Apollo Global Management, Inc. — 2024 Q1
Transcript
Each turn shows the speaker, their inferred role, the section, and that turn's net sentiment (×1000).
Good morning, and welcome to Apollo Global Management's First Quarter 2024 Earnings Conference Call. [Operator Instructions] This conference call is being recorded.
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.
Thank you, Noah, and good morning. As Noah detailed, first quarter results were strong. Personally, I was very pleased. FRE was $462 million, up 16% year-over-year. And you will hear a little bit from me but mostly from Jim, there is momentum in every part of the business. For SRE, we reported $817 million, up 19% year-over-year. Key note for the quarter, a record inflow of $20 billion for the quarter.
Great. Thanks, Marc. Let me dive into a few more details. The foundation of our business is built upon delivering strong investment returns for our clients. And we have historically done so by upholding a purchase price matters investment philosophy across market cycles and strategies, which embrace downside protection structure in return for excess return per unit of risk.
Investment performance, education, distribution capabilities, technology and a diversified product list, all of which we've successfully established over the last 24 months.
The traditional channel, platforms and corporate solutions. And more recently, we've identified partnerships with other financial institutions as the fourth avenue that we plan to expand over time. Additionally, we have expanded our focus on a fifth leg, the broad equity and hybrid ecosystem as well, which you will hear more from us in the future.
Thanks, Jim. Good morning, everyone. Let me close out with some brief comments on our financial performance. Our first quarter results positioned us well to deliver on the financial targets we've communicated for 2024, which signal an attractive mid-teens earnings growth trajectory.
[Operator Instructions] Today's first question is coming from Glenn Schorr of Evercore.
So I like hearing about all the progress in the wealth channel. My question is, in the asset management segment, non-comp was higher. One of the things you noted in the footnote was higher placement fees, so good expenses.
I'd say -- I can say a couple of things, Glenn. It's Martin. Firstly, we are -- we're at the back end of the financial impact of decisions we've made to reset our cost base, both comp and non-comp. And so you should expect that Q1, which was a step-up from Q4, represents normal going forward. And so -- and that's all consistent with the guidance for the year, which is 100 basis points of margin expansion, '24 over '23.
The next question is coming from Alex Blostein of Goldman Sachs.
I was hoping we could start maybe with your outlook for third-party fundraising. You guys are obviously off to a really good start here in the first quarter. So maybe update us on what you're expecting for the rest of the year with respect to third-party fundraising. What are some of the key drivers behind that? And as you sort of think about some of these larger insurance companies coming in into your offering, how should we be thinking about the fee rate, particularly within the yield bucket, on the blended basis going forward?
Thanks, Alex. I think Marc and Martin hit it. Like we think the first quarter, it sets the level for great trend growth throughout the year. We're very comfortable that what we've seen in terms of the last 24 months, bringing the products together, being very thoughtful about our product suite, really delivering a holistic package. So we're very comfortable taking the first quarter and looking at that as the year grows out.
The next question is coming from Brennan Hawken of UBS.
I'd love to hear updated outlook on capital solutions. Really strong revenue momentum there, building on last year's strengths. So were there any particular platforms that were notable contributors? And given the building momentum behind capital markets activity, why shouldn't we see those revenues continue to show robust growth?
Well, this is Jim again. I think there's a number of questions there. We do get excited about our capital solutions because it ties into not only distribution of great ideas, and as Marc said, 25% of everything and 100% of nothing, but it increases the dialogue that we have in our capital formation. Investors see the product that they're seeing from us and it opens the door to get closer. And again, so we're seeing momentum.
The next question is coming from Bill Katz of TD Cowen.
Look forward to seeing everybody in October, if not sooner. So Marc, not to steal any thunder from a couple of months from now. But when you laid out your goals for the sort of 15% to 20% FRE growth and the low double-digit growth for SRE, your flywheel that Jim was just talking about was substantially smaller. How do we triangulate between the sort of the rapid growth of your ecosystem to the financials in terms of thinking through the earnings growth?
