Q2 2024 Apollo Global Management Inc Earnings Call

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[inaudible]

Unknown Executive: Good morning, and welcome to Apollo Global Management's second quarter 2024 earnings conference call. During today's discussion, all callers will be placed in a listen-only mode.

Operator: Good morning and welcome to Apollo Global Management's second quarter 2024 earnings conference call. During today's discussion, all callers would be placed in a listen-only mode. And following the management prepared remarks, the conference call will be open for questions.

Speaker Change: Good morning and welcome to Apollo Global Management's second quarter 2024 earnings conference call. During today's discussion, all callers will be placed in a listen-only mode.

Unknown Executive: And following management's prepared remarks, the conference call will be open for questions. Please limit yourself to one question and then rejoin the queue. This conference call is being recorded, in our industry, True and Private Equity, in Hybrid, and in our Credit France. 45 billion of capital, 13 billion of which have already been realized, in a market characterized by volatility, by indexation and correlation, by key bets on very high-flying companies. We were early in credit, and we have built a leading and a differentiated front. Recall that the differentiation of our franchise is a unique focus on investment grade, private investment grade. I start with performance, really interesting trends.

Operator: 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 filing links for risk factors related to the statement. Apollo will be discussing certain non-GAT measures on this call, which management believes are relevant in assessing the financial performance of the business. These non-GAT measures are reconciled to GAT figures and Apollo's earnings presentation, which is available on the company's website.

Speaker Change: And following management prepared remarks, the conference call will be open 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.

Speaker Change: Please refer to Apollo's most recent SEC filings for risk factors related to these statements.

Speaker Change: 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.

Operator: Also note that nothing on this call constitutes an offer to sell or solicitation of an offer to purchase an interest in any Apollo fund.

Noah Gunn: Also note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any Apollo fund. I would now like to turn the call over to Noah Gunn, Global Head of Investor Relations.

Noah Gunn: I would now like to turn the call over to Noah Dunn, Global Head of Investor Relations. Thanks, operator, and welcome again, everyone, to our call. We appreciate the opportunity to speak with you and discuss all the momentum we're seeing across the firm.

Noah Gunn: Thanks, Operator, and welcome again, everyone, to our call. We appreciate the opportunity to speak with you and discuss all the momentum we're seeing across the firm.

Noah Gunn: Earlier this morning, we published our earnings release and financial supplement on the Investor Relations portion of our website. We reported solid second quarter financial results, which included record quarterly FRE of $516 million, or 84 cents per share, and SRE of $710 million, or $1.15 per share. Combined with principal investing income, hold co-financing costs, and taxes, we reported adjusted net income of $1 billion or $1.64 per share.

Noah Gunn: Earlier this morning, we published our earnings release and financial supplement on the investor relations portion of our website.

Speaker Change: We reported solid second-quarter financial results, which included record quarterly FRE of $516 million, or $0.84 per share, and SRE of $710 million, or $1.15 per share.

Noah Gunn: Combined with principal investing income, hold co-financing costs, and taxes, we reported adjusted net income of $1 billion, or $1.64 per share.

Noah Gunn: Joining me this morning to discuss our results and further detail are Mark Rowan, CEO, Scott Kleinman, Co-President, and Martin Kelly, CFO.

Speaker Change: Joining me this morning to discuss our results in further detail are Marc Rowan, CEO , Scott Kleinman, Co-President, and Martin Kelly, CFO . With that, I'll hand the call over to Marc.

Mark Rowan: With that, I'll hand it all over to Mark. Thank you, Noah. Good morning, tall. Thank you for joining us. Happy summer. Those in New York certainly know what I'm talking about.

Mark Rowan: Thank you, Noah. Good morning to all. Thank you for joining us. Happy summer. Those in New York certainly know what I'm talking about.

Mark Rowan: This quarter was a good reminder that great companies are built by honoring the fundamental promise they have made to their clients. In our industry, alternative assets, the fundamental promise that we make to our clients is excess return per unit of risk. As in that, I'm not sure why we, as an industry, would exist. This promise, the delivery on this promise was on full display across the entirety of our franchise for the quarter. Through in private equity, in hybrid, adding our credit franchise. Just a quick tour of the quarter. In private equity, we announced three transactions in the past 30 days: Travel Corp, Every in ITT Gaming.

Speaker Change: This quarter was a good reminder that great companies are built by honoring the fundamental promise they have made to their clients.

Speaker Change: in our industry.

Speaker Change: This promise, the delivery on this promise, was on full display across the entirety of our franchise for the quarter.

Speaker Change: through in private equity, in hybrid, and in our credit franchise.

Mark Rowan: Truly an amazing stat. Team is working around the clock. You think about the last decade of our private equity franchise, which is encompassed by funds 9 and 10. 45 billion of capital. 13 billion already realized. In Fun 9, as of the end of the quarter, 29 gross, 20 net. In fun 10, 47 gross, and 20 net. Notwithstanding headwinds across the private equity industry by people who perhaps strayed from a fundamental promise. The team is doing an unbelievable job.

Mark Rowan: In hybrid, or equity that is private, something we'll talk more about on Investor Day, AAA which is our flagship vehicle, return 10% over the last 12 months with on track quarterly results. We now have positive returns in AAA 16 quarters in a row. To give you a longer term perspective of why investors like hybrid, we've had two down quarters over the past 38. In a market characterized by volatility, by indexation and correlation, by key bets on very high-flying companies, the notion that you can achieve double-digit rates of return in the equity market, and still have downside protection and reduce volatility, is incredibly attractive to investors across the entire spectrum from retirees to those seeking to accumulate.

Speaker Change: in hybrid.

Speaker Change: returned 10% over the last 12 months with on-track quarterly results. We now have positive returns in AAA 16 quarters in a row. To give you a longer-term perspective of why investors like hybrid, we've had two down quarters over the past 38.

Mark Rowan: We have 17 billion of NAV now in our AAA vehicle, and as I've suggested, I expect this will be our largest fund over a period of time.

Mark Rowan: Credit, which is the largest of our franchise, also had an amazing quarter. We were early in credit, and we have built a leading and a differentiated franchise. Recall that the differentiation of our franchise is a unique focus on investment grade, private investment grade to be specific. To give you just some of the performance stats for our major vehicles for the quarter, our total return fund, up nearly 2% for the quarter, 10% latest 12 months; structured credit and ABS, 2% for the quarter, 15% for the latest 12 months. ADS, our direct lending vehicle, private market BDC, if you will, up 3.4% for the quarter, 17% played as 12 months. Direct origination, 3.8% for the quarter, 19% for the latest 12 months.

Speaker Change: also had an amazing quarter.

Speaker Change: To give you just some of the performance stats for our major vehicles for the quarter, our total return fund up nearly 2% for the quarter, 10% latest 12 months.

Speaker Change: Structured Credit and ABS, 2% for the quarter, 15% for the latest 12 months.

Speaker Change: ADS, our direct lending vehicle, private market BDC, if you will, up 3.4% for the quarter, 17% for the latest 12 months. Direct origination, 3.8% for the quarter, 19% for the latest 12 months.

Mark Rowan: Across the entirety of the franchise, equity, hybrid, and credit, this was an awesome quarter. I start with performance because ultimately the reward for good performance is more work. In our case, more work is inflows. We had record inflows for the quarter for a non-PE franchise year of 39 billion. Institutional was 16 billion, global wealth, 4 billion, up 50% versus the first quarter, and a theme had organic inflows of 17 billion. It was truly a great quarter across asset management. Asset management is generally better fitting from tailwinds. What we're seeing in our business is not the result of a quarterly spike or peak.

Speaker Change: is more work. In our case, more work is inflows. We had record inflows for the quarter for a non-PE franchise year of $39 billion.

Mark Rowan: We're seeing a fundamental shift in the marketplace, and it is happening across the entirety of our franchise. If you step back and think about what the big drivers are, certainly the big driver in credit, we are looking at three really interesting trends. Think of the places the capital is needed in our economy over the next decade. We are going to spend an awful lot of money on the next generation of infrastructure for data centers and AI. We are going to spend an equal amount of money for energy transition, and we are going to spend a lot of money on what they'll call normal infrastructure.

Marc Rowan: Think of all the places that capital is needed in our economy over the next decade. We are quickly approaching the $150 billion target that we set for 2026. The team is unhappy to hear this because they know I'm going to revise the number up.

Speaker Change: Really interesting trends. Think of the places that capital is needed in our economy over the next decade. We are going to spend an awful lot of money on next generation of infrastructure for data centers and AI.

Speaker Change: We are going to spend an equal amount of money for energy transition. And we are going to spend a lot of money on what I'll call normal infrastructure.

Mark Rowan: All three of those things are long dated. Many of them are structured. Many of them are complex. These are the kinds of things that are not well suited for institutions who are funded short. These are exactly the kinds of transactions in the investment-grade market that we expect to drive our business and our driving our business. The way we look at the driver of our business, certainly in credit, is by originations. Recall that we have a 125 billion target for this year for originations. We originated $52 billion in the United States within the quarter, including $11 billion from Intel alone.

Speaker Change: These are the kinds of things that are not well suited for institutions who are funded short.

Speaker Change: The way we look at the driver of our business, certainly in credit, is by originations.

Speaker Change: Recall that we have a $125 billion target for this year for originations. We originated $52 billion in the quarter, including $11 billion from Intel alone.

