Q3 2020 Apollo Global Management Inc Earnings Call
Ladies and gentlemen, today's conference is scheduled to begin shortly please continue to stand by thank you for your patience.
[music].
Global management's third quarter of 2020 earnings conference call.
Today's presentation, all colors will be placed in a listen only mode and following management's prepared remarks. The conference call will be open for questions. This conference call is being recorded.
Call May include forward looking statements and projections, which do not guarantee future events or performance. Please refer to apollo's. Most recent S. E C filings, including the 8-K, a polo filed this morning for risk factors related to these statements.
Apollo will be discussing certain non-GAAP financial measures on this call, which made it believes are relevant in assessing the financial performance of the business.
He's not got measures are reconciled to get figures and Apollo's earnings presentation, which is available on the company's website.
Also note that nothing on this call constitute an offer to sell or solicitation of an offer to purchase any interest in a pollo fun.
I would now like to turn the call over to Gary Stein head of Investor Relations.
Great. Thanks, operator welcomed to our third quarter Twenty-twenty earnings call. We hope you and your families are doing well in these challenging times.
Joining me this morning, or Leon Black Chairman and Chief Executive Officer, Josh Harris Cofounder, Martin Kelly, Chief Financial Officer, a co Chief operating officer.
In addition, mark Rohan cofounder and gyms out there and Scott climbing a co presidents will be available for Q&A on this morning's call.
Earlier. This morning, we reported distributable earnings of 47 cents per common sure pretax fee related earnings or F. R. A 63 cents per share we declared a cash dividend of 51 sounds per share for the third quarter.
Well open today's call with comments on our business and our quarterly earnings from Josh Harrison Martin Kelly and then we'll move to a personal statement from Leon Black regarding his relationship with Jeffrey up steep.
We also remarks will be the extent to which this matter will be discussed the might of the review the independent review currently underway.
As we have continuously stated Apollo never did any business with Jeffrey up see.
We have a firm are appalled by Jeffrey I've seen horrific acts and despicable conduct.
Following Leon statement, Martin, Josh Mark Djimon, Scott will be available to answer questions about our business and performance this quarter.
With that I'll turn things over to Josh.
Thanks, Gary I, clearly echo your sentiments on behalf of our for.
And believe the conflicts Committee review is an important step.
Thank you all for joining our third quarter earnings call.
I hope, we can see to find you in good health.
And to our employees.
Thank you very much for another quarter of hard work and dedication, which has resulted in strong results for our clients and shareholders.
Starting with the investing environment the equity markets remain ahead of fundamentals.
The Swift pace of economic recovery that we saw in the second quarter and into the third quarter has more recently slowed.
As a result of low rates and the overvalued public market.
Global Investor demand for private market opportunities remains strong.
Notwithstanding high valuation.
How old continues to source attractive risk return investments for our clients through selective market opportunities.
Credit private equity in real assets.
And the third quarter [noise].
I'll continue to demonstrate the strength of our platform.
For the nine months ended September 30, we achieved a U M grows a 31%.
F R U revenue growth of 17%.
And FRE growth or 16%.
Revenue, rather, 70%, an F or a growth of 16%.
Cause the third quarter, a U M increased to 433 billion and we reported FRE of 63 cents per share a record for power.
Year to date asset under magic rows of 102 billion.
Was largely due to growth of our insurance clients through strategic acquisition and strong organic growth.
Specifically.
Insurance accounted for $82 billion of inflows ear today.
Large majority of which is fee generating immediately.
Ah seen in a store I have now reached $238 billion and permanent capital vehicles now represent 60 per cent of our asset base well over 90 per cent of our assets under management are either permanent in nature.
Or has a contractual life of five years or more from inception.
We believe this long dated capital base gives us an advantage on the capital deployment side and provides resiliency for our FRE and all market environment.
Well increasingly our peers are focusing on insurance.
We can change I believe that our platform.
As a number of advantages to make us the premier player in the space.
Our insurance affiliates or well capitalized.
Having raised over 18, and a half billion of equity capital.
Which allows them to target large and transformative transactions.
Just this week it.
It was announced that Venerable Japan.
Paul help create.
By a variable annuity block from equitable.
That has total assets of approximately 35 billion roughly doubling the size of venerable.
