Q3 2025 Apollo Global Management Inc Earnings Call
Speaker #1: I wish that you were there. I looked across the room and saw you standing on the stair, and when I caught your eye, I saw you break into a grin.
Speaker #1: It feels so good, feeling good again. I wanted you to see them all. I wish that you were there. I looked across the room and saw you standing on the stair, and when I caught your eye, I saw you break into a grin.
Speaker #1: It feels so good, feeling good again.
Speaker #3: Good morning and welcome to Apollo Global Management's third-quarter 2025 earnings conference call. Today's during today's discussion, all callers will be placed in a listen-only mode, and following management's prepared remarks, the conference call will be opened for questions.
Speaker #3: 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 #3: Please refer to Apollo's most recent SEC filings for risk factors related to these statements. Apollo will be discussing certain non-GAAP measures on this call, which management believes are relevant in assessing the financial performance of the business.
Are really the drivers of our business and we are fortunate to participate in an industry that benefits from this.
We are not the only ones to recognize this.
If you think about the history of our industry, the entirety of our industry up until the last few years.
Was essentially powered by the smallest bucket of our institutional clients called alternatives.
The first 35 years of this industry were funded out of this little bucket.
More recently. We've been given a second Market called individuals,
That second Market, we expect to be the size of the First Market and I don't think it will take 35 years to get there.
We've now been given a third Market called insurance.
The industry watching what we've done at a scene now understands.
That insurance company balance. Sheets are the perfect place to take liquidity risk rather than credit or Equity risk.
And insurance companies.
Are increasingly large buyers of private assets as they seek to earn safe, returns consistent with matching their liabilities.
We've also been given a fourth market. And that fourth Market comes from our institutional clients who are now considering and actively investing in private assets, out of their debt and Equity buckets.
As we watch Total portfolio approach, take hold in the asset management industry. We expect this to grow pretty significantly over the years.
If that were not enough, I believe we've been given a fifth market. And that fifth Market is traditional asset managers. And I think this has the potential to be among the largest sleeves of investors in private assets.
I expect that we will see significant private asset exposure inside of mutual funds inside of ETFs and inside of products.
All types offered by traditional asset managers.
As there is a rethinking of what active management is.
Perhaps active management is not the buying and selling of individual stocks and bonds. But it is the addition of private assets to public portfolios. This will allow our industry to reach clients. We would never honor our own reach and who want exposure to private assets but will not get exposure to private access directly.
and as all of you on this call, know more recently, a potential 6 Market has opened for us in the form of 401k and related, retirement plans,
In short.
Foreign industry that has grown pretty large over the years. We are now anchored by 3 really powerful secular trends that serve a fundamental good. Not just in our economy, but in the world,
And we don't recognize this by ourselves. Private assets are becoming more and more acceptable and more and more in demand.
What do we worry about?
Well, we worry about the things that we've always worried about. I believe our industry will find that it is limited in its growth by its capacity to find good Investments.
Rather than by its capacity to raise capital.
It is incumbent on us.
To focus on origination to make sure that we grow origination Corridor of a quarter.
And that we really do respect the fundamental principle of our industry.
Which is excess return per unit of risk. This is ultimately why private assets are in demand and why we as a firm Are
I also worry about culture.
We are industry and our firm we have been preferred employers for the last 35 years.
We work very hard day and night to make sure we do not lose the preferred employer status.
What do I have the luxury of not worrying about?
Well, I have the word the luxury of not worrying about credit.
I thought yesterday's call by 1 of our competitors. Did I thought an adequate job describing the, the current credit regime?
From my point of view, credit is credit.
Whether it's originated by a bank or an asset manager.
It makes almost no difference to me. There are fundamentally good Underwriters of credit and there are less good Underwriters of credit.
The observed outcome.
Of the number of articles, focus on a couple of isolated incidents.
In the marketplace is nil.
10 basis points of spread widening.
Jim, I'm sure will spend some time on this but I've encouraged him, not to given this. What I thought was a very successful discussion yesterday by 1 of our peers.
Me Delvin, a little bit to Asset Management, the quarter and asset management. And the momentum we're seeing starts with performance.
All buckets across our firm performed very well in credit, it was up 8% to 12%.
Performance was achieved without reaching.
We are at a really interesting juncture of time in asset management and 1 that we frame, really simply for our clients. We have them, ask 3 questions are things cheap, resoundingly know.
Do we think REITs that matter, long rates are going to plummet?
We do not. We think most of what we're doing in the world.
Is actually inflationary rather than contributing to lower rates. And finally, do we see in enhance sources of geopolitical risk. We do
the answer to those 3 questions is yes.
The logical thing to do is to take risks down.
that is what we are doing as a firm that is what we are doing for our clients and we have been able to do this without reducing
our need for return.
Ads is a shining example of this.
9% annual return. Since the exception is 2.1% for the quarter, 100% first lien lower, leverage less, pick less concentrated.
40% less exposed to Software.
In our asset back retail vehicle. We're now at 1.2 billion up 425 million in the quarter. 70% of the portfolio is IG 95%. We are richer originated on a proprietary basis.
In debt, it's always been clear how 1 takes risk down. You move higher up in the capital structure
In equity. It is also possible to take risk down our hybrid franchise, which is now some 90 billion.
With nearly 12 billion raised year to date.
19%, LTM return.
The flagship vehicle within hybrid value is AAA Apollo aligned Alternatives, which is now approaching 25 billion and no doubt will be our largest fund. Although there's a healthy competition amongst the various fund managers.
Ultimately that competition is not fundraising. It's based on performance AAA now has 42 of 43, positive quarters with a fraction of the volatility of the S&P roughly an 11% LTM rate of return and 12% Inception to date, return on the strategy.
This is the kind of performance that attracts assets and is consistent with our ethos in this sort of environment of getting returns without reaching.
In our private Equity business, the focus on cash flow and rational underwriting, and avoiding fads and trends.
