Apollo Global Management, Inc. (New)

Good morning and welcome to Apollo Global Management's fourth quarter and full year 2018 earnings conference call. During today's presentation, all callers will be placed in listen-only mode and following management's prepared remarks, the conference call will be open for questions. 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 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. These non-GAAP measures are reconciled to GAAP figures in Apollo's earnings presentation, which is available on the company's website. Also note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase and interest in any Apollo Fund. I would now like to turn the call over to Gary Stein, Head of Corporate Communications. Sir?

Great. Thanks, Operator. Welcome to our fourth quarter 2018 earnings call. Joining me this morning are Leon Black, Founder, Chairman, and Chief Executive Officer, Josh Harris, Co-Founder and Senior Managing Director, and Martin Kelly, Chief Financial Officer and Co-Chief Operating Officer. Two other senior members of our team are also participating on this call, including one of our co-presidents, Scott Kleiman, and Gary Parr, Senior Managing Director. Scott and Gary will be available during the Q&A portion of today's call. With that, I'll turn the call over to Leon Black.

Thanks, Gary, and thank you all for joining us this morning. My remarks will be focused on the continued strong growth and diversification of our business over the past year, despite the significant volatility within equity and credit markets in the fourth quarter of 2018. I'd also like to highlight the ongoing drivers of growth ahead for Apollo, including fundraising and opportunities for capital deployment. From there, Josh will discuss the earnings power of our business, which is supported by stable, growing, and recurring fee-related earnings. He will also provide you with some color around our recent performance, as well as details regarding the increase in the buyback authorization we announced this morning. Martin will conclude our prepared remarks with a few words about Apollo's financial performance before we take your questions. I'd like to start with some comments on asset growth across the Apollo platform. During the fourth quarter, we generated strong gross inflows of $22 billion, which brought full-year gross inflows to $60 billion, including more than $35 billion among our permanent capital vehicles. Notably, this growth occurred in a year where we did not have a flagship private equity fundraise, which we believe highlights the ongoing expansion and diversification of our traditional product offerings and strategic capital initiatives, as well as the high level of demand for differentiated returns by our fund investors. Our strong track record through cycles has continued to resonate with fund investors and has led to new and longstanding institutional relationships, not only in success or vintages of flagship funds, but in raising capital opportunistically for new and expanding initiatives. Over the past year, we have raised nearly $13 billion of capital for funds and products that did not exist five years ago, and we believe our culture of continuous innovation and creativity will serve us well as we continue to build our businesses. We are tremendously appreciative of our limited partners who have continued to be extremely supportive of our growth and diversification. And as just one example, our top 25 LPs have an average of eight active investments across the platform, which is a 100% increase from six years ago. During Josh's remarks, he will provide some more detail around individual fundraisers but I'd like to highlight a couple of items that are strategic in nature. During the quarter, Athene, the largest permanent capital vehicle to which we provide investment management services, completed its strategic transaction with Lincoln's fixed annuity business, which helped grow Athene's total assets to $109 billion, a 41% increase over the prior year. In addition to the Lincoln transaction, Athene continues to grow through a variety of well-established organic channels with the potential to engage in further opportunistic transactions. Through the strength of our strategic relationship with Athene, we have provided them a variety of services, including helping them deliver consistent investment outperformance within the life insurance industry. As we noted last quarter, we believe the revised fee arrangement we announced together with Athene in September maintains the strong alignment of interest that has endured since Athene was founded more than a decade ago. Turning briefly to Athora, its acquisition of Generali Belgium closed earlier this month, bringing its total assets to 15 billion euros and leaving it well capitalized for further growth. We believe Athora is well positioned to become a best-in-class solution provider and partner for companies across the European life insurance market, particularly with the support of Apollo as a strategic partner. Moving on to deployment, which has been very strong over the past year, funds managed by Apollo have put more than $16 billion of capital to work across our credit, private equity, and real assets businesses, despite a backdrop in which valuations were generally elevated. Our methodical and patient approach of embracing complexity, combined with our ability to source and structure investments in a creative and flexible fashion, has enabled our funds to deploy capital at what we believe are attractive valuations. As the public credit and equity markets begin to experience significant volatility in the fourth quarter, we were able to move quickly and opportunistically to deploy capital, often in a variety of situations we've been tracking for months or years while waiting for the right entry point. In an environment like this, we leverage the acumen of our experienced investment teams and the power of the long-dated capital we manage to serve as liquidity providers in dislocated markets. We continue to identify and evaluate an active pipeline of investment opportunities across a broad spectrum of asset classes, and are optimistic about our ability to deploy capital at a solid pace. As I have shared with our investors over the past 30 years, my crystal ball isn't any clearer than others, but I do have great confidence in our flexible business model, which has enabled us to repeatedly generate investment opportunities and ultimately attractive returns in any part of the cycle. Before I turn the call over to Josh, As we look towards 2019 and beyond, I believe the prospects for the continued growth and expansion of our business are as robust today or even better as they have ever been. I believe that our integrated platform, which now employs more than 1,100 people around the world, including more than 400 investment professionals, enables us to deliver strong long-term investment performance across a range of market environments. At this time last year, we announced the elevation of Scott Kleiman and Jim Zelter to co-presidents, and the transition has been even more successful than my partners and I could have imagined. This year, I'm pleased to be able to highlight our recent appointments of Anthony Savali and Martin Kelly to the newly created positions of co-presidents COOs. Anthony and Martin have been key contributors in building our business over a number of years and are great examples of the deep bench of leadership strength at Apollo. Talent identification, management, and advancement are core tenets of Apollo's culture. We believe our steadfast focus on these elements has contributed greatly to our success throughout the years and will continue to do so as we follow our path of growth and innovation across the spectrum of asset classes, investment solutions, and strategic initiatives. I expect that all this activity will translate into the continued strengthening of our earnings power as we drive our business forward. With that, I'd like to turn the call now over to Josh Harris. Thanks, Leon.