Mark Rowan: We are quickly approaching $150 billion target that we set for 2026, and the team is unhappy to hear this because they know I'm going to revise the number up. Just to give you a sense for how strong the trends are, year-to-date we've deployed 17 billion in next-generation infrastructure alone. I expect this not to be a one or two-quarter blip. I expect this to drive our business over the next decade against the backdrop of regulatory change, against the backdrop of government borrowing, and all the other trends that we know are happening in fixed income. Origination also drives for us Capital solutions.

Speaker Change: We are quickly approaching the $150 billion target that we set for 2026. And the team is unhappy to hear this because they know I'm going to revise the number up.

Unknown Executive: Year-to-date, we've deployed $17 billion in next-generation infrastructure alone, both by industry and by geography, including major advances in Australia and in Asia. The Need for Originated High-Quality Investment-Grade Assets with Spreads, just like an asset manager. Profitability, excuse me, profitability for the quarter was impacted by the roll-off of exceptionally profitable business, which was put on during the peak of COVID, also during the quarter

Speaker Change: I expect this not to be a one or two quarter blip, I expect this to drive our business over the next decade against the backdrop of regulatory change, against the backdrop of government borrowing and all the other trends that we know are happening in fixed income.

Mark Rowan: Capital solutions, fees, and revenues are the byproduct of a successful origination franchise. The revenue totaled more than 200 million. We are on pace for a record year.

Speaker Change: Capital Solutions Fees and Revenues are the byproduct.

Speaker Change: of a successful Origination franchise.

Mark Rowan: Our pipeline is as strong as it has ever been, and we will continue to build out the business both by industry and by geography, including major advances in Australia and in Asia because the need for originated high-quality investment-grade assets with spread is global.

Speaker Change: Fee revenue totaled more than $200 million. We are on pace for a record year. Our pipeline is as strong as it has ever been, and we will continue to build out the business.

Mark Rowan: Let me turn now to Athena and retirement services. Retirement services is now in its 15th year. We've basically grown our earnings over 15 years at 15 percent, including 26 percent last year. Just like in asset management, good performance is ultimately rewarded with more capital. In Athena's case, this is the ability to attract strategic investors to support Athena through its side-car, which we call ADIP. ADIP is the capital engine that helps Athena scale its business and run a truly efficient franchise. ADIP too has now closed and raised $6 billion, almost twice as much as ADIP won.

Speaker Change: Let me turn now to Athena and Retirement Services.

Speaker Change: Retirement Services is now in its 15th year.

Speaker Change: We've basically grown our earnings over 15 years at 15%, including 26% last year.

Speaker Change: Just like in asset management.

Speaker Change: Good performance is ultimately rewarded with more capital.

Speaker Change: ADIP2 has now closed and raised $6 billion, almost twice as much as ADIP1.

Mark Rowan: As far as we know, this is the largest third-party capital-side car in the retirement services industry. For the quarter, Athena hit every operating metric. New business volumes, underwritten returns, credit quality, expenses, surrenders, capital. The quarter was impacted by the roll-off of exceptionally profitable business, which was put on during the peak of COVID. That same roll-off of business will also occur in the next quarter. Also during the quarter, the disagreement over the direction of interest rates toward the beginning of the quarter provided us opportunities to do additional hedging, which we did for the quarter. The roll-off of this business and hedging essentially cost us growth for the quarter and will cost us growth for Q.

Speaker Change: That same roll-off of business will also occur in the next quarter.

Speaker Change: Also during the quarter, the disagreement over the direction of interest rates toward the beginning of the quarter provided us opportunities to do additional hedging, which we did for the quarter.

Mark Rowan: 33.

Mark Rowan: We expect by Q4 the business to grow, and to be back on trend, the result being that we will achieve in our estimation mid-single digits SRE growth for the year, accounting for the two lost quarters, and we will return to trend double-digit growth next year. Martin will detail further and will dissect the pieces of this business, which I know are of interest to many of you. I think is on track for 70 billion of organic inflows for the year.

Speaker Change: essentially cost us growth for the quarter and will cost us growth for Q3.

Speaker Change: We expect by Q4 the business to grow and to be back on trend.

Speaker Change: Martin will detail further and will dissect the pieces of this business which I know are of interest to many of you.

Mark Rowan: When I step back, we are simply fortunate to have delivered on our core promise to customers and to be in a market and in an industry that is driven by long-term tailwinds. We have essentially four tailwinds in front of us. The first I've already detailed, which is this voracious need for capital, most of which we believe to be investment grade. That will drive our fixed income franchise, fixed income replacement. The second retell retirement is effective life. We are all getting older. We have so far over the first 15 years at a theme. One, by producing incredibly good returns, not just for investors, but for customers.

Martin: Athene is on track for 70 billion of organic inflows for the year.

Martin: When I step back, we are simply fortunate.

Martin: and to be in a market and in an industry that is driven by long-term tailwinds.

Speaker Change: We have essentially four tailwinds in front of us.

Speaker Change: The second, retirement is a fact of life. We are all getting older. We have, so far, over the first 15 years at Athene,

Speaker Change: [inaudible]

Mark Rowan: But essentially, what we have done is we have modernized existing products. The opportunity now exists for the entire next generation of products to serve retirees, whether they are in the traditional insurance sector, or they are in the vast pool of 401k, which heretofore has been off limits to most alternative assets providers. The third, our entire industry, over a 40-year period, has been built out of a small bucket of the institutional marketplace. We are watching an individual marketplace led by family offices and high network individuals that I believe will grow to be the size of the institutional market over time.

Speaker Change: The third, our entire industry over a 40-year period has been built out of a small bucket of the institutional marketplace.

Unknown Executive: We are watching an individual marketplace led by family offices and high-net-worth individuals. We are watching invest. What if our fundamental premise is wrong? I don't have to guess. But make no mistake.

Speaker Change: We are watching an individual marketplace, led by family offices and high net worth individuals, that I believe will grow to be the size of the institutional market over time.

Mark Rowan: And finally, a notion that we will spend lots of time on an investor day. We are watching investors fundamentally rethink the difference between public and private. We grew up thinking that private was risky and that public was safe. And that probably was true 40 years ago. Private represented three products: private equity, venture capital, and hedge funds, and public diversified portfolio of stocks and bonds. What if our fundamental premise is wrong? What if private is both safe and risky, and public is both safe and risky? The entire basis on which we have constructed portfolio allocation will need to be rethought.

Speaker Change: And finally, and a notion that we will spend lots of time on in Investor Day.

Speaker Change: And that probably was true 40 years ago.

Speaker Change: Private represented three products, private equity, venture capital, and hedge funds.

Speaker Change: What if private is both safe and risky, and public is both safe and risky?

Speaker Change: The entire basis on which we have constructed portfolio allocation will need to be rethought.

Mark Rowan: I don't have to guess at this. This is already happening in the fixed income bucket of our large institutional clients who are making daily trade-offs between public investment grade and private investment grade. It is happening in fixed income first because there are helpful gatekeepers or signposts called rating agencies who help investors discern quality between public and private markets. It is also helped by that there is not real liquidity in public fixed income markets. So the trade-off of liquidity is not that immense.

Mark Rowan: The opportunity in front of us over the next few years is fixed income replacement, which will provide a turbo charge to an otherwise healthy business. But make no mistake. Replacement is coming for the equity business as well. We will end up with a portion of public equity that decides that equity can be private as well, and we will have access to other parts of our institutional investor's allocation.

Unknown Executive: Placement is coming for the equity business. Another theme we're observing in the current rate backdrop is that the bid-ask spread between buyers and sellers is persisting, hampering investment activity for most. As Marc highlighted, we've announced five transactions in just the last couple of months representing approximately $15 billion in total enterprise value at an average creation multiple of under seven times, and our deal pipeline looks strong from here. And, as Marc alluded to earlier, our PE portfolios are enjoying very strong performance and are marked at very defensible valuations.

Speaker Change: But make no mistake, replacement is coming for the equity business as well.

Speaker Change: We will end up with a portion of public equity that decides that equity can be private as well. And we will have access to other parts of our institutional investors allocation.

Scott Kleinman: We look forward to seeing you at Investor Day, and it certainly has been an active summer. And with that, I will turn it over to Scott.

Scott Kleinman: Thanks, and as Marc touched on, each of our core business drivers, deployment, investment performance, and capital formation, were strong in the second quarter and highlight that momentum across the Apollo is building.

Scott Kleinman: As we've discussed, our current five-year plan is underpinned by three strategic growth pillars, including origination, global wealth, and capital solutions, all of which are tracking ahead of our 2026 targets and fueling growth in our franchise and our earnings power. On the investing front, gross capital deployment surged to a record 70 billion in the second quarter. The driving force of this strong investing activity was debt origination, complemented by deployment in hybrid and equity strategies. Record debt origination in the second quarter was driven by broad-based strength across all three forms of origination: traditional, platforms, and record levels of high-grade corporate solutions activity.

Speaker Change: As we've discussed, our current five-year plan is underpinned by three strategic growth pillars, including origination, global wealth, and capital solutions.

Speaker Change: On the investing front, Gross Capital Deployment surged to a record $70 billion in the second quarter.

Speaker Change: The driving force of this strong investing activity was debt origination, complemented by deployment in hybrid and equity strategies.