Well this transaction has limited direct impact you are powerless to natural results. It speaks to our expertise across insurance segments.
As we consider the big themes of investing over the last several years.
Financials, particularly insurance.
Is a key focus of our firm and as such we have approximately 150 investment professionals.
Focused on the sector, providing a broad set of capabilities across U S and European spread variable property and casualty in life settlements.
Digitally.
As we sit at the crossroads would provide a yield for our investors and capital solutions for companies in need of liquidity.
We have developed extensive asset management capabilities, including a large and growing direct origination business.
This expertise fans mid.
Middle market in large cap origination and a number of acid based lending categories that benefit our insurance and third party.
<unk>.
One example of our leading origination platform is a sizeable transaction, we completed this quarter with the Abu Dhabi National oil company or Adnah.
And what's your power source.
Structured and executed investments for our clients.
And a five and a half billion dollar real estate portfolio.
This was an investment grade transaction that was placed with our insurance and third party clients looking for long term yield.
Longterm and high quality yield.
Given the sustained low rate environment.
The size and strength of our asset management and origination capabilities.
<unk> organic growth trends.
And our acquisition capabilities, we expect continued growth and these insurance platforms.
In addition to the strong growth, we've seen insurance and insurance we.
We've made progress in a number of other business initiatives.
This year, we launched a 12 billion dollar large cap direct originations strategy announced our impact investing platform enlisted a pause strategic growth capital spak.
Additionally.
We've continued to grow our existing strategies, such as a cord hybrid value infrastructure and our total return strategy the name of your.
In terms of third party fund raising.
We closed on $3.9 billion, a third party capital in.
In the corner.
Highlighted by a number of first closes including hybrid value too and a cord for in our new infrastructure opportunities strategy.
These and other strategies have resulted in a strong year to date third party fund raising of $18.4 billion through the end of the third quarter.
Looking forward, we expect that third party fund raising will slow over the near term.
Some investors await the findings of the review, which liane will discuss.
Martin will also provide additional color on the potential impact to revenues.
Before I turn the call over to Martin I would like to reiterate my appreciation for those responsible for our strong earnings.
Our employees.
Led by our impressive global leadership team.
Looting co presidents gyms, Algetic, Scott climbing or here with me today.
Our 14th person Management Committee.
And our leadership advisory form of sixties senior global professionals.
With.
With each day that passes I'm increasingly impressed by the commitment.
And the collaboration of our appalled team towards one another in our business.
Thank you again for all of your hard work.
With that our hand, the call over to Martin to cover something natural highlights of the quarter in greater detail.
Thanks, Josh I'd like to Echo Josh as appreciation for all employees, whose continuing hard work is very much appreciated by a senior management team.
For the third quarter, we announced the dividend of 51 cents per share fully supported by out after tax Jeffery.
A reliable SRA stream supports a dividend at a level above as stated minimum of 40 cents per quarter.
Any photos of more meaningful transaction fees, the dividend can be substantially higher even without the benefit of performance face.
We generated FRE of 63 cents per share on a pretax basis for the quarter.
My growth in management fees and supply a transaction fees.
Management fees were up 6% over the prior quarter and 13% over the over the third quarter of 2019.
Even buy clothes and fees for investing the assets of their insurance clients.
And your business as described by Josh and deployment across the platform broadly.
Transaction, an advisory face with $72 million for the quarter.
By capital solutions transactions and private equity activity.
The increasing compensation costs reflects that continued investment in building out capabilities across the areas of course that Josh violated including.
Including an infrastructure hybrid capital business and I'll pick platform as well as in technology and various business support functions across the phone.
FRE margin for the third quarter was 55%.
In line with I get a date margin and without four year 2019 margin.
We continued to anticipate that for the full year 2020, I imagine will remain in the range of mid fifties, reflecting low double digit revenue cause balance against the significant investments, we're making across the a policy platform.
Specifically, we've invested over $100 million over the last two years in establishing new businesses growing existing businesses and building technology and support teams around those businesses old online training industry, leading FRE margins.
So I think twins Santa realizations, we continued to experienced very low realized performance fees in the third quarter.
As gains for monetization activity and find a word since L. PS as a result of the impediments recognized in the first half of 2020.
