All right. Before we get started, for important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. All right. With that out of the way, good morning, everyone. Welcome back. Day two of Morgan Stanley's Financials Conference. I'm Mike Cyprus, equity analyst covering brokers, asset managers, and exchanges from Morgan Stanley Research. I'm excited to have with us this morning Martin Kelly, the Chief Financial Officer of Apollo. With nearly $800 billion of assets under management, Apollo is one of the world's largest alternative investment managers. Martin, thanks for joining us today. Good morning, Greg. Thanks for having me. Great. Thanks for being here. A lot to talk about. Why don't we start with the macro picture? I'd love to kind of get your thoughts on the macro backdrop here. It's been a little bit of a whiplash of investor sentiment, uncertainty, a lot of volatility, some of which has normalized a bit since some of the peak volatility in April. Just curious, what's Apollo's house view on the state of the economy through the lens of your portfolios, what you're seeing out there, and how are you positioning and navigating in this backdrop? Yeah, it's certainly been an interesting couple of months. I would say I think what we are all seeing is that the uncertainty of the trade war seems to be fading. You can see that reflected in the markets. I think the focus of the administration will most likely now turn to the other components of the plan that are stimulative in nature: deregulation, tax reform, and then likely energy. You look at the rate futures market, and even a month ago, sort of three cuts baked in for this year, six by middle of next year, that's now about half that. The market is sort of reflecting a likelihood that there'll be more inflation from the stimulative effects, a likelihood that there'll be less need for rate cuts. I think when you combine that with the Treasury supply that's required, there'll be pressure on the long end of the curve as well. The rate market is likely to be higher for longer. I think our view is that the number of cuts implied by the market is probably overdone. We think there may be a cut this year, but probably not more, subject to Treasury auctions functioning properly. Long rates probably stay high. With that backdrop, it's a pretty good environment for us. Higher rates, generally speaking, are a good environment for credit. We're actually pretty constructive on the environment that's ahead of us. In terms of what we own, the portfolio, the data is positive. We're not seeing adverse trends in the data. It's tended to surprise to the positive. Even in the most tariff-exposed companies that we own, a month or two back, I think the potential consequence looking ahead is much less than we thought. Across the portfolio, with an orientation to investment grade and therefore more high-quality credit with lower LTVs, the portfolio is performing well, and there is nothing of any real concern across we own. We think that the backdrop is therefore constructive for growing the business, similar to the way we have laid out. Okay. Turning to capital markets, you've built out a meaningful capital solutions revenue stream in recent years. Can you talk about some of the steps you took to get to where you are today? Looking out over the next several years, how meaningful could this capital solutions business be for Apollo? What are some of the incremental steps that you would look to take in the coming years? Yeah, I think this is one of the great successes that we've had. It has a lot of potential ahead of it. Capital solutions really sits at the center of a lot of what we do. It's managed by people who are sort of expert capital market bankers who have decades of experience and find working with us an attractive place to be. It sits between origination teams who originate credit, investment teams who deploy capital, banks as key partners to us, LPs. It really sits at the center of a lot of what we do. I think what we've been successful in doing is evolving the business to be, it's roughly three-thirds today of business the way we think about it. It's sort of captive business coming from businesses that we own, including all the platforms. We've seen much more stability in the revenue stream with repeat business from customers, clients who have financed through us and are now coming back to refinance, either refinance existing debt or restructure or have other financing priorities. About a third of it is episodic, and it's sort of transaction-dependent. That is quite different from what it was even a year or two ago. I think we now have the benefit of a pipeline which gives us pretty good confidence and visibility into quarters ahead of business. The business remains debt-focused, although the equity contribution is growing. It'll remain a debt-focused business, both investment-grade and non-investment-grade. It really is, it's a business that you've seen the stability in the revenues. You've seen, I think we've had 10 quarters of more than $100 million of revenue in a row. Our focus is on continuing to grow it. We have laid out a target of $1 billion of annual revenue by year five of the plan. We are certainly well on track to achieve that. We are six months into the plan. We continue to build out the business, attract great people, grow out relationships with corporates and with banks as key providers to us. The origination comes through our teams. It comes through bank partnerships. It is just an important and growing ecosystem sitting at the center of a lot of what we do. What do you have to do to hit that billion dollars? Do you have to add more people? Do you have to take your origination? I mean, I think you've put out a target on origination. Do you have to take it to that level in order to hit that billion? It's organically growing. I think we are continuing to add people to the team. If we look at where we're investing in growing at our teams, that's one of the key areas. Along with global wealth and other parts of credit, we attract really good people who are really good at what they do, with great relationships, knowledge of the