Scott Kleinman: Combined with the strong first quarter, debt origination volume in the first half of the year was close to the total amount originated for all of 2023, highlighting the increasing scale of our ecosystem. We expect momentum in overall deployment activity to persist, given the line of sight we have to robust transaction pipelines in both our equity and debt-focused businesses. As a result of the higher interest rate backdrop and structural changes in traditional financing markets, we're seeing a lot of demand for customized, long-dated solutions that utilize debt capital, equity capital, or a combination of both. We believe we're uniquely positioned to meet this need by accessing our lower-cost, scaled-long duration capital within a theme and elsewhere, coupled with our flexible investment approach that aims to maximize risk return across the capital structure.

Speaker Change: Combined with a strong first quarter, debt origination volume in the first half of the year was close to the total amount originated for all of 2023, highlighting the increasing scale of our ecosystem.

Speaker Change: We're seeing a lot of demand for customized, long-dated solutions that utilize debt capital, equity capital, or a combination of both.

Speaker Change: We believe we're uniquely positioned to meet this need by accessing our lower-cost, scaled, long-duration capital within Athene and elsewhere, coupled with our flexible investment approach that aims to maximize risk-return across the capital structure.

Scott Kleinman: Within second quarter activity, the Intel transaction market explained earlier as a prime example of how we combine these powerful advantages to serve clients in a differentiated way. Importantly, we expect the markets for these type of transactions to grow from here, supported by the multi-trillion-dollar opportunity to finance the clean energy transition and AI infrastructure build out. Another theme we're observing in the current rate backdrop is that the bid-ask spread between buyers and sellers is persisting, hampering investment activity for most.

Speaker Change: Within second quarter activity, the Intel transaction Marc explained earlier is a prime example of how we combine these powerful advantages to serve clients in a differentiated way.

Marc: Importantly, we expect the markets for these type of transactions to grow from here.

Scott Kleinman: At the industry level, the second quarter saw the lowest number of private equity deals in a quarter since the onset of COVID. This is a moment where our PE capabilities have the opportunity to shine. We believe that, unlike others, we're well positioned to capitalize amid these conditions given our ability to find value, structure creatively, and embrace complexity. As Mark highlighted, we've announced five transactions in just the last couple of months, representing approximately $15 billion in total enterprise value, and an average creation multiple of under seven times. And our deal pipeline looks strong from here. Ultimately, all of our sourcing and origination activity is a function of being able to find interesting investments and deliver good outcomes.

Speaker Change: At the industry level, the second quarter saw the lowest number of private equity deals in a quarter since the onset of COVID.

Marc: This is a moment where our PE capabilities have the opportunity to shine.

Marc: We believe that, unlike others, we're well-positioned to capitalize amid these conditions, given our ability to find value, structure creatively, and embrace complexity.

Marc: As Marc highlighted, we've announced five transactions in just the last couple of months, representing approximately $15 billion in total enterprise value at an average creation multiple of under seven times. And our deal pipeline looks strong from here.

Marc: Ultimately, all of our sourcing and origination activity is a function of being able to find interesting investments and deliver good outcomes.

Scott Kleinman: And indeed we're doing that across the business. Returns across our yield focus strategies remain strong. For example, direct origination and structured credit portfolios have appreciated 19% and 15%, respectively, over the last 12 months. Hybrid value had a standout quarter, with a portfolio appreciating 5% in the second quarter and 17% over the last year. And another of our flagship hybrid businesses, Accord and Accord Plus, has also delivered robust returns over the past year, totaling 17%. And as Marc alluded to earlier, our PE portfolios are enjoying very strong performance and are marked at very defensible valuations. Strong investment results are hoping to drive strong capital formation.

Speaker Change: Returns across our yield-focused strategies remain strong. For example, direct origination and structured credit portfolios have appreciated 19% and 15% respectively over the last 12 months.

Speaker Change: Hybrid Value had a standout quarter with the portfolio appreciating 5% in the second quarter and 17% over the last year.

Scott Kleinman: Inflow's total $39 billion in the second quarter across our asset management and retirement services businesses, bringing total inflows close to $80 billion in the first half of the year. Within that, third-party fundraising, excluding any leverage or segment transfers, has been particularly robust, totaling $20 billion and $33 billion in the second quarter and year-to-date, respectively. This momentum gives us confidence that we're on track to achieve our 50 billion fundraising target this year. Second quarter fundraising activity included a record amount of third-party capital raised in yields, as well as strong hybrid inflows. Fundraising was diverse across a range of products and also benefited from some sizeable institutional commitments.

Marc: Strong investment results are helping to drive strong capital formation.

Marc: Within that, third-party fundraising, excluding any leverage or segment transfers, has been particularly robust, totaling $20 billion and $33 billion in the second quarter and year-to-date, respectively.

Marc: This momentum gives us confidence that we're on track to achieve our $50 billion fundraising target this year.

Marc: Second quarter fundraising activity included a record amount of third-party capital raised in yields, as well as strong hybrid inflows.

Marc: Fundraising was diverse across a range of products and also benefited from some sizable institutional commitments.

Scott Kleinman: Some of the more significant drivers by strategy included asset-back finance, multi-credit, large cap direct lending, ADIP, opportunistic credit, and infrastructure equity. Additionally, we recently secured a sizeable strategic investment from Zuhu Bank in Apollo Clean Transition Capital, our flagship climate and transition credit strategy. This capital enables us to continue building a strong portfolio following initial seed investments in 2023, as we position the strategy for a broader fund raise next year. Importantly, Zuhu's limited partner commitment is the largest they've ever made, which speaks to their support and advocacy of energy transition, as well as the broader Apollo relationship.

Unknown Executive: Some of the more significant drivers by strategy included asset-backed finance, multi-credit, large-cap direct lending, ADIP, opportunistic credit, and infrastructure equity. We've raised north of $6 billion in the first half of the year, including record fundraising in the second quarter, positioning us to exceed the $8 billion of capital raised last year. Management fees grew 3% and 8%, respectively, driven by strong capital formation activity and the deployment of capital with which it had already raised.

Marc: Additionally, we recently secured a sizable strategic investment from Mizuho Bank in Apollo Clean Transition Capital, our flagship climate and transition credit strategy.

Scott Kleinman: Turning to global wealth, our momentum remains strong as we continue to solidify our position as one of the top players in the market. We've raised north of $6 billion in the first half of the year, including record fundraising in the second quarter, positioning us to exceed the $8 billion of capital raised last year. The most significant contributor to our growth momentum is Apollo Debt Solutions, the I share returning more than 13% net over the past year from a portfolio comprised almost entirely of first lean loans. Monthly inflows average over 500 million in the second quarter, reflecting these strong returns, continued traction with global distribution partners, as well as new approvals across channels.

Scott Kleinman: Additionally, we're focused on further broadening access to the strategy on a geographic basis by extending into Europe, Asia, and Latam via our Luxembourg-based product platform. As we think about the evolution of our private credit offering in the global wealth channel, we're very excited about introducing an asset back strategy as a complement to what we've built with ADS. Initial interest in Apollo Asset Back Credit Company, or ABC, has been quite strong as we believe distributors recognize the scale, diversity, and maturity of our asset back finance franchise as a significant competitive advantage. We've just launched ABC in the global wealth market, and we expect flow to increase as we expand distribution to wirehouses over the coming quarters.

Marc: Initial interest in Apollo Asset-Backed Credit Company, or ABC, has been quite strong, as we believe distributors recognize the scale, diversity, and maturity of our asset-backed finance franchise as a significant competitive advantage.

Marc: We've just launched ABC in the global wealth market and we expect flows to increase as we expand distribution to wire houses over the coming quarters.

Scott Kleinman: More broadly, as we think about how best to access different client segments, we've also been engaged in a number of conversations around partnerships. Our role can and will take on multiple forms, ranging from joint ventures to parts provider, where at the center of these conversations in what's an incredibly robust opportunity set.

Marc: More broadly, as we think about how best to access different client segments, we've also been engaged in a number of conversations around partnerships.

Marc: Our role can and will take on multiple forms, ranging from joint ventures to parts provider. We're at the center of these conversations in what's an incredibly robust opportunity set.

Martin Kelly: With that, let me turn it over to Martin to cover our financial results in more detail.

Martin Kelly: Thanks, Scott, and good morning, everyone. So as we execute on our strategy, the building blocks powering our business asset, origination, capital formation, and investment performance, as you've heard, setting us up to continue generating attractive long-term earnings growth.

Marc: With that, let me turn it over to Martin to cover our financial results in more detail.

Martin: Thanks, Scott, and good morning, everyone.

Martin: So as we execute on our strategy, the building blocks powering our business, asset origination, capital formation, and investment performance, as you've heard, are setting us up to continue generating attractive long-term earnings growth.

Martin Kelly: Let me close out with some comments on our Q2 financial performance and outlook in advance of a comprehensive review of our next five years at our Investor Day on October 1st. Starting with FRE results, fee-related revenues increased 11% quarter over quarter and 18% year over year, driven by solid growth across all three revenue streams. Management fees grew 3% and 8%, respectively, driven by strong capital formation activity. Capital solutions fees, as you heard, exceeded $200 million in a quarter for the first time, reflecting strong growth across the broader debt origination ecosystem that included a record quarter of high-grade corporate solutions activity.

Speaker Change: Let me close out with some comments on our Q2 financial performance and outlook in advance of a comprehensive review of our next five years at our Investor Day on October the 1st.