At the end of the third quarter, the netting hold on Sunday had been reduced to $650 million from $1.1 billion.
We expect that gross realized performance fees will be negligible over the remainder of 2020 and the early part of 21.
His portfolio companies manage the impacts of Covid on their operations and there were a ton of L. P capital and funded his prioritize.
Tony's a U M. We ended the third quarter at $423 billion, reflecting 5% quarter over quarter and 44% cause year over year.
Inflows totalled $13 billion for the quarter, reflecting organic growth sort of thing as well as fund raising for a number of strategies, including a cord hybrid value and infrastructure.
For the third quarter fee generating are you angry by 2% quarter over quarter and 38% year over year.
Just $336 billion supported by inflows and capital deployment.
Tony's deployment investment activity across the platform returned some more normalised levels. This quarter consistent with the continued recovery in the markets following the feds stimulus actions.
During the third quarter deployment in a drawdown funds was why it a $2 billion compared to our average pace of $4 billion to $5 billion per quarter.
However, a pipeline across the platform remains robust with a number of transactions and what we believe to be the latest stages over on writing process.
During the first and second quarters of this year, we provided information on that gross buying activity across the platform.
Obviously this metric was to provide an indication of the breath of air activities activity levels in a volatile market.
Recognizing the evolution and parts of that platform beyond the outdoor down funds and to provide.
Had an indication of a net investing and originates at origination activity.
We're introducing and expanded deployment measure to supplement how historical equity drawdown deployment measure.
In addition to equity deployment enjoyed on funds, especially concludes all net purchases and originations across our businesses, including on behalf of their insurance clients evergreen tons managed accounts and across the ideal platforms.
In the third quarter. This expanded deployment measure was $21 billion a year to date basis, It was $65 billion.
This measure is training modestly ahead of last year as the components of ideal business continued to expand.
Additional disclosure around this expanded view of deployment is available and our earnings release Intitle and for each segment.
Moving onto investment performance during the third quarter, how private equity funds portfolio appreciate it by 8% Judith strong performance across all funds public and private holdings.
An eight appreciate it by 10% driving an increase in the neck carry asset to 76 cents per share.
Fun eight is now marked at a multiple of invested capital of 1.5 times.
It's important to note that the fund eight is in full Kerry and then that carry I said is fully realizable current box.
The impairment whole results in an an acceleration of proceeds to the fund El Pais, but does not change the value of the net carry asset.
It is also important tonight that the call back is independent of Sunday.
Primarily related to a legacy funds, which we expect to monetize multiple years.
Fun to five for example, a 2001 vintage fun.
And it has call back.
On a year to date basis through the end of the third quarter at private equity funds portfolio is down by only 5%.
Which compares favorably to the performance of the S and P value index down 13%.
The portfolio remains in good shape overall, despite the challenging economic environment, and we remain confident enough platforms ability to generate meaningful realized for tons of it's fine.
We have not experienced any impediments beyond those recognized in the second quarter.
And credit Alphonse aggregate portfolio appreciate it by 3.7% during the quarter.
Notably on a year to date basis, a global corporate credit business has generated a 2.52, 0.4% total road Sun.
Reflecting 300 basis points of outperformance to its benchmark.
In addition, the performance of lunch and a credit portfolio exceeded the S and P leverage living in the next 540 basis points to get a date through September 30th.
Albarn performance excited to be at a Merril high yield index by other 800 basis points for the same period.
And a credit strategies fun continues to perform very well is up 18% for the yes, we September 30th.
In real assets overall, we're trying for the quarter was 3.4%.
By broad appreciation across the portfolio.
And as you continue to have a de minimis effects on that portfolio performance in both private equity and credit this quarter.
On that economic balance sheet value at the end of the foot quarter after that and preferred equity financing obligations was approximately $3 26 per share.
Growing meaningfully from the private quota.
On that performance favorite suitable increased it to one dollar five cents for sure supported by the strong performance across the platform.
Paula remains at a very strong liquidity position with approximately $1.8 billion of liquidity available on a balance sheet.
A dry powder for investments across the phone complex was $46 billion at the end of the quarter, reflecting fundraising activity during the quarter all set by capital deployment.
