Apollo Global Management, Inc. (New)

Good morning and welcome to Apollo Global Management's first quarter 2026 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 is being recorded. This call may contain 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 an interest in any Apollo Fund. I would now like to turn the call over to Noah Gunn, Global Head of Investor Relations.

Great. Thanks, Operator. And welcome again, everyone, to our call this morning. Joining me to discuss our results and the momentum we're seeing across the business are Mark Rowan, CEO, Jim Zelter, President, and Martin Kelly, CFO. Earlier this morning, we published our earnings release and financial supplement on the investor relations portion of our website. As you can see, our first quarter results set a strong tone for the year. We generated record fee-related earnings of $728 million or $1.17 per share, spread-related earnings of $719 million or $1.15 per share, and total earnings or adjusted net income of $1.2 billion or $1.94 per share. We also declared a common dividend at our new higher rate, annualizing to $2.25 per share and reflecting a 10% growth rate year on year. Lastly, I would flag that we published several presentations on Athene's website last Friday that provide in-depth, insightful information about the asset portfolio. This effort highlights our continued commitment to lead with transparency and be responsive to market feedback. And with that, I'll turn the call over to Mark.

Thanks, Noah. Let me start where Noah ended. Strong results set a strong tone for a strong year. FRE of 728 was up 30% year over year and 6% quarter over quarter. ACS fees, 246 for the quarter. It's the fourth straight quarter over 200 million. And just to spend a second there, ACS fees being strong means origination has been strong. Not just in the quantity of origination, but in the quality of origination. No one pays a fee. for a normal course CLO, which many people count as origination. Origination for us comes from our syndication activities, which is also how we expand our client base. And many of our syndication partners turn into management fee over time once they see repeatable transactions. We continue to build businesses on this basis and use ACS fees and origination as a diagnostic of just how strong the business is. SRE of 719 And our long-term alts return of 11% would have been 907. On that basis, 2% quarter over quarter, 6% year over year, strong organic growth and inline core spreads. The alts portfolio, low for the quarter, but doing exactly what it is supposed to do. The quarter S&P was off 17%. The Russell was off 16%. Levered equity, private equity, which is the strategy that most of our industry uses, in their ALTS portfolio would have been worse, down north of 20%. We were up 6% for the quarter. While this is not in line with our long-term expectation, this is not a miss. This is entirely how we invest. AAA, which continues to constitute the vast majority of Athene's ALTS portfolio, is now the largest fund at Apollo, north of $27.5 billion, 12% net returns since inception. We are, in short, exactly where we want to be. We're seeing momentum across the business. Origination for the quarter was of particularly high quality, 71 billion. Based on the pipeline we see, I expect origination in Q2 to be even stronger. Recall that our record quarter for origination ever has been 97 billion. Whether we get all the way there or not will depend on how hard the team works, but I think we have a shot doing something very close to that. Origination is not just about numbers, it's about spread. Here, origination for the quarter was 350 basis points over Treasuries with an average rating of BBB, and I'm sure Jim will spend more time on that in his remarks. Capital formation, also really strong, $115 billion for the quarter, of which $50 billion was organic, and $65 billion was the closing of the Pension Investment Corp transaction for Thora. To break down the organic, asset management was $30 billion, Athene $20 billion. Based on what we're seeing for the first quarter and what we see in the pipeline for the year, we're reaffirming our 26% outlook of 20% FRE growth and 10% SRE growth, and the business trends continue to be highly favorable. The business, of course, is dependent on the macro environment. And the macro environment, notwithstanding the noise of what's happening geopolitically, continues to be consistent with how we viewed the business over the past few years. Jim and I, each of us, have now worked more than 40 years. And for the vast, vast majority of that time, we have seen and managed our business and managed our investments with the notion that 95% of the outcomes will occur on the playing field and not outside the sidelines. And sometimes we like what's on the playing field and sometimes we don't in terms of rates and economic cycle, but we know how to navigate that. And we never spent much time thinking about the small chance of out of box results, because if I go through at least my career, 1987, 1990, 1997, 2000, 2001, 2008, and COVID, almost every out of the box event was unpredictable, uncorrelated, and not something you could have spent your time preparing for. We have a little bit different situation today where, I don't know, 65, 35, 70, 30, we just have a much greater chance, in our opinion, of out of sideline results. Everything we see in front of us is actually quite strong. Everyone has a job. Employment stats are good. CapEx cycle is awesome. Government policy, incredibly accommodative. Capital markets, wide open. Why do we think that we have a greater than average chance of out-of-the-box results? Well, geopolitical reset is taking place around the globe, not just talking about what's happening with Iran. It's a total geopolitical reset. Again, maybe much needed, but nonetheless has the potential to cause out-of-line results. Second, almost everything we're doing, whether intentional or not, has the potential to be inflationary, at least in the short term. Restricting the supply of goods, restricting the supply of labor, and the free movement of goods and labor, maybe for good and valid reasons