I don't -- thanks for the question. I don't think any of the above. I want to come back to and I guess maybe be a little bit of an outlook for the industry. Our industry has amazing potential. The case for private markets is a very compelling case. People used to look to private markets for excess return. Now they look to excess -- to private markets for both excess return and diversification.
Origination, culture, education because to build something that's not sustainable is not what we're interested in doing. Sustainable, predictable, 15% to 20%; long term in the asset management business; low double digits in SRE. If we get periods of market volatility where things are really mispriced and we can put large amounts of capital to work, as historically we've seen at least once a decade if not twice a decade over the past few decades, you will see those accelerate. Origination, origination, origination for us.
The next question is coming from Ben Budish of Barclays.
I wanted to ask about some of the nuances on the retirement services flows. It looks like your FABN issuance was a bit better than what we would have expected from what we saw publicly. The PRT side was a little bit lower. Just any nuances there.
Thanks, Ben. It's Marc. The business is a 2-sided business, and I've said this a lot. And it's -- we've been the only ones disclosing this. So it's been difficult, I believe, for analysts to really understand it.
The next question is coming from Patrick Davitt of Autonomous Research.
My question is on the ATLAS-MassMutual partnership. Firstly, any framework you can give on how to think about the impact on ATLAS' origination volumes and thus Apollo earnings?
So first, I've said this publicly, and it's actually kind of an interesting observation for how this goes. I think when I think -- I'm asked often who our best competitors are, I think MassMutual is our best competitor. I look at what they do on the asset side. I look at their -- on the liability side, the quality of the team.
Yes. I think continuing to taking the wide scope and then drilling down, I mean, ATLAS for us and this conversation about what private credit is historically been defined versus what it really is defined, the $40 trillion, ATLAS is really that platform, of our 16, we've got 6 or 7 that really drive the activity. And what you're seeing in the recent announcements about ATLAS is it is a finance lender to finance companies. And therefore, the breadth and scale of equity and debt financing that, that vehicle attracts and needs to have, as well as SMAs, partnerships, offtake facilities, that's what we call the ATLAS ecosystem.
The next question is coming from Michael Cyprys of Morgan Stanley.
I wanted to circle back to the new Apollo asset-backed company, ABC, that you guys are launching. I was hoping you could elaborate a bit on the product, the return profile. Interesting, you're structuring as an operating company. I hope you could elaborate a bit around that. And maybe just talk about your vision and how big could this be over time.
Well, really, Mike, when we think about the activities in terms of consumer finance, hard assets, the broad areas of asset-based finance, this is the vehicle that lets us -- we have the institutional product, ABF, which we've raised some nice money and will continue to be one of our flagship pillars in the yield and credit infrastructure.
Yes. I'm going to just punctuate this a little bit, especially given the environment we're in and the concerns over credit quality. We've been in this business a long time. And for me, this is -- for Jim and I, it's our 40th year. It's hard to believe that sometimes.
The next question is coming from Kenneth Worthington of JPMorgan Chase.
This is Alex Bernstein on for Ken. I know there was a question previously around ATLAS and the MassMu relationship, so apologies if any of this is repetitive. But I do think there are a couple of other points we're hoping to dry out.
Well, thanks for the question. This will be a great conversation at our October day. But basically, we have these 16 platforms. The top 5 to 7, namely MidCap, ATLAS, PK, Wheels are the great drivers. And yes, as we think about running those as a portfolio, optimizing the financing on those and bringing in third parties, whether it's in SMAs on the production side, or even in many instances where we brought in investors to own the equity along with us, that's all part of the flywheel.
Thank you. That concludes the Q&A portion of today's call. I will return the floor to Noah Gunn for any additional or closing comments.
Great. Thanks, everyone, for your time and attention this morning. If you have any follow-up questions on anything we discussed on today's call, please feel free to follow up with us. And we look forward to speaking with you again next quarter.
Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines at this time or log off the webcast, and enjoy the rest of your day.