Let me spend a moment on the jury ability of R. A U M. In light of the current review and any impact on fundraising.
We believe a O M is gerbil and consequently F. R is is resilience.
With 60% of our a O M and covenant capital vehicles and over 90% of women covenant careful vehicles or funds with five years or longer from inception, now revenue base is less susceptible to redemption.
Only 3% of our a O M is able to be redeemed from funds that we manage within a 24 month period.
And managed accounts, a customized and have a variety of redemption features.
Despite out progression fund, raising which Josh commented on it Oh, yeah. We expected some investors may look to pause do investments to you wouldn't new commitments to a pillow over the niche.
Until the independent review being conducted by the the conflicts committee has been completed.
To put out fundraising in context typical third party capital raising has been in the range of $15 billion to $20 billion on an annual basis and has been $18.4 billion you get a date is September 30th.
With a further significant contribution from organic growth and strategic transactions from our insurance clients.
$82 billion today in 2020.
Even and what we believe to be the very unlikely event of no third party fund raising through 2021, but as a way to book and like.
The potential impact the combined effects of annualize Asian of a robust growth in 2020.
Expected ongoing organic growers and redeployment of assets for our insurance clients currency rates.
An ongoing deployment of dry powder across the platform.
Will result in revenue growth in the range of 7% to 9% and 2021, assuming redemptions from transaction fees at levels consistent with 2020.
With that I'll now turn the call to Liam.
Good morning, everyone.
This is Leon black.
And your families.
And doing well despite these extraordinary in difficult times.
I have noted before this is apollos 31st year of doing business and I am extremely proud of our team and everything we have accomplished.
The past three decades found.
Foundation of excellence performance and integrity.
I want to begin today by addressing my prior business relationship with Jeffrey Epstein.
By nature.
Private person and it runs counter to my nature.
<unk> publicly about personal matters.
Has been true ever since living through the press coverage of my father's suicide 45 years ago.
But this matter is now affecting Apollo, which my partners and I spent 30 years building and it's also causing deep pain for my family.
Knowing all that I have learned in the past two years about Epstein is reprehensible and despicable conduct I.
Deeply regret having had any involvement with him.
With the benefit of hindsight working with him was a horrible mistake on my part.
I am not seeking to excuse that decision, but I do believe it may be helpful to convey some relevant facts.
First and most important.
Apollo never did any business with Epstein, neither epstein or any company controlled by him ever invested in any funds managed by a power.
<unk>.
Second as I.
I stated in July 2019.
<unk> did provide professional services to my family partnership and related family entities involving estate planning tax structuring of art entities and philanthropic advice.
His work extended over a period of six years from 2012 to 2007, Jean and I paid him millions of dollars annually for that work.
There exists substantial documentary support for the services provided.
All of that seems advice was vetted by leading law firms accounting firms and other professional advisors.
Let me be clear.
There has never been an allegation by anyone that I engaged in any wrongdoing, because I did not.
And any suggestion of blackmail or any other connection to Epstein is reprehensible conduct is categorically true.
Third.
I'd like to provide some chronological context regarding my decision to do business with obscene.
First met Epstein around 1996 at the time Epstein was advising prominent clients on a state tax matters and his network of relationships included luminaries I respected and admired including several heads of state has a prominent families in finance.
A U S Treasury Secretary accomplish business leaders Nobel Laureates Ah claimed academicians and noted philanthropist.
I've seen had just been named a trustee of Rockefeller University. He was also a member of both the council on foreign relations and the Trilateral Commission.
I was not aware of F seems criminal conduct until it was publicly reported that Epstein was being investigated by Florida state and federal prosecutors and law enforcement officials beginning in late 2006.
2009, after being released from jail Epstein return to his previous financial advisory activities and once again began working and associating with many prominent individuals spanning the world's a finance academia.
<unk> technology philanthropy business and government.
To distinguish reputations of these individuals gave me misplaced comfort and retaining I've seen services in 2012 for my personal estate planning tax structuring and full of philanthropic advice.
Like many other people I respected.
To give up seeing a second chance.
This was a terrible mistake I wish I could go back in time and change that decision, but I cannot.
Had I known any of the facts about Epstein sickening and repulsive conduct which I'd learned in late 2018 more than a year. After I stopped working with them I never would have had anything to do with him.