Has served us very well over the long term. Our most recent fund fund 10, 22% net irr or already point to DPI on 9. The 1 before that 15% net irr 50% higher DPI than the industry average.
The franchise over our history. 39, Grouse and 24 net. We excited for fund 11, which will come beginning of next year.
And we will continue to do what we have always done, which is try and produce excess return per unit of risk and be responsive to the environment and be good stewards of capital.
1 of the things that we are increasingly Hearing in our business.
Is a divide in our industry between agents and principles.
the notion of being a principle is that you underwrite a risk that you are prepared to hold
The notion of being an agent is that you underwrite a risk that you think you can distribute?
Sometimes it doesn't matter but when things are priced for Perfection, we believe it matters more than ever.
The thing that we have done as a firm is to align ourselves with our clients, the amount of comfort that they take with us as the largest owner side by side in almost everything we do is unparalleled and has really set us apart amongst our peer group.
So what is the future hold?
The future in asset management is all about innovation.
Of the cllo market.
And I expect Innovations to take place broadly across the asset management franchise.
The outlook for asset management is indeed very bright. And as you will hear from Martin, we expect FR growth of 20%, plus in 26,
on the Retirement Services side of our business.
We're seeing the same sort of robust demand. It's very clear that we have a retirement crisis, not just in our country but across the world. The annuity Market is a multiple of size versus a few years ago. And while rates are always important, secular demographics or demographics themselves are a driver of growth.
Everywhere we look, there is a need for guaranteed income.
The inflow is our literally off the charts.
Through Q3 first Q3 23 billion year to date 69 billion. We're pacing toward a record year with the PGA Market, essentially closed for the entirety of the industry.
New business remains in line with our mid teens, Roe Target and we deploy 22 billion in the quarter at 220 basis points. Over treasuries,
Almost all IG.
Very little non-igbo.
There's no secret that the market that spreads for the kinds of assets, that are appropriate for insurance companies are tight and without the access to proprietary origination, this would not be the business that it is.
Thankfully the team at aine has done an unbelievable job, not just on the origination, but also on the sourcing of liabilities and the discipline to turn off various spigots. When pricing does not make sense,
And at the end of the day, running an efficient business from an overhead point of view and employing the latest technology allows you to keep ROIs up in periods of time when others are suffering.
As I'm sure, Mark, Martin Martin will tough will touch on and we will discuss on the 24th.
The result of running this business over a really long period of time and not being a current period profit. Maximizer has given us tremendous amounts of flexibility.
when rates are down massive gains appear in our portfolio, which allow us to recycle securities,
Which does not produce Sr but frees up capital for investment. And if we are successful in creating origination allows us to pick up Sprint,
We have lots of tools at our disposal to achieve our SRE and Roe targets that others in our industry. Do not have.
While the slope of the forward curve can change.
And you will hear from Martin. We have significantly reduced our sensitivity to rates to the lowest in a decade.
We are just a very tough competitor.
And for those who again, who are interested in SRE, we expect SRE growth year-over-year for next year at 10% and we expect average growth over the 5-year plan to also be 10%.
We become over time at a theme, since the rate of change in our volume is just not as significant going forward, as it has been historically. We become a massive Capital generator.
1 of 2, things will happen with that pile of capital, that we
Either we have been conservative.
On how much new business we will add to the theme, which is the challenge to the management team on the new product side, or we will be able to redeploy that Capital elsewhere in our business or to our shareholders.
In short.
Q3 was an exceptional quarter.
We're seeing signs.
Not just for the current year, a very positive things happening, but the seeds being planted for not just Q4 but also for next year. It's just a fascinating time in asset management and retirement and with that, I want to turn it over to Jim zelter.
Thanks Mark.
Having navigated credit cycles for more than 4 decades. I can tell you, we've seen this when we before
Isolated incidents are nothing new and they're rarely a signal of broader stress.
As we may remain Vigilant in our underwriting and risk management efforts, what we're seeing is idiosyncratic not systemic.
Over the years, there has been a propensity to overemphasize short-term, technical headlines, and Overlook the broader direction of travel within our industry.
Broad secular forces such as the increasing economic activity, generated by private companies, the global industrial Renaissance, as well as massive Capital. Uh fueling the global industrial Renaissance are driving increased demand for Global private Credit, in particular investment grade.
This is the foundation of our business. We've leaned into senior, secured top of the capital structure Investments to serve a market that we believe exceeds 40 trillion
As you can see from our growth that has served us. Well and we are just beginning to scratch the surface
Recent events. Give us a moment to step back and reflect on the marketplace and I believe there's an important point to be made here.
Whether a particular transaction is public or private is simply the manner in which the risk is originated. Ultimately, it is not the litmus test for credit quality.
Not an agent or a tourist across both public. And private markets, has allowed us to be trusted stewards of our investors Capital through various Market cycles and position us for continued success.
We look forward to Leading and performing in a marketplace with a dispersion of returns.
On origination, let me put the quarter and the origination engine in perspective.
As Mark mentioned, we generated 75 billion in the quarter, a remarkable number, and second only to last quarter's record.
This brings origination volume to over 270 billion for the last 12 months up, more than 40% versus the prior period and effectively achieve. Our multi-year Target about 3 to 4 years early.
With a toolkit that includes not only direct lending, both large and midcap, which is where many of our peers end but also fund Finance asset base Finance as well as other capabilities.
Taken together, our sponsor ecosystem is unmatched in scale and speed in the breadth of the solutions. We deliver.
Let me bring the light to this to life with 2 recent examples of our origination leadership first in support of current Dr. Pepper strategic objectives. We call that a fine financing solution, totaling 7 billion, there was announced last week.
This was yet another example of our leading position, in the high-grade Capital Solutions and hybrid Marketplace, by providing flexible Capital Solutions.
The second transaction. I'd like to highlight is yesterday's announcement with the oersted.
Where our funds will acquire a 50% stake in horny 3. A 3 gigawatt scale offshore wind project for 6 and a half billion.
