Apollo Management(US:APO)2024-11-05 17:04Financial Data and Key Metrics Changes - The company reported record fee-related earnings of $531 million or $0.87 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, marking the second highest level on record [5][26][30] - Fee-related earnings (FRE) reached a new quarterly record, surpassing $1.5 billion year-to-date, supported by a 20% year-over-year increase in credit management fees [27][30] - The company generated over $140 billion of inflows over the last 12 months, with credit inflows totaling $39 billion in the third quarter [28][30] Business Line Data and Key Metrics Changes - In the Retirement Services segment, the company achieved robust organic growth of $20 billion in the quarter, with net spread increasing by 16 basis points quarter-over-quarter [31][32] - The alternatives portfolio generated an 8.2% annualized return in the third quarter, with the AAA product generating a 10.5% annualized return [32][33] - Principal investing income benefited from monetizations by Fund 9, with a net accrued performance fee balance of $1.4 billion as of September 30 [34] Market Data and Key Metrics Changes - The company reported a record origination quarter with $62 billion of originations for the quarter and $194 billion year-to-date [13][30] - The company expects to maintain strong revenue growth trends supported by a diversified origination pipeline and a target of $120 billion in organic capital formation for full-year 2024 [30][31] Company Strategy and Development Direction - The company outlined a five-year plan targeting average annual FRE growth of 20%, average annual SRE growth of 10%, and capital generation of $21 billion by 2029 [9][12] - The company identified four macro trends expected to drive growth: global industrial renaissance, retirement, growth of individual investors, and public-private convergence [11][12][20] - The company aims to double its business over the next five years, focusing on the capacity to originate assets that offer excess return per unit of risk [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to execute its five-year plan and capitalize on strong tailwinds in the industry [9][12] - The company anticipates continued strong performance in the retirement space and expects to see significant demand for private assets [73][74] - Management emphasized the importance of asset origination and maintaining a competitive edge in the market [20][21] Other Important Information - The company has built a third-party insurance business with approximately $100 billion of AUM, expecting it to double over the next five years [23] - The company is focused on cost discipline, with total expenses increasing by 11% year-to-date, excluding fund merger costs [30] Q&A Session Summary Question: Progress on third-party fundraising in the insurance channel - Management highlighted the collaborative nature of partnerships with competitors in the insurance space and the vast market for private investment grade assets [38][39][40] Question: Retirement outflows and future trends - Management indicated that the runoff of insurance liabilities is predictable and plans to update forecasts for 2025 [46][48] Question: Retail platform opportunities - Management discussed the evolving retail channel and the need for simpler products to penetrate the market effectively [50][52][54] Question: AAA sleeve in CIT offering and future pipeline - Management confirmed expectations for the AAA product to reach approximately $20 billion by year-end and discussed the potential for broader adoption in portfolio allocations [66][67] Question: Near-term margin expectations and distribution costs - Management stated that they do not expect margin degradation and highlighted the migration of costs from upfront fees to trailer fees [70][72]