In conversation with Apollo’s Martin Kelly

Apollo Global Management’s CFO took us behind the scenes at the firm that raised the largest-ever private equity fund 

How does Apollo manage a large LP base?

The $24.7 billion Apollo Investment Fund IX has 350 distinct limited partners, with 85 percent of Fund VIII LPs reupping. Apollo manages such a large LP base by standardizing as much as possible.

“We try to have all investors subject to a similar process,” Kelly said. “As soon as you start to deviate from that you create exceptions, and exceptions create work and potential issues.”

Thanks to streamlined and scalable processes across the business, Apollo has not had to make new hires on the finance team or the investment professional side on the back of the fundraise.

“We’re at a point where we’re really quite scaled and we have domain expertise in the 10 industries that we cover on the deal side, and then the finance and compliance and marketing teams are pretty well scaled around that,” Kelly said.

How large an opportunity are managed accounts?

Apollo has around $20 billion in managed accounts, which range from $250 million-$500 million up to $4 billion-5 billion. The demand for these vehicles, which Apollo invests across its products according to a pre-agreed set of criteria, is episodic, but tangible.

“It’s quite negotiated, it’s quite bespoke, and that’s where it’s harder to scale because investors want information, they want things done a very particular way for their needs, which is understandable,” Kelly said. “But it’s good business and I think it’s something we see, our competitors all see, and I expect that to continue.”


How does Apollo assess the firm’s performance?

Over the last couple of years Kelly has spent a lot of time visiting current and prospective shareholders to understand how they view and value the firm.

“We’re very, very cyclical, we’re volatile in terms of our earnings, and so how do we appeal to shareholders and provide the right information to do that?” Kelly said.

“We had to create a language internally at the firm which was ‘What are the most important metrics for us in terms of running the firm? How do we assess the performance of businesses today as they grow, as we start new products or new asset classes, as we look to buy things? What’s important and how do we condense all of the metrics that we use into a handful that we can use as an objective measurement against new business?’ It’s been a fairly long process to do that, but we think we’ve got a pretty good handle on that now.”


Where are future pockets of growth for Apollo?

Looking to the future, Apollo plans to find ways to grow its nascent real estate business, as well as make in-roads in infrastructure. Kelly also sees robust growth on the horizon for the firm’s permanent capital vehicles, the best example of which is fixed-annuity insurance company Athene.

“We see that as a way to grow out our business both here and in Europe,” he said.

“We think the opportunity to do that in Europe is vast actually, with Solvency II coming in and restrictions on the insurance companies,” he added, referring to the European regulatory framework for EU insurers launched in January 2016.

As of 31 December, Apollo had just over $100 billion of AUM across seven permanent capital vehicles. The compound annualized growth rate of the firm’s permanent capital AUM since 2010 has been 47 percent. n