Marc: Starting with FRE results, fee-related revenues increased 11% quarter-over-quarter and 18% year-over-year, driven by solid growth across all three revenue streams.

Marc: Management fees grew 3% and 8% respectively, driven by strong capital formation activity.

Martin Kelly: And fee-related performance fees, which are spread-based versus NAV-based in our business, continued their upward trajectory. Driven by our credit business, including growth in ADS, these fees have a high degree of stability and are now run rating at more than $200 million on an annualized basis. Looking to the second half of the year, management fee growth should be aided by healthy, organic, and positive fan, fundraising activity in equity strategies, and a deployment of capital with already raised. We're currently sitting on a record $55 million of management fee eligible AUM, of which approximately 80% is in yield and hybrid strategies, which generate fees when the capital is invested.

Marc: Driven by our credit business, including growth in ADS, these fees have a high degree of stability and are now run rating at more than $200 million on an annualized basis.

Marc: Looking to the second half of the year, management fee growth should be aided by healthy organic infos of the theme, fundraising activity in equity strategies, and a deployment of capital with already raised.

Martin Kelly: Given the robust results in capital solutions in the first half of the year, we expect full year fees to be stronger than originally expected, inclusive of expectations for normalized fee revenue in the third and fourth quarters, supported by the very healthy pipeline that Mark referenced. Turning to FRE expenses, the sequential increase in fee-related compensation resulted from continued investments in building out our capital formation and credit investing teams, as well as some pull-through of strong fee-related revenues to compensation. We also recognize a $15 million one-time item in non-comp expenses related to a fund merger that we previously commented on.

Marc: which generate fees when the capital is invested.

Marc: Turning to FRE expenses, the sequential increase in fee-related compensation resulted from continued investments in building out our capital formation and credit investing teams, as well as some pull-through of strong fee-related revenues to compensation.

Martin Kelly: Importantly, we're on track to grow total fee-related expenses by a low double-digit rate in 2024, inclusive of the one-time expense.

Marc: Importantly, we're on track to grow total fee-related expenses by a low double-digit rate in 2024, inclusive of the one-time expense.

Martin Kelly: SRE, so moving on to retirement services, the fundamentals underpinning a themes business remain fully intact and very strong relative to the industry. Organic Infos continue to be robust, totaling $17 billion in the second quarter and $37 billion a year today. We are benefiting from giving our four organic growth channels and leading market share in the U.S. and U.N. market as well as strong secular tailwinds driving demand for retirement income solutions. The combination of our first half results and competitive positioning gives us continued confidence in reaching our $70 billion organic inflow target for the full year.

Speaker Change: SRE. So moving on to retirement services, the fundamentals underpinning Athene's business remain fully intact and very strong relative to the industry.

Marc: Organic inflows continue to be robust, totaling $17 billion in the second quarter and $37 billion year-to-date.

Marc: We are benefiting from the availability of our four organic growth channels and leading market share in the U.S. annuity market, as well as strong secular tailwinds driving demand for retirement income solutions.

Martin Kelly: Profitability on new business has remained in line with targeted returns, both in terms of spread and ROE. Through our differentiated origination capabilities, we were able to invest new business volumes in attractive investments that generate excess spread through structure and liquidity. We have continued to deliver value so far this year, driven by deployment into directly originated investment credit of more than $10 billion, with an attractive excess spread of approximately 200 basis points above comparably rated public corporate benchmarks. In terms of our Q2 financial results, adjusting for long term expectations of 11% for the alternative portfolio, the net spread would have been 27 basis points fire.

Unknown Executive: Through our differentiated origination capabilities, we're able to invest new business volumes in attractive investments. We've continued to deliver value so far this year, driven by deployment into directly originated investment-grade credit of more than $10 billion, with an attractive excess spread of approximately 200 basis points above comparably rated public corporate benchmarks. Turning to ADEP, integral to Athene's long-term success, we view the $6 billion fundraiser for ADEP II, the second vintage of our strategic third-party capital, Sycar, as further validation of Athene's attractive growth trajectory.

Marc: Through our differentiated origination capabilities, we're able to invest new business volumes in attractive investments that generate excess spread through structure and illiquidity.

Marc: In terms of our Q2 financial results, adjusting for long-term expectations of 11% for the Alternatives portfolio, the net spread would have been 27 basis points higher.

Martin Kelly: And on a comparable basis, the Q2 net spread was six basis points lower than Q1. There are three dynamics that influence the spread performance. One nearly $4 billion of highly profitable funding agreements issued during covert market uncertainty at a low 2% cost of funds and invested attractive spreads matured in Q2. Two, we strategically executed hedges primarily in Q1 and in Q2 to immunize earnings exposure to potential changes in interest rates, the cost of which is expected to be an approximate 5% headwind to earnings growth this year. Three, we also allocated more than 40% of our first half purchases to corporate securities compared with 25 to 30% in 2023.

Marc: And on a comparable basis, the Q2 net spread was six basis points lower than Q1.

Marc: There are three dynamics that influence the spread performance.

Marc: One, nearly $4 billion of highly profitable funding agreements issued during COVID market uncertainty at a low 2% cost of funds and invested at attractive spreads matured in Q2.

Marc: Two, we strategically executed hedges primarily in Q1 and in Q2 to immunize earnings exposure to potential changes in interest rates, the cost of which is expected to be an approximate 5% headwind to earnings growth this year.

Martin Kelly: And we experienced some back-weighted deployment activity, a dynamic we also experienced last quarter. Considering these factors and their impact on the second half of the year, along with in-line business performance, we expect our SRE growth rate for 2024 to be in the mid-signal digit percentage range, assuming 11% alternatives return. We anticipate our net spread to be approximately 150 basis points on the same basis. For the back half, we expect Q3 SRE to be in line with Q2 before growth regimes in Q4 at a more normalized rate.

Marc: Considering these factors and their impact on the second half of the year, along with inline business business performance, we expect our SRE growth rate for 2024 to be in the mid single-digit percentage range, assuming 11% alternatives return.

Martin Kelly: Turning to ADA, integral to a theme's long-term success, we view the $6 billion fundraiser for ADA II, the second vintage of our strategic third-party capital cycle, as further validation of a theme's attractive growth trajectory. This vehicle invests side-by-side a theme in new business, enabling a theme to scale in a capital-efficient manner while providing an attractive risk-adjusted return to fund investors. Organic growth at a theme continues to be very attractive in today's environment, equating to an approximate 20% return on equity to the whole co, when accounting for spread earnings, management fees, and side-car fees generated. We view the Cycast strategy as a true strategic differentiator, as we look to penetrate the massive retirement services addressable market in front of us.

Marc: Turning to ADEP, integral to Athene's long-term success, we view the six billion dollar fundraise for ADEP II, the second vintage of our strategic third-party capital sidecar, as further validation of Athene's attractive growth trajectory.

Marc: This vehicle invests side-by-side athene in new business, enabling athene to scale in a capital-efficient manner while providing an attractive risk-adjusted return to fund investors.

Unknown Executive: Organic growth, I think, continues to be very attractive in today's environment, equating to an approximate 20% return on equity to the whole curve when accounting for spread earnings, management fees, and sidecar fees generated. Hi, thanks very much. What maybe you could help us with? What produced the underperformance of Thor and Venerable? What, you know, this seems like a good environment. Why are they not performing their normalized return? Thanks a lot. Hopefully, that's helpful. Call at 15.

Martin Kelly: Before concluding, let me spend a moment on a theme's old investments. The theme's alternative portfolio is highly diversified and constructed to generate a hybrid-like risk and return profile. Most of the portfolio is represented by the triple A, which had a 9% return for Q2 and 10% over the last 12 months, inclusive of significant cash being held for future investment. The remainder of the portfolio is in several retirement services companies, including Athora, Catalina, Venerable, and FWD, which are all strategic investments and important to our long-term growth, but which have underperformed the broader portfolio on a market valuation basis.

Marc: Before concluding, let me spend a moment on Athene's Alts investments.

Marc: Most of the portfolio is represented by AAA, which had a 9% return for Q2 and 10% over the last 12 months.

Marc: Inclusive of significant cash being held for future investment.

Marc: The remainder of the portfolio is in several retirement services companies, including Thora, Catalina, Venerable, and FWD.

Marc: which are all strategic investments and important to our long-term growth.

Operator: With that, I'll turn the call back to the operator for Q&A. Thank you. At this time, we'll be conducting the question-on-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Marc: but which have underperformed the broader portfolio on a market valuation basis.

Marc: With that, I'll turn the call back to the operator to Q&A.

Speaker Change: 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Operator: As a reminder, we ask that you please limit yourself to one question and then rejoin the queue. One moment, please, while we pull for your question.

Glenn Schorr: Our first question comes from the line of Glenn Shore with Evercore ISI. Please proceed with your question. Hi, thanks very much. I just want to get a clarifier on your outlook. You talked about what would impact the second half; the first half on the alternative investment income, so I appreciate that.

Mark Rowan: I just want to be clear; does that mean 2025 you hope to grow low-double digits over what is the new thought process around 2024? You mentioned that includes an 11% return on all, which was kind of half of that recently. What maybe you could help us with is what produced the underperformance of a tour and then or what? You know, it seems like a good environment. Why are they not performing their normalized return? Thanks a lot. So, Glenn, the short answer is yes to what you've said. What we do in test paid growing double digits over the results for 2024.