Alongside transactions. We announced this year for ED andf.
Rwe and BP. This is the latest large-scale transaction in Europe where we are investing behind energy, critical infrastructure and transition Assets in the region.
Our activity and providing IG Capital Solutions to large-scale.
Companies in Europe is unmatched.
Looking across all of our origination in the quarter. 69 billion was debt. Comprised of approximately 70% investment grade with an average rating of a minus, and approximately 30% sub investment grade with an average rating of single B.
On the investment, grade origination we generated excess spread of over 285 basis points, over treasuries or approximately 200 over comparable rated corporate indexes.
and that our sub, IG origination we generated excess of 400 in basis points, over treasuries or approximately 220 basis points, over comparably rated high yield corporates
in importantly, we observed stable spreads on on our origination quarter over quarter and that's particularly notable in the period where public markets, spreads are near generational, tights,
While existing or origination engine continues to scale and has driven incredible results. We're not standing still in the past few months, we have added several new resources that will augment grow and diversify these origination capabilities.
Number 1 with Olympus housing capital is the new home builder Finance strategy sitting at the Nexus of multiple secular Tailwinds. Be streamed between structural under supply of single family, homes and demographics.
Green data centers, strengthens our presence in digital infrastructure.
1050 is our new European CRA lending platform focused on structurally underserved small and medium-sized CRA markets.
And finally, we announced the launch of a, a polo Sports Capital focused on the sports and Live Events, ecosystem. And a market that continues to exhibit. Strong uncoordinated growth and faces significant Capital demands.
This will be a permanent Capital vehicle, primarily focused on credit and hybrid opportunity. And ASC is designed to be a long-term value added Marketplace, player leveraging, our our inter infrastructure and credit and media, and physical assets.
In capital formation momentum. Momentum remains exceptionally strong as quarter.
Regarding 82 billion, including 49 billion of organic inflows nearly matching last last quarter's record as well, 34 billion from our closing of the bridge acquisition.
By channel, the institutional.
Channel remains strong and Global wealth had another excellent quarter with a theme. Continuing its remarkable trajectory
Across institutional and Global wealth within the 26 billion of organic inflows during the quarter 80% were focused on credit oriented strategies and 20% to equity oriented strategies.
Coming from a broad array of investor classes.
The 5 billion we we raised in the wealth channel was the second best quarter on record bringing year to date total over 14 billion up 60% over the prior year period.
And strengthen this quarter was broad-based with 6 strategies, raising more than 200 million and 10 strategies raising greater than a 100 million.
With that success, 1 strategy, stood out, as Mark mentioned ABC, which had its strongest quarter since law. Launch raising nearly 400 million
The asset base Focus Corporation has all the makings of our next flagship.
Deep expertise, strong performance and accelerating demand again. This trajectory reminds us of ads.
Since ABC, the similar point, but with a major focus on investment-grade counterparty risk.
Across wealth, our distribution continue to expand. We launched 3, new relative during the quarter, expanding our lineup in broadening Apollo access to Apollo private markets, strategies, across Amia Asia and latam
It's clear. Our offering our offering continues to resonate with investors around the globe and our partners are not simply looking for a good product. They are increasingly looking for a comprehensive, Holistic Solutions, provider in constructing portfolios.
Turning to a theme, they had an excellent quarter with 23 billion of organic inflows. Inflows were driven by 10 billion from retail, 10 billion from funding agreements and 3 billion in flow reinsurance.
Retail flow, saw, particularly strength and fixed in the index, annuities and migas.
Funding agreement, issuance was the third strongest quarter on record as we continue to capitalize on the favorable issuance backdrop.
While the themes core products have been the foundation of its impressive growth trajectory, we expect emerging products to widen the funnel. Products like Riya, with over $1 billion of inflows year to date, and the successful launch of stable value and structured settlements, as well as tax-advantaged and guaranteed income products, will augment the growth and expand the opportunity set.
Globally. The the growing retiree population continues to drive significant demand for long-term income Solutions and this is a durable secular Trend that we're fortunate to have the significant leadership position with meaningful advantage that will allow us to continue to grow.
The opportunity ahead is massive and our platform has never been stronger and execution with that. I'll turn it over to Martin.
Thanks Jim. Good morning everyone. Um, I our third quarter results.
Uh, highlight clearly. Excuse me. The accelerating momentum across our platform reaffirms our ability to execute consistently on our long-term plan.
And discuss the key factors supporting our progress. As we close out the year,
I'll then share more details on the outlook for 2026 to supplement Mark's comments.
In Asset Management. We generated an increase in both asset under management and fee. Generating assets on the management of 24% year-over-year to 98 billion and 685 billion respectively,
We generated fee related, earnings of 652 million in the quarter and 1.8 billion a year. Day up. 20% year-over-year in each quarter this year versus the comparable period
Evidence of the momentum across the platform and keeping us firmly on Pace for a 4 year, growth rate of 20%.
In the quarter, we delivered 22% year-over-year growth in management fees, driven by third-party asset management inflows and record gross capital deployment, particularly across our credit platform, as well as strong growth from Retirement Services.
Capital Solutions, fees of 212 million as highlighted represent. Our second strongest quarter on record.
The breadth of origination capabilities was very clear this quarter with 50% of ACS fees generated by our hybrid value.
Opportunistic Equity, climate transition and real estate businesses.
complementing, the other 50% from our high-grade and Global Credit businesses including Atlas
We generated 28% year-over-year growth in fee, related performance, fees reflecting, sustained growth in spread-based income across a variety of our Perpetual Capital Vehicles led by ads and complemented by reading Ridge and midcap among other platforms.
Both inferior related expenses, reflects continued investment in hiring and infrastructure to support the firm's Global strategic growth initiatives.
Compensation growth reflecting our performance this year.
And the inclusion of bridge into our financial results.
We closed the acquisition of bridge on September 2 which significantly enhances our existing real estate business.
bringing to scale some of the most attractive areas in the market, including multi, family and Industrial
Bridge also adds origination capabilities that are highly synergistic with existing asset demand from uh opposed ecosystem in particular a theme.
