Photographer: Dylan Gillis | Source: Unsplash
Apollo Global Management, one of the largest investment firms in the world, announced a lofty goal: to double its assets under management by 2026. If the firm meets that goal, its assets under management (AUM) would exceed $1 trillion. As of September 30, 2021, the firm had approximately $481 billion AUM.
“I think people have always known us as good investors,” remarked CEO Marc Rowan. “I don’t think they’ve understood what a good business we have in addition to being good investors.”
The Rise of Apollo
Leon Black, Marc Rowan, and Josh Harris founded Apollo in 1990. It is headquartered in New York. As a globally focused asset manager, the firm has offices across North America, Europe, and Asia.
Marc Rowan is Apollo’s current CEO. Previous CEO Leon Black served until March 2021. Mr. Black’s high-profile departure was related to his affiliation with disgraced financier and sex offender Jeffrey Epstein. An outside review revealed that between 2012 and 2017, Mr. Black paid Mr. Epstein $158 million for tax and estate planning services. Cofounder Josh Harris has also scaled back his involvement there.
Share price for this high-growth, alternative asset manager has risen by 96% over the past year. As revenue increases, Apollo invests record amounts of capital across its business. Distributable earnings are the portion of earnings that could be returned to shareholders. They will rise significantly next year, along with fee related earnings (FRE). Higher management fees will drive the upswing in FRE.
Winning Investments and Acquisitions
Since its inception in 1990, Apollo has made several high-return investments. It has invested in some notable companies, including ADT Corporation, Shutterfly, and Sirius Satellite Radio. On average, Apollo’s private equity funds have generated a 24% net internal rate of return (IRR) annually since 1990.
Perhaps Apollo’s biggest recent strategy move has been to expand its foothold in the insurance sector. For example, it plans to acquire Athene Holding Limited, an annuity provider. The all-stock transaction is valued at approximately $11 billion and is expected to close in January 2022.
Apollo has owned a minority stake in Athene for more than a decade, which has generated lucrative fees. The merger with Athene is anticipated to be a major driver of Apollo’s future growth.
Private Equity Boom
Private equity firms saw soaring profits in 2021. During the first half of 2021, private equity funds generated $514 billion, representing a 70% increase from the same period in 2020. Several of the firms mentioned here have recently gone public; learn more about them and as well as IPO predictions for 2022 here.
Blackstone, the world’s biggest manager of alternative assets, largely outperformed its peers in 2021. As of September 30, 2021, Blackstone had $731 billion in AUM. Real estate and private equity are its two largest investment focus areas.
There have been some notable highlights in 2021’s acquisition spree. In August 2021, Blackstone bought a majority stake in Reese Witherspoon’s media company Hello Sunshine. Shortly thereafter, Blackstone acquired a majority stake in another female founded company, Spanx. The deal valued the apparel and shapewear maker at $1.2 billion.
Blackstone has honed a strong reputation in real estate. 2021 was a remarkable year for Blackstone’s real estate portfolio. The asset management firm made several multibillion real estate purchases in 2021. For example, Blackstone acquired Bluerock Residential Growth REIT, a real estate investment trust focused on apartments, for $3.6 billion. It also bought QTS Realty Trust, a data center REIT, for $10 billion.
Other Private Equity Players
Other large private equity players, such as TPG, Carlyle, and KKR, were successful in 2021. In December 2021, TPG filed documentation with the Securities and Exchange Commission (SEC), the first step toward going public. TPG, which manages over $100 billion in assets, is targeting an IPO with a valuation of $10 billion. Apollo, Blackstone, Carlyle, and KKR are all already publicly traded.