Apollo Global Management, Inc. (New)

Good morning and welcome to Apollo Global Management's third quarter 2024 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 opened for questions. Please limit yourself to one question and then rejoin the queue. 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 any interest and interest in any Apollo Fund. I will now turn the call over to Noah Gunn, Global Head of Investor Relations.

Thanks, Operator, and welcome again, everyone, to our call. Earlier this morning, we published our earnings release and financial supplement on the investor relations portion of our website. We reported strong third quarter financial results that included record fee-related earnings of $531 million, or 87 cents per share. near record spread related earnings of $856 million, or $1.40 per share, and adjusted net income of $1.1 billion, or $1.85 per share, which reached the second highest level on record. Additionally, I'd like to take a moment to thank you all for participating in our Investor Day last month. We were thrilled to have fantastic attendance, with over 3,000 people participating live, in addition to another 54,000 who have accessed the replay since then. Given our proximity to this comprehensive event, today's call will be a shorter update. I'm joined this morning by Mark Rowan, CEO, Jim Zelter, co-president, and Martin Kelly, CFO. Mark and Martin will cover prepared remarks, and Jim will be available for Q&A. And with that, I'll hand the call over to Mark.

Thank you, Noah, and good morning. I want to echo Noah's sentiment that we take nothing for granted, and we deeply appreciate your willingness to spend three to four hours with us on Investor Day to truly dig into the unique business that we are building. Hopefully, we outlined a clear vision for our five-year plan as well as the upside drivers. In summary, for those who did not suffer through the three to four hours, we talked about average annual FRE growth of 20%, average annual SRE growth of 10%, FRE and SRE reaching $10 billion, $5 billion each in 2029, and pay and I more than doubling to $15 a share by 2029, capital generation of 21 billion. In short, we laid out ambitious targets, but their targets, the management team and I are fully behind and believe we can meet. Third quarter was a solid start in that direction. In short, everything worked. The team made all of us look good. We will open the frozen yogurt bar today. to reward the team for that. It's one of the tools we joked about on Investor Day, but it's part of the culture of Apollo. Let me spend a second as to how the long-term business plan and the corridor relate to each other. In terms of our five-year plan, we laid out four macro trends or tailwinds that we thought were going to drive ourselves and our industry forward over the next five years. the so-called global industrial renaissance and this massive need for capital to rebuild infrastructure, energy transition, and next generation power and data. The second, retirement. The third is the growth of individuals complementing institutions who have long been the sole source of capital for private assets. And finally, the notion of public and private convergence. In short, any of these four TAMs, could double our business over the next five years. It is up to us to execute against this opportunity set and to position the franchise squarely in front of these very strong tailwinds. We're fortunate in many ways that even at our size and scale, in the scheme of the asset management industry, we are a relatively small player. And while we project that we will double our business over the next five years, That is not all that large, particularly compared to the enormous TAMs in front of us. Bringing it down to the quarter, in terms of global industrial renaissance and the massive need for capital, this was a record origination quarter. 62 billion of originations for the quarter, 194 billion year-to-date. Platforms, really strong quarter. Atlas, in particular, had a really strong quarter. 50 billion of cumulative originations to date. $5 billion of equity capital raised, a new $5 billion facility from BNP, 350 person strong. In short, the cylinders are all firing at Atlas, and we expect great things from them going forward. In retirement, Athene had another $20 billion organic growth quarter. We continue to widen the funnel through distribution expansion. Just launched with BAML last week. another top 15 platform. Away from Athene, we continue to make inroads into the retirement space, in particular in the DC market. We have our first mandate for our AAA product on an RAA platform. We are in the equity sleeve of a CIT offering and we launched in October. While technical, this is an enormous milestone for us and I believe portends well for the future in front of us in adding private assets to help bulk and accelerate retirement solutions for those in need. In terms of individual investors and progress against retail, fundraising is on pace to increase 50% year-over-year in 24 without a flagship fund. The team here has done an extraordinary job. ABC, our asset-based company, is now distributing on two large wire house platforms. ASPM, our evergreen multi-asset secondary strategy, launched globally. We now have, post these two, 11 wealth products focused on the market, six of which have been in the market for a year or less. But I want to really call out here what the potential of what this can be. Recall that our strategy here is to be seen as an innovator in this marketplace. So AAA, which we talked