Apollo merged with annuity provider Athene in 2022, turning insurance capital into perpetual capital and roughly doubling its stock since.
Apollo manages $750bn total AUM, mostly credit, with $570bn fee-earning across $480bn yield, $62bn hybrid, and $107bn equity.
Under CEO Marc Rowan, Apollo originated $222bn of credit last year across 16 platforms, including a $12bn NVIDIA-backed CoreWeave deal.
Apollo built a credit machine funded by annuities
Apollo grew up buying complexity other investors would not touch, an instinct inherited from Drexel Burnham Lambert and Michael Milken. That model hit its limits in the Harrah's buyout, when cheap debt met the financial crisis and Apollo's best client turned out to be an insurer that needed spread rather than buyouts. Rowan's answer was to buy the client. The 2022 Athene merger gave Apollo permanent capital, which now funds the credit origination platforms that feed it.
Takeaways
Apollo buys complexity that others avoid. Founded in 1990 by Leon Black, Josh Harris and Marc Rowan, Drexel Burnham Lambert alumni who came up under Michael Milken. Credit Lyonnais's mandate to manage distressed debt after Drexel's collapse got Apollo off the ground, and the Executive Life deal delivered control of Samsonite.
Athene gave Apollo permanent capital. Athene was 30% of Apollo's asset base, and insurance is regulated and capital intensive, so Apollo could not risk losing the account. Rowan merged with the annuity provider in 2022. Apollo now holds $450bn of perpetual capital, and annuity sales are on pace for around $400bn this year.
Insurance capital seeds the origination platforms. Roughly 90 to 95% of Athene's capital must sit in investment grade fixed income or cash. The remaining 5 to 10% becomes equity that seeds originators like MidCap and Merx Aviation. Apollo originated $222bn of credit last year across 16 platforms and 4,000 employees.
Private credit has to move up market. Rowan argues the asset class cannot stay confined to highly levered, private equity sponsored borrowers. Apollo wants an investment grade rating so it can originate investment grade credit and feed it into the top of the balance sheet. CoreWeave's $12bn NVIDIA-backed deal is the template.
Rowan won the succession on strategy. After Leon Black's 2021 Epstein-related headlines and a brief contest with Josh Harris, Apollo chose Marc Rowan. Harris's sports ownership and deal-making style fit buyouts, not the credit and insurance direction the firm was taking. Rowan's 2021 investor day set out the vision.
Hopcroft warns of return decay, not systemic risk. He disagrees with the view that private credit is building systemic risk, arguing the bigger danger is a slow degradation of returns as more capital chases the same deals. He expects Apollo to be valued more like an unregulated bank, on the spread it can originate.
The Harrah's buyout, step by step
Apollo and TPG agree a $31bn leveraged buyout of Harrah's in December 2006, one of the largest gaming deals ever.
The deal closes in 2008 with $24bn of debt and runs straight into the financial crisis.
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On this episode 2
Show 1
Leverage reaches 14 times EBITDA by 2009, so Apollo moves assets off the balance sheet and pushes junior creditors to swap into equity.
The resulting legal battle drags on for years.
Apollo exits by 2019, and Caesars' real estate later becomes VICI, which helps finance its Las Vegas Sands bid.