Reach will initially contribute, approximately of annual fee, related revenues across management fees and ACS fees, and approximately $100 million of pre-tax efree.
with expenses principally, compensation based
Bridge will also contribute to Sr, regrowth as an originator of investment grade spread products, as well as principal investing income overtime.
Excluding Bridge, our efre margin with stable quarter of a quarter and expanded approximately 120 basis points year to date.
Demonstrating continued, scaling of our business.
Including Bridge, we expect our full year 2025 margin to be consistent with 2024.
Moving to Retirement Services Q3 delivered, another strong organic growth quarter supported by 23 billion dollars of gross inflows.
Athens. Net invested assets grew by 18% year-over-year to 286 billion.
We generated 846 million of Sr, X notables for the quarter with an additional 37 million or 5 basis points. At our long-term 11% return expectation on the alternative portfolio.
The blended net spread externals in Q3 was 121 basis points versus 122 basis points in the prior quarter.
Reflecting the effect of roll off of existing assets and liabilities offset by new business growth.
Athens core earnings power is very strong and clearly evident in the third quarter.
In a tighter spread environment, we continue to originate new business that meet our long-term, Roe targets, and that is in line with historical averages.
The themes competitive positioning is unmatched.
Over the last 12 months Athen has sourced. New business volumes on par with the entire site of some of its competitors with a capital profile that is self-sustaining, includes the largest site car in the industry and is managed to achieving a double a rating level.
During the third quarter, we talked hedging actions to further, reduce the size of Athens floating rate portfolio.
Net floating rate assets, totaled 6 billion dollars or 2% of total, net invested assets at quarter end.
Adjusting for these actions. Athens SRE sensitivity on Netflix. From a 25 basis, point move in short-term. Interest rates is now approximately 10 to 15 million dollars versus 30 to 40 million dollars previously.
In the context of the Year Q3 was a very strong quarter with earnings trending higher than our first half average reflecting the impact of higher, new business volumes, and our ability to originate attractive investment grade investment opportunities.
Importantly, we believe our spread related earnings troughed in the first half of 2025.
Looking across the asset and liability profile of the portfolio, we see asset prepayment headwinds peaking through Q1 of 2026, and the spread drive from profitable core business dissipating in 2026 relative to 2025.
But the fourth quarter as Mark suggested, we anticipate SRE, external Wills to be approximately stable to Q3 at an 11% alts, return or approximately 880 million with an equivalent SRE spread of 125 basis points.
Combined with you today. Performance behind this, this resolved would drive a 4 year growth of approximately 8% ahead of our mid single digit Target.
Importantly, with the business executing at a high level.
Expectations, that headwinds experience in 2024 and 2025 are starting to dissipate and exposure to floating Rate rates. Largely immunized, the exit velocity into 2026 is strong.
Turning to our 2026 Outlook, we expect 20% plus growth in fere in addition to the earnings from bridge.
Momentum across our core businesses. Building with management fees showing increasing growth, each quarter on an LTM basis.
Recent growth initiatives, including across wealth.
Credit and origination are translating into tangible results.
Evident in our strong quarterly and yet today performance.
We expect that roughly 75% of our Topline growth in fee related. Revenue in 2026 will be attributable to fundraising and deployment from existing well-established businesses. As well as the annualization of growth already in the ground coming out of 2025.
The remaining 25% of Topline growth is expected to come from new initiatives, already underway.
From a from a poly Sports Capital to a Thor's. Pending acquisition of pick as well as a variety of other new strategies in the pipeline.
And to clarify, we expect this 20% plus referee growth. Next year is without any contribution from our next Flagship private Equity Fund fund 11, which we currently estimate will turn on sometime in the first half of 2027 subject to our pace of PE deployment.
For SRE, we anticipate 10% growth in 2026, assuming 11% volatility in returns, and including notable year-over-year changes.
Is underpinned by strong organic growth, and our origination capabilities, which generate high quality assets with spread.
We expect prepayment headwinds to to diminish as a result. Both of our reduced purchases of Co assets and the already high premium levels. We are experiencing at today's very tight, triple o AAA Co spreads
We further expect the headwind from the roll off of profitable Coast, postco business to have already peaked in 2025.
As Mark alluded to, we have various choices and management actions to help us navigate the path forward such as managing, our floating rate position optimizing, our bakbuk of assets, utilizing psycho capital, and prudently, managing crediting rates.
our 2026 Outlook embeds, the current forward rate curve, which contemplates 3 total cuts by year, end, 26, and 9.5, total Cuts over the cycle and assumes the current tight Market spread environment persists,
Acknowledging these growth expectations we expect and caution that there will be normal quarterly deviation around the growth trend line reflecting the scale of an approximately 400 billion balance sheet.
Looking Beyond 2026. We we remain confident in our long-term effort and sere average annual growth targets of 20 and 10% respectively through 2029.
We expect the earnings mixed shift towards efere will result in F, equaling sometime in 2028, a year ahead of our expectation and exceeding s thereafter.
Lastly, on Capital, we executed over 350 million in share repurchases during the quarter, the majority being opportunistic.
The sequential growth in our share count reflects this activity as well as the shares issued in connection with closing the bridge transaction.
With that, I'll hand the call back to the operator. We appreciate your time and welcome your questions.
Pad at this time, a confirmation tone will indicate that 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. Again, that's star 1 to register a question at this time.
Today's first question is coming from Steve Tubac of wolf research. Please go ahead.
Hi, good morning and thanks for taking my question.
So wanted to start with uh discussion just around the original Nation targets that you unveiled at investor day. Um annual origination volume of 275 billion. You just reported origination activity and annualized clip of more than 300 billion. Last quarter's volume through even better. So taking a step back as we think about the year to date origination strength which is running ahead of plan ongoing extension of origination capabilities, with both the IU Mark and Jim had discussed on your prepared remarks. As you're thinking changes to, whether this is still an appropriate Target. And this what informs your outlook over the next few years?
