• Fee-Related Earnings (FRE): $554 million or $0.90 per share for Q4; $2.1 billion for the full year, up 17% year-over-year.
• Spread-Related Earnings (SRE): $841 million or $1.37 per share for Q4; $3.2 billion for the full year.
• Adjusted Net Income (ANI): $1.4 billion or $2.22 per share for Q4; record annual ANI of $4.6 billion.
• Assets Under Management (AUM): Record $751 billion.
• Total Inflows: $150 billion.
• Origination Volume: Over $220 billion.
• Athene Organic Inflows: More than $70 billion for the year.
• Net Spread ex Notables: 137 basis points.
• Net Accrued Performance Fee Balance: $1.7 billion or $2.75 per share.

• Warning! GuruFocus has detected 11 Warning Signs with APO.

Release Date: February 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Apollo Global Management Inc (NYSE:APO) reported record fee-related earnings of $554 million or $0.90 per share for the fourth quarter.
• The company was added to the S&P 500 in December, reflecting its remarkable growth and institutionalization.
• Apollo achieved a record annual adjusted net income of $4.6 billion, showcasing strong financial performance.
• The firm reported a record AUM of $751 billion, with total inflows of $150 billion and origination volume over $220 billion.
• Apollo's strategy focuses on sustainable growth, aiming to grow fee-related earnings at an average annual rate of 20% over the next five years.

Negative Points

• The company faces internal challenges in executing its five-year plan, as identified by 90% of its partners.
• There is a risk of increased competition in the retirement market, which could impact growth in that segment.
• Apollo's cost of funding for Athene rose by 12 basis points sequentially, indicating potential pressure on spread-related earnings.
• The firm acknowledges regulatory uncertainties, particularly in the insurance and retirement sectors, which could impact future operations.
• Despite strong performance, the company is cautious about not growing disproportionately in any one quarter, which may limit short-term gains.

Q & A Highlights

Q: Marc, you mentioned opportunities in retirement accounts even without legislative changes. Can you expand on how you plan to achieve this and any insights from discussions in D.C. about enhancing fiduciary opportunities in target date funds? A: Marc Rowan, CEO: The $12 trillion to $13 trillion in 401(k) accounts are mostly invested in daily liquid stock index funds, which isn't ideal for long-term investments. Adding private market solutions has shown significantly better results globally. The challenge is a litigation culture focused on fees and a slow record-keeping infrastructure. We're seeing changes with semi-liquid equity and credit products. Regulatory reform could enhance this, but the focus is on producing the best net returns, not just low fees.

Q: Can you elaborate on the convergence of public and private markets, especially regarding asset-backed and private investment-grade opportunities? A: Marc Rowan, CEO: Not all banks are the same. Some may keep more assets due to reduced capital strain, but banks inherently borrow short and lend long, which is unstable for long-dated, complex projects like energy transition. Our partnerships with banks allow us to offer credit-neutral solutions with more flexibility than public markets. Regional bank consolidation will also create opportunities for us.

Q: With rumors of large insurance assets for sale, can you update us on Athene's capacity for large M&A transactions? A: Marc Rowan, CEO: Apollo has three pockets for acquiring insurance assets: Athene for US spread-based products, Athora for European markets, and Venerable for variable annuities. We have the capital and capability to pursue opportunities that make economic sense, focusing on earnings spread rather than just asset growth.

Q: What are your expectations for origination in 2025, and how do you see the mix of Atlas, lender finance, and direct lending evolving? A: James Zelter, Co-President: We expect geographic expansion, particularly in Europe, Japan, and Australia. High-grade capital solutions will expand, and there's a focus on hybrid origination, especially in the US, Europe, and parts of Asia. Partnerships with banks will continue to grow, offering solutions that public IG markets can't provide.

Q: How do you view the shift in interest rate sentiment to higher for longer, and what are your thoughts on balance sheet positioning for 2025? A: James Zelter, Co-President: We run a duration-matched business and prefer a higher rate environment. While the new administration's actions suggest higher rates for longer, we are well-positioned with our floater strategy. Credit is more attractive in absolute terms, and our business benefits from a higher rate environment.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.