Speaker Change: It seems like a good environment why are they not performing they are normalized return thanks a lot.

Glenn: So Glenn.

Mark Rowan: In the alt book, as Martin was saying, we have two types of alt. One is the invested alt. Most of the invested alt are inside of AAA, which posted, which is LTM 10-ish, may just over 10, and that includes a substantial amount of cash which is yet to be invested, which is being invested, which gives us great comfort that will be 11.

Mark Rowan: In terms of the back and forth over the strategic investments, Catalina and FWD have not performed well and are basically flat. Athora and Venerable, in particular, has been an awesome investment, but grew, I want to say, 16 to 20% last year. You just don't get a straight line. And Athora basically has been the same. It's been mid-teens rates of return, and this year it's up in the low single digits. So, you do get some lumpiness quarter to quarter over the strategic alt.

Mark Rowan: The other thing we're looking at is, and Martin mentioned this. You have a forward curve which talks about seven rate cuts. That is what we budget. And so we basically are going into an environment where we think we're going to earn low double digits against a backdrop of seven rate cuts. While we have dramatically reduced our exposure to rates, we have not fully immunized our exposure to rates. So that is a little bit of a headwind, and we're taking that into account when we're giving you guidance. Hopefully, that's helpful.

Speaker Change: So it should rates so that is a little bit of a headwind and we're taking that into account when we're giving you guidance hopefully that's helpful.

Alexander Blostein: Thank you. Our next question comes from the line of Alex Blostein with Goldman Sachs. Please proceed with your question. Hey, great. Good morning, everybody. So Mark, a private fixed income, has been obviously a huge growth driver for Apollo over the last several years. And you know, we spoke spoken extensively about that. More recently, I think you started to highlight opportunities. You see to further expand Apollo's private equity capabilities.

Speaker Change: Thank you. Our next question comes from the line of Alex Blaustein with Goldman Sachs. Please proceed with your question.

Alex Blaustein: Hey, great good morning, everybody.

Alex Blaustein: Private fixed income has been obviously a huge growth driver for Apollo over last several years and we spoke spoken extensively about that more recently I think you've started to highlight opportunities you see to further expand our Polish private equity capabilities and I was hoping you could spend a couple of minutes on what that could look like sort of two three years out I'm, assuming you're going to.

Mark Rowan: And I was hoping you could spend a couple of minutes on what that could look like. Sort of two, three years out. I'm assuming you're going to spend quite a bit of time at the investor day, but maybe a bit of a preview would be helpful. And I guess looking at the more near-term opportunities. Fun 10 seems to be quite active, as you highlighted. How does that inform your thinking about fund fund 11. Thanks.

Speaker Change: Spend quite a bit of time at the Investor day, but maybe a bit of a preview would be helpful and I guess looking at the more near term opportunities fund 10 seems to be quite active as you highlighted.

Speaker Change: How does that inform your thinking about fund fund 11.

Mark Rowan: Okay, so I'll do some event, and then Scott will pick up as he corrects or fix fills in from what I screw up. Let's start with this. Private equity is the traditional business on which the alternative asset management has been built. It is a 40-year-old business. Over the last decade, in particular, call it 15 years. A lot of what has been produced was not the result of great investing; it was the result of a trillion of money printing. Well, guess what? We stopped printing that magnitude of money. Rates went up. And lots of people in the industry, this took good performance for actually a beta bet.

Speaker Change: Okay. So I'll I'll do some of it and then Scott will pick up.

Mark Rowan: We did not succumb to that. We are not facing the headwinds that the general private equity industry is facing. And what I wanted to do is really call it out. The benefit of purchase price matters is you get to be on offense in markets like this. You get to produce good returns. I personally think this sets us up well for Fund 11. We have to deliver it though.

Unknown Executive: We did not succumb to, is happening. And the trends, if you think about where money is needed in the world, are the ones I cited. There are three really long-dated, structured trends that are generally not appropriate for bank balance sheets.

Mark Rowan: Scott, I'll leave it to Scott to speculate on timing and other things, but I'm feeling incredibly good about what the team is doing at Private Equity. Fixed income replacement, which you also mentioned, is happening. And I wanted to distinguish that from what people normally call Private Credit. Most of the usage of the term private credit refers to below investment grade direct lending, which I actually think is a terrific business, but it is funded primarily out of the alternatives bucket as an alternative to equity allocations. What I'm talking about in fixed income replacement is primarily the replacement of public investment grade with private investment grade.

Mark Rowan: Think about Intel as an example. Intel has bank debt. Intel has public bonds. And now Intel has $11 billion of investment-grade private credit. The fact that there is a rating agency helps investors arbitrate as to whether they prefer to be in the bank debt, the public investment grade, or the private IG. And the trends, if you think about where money is needed in the world, are the ones I cited. There are three really long dated structured trends that are generally not appropriate for bank balance sheets. Some of it will go to the public markets, but an awful lot of it will go to the private marketplace, and most of it is IG.

Mark Rowan: As an industry, we have basically built an entire industry out of the smallest bucket of our institutional clients. And what I was pointing out is that we, as an industry, and us in particular, now have access to the next largest bucket, fixed income. We've never had access to it before. We're starting to get access to it. We will not be the only ones, but clearly I believe that we are in the leading position to do this because we were forced to do it and have been doing it for 15 years for a thing and for the insurance industry.

Unknown Executive: We have basically built an entire industry out of the smallest bucket of our institutional clients. We're starting to get access. Transcripts provided by Transcription Outsourcing, LLC, get access to the equity bucket of our. Most of our investors invest in public equities through Index 8, will be our fastest-growing. The thing that's here and now, 16.., thing that I think we look forward to. You know, I think Marc said that well.

Speaker Change: It has to it we will not be the only ones, but clearly I believe that we are in the leading position to do this because we were forced to do it and have been doing it for 15 years for Athene and for the insurance industry. So we've gotten a huge head start through the building of 16 platforms and everything else right now.

Mark Rowan: So we've gotten a huge head start through the building of 16 platforms and everything else you know.

Mark Rowan: I am also pointing out that I believe we will at some point get access to the equity bucket of our institutional clients. 8,000 public companies is now 4,000 public companies. Most of our investors invest in public equities through indexation. 10 companies are 35% of the S&P. 4 companies determine 100% of their returns. I'm not sure that that's how they really thought their public equity portfolio is. 80% of companies over 109 are revenue or private. 80% of employment is private. I believe that we will see investors own equity that is private, which, in addition to owning private equity, the distinction being leveraged.

Speaker Change: I'm also pointing out that I believe we will.

Speaker Change: At some point.

Speaker Change: We get access to the equity bucket of our institutional clients.

Speaker Change: 8000 public companies is now 4000 public companies most of our investors and invest in public equities through indexation hen companies are 35% of the S&P four companies determined 100% of their returns I'm not sure that that's how they really thought they're public equity portfolio is 80% of companies over 100 million of revenue.

Speaker Change: But 80% of employment is private.

Speaker Change: I believe that we will see investors own equity that is private.

Mark Rowan: What is private equity at the end of the day? It is equity with active management. In this case, active management defined as control of companies with leverage added to fit into a required high return of the alternatives bucket. Without the leverage, maybe the new form of active management is the active running of companies rather than the active buying and selling of stocks.

Scott Kleinman: We've built a business that we call hybrid that is a $50 billion plus business for us today, and I believe on a percentage basis will be our fastest growing business because the equity bucket is as yet untapped and it is the largest bucket of our institutional clients. The thing that's here and now is fixed income replacement. I think we look forward to equity replacement. I think Mark said that well, going back to your question around our private equity business, you're right, deployments going very well there as I alluded to in my comments. The market we're in right now is really the sweet spot for a private equity deployment.

Unknown Executive: Going back to your question around our private equity business, you're right, deployment's going very well there. As I alluded to in my comments, the market we're in right now is really the sweet spot for Apollo private equity deployment. And we see that continuing, regardless of what, you know, the Fed may do in a quarter or two. So as we look at just deployment pacing, I would expect by the end of next year, Fund 10 will be largely deployed, and we'll be kicking off a fundraise for Fund 11.

Scott Kleinman: We see that continuing regardless of what the Fed may do in a quarter or two.

Scott Kleinman: As we look at just deployment pacing, I would expect by the end of next year that a fun 10 will be largely deployed and will be kicking off fundraise for fun 11. That should give you a sense of the timeline there.

Speaker Change: We will be kicking off our fund raise for fund 11, so that should give you a sense of the.

Speaker Change: The timeline there.

Patrick Gabbett: Thank you. Our next question comes from the line of Patrick Gabbett with Autonomous Research. Please proceed with your question.

Speaker Change: Thank you. Our next question comes from the line of Patrick Davitt with Autonomous Research. Please proceed with your question.

Mark Rowan: Good morning, everyone. Mark, get a conference a couple months ago. I think you hinted that a partnership like the KKR Capital Group one is on the come with two hybrid illiquid liquid products planned for launch this year. Do you have any update on the progress there when you expect to actually have products like that in the market? Thank you. The answer is yes, I still am confident that we are on track, and you will see the first product in the market in Q3, and where I'm hoping the second product will be in the market in Q4.

Patrick Davitt: Hey, good morning, everyone.

Speaker Change: Mark at a conference a couple months ago, I think you hinted.

