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Apollo Global Management is a publicly traded alternative asset manager. Founded in 1990 as a private equity firm, Apollo invests in several different strategies such as credit, which includes direct lending and asset-backed finance; equity, which includes private equity and secondaries; and real assets such as real estate and infrastructure. Apollo also owns Athene, a retirement services business that offers annuities. Investors in Apollo funds include public pension funds, endowments, family offices, sovereign wealth funds, and insurance companies.

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Q4 2024

Apollo Global Management (APO): Company Profile, Stock Price, News, Rankings

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Apollo Global Management

apollo global management

Good morning, and welcome to Apollo Global Management's Fourth Quarter and Full Year twenty twenty four Earnings Conference Call. During today's discussion, all callers will be placed in listen only mode. And following management's prepared remarks, the conference call will be opened for questions. Please limit yourself to one question and then rejoin the queue. This conference call is being recorded.

This call may include forward looking statements and projections, which do not guarantee future events or performance. Please refer to Apollo's most recent SEC filings for risk factors related to these statements. Apollo will be discussing certain non GAAP measures on this call, which management believes are relevant in assessing the financial performance of the business. These non GAAP measures are reconciled to GAAP figures in Apollo's earnings presentation, which is available on the company's website. Also note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase any interest in Apollo Fund.

I would now like to turn the call over to Noah Gunn, Global Head of Investor Relations. Please go ahead.

Great. Thanks, operator, and welcome again everyone to our call. Joining me to discuss our results and the momentum we're seeing across the business are Mark Rowan, CEO Jim Zeltzer, President and Martin Kelly, CFO. Earlier this morning, we published our earnings release and financial supplement on the Investor Relations portion of our website. As you can see, results punctuated a very strong year of performance.

In the quarter specifically, we generated record fee related earnings of $5.54,000,000 dollars or $0.9 per share, spread related earnings of $8.41,000,000 dollars or $1,.37 per share and adjusted net income of $140,000,000,0.0 or $2,.22 per share, the highest quarterly level we've earned to date. The represented another milestone for us as we were thrilled to be added to the S and P 500 in Dec. 0. This is a testament to the firm's differentiated strategy, remarkable growth and institutionalization as a public company. Since we listed on the NYSE in 2011, our market cap has grown from approximately $2,000,000,000 to more than $100,000,000,000 We expect our inclusion will broaden our public shareholder base and enable more investors to gain exposure to private markets by investing in our business.

Of course, this milestone would not have been possible without the collective effort and ingenuity of all our colleagues across the firm who drive the business forward every day. And with that, I'll now hand the call over to Mark.

Thank you, Noah, and good morning to all. As Noah suggested, 2024 wrapped up in exactly the way we wanted, growth and execution FRE for the quarter, $210,000,000,0.0 up 17% year over year FRE $320,000,000,0.0 in line with Investor Day guidance record annual ANI $460,000,000,0.0 As we've often suggested, the reward for good work is more work Record AUM $7.51,000,000,000 dollars total inflows $150,000,000,000 and origination volume over $2.20,000,000,000 dollars In short, this is exactly the quarter and exactly the year we wanted. Recall

we are trying to do and what we've reiterated in our five year planning process. We are not here to grow the fastest. We are not here to grow the largest. We are here to deliver the plan plus a little and like who we are and like our franchise at the end of the five year journey. As we've said, our goal over the next five years is to grow FRE at an average annual rate of 20% FRE at 10% and in any one year FRE between 1520%, particularly in non fundraising years.

This is exactly what we hope to do. And again, we are not here to blow the doors off any one quarter. We are investing in the business because what's in front of us dwarfs what's behind us and it is important that we set ourselves up well for that opportunity. At our recent partners off-site, we gather all 200 partners of Apollo. And among the questions I asked them was, if we have a challenge meeting our five year plan, is that challenge external or internal?

90% of the people recognize what I recognize, is that challenge is internal. It is all about us executing, all about us aligning the resources that we have, making the right investments. The market is coming our way. It doesn't mean every day, it doesn't mean every quarter, but I like the way the external environment is developing. And the toughest thing we do, and I know this will sound somewhat trite, toughest thing we do and now that Jim does, because I get to share the responsibility with him is to keep the team playing to win.