markets, structuring capability. It's an organic build. I think what we're seeing is quarter by quarter, year by year, it's just becoming more entrenched and more embedded at the center of a lot of our business. Okay. Turning to private credit, which has seen tremendous growth and success with Apollo, more focused on the private IG side, maybe versus others. Where are we in terms of expanding the scope of private credit as you look out over the next couple of years? You have announced a number of financing solutions at JV with Intel. There were some discussions in the press with Meta. I guess, how do you view the role of Apollo going forward in these markets? It connects to the previous question. This is the debate. What is private credit? We have been pretty clear that we think the opportunity in private credit is not only the way it is classically defined, which is a below investment grade, sort of direct lending business, lending to sponsors predominantly, which is a great business, but in size about equal to the leveraged loan market and the high yield bond market. We think that the opportunity for private credit is a $40 trillion marketplace, predominantly investment grade, significantly asset-backed financing, warehouse lending. It really is the opportunity that is grounded in the thesis that the investment grade opportunity is a vastly larger opportunity for us. As we look at the adoption of private credit, we are in the early stage. I think the most advanced adopters of private credit as part of portfolio construction are insurance companies. That is still a significant work in progress. Apart from that, the convergence of public and private in investment-grade private credit is at the very early stage. That speaks to partnerships that we are creating, as are others in our industry with traditional firms, to provide private investment-grade solutions to them to combine with public as a part of the portfolio, whether that is done through traditional firms or directly with institutional clients that we have relationships with. It is in, I would say, infancy stage in terms of adoption, for insurance companies who are more advanced, but still have significant growth in front of them. Insurance, early days, retail, perhaps a significant opportunity and maybe the next leg of the. Yeah. I'd say every other institutional investor, so third-party insurers as the more advanced, but other institutional investors, generally speaking, very early stage. It's obviously a wealth opportunity as well. Okay. We'll come back on the wealth side, maybe just sticking with the credit theme you have. On the origination side, 16 origination platforms today, I believe it is. These are a lot of finance companies, these 16. They're sitting on the 16 balance sheet. Talk about the magnitude of origination volume that you're seeing from these 16 platforms, the steps that you're taking to drive growth of that origination volume from these platforms, and how you're thinking about maybe adding new platforms over time. What could make sense to extend into? It's another area where we can look at what we've done in the last two or three years, and we've doubled the size of origination. We look ahead, and we also see a significant growth potential ahead of us. The 16 platforms are owned by AAA, the vehicle that's partly owned by Athene, and then partly owned by individuals. The platforms are a key part of, but only a part of, the overall origination strategy. When we set out our five-year plan three years ago, we had origination of $100 billion per year. We expected that to double over five years. We're now running at more than $200 billion per year, $230 billion, $240 billion on an LTM basis, and expecting that to get to $275 billion over the next four or five years. Very, I think, realistic and feasible growth ambitions that are needed to sort of create equilibrium in our earnings outlook. The 16 platforms that you mentioned are not quite half of that origination volume. The other half is provided by the large high-grade financings and all our other credit businesses: CLOs, risky mortgages, warehouse lending, and so on. In terms of the 16, there is actually quite a wide dispersion around the maturity of the platforms and the size and the contribution to that close to half of the $200 billion. Even the largest platform, which is the Atlas business that we bought from Credit Suisse, is also, we think, subscale relative to the opportunity that it can be. It is a predominantly U.S. business. Part of the opportunity for growth is outside the U.S., in Asia and Europe. It is growing each platform. It is growing domestically. It's certainly growing some of them internationally. It'll likely be done by organic growth, roll-ups of other platforms into what we own. I wouldn't expect the number of platforms to increase a lot over time, because I think we're represented in most of the asset classes we want to be from an origination perspective. I think you'll see us grow both by attracting great management teams and growing the teams we have, and then doing roll-up acquisitions into the platforms. It's a key part. We keep talking about origination as the most important thing we do, because without quality, sort of risk-appropriate, risk-adjusted returns, nothing else matters. It's the ability to attract capital to the system. This is certainly a very important part of that. It's also connected to the question that you had on capital solutions. The platforms are a source of financing requirements for the capital solutions business. It sort of adds to the predictability of the earnings stream that we see from that business. Great. Maybe just turning over to fundraising, which remains strong for you guys. Hearing some challenges at the industry level around endowments, foundations, also China LPs, reducing exposure, in addition to the still limited distributions that we've seen in recent years, just given the exit environment has been a bit soft. Putting all that together, I guess, how would you characterize the fundraising environment today? Can you tie into that the funds that you have in the market and your expectations for fund 11 