Patrick Davitt: About a partnership like the KKR capital group one is on the Com with two hybrid illiquid liquid products planned for launch. This year do you have any update on the progress there and when you expect to actually have products like that in the market. Thank you.

Speaker Change: The answer is yes, I still am confident that we are on track.

Speaker Change: You will see the first product in the market in Q3.

Unknown Executive: So that should give you a sense of the timeline and where I'm hoping the second product will be in the market in Q4. At the Capac. I believe as the firms have matured, the limitation to our growth is essentially our ability to originate really good assets. If I'm right, that origination is, in fact, the key limitation to growth. First, we have to scale origination as much as we can. And second, we have to not get excited by the shiny dot of distributing to third parties and not getting full fees for assets we otherwise would want to get full fees from by sharing. That is how we approach these partnerships. I think you will see that not just

Patrick Davitt: Well I'm, hoping the second product will be in the market in Q4, I'm going to give you a little I mean I answered more than you wanted because I think it's important to explain in the business.

Mark Rowan: I'm going to give you a little; I'm going to answer more than you want because I think it's important to explain in the business. One of the things we have to decide as an industry is whether we are limited by origination capacity or not. Historically, I have thought we've been a small industry; we've never thought about a limitation to our growth as the capacity to originate. We've always thought about money raising as the capacity to it. I believe as the firms have matured, the limitation to our growth is essentially our ability to originate really good assets.

Patrick Davitt: One of the things we have to decide as an industry.

Patrick Davitt: Is whether we are limited by origination capacity or not.

Mark Rowan: We're finding this in fixed income; every really good asset we originate has a home. Okay, we did really well for the quarter; it was 50 billion. That's great.

Mark Rowan: We have to think about these partnerships as additive to our franchise, not in place of our franchise. If I'm right, that origination is in fact the key limitation to growth. First, we have to scale origination as much as we can responsibly in the context of our culture. Second, we have to not get excited by the shiny dot of distributing to third parties and not getting full fees for assets we otherwise would want to get full fees from by sharing them. That is how we approach these partnerships.

Mark Rowan: I think you will see not just the partnerships that I've alluded to; I think you will see lots of partnerships this year. All of the big firms have a seat at the table and a right to participate in this because they originate somewhat uniquely. You are going to see lots of interesting alignments.

Mark Rowan: If you think about what's happening in asset management, or generally, active management traditionally defined has had a relatively tough decade. It has not outperformed the broader index for a very substantial portion of its time. Each of those active managers is undergoing their own strategy review. In some cases, they are buying alternative managers, and in other cases, they are partnering.

Speaker Change: Cases, they are partnering with.

Mark Rowan: This to me is one of the most exciting pieces of our business because we, as an industry, not just Apollo, will reach family offices directly. It makes sense to cover them. They're just institutions. We will reach really high net worth served by the global wealth systems and RIAs.

Speaker Change: This to me is one of the most exciting pieces of our business because we as an industry not just the pollo, we will reach family offices directly it makes sense to cover them, they're just institutions.

Unknown Executive: We will reach really high net worth, served by the global wealth systems and RIA. There is nothing fundamentally wrong at Venerable, it's all, Catalina is a relatively small investment, and you should expect Catalina to be wound down over the next few years if I step back.

Patrick Davitt: We will reach really high net worth serve by the global well systems in our eyes.

Mark Rowan: We will not, as an industry, build the infrastructure required to reach the vast, vast majority of investors who are already well served by traditional asset managers. I believe our role is, as God alluded to, to be a parts provider for those pieces of our product that we can originate, and we like having the access. And to be a joint venture partner. And I can't tell you exactly how it is going to align, but it is one of the more interesting parts of our business right now. It is on track relative to my comments.

Patrick Davitt: We will not as an industry.

Scott: Build the infrastructure required to reach the vast vast majority of investors who are already well served by traditional asset managers I believe our role is as Scott alluded to to be a parts provider for those pieces of our product that we can originate and we like having the excess.

Scott: And to be a joint venture partner and I can't tell you exactly how it is going to align but it is one of the more interesting parts of our business right now and it is on track relative to my comments.

Brennan Hawken: Thank you. Our next question comes from the line of Brennan Hawking with UBS. Please proceed with your question. Good morning. Thanks for taking my question. Mark East spoke to lumpiness quarter of a quarter in some of the strategic investments that you guys have in your all its business, which is totally understandable. But given these strategic investments, I think it would be really helpful to understand some of the sources of the weakness within these firms. And it hasn't really, it's my understanding that some of the weakness in those insurance properties' earnings has not just been like a one or two quarter phenomenon and actually that Catalina has been losing money.

Scott: Thank you. Our next question comes from the line of Brennan Hawken with UBS. Please proceed with your question.

Brennan Hawken: Good morning, Thanks for taking my question.

Mark Rowan: So could you speak to what has caused the weakness, what is going to result in that weakness reversing, and whether or not there's any active efforts on behalf of Apollo. And a theme to help to support those earnings going forward. Thank you.

Mark Rowan: Okay, so this will be. I'm not going to use this call because it would take the whole call to go through it, but I will encourage Jim Belardi and team in their fixed income call to do a little more detail and really go through it and get you what you need. But I think what we need to do is we need to look over a period of time. Venerable has been an extraordinarily profitable investment. I don't have the stats in front of me, but by memory it is like 20% return over a long period of time.

Mark Rowan: The business has volatility, and so we end up with very high returns in some quarter. There is nothing fundamentally wrong at Venerable; it's all doing great. Challenger, a public company, had a big run-up and then has been flat, but over time has been just fine. Athora had a big run up and is now just flat and has been fine over time. Catalina, as you said, has been weak. Catalina is in the PNC closeout business. We decided that from a capital return, notwithstanding recent activity, we did not like the long-term trends of that business. We are in the process of transitioning Catalina from its traditional business of old block PNC to simply being a side car for a theme.

Mark Rowan: Catalina has a very attractive capital benefit for doing business in annuity through diversification benefits and otherwise.

Mark Rowan: Catalina is a relatively small investment, and you should expect Catalina to be wound down over the next two years.

Mark Rowan: If I step back, a little bit of what's going on here is a legacy from the point in time that Apollo and Athene were not fully aligned. When Athene was its own entity and Apollo owned a third, it made sense that all the strategic stakes were held within the insurance company so that all the insurance company activity was held in a regulated entity. Since the merger, where now we own 100%, many of these stakes should probably have been held the same way we hold Motive or Sofinova or something else as balance sheet investments of Apollo.

Unknown Executive: When Athene was its own entity and Apollo owned a third, it made sense that all the strategic stakes were held within the insurance company so that all the insurance company activity was held in a... Many of them should probably have been held the same way we hold Motive or Sofinova or something else as balance sheet investments of Apollo. And so what you're watching is a little bit of frustration on our part because, on the one hand, the vast majority of Ally's portfolio is doing exactly what it's supposed to do, and you're watching some lumpiness.

Mark Rowan: And so what you're watching is a little bit in this quarter frustration in our part because, on the one hand, the vast majority of the all-portfolio is doing exactly what it's supposed to do, and you're watching a lumpiness in some of the strategic stakes. The only strategic stake that is not performing where it is, is Catalina, and it's a relatively small stake, and it is in the process of transitioning its business, and that's what's going on at Catalina.

Unknown Executive: Thank you.

Craig Siegenthaler: Our next question comes from the line of Craig Siegenbauer with the Bank of America. Please proceed with your question. Thanks. Good morning, everyone. I was actually just curious on the repaired comments that the liability outflows in retirement. I think we're going to stay elevated in the third quarter driven by funding agreements because in the fixing and presentation that you guys update every quarter, it looked like they'd be elevated in the second quarter, which they were, but they were going to step down in three kill. So I'm just wondering, kind of why the difference. I don't think there is a difference.

Martin Kelly: I think you misheard. I think that we were saying that there are extraordinary levels of profitability associated with business that is terminating in the quarter rather than there will be deviations from the schedule. The schedule, as you know, we're pretty much on schedule, and we expect. to be on schedule.

Speaker Change: Be deviations from the schedule the schedule as you know, we're pretty much on schedule and we expect to be on schedule.

Martin Kelly: Yeah, it's, it's Craig; it's the run rate impact principally. The, you know, the reason we've been so transparent in publishing our expected future. Maturities across the portfolio is, is to, is to provide that guide. And if you look at actual experience, relative to expectations, it's right on top. This quarter, you know, going back in time and obviously we expect that to be the case going forward. Thank you.

Scott: Yeah, It's it's Craig it's the run rate impact principally.

Brennan Hawken: The reason we've been so.

Scott: Transparent.

Scott: <unk> publishing are expected future.

Scott: Maturities across the portfolio is to provide that guidance and if you look at actual experience relative to expectations, it's right on top.

Scott: This quarter, you know going back in time, and obviously, we expect that to be the case going forward.

Scott: Thank you. Our next question comes from the line of Michael Cyprus with Morgan Stanley. Please proceed with your question.

Michael Cypress: Our next question comes from the line of Michael Cypress, from Morgan Stanley. Please proceed with your question. Hey, good morning. Thanks for taking the question. I just wanted to ask about Asia. I know that's come up on prior calls and conversations.

