Apollo completes rebound from pandemic low

Apollo's Fund VIII returned to paying carry after recovering from the 21.6% devaluation of its private equity portfolio in the first quarter of last year.

Private equity was central to a big quarter for Apollo Global Management, which rebounded sharply from the pandemic-induced hit of last year.

The New York-listed firm’s private equity portfolio appreciated by $9 billion, or 22 percent, in the first quarter compared with the prior three-month period, said chief executive Marc Rowan on the firm’s latest earnings results call Tuesday.

This was driven by the strong performance of 2013-vintage Apollo Investment Fund VIII, which grew by 19 percent, and 2017-vintage Fund IX, which grew by 33 percent.

“Our opportunistic businesses are well positioned for a strong US and European recovery,” Rowan said, adding that the S&P 500 index grew by 5.8 percent over the same period.

Growth in the private equity portfolio helped drive firm-wide assets under management up 46 percent year-on-year to $461.1 billion, with fee-related earnings growing 26 percent on an annualized basis to a record level of $286.7 million.

Fund IX started paying full carry in the quarter while Fund VIII returned to paying carry, Rowan said. Last May, Apollo said it was facing close to $1 billion of clawback obligations across several funds, including Fund VIII, as the value of its PE portfolio was slashed by 21.6 percent as of end-March.

The performance of the private equity portfolio pushed net carry to $3.04 per share, from $1.82 per share in the fourth quarter, Rowan added.

On last year’s first-quarter earnings call, co-founder Josh Harris said that Apollo had shifted the strategy of the $24.7 billion Fund IX almost entirely to “credit, distressed-for-control and stressed investing” as it adapted to the changed market environment.

Apollo completed $3.7 billion of realizations during the first quarter of this year, contributing to a total of $10.4 billion over the past 12 months. Exits include the listing of Fund VIII portfolio company and low-cost airline Sun Country and the sale of mortgage broker AmeriHome by Athene and several Apollo funds to Western Alliance, it was noted on the earnings call.

In March, Apollo merged with longstanding partner Athene, creating a combined entity with a market capitalization of $29 billion. The insurer’s portfolio grew by $4 billion, contributing to $13 billion of total inflows for Apollo during the quarter.

Marc Rowan became chief executive of Apollo in March with the early retirement of Leon Black, citing his own health issues and those of his wife as well as “relentless public attention and media scrutiny” concerning his relationship with deceased convicted sex trafficker Jeffrey Epstein. An investigation by law firm Dechert found no evidence that Black had been involved in any way with Epstein’s criminal activities.

This article first appeared in affiliate publication Private Equity International