I understand and appreciate that concerns remain for that reason and last week. So Paulo Board meeting I requested that the boards conflicts committee comprised of three independent directors retain outside counsel to conduct a thorough review.
Of an independently confirm the information I have conveyed conveyed about my prior professional dealings with Epstein.
I strongly believe that such an independent review is in the best interests of Apollo our employees are shareholders and R. L. PS.
I look forward to the results of the independent review.
I believe it will assure all of our stakeholders that they have the relevant facts and demonstrate that everything I have said about my relationship with Epstein is accurate and truthful.
The review is now underway and I am cooperating fully.
Out of respect for that process I do not intend to provide any further details today or respond to questions concerning the matters under review by the conflict committees and it's counsel I look forward to the committee completing its work and releasing its conclusions X.
Finish asleep.
Finally, I would like to add my support for Apollos, 1500 employees, who work tirelessly to achieve the best possible returns on behalf of all our valued investors I am extremely proud of the extraordinary breadth and depth of talent.
We have built that the firm, which I believe is the best in the industry.
I also greatly appreciate the Florida, two they have demonstrated over the past few weeks.
With that I. Thank you for your patience and we'll now turn it over to our senior leadership team for questions and answers to discuss Ah strong quarterly earnings.
Okay. Thanks. Thanks, Thanks, operator that concludes our prepared remarks today can you. Please open up the lines for questions.
Ladies and gentlemen, if you'd like to ask a question at this time. Please press the star and the number one on your Touchtone telephone to withdraw your question press the pound key.
Our first question comes from the line off Craig's he can tailor with credit Suisse line is now open.
For my Great question I wanted to hear your perspective on how to Polish clients had been reacting to the press reports, including the New York Times article that focused on liam's relationship with Jeffrey Epstein.
And we saw Commons from Cambridge and pieces, but I did not see any comments from your larger strategic investors. Thank you.
Yeah. So it's it's Josh I'll start and then I'll turn it over to the gym and Scott basically you know, we have incredibly long and durable relationships our clients like spanning over 30 years and.
We've delivered for our clients were deeply in contact with them and you know obviously there awaiting you know the results of.
The the review that we discussed and so but you know right. Now you know we are we're we're moving forward with our clients and and and and focused on you know kind of distress.
The strategies that that I discussed Jimmy Scott anything to add her.
Yeah, I would just say I listen we're we're fortunate Scott is Josh that we've got you know thousands of global clients and we'd been an active dialogue. They are continuing to drawdown capital and allocate capital to us we've been very active and they support and embrace the process.
Our next question comes from the line of plain sharp with Evercore ISI. Your line is now open.
Thank you and I I thought <unk> comments were loud and clear and I appreciate that and it will not be a follow up question for him on anything respect that however, I do have one for you guys on the <unk>.
Unapologetic operationally.
What kind of process I know you gotta, let them do their thing, but what are we talking about a couple of months are we talking about all of the next 12 months what kind of process.
It does that didn't need to go through.
And and do what <unk>, what is the outcome that L. PS are waiting to hear and do you expect.
It's it's the process echoes leon's comments that.
We're we're back on the same glow plan you've been on the need new cavalry from thanks.
Sure glad that spot and so the the process as being run by as a conflicts committee and are independent directors.
On that committee, there's three independence and they have a fiduciary obligation to shareholders.
And so they they are they are running that process that review that would involve.
You know email reviews interviews with people and so on the timing timing is is a little clearer I think there's a hope that it can be.
Completed by the end of the year.
But yeah that that that has the usual.
Abstrict surrounded based on how the how the review procedure.
So you know in the meantime, we're continuing to be actively engaged with L. PS and we've had we've had some capital clothes. Just this week, we expect more capital to close in in the niche and so you know were highly engaged with L. PS and we're we're letting that review take its course as a.
[noise] independent process and will await the results.
Our next question comes from Robert Lee with K B W. Your line is now.
Thank you for taking my my questions.
Thank you, it's not to belabor too much but you know an additional unreasoning.
I don't know why it was it you know.
It was affecting you know.
The second of all kind of.
The opportunity you said you see out there.
Appointment in some markets, where you know maybe more competitive than five minutes.
