political constituencies, even if they cannot bring down the banking system. And while asset managers are usually far less leveraged than banks — typically matching a dollar of equity with every dollar or two of debt, compared with the $20 or $30 that banks were borrowing ahead of the crisis — they often have far fewer safe assets such as US government bonds.

“So which is riskier,” Mr. Marks asks, “an entity that’s 32 times levered and has a diverse loan book, or one that’s two times levered and has a book of all the somewhat unseemly loans?”

The question, he says, may be unanswerable. “It all comes down in the end to judgment. Let’s say that they go into a deal that I say I won’t do because it’s too risky. Am I a fuddy-duddy and are they astute? Or are they nutty and going to get wiped out?”