You know. Listen. Um, it's a it's an appropriate question to answer or to ask because we've gotten off to such a strong start. I think you know, taking the view that Mark and and management have put forth about origination being the key. I think it really ties into our conversation about how the end Universe of buyers has expanded from the
Alternatives, uh, bucket to the other 5 that Mark mentioned. And I think it allows us in terms of broader uh, product creation and broader solutions to investors and retirees, but it would be premature while we're very happy with the accelerated success. And while we see tremendous wins to our back, in terms of the solutions, we're providing it'd be a mistake to, to change our 5 year, uh estimates uh, 9 to 12 months into the into the plan. So great momentum. Uh, we feel this is, by no means. Are we having early wins that that are going to take away from, uh, future gains? So, it is a trajectory. But on this call, we're not prepared to put a new estimate for a 5 year number, but I do think and Martin tied into it. I think it's all about the flywheel, you know, 75% of our growth next year is From existing Vehicles, existing funds, existing strategies, which is the flywheel of original
Imagination. So it gives us greater confidence in our ability, about the excess of 20% F growth in the coming years.
Thank you. The next question is coming.
Coming from Alex bin, of Goldman Sachs. Please go ahead.
Good morning. Um, wanted to start, uh, with a question around the wealth Market, uh, for Apollo broadly, uh, couple of really strong quarters 5 billion dollars of flows in the third quarter. Um, you talked about the new product Pipeline and Mark, I was intrigued by your comments around the asset management Partnerships broadly. So maybe you could expand expand a little bit on how you view this 5 billion. Trajectory from here, how much is likely to come from new products or the existing lineup? And when it comes to the sort of asset management Partnerships uh maybe expand on that? What that could look like uh for Apollo over the next couple of years? Thanks.
Yeah. So let me just start out by saying is you point out so when we did our investor day last fall, we talked about 150 billion within the 5 years and aggregate, so we're still on that pace. Um, but and and I'll pass along to mark. But certainly what we see is the product Suite that we've created over the last 24 to 36 months. In terms of breadth of products Evergreen. Uh, non-traded BDC is ABC, not only is expanding product set and geographically, but there you will see more solutions oriented. But also as we talked about the, the 6 channels, and with that, I'll really toss it over to Mark to talk about those 6 channels.
So Alex think about the falling in the global wealth business. At the top end of the global wealth business is our family offices. We, as we Apollo and we as an industry have elected to cover these accounts directly and interact with them directly.
The next tier down if you will in global wealth.
Are high net worth. And this the definition of high net worth varies from firm to firm for us, think of a client that is worth a financial intermediary and Ria a wealth manager. Advising. Well
We cover these accounts indirectly by covering the Raya and by covering the wealth manager, but do not cover for the most part, the individual account.
Or are they family offices?
Our industry and ourselves. We we do not cover these accounts and it is my belief.
And the strategy we're pursuing is not to try and cover these accounts. They are already well, covered by their traditional asset management managers. They already have a relationship in many instances. They are not likely to buy.
100% private products, either from lack of knowledge, lack of suitability or lack of available liquidity.
I believe that they are going to get going to get exposure to private assets through their traditional asset manager.
You watched what we've done with State Street, what we're doing with Lord abbett, what others in our industry have done, I believe that you will see
A significant uptick in the Partnerships will which will not just be a new products, you will start to see private assets added to in place exposures.
That will be the fastest uptick in the wealth Market as far as we're concerned. And I think it's going to come billions at a time, rather than by fundraising quarter over quarter.
And so what do we as an industry have to learn and this gets to Innovation, we have to learn that. We are living in a public ecosystem.
You will find that we are on our fixed income. Suite of replacement products. Daily nav.
By year end.
The ability to provide a daily now is table Stakes to be able to work with traditional asset managers. The work we're doing around transparency and liquidity which some in our industry oppose because we're shining a light on the assets and the quality, the ratings and the pricing, this is what gives you entry to traditional asset managers. The more we do that makes private accessible the more, I believe those with origination and those with the capacity to produce it when
I think that's where we are. I'm excited for what's happening.
I come back to you. I think we have
Over time. Lots of demand for private assets. I believe increasingly our dialogue will be focused on the quality and ability to originate.
And then have we as an industry, and as a firm made the choices and operating, uh, techniques required to interact in these other environments.
Thank you. The next question is coming from Patrick David of autonomous research, please go ahead.
Morning. Um I'm sure you're seeing but but Cole Keller is on the table this morning. Warning on private letter ratings Arbitrage and US Insurance being quote. Looming, systemic risk. Uh firstly, what are your thoughts on that view? And then perhaps more specifically to its Dean? Can you remind us to what extent is using similar? Private letter, ratings in its own portfolio? Thank you.
Um first um I column is 1 of the most respected uh people in the banking industry. Uh I've been I'm I'm sorry I'm not in Hong Kong this year because normally I appear right after him and we, um, like to mix it up in front of the crowd. Um,
Might this is the background and I'll speak for a theme and not for the industry Coleman's just rock.
If you look at like I'll give you a theme stats.
Um,
First, a scene does not use Eagan Jones. Let's start with that less than 8% of our assets. Have a rating from crawl or dbr dbrs.
70% of our assets have 2 plus ratings.
S&P Moody's and Fitch each rate. 50% of our fixed income assets. Crawl 18%. Dbrs, 15%.
By the way, dbrs and crawl have most of the expertise right now, in Structured Products and they are doing a good job, competitively with Moody's S&P and Fitch close on their heels. So I don't mean to contrast them from the the Big 3 that they are any less qualified.
but,
Calm.
I compare the insurance industry to the banking industry.
100% of what is on a bank balance? Sheet is private credit.
Almost nothing has a rating.
and so, when we talk about,
Now I you know our industry, not everyone has done what we've done.
And column is not wrong to think about and to talk about systemic risk, because like the banking industry, you have really strong players.