Making it more difficult to.
E H.
It's really not basically we have a very active pipeline across private equity real assets infrastructure and credit I mean, and Scott or Jim. If you went out any color and go for it no. Yeah. All all of this is Scott I'll I'll, just replied, no our teams or as busy.
As as they really have been so this this is to answer your question pretty clearly no.
Our next question comes from Alex Blow steam with Goldman Sachs. Your line is now open.
Morning, and I appreciate everybody's comments here two things I was hoping to get a little bit of more clarity on I guess, one understanding that there could be slowdown in new commitments do you guys have strategies do you think current situation could impact any of the potential insurance transactions that can.
Would be down on behalf of your insurance partners. So I guess, that's one and two are there any conditions, where lp's could choose to pull their commitments from funds that that that have already been committed to so in other words, not obviously, a permanent capital ones, but the more longer dated once like private equity et cetera. Thank you.
Sure. So yeah, I'd say answered the first question on the on the insurance side. The the the pipeline there for everything from PRT block positions to larger transactions is is extremely busy so I I think you know.
There's there's a lot going on there and and that will continue.
As far as your second question around capital being able to be to be pulled the the the answer is no as as Martin said in his comments only 3% of our capital can be it can be withdrawn in the next 24 months.
So that there's really no scope for what you were trying to what you were describing.
Our next question comes from Ken Worthington with J P. Morgan airline is now open.
Hi, good morning, maybe on Clawback the call back table. This quarter was essentially flat can you give us more details in terms of the path floor path for to climb out of Clawback.
And does Clawback impact the way you think about taken Kerry going forward on future funds. Thanks.
Sure can so so I'm I made some reference to this in my comments.
Kerry or call back is calculated and it's one or the other at the phone level and so I find that's in Kerry doesn't have any callbacks associated with it so fun fun to it is clearly and Carrie.
76 cents, if not carry on the balance sheet.
The call back is is related to legacy funds more than half the call back is fun seven.
And then the rest of it is a variety of other funds and it's not uncommon to have pullback towards the back end of a fun. When you have the last the last investments that may not do as well in in in in fact, there's been a slight over distribution of Kerry from from other successful investments earlier.
The fun.
These things tend to have a a very long life to them and so I I've I referenced fund five which which is 20 years old. So you know and call back is only payable when the fund is finally close when the loss as it is solved and the funniest liquidated. That's why I call back is is is you and we can choose a phone call back either.
Ah Ah Ah Ah reduction in the just distribution or off the balance sheet. So.
It has a very very long tail to it and I don't see it's not uncommon so I don't see it affecting.
Kerry structures and how we take care of it carry on future funds.
And it's just a you know it's just a dynamic that we managed and we're we're accustomed to.
Our next question comes from William Cats with Citigroup. Your line is now open.
Okay. Thank you very much just a two part question. This morning, Martin you had mentioned that qualified sort of how you're spending a day. She I was wondering if you could talk a little bit about the investment cycle into next year and maybe the F. O V margins on that and then maybe a board of question around and who knows about this next week, but carried interest tax if that were to actually rise.
What if any impact it might have on on earnings. Thank you.
Sure. So so I referenced about $100 million of spend over two years with we've been in a period of time when we've been investing in the platform and we've talked to about that a fair amount I roughly speaking that breaks down into a third investing in going out opportunistic businesses, that's how it into growing a yield businesses kind of slowed into growing the some.
Port functions around the phone for those businesses in front of the reasons. So I would not anticipate the place of investment that would've been on Ah continuing at those levels. Although we're continuing to look at opportunities in front of us and invest where we see areas for growth.
And then on the on the tax point.
You know it's hard to know at this stage, what you know what the bill what any bill might look like and there's so many potential components to it. If you know if tax rates increase if corporate tax rates increase then of course that will that will increase our our overall tax.
Right at the company level, an increase in in in Texas on Kerry.
Doesn't affect the phone zoning and we don't see that affecting calm and come structures.
Because we look for it.
Our next question comes from Chris Harris with Wells Fargo. Your line is now open.
Thanks, guys.
With with Mark Rowan on the call I was wondering if he could maybe take a minute or two and talk about his decision to take the semi sabbatical and you know I asked the question because there's been some investors speculation about whether that decision was at all related to to the Epstein matter.
