Apollo Management(US:APO)2024-02-08 18:16Financial Data and Key Metrics Changes - In 2023, Apollo Global Management reported record adjusted net income of $4.1 billion, or $6.74 per share, with fee-related earnings (FRE) and spread-related earnings (SRE) growing more than 25% to a record $4.9 billion [5][31] - The company achieved a 200 basis points margin expansion, with assets under management (AUM) hitting a record $651 billion and inflows totaling $160 billion [10][31] - GAAP earnings totaled $2.9 billion for Q4 and $5.1 billion for the full year, maintaining eligibility for S&P 500 index inclusion [41] Business Line Data and Key Metrics Changes - The asset management business achieved a 25% growth in FRE, while SRE grew by 26% in retirement services [31] - Athene, a key segment, had record inflows of $66 billion, contributing to total organic inflows of $107 billion across the platform [22][31] - The direct origination portfolio appreciated by 20% over the full year, with hybrid strategies returning more than 15% [21] Market Data and Key Metrics Changes - The company noted a shift in institutional investor focus towards asset classes offering current income and inflation protection, particularly in credit, infrastructure, and sustainability [24] - The retirement market is seen as a significant opportunity, with a potential opening for private investments in 401(k) plans [43][44] Company Strategy and Development Direction - Apollo aims to scale origination from approximately $100 billion annually to between $200 billion and $250 billion over the next five years, emphasizing the importance of origination for growth [17][50] - The company is focused on building out its high net worth coverage and expanding its product offerings, particularly in private credit and hybrid investment solutions [18][26] - Management highlighted the need to adapt to changing market dynamics and investor preferences, particularly regarding private investments [12][15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued momentum in 2024, expecting to raise approximately $120 billion of capital organically, representing a 20% increase [23] - The company anticipates low double-digit growth in SRE for 2024, driven by organic inflows and a favorable interest rate environment [38] - Management acknowledged the need to focus on high-quality growth rather than merely increasing volume, emphasizing the importance of sustainable business practices [62] Other Important Information - The company announced a 7.5% increase in the annual dividend to $1.85 per share, beginning in Q1 2024 [40] - A new presentation format was introduced to separate SRE excluding notable items, reflecting industry trends [32] Q&A Session Summary Question: Insights on the 401(k) market and competitive landscape in wealth management - Management sees an opening in the 401(k) market for private products, driven by a shift in risk mentality and a focus on guaranteed lifetime income [43][44] Question: Return differential in alternatives and performance issues - The performance of Athene's alternatives portfolio was slightly below expectations, primarily due to underperformance in certain insurance stakes [48] Question: Clarification on origination targets and growth strategy - The company aims to increase origination significantly to meet the needs of institutional investors and high-net-worth clients, focusing on scaling existing platforms [50][56] Question: Capital allocation strategy and share buybacks - Management plans to prioritize organic growth and immunize employee stock issuance, with share buybacks dependent on market conditions and realizations [66]