Successful companies across our industry, across every industry have a tendency to play not to lose. And with the amount of change that our industry is facing and the amount of opportunity in front of us, we want the team that steps up every day and plays to win. The strategy, as you know, is set. So what does playing to win look like? Well, for us, it is to recognize where we think the industry is going and how we think the industry is developing.

As we've said, our business is going to be driven by four really large fundamental changes taking place in the marketplace. The first is this notion of a global industrial renaissance. We're seeing it literally every day in The U. S. In particular.

And this is not just about AI and deep sea. This is about fundamental investments in energy, in infrastructure, in power, in data, in next generation manufacturing and a host of other things that are going to be needed, financed and borrowed. The second big driver of our business is retirement. Retirement not just in the traditional sense through a theme of providing guaranteed lifetime income, but in the nontraditional sense of helping retirees retire better. The third, recall that our entire industry was built out of the alternatives bucket of institutional clients.

As all of you know from the past few years, individuals have the potential to be as large as institutions in the same sorts of products and they will not take anywhere near forty years to get to that size. And finally, and I think personally the most important driver of our business is an entire rethink of public and private. And what I mean by that is our industry grew up where people thought private was risky and public was safe. And when something is risky, you put it in a small bucket and you call it an alternative and you want very high rates of return from it. And forty years later after our industry start, I think that professionals in our industry now understand that private is safe and risky and public is safe and risky.

And if people are not watching closely, the largest asset manager, the traditional asset manager in our industry has delivered a wake up call to their entire peer set that private is going to be an important part of client solutions going forward. So let me spend a little bit on each of these four drivers. When we think about the global industrial renaissance to us, this is the largest place we can originate. It is not just the origination coming off our 16 owned platforms, but it is the unique bespoke underwriting for the Intel's and others to build the next generation economy. This quarter, second best quarter ever, more than $60,000,000,000 of originations.

Originations are not just about putting capital out the door. It's about putting capital out the door at excess return per unit of risk. We want to originate that which has value so long as we originate and capture spread by offering clients things they cannot buy in the liquid public markets, we will win. It is not simply chasing a number for the quarter. In retirement, yes, we are well set up to serve retirement.

Athene is the largest in the industry, continues to have leading market share and for the year generated more than $70,000,000,000 of organic inflows. Dollars 70 billion dollars could have been $75,000,000,000 or $80,000,000,000 It is not our goal as I suggested to grow disproportionately in any one quarter or in any one year. And to give you a sense of momentum in retirement, just Jan. 0 of the fee inflows more than $9,000,000,000 That should not be 12 times nine for the year because that is not what we seek to do. We seek to earn excess returns and when we see opportunities to do that, we will be very aggressive.

And when returns are not as plentiful or not where we want them to be, we will back off. We run a principle based business and you can count on us to be good responsible stewards of capital. Elsewhere in retirement well, before I pivot from Athene, as I said, Athene has grown in traditional products that we would associate with the retirement industry, pension, funding agreements, individual annuities, group annuities and the like. We will continue to do that and that will continue to be a growing market. But the future of Athene is about the next generation of retirement products.

We as a company and we as an industry have yet to really hit on our full potential. And I believe our full potential is to offer consumers and businesses and clients much simpler solutions, Guaranteed lifetime income versus a complex annuity is where I think the journey is focused. There are other forms of guaranteed income that are prevalent throughout our financial system that Athene also has the opportunity to make inroads in and to offer industry leading solutions. Away from the pure retirement business built on Athene, Apollo Asset Management continues to make inroads into the retirement market. This is in the absence of any legislative or regulatory change.

As we suggested in our last get together, we already had one CIT up and running in a retirement solution. We now have our second and we are making really good progress with record keepers and continue to believe that target date funds, managed accounts and other forms of retirement solutions will offer a robust future in the absence of legislative change. And with legislative change, this could be one of the true drivers of our industry, not just our business going forward. As to individuals, record results $12,000,000,000 in 2024, up 50%. Q4 was our second best ever.

Just truly an exceptional year. And again, the philosophy by which we run this business is not to grow disproportionately in any one quarter. Consider ADS. We run this vehicle for the long term. We run it with the least leverage, the most senior, the largest companies.