Oh sure, it's Mark I'm happy to take that so.
So firm grew in the insurance business, which I spend most of my time, then more than 80 billion literally in the second quarter I had never work that hard since I was a young associate it more than 30 years ago.
And so I decided to take a semi sabbatical so far it's been more semi then sabbatical.
But there's an amazing team.
That's there and as you saw from the case of activity, we haven't missed a beat in the insurance business in terms of anticipation of any events absolutely not.
Our next question comes from Patrick debit with Autonomous Research. Your line is now open.
Thanks, One one quick follow up from the call and then and then another question on the <unk>, the 7% to 9% revenue growth.
You gave that that's management fever arthritis would not include performance fees.
Right. That's that's that's F R a management fees Madison rash right.
And then a quick follow up on the Clawback cause I think you said the the netting holders reduced but the club back remain the same could you help me understand the disconnect Sir.
Yeah, there there again, just stink from each other so the the Kerry Kerry I said.
Let's let's just focus on finding the carry I said unfunded.
Is based on current marks on the portfolio and if we sold everything today at the at the prices that we marks I said sad than we would have a net carry of 74 censorships are distributed.
The the impairment.
Is is not more than a timing impacted it results in a.
A diversion of the next sales of of assets in the next profit to come out of the two L. PS to sort of rightsize them for some philosophers that we've taken but ultimately.
Ultimately, it's the sequencing versus the quantum.
Of carry that that's affected by that it's completely independent of the call back they call back it's not related to find it.
But but you know the the impairment is and we'll we'll work our way through the impairment as we've been doing and as you saw in Q3 and once we clear that that won't be sort of painful.
Distribution mode.
Our next question comes from Devon, Ryan with JMP security.
Your line is now open.
[laughter].
Greek morning, Uhm, just a question on investing philosophy, obviously overtime Apollos established a great track record as being a leading value investor clearly.
Yeah, It feels like the public markets booster much more focused on growth then value industries in this country rewarding that the pandemic.
Only I think accelerated that structural shift shifts in the economy. So I'm curious whether just plays it all to how you guys are thinking philosophically about the construction of funds in the intermediate term meeting whether you would tend to lean more towards gross some areas just given that you know the economy's kind of being.
Into a house and have Nots World, where you know a lot of value you know, it's probably value for good reason.
So we set up our platform was 550 plus invest stores you know that are focused on creating idiosyncratic opportunities.
You know outside the public markets that that have you know that at discounts that create you know except excess Ah return in alpha for our clients clearly as we're not.
Tone deaf to the opportunities and growth and so there's certainly we are reorienting a little bit around like what what is apollo's how does a power play play gross and the way. We're gonna playgrounds is very similar to how we approach everything else, which is you know there are definitely gonna be those companies that are.
Growing that might be a little higher multiple.
That need capital that might be for whatever reason, you know kind of discounted maybe it's a portfolio of assets.
Maybe it's us recognizing value that others don't see.
And then on the credit side clearly, we increasingly you know whether it be you know air Bnb or Expedia or you know there are just a number of gross companies. They need you know kind of credit and capital and hybrid value type capital that were deeply deeply and dialogue with.
And providing capital structure solutions for and so I think for sure. We are are affected by you know the the world in the market and you know we.
D C that is a huge opportunity for us.
Our next question comes from Michael Cyprus with Morgan Stanley Your mind US now open.
Go back to the origination platforms and some of the investments you're making of the business day I was hoping you can elaborate on that a little bit and then we saw some headlines that you may be taking one of the platforms public through an I P. O. I guess, just maybe bigger picture. If you could just talk to you know what the long term aspirations are with these plans with the portfolio.
It was in part forms and how that might work in terms of feeding director of origination into your business and for clients are separate companies or maybe less attached how do you see that sort of playing out.
Hey, Mike It's Jim.
And then we we've talked for awhile on this theme over the last several you'll be talking about an investor day last year about the evolving backdrop of lending and what's going on in the markets and you know Josh alluded to the AD knock transaction today, obviously the value question is sometimes pointed it are opportunists.
