Apollo Global Management, Inc. (New)

Good morning, and welcome to Apollo Global Management's first quarter 2021 earnings conference call. During today's discussion, all callers will be placed in listen-only mode, and following management's prepared remarks, the conference call will be open for your 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 filing 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 any interest in any Apollo fund. I would now like to turn the call over to Peter Mintzberg, Head of Investor Relations.

Thanks, operator. Welcome to our first quarter 2021 earnings call. Joining me this morning are Mark Rowan, CEO and co-founder, Scott Kleiman, co-president, and Martin Kellett, CFO and co-COO. I'd like to turn it over to Mark to kick off our comments for today.

Good morning. Thank you, Peter. And welcome all. Q1 2021 was a strong quarter for Apollo. Record FRE of $287 million, or $0.65 a share, up 26% year-over-year, up 4 percent sequentially. Total inflows of $13 billion, driven by $5 billion of fundraising and $4 billion of Athene organic growth. AUM of $461 billion, up $145 billion year-over-year, 46 percent year-over-year, and 6 billion quarter-over-quarter, reflecting $13 billion of inflows, $9 billion of positive marks on the PE portfolio, partially offset by reductions in the yield portfolios at Athene and Athora due to rising rates and changing position of the Euro. Our opportunistic businesses had a particularly strong quarter as they are positioned for a strong U.S. and European recovery. The PE portfolio in particular was up 22 percent versus an S&P of 5.8 percent. Scott, I know, will take you through more details, including deployment and realizations, and Martin will take you through the driven primarily by the need for retirement income. We serve this market directly through our Athene and Athora affiliates and indirectly through our institutional clients, our pension funds, retirement systems, sovereign wealth funds, and others. The demographics and market trends of our market, aging, indexation, low rates, need for retirement income, mean that in general, the business gets better every day. we recognize how fortunate we are to be in a growth business. If you dig down to the next level, if you look at our largest business, our yield business, which is more than $330 billion of our AUM, that business is not limited in its growth by capital or liabilities. It is limited in its growth by assets, and that limitation is only temporary. It is our job and therefore our strategy to to expand our capacity to generate assets that provide interesting risk-reward for this segment of the market. In our hybrid and opportunistic businesses, it is a little bit more balanced. Some of our strategies still have substantial room to expand by expanding their access to capital because the front end of those businesses is just so strong. Apollo's unique value proposition is that we are exceptionally good at generating excess returns across a very broad swath of the risk-return spectrum from investment grade to private equity. Examples of excess return across this very broad spectrum, not over one year, but over a very long period of time, I think are instructive. In private equity, our 31-year return 39% gross, 24 net, with every core private equity fund having generated carry, an incredible track record which puts us substantially ahead of the top quartile PE performance. It's not any one fund. It's not size of fund. It's not any one investment cycle. It is the discipline of the franchise and what we do, and I know Scott will spend time walking you through the returns of the most recent fund and how we approach our opportunistic businesses. In our yield business, I believe the best example of our capacity to generate excess return is manifested by examining our largest client, Athene. If you look at Athene since inception over more than the past decade, their ROE in their insurance businesses is 22% and on a consolidated basis, 15% on average over this period of time. This is substantially in excess of any comparable company or comparable index. In the context of this background, this quarter was all about reinforcing strategy, building our front end or capacity to generate additional assets, and positioning us to grow faster. The biggest step in the quarter was obviously our decision to enter into an agreement to merge with Athene. This transaction massively reinforces our position serving retirement income and retirees. adding almost a million clients, including our pension retirement transfer business, an average age in the high 60s. This transaction adds to our capacity and coordination to develop additional yield platforms through aligning Apollo and Athene. Thinking back to what we have been able to achieve with us not fully aligned, whether it is our mid-cap corporate credit business, our triple net lease business, our aircraft finance business, our Reading Ridge Structured Products business, the list goes on and on. I'm excited as to what we can achieve with full alignment. In our hybrid and opportunistic businesses, this transaction increases our ability to seed products and to seed teams and to launch new funds and simply to get to market faster. Some examples of what we've done historically include our hybrid value fund, our infrastructure fund, and numerous others. The transaction also represents a significant strengthening of our connection to additional forms of distribution, including retail, banks, independent broker-dealers, and other wealth channels. These wealth distribution channels represent a significant source of growth for us, and we expect 2021, even prior to the closing of the transaction with Athene, to be a record year for Apollo in these channels and a source of significant future growth. The merger was not the only step we took in the quarter to reinforce our strategy. Significant progress was made in our high-grade alpha business. Apollo has developed a unique platform to provide capital and funding to large corporations globally in the investment-grade market. Our unconstrained appetite for long-dated, creative, and semi-liquid solutions have allowed us to execute multibillion-dollar transactions in a short timeframe as the sole counterparty to these corporations. Working with our partners, With our 400 plus investment professionals, we expect to generate 15 to 20 billion of these transactions in 2021. Also in the quarter, we announced the launch of our credit secondaries business, a new platform levering our insurance affiliates appetite for this asset class into a very fast growing private credit secondaries market. This is one of the first funds in this rapidly growing space, and we plan to raise substantial additional money in the future for this strategy as we continue to build out our general partnership solutions capabilities. In summary, this is an investment year. We're focused on setting the business up so that it grows faster over the next five years, and Scott will take you through some of the investments we're making during 2021 in his prepared remarks. Away from the financials of the business and the strategy of the business, We delivered the changes in governance that we had set out in the first conference call I had done with you. We began to implement changes to our governance to establish a simpler, more transparent corporate structure we believe ultimately positions us to be eligible for S&P index inclusion. In closing, the business is firing on all cylinders. We're making tremendous progress, and I'm very optimistic about growth. I want to take this moment to thank over 1,700 Apollo employees around the world, including 59 new hires in Q1 who worked tirelessly to achieve the results we have announced today. Culturally, the senior management team is focused on positioning the firm to speak authentically about what we can achieve and what we can particularly have an impact on. We are very focused on expanding opportunity, particularly for broader segments of society that heretofore may not have had access to the same opportunities. We can do this at Apollo. We can also do this through our portfolio companies. More to come on this in the near future. Our efforts around citizenship, diversity, equity, inclusion, and ESG are core to our value proposition for our people, and we continue to raise awareness and deepen education on the key issues. In January, we received a score of 100% from the Human Rights Campaign Foundation with regard to being the best place to work for LGBTQ equality. Yesterday, we announced a significant donation to United Way India's Partner Act to immediately deploy thousands of oxygen concentrations and other critical life-saving medical equipment to those in most need. Our hearts go out to the Apollo community in India and their loved ones who are experiencing the impact of this crisis. With that, I will now turn it over to Scott.