Apollo's Athene merger turned insurance capital into a fee engine, as Marc Rowan uses about $10 of insurer equity to seed origination platforms, Hopcroft's example shows yielding roughly $30 of equity for Apollo.
Hunter Hopcroft says Apollo's perpetual capital, now $450bn, drove growth from $8bn of AUM in 2002 to $70bn at its IPO.
Hopcroft argues the bigger risk is slow erosion of returns as debt captures more of asset ownership's benefits, not a sudden Minsky moment.
Apollo turned insurance money into a credit origination machine
Apollo grew from a Drexel-born distressed investor into a credit machine built on insurance capital. Athene's long-duration annuity money buys investment-grade assets, and the thin equity layer seeds origination platforms that earn fees and carry. That model needs ever more origination, and it may change how the firm is valued.
Takeaways
Insurance equity seeds Apollo's origination engine. Regulation puts 90 to 95 percent of insurer capital in investment-grade assets, leaving 5 to 10 percent as equity. Rowan uses that equity to seed platforms like MidCap and Merx Aviation, earning fees and carry. $100 of assets yields about $30 of equity, not $10.
Credit and perpetual capital drove Apollo's scale. Focus on credit and perpetual capital lifted AUM from $8bn in 2002 to $70bn at IPO and about $750bn today. Perpetual capital is $450bn, mostly from insurance and annuities, and the yield segment is the largest at $480bn.
Spread income may change how Apollo is valued. Spread-related earnings now exceed fee-related earnings. Alternative managers have traded on a multiple of fee-related earnings, a projection of fundraising ability, while insurance trades at a much lower multiple. Apollo may be valued more like an unregulated bank.
Growth now depends on origination capacity. Annuity sales are expected near $400bn in 2025. John Zito, the CIO, argues private credit must move up market into investment-grade lending, as the CoreWeave deal secured by NVIDIA chips suggests. Apollo originated about $222bn last year through 16 platforms with 4,000 staff.
Hopcroft sees slow return erosion, not a crash. Hopcroft rejects the idea of a Minsky moment and argues the bigger danger is a gradual degradation of returns, as debt takes more of the benefits of asset ownership.
Rowan pushes private and public market convergence. Rowan argues retirees and pensions 20 to 30 years from needing money do not need daily liquidity, and that 80 percent of companies above $100m in revenue are private. The Apollo and State Street private credit ETF reflects the push.
From Drexel to Athene
Leon Black and fellow Drexel alumni Joshua Harris and Marc Rowan founded Apollo in 1990. Credit Lyonnais gave it a mandate to manage distressed debt.
Executive Life's distressed portfolio moved to Apollo, along with Samsonite control. The first two funds returned 3.6 times capital, with a 37% net IRR.
The 2008 Caesars buyout with TPG used $24bn of debt and reached 14 times leverage by 2009. Apollo exited in 2019.
Apollo listed in 2010 and 2011 as a partnership and converted to a C Corp in 2019.
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On this episode 2
Show 1
Black left after 2021 Epstein reports, Harris stepped down as CEO, and Rowan took over.
Apollo bought American Equity Life in 2009. It became Athene, listed in 2016 and merged with Apollo in 2022.