that need to be done, are all inflationary in the short term, even if we are not seeing signs of it. Third, we are seeing the most comprehensive tech cycle we have ever seen, or certainly I've ever seen in my career. This will be very, very far reaching. Almost every job will be enhanced or replaced. We're going to see, in our opinion, a complete flip of blue-collar ascendancy and white-collar stress. The political and other consequences of that I just think are unknown. And finally, consumers and businesses are actually in great shape. Governments, not so much. And this is not just the U.S. What is the natural reaction to This higher percentage of out-of-the-box results, well, for us, it's to be defensive and continue to be defensive. That doesn't mean we're not investing, but it means we're investing with an eye toward protecting our capital and making sure that we are here to ride through cycles if there are corrections, which we, quite frankly, expect. That leaves us positioned well and ready to play offense. How does that play out in practice? Well, look at our equity business. In our equity business, whether it is the private equity business or the hybrid equity business, zero exposure to software. Hybrid value results for the last 12 months plus 16%. Private equity results fund 10, 20% net IRR, 0.4 DPI versus zero for the industry. In equity, again, that's how this defensive posture plays out. In credit, almost everything we've done recently is upmarket. moving more toward investment grade, moving more toward structure, moving more toward protection. Recall that better than 80% of what we originated last year was investment grade. If you look across the entirety of our credit business, sub-2% software exposure, all buckets of credit up 8% to 11% LTM. Credit AUM is now vast majority investment grade. Let me flip now to discuss private credit. The market, actually the press, remains fixated on a $2 trillion slice of this market, which properly should be called levered lending. Most of the financial press treats this as if it is the entire story of what's happening in private markets, and it is far from it. The investment-grade private credit market, which is being driven by the global industrial renaissance, is a $38 trillion market. Therefore, the total opportunity in private credit is some $40 trillion. The obsession with this very narrow corner of the market, this $2 trillion slice, levered lending, is frankly a failure of imagination. Credit in any economy only comes from one of two places. It comes from the banking system or the investment marketplace. There is no third choice. If levered lending is risky, do we want it as a policy matter inside the banking system or do we want it in the investment marketplace? I think the market has spoken. I think regulators have spoken. Does that mean that risk has been transferred to investors? I don't think so. What has happened in our marketplace and the growth of levered lending, particularly exposure to BDCs, is a rational move by investors who are looking to de-risk. Why do I say de-risk? Because most of the funds investors have invested in levered lending have come from the sale of their equity portfolio. Investors rationally have decided that they can earn equity-like returns from first lien risk rather than by holding equity for a portion of their more speculative exposures. This is not people who have taken their treasury portfolio or their investment-grade portfolio and gone into levered lending. This is people who have sold their equities to go into levered lending. The notion that a loan is somehow riskier because it wasn't originated by a bank is not a coherent argument. Private credit is just credit. You underwrite it well and it performs. You underwrite it poorly and it doesn't. If you are concentrated in one industry and you are seeking very high returns and you do things other than first lien and you do things that are highly pick and highly structured with smaller companies, you will suffer losses in pursuit of higher returns. If you run a large cap only, first lien only, cash pay only, less levered credit book on a fully diversified basis, You will not suffer losses absent a massive credit cycle, in which case credit everywhere in the economy will be affected. The origination channel is irrelevant. The jockey, not the horse. All of this is about risk management, and Jim will reinforce this and discuss ADS, our flagship, including recent performance. But the cycle we've been through in the press and the cycle we've been through explaining actually reinforces something that we've been doing over the past few years which have not always made us popular in our industry. Trust and reputation now more than ever necessitates greater transparency on fund pricing for fund investors. New buyers particularly want more transparency around private assets. Last year we launched a notion of estimated daily value as a pilot for our investment-grade fixed-income suite of products, and we validated our asset pricing methodology. For our platform, which is the largest private credit platform in the world, by 6.30, our investors will have daily pricing for all corporate investment-grade fixed-income assets. By 9.30, all investors will have daily pricing for direct lending and asset-backed finance also, That essentially means the totality of our credit business will be 100% daily pricing by 930. 