And you have really weak players.
Store jurisdictions of significant size.
That have not produced the kind of regime that is consistent with us ratings and US state-based regulatory reform.
And we continue to highlight came is because it is the largest but there are others.
So K is not wrong at this point in the credit cycle to say that there are systemic risk piling up.
I think the deflection from banking to insurance, is an easy deflection. And something 1 says at a conference
Almost all those blow-ups have have taken place in credits underwritten by the banking system.
So it is not as I said that we have Public Credit and private credit. We have crest
The difference between Public Credit and private credit and bank credit is literally whether it is syndicated or not.
There are good Banks. There are bad Banks. There are good asset managers. There are bad asset managers. There are good insurance companies. There are bad insurance companies.
I don't think we're talking about systemic risk. I think we're talking about late cycle behavior and Bad actors. I believe are going to get called out.
1 of the things that we do and just like a bank, the banking system that has contagion risk.
From the svbs, and the first republics of the world. We in our industry, asset managers have contagion risk.
We need to make sure that we provide the information to our investors and to all of you.
Of how we think about the philosophy of credit underwriting. How we run our vehicles, how we run our insurance company?
And remind people of what it is we do. So on our largest balance sheet, a theme,
Less than 75% of direct Landing.
90 plus, percents investment grade. It's a different environment than the banking system which is 60% investment grade
Thank you. The next question is coming from Bill cats of TD Cowen. Please go ahead
Okay, thank you very much for all the commentary this morning and taking the question today. I just want to Circle back on the wealth management opportunity 1 of the push backs. We get for Apollo and the industry at large is just as rates come down, the demand for yield or income will come down and uh the industry will suffer from rotation risk. I was wondering if you could address what you're sort of seeing and how you think about that. And then as you look out to 2026 wonder if you could just lay out a little bit more detail the road map in terms of what drives the incremental growth from here. Thank you.
So it it's Mark. I'm gonna start with a bit of a philosophical and then I'm gonna hand it to Jim who really will delve into a little bit more specific. Um private lending was a Better Business 4 years ago and 3 years ago and 2 years ago in last year.
By the way, I wish I owned the video 4 years ago and 3 years ago and 2 years ago and last year
This is fundamentally. What people fail to understand?
The rotation into private credit is a rotation out of equity.
That is what investors are doing. That is what we observe. They are making a decision to take risk off.
Because they perceive the ability to earn long run Equity returns in first lean debt, top of the capital structure.
As an attractive opportunity. But I think we cannot, as an industry, deny that there was more value.
Just like there was more value in the equity Market. We're now talking about where we sit in the valuation cycle and the Alternatives that we provide, as I suggested, we believe that prices are high.
That rates for long rates are not likely to plummet and that we have enhanced geopolitical risk and so as a firm we are in Risk reduction mode. We preach risk reduction. Our balance sheet is in Risk reduction mode. And what we see in terms of flows into private credit.
In a traditional sense, private Credit in the form of levered, lending, reflects investors who are reducing risk and moving money out of equity and into private credit vehicles.
Back from a 2 and a half week 9, Country tour everywhere. I went
There was massive need for Evergreen compounding, retirement income.
And that is such a large number. It's it's it, it overwhelms, the 1.6 trillion direct lending Market
And again, we just find country after country, region after region, the ability to, to generate high-quality compounding robust, yield is a secular Trend and especially as the rates have have gone up over the last 5 to 7 years. As more pensions are fully funded, they're going through a variety of immunization strategies. So yes, um, on the margin not as attractive as it might have been 24 36 months ago. That's why we've been preaching top of the capital structure. No pick less software, etc, etc. But do not confuse that with a secular Tailwinds,
Thank you. The next question is coming from Craig seigenthaler of Bank of America. Please go ahead.
Thanks. Good morning everyone. Um we wanted to come back to Mark's comments on the 6 Mark it's including several newish markets like the traditional asset management and the 12K Channel. What type of shares? Do you think the alts will eventually take about the traditional and the foreign K markets? And also, what investments is not just a pile but the entire industry need to make in order to prepare the origination platforms to address this much larger tasks
so,
Traditional asset managers because I, I think there is a natural limit. Um, right now inside of a number of vehicles, you have a 15% limit.
And most of the investors do not bump up against this 15% limit. And so back of the envelope we think that there is potential which is different than a forecast of roughly 10% of traditional asset managers. If you look at what some of the traditional asset managers, who have been large investors in privates before
They own SpaceX.
They own open AI.
We have.
For a long time. Just thought that this applied to this unique Network, it doesn't. It will not surprise me to see 20, large industrial companies that stay private for a longer period of time. In addition to all of the credit and other vehicles.
And so I think you will get a good sense of this in the first quarter next year, as some of the Partnerships that are under discussion. Begin to get announced and begin to get rolled out. And again, the prize for the industry is not just the creation of new products and we will create new products as we have. And as others have
I think it is getting a share of in place assets as traditional asset managers compete.
For rates for rate of return. And for for through performance, for clients almost no 1 else. In the traditional asset to management industry has the 35 billion dollars that BlackRock has. If you're watching what BlackRock is doing and you're in a traditional asset management mode, you're looking to figure out how you get private Market exposure. I believe they will get private Market exposure through Partnerships through relationships.
And what we need to do is not just invest in origination. We need to invest in structure. We need to invest in business processes. We need to Embrace Transparency and disclosure.
Because traditional asset managers will not move in size into the private Marketplace unless we can do things like daily nav unless we can provide price unless we can provide liquidity. A whole new set of skills is going to be need to be learned by our industry. And I believe that we have a leadership position in this and have embraced this as a methodology of. How do we do business going forward?
Yeah, Craig. And I would just add that, you know, I think many of us in the industry two to three years ago thought that the promised land was just getting our
Together. Uh, and this is just 1 of the many distribution channels that we believe. Um, you know, you'll be able to service going forward. Just like at a place like a variety of firms that are using models and oshios, the ability to cover those folks with actual product Solutions as well not just funds. So it's really a much more open architecture view of how you
Partner with your origination, which is the scarce attribute.
