Apollo Global Management wants to more than double the nearly $700 billion in assets it manages over the next five years, and is already well ahead of achieving its short-term goals, the fund said this week. The announcement was made at Investor Day in 2017.
The fund says it is already close to achieving its 2026 goals set at its previous investor day in 2021, including reaching $1 trillion in assets under management. The fund updated its 2029 total assets under management to $1.5 trillion, more than double the $696 billion the fund was managing across all its units as of June 30.
Apollo expects growth to be driven by debt origination by its private credit business and insurance subsidiary Athene, as well as plans to replace debt and public equity in institutional investor portfolios with private market alternatives.
The fund plans to originate about $150 billion in loans by 2026 and $275 billion by 2029, which is comparable to the lending volume of major banks. In his remarks, Apollo CEO Mark Rowan said private markets and private lenders will grow faster than banks and public markets.
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Apollo also wants to increase global assets under management more than fivefold from the current $30 billion to more than $150 billion by 2029, citing demand for alternative assets among wealth management customers. are.
As of June 30, Apollo’s assets included $502 billion in private credit, $105 billion in private equity, and $88.2 billion in real assets.
future opportunities
Rowan outlined four opportunities for Apollo to grow. The first comes from capital demands driven by an expected global industrial renaissance, including an estimated $30 trillion to $50 trillion for the energy transition and other power and utility needs. This includes approximately $30 trillion for investments in digital infrastructure, and $15 trillion to $20 trillion for investments in digital infrastructure. .
“We and institutional investors are the long-term capital that we need to do this,” Rowan said of the large sums of money needed to meet infrastructure demand, adding that banks don’t have the capacity to provide the necessary capital. Ta.
Apollo also intends to tap demand for retirement products, which the National Association of State Retirement Administrators estimates to be a market of about $45 trillion.
Mr Rowan also noted the success of Australia’s superannuation system, where private market assets are included in retirement plans. “The payoff of compound interest over 40 years is just amazing,” Rowan said. “I think we’re about to revisit this opportunity.”
Regarding the third option, retail investors are creating a $150 trillion opportunity, according to Apollo, citing a Bain & Company report. Of this total addressable market, approximately 50% are family offices, 2% are high net worth individuals, and 1% are high net worth individuals. The wealthy class of the masses. “We are now seeing a market for individuals that is at least as large as the industry as a whole,” Rowan said.
According to a 2023 Bain report, individual investors own approximately 50% of the world’s estimated $275 trillion to $295 trillion in investable assets, but these individuals account for the largest share of assets invested in alternatives. Of these, they account for only a disproportionate 16%. Private equity investing is therefore primarily available only to institutional investors, while retail investors offer a relatively untapped market. Other major private equity firms, including Blackstone and KKR, have recently expanded their offerings to retail investors in an effort to capture market share in what Bain calls a “vast, untapped market.”
“Institutional Revolution”
The fourth opportunity that Rowan said is most interesting is the concept of rethinking the role of public and private assets in institutional investor portfolios. He said Apollo sees about a $50 trillion opportunity in replacing investment-grade bonds and public equity with private market alternatives.
Apollo calls this shift the “Fourth Institutional Revolution,” which will see institutional investor portfolios move to an asset allocation that is evenly split one-fifth between private credit and private credit. . Alternatives to bonds. Other alternatives. Passive investment. and stock alternatives.
What are those alternatives? For bonds, this will primarily be in the form of private investment grade credit.
“Everything that exists in the (investment grade) public market will also exist in the IG private market,” Rowan said. “We see this happen every day.”
Rowan criticized the modern stock market, saying the problems experienced managers have in trying to outperform the market have changed the structure of the market.
“Most of the market today is passive,” he said. “The percentage of active management is small, but more importantly, active management is actually failing. I think that in the future, investors will own private equity. Think of it as private equity within a fund without a fund. Active management may actually be buying and selling stocks, but active management of a company can also be active management.”
Related articles:
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Unsold private equity assets hit $3.2 trillion, Bain reports
Tags: Apollo, Apollo Global Management, Athens, Insurance, Mark Rowan, Private Credit, Private Equity
