Apollo Global debt deal fees and insurance earnings rise, asset sales drag

Apollo Global Management raked in record fees from its lending and insurance businesses in the second quarter, but cashed in less on its own investments in a tougher environment for asset sales, it said on Tuesday.

The New York-based company posted adjusted ‌net income of $2.11 ⁠per share, ⁠10% higher than the same period last year but below a $2.17 per share forecast based on an LSEG analyst poll.

Shares dipped in ​early trading and hovered around 1% lower on the day. They are down around 11% on the year, in line ​with other alternative asset managers.


Apollo started as a private equity firm in 1990 and has since pushed hard into credit and insurance, helping swell its total assets under management to $1.05 trillion at end-June.

More stable income streams from ​arranging deals and investing insurance premiums surpassed market expectations. But the headline figure ⁠was crimped ‌by principal investing income, which reflects divestment profits, and is "the most volatile line item on ​a quarterly basis", ​Piper Sandler analysts said.

Sales of assets had been "prudently delayed", Apollo said, describing market conditions ⁠as "less accommodative for monetization". As a result, realized performance fees fell 41% from the ​prior year to $130 million.

Rising interest rates have weighed on private equity ​firms' traditional model of buying and selling companies for profit, although peers KKR and Blackstone last month reported brisk quarters for sales and listings.

Apollo President Jim Zelter said "we feel pretty good" about monetization over a longer period, and Apollo had raised $12 billion for its most recent flagship private equity fund through July.

Fee-related earnings rose 25% to $785 million, while spread earnings rose 7% to $877 million, which Apollo said both broke quarterly records.

PLEDGE TO IMPROVE TRANSPARENCY

CEO Marc Rowan has ‌pledged to increase transparency and liquidity for private assets as valuations for typically illiquid assets have come under scrutiny across the sector.

Rowan said Apollo was on track to offer ​daily pricing in ​its funds by October, opening up ⁠to new potential customers.

"The more we do this, the more we will make ourselves acceptable to 401k (retirement plans), to DC (defined contribution pension plans), traditional asset managers, individuals," he said.

Wealthy individuals, who have been staging a retreat from private credit ​this year, pitched in $3 billion during the quarter, down from $4 billion in the previous three months.

Overall, Apollo's asset management arm brought in $38 billion in fresh capital.

The company said that was driven in part by multi-asset securitization strategies, which include new vehicles pulling together different types of debt. The firm is marketing those vehicles, dubbed AMAPS, as a replacement for collateralized loan obligations.

Credit products for institutional investors also attracted inflows.