Apollo’s Stephanie Drescher on running a global investment firm from her living room
Like most working parents, Stephanie Drescher’s days have looked a lot different since March, when the coronavirus pandemic shut down offices and schools alike—forcing millions of parents and children to see a lot more of one another during business hours.
Of course, that’s been a good thing in many ways. For Drescher—a senior partner at Apollo Global Management, one of the world’s largest alternative investment firms—and her husband, the chance to regularly have lunch with their three children (two boys and one girl, ages 3 to 13) at their home in New York has been a “welcome change.”
Yet it has also come with a new set of challenges for Drescher. As Apollo’s global head of client and product solutions, she leads an 85-person team charged with developing an array of multibillion-dollar investment products for the firm’s global base of institutional investors. Since she joined Apollo in 2004, the firm has transformed from a traditional, buyout-focused private equity player into a multifaceted, alternative investment behemoth that now holds 70% of its assets in the credit space.
In that time, Apollo has grown exponentially; its assets under management now stand at more than $400 billion, thanks in no small part to the diversification spurred by Drescher and others at the firm. In turn, Drescher has established herself as one of the most influential women in the heavily male-dominated world of investment management. In 2014, she was promoted to Apollo’s management committee—the inner circle occupied by cofounders Leon Black, Marc Rowan, Josh Harris, and nearly a dozen other top executives at the firm.
Drescher’s job, she notes, has typically entailed “a healthy amount of travel around the world” for face-to-face meetings with the pension funds, sovereign wealth funds, and other investors making up Apollo’s client base. With that travel having been curtailed significantly because of the pandemic, Drescher and her team have had to rely heavily instead on Zoom conferences and telephone calls to keep clients abreast of updates and new developments during an unprecedented, tumultuous time.
“The first stage of the [remote] conversations with our investors was a human one—of wanting to empathize with them, but also being transparent and clear,” Drescher says of the post-lockdown transition. “It was crucial for them to understand that we were there for them. Once they felt comfortable with our clarity around their portfolios and the evolution of the markets, then they wanted to speak about the opportunities.”
The opportunities, it would appear, have been plenty. In April, as the global economy reeled from the initial impacts of the coronavirus pandemic, Apollo saw a chance to capitalize on companies’ need for liquidity during such a challenging time. So like fellow private equity titans Blackstone Group and Oaktree Capital, Apollo set itself an ambitious fundraising target with the goal of taking advantage of distressed opportunities in the credit markets: $20 billion, to be raised over the course of the following year.
Fast-forward three months, and cofounder Josh Harris provided investors with an impressive update on the firm’s second-quarter earnings call in July: Apollo had already raised more than $17 billion in fund commitments, bringing it within reach of hitting its $20 billion target well ahead of schedule.
Through her role at Apollo and her position on the firm’s management committee, Drescher has played an influential part in both raising those funds and devising how they’ll be deployed. In May, Apollo announced that it had closed $1.75 billion in commitments for the latest in its series of Accord dislocation funds, which seek to take advantage of mispriced corporate credit opportunities during times of market stress.
With many investment-grade companies having struggled to maintain their credit ratings amid pandemic-related economic challenges, there have been plenty of opportunities for investors to target those “fallen angels” and purchase their downgraded debt at a discount.
Capitalizing on an influx of investor demand in that space, Apollo managed to raise the $1.75 billion for its latest dislocation fund in a matter of eight weeks during the height of the lockdown. The firm also deployed 70% of its preceding $886 million Accord fund over the course of seven days in March, according to Drescher, to take advantage of buying opportunities during the height of that month’s market volatility.
“We were having daily, if not intradaily, calls to evaluate what was going on in the markets,” Drescher says of Apollo’s approach in the wake of the pandemic’s onset. “We were very active in our conversations with investors and recognized that there was likely more volatility ahead.”
With a long and uncertain economic recovery to come, Drescher believes Apollo should be able to find more “values that are disconnected from the technicals” in the credit market. To that end, the firm has already raised more than $1 billion toward the next fund in its Accord dislocation series, according to sources familiar with Apollo’s operations, with the goal of eventually raising $2 billion to $3 billion in total.
But the Accord series is hardly the largest new credit product that Drescher has helped launch recently. In July, Apollo unveiled a new, $12 billion direct lending platform known as Apollo Strategic Origination Partners—a vertical through which it plans to directly provide companies with loans valued around $1 billion. The platform is meant to fulfill what Apollo deems growing demand for financing deals that sit between “middle-market” direct lending and the broadly syndicated loan market.
While Apollo has been active in the direct lending space, the new Strategic Origination Partners platform will tackle deals of a much larger and more ambitious variety. Drescher and her team managed to finance and launch the platform—securing Abu Dhabi state-owned fund Mubadala Investment Co. as its lead backer—while working virtually entirely remotely.
The platform “fills out a piece of the credit spectrum that has evolved more recently,” according to Drescher, with more companies looking to private lenders for capital as banks have tightened their underwriting standards since the Great Recession. “Direct origination is not new, but our ability to offer corporations these private credit solutions in a large-scale way is a trend advantageous to them.”
Drescher has witnessed firsthand the extent to which credit has driven Apollo’s remarkable growth into an alternative investment powerhouse. When she joined the firm from JPMorgan Chase in 2004, Apollo had only $11 billion in assets under management. By the end of June 2020, that figure stood at $414 billion, with most of that growth coming from a credit platform that—thanks in no small part to Apollo’s success with insurer Athene—is now valued at around $300 billion, or roughly 70% of the firm’s AUM.
For all that success in the credit space, Apollo remains active in its traditional private equity business, and Drescher has helped grow that side of the firm’s business as well. She played a role in closing Apollo’s $24.6 billion flagship private equity fund in 2017—reportedly the largest fund ever raised at the time—and conceiving platforms like Apollo’s hybrid value business, which provides both debt and equity funding to companies.
In April, Apollo deployed a total of $900 million through the hybrid value platform, including a $600 million preferred equity investment in Expedia that is meant to give the online travel booking firm the “financial flexibility and resources to emerge from the current economic environment in a position of strength,” Apollo said at the time.
“We definitely have a value lens through which we look for [private equity] opportunities,” Drescher says. “There’s a willingness to take on complexity in order to find that value. We want to find those circumstances where there’s a company that may be misunderstood or mispriced—and through a very diligent, rigorous process, understand it in a different way that can drive values and create returns where others may not have thought they existed.”
She pointed to Apollo’s experience with Twinkie-maker Hostess Brands—which the firm bought out of bankruptcy in 2013 and turned around, before selling its stake for a lucrative profit in 2017—as an example of its strategy in this regard. Drescher herself sits on the board of ADT Security Services, which Apollo bought out for $7 billion and which recently secured a $450 million investment from Google that will see the Silicon Valley giant market its Nest smart-home products through ADT.
All in all, it’s a lot of responsibility for Drescher and her colleagues at Apollo to balance, especially at a time when most of the firm’s 1,400 employees are confined to working from home and having to juggle their personal and professional lives. To that end, she lauded the firm’s launch of yet another platform: the Apollo Family Network, an initiative designed to offer the firm’s employees and their families support and networking as they navigate the realities of the pandemic at home.
But such challenges aside, Drescher described her colleagues’ abilities to adapt to the new, pandemic-era normal has “exceeded” her expectations—with some help, of course, from the contemporary technologies that have become ubiquitous over the past six months.
“I would say the receptivity to using Zoom has been phenomenal,” she says. “While I personally miss that casual collision around the watercooler, Zoom has given us a different dimension.”