Apollo’s expansion in Asia brings in US$35bil

Forging ahead: Michelini at Apollo Global Management Inc’s offices in Hong Kong. The company’s revamp of its Asia business is starting to pay off as it raised a substantial number in the region since the start of 2022 to bolster expansion. — Bloomberg

HONG KONG: Apollo Global Management Inc’s revamp of its Asia business is starting to pay off. It’s raised US$35bil from the region since the start of 2022 to bolster expansion.

Under head of Asia-Pacific Matthew Michelini, the person chief executive officer Marc Rowan picked to reshape Apollo’s presence in the region, the company has been tapping into clients’ demand for more reliable yields from private-market investments, including credit and hybrid financing.

Apollo has set its sights on luring capital from insurers and institutions that handle money for retirees in the region.

That includes Japan and Australia, where such firms want more access to private-market opportunities. Insurance companies alone contributed about US$14bil of the money raised in the last two years.

The company has also beefed up regional investment teams in private credit and hybrids while shutting down its Asia real estate equity fund business.

“A lot of the tailwinds in the last 10 to 15 years are not going to be tailwinds anymore,” Michelini said in an interview, referring to easy monetary policy and low interest rates that propelled a long rally in public market investments.

The New York-based firm, with US$651bil of assets worldwide, has historically focused on private equity and such real estate deals in the region.

While other investors chased high-growth companies in countries including China and India, Apollo opted to buy stakes at more reasonable prices, often valued at six or seven times earnings before interest, taxes, depreciation and amortisation.

After Rowan took over as chief executive in 2021, the company started an investment-grade-focused credit team in Asia.

It also added staff that specialise in hybrids, such as convertible bond and preferred stock-like investments in the private markets. It’s struck annuity and insurance partnerships, including those with Australia’s Challenger Ltd and FWD Group Holdings Ltd.

Apollo has recruited 50-plus investment staff in the region since 2021, doubling such headcount ahead of the five-year time-frame initially set. It’s boosted the overall Asia-Pacific-based full-time staff to more than 650, the firm said.

Nine additional senior appointments have been made, including regional heads of wealth and insurance as well as senior credit investment executives.

The firm’s investment in Asia grew by about 8% over the two years through the end of 2023, even after deal flows slowed for the broader industry because of higher returns in the United States and Europe.

A Princeton University math graduate, Michelini joined Apollo in 2006.

Having worked closely with Rowan in building the Athene Holding Ltd annuity brand and then Apollo’s hybrid investment business, he was sent out to the region during the pandemic for a “redesign” with both businesses seen as having strong potential in the region.

In one of the biggest partnerships sealed since his arrival, Japan’s Sumitomo Mitsui Trust Holdings and its bank unit pledged US$1.5bil to invest alongside Apollo and Athene in July 2022.

The deal gives the Japanese companies’ pension clients access to a pool of hybrid investments that Apollo and Athene have been incubating for the last 15 years.

Apollo sees Japan as one of the most important markets outside the United States for the firm.

Heavily exposed to cash and domestic equities in the last two decades, Japanese consumers earned lower returns than their US and European peers.

Now, facing inflation for the first time in about 20 years, Japanese consumers are looking for safe, guaranteed investment products, Michelini said in a separate interview on April 11.

The Japanese government has introduced asset management reforms to help bring quality investment products to the market.

Regional insurers are also increasingly enlisting the help of the likes of Apollo to venture into private market investments.

Apollo agreed to take a small stake in Richard Li’s FWD in 2021. FWD said in its filing that Apollo affiliates will help manage part of the Pan-Asian insurer’s investment across credit and alternative assets. — Bloomberg

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