Business, but it really permeates the entirety of our business to 425 billion, so and credit as you pointed out you know, there's a variety of areas where origination whether it's mid cap, whether it's large cap origination weather's, what we're doing an aircraft Ah commercial mortgage and resident resident more mortgages.
P. T aviation those are all businesses and platforms. They really are enable us to source analyze and execute for our insurance clients are third party clients together.
And as we pointed out last few there's no one manner in which the restructured sun makes sense to be owned by the insurance affiliates because those are going to create flow for those vehicles really primarily some have a much broader application. So from our view is if there's no one way to do it.
We certainly will expect to continue you know we've been is Joshua alluded to there's a variety of large transactions in our pipeline there'll be can't announce now, but as you can see whether it was the arrow, Mexico dip or very similar situations like that and credit or other areas that are critical to our growth.
Really that's really the ferocity is the critical area.
In terms of the name you mentioned about one of our companies sometimes it makes sense for us to.
To take on a third party equity funding the company, referring to a mirror home has had a phenomenal successful run we thought where the where valuations were in the long term aspirations and who owns that equity that we thought of public listing made sense you know certainly the marketplace had a different view of it.
As of this week, but again, it's been very successful contributed a lot of earnings and acids to us and we continue to think this is a big priority for us.
Our next question comes from my carrier with Bank of America.
Minus I'm open.
Good morning, and thanks for taking the question Martin just two clarification, just when you mentioned the 79% revenue growth next year just wanted some contexts on would that included and then on the new metric an overall deployment I think you mentioned the 21 billion is that driving you do something in terms of the business, whether it's higher yield like any revenues just.
You know wondering in terms of you know why you guys you know maybe focus on that thanks.
Sure My.
So so let's start with the first question that the 7% to 9% is a combination of a number of different things. One is is annualized being gross and the platform.
Across the whole platform this year.
Including the insurance transactions and everything else.
It takes account of what we see is is wind down. This next year based on what we anticipate showing.
It's actually kind of organic growth.
And Ah innocent.
As well as deployment activity using our existing dry powder.
So that's that's what it is see them as transaction fees at a level of similar to this year given our emphasis on the large corporate lending business in in the face that's generating so.
So that's that's sort of the context behind behind that number.
It it obviously doesn't take any credit for.
For incremental capital raising from here.
Which we think is unlikely, but you know we wanted to give the sensitivity.
Everyone Yep.
And the second the second question is we we view it as a I guess in.
The appointment appointment as we.
As was typically disclosed.
Is specific to Georgia on funds and the non Georgia I'm fond part of our business is is increasing you know, it's it's really what I was saying most of the growth.
And so we see this this additional metric as an an important measure of the growth of our business across the whole platform.
Including origination platforms, including a business for insurance clients, NFO potty clients and including the drawdown funds. So you know it's it's a we think of more encompassing measure of the true activity levels across the platform and will continue to to report that and speak to a going forward.
Our last question comes from the line of Robert Me with K B W. Your line is now okay.
Great. Thanks for taking my my follow up I did have a question on the transaction then advisory fees I mean, they I know you had a lot of activities is supposedly they were up there.
Order you maybe talk a little bit about no underneath that how much that has just been for them more than he kind of ramp up your account some of your your capital allocation businesses versus just the screen appointment just trying to get a sense of how we should.
Why not and you know migrating they'll going for.
Yeah, Robert to mix actually so so last quarter, there was a big fee and it was related to closing some coinbase capital on a large P transaction and they they occur from time to time as we as we close big transactions Ah. This quarter. It was more related to the to the lending business, which which Jim has spoken to it.
But that's you know that's that's an important of course area for US we view the ability to originate a very large transactions and speak to a whole transaction with a capital and then and then and then syndicated to investors that want to take a piece of it to the to them important and.
Important to eyeglasses. So so the the face this quota related more to that than than sort of classic throwing first couple, but as we ramp up origination you know whether it be a part of a strategic partners or.
Uhm are large cap origination engine or otherwise you know we would expect that you know that those fees would the.
Would grow over time and they are.
And become more predictable and sustainable.
And that concludes today's question and answer session I'd like to try and call back to get any time for closing remarks.
Great. Thanks, operator, and thanks to everyone for joining us. This morning, as we said earlier, we hope you had your family's all remain safe and healthy.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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