First quarter financial results showed strong performance with FRE of $462 million or $0.75 per share and SRE of $817 million or $1.32 per share, totaling $1.3 billion, an 18% year-over-year increase. Adjusted net income was $1.1 billion or $1.72 per share, up 26% year-over-year.
A quarterly cash dividend of approximately $0.46 per share was declared for Q1, reflecting a new higher annual run rate of $1.85 per share.
Business Momentum and Investment Activity
A record inflow of $20 billion was reported for the quarter.
$40 billion in originations for the quarter, with half from Apollo’s platforms, showcasing the firm’s ability to generate assets that provide excess return per unit of risk.
Capital formation for the quarter was strong at $40 billion, split between retirement services and asset management, highlighting momentum in global wealth and institutional sectors.
The floating rate book was significantly derisked, reducing exposure to about $16 billion, aligning with more normalized interest rates.
Strategic Focus and Outlook
Expectation to meet or exceed $70 billion of organic inflows in 2024, aiming for 15% to 20% growth in FRE in nonflagship private equity year and targeting low double-digit growth in SRE.
Emphasis on origination as the lifeblood of Apollo’s business, with a goal of $125 billion in origination for the year.
Preparing for changes in how capital is formed, focusing on global wealth and the transition of the fixed income bucket to private markets.
Investment Performance
Strong investment returns driven by a focus on larger companies and transactions at the top of the capital structure with less leverage, particularly through Apollo Debt Solutions (ADS) with a 14.5% return over the last year.
Hybrid strategies, including the accord series and hybrid value series, generated strong returns, appreciating 4% in Q1 and more than 16% over the last year.
Capital Formation and Global Wealth
Strong inflows across the business in the first quarter, with significant contributions from credit-oriented strategies.
Global wealth is identified as a strategic and growing contributor, with monthly inflows approaching $1 billion in April, significantly up from previous quarters.
Launching a new asset-backed finance vehicle, Apollo Asset-Backed Credit Company (ABC), to provide credit investors access to Apollo’s origination capabilities.
Origination and Debt Capacity
Total debt origination volumes of nearly $120 billion over the last 12 months, showcasing Apollo’s expanding debt origination capabilities.
The platform ecosystem, particularly Atlas SP, has been a major driver of origination growth.
Financial Performance and Guidance
Apollo is well-positioned to deliver on its financial targets for 2024, with expectations of mid-teens earnings growth and a sustainable and predictable earnings profile.
The company expects net spread of approximately 160 to 165 basis points for the full year, supporting low double-digit SRE growth.
Question and Answer
Asset Management Segment Noncomp Expenses
Question
Why were noncomp expenses in the Asset Management segment higher, and is there a shift from placement fees to revenue sharing with distributors?
Answer
The higher noncomp expenses in Q1 were due to the financial impact of decisions made to reset the cost base, both in compensation and noncompensation, and this level is expected to be normal going forward.
There is a variety of distribution methods for products, some involving front placement fees and others involving trailer fees against revenues, depending on the distributor and product.
There is no significant change in distribution methods, and different constructs are used for different products.
Outlook for Third-Party Fundraising and Fee Rates
Question
What is the outlook for third-party fundraising for the rest of the year, and how should we think about fee rates, particularly within the yield bucket on a blended basis?
Answer
The first quarter sets a positive trend for growth throughout the year, and the company is confident in achieving its full-year target of $50 billion in third-party fundraising.
The company is seeing strong traction across all channels, particularly in the yield businesses, but also in other areas such as hybrid, equity, and infrastructure.
There is no fee compression observed, and the company believes the trend line growth and pipeline are strong, driven by the attractive nature of high-yield investments for insurance portfolios.
Capital Solutions Business and Revenue Momentum
Question
Can you provide an updated outlook on the capital solutions business, including notable contributors and the potential for continued revenue growth?
Answer
The company is excited about the momentum in the capital solutions business, which is driven by the distribution of great ideas, increased dialogue with investors, and the intersection of trends such as the transition from private equity to private debt and the growth of asset-based solutions.
The company expects continued expansion in this area, given the opportunities presented by large-scale growth initiatives in various industries and the success of recent transactions such as those for Air France and Vonovia.
The company is focused on measured growth and balancing the flywheel of origination, distribution, client relationships, and new avenues for funding and financing.
Earnings Growth Outlook and Flywheel Acceleration
Question
How should we think about the earnings growth potential in the context of the rapid growth of the ecosystem and the company’s flywheel strategy?
Answer
The company believes the private markets industry has significant potential for growth, driven by the appeal of private markets for both excess return and diversification.
The company is focused on delivering excess return per unit of risk and is not limited by capital flows but rather by origination and culture.
The company is confident in its ability to achieve sustainable and predictable growth targets in both the Asset Management and SRE businesses and sees opportunities for acceleration during periods of market volatility.
Retirement Services Flows and PRT Business
Question
Can you provide insights into the retirement services flows, particularly the FAB and PRT segments, and address any concerns related to shareholder lawsuits impacting PRT business?
Answer
The retirement services business is two-sided, focusing on creating spread, and the company is selective in pursuing business opportunities with wide spreads.
The company has built a strong asset pipeline on the liability side, but the PRT segment has seen reduced spread due to higher cost of funds, even before the emergence of lawsuits.
The company expects a decline in PRT volume across the industry due to the lawsuits, but this is not a significant concern for Athene given the current spreads in the PRT business.
The company encourages focusing on cost of funds and spread rather than flow when evaluating the PRT business.
Atlas-Mass Mutual Partnership and ABC Product Details
Question
Can you provide a framework for understanding the impact of the Atlas-Mass Mutual partnership on origination volumes and earnings, and clarify any separate agreements with the ABF business?
Answer
The partnership with Mass Mutual is viewed as a positive and aligns with the company’s philosophy of partnership and sharing economics.
Atlas is a key platform in the company’s ecosystem, serving as a finance lender to finance companies and attracting a wide range of financing options and structures.
The partnership with Mass Mutual is holistic and spans the entire ecosystem, and the company expects it to serve as a template for future partnerships.
The ABC product is designed to address the concentration issue in sponsor buyout activity and offer diversification, focusing on investment-grade and some non-investment-grade debt exposure with high single-digit to low double-digit returns without using leverage.
Atlas-Mass Mutual Relationship and Platform Management
Question
Will the Atlas-Mass Mutual arrangement accelerate the company’s ability to reach its long-term origination targets, and how is the company managing its platforms as a portfolio to achieve its growth goals?
Answer
The company views the Atlas-Mass Mutual partnership as a positive development that will contribute to reaching its origination targets, and the company is focused on optimizing financing, bringing in third parties, and utilizing its integrated toolbox of solutions to drive growth.
The company is confident in exceeding its previous 5-year plan and achieving its long-term debt and equity/hybrid origination targets through the integration of its platforms and the various ways in which investors can engage with the company.