Thank you. Our next question.
Is coming from Glen shore of evercore isi. Please go ahead.
Hi, thanks. Um,
Sorry 1 more on this topic because I think it's so interesting, so I'm a Believer. I think you infusing some of your private Market origination, it can produce better returns. Better diversification, even maybe turn their outflows into inflows for some of these products.
My question is, how do you get a traditional manager to give up some of the assets and therefore, some of the fees in order to make this investment and turn it around? Um, their products are making them more appealing to to their investor base.
So again, it's it's Mark, I'll speak to it. But first just to um, we were apparently exceptionally long-winded, all 3 of us. So we are going to cut the call at 9:45. No, no, it tells me. Anyone we missed. We will make it up to you as we go but I start this way. Glenn.
When we cover a client, we cover wealth. We have a massive infrastructure hundreds of people. Lots of expense in doing it when we cover a traditional. We're essentially leveraging their distribution. The ability of us to provide a portion of our fee and you heard me say this on this call.
Is actually margin accretive for us.
And its margin accretive for them.
If we can give them good performance and we can turn outflows into inflows or if we can give them a unique client solution.
We can give the client another reason to stay with the asset manager that that's a win and for us.
I think we're going to be in a situation where, over time, we have excess demand for private assets versus the supply of private assets, and we should be looking at balancing, protecting, and diversifying our distribution. But also for distributors who can remove costs on a net basis from our system, we should embrace them and pay them accordingly.
Thank you. The next question is coming from Ben Buddhist of Barclays. Please go ahead.
Hi, uh, good morning. And thank you for taking my question. Um, just wondering if you could unpack a few more of the details around the 2026, uh, SRE guide, you know, how should we be thinking about, you know, um, gross flows outflows. Uh, the level of spread it sounds like versus at least prior expectations. The decline in spread over the next couple of quarters would be much lower than expected. Um so any other any other details you can share, you know, 8 of utilization. Um just as we're kind of fine-tuning models uh after the results. Thank you.
Well, I'll hit Top of the way and I'll turn it to Martin. Um, recall that this beginning end of last year. Beginning of this year, we had 3 unique issues.
We were facing rates headwind.
prepay headwind and the roll off of massively profitable business that as a result of business that we put on at Co and as Martin suggested,
Having now dug in and really understood on a much more granular basis, where we stand on prepays and where we span sat on the rolled off of business and having immunized rates.
We just have a much more predictable and much better understanding.
Of where we're going to be on an SRE basis subject. Again, as Martin said to the vagaries of having a 400 billion dollar balance sheet
What we intend to do is on the 24th.
Is to spend more time on this.
So that you can help build a model but just to give you top of the Waves again, I don't think much is going to change in terms of 8 of utilization and uh, and gross flows inflows or outflows.
Environment with the spreads that we've been able to achieve.
And the right actions we've taken that. That all sort of gets to a more healthy jump off point, um, into 26 uh with the sort of similar Baseline set of assumptions and we'll unpack that more.
Thank you. The next question is.
Good morning, thank you for the opportunity.
With a capital markets, World opening up more and open AI moving towards an IPO in 26.
Do you think this open Capital markets environment in those companies moving from the private bucket to the public market? We'll call the natural inflow of public dollars back into those private assets from those asset managers you mentioned. Thank you.
You know, um, it's interesting the last 6 8 weeks.
Uh, Amazon Google meta, Oracle and several others have issued jumbo IG issuance.
At the same time we had a record quarter.
Um the these needs are so vast and so great and Global that, you know, temporary flows in the public IG Market which is a necessary uh part portion of the overall multi-trillion funding, it's going to be funded by all markets. When you look at a capital structure in the future, you'll have a company that
Will have a broadly syndicated facility, they'll have public IG. They'll have private IG. That is the way of the world. And so, you know, when a company can and scale issue in the public IG Market they should. But as we've talked about a company that we announced, whether the 2 that I mentioned on the call current Dr. Pepper. Oersted very unique financing needs that. The public market solution is not going to check the box.
So it's not a black and white winner. Take all its open architecture like you've seen in other financing markets.
Thank you. The next question is coming from Michael Cyprus of Morgan Stanley. Please go ahead.
Hey, good morning, thanks for squeezing me in here. Um wanted to ask about the the Partnerships that the traditional office managers that you were alluding to earlier. I was hoping you could elaborate a bit on how you anticipate these Partnerships evolving, what the different flavors might look like. And what scenario might it make sense to maybe even acquire in uh some of those types of firms as opposed to partnering and then if you could just speak to Market making around your aspirations and steps you're taking their as you look to uh support the development of the marketplace.
Mike, I'm just going to mention a few things we've talked about in the past. I mean you you know about what we've what how we partner with States rate um on the ETFs you know how we've uh announced our dialogue with Lord abbett in terms of the short duration vehicle, I think, what, Mark and I are describing when our partners are describing is the evolution. It was really like the idea of private direct lending. 10 years ago was an augment to how the high yield and Loan markets work. It was a third tool and I and I think that a lot of questions today about sizing The Tam sizing it's it's too early to be doing that but what we're really trying to do is to really have folks recognize that the only path to Rome is not only this Distributing our ads and ABC, but there's a variety of open architecture solutions that are going to take place and that are going to be evolving as those PMs. And those there's a lot of trusted investors in some of those traditional strategies.
And so again, I think we're still early days, you know, it's it's our view that we want to be the leading voice of this. We want to be part of the broader dialogue and I do think it's going to be about brand and scale and the commentary about Market making in our experience, our Collective, 80 years between the 2 of us. Every time there's been more transparency, information, price Discovery and you know, really
Putting information at the Investor's footsteps.