We want to be around for the long term. We want to take advantage of market dislocation. If we're innovating, we're innovating in access. As you know, we now offer it in a tokenized format. We'll innovate in how to serve our clients, but as an investment proposition, excess return per unit of risk purchase price matters.

We run these businesses for the long term, not for any quarterly goal or otherwise. Jim will talk more about the diversified portfolio of products that we now offer to individuals. And I continue to believe this will be one of the most promising areas. Just a word on public versus private before I wrap up and talk about a few other things. BlackRock made a number of very significant acquisitions in 2024.

Those acquisitions lay a foundation for an integration of public and private. I continue to believe this convergence of public and private will be a very important source of demand for private assets. I see private assets in any number of forms. Our industry and our firm will be a supplier of product to traditional asset managers as they seek to make their products more competitive given the incredible amount of indexation and correlation and quite frankly just data that exists in the market. We envision that traditional asset managers will evolve their businesses to include products that are public and private.

Some traditional asset managers will actually want to launch new products that are co branded. We are doing that as well. And some will seek to augment their business with massive managed accounts where they have access to private assets from a variety of different players. I think this is good for our entire industry. We will not as an industry serve the vast majority of clients around the world.

We simply don't have the resources, we don't have the efficient systems and we don't have the relationships. What we do have so long as we're good at it is products that offer excess return per unit of risk. I see a very good marriage between our industry, our company and the public or traditional asset managers who I believe are going to reinvent their businesses spurred on by competitive forces. So enough on the market for a bit, I continue to think in summary that we have four drivers, any one of which could be a doubling in our business and they will power our business forward in terms of demand for private assets. I continue to believe that the carburetor or limiter of growth in our business is limited to our capacity to originate good risk and to our culture and ability to absorb growth.

We watch both very carefully in particular on originations. One of the things that we have begun to do this year is to figure out how to expand our origination engine. In certain parts of our business, for instance in infrastructure, we have decided to do some modest M and A. We noticed in the quarter the addition of Argo. Argo is an infrastructure manager will add some $6,000,000,000 of high quality AUM to our platform, but the single most important factor in deciding to absorb Argo is the Argo team.

The capacities to continue to originate not just for their drawdown funds, but for our evergreen retail funds, for our SMAs and managed accounts and for all the vehicles of the Apollo platform is eye opening to the Argo team and we will benefit by having a scaled business with an excellent track record join us. You should expect us to continue to do modest M and A along these same lines where we are quite focused on increasing our capacity to originate. That is what we intend to do. So I will leave lots of time for Q and A and I'm sure we will talk about regulatory and the backdrop to what we do. But with that, I'm going to pass it over to my partner, Tim Selter.

Thanks, Mark. At Investor Day, we discussed our view of today's investing paradigm, which is that private markets have a pivotal role to play in the financing in the global industrial renaissance. As a society, we've laid out our massive global goals, including managing the energy transition, modernizing our power and utility grids, and building next generation digital infrastructure. Each of these has already created unprecedented need for capital. And in our view, these ambitions will be difficult to accomplish with our large scale private capital solutions.

As we've discussed, our success is determined by our capacity to originate high quality assets with excess return that benefit our fund partners and investors. The lack of flexible financing available today provides a unique opportunity to offer solutions that access our differentiated scaled capital base. While public IG funding is widely accessible, we believe we can provide superior flexibility, customization and certainty for borrowers and these capabilities are resonating in the marketplace. As Mark mentioned, our origination engine has had tremendous momentum with a record $2.22,000,000,000 dollars of our assets originated across our ecosystem in the last twelve months, approximately double that of 2023. This result was driven by meaningful contribution from each of our channels, including more than $95,000,000,000 from our 16 origination platforms and more than $90,000,000,000 from traditional core credit and approximately $25,000,000,000 from high grade corporate solutions and $10,000,000,000 from a variety of equity inputs.