100% daily pricing by 930. How does this work in practice and what have we been doing to date? Because technique and process vary across our industry. If I take our direct lending business, our levered lending business, ADS, even in this market, We are focused on transparency and consistency, and we run a rigorous process with discipline. When public markets reprice, private markets should too. In ADS's case, the rules of the road are as follows. If we hold a position with anyone else, we take the lowest mark always, whether we agree with that mark or not, because that is indicative of where someone might sell the position, and therefore, we market to the lowest price. We map the entirety of our ADS book to the broadly syndicated loan index, industry by industry. If any sector of the broadly syndicated loan industry is down more than 2.5%, at a minimum, we reflect 50% of the value, but it causes us to reanalyze 100% of our exposure in that. There are layers of analysis here about fundamentals, cost of capital, public comps, and market trade, and we mark to current information, not to hope. Whether we agree or not with these marks, just as we sometimes agree or disagree with public marks, we reflect them because private markets need to move when public markets move to the extent they reflect a broader consensus of spread or risk or other things. Another place we've seen noise in private markets is the noise around day one markups and secondaries, particularly on some of the calls for some of our peers. Let me address this directly in how we think. From our point of view in an evergreen format, this practice makes no sense. This leads to mispricing on a short-term basis, which was not that important in institutional funds where investors were not coming and going, but turns out to be very important in funds on an evergreen basis where investors have the opportunity to receive at least a portion of liquidity on a quarter-by-quarter basis. Across the totality of our $1 trillion platform, secondaries that have been marked up round to zero To give you a sense of revenue for 2025 as a result of this markup, for the year 2025, revenue was sub $3 million. We're not sure this accounting practice makes sense, although it is what is currently demanded by the marketplace, and we are part of a group seeking to bring common sense and common sense marketing to this practice because we believe that this reflects reality. is another part of transparency. The continued convergence of public and private assets ultimately requires more liquidity. We have never seen a market where enhanced liquidity and enhanced transparency does not result in tremendous growth for the asset class. Last year, we started really pushing on market making in private markets. From a cold start, we are now north of $13 billion of traded assets. This quarter was exceptionally strong particularly as fund managers now recognize that we are the leading source of liquidity for private market assets, particularly credit assets. On top of that, our venture with ICE will bring greater transparency and consistency of data to this market. Every private asset in the Apollo portfolio going forward will have an ICE ID, possibly in addition to a QSIP. This is the beginning of standardization across this marketplace. It also gives us a tremendous amount of information on real-time pricing and helps inform our estimated daily values across our credit portfolio in particular. Enough on asset management for the moment. Let's flip to retirement services. It is clear to us that there is significant demand for guaranteed lifetime income and for retirement income in all forms. The global retirement crisis gets clearer day by day, and we believe this is one of the biggest secular opportunities out there. Against that backdrop, we tap a portion of this market through a theme. 25, as you know, was a record year with $82 billion of organic origination, and we expect and plan to do more of that in 26. In Q1, we did see lots of competition, in our view, irrational competition of people putting business on the books and at ridiculously low spreads. We did the business we wanted to do and not anymore. Fortunately, we had a very strong and rich origination pipeline, which allowed us to continue to preserve spread against this competitive backdrop. Cash now in the Athene ecosystem is circa $40 billion, along with our treasury and our agency portfolio. This gives us a significant amount of dry powder, along with a robust origination pipeline, tells me that we are on a better trajectory. Lots of noise around the industry, particularly with the words private credit. This is not about PE-backed insurers. It's about insurers. For us, no Cayman, no collateral loans, no games, just straightforward business. What we are doing is totally transparent. No guesswork is required. As Noah mentioned, we put out three decks consistent with our policy of providing the greatest degree of transparency in our industry. If you find that we have not met that standard, please give Noah a ring. I don't know of any other insurer or any other financial institution that puts out the kind of data that we do, whether it is liability data or granular data on our asset portfolio. We have the luxury of doing this. because we are not concerned about transparency. We have amassed the second largest capital base in our industry, some $35 billion, and we are committed to pursuing our AA rating. Why are we focused on rating? Well, because not everyone in our industry is doing what they should do. Not everyone runs their business the way we have run our business. We do worry about contagion, And again, this is not about PE-backed insurers. This is about insurers. Some of the more egregious practices we have seen across our industry do not come from some of the new players. They come from incumbents. What we can do is be transparent, be committed to higher ratings, build our capital base, and run the business for the long-term like principles because we are. Anyone out there peddling false narratives about a theme, you now have all the information that you need. Christine has a Fortress balance sheet with 95% fixed income, of which 90% is investment grade. Our exposure to levered lending, which people sometimes call private credit, is de minimis. Rounds closer to zero than to 1% came in at 0.4%. Our exposure to software, 0.1%. Less asset impairment than our peer group. Full transparency on related party affiliate and Apollo originated assets. We celebrate Apollo originated assets because that means we are controlling the risk and controlling the spread. Full transparency on top holdings with case studies. Full transparency on credit quality and ratings. Interesting statistics in the materials that we've done on ratings. People can now draw conclusions as to whether any of the rating agencies are more or less lenient. I challenge you to come to a conclusion that any one