Apollo pledges future growth as profit, assets swell

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By Isla Binnie and Arasu Kannagi Basil

NEW YORK (Reuters) -Apollo Global Management beat Wall Street’s forecasts for third-quarter profit and pledged more growth on Tuesday, backed by a swelling pile of assets, growth in lending and profit from its retirement unit. 

The alternative asset manager reported adjusted net income per share of $2.17, surpassing a $1.91 estimate compiled by LSEG, and told investors to expect rising fee income and better returns from annuity provider Athene into 2026.

Apollo shares were up 7.3% at $133.04 on Tuesday afternoon. The rise helped offset some of the stock’s year-to-date losses, but still left the company’s market value 19% lower on the year.

Apollo primarily focused on private equity when it was founded in 1990, but later branched out to become a major corporate credit investor, helped launch Athene and took full control of it in 2021. 

Overall inflows hit $82 billion in the quarter, boosting total assets under management to $908 billion, edging toward CEO Marc Rowan’s target to manage $1 trillion by 2026 and $1.5 trillion by 2029. About  $34 billion came from the purchase of real estate firm Bridge Investment Group. 

Athene sold around $10 billion in annuities, which promise a fixed stream of payments over time, to retail customers in the third quarter. This was closely followed by a $9.7 billion chunk from funding agreements which are used to raise capital from U.S. Federal Home Loan Banks – government-chartered cooperatives that provide mortgage funding – and other institutions. 

It is generally harder to withdraw money from annuities than from bank accounts, meaning insurers can use those stable, long-term funds to invest in other assets to generate returns. 

Spread-related earnings, a key indicator of Athene’s profitability, rose to $871 million. 

Apollo assuaged some investor concerns about the impact of interest rate fluctuations on the unit. The company said it had reduced $9 billion of exposure by hedging, and Rowan said he did not expect long-term interest rates to “plummet.”

Chief Financial Officer Martin Kelly said spread-related earnings had “troughed” in the first half of the year.

RECORD FEE-RELATED EARNINGS

Fee-related earnings from managing assets and arranging debt and equity transactions hit a record $652 million.     

Apollo and many of its peers in private equity have met challenges to the traditional model of buying companies and selling them for a profit as interest rates rose.  

Apollo said on Tuesday the environment for cashing out on the companies it had acquired remained “uncertain.” It has signed several financing deals, including a hybrid capital arrangement for a $2.7 billion deal to take members club Soho House private.  

Last week, the company said it had teamed up with fellow private capital firm KKR to invest $7 billion in Keurig Dr Pepper, which soothed investor worries about the beverage group’s mounting debt.     

It also raised $5 billion from wealthy investors, whom alternative asset managers are increasingly targeting as investors in private markets.

Rowan responded to recent questions about whether a handful of bankruptcies indicate serious risks to credit markets, and what this means for lending outside the traditional banking system.

“Look at the recent blow-ups. Almost all of those have taken place in credits underwritten by the banking system,” he said.

“I don’t think we are talking about systemic risk,” he said, adding: “bad actors are going to get called out.”

(Reporting by Isla Binnie in New York and Arasu Kannagi Basil in Bengaluru; Editing by Arun Koyyur and Matthew Lewis)