Apollo’s Chance to Be a ‘Financial Juggernaut’

Marc Rowan wants to be in the larger office, the one with the better view.

He has a very specific definition of what that means. When the Apollo Global Management chief executive officer meets with clients, they use a smaller office to host managers of alternative assets, which represent about 13% of a typical pension fund’s portfolio. The bigger room -- with the better view -- is reserved for the managers of fixed income, which makes up close to four times that share.

This is just one way to understand the transformation of Apollo.

Private equity titans are gearing up for a bigger takeover of credit markets. Rowan and his team explained to investors during an almost-five-hour investor presentation this week that Apollo is likely to gain from filling large holes in financing markets. He contends that Apollo’s merger with Athene, the retirement-services company, will make the combined firm more competitive than every one of its rivals.

As Athene CEO Jim Belardi put it, “It’s going to be a financial juggernaut.”

Apollo already has the lion’s share of its $472 billion of its assets allocated to what it calls “yield” strategies, which includes corporate fixed income, loans originated by Apollo and its various entities, and real estate debt. The yield business alone is expected to double in the next five years, a large part of the $1 trillion in assets Rowan wants to reach by 2026.

Already more than 1,000 people work on Apollo’s origination capacity at third parties, which is on top of the nearly 2,000 people who work at Apollo as employees. And it’s one of several areas in which the firm expects to keep hiring.

“I like competing with the large money-center banks,” Rowan said. “It’s not that they do not have their advantages, we are just a better employer. We are a better employer in any way.”

More from the presentation:

• On financial technology: “We will not only provide them capital in very large amounts, we will take stakes in their business,” Rowan said of the new challengers in the financial system. Blythe Masters, the former JPMorgan executive who now works at Apollo-backed Motive Partners, estimates that the space will reach $10 trillion in revenue by 2030. “Apollo can act as an enabler,” she said at the investor day.
• On retail investing: Global wealth is twice the size of the institutional market, Apollo’s Stephanie Drescher said. For the firm, Rowan explained that reaching more retail investors is a part of the “democratization of finance.”
• On capital markets: “We need to be competitive, we need to be fast,” Apollo’s Craig Farr said. He used Apollo’s work with Hertz as an example, while also discussing how it’s been able to provide financing for a traditional rival, Blackstone.

Blackstone Rivalry

The private-asset boom really is unprecedented. Days after Apollo’s presentation, Blackstone said it produced its best quarter in the firm’s 36-year history.

“We had nearly record appreciation in our funds, we had extraordinary fundraising,” Jonathan Gray, the firm’s president and chief operating officer, said in a television interview with me and my colleagues. “We continue to expand what our business is about.”

The stock has more than doubled this year, outpacing each of its peers by more than 30 percentage points. Gray also cited the ability to serve more clients, especially in retail, and expanding in areas like real estate and credit.

Blackstone is also gearing up to raise what could be the largest buyout fund on record, sources have told Bloomberg’s Sabrina Willmer, at as much as $30 billion for a new flagship fund. The firm’s assets reached a record $731 billion at the end of the third quarter, with gains across its funds.

More on Wall Street

• Apollo hired former Fed official and TIAA CEO Roger Ferguson, news we broke earlier this week.
• Two major ETFs tied to Bitcoin futures began trading this week, sending the price of the cryptocurrency past $60,000.
• Blue Owl, the asset manager formed through a novel SPAC merger earlier this year, agreed to buy a property investor based in Chicago. It will add more than $10 billion in assets through the deal .
• WeWork finally goes public -- and the shares are trading higher. It’s on track to end the week with a valuation at about $10 billion.
• Goldman CEO David Solomon and his top deputy, John Waldron, stand to gain more than $50 million based on the bank’s current stock price if the firm meets certain performance targets, Bloomberg’s Sridhar Natarajan reports . The special bonus comes months after the CEO’s pay was cut in relation to Goldman’s role in the 1MDB scandal.
• Jamie Dimon is boosting pay for JPMorgan’s wealth advisers, Bloomberg’s Hannah Levitt and Natarajan report .

More to come. There’s clearly a lot going on, and there’s no stopping now. I hope you’ll join us next week, when I’m set to fill in as a co-anchor from 2 to 5 p.m. New York time on Bloomberg Television. Also, please tune in for Bloomberg’s Equality Summit, as I’ll be interviewing Ray McGuire and Cadre CEO Ryan Williams on how to keep corporate America focused on racial equity. In the meantime, your tips and opinions are very welcome at [email protected] .