rating agency is better or worse with respect to credit quality than another rating agency. Public ratings and private ratings, these are the same analysts at the same firms in the same team, rating in many instances the same company. There is no difference that we have seen between public and private ratings other than whether they are publicly available, and most times they are not publicly available. It is at the request of the issuer. In every instance we can, we're in the process of going back and getting a second rating for places that we only have one rating. at our private and continue to think this is best practice for the industry and challenge anyone to find what we have yet to disclose or anyone in the industry who's doing better than we are doing with respect to disclosure. The same risk-off defensive mentality that we talked about in our asset management business applies to our retirement services business. One of the ways we earned excess spread over a really long period of time were the investment-grade tranches of CLOs going back 17-plus years. Investment-grade tranches of CLOs have outperformed investment-grade corporate bonds with respect to defaults and recoveries for the last 26 years. That is not a widely understood fact, but it is in fact a fact. They have also offered excess return because of a perception that somehow structured products are more risky. We had at one point on Athene's balance sheet north of $40 billion of investment grade tranches of CLOs, some 11% of Athene's balance sheet. By the way, 99.8% investment grade. What we saw, the market began to see, and over time, the spread available on CLOs vis-a-vis corporate bonds became challenged and declined. We have, as a result, run off our book. and CLO exposure is now down below 8%, and we expect it to be even lower in the coming quarters. Recall that this book has an average life of less than three years in current market environment, and we expect the vast majority of this book to repay simply in the normal course. Enter AMAPS. We are in the business of innovation and continuing to originate. AMAPS, Apollo Multi-Asset Prime Securities, essentially takes the benefit of CLO, and adds greater number of issuers, less leverage, better structure for investors with a thick single A tranche versus a skinny single A tranche, and 40 to 50% investment grade assets. We believe, again, this is risk reduction. Oh, by the way, greater spread than the A tranche of a CLO. The way we view this, is we are taking the zero to 75 risk, which is equivalent in a CLO to AAA and AA, and getting paid more than single A pricing for a more diverse, more highly rated structure, simply because it is new. Athene now has $11 billion of investment grade exposure, or 3% of the portfolio, essentially making up the decline of our CLOs. We would expect this to double over the coming months, As our CLO exposure comes down, you can see in real time us de-risking the portfolio while preserving spread. And we are also seeing increased demand for this product across the marketplace as other insurers and other investment-grade accounts begin to appreciate a new structure. But new structures always take time, and we will garner the lion's share of this asset for the foreseeable future. Innovation is not just about assets. Innovation at Athene is about liabilities. Recall that New Markets, which was a very small contributor to volume in 2025, less than a billion dollars, we expect to be north of $5 billion this year and ultimately to make up as much as half of Athene's new business. In Q1, it exceeded a billion dollars for the first time in terms of liability generation from New Markets and momentum is building. and we expect this to go up over time. Retirement is not just an issue in the U.S. Retirement and retirement income and the need for it is as much an issue in Europe. Athora this month closed the Pension Investment Corp transaction. Pension Investment Corp doubles Athora's assets to 125 billion and also presents us another market of organic growth in addition to the Dutch market. In connection with this purchase, another 3.5 billion euros of Equity was raised for PIC. Total common equity inside of Thora today is in excess of 9 billion euros. And just like Athene focused our energy around originating investment-grade product denominated in dollars appropriate for a U.S.-regulated balance sheet, PIC, in addition to the other assets within other franchises within Athora, now requires us to expand our efforts to generate pound denominated assets that are appropriate for UK regulated balance sheets. Let me now bring it home. We've been leading our industry into the future. Not everyone is doing what we're doing. Most of our industry started life as private equity firms. They then branched out into real estate and infrastructure. and even private credit, but still in the structure of private equity firms inside of funds in relatively slow-moving businesses where money was raised by investors in fund format and now evergreen fund format. We are revolutionizing how and where capital, wealth building, and retirement solutions are delivered. As we scale, which is a difficult thing, it is crucial to define and maintain what makes Apollo Apollo. Some of the most important work Jim and I and the team have done is now on our website under our employment pages. It's now been downloaded either on LinkedIn or from our website nearly 100,000 times defining what makes Apollo Apollo. This is our way of explaining to new hires and to new partners who have joined us not just what the business norms are here but what the cultural norms. As the world changes and as we are all confronted with new technologies and new ways of doing business, it is, in our opinion, the strongest cultures that are going to survive and adapt. We now have everything we need in front of us to achieve our 2029 targets. To keep our edge and continue winning, we need to be uncompromising about who we are. We are now focused our energies on building what comes after 2029. And we are purpose-built for exactly this kind of environment, and we are leaning in. And with that, I'll turn the call over to Jim.