Key Points:
- Apollo Global Management has rebuilt its business around origination of assets for the recently merged insurance affiliate, Athene.
- CEO Marc Rowan and his team have a forensic focus on their goal of doubling the business, including private credit, within five years.
- Apollo is also innovating, with a $15 billion fund aimed at high-net-worth individuals, designed as a replacement for S&P 500 exposure.
- In place of top-down DEI initiatives, the business seeks to empower its 4,000+ employees at Apollo and Athene to drive diversity progress themselves.
The vision that drove a restructuring
Marc Rowan has a message for investors: the market has changed irrevocably. “If you’re going to execute the same playbook as in past decades, you will lose,” he declared.
In the view of the Apollo Global Management’s co-founder and CEO, the shift has its roots in the changes that followed the 2008 financial crisis. The past decade was unusual, and the events of 2022, which overturned the “public safe – private risky” maxim, heralded the new normal.
This is part of the rationale behind Apollo’s recent $11 billion merger with its retirement services affiliate, Athene, which Rowan explained to RBC CEO Dave McKay, at RBC Capital Markets’ Global Financial Institutions Conference in New York.
“Starting the year knowing we will originate $40-$50 billion from platforms we own is a powerful differentiator for our business.”- Marc Rowan, Co-Founder and CEO, Apollo Global Management
Rowan sees credit as the biggest potential growth area, due to the diminished role of banks, which now provide less than 20% of debt capital.
“To be successful, you need capital, a really efficient cost structure, and most importantly, the ability to originate really high-quality investment-grade yield with spread,” he said. “So we built our business out of necessity to feed Athene. We started looking for, and manufacturing, investment-grade assets at a time when banks were looking to reduce their balance sheet dependence.”
The merger puts Athene at the heart of a vast new financial powerhouse serving the fast-growing retirement market. Apollo’s stable of origination platforms provides a steady supply of assets: “Starting the year knowing we will originate $40-$50 billion from platforms we own is a powerful differentiator for our business,” Rowan says.
“We are now the number one originator of annuities, and we grow organically by about $50 billion a year,” he adds. “It’s a nice place to be.”
No rush to growth, no new toys
Today Apollo has $550 billion of assets under management (AUM), of which $400 billion is credit. Of the remainder, $75 billion is private equity and another $75 billion ‘hybrid equity’ – that is, lower risk and lower reward. “I think we do each of those businesses as well as they can be done,” Rowan said.
He remained modest, however, about the overall significance of the private credit business. He described $400 billion as “a blip in the system” and said it would remain so even if he achieves his goal to double the business within five years.
“The upside of executing the plan and doing nothing else is so high; the payoff is beyond anything we could possibly imagine.”- Marc Rowan, Co-Founder and CEO, Apollo Global Management
In any case, Apollo’s goal is “not to be the biggest or the fastest growing; the goal is to deliver the business plan we’ve promised to investors, plus a little.” Rowan is suspicious of expansion for its own sake: “Blind pursuit of growth has investment and cultural consequences that are, at the moment, overlooked.”
For that reason, Rowan and his team have a motto: “No new toys.” Its repetition reminds Apollo executives to maintain their focus. “The upside of executing the plan and doing nothing else is so high; the payoff is beyond anything we could possibly imagine,” Rowan explains.
A replacement for the S&P 500?
After 30 years at Apollo, Rowan now has a strong sense of how best he can steer it as CEO. He sees his chief task as influencing his 4,000-strong team: “If I can change the way they think, I can get them to paint my fence, to use a literary analogy,” he told the conference.
At the same time, some innovations are permitted. Last year saw the launch of Apollo Aligned Alternatives, a $15 billion fund allowing high net worth individuals and institutions to invest alongside the firm.
The fund is designed to replace public equity investments by offering exposure to lower-volatility, private ones. In fact, Rowan sees it as a replacement for S&P 500 exposure, offering “S&P returns, but with the variability of fixed income.”
Another venture is a credit unit overseeing the securitized products acquired in November from Credit Suisse. Atlas SP Partners focuses on asset-backed financing and capital markets solutions.
“Every day we try to have as much fun as we can, while doing right by our clients.”- Marc Rowan, Co-Founder and CEO, Apollo Global Management
A culture of empowerment and opportunity
Having led Apollo for 30 years, Rowan now has a strong sense of how best he can steer it as CEO. He sees his chief task as influencing his 2,600-strong team: “If I can change the way they think, I can get them to paint my fence, to use a literary analogy,” he told the conference.
He strives to live by what he describes as the best advice ever given to him: “Don’t be defensive, be curious.” That entails listening to his team’s ideas: “If I can withhold giving my opinion, I’ll encourage conversation and I may learn something.”
A similar top-down style influences Apollo’s approach to diversity, equity and inclusion. Rather than imposing centralized initiatives, Rowan has “replaced DEI with opportunity”, empowering individuals to accelerate progress in areas they are passionate about.
“It’s defused the conversation and it feels authentic – in two years, I’ll tell you whether it’s been successful,” Rowan said.
The other imperative in Apollo’s culture is to enjoy the ride. “The job of creating products, solving problems and responding to markets is beyond fun,” Rowan concluded. “Every day we try to have as much fun as we can, while doing right by our clients.”
