Private equity giant Apollo Global Management Inc. is expecting commitments for its 10th flagship private equity fund to reach the “low $20 billion range,” falling short of the $25 billion target set earlier. The fund had received $16 billion of commitments through March 31, and a final close is expected in the summer, according to Apollo Co-President Scott Kleinman. The flagship fund, Apollo’s 10th, has already invested about $6 billion of capital, with the private equity team signing four deals since the last earnings call, including the acquisition of chemical company Univar Solutions and aluminum products manufacturer Arconic Corp.
While Apollo’s private equity business, led by David Sambur and Matt Nord, is facing a challenging fundraising environment amid rising interest rates and a looming recession, the firm’s credit and insurance businesses were a source of strength during the quarter. Athene insurance unit, which sells annuities to retirees, saw earnings grow 2% as higher interest rates boosted its investment portfolio. Apollo expects at least $17 billion of inflows during the second quarter, putting the firm on track to exceed Athene’s record annual inflows of $48 billion in 2022, according to Apollo CEO Marc Rowan.
The private equity industry has struggled in the fundraising space over the past year, with constraints on pensions and endowments, which hit the limits of what they could allocate to private equity during last year’s market downturn. While the challenging fundraising environment persisted, Apollo’s principal investing income from selling assets plunged 96% to $8 million in the first quarter, dragging earnings down 7.9% from a year earlier. Nevertheless, Kleinman said, “We’re one of the few firms who can play offense in these periods of uncertainty, which was quite clear by the level of deployment activity in the first quarter. Our current pipeline of opportunities is about three times a year ago and growing.”
Meanwhile, Apollo Chief Executive Officer Marc Rowan addressed concerns about the firm’s Athene insurance unit, which contributes about two-thirds of Apollo’s income, saying insurance companies focused on retirement services don’t face the deposit-flight risks seen in the banking industry. Athene invests in long-term, locked-in liabilities, and 80% of the portfolio isn’t surrendable, he said. “People who own annuities are saving for retirement,” Rowan said. “This is not money they think is accessible. When they do surrender or move it, they’re typically moving to another policy — otherwise they incur” a tax burden.
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