8-K: Apollo Global Management Reports Record Fee-Related Earnings in Second Quarter 2024

Apollo Global Management announced record fee-related earnings for the second quarter of 2024, driven by strong performance in asset management and retirement services.

Summary

• Apollo Global Management reported its second quarter 2024 financial results, highlighting record fee-related earnings.
• The company's adjusted net income was $1.0 billion, or $1.64 per share.
• Fee-related earnings reached $516 million, driven by record quarterly fee-related revenues.
• Spread-related earnings were $710 million, supported by organic growth.
• Total assets under management (AUM) reached $696 billion, with inflows of $39 billion in the second quarter and $144 billion over the last twelve months.
• The company saw record levels of quarterly debt origination at $52 billion and gross capital deployment at $70 billion.
• Apollo declared a cash dividend of $0.4625 per share of its common stock and $0.8438 per share of its mandatory convertible preferred stock.
• The company's retirement services business, Athene, continues to attract significant third-party capital.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to record earnings, strong AUM growth, and successful fundraising. However, some negative aspects like decreased alternative investment income and increased outflows temper the overall optimism.

Positives

• Record fee-related earnings demonstrate strong performance in asset management.
• Significant growth in assets under management indicates investor confidence.
• Record debt origination and capital deployment highlight effective investment strategies.
• Strong fundraising from individual investors shows growing demand for Apollo's products.
• Athene's profitability and ability to attract third-party capital are positive indicators.
• The company's return of capital to stockholders through dividends and share repurchases is beneficial for investors.
• The successful closing of the ADIP sidecar demonstrates the company's ability to raise capital.

Negatives

• Alternative net investment income in the Retirement Services segment decreased by 35.1% year-over-year.
• Spread-related earnings decreased by 11.1% year-over-year.
• The net spread for the Retirement Services segment decreased by 28 basis points compared to the same quarter last year.
• Realized performance fees decreased by 21.1% year-to-date compared to the same period last year.
• Outflows increased sequentially in the Retirement Services segment due to funding agreement maturities.

Risks

• The company faces risks related to inflation, interest rate fluctuations, and market conditions.
• Apollo's ability to manage growth and operate in competitive environments is a potential challenge.
• The performance of the funds managed by Apollo and the ability to raise new funds are critical risks.
• The variability of revenues, earnings, and cash flow could impact the company's financial stability.
• Athene's ability to maintain financial strength ratings and manage its business in a regulated industry are important risks.
• Changes in the regulatory environment and tax status could affect the company's operations.
• Litigation risks are a constant concern for the company.

Future Outlook

The company's forward-looking statements include discussions related to expectations regarding the performance of its business, its liquidity, and capital resources. These statements are subject to risks and uncertainties, and the company undertakes no obligation to update them.

Management Comments

• Marc Rowan, Chief Executive Officer at Apollo, stated that they generated record fee-related earnings in the second quarter due to strong momentum in Asset Management.
• He also noted record levels of quarterly debt origination, gross capital deployment, and third-party fundraising, excluding flagship private equity.
• Rowan highlighted Athene's compelling profitability and its ability to attract significant third-party capital.

Industry Context

Apollo's strong performance in asset management and retirement services reflects a broader trend of growth in the alternative asset management industry. The company's focus on yield, hybrid, and equity strategies aligns with investor demand for diverse investment options. The success of Athene in attracting third-party capital also highlights the growing importance of retirement services in the financial sector.

Comparison to Industry Standards

• Apollo's AUM of $696 billion places it among the largest alternative asset managers globally, comparable to firms like Blackstone and KKR.
• The company's record debt origination of $52 billion is a significant achievement, demonstrating its ability to source and deploy capital effectively, similar to the origination capabilities of large credit funds.
• The 5.7% annualized return from Athene's alternative investment portfolio is a solid performance, although it is below the company's long-term expected average annual return of 11%, which is a benchmark used by many insurance companies.
• The successful fundraising for ADIP II, the largest equity sidecar in the industry, highlights Apollo's strong fundraising capabilities, which are comparable to top-tier private equity firms.
• Apollo's focus on perpetual capital, which makes up nearly 60% of its AUM, is a strategic move to reduce reliance on cyclical fundraising, similar to strategies employed by other large asset managers.

Stakeholder Impact

• Shareholders will benefit from the declared dividends and share repurchases.
• Employees may benefit from the company's strong performance through compensation and equity-based awards.
• Customers of Athene will benefit from the company's ability to provide retirement savings products.
• Investors in Apollo's funds will benefit from the company's strong investment performance and capital deployment.

Next Steps

• Apollo will continue to focus on its three strategic growth pillars: origination, global wealth, and capital solutions.
• The company will continue to manage its sizeable flagship private equity funds prudently.
• Apollo will continue to execute share repurchases to offset dilution from share issuances under equity incentive plans.

Key Dates

Keywords

Asset Management, Retirement Services, Fee Related Earnings, Spread Related Earnings, Assets Under Management, Debt Origination, Capital Deployment, Athene, Dividends, Alternative Investments