Across all of our debt origination activity, we sourced assets at approximately three fifty to 400 basis points above treasuries on average. Importantly, with spreads near multiyear tights across many segments of the credit market, our direct origination advantage remained durable, allowing us to capture 200 to two fifty basis points of excess spread relative to comparatively rated corporates on the majority of what we originate. And I'll just comment over the course of last year, we observed the market tighten approximately 25 to 30 basis points, but our debt origination saw similar, even less compression depending on the specific asset class, not more, enabling us to capture the attractive excess spread origination, which is the key to our success. Entering 2025, we're focused on continuing our scale of origination capabilities and make progress toward our targets. This year, there will be really three key areas where we originate and focus and define success for the year.

One is continuing scaling of Atlas SP, our affiliated warehouse financing platform, which drove approximately half of our platform origination last year and represents a significant part of our growth plan. The second pillar is lender finance. Lender finance is a large opportunity that we expect to grow rapidly across multiple areas of our credit franchise. One area we're particularly focused is on the ability to lend against private credit collateral in all channels where investors reside today. The third is our combined direct lending.

This encompasses our affiliated mid cap financial lending platform, which originated more than $20,000,000,000 of volume last year, as well as our high grade corporate solutions and our large cap direct lending, which we continue to expand client coverage with an integrated toolbox that is unmatched in the marketplace. Alongside origination, capital formation is the lifeblood of our continued growth. Last year, we generated $152,000,000,000 in total inflows across the platform, comprised of $81,000,000,000 from our asset management business and as Mark mentioned, $71,000,000,000 from Athene. In short, both sides of the house produced. Within asset management, our institutional wealth channels each had strong results.

Within institutional, '24 was a record year for a non flagship year and Global Wealth is continuing to gain momentum with greater inflows over successive years and successive quarters. Double clicking on that fundraising for the quarter, credit oriented strategies drove the activity, accounting for nearly 80% of third party capital raised with inflows coming from more than 100 discrete funds or accounts. Some of the more significant contributors included our IG, investment grade total return fund, the second vintage of Accord Plus, several third party SMAs, which now insurance SMAs, which now total 24, as well as credit focused wealth products we manage, including ADS, ABC and others. For Athene, it's worth noting that the business was able to exceed its full year growth target by adeptly pivoting across its four channels. This is despite having to navigate a unique set of circumstances, particularly within the pension business where Athene provides value added solutions for corporate clients and serves more than 500000.0 pensioners.

We continue to be focused on diligently building Athene, managing its growth on a year to year rather than quarter to quarter basis to drive consistent and durable growth earnings over time. The business remains extremely well positioned and we expect we'll be a leader in new product creation to serve the needs of this massive retirement population. Relative to 24 levels, we expect to drive greater inflows across both asset management and retirement services in 2025 as we expect to execute against our five year plan. The average annual capital formation targets we communicated at Investor Day indicate a natural upward progression as we continue to penetrate the vast market opportunities that Mark discussed. With that, I'll turn it over to Martin to address our financial results in more detail.

Thanks, Jim, and good morning, everyone. As you can see in our results and as you've heard from both Mike and Jim this morning, 2024 was a very successful year of growth and execution for Apollo, particularly given the shifting interest rate and more subdued monetization backdrop. We delivered on the financial targets we communicated and we set a very strong foundation for the five year plan we presented at the Investor Day. I'll quickly walk through our financial performance and highlight some key drivers that we believe will position us for a successful 2025. In the asset management business, we posted a new quarterly record for fee related earnings, generating 2100000000.0 of FRE for the full year or 17% growth.

Two distinct areas of strength in our revenue picture in 2024 were management fees from our credit business, which increased almost 20%, within that growth in third party credit management fees exceeding that of Athene and Athora, as well as capital solutions fees, which increased almost 25% year over year, as Mark highlighted. Our capabilities within ACS continue to expand alongside our overall origination and deployment activity. Fee related revenue grew by 15% and expenses by 14%, resulting in another year of FRE margin expansion. Very importantly, we're reaping the reward from past investments, which are now generating revenue growth across the platform, while at the same time prioritizing current investments to build strategically important areas of our multiyear plan. A few of the most important initiatives that will be critical to driving success in the year ahead and beyond include Global Wealth, third party credit and PE adjacent businesses within equity.

