Asset AllocationOctober 4, 2024

Apollo Aims to Double AUM by 2029

During the firm’s investor day, CEO Mark Rowan laid out plans to achieve $1.5 trillion in managed assets, which include leaning into demand for private credit and retirement products.

Reported by Matt Toledo

Apollo Global Management Inc. wants to more than double over the next five years the nearly $700 billion of assets it manages and is already well ahead of achieving its near-term targets, the fund announced this week at its 2024 investor day.

According to the fund, it is already close to meeting the targets for 2026 that were laid out at its last investor day, in 2021, which included reaching $1 trillion in assets under management. The fund updated its 2029 target to $1.5 trillion AUM, more than double the $696 billion the fund managed across its units as of June 30.

Apollo expects that growth to be driven by debt origination through its private credit business and by insurance subsidiary Athene, as well as plans for replacing fixed income and public equities in institutional portfolios with alternatives in the private markets.

The fund intends to originate approximately $150 billion in loans by 2026 and $275 billion by 2029, rivaling even the level of debt origination of the largest banks. Apollo CEO Mark Rowan noted during his remarks that private markets and private lenders will grow faster than banks and the public markets.

Apollo also wants to expand more than fivefold the amount of global wealth it manages, to more than $150 billion in 2029 from $30 billion today, citing the demand among wealth management clientele for alternative assets.

As of June 30, Apollo 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 the demand for capital prompted by an anticipated global industrial renaissance, including an estimated $30 trillion to $50 trillion for energy transition, another approximately $30 trillion for other power and utilities needs, and $15 trillion to $20 trillion for investments in digital infrastructure.

“We, and institutional investors, are the long-dated capital necessary to do this,” Rowan said of the massive amounts of money required to meet the demand for infrastructure, saying that banks do not have the capability to provide the financing needed.

Apollo also intends to tap into the demand for retirement products, which the National Association of State Retirement Administrators estimates to be an approximately $45 trillion market.

Rowan also noted the success of Australia’s superannuation system, in which private market assets are included in retirement plans. “The outcome over 40 years of compounding is nothing short of spectacular,” Rowan said. “I think we are on the cusp of revisiting this opportunity.”

For the third option, individual investors make up a $150 trillion opportunity, according to Apollo, citing a report from Bain & Co. Of this total addressable market, roughly 50% are family offices, 2% are high net worth individuals and 1% are the mass affluent. “We are now … with individuals, being presented with a market that is at least as large as the entirety of our industry,” 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 only account for a disproportionate 16% of assets invested in alternatives. Individual investors therefore present a relatively untapped market, while private equity investments have mostly been available only to institutional investors. Other large private equity firms, like Blackstone and KKR, have recently expanded their products to retail investors in a bid to gain market share in what Bain calls a “vast, untapped market.”

‘Institutional Revolution’

The fourth opportunity, one Rowan said he finds the most interesting, is the notion of re-thinking the role of public and private assets in institutional portfolios. He said Apollo sees a roughly $50 trillion opportunity in replacing investment-grade fixed income and public equities with private market replacements.

Apollo refers to this switch as the “fourth institutional revolution,” one that sees institutional portfolios transitioning to asset allocations evenly split in fifths between: private credit; a fixed income replacement; other alternatives; passive investments; and a replacement for equities.

What do those replacements look like? For fixed income, it will mostly take the form of private investment-grade credit.

“Everything that exists in the public market for [investment grade] is going to exist in the private market for IG,” Rowan said. “We are watching this happen every day.”

Rowan criticized modern equity markets, saying the structure of the market has changed due to the problems experienced managers are having trying to outperform the market.

“So much of the market is passive today,” he said. “Active management is a small percentage, but, more importantly, active management has actually failed. I think in the future, investors will own equity that is private; think of that as private equity not in a fund without the leverage. Active management may actually be buying and selling of stocks, but active management may also be the active running of companies.”