Unknown Executive: The only strategic stake that is not performing where it is is Catalina, and it's a relatively small stake, and it is in the process of transitioning its business, and that's what's going on. Hey, good morning. Thanks for taking the question. I just wanted to ask about Asia. I know that's come up on prior calls and conversations, just as a meaningful opportunity set for you. I was hoping maybe you could update us on your initiatives overseas in Asia, remind us of your footprint there, how you see the opportunity set unfolding, and which particular countries you're most excited about.

Michael Cyprus: Hey, good morning, Thanks for taking the question just wanted to ask about Asia I know that's come up on prior calls and conversations just as a meaningful opportunity set for you I was hoping maybe you can update us on your initiatives over date overseas and in Asia remind us of your footprint. There how you see the opportunity set on folding which particular countries you're most excited about.

Scott Kleinman: It's just as a meaningful opportunity set for you, as hoping maybe you can update us on your initiatives over the overseas and Asia, remind us of your footprint there. How you see the opportunity set on folding, which particular countries you're most excited about. And in particular, I just be curious for any update color and what you see evolving in Japan and the opportunity there. Thank you.

Speaker Change: In particular I'd just be curious for any updated color on what you see evolving in Japan and the opportunity there. Thank you.

Scott Kleinman: Sure, sure it's got. Yeah, no, as we've alluded to in prior quarters, our Asia business continues to grow pretty substantially. I'll be it from, from a small base starting a couple of years ago. Today, we have close to a couple hundred employees on the ground in Asia across a number of different countries and a number of different asset classes. Just walking through, I would say from a PE perspective, we have really made a lot of progress in Japan. We've now announced and have really established our presence there. Most recently, just a deal announced a couple of months ago.

Scott: Sure sure it's Scott.

Scott: Yeah, no as we've alluded to in prior quarters, our Asia business continues.

Unknown Executive: And in particular, I'd just be curious for any update, caller, on what you see evolving in Japan and the opportunity there. Thank you. Just walking through, I would say from a PE perspective, we have really made a lot of progress in Japan.

Unknown Executive: We've now announced and executed about four or five transactions over the last couple of years in Japan and have really established our presence there, most recently with the deal announced a couple of months ago. So I really like what we see from that market from a PE perspective. Other markets for PE, India and Australia would be where we're focused on private equity. Other things we're doing across Asia, you know; we're building out our insurance capabilities.

Scott Kleinman: So, really like what we see from that market, from a PE perspective. Other markets for PE, India, and Australia would be where we're focused for private equity. Other things we're doing across Asia, we're building out our insurance capabilities. So, whether it's through flow agreements and reinsurance agreements in Japan, as some stakes in companies in Australia and Hong Kong, we continue to penetrate there both on the liability side as well as the asset management side for numerous Asian insurance companies that are looking for, you know, improved returns for their portfolios. And then on the credit side, we're continuing to scale really pan-Asia as a real opportunity, as Mark alluded to in his comments.

Unknown Executive: So whether it's through flow agreements and reinsurance agreements in Japan, as you know, some stakes in companies in Australia, and in Hong Kong, we continue to penetrate there, both on the liability side, as well as the asset management side, for numerous Asian insurance companies that are looking for, you know, improved returns on their portfolios.

Scott: Numerous.

Scott: Asian insurance companies that are that are looking for you know.

Scott: Improved returns for their portfolios.

Unknown Executive: And then on the credit side, you know, we're continuing to scale Pan-Asia as a real opportunity. As Mark alluded to in his comments, just the need for thoughtful, long-dated credit capital there is huge. And so that business, you know, continues to scale. So overall, you know, we're being very methodic, very true to the Apollo, you know, value orientation strategy, you know, safe, secured strategy.

Scott: And then on the credit side, we're continuing to scale really Pan Asia.

Scott: As a as a real opportunity as mark alluded to in his comments just the need for.

Scott Kleinman: Just the need for for a thoughtful, long-dated credit capital there is huge. So, that business continues to scale. So, overall, we're being very methodical, very true to the Apollo value orientation strategy, safe, secured strategy. But there's real opportunity when we continue to scale it. So, you know, it's right now, it's, you know, call it in the 5 to 10 percent of Apollo dollars. That's, you know, as Apollo continues to grow at the rates it's growing, that percentage will probably remain constant, but, you know, continue to grow, continue to grow dollar-wise.

Scott: Four.

Scott: Thoughtful long dated credit capital there is huge and so that business continues to scale. So overall, we're being very methodical very true to the Apollo value orientation strategy.

Scott: Safe secured.

Scott: Our strategy, but there is real opportunity we can we continue to scale it so.

Unknown Executive: But there's real opportunity. We continue to scale it. So, you know, right now, it's, you know, call it in the 5 to 10 percent of Apollo dollars. That's, you know, as Apollo continues to grow at the rates it's growing, that percentage will probably remain constant.

Scott: It's right now it's.

Scott: Call it in the 5% to 10% of.

Scott: Apollo dollars, that's as Apollo continues to grow at the rates. It is growing that percentage will probably remain constant but <unk>.

Unknown Executive: But, you know, continue to grow, continue to grow dollar wise. Thank you. Our next question comes from the line of Kenneth Worthington with J.P. Morgan. Please proceed with your question. Hi, this is Alex Bernstein on for 10.

Scott: Continue to grow continue to grow dollar wise.

Kenneth Worlington: Thank you. Our next question comes from the line of Kenneth Worlington with J.P. Morgan. Please proceed with your question. Hi, this is Alex Bernstein on for 10. Thanks so much for taking our questions. We wanted to double-click on the infill transaction. You've obviously done other similar large scale deals on some of the examples, such as AT&T and Air France, come to mind, but this one's obviously quite a bit bigger. So I think we wanted to double click and get a better understanding of how the transaction came together, how it made different from some of the other ones or what made some of the lessons learned from the prior ones B.

Speaker Change: Thank you. Our next question comes from the line of Kenneth Worthington with Jpmorgan. Please proceed with your question.

Unknown Executive: Thanks so much for taking our questions. We wanted to double-click on the Intel transaction. You've obviously done other similar large-scale deals. Some examples, such as AT&T and Air France, come to mind. But this one's obviously quite a bit bigger.

Unknown Executive: So I think we wanted to double-click and get a better understanding of how the transaction came together, how it may differ from some of the other ones, or what some of the lessons learned from the prior ones might be. And then from a P&L perspective, to what extent it flows through the GQ results that you reported, notably on the capital markets business side, if you can provide maybe a concept of just how big of an impact it had there, obviously record returns. And then perhaps what else we can expect from Q3 from this transaction. Thanks so much.

Scott Kleinman: And then from a P&L perspective, to what extent it flows through the two key results that you reported, notably on the capital markets, business side, if you can provide maybe a concept of just how big of the impact it was there, obviously record returns. And then perhaps what else we can look to expect from key three from the transaction. Thanks so much.

Scott Kleinman: Yeah, so to talk about the transaction while you're right, Intel is a bigger transaction than some of the previous ones we've announced. The way it comes together and the way it operates is actually very consistent with how we approach this hybrid capital solution activity. It is really to serve these type of large blue chip companies, you really have to bring all the resources of the firm to bear from the relationships that may exist across the firm, whether it's private equity or credit or otherwise, or structuring capabilities, or underwriting capabilities, or syndication capabilities. So, on a transaction like Intel, probably if I had to guess, something like 50 different boats across the firm touched that transaction as it was coming together over a period of several months.

Scott Kleinman: So these are not sort of desk trades, if you will, the way a small middle market private credit might happen. These are really big undertakings that only firms like Apollo with the breadth of capabilities and relationships could really do. From a scale standpoint, while it was large, these are given the magnitude of what's transpiring and whether it's the digital infrastructure build-out, the de-globalization and the amount of infrastructure that has to be rebuilt across the globe, the energy transition and all of the capital required there. This is becoming more than norm of the types of dialogues that we're having.

Scott Kleinman: So I think you're going to see more and more of this type of scale or potentially even larger. And so again, only a very small number of firms can stand up and speak to that type of capital. And as you start to deal with companies like the ones you mentioned, counterparties matter. These are our highly structured transactions, what are in essence partnerships, and so who these companies are partnering with to get these transactions done really, really matter.

Bradley Hayes: Thank you. Our next question comes from the line of Bradley Hayes with TD Cowan. Please proceed with your question.

Unknown Executive: Thank you. Our next question comes from the line of Bradley Hayes with TD Cowen. Please proceed with your question. Hi, it's Bradley Hayzelon on behalf of Bill Katz.

Unknown Executive: You spoke a bit about origination driving capital solutions fees. Could you give us a bit more color on the step up in originations in the quarter, and in particular, how the non-US origination opportunity contributed to that, and how we should be thinking about the go forward slash pipeline? So I'll do a little bit, then I'll hand it over to Scott. So, if you think about what we've done and you think about the world, we've done something for Sony. Air France.

Scott Kleinman: Hi, it's Bradley Hayes. I'm from Bill Katz. You spoke a bit about origination, driving Capital Solution series. Could you give us a bit more color on the step up in originations in the quarter and in particular, how the non-US origination opportunity contributed to that and how we should be thinking about the go-forward flash pipeline.

Mark Rowan: So I'll do a little bit, and then I'll hand it over, Scott. So if you think about what we've done and you think about the world, we've done something for Sony; we've now told corporate Japan that this is an opportunity. A.V. and Bev, we've now told Corporate Europe, Northern Europe, we're open for business. Air France, we've now told France we're open for business. Vanovia, Germany, told them we're open for business. Intel told technology and next generation infrastructure we're open for business. AT&T, open for business. What's happening is we are creating and watching the creation of a new market.