In Global Wealth, we see significant momentum across the business with meaningful contributions likely to come from the semi liquid products suite, comprising 11 discrete products, including six currently sized at approximately $1,000,000,000 or more and continuing to scale. In third party credit, we expect asset backed finance, key origination platforms on catalyst as well as direct lending strategies to be impactful. And in terms of PE adjacent businesses, we expect infrastructure, clean transition, secondaries and hybrid value to have increasing contributions. Taken together and combined with the growing ACS franchise, we expect to raise, deploy and syndicate significant amounts of capital that will drive attractive fee related earnings growth. In 2025, we expect fee related earnings growth to approximate 15% to 20%, consistent with non flagship PE years and reflecting capacity to continue making significant investments in the growth priorities we have articulated.

As we discussed at Investor Day, we continue to expect fee related earnings will grow by approximately 20% on average over the next five years, and everything we're seeing in the business is tracking well still on that goal. Moving to Retirement Services, we posted a strong quarter of spread related earnings, generating $320,000,0.0 of SRE for the full year, consistent again with our comments at Investor Day. Fourth quarter returns from Athene's Alt portfolio were in line with our inaugural pre release issued on January '2. Net invested assets grew 14% in 2024, driven by record organic growth. Net spread ex notables of 137 basis points declined moderately year over year due to several factors, principally the interest rate transition and our proactive steps to mitigate the impact and lock in spread, as well as a tighter spread backdrop and a slightly lower average allocation to alts.

Importantly, the underwritten spread on new business volumes exceeded 140 basis points during the year, supporting the current net spread of the business before considering the carry through impact from interest rate cuts that have already taken place. As we discussed at Investor Day, we expect to grow spread related earnings by approximately 10% on average over the next five years, excluding the impact of interest rate transitions. We expect interest rate related headwinds in 2025 to be largely consistent with our Investor Day comments, which embedded an assumption of six total equivalent rate cuts from through the Assuming an alt return of 11%, we expect SRE to approximate $350,000,000,0.0 in 2025 as we previously communicated. Key drivers of our SRE growth in the year ahead will be Athene's net organic growth, the net spread on that growth, the trajectory of interest rates and the returns on Athene's Vaults portfolio. Turning lastly to principal investing income.

PDII benefited from greater realized performance fees in 2024 as monetization activity improved from 2023 levels. In the specifically, PDII benefited from the seasonal carry crystallization of certain credit strategies as well as a lower compensation ratio. Our net accrued performance fee balance at December '31 was $170,000,000,0.0 or $2,.75 per share and continues to be supported by strong investment performance. We've generated compelling double digit gross returns across a variety of credit strategies in 2025, as well as hybrid value sorry, in 2024, as well as 35% for PE Fonten. And finally, our operating tax rate in the benefit from large deductions in the quarter related to employee stock compensation due to a higher share price.

Going forward, we continue to expect our effective tax rate to remain approximately 20% over the long term, subject to the usual quarterly variability. And with that, I'll turn the call back to the operator for Q and A.

Thank you. The floor is now open for questions. Today's first question is coming from Bill Katz of TD Cowen. Please go ahead.

Okay. Thank you very much. Appreciate the opportunity to ask questions and the color for the call. Mark, you mentioned sort of three or four major opportunities looking ahead. I think I'm most intrigued on the retirement at the margin.

I think your comments were like you think you can make progress within the retirement accounts even if there's no improved legislation. I was wondering if you can maybe expand on A, how you do that? And then B, from your conversation you might be having with folks down in D. C, what is the appetite to enhance the fiduciary umbrella to allow more proactive opportunity into target date bonds? Thank you.

I'll do my best still, but a real answer would probably absorb the rest of the call in question queue. So let's start with what people are investing in. We think people suggest there's $12,000,000,000,000 to $13,000,000,000,000 in 04/2001 that will be there on average for fifty years. These people are for the most part invested in daily liquid stock index funds for fifty years. Why?

Well, that was history. That's just what people did. And what's happened to their investment is it's done well, I won't say that, but they are now 10 stocks are now 40% of the S and P and their returns are levered to NVIDIA. We basically have levered the retirement system of the country to NVIDIA. And some quarters that's good and some quarters that's not so good.

But for a fifty year investment it doesn't seem to be all that great. So the next innovation was the notion of a target date fund. A target date fund takes a mass of individuals, not an individual and allocates them depending on their age cohort between daily liquid stock index funds and daily liquid bond funds. There's not really much innovation. People are still getting beta, although the beta is now more appropriate for their age cohort.