about a year and a half ago, we've now crossed 18 and a half billion and we expect to be circa 20 billion by year end. Strong returns here. now approximately 10.5%, with a fraction of the volatility of public equity markets and public debt markets. This is the kind of product that has multiple uses across portfolios, and I stick by what I said when we launched the product. I expect this to be the largest fund at Apollo within a very short period of time, and I think next year will be when that happens. ADS, also really strong performance. Durable yield. taking advantage of trends in private credit, but done in an Apollo-esque way, lowest leverage, all first lien. We expect the strategy to be circa $15 billion a year end. I cite the size of this because I think it's important to show just how fast this channel is developing. And the channel development is about product. It is about performance. But it is also about the capability to serve this large and growing market. and the capability to continue to innovate. We learn something almost every day in this marketplace. To cite just one example, we talked a year ago about an insurance-wrapped product to take advantage of the unique tax situation of individual investors. Our Altitude series, which encompasses our insurance-wrapped product, we expect to be circa a billion dollars a year end, and now active in two significant wire houses. Those three trends, global industrial renaissance, retirement, and growth in the retail channel, are three of the four cylinders that we expect, or three of the four tailwinds that we expect to power our business going forward. The fourth is this whole notion of public and private convergence. We see this as fixed income replacement. What we're watching take place is investors who have historically allocated to private markets solely out of their alternative buckets. are beginning to allocate out of their fixed income bucket, which historically has been 100% public investment grade. We expect that over time, investors will begin to divide this bucket between beta, public investment grade, and alpha, private investment grade, and they will consume that in a number of different formats. Some will consume it directly as pure private assets, some will consume it in fund format and yet others will consume it in products that are more familiar to them from more familiar names such as the partnerships and the relationships we've announced with Lord Abbott and with State Street. More on that product when it is approved because it is currently in registration. Those four tailwinds, I believe, will push our business forward and they will push our industry forward. But all of them ultimately depend on one factor. They depend on our capacity to originate assets that offer excess return per unit of risk, or alpha. We are not solely an asset manager. If we behave like an asset manager and simply gather funds, we will simply degrade our business and degrade our franchise. That is not our intention and that is not what we are going to do. Our capacity to grow is limited, as I've said previously, by our ability to originate, and we are keenly focused on how we go about doing this. We have a number of platforms, some 16, which we've spent roughly $8 billion building over the past 15 years that now employ circa 4,000 people. This is a very significant investment and a bar that many of our competitors will need to cross to compete with us in this area. Some will do that, and we expect them to do that. But make no mistake, this market is enormous, but one has to originate good risk. to be able to grow their business and offer their clients excess return per unit of risk. In the three and a half hours that we talked during our investor day, I wish we could have covered everything, but we failed to. One area I really want to drive home and talk about a recent promotion is our third party insurance. We have built for Athene the capacity to originate good assets and have proven over the past 15 years that we can scale our retirement services business. Recall that as an originator of assets, we want 25% of everything and 100% of nothing. In some ways, the ideal partners for us are other insurers, people who are trying to amortize the same sorts of liabilities that we're seeking to amortize and deal with the same capital and regulatory regimes. Our third-party insurance business is approximately $100 billion of AUM as of this date, and we expect it to double over the next five years. But it will not double on its own, and so we've taken one of our most senior partners, Jeff Jacobs, and asked Jeff to become the CEO of our third-party insurance business with all of the resources of the firm at his disposal. This is important to us, not just in the capacity to add AUM, but also to support an industry and to support retirement, and to make sure that there's a broad understanding of the regulatory and capital regimes associated with private assets, particularly private investment grade, and it's an area that will receive lots of attention from us. In short, we're playing to win. Lots of the terms we've introduced across the industry, this notion of origination, fixed income replacement, and an industrial renaissance, now seem to be mainstream. We believe we are building something unique. in the context of our industry, and we believe we are uniquely positioned for this opportunity with the capacity to originate, the right cost and form of capital, and the right culture to succeed. In short, we get to do this. With that, I'll turn it over to Mark.