Investment management firm Apollo Global Management achieved a significant milestone Wednesday, reaching $1 trillion in assets under management while exceeding analyst expectations for first-quarter earnings.
The company reported record quarterly fee-related earnings, marking success for CEO Marc Rowan’s ambitious strategy launched in 2021. Rowan had established an aggressive five-year goal to double Apollo’s managed assets to $1 trillion through expanded retirement services and credit operations.
With this achievement, Apollo is now closing the gap with industry frontrunner Blackstone, which manages $1.3 trillion. The company has set its sights even higher, targeting $1.5 trillion in assets under management by 2029.
Apollo’s adjusted net income climbed 8% to $1.21 billion, translating to $1.94 per share compared to the same quarter last year. This growth was fueled by a 30% surge in earnings from asset management and debt and equity transaction arrangements.
Wall Street analysts had projected earnings of $1.93 per share, according to LSEG data compilation.
The company did face some challenges, with its asset-backed finance portfolio recording a 1% decline due to reduced contributions from its Atlas SP division. This unit had provided financing to UK mortgage lender Market Financial Solutions, which collapsed in February, raising questions about lending practices across banks and credit funds. HSBC reported unexpected losses Tuesday, which sources indicated were connected to Atlas lending and MFS financing.
Apollo stock showed modest gains during volatile morning trading. While shares have recovered 30% from their March 52-week low, they remain approximately 9% lower for 2024, compared to a 5% decline in the S&P 500 Financials sector index.
The company and its competitors have faced pressure over concerns about lending standards, growth prospects, and private capital’s vulnerability to artificial intelligence disruption in the software sector.
Despite these headwinds, Apollo saw strong capital inflows totaling $115 billion during the quarter. This influx was partially driven by acquiring UK insurer Pensions Insurance Corporation through Athora, Apollo’s European subsidiary. Wealthy individual investors contributed $4 billion to the inflows.
On an unadjusted basis, Apollo recorded a net loss of $1.9 billion, contrasting with $418 million in net income from the previous year. This loss stemmed from a $2.1 billion unrealized loss on insurance unit investments.
The company’s direct lending funds, which have faced increased scrutiny recently, generated modest 0.5% returns in the first quarter, compared to 8.5% over the past year. Competitors Blue Owl and KKR also reported negative performance in this sector during the same timeframe.
Apollo’s main private equity fund posted a 0.3% loss, while its hybrid value strategy, which CEO Rowan has highlighted as a key growth area, delivered 4% returns.