Everywhere in the world where privates, and I'm going to use the word private, not alternative, has been added to retirement solutions, the results are not just a little bit better, they're 50% to 100% better. We are on that journey. Plan sponsors understand this, investment managers understand this. What we have is a litigation culture that has focused historically on fees that has prevented widespread allocation to private market solutions and a record keeping infrastructure that has been slow to adapt. We are starting to see changes in that around the edge.

And as you would expect, we're starting to see it in three products, semi liquid equity, semi liquid credit, particularly investment grade credit and guaranteed income solutions. I believe we are at the very, very beginning approaching a $12,000,000,000,000 market admittedly in the current environment with some handcuffs on. As to regulatory reform, I would not be naive enough to expect that I could predict what's going to happen, but I will make some observations. And some of it is really good for our business and some of it is just okay. So a number of you asked previously about regulatory more generally.

In the bank sector, it is clear that tone of bank regulation is appropriately getting better. Banks will be stronger competitors in what we call direct lending or a small portion of our private credit business. This is appropriate. This is logical. I don't think it really matters to us per se.

We continue to see robust appetite for partnerships with banks which are now north of 12 because they are still commercial entities at the end of the day that are structurally borrowing short and don't like lending long. We can work with a bank from a capital alleviation point of view, we can work with them from a duration alleviation point of view or simply complementing each other's origination. As it relates to the question you asked, I think we're going to see increased access, increased fairness and increased recognition that the financial markets have changed. I'm not going to be so bold as to predict this, but it is not rulemaking, it is advice. Simply being told as a trustee that your job is to produce the best net returns, not the lowest fee, I believe would go a very, very long way to solving this in a way that would be overwhelmingly positive for our business.

I know that I'm not the only one in the industry who's focused on this. The industry in mass is focused on this. And in fact, we're seeing traditional asset managers and I've mentioned previously BlackRock understand that privates are going to be part of the solution set. The more that this evolves, the better it is for all of us who are in the business of producing private assets. The third place we're going to see substantial change is in the some of the regulatory apparatus around retirement and particularly around insurance.

If you work in a Department of Treasury, call it the FIO, you probably are looking over your shoulder. We have allowed the European system to crowd out The U. S. System because we have not protected it. We have not been playing Team America in capital markets.

And America First also applies to its capital formation tools. Further, we have been asleep at the regulatory switch and $150,000,000,000 of reserves have moved offshore to the Cayman Islands with a fraction of the capital of The U. S. Or the Bermuda system, putting the system at risk. I believe the FIO will be under tremendous pressure.

I also believe the state based regulatory system, which we believe in and are big supportive of, they have a choice of evolving to address this issue in payment or risk someone stepping in and usurping their authority because it is a hot button issue around our industry, it is a hot button issue in DC and it is just common sense. But in general, incredibly enthusiastic about what's happening on the regulatory front.

Thank you. The next question is coming from Glenn Schorr of Evercore ISI. Please go ahead.

Hi, Mark. I wonder if you could peel back the onion just a little bit. You touched on it, but I'm a believer in the way you described the rethink of and convergence of public and private. But for asset backed specifically and private investment grade, I think the vision is there, the proof is there with some of your partnerships. But some of the banks push back and say, we already have excess capital, regulations coming down.

Why will more of this transition over? It made sense with direct lending on non investment grade and the capital charges. Don't the banks want to hang on to this business? So I just figured I'd get you to pontificate a little bit on that. Thanks.

So look, this is consistent with our theme. Not every bank is the same. Let's start by saying we have a multi tiered banking system in The U. S. With a few banks at the very top, lots of small community banks and then a baby oil.

I think your comments are mostly directed at the top end of this and I don't disagree with that. Some of the banks at the top end will choose in a reduced capital strain or better regulatory tone to keep more of their assets. I don't know why I actually think the place they will keep assets is where you don't. I think they'll keep them in direct lending, because it's a really easy business to run. These clients are very fee generative.

They're very relationship oriented and it's a pretty simple business. That is where the vast majority of private credit franchises around the world have been built. Do I think there'll be competition? I do. And typically in every cycle, we see people go to excess, which is why we run EDS in our vehicles the way we insist on running them.