Asset classes have grown. I was there the early days of the higho market. The old junk bond market now is the high, yo, market, and every asset class that we have seen in the development of that information and dialogue. So I, I believe that as we think about stable coins, as we think about tokenization, there's a an ecosystem that will evolve and we intend, to be the leading voice in the leading player in that evolution.
Thank you. The next question is.
Coming from Brennan Hawkins of Bank of Montreal, please go ahead.
Thanks for extending the call, to squeeze, uh, more of us in here. Um, just wanted to ask, I know, I know we're going to get into all the components of SRE on the 24th, but on the alts, return you guys restructured the portfolio, uh, about a year ago. Uh, explain waited out at the investor day, um, the returns have gotten better, uh, but they still have run below that 11% level. I, I know you guys are assuming that a return to the 11% for next year. And it and it's part of, uh, the Outlook, uh, uh, uh. So what has constrained it even despite the restructuring from getting to that 11 and maybe even seeing a few quarters above it? You know which you would think with an average would happen uh and and what's the confidence of the progression? Uh you know continuing to eliminate that Gap. Thanks.
So um big picture and we will spend more time on this on the 24th. We have uh 2 components of the alts portfolio at a theme by far the largest component is Triple A Triple A is my recollected 10.9% LTM and we're in Triple A the returns have been just fine um we do suffer a little bit from cash drag and we have a relatively healthy Pipeline and we expect the cash track to come down and we are optimistic and confident subject to market conditions that we will exceed the bogey there.
The other portion of Athens portfolio of alts, which is outside of AAA, uh, relates to its Holdings of other insurance assets. Um, 1 of which is venerable, which has quite frankly more than exceeded by a wide margin, the 11%, and the second is a Thora where athora has dragged a little bit. Because again, we've been holding a decent amount of excess Capital, the deployment of the excess Capital into pick.
Um, should we be granted regulatory approval? Which we expect is highly accretive?
To the eythora investment. And we would expect to see both categories, insurance and AAA be more in line or exceed Target levels of return.
Thank you. We're showing time for one final question.
The final question.
From Brian Bedell of Deutsche Bank, please go ahead.
Oh great, thanks, thanks so much for squeezing me in, um, maybe, just back on the 401K, um, uh, theme. Um, I, I guess Mark. Are you, are you seeing any near-term traction, um, from plant sponsors and thinking about, um, adding um, you know, private, uh, to their portfolios? I know it's a longterm theme, but just trying to get a sense of, if we might see some, uh, progress actually this year in the industry and then also on the deck, uh, the accumulation side, uh, you've talked about, um, you know, the importance of or the opportunity for, you know, a scene
to make its way into, uh, the, the accumulation strategies for, uh, retirement plans, is that something that, you know, um, you might see Traction in the next couple years and, uh, begin to generate even some upside to that 85 billion, um, you know, run rate that you're running at now for, um, retirement service in flips,
Um that's the Hope. Um look on the we are maybe taking them in reverse order. We are very focused on the notion of guaranteed lifetime income. Guaranteed lifetime income is the simple decumulation strategy, it's a journey that quite frankly retirees have been on if you go back in history they were they love their defined benefit plan. They knew exactly what they were going to get the corporations. Not so much.
And so we kind of put them in a 401k self-directed Marketplace and it turns out very few of them actually make a decision. Almost all of them end up in the default option selected by their employer.
The ability to offer to them, guaranteed lifetime income. But this time not provided by the plan, but provided on a commercial basis, by Third parties is the Holy Grail for us. It is what we're focused on. I think we will do this a little bit on the 24th, but probably more likely
Guaranteed income strategy. Um, again, not in our 5 year plan, but certainly something we're working on and we believe upside to where we are.
Um, the second in 401(k), we continue to see progress in 401(k), as I've mentioned previously on these calls. We've crossed over, you know, a couple of billion in the various managed account Pro platforms and others. By people looking to do this, is it in any way like a groundswell? I know everyone is in the information gathering phase right now, the guidance that the Administration has put out in terms of their desire.
The massive take up until we end up with either guidance which would be something that would be able to happen in the relatively short term or a ruling of some sort, which might take a longer period of time. But this is a time for us to be out educating
and Jim and I get all of these call reports. It is among the most important things uh that we watch and follow.
Thank you. We actually are showing time for 1 additional question. Our next question is coming from Wilma. Bertis of Raymond James. Please go ahead.
Um hey, good morning. How do you think about the trade-off between higher volumes versus higher spreads in this Ultra tight, credit, spread environment? And how does that change Athens Capital efficiency or are we? Thanks.
So I I don't know that it's just in a scene issue. I think it's a cross the board. Um, we are in the excess return per unit of risk and so it's not just spread absolute, it's spread in various marketplaces and so to the extent, we can earn excess spread at the a level or at the Double a level.
We have different requirements than we do, having it at the Triple B, or double B level. So we see this across the board for a theme where we are the capital. At the end of the day that supports this, we do not think it is.
Fundamentally intelligent to grow the business without adequate spread.
If you do this, you will be the only 1 who supports it. The reason we have been trusted with the industry's largest sidecar, is because investors know that we will not take volume unless we are earning adequate spread.
and you bring back 1 of the theme that I think Jim and I live with
At the end of the day.
We and our entire industry are origination constraints. Now, the good news is we're doing
Any number of things to massively scale? Origination and there are a number of very positive Trends in the world in that regard, but we should not ignore that. We are
Essentially Hostage, to origination in our capacity to create excess return for unit of risk, that is the promise of private markets.
And I would just add I think if you look at the last 5 to 7 years, how we've navigated our uh securitized products Co Holdings, we've constantly upgraded and it's it's over the view of where we are in a credit cycle even though we probably would have on a pencil, we'd have a higher Roe owning more triple double and double B's, but we've owned a lot more Double A's and single A's because of the overriding you on credit.
So, let let our actions speak louder than our statements.
Thank you all. I look forward to next quarter, and thanks for all your support on the call.
Ladies and gentlemen.
Concludes today's event, you may disconnect your lines or lock off the webcast at this time and enjoy the rest of your day.