Speaker Change: We're open for business.

Speaker Change: Air France, we've now pulled the frac.

Unknown Executive: We've now told them, "open for business." What's happening is we are creating and watching the creation of a new... We are watching accelerating growth. It will always be lumpy.

Speaker Change: France, we're open for business for Novia, Germany told them, we're open for business.

Speaker Change: Intel told technology.

Speaker Change: Allergy and next generation infrastructure, we're open for business AT&T.

Speaker Change: Opened for business.

Speaker Change: What's happening is we are creating and watching the creation of a new market.

Mark Rowan: The new market is being created not just on the investor side where investors are actually considering fixing come replacement. It is happening on the issuer side. Rather than the issuer having a choice between bank debt and ten-year corporate bonds, the issuer now just has a third choice. We will not do every transaction, but the point is in the scale of the opportunity relative to the size of our business. We are watching accelerating growth. You will always be lumpy; you will always get the one big one in the quarter, but as a build and as a general trend line, we are watching private as a solution for capital needs take hold, and I like the way the strategy is shaping up.

Speaker Change: New market is being created not just on the investor side, where investors are actually considering fixed income replacement. It is happening on the issuer side, rather than the issue of having a choice between bank debt and 10 year corporate bonds. The issue now just has a third choice.

Speaker Change: We will not do every transaction.

Speaker Change: But the point is in the scale of the opportunity relative to the size of our business.

Speaker Change: We are watching accelerating growth.

Unknown Executive: You will always get the one big one in the quarter. But as a build, and as a general trend line, we are watching private equity. We are going to have crowds. We stick to that, which is more matched to the shorter-term funding base, and they are generally not the right home for really long-dated capital. That leaves only two choices, because capital credit in our economy comes from only two places.

Speaker Change: We'll always be lumpy you always get the one big one in the quarter, but as a build and as a general trend line.

Speaker Change: We are watching.

Speaker Change: I have it as a solution for capital needs take hold and I like the way the strategy is shaping up governments around the world are going to borrow an awful lot of money over the next 10 years, we are gonna have crowding.

Mark Rowan: Governments around the world are going to borrow an awful lot of money over the next ten years; we are going to have crowding. Banks are being asked directly or indirectly to stick to that which is more match to the shorter term funding base, and they are generally not the right home for really long dated capital. That leaves only two choices because capital credit in our economy comes from only two places. It comes from the banking system or the investment marketplace. In the investment marketplace, it can come from the public daily liquid market, or it can come from the private match funded market.

Speaker Change: Banks are being asked directly or indirectly to stick to that which is more matched to the shorter term funding base and they are generally not the right home for really long dated capital.

Speaker Change: That leaves only two choices because capital credit in our economy comes from only two places it comes from the banking system or the investment market place in the investment marketplace. It can come from the public daily liquid market or it can come from the private match funded market.

Unknown Executive: It comes from the banking system or the investment marketplace. It can come from the public daily liquid market, or it can come from the private sector. Not everything is going to end up in the private match funded market, but an awful lot is, particularly given the three big drivers.

Scott Kleinman: Not everything is going to end up in the private match-funded market, but an awful lot is going to, particularly given the three big drivers of capital.

Speaker Change: Not everything is going to end up in the private match funded market, but an awful lot is going to particularly given the three big drivers of capital.

Scott Kleinman: Yeah, and just to your specific question, I mean, it should come as no surprise. For the last two years, we have been talking about how the single most important thing we have been doing is scaling our origination capabilities in breadth, geography, and category. And that is exactly what we have been doing, and an offshoot or ancillary item to origination is ACS, and some of the excess that we don't consume across our control balance sheets go through that ACS system. And so we have similarly been building our capabilities there. If you look at our ACS panel, it is represented by literally hundreds of transactions.

Speaker Change: Yeah, and just to your specific question the I mean.

Speaker Change: It should come as no surprise, we've been for the last two years, we've been talking about how the single most important thing we've been doing is scaling our origination capabilities you know are in breast and geography and category.

Speaker Change: And that's exactly what we have been doing in and a.

Scott Kleinman: As Mark alluded to, once a quarter there are one or two big ones, but the vast majority of what is flowing through that are just smaller trades that build up to our quarterly earning there. And that is what you are seeing. We continue to invest in both the origination and the ACS side of our business, and we will continue to invest in those areas because that really is the engine room, if you will, of everything else that we are talking about on the appallable. Thank you.

Ben Budish: Our final question will come from the line of Ben Budish with Barclays. Please proceed with your question. Hi, good morning, and thanks for fitting me in here at the end. I want to just ask on the capital market fees. You know, you alluded to a very strong back half of the year. I don't know if it's too early to ask, but any color on what 2025 looks like. I don't know if the pipeline kind of stretches out that far. And I guess what I'm trying to get a sense of or a better understanding of is what degree does the back half of this year look like, you know, an explosion to sort of pent up demand versus a return to normal and what that might mean for, you know, the fiscal 25.

Unknown Executive: Yeah, and just to your specific question, the mean Hi, good morning, and thanks for fitting me in here at the end. I want to just ask about the capital markets fees, you know, you alluded to a very strong back half of the year. I don't know if it's too early to ask, but any color on what 2025 looks like? I don't know if the pipeline kind of stretches out that far, and I guess what I'm trying to get a sense of, or a better understanding of, to what degree does the back half of this year look like, you know, an explosion of sort of pent-up demand versus a return to normal, and what Thank you. Ben, it's Martin. So, you know, we, we, the visible, um, So that, you know, that makes sense. Briefly, it's an ecosystem.

Speaker Change: For the year.

Speaker Change: I don't know if its too early to ask but any color on what 2025. It looks like I don't know if the pipeline kind of stretches out that far and I guess, what I'm trying to get a sense of a better understanding of is to what degree does the back half of this year looked like an explosion of sort of pent up demand versus a return to normal and what that might mean for the.

Speaker Change: Yeah.

Martin Kelly: Thank you.

Speaker Change: Fiscal 'twenty five thank you.

Martin Kelly: Ben, it's Martin. So, you know, we, the visible pipeline of businesses, about two quarters ahead, which, which, you know, you would, you would probably expect. The business continues to grow. You know, we're building our capabilities, geographies, awareness around the products, and aligning the sort of supply, if you like, with demand for that. And so, and as you recall, from the origination and platform to spotlight day, we did almost a year ago, there are, there are multiple homes for, for everything we originate. You know, pie, pie goes to a thing to its investment grade portfolio, pie goes to third party LPs through, through funds or managed accounts for which we want to manage to see.

Speaker Change: And it's Martin so yeah, we the visible.

Martin: Pipeline business is about two quarters ahead, which which you would you would probably expect.

Speaker Change:

Speaker Change: The business continues to grow we're building out capabilities geographies.

Speaker Change: Awareness around the products.

Speaker Change: And aligning.

Speaker Change: The sort of supply if you like with demand for that.

Speaker Change: And so and as you recall from.

Speaker Change: From the.

Speaker Change: From the origination and platform. So spotlight day, we did almost a year ago. There are multiple homes for for everything we originate part goes to a thin towards investment grade portfolio part goes to third party LP through through funds or managed accounts for which we earn a management fee.

Martin Kelly: And pie goes to Capital Solutions for which we want to transaction fee. So that, you know, that makes that sort of equilibrium, if you like, holds. And as we grow the supply side, we can grow the demand side. But, you know, we would expect the business to continue ramping from here to, to answer your question briefly. It's, it's, it's an ecosystem; we have an advantage. It continues to build. And we're, you know, we're very enthusiastic about the growth from here.

Speaker Change: And part goes to capital solutions for which we own a transaction fee. So that that makes that sort of equilibrium. If you like holds.

Speaker Change: And as we grow the supply side.

Speaker Change: We can go to the demand side.

Speaker Change: But.

Speaker Change: We would expect the business to continue ramping from here to answer your question.

Speaker Change: Briefly it's it's.

Speaker Change: It's an ecosystem, we have an advantage it continues to build.

Unknown Executive: We have an advantage. It continues to build, and we're very enthusiastic about the growth. Great, thanks again for joining our call this morning. As usual, if you have any questions about anything we discussed on the call, feel free to follow up with us, and we look forward to hosting you and are excited for you to join us for our investor day on October 1st. Thank you. That does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

Speaker Change: And we're very enthusiastic about our about.

Speaker Change: About the growth from here.

Martin Kelly: Thank you.

Operator: That concludes the Q&A portion of today's call.

Speaker Change: Thank you that concludes the Q&A portion of today's call I will now return the floor to Noah Gunn for any additional or closing comments.

Noah Gunn: I will now return the floor to Noah Gunn for any additional or closing comments. Great. Thanks again for joining our call this morning. And, as usual, if you have any questions about anything we discussed on the call, feel free to follow up with us.

Noah Gunn: Great. Thanks, again for joining our call. This morning as usual if you have any questions about anything we discussed on the call feel free to follow up with us and we look forward to hosting you and are excited for you to join us for our Investor Day on October one thank you.

Noah Gunn: And we look forward to hosting you and are excited for you to join us for our best day on October 1st. Thank you.

Operator: That does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

Speaker Change: Thank you that does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time enjoy the rest of your day.