I don't think it fundamentally changes the nature of the banking business though. The nature of a bank is to borrow short and lend long. There is an inherent instability to taking long dated risk inside a short funded institution. Think about what the world is building. Next generation energy, next generation power and data, next generation infrastructure, energy transition, all of these things are long dated and complex.

They are not normally in any market funded on bank balance sheet. I think what people don't really understand is a lot of the competition or substitution is replacement of the normal regular way ten year IG market. IG wants simple, not complex. They don't want structured. They don't want, they don't want, they don't want.

Every time we have landed a large fixed income replacement mandate is because we are offering the borrower something that is credit neutral or credit better to us, but more flexibility in some way that is not available to the public market. And so again, I come back to this notion of the bank partnership. Some banks will simply say, thanks, we'll do it ourselves. Some banks will actually realize what I think most have that we are symbiotic with them and that we do not want their clients. All we want is the asset.

The bank typically does not want the asset and if they want a piece of the asset, it's available to them. So if they can grow without capital, that's ROE enhancing. Some banks will actually fund an asset with us and they will take the short end of the asset and we will take the long end of the asset. Some banks will fund with us and they will take the AAA tranche back and we will take the AAs and everything else. The variety of partnerships with the banking industry is limited only by with the problem that the banks are trying to solve.

And then the whole opportunity is the notion of regional bank and regional bank consolidation. If you're a regional bank today, you are paying more for your capital, your inventory, your money than a money center bank. Your financial regulatory and technology costs are being spread over a much smaller base. You don't have the capital markets revenue to give you the fee streams that the big banks have. And you don't really know whether deposits are sticky, because like every crisis where SVB and FRB were taken out, we don't really know whether that was bad management or bad management coupled with 70% online banking.

And I think we're going to see in this administration in particular tremendous consolidation of regional banking. We, Apollo, just speaking for Apollo, we're a small asset manager. Our goal is not to be one of the four money center banks. We don't even think that way. Our job is to deliver our business plan, which is roughly doubling the size of the business.

Five years from now when we double the size

a small asset manager. There is plenty for us to do in the context of our business and win.

Thank you. The next question is coming from Patrick Davitt of Autonomous Research. Please go ahead.

Good morning, everyone. There's been some chatter of some potentially large insurance assets coming up for sale. So could you update us on Athene's willingness and ability to take on large and or more complicated M and A transactions? Thank you.

Thanks, Patrick. So I've heard the same rumors. I won't repeat them, but I've heard the same rumors. But recall that Apollo Global as an entity actually has three plus pockets by which we acquire retirement or insurance assets. One is through our wholly owned subsidiary Athene.

Athene primarily focuses on U. S. Spread based products along with UK and Japan. The second and we don't spend much time talking about it is our interest in Athora. Athora is our scaled European vehicle who primarily works in a Solvency II jurisdiction in Solvency II jurisdictions around the world.

And the third is our interest in Venable, which we share with some partners who primarily buys variable annuities. When you add the three capabilities together, I believe that we are well positioned to do anything that we want to do that makes sense. When I say makes sense, we have the ability to issue $70 plus billion organically each year with protected surrender charges and market value adjustments at a pace and time that we want at a reasonable cost upfront. For us, growth is not about just growing the assets. This is a fool's errand.

Growth for us is about earning spread. If someone is willing to step in and take low spread for the purpose of juicing for a short period of time their asset management, That to me is a very short term trade and one we should all be concerned about. But as it relates to capacity, we have plenty of capital, including committed capital in our ADIT vehicle for Athene in uncalled equity at Asora. And anything that we want to do, we are capable of doing, but it all comes down to economics.

Thank you. The next question is coming from Alex Blostein of Goldman Sachs. Please go ahead.

Hey, Mark. Good morning, everybody. I was hoping to spend a couple of minutes on your expectations for origination into 2025. The way you framed it, I thought was really helpful between Atlas lender finance and direct lending. I guess how do you expect the mix of these three buckets to evolve over the course of next year?

And as part of that, I think you mentioned some of the inorganic opportunities. Could you spend a minute on what could look most interesting from an acquisition perspective? And would that be in Apollo deal or should we think of that similar to other platforms kind of residing within AAA?

Thanks. So, I'll just say yes and then I'll hand it to Jim.

Alex, I would say that as we've identified, Atlas when we thought about it three, four years ago, it was really a U. S. Business. And geographically, with places like Europe, Japan and Australia in particular, I would expect that to grow. So, I don't think when you think about the large buckets of the platforms and traditional credit at $85,000,000,000 90 billion dollars apiece, I don't think there is a variety of new dramatic moves out of those.

I think you'll see geographic expansion. I do believe what you're seeing go on right now with the European banks, the logical moves that Mark talked about earlier with really focusing on their business model. We've seen it out of HSBC and many others. So I think you'll see geographic distribution, geographic expansion. I also think that the high grade capital solutions, and I know there was a question earlier and Mark addressed it, but there's just even the most well capital transactions we did for Sony and AB InBev and Intel and others that will expand.

The last thing I would say is massive focus on hybrid origination here across the platform. Obviously, we made some leadership evolutionary change over the last month. We brought together a lot of resources in that hybrid area, which is really the area between debt and equity. That is really when you think about the overhang from PE sponsors, when you think about the other challenges right now in monetization of the IPO market, Certainly, I think you're going to see a much, much greater volume of opportunity in The U. S.

And in Europe and parts of Asia with regard to places like Australia and Singapore and Hong Kong in that hybrid area. So, I think it's really leaning into what we've done in the past. We're very, very comfortable with the breadth of what we have. And I do think Mark appropriately addressed it. There's a narrative out there that we don't partner with the banks, so there's a battle for the banks.

The reality is somewhere dramatically different. The partnership dialogue, look what's going on with Standard Chartered with Avtera. Across the board, there are numerous partnerships that are in the drawing room or about to be announced. So, I think that's really where the expansion will be in terms of bank partnerships.

Thank you. The next question is coming from Ken Worthington of JPMorgan Chase. Please go ahead.

Hi, good morning. Thanks for taking the question. So sentiment on rates has moved to higher for longer. I guess, what do you think about this shift in sentiment in the context of your inflation outlook and the Trump administration policy changes? And Apollo is comparing for the lower interest rate environment for a lot of last year.

What are your thoughts on the balance sheet positioning as you think about 2025?

mean, we run a duration match business. We prefer a bit of a higher rate environment. There's that preparation for that. There's not really a prediction of it. Certainly, the actions of the last ninety to one hundred and twenty days with the new administration is a bit different than we might have expected when we had Investor Day.

And so you're right, there is a view of a bit higher for longer, what Thorsen has been articulating. But again, when we talked about Investor Day last year, we talked about five or six prospective cuts, four have taken place. But again, I think we think we're appropriately positioned right now where rates are with regard to our floater strategy, which we've been very focused on. But again, I don't think we have a Folio with Athene.

I'd say I'd just add to that Tim. Torsten has been on record and all of us have been on record. We have Torsten has kind of been right here. Tire for longer has been the house theme, notwithstanding where the market has been. And so as Jim said, we took the appropriate action and we reduced our floater bug to a more prudent level just given where rates and spreads are.

But if I look at our business, we are generally better off in a higher rate environment. The vast majority of our business is credit oriented. Credit is simply more attractive in absolute terms in the environment we're in as a solution set because again our client base is either solving for absolute levels of income or is amortizing a retirement constant which is usually a fixed constant. And so as John Zitooff says, he scaled our credit business on the back of zero interest rate environment when no one wants us to talk about credit. Where we are right now is just orders of magnitude better off.

So I kind of like where we are and we'll have regulatory uncertainty, but generally the trend of regulatory uncertainty I think is pretty favorable.

Thank you. The next question is coming from Stephen Chubak of Wolfe Research. Please go ahead.

Hi, good morning. So wanted to spend some time just unpacking your thoughts on the ACS fee outlook. You spoke a very strong momentum in the business. If we look at the multi year trend, ATS fees grew 24% this year, 30% in 23%, thirty nine % in 22%. And these outcomes were all achieved in a more subdued Cap Markets backdrop.

Apollo Global Management (APO) Q4 2024 Earnings Call Transcript

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