coming to the marketplace? Yeah. I think the whole way that capital is raised in our industry is evolving, and it's moving past the traditional way of just institutional capital raising. It's obviously an important part of what we do. If you look at how we accumulate capital, sort of capital formation broadly defined, it's obviously institutional. I'll come back and answer the question more directly. It's the global wealth opportunity. It's Athene growing its top line. Increasingly, it's becoming partnerships with traditional firms as a way to access distribution. It's what we're calling new markets, which is defined contribution, 401(k), tax advantage, and getting sort of innovative new products into the marketplace. That's the spectrum of how we think about capital raising most broadly defined. When you look at institutional capital raising, which has been sort of the backbone of the industry for the last three or four decades, there's no question it's more challenging now to raise capital in the environment that we're seeing with exits being more difficult. I think it creates a real delineation in managers between the larger managers who have strong track records, and this is specific to equity, and those that don't. I do think you'll see a dispersion of outcomes on capital raising that relate to the firms that have been through cycles and that can demonstrate strong track records over time and have a track record of investing money at different points in the cycle with consistent and sort of top quartile returns. They will do well. We put ourselves in that category. That's, I think, with the narrowest definition that you can think of, which is sort of classic private equity. I think we will, we are seeing growth. I think we'll continue to see growth in what we think of as equity-adjacent strategies. Infrastructure, secondaries, climate financing, renewables, and so on. You look at where the larger opportunities for growth come from here, which are hybrid. The area that sits between equity and credit, structured equity solutions, which is under-penetrated and under, I think, appreciated as an asset class, but becoming much more interesting to people to get sort of equity-like returns, but with low return dispersion. There's credit, everything around credit, investment grade and non-investment grade, which by dollar value is the far greater opportunity. We're very focused on relationships with institutional clients, making sure that we can provide solutions to them that are appropriate for them as the world moves more to a private orientation. Even with the equity strategy, I think you'll see, as I mentioned, you'll see a dispersion of outcomes. Specific to fund 11, it depends on when we responsibly invest the balance of fund 10. I would think we have this year and next year to invest fund 10. We'll be in the market to raise fund 11 starting later this year. When we sort of activate that fund depends on when we're fully invested in fund 10, which is about two-thirds invested today. Think late next year, early 2027 as the time frame for fund 11. Great. You mentioned a number of different sort of subcategories related to fundraising. I want to dig into as many as we can. Okay. All right. Maybe starting on the private wealth side, you have a number of strategies and vehicles from AAA to Altitude to ADS, among others, seeing notable success today with them. I guess, how broadly distributed are these strategies today? What strategies might be more meaningful contributors as you look out over the next 12, 24 months? Yeah. This is our largest investment area as a firm. I mentioned where we're putting our sort of investment dollars to work. Global wealth sits at the top. It is a complicated ecosystem of having the right products, the right relationships with distributors, the right technology to service end customers, and obviously people on the ground who are out selling the product. We are very pleased with the progress we have had. We had $12 billion raised last year. We had a strong first quarter. Second quarter has been strong as well. The product set we have out in the market is actually 18. We have 18 separate products in the marketplace. There are a handful that I think you mentioned are the ones that are by dollar value performing better. This is a marketplace where it often takes 6, 12, or even 18 months for a product to start to resonate and to be adopted. I still view this as really early stage. We have a couple of mature products headlined by ADS, the non-traded BDC. We have others, infrastructure, secondaries, other forms of private credit that sit behind that, which are all, I think, attractive and starting to get traction. There is AAA, which we mentioned earlier. In terms of geography, Asia has been an attractive place to raise capital for us, as has the US and also Europe. We are experimenting with different fund structures in different markets to see what resonates. We are willing to take some bets around products that we expect that work but may not work. We're bringing product to market through different structures in Europe, different structures in the U.S. and Asia that are appropriate for different investors in different jurisdictions with different regulations. It all comescomescomescomescomescomescomescomes down to being what we think is a partner to distributors, providing quality products, providing product that's sort of appropriate for investors, and then having the technology to support that. Great. In retail, sticking with that, you've launched a number of products in partnership with others, State Street, Lord Abbett. It's still early days. What are you hearing in terms of reception, demand, and then more broadly? Can you talk about your partnership approach and what else could make sense? Sure. We have partnerships with Lord Abbett and with State Street. Among those relationships, we have two ETFs. We have an interval fund. We have a target date. We are connected to a target date fund. We are accessing those that have the heft to distribute to individual investors in a way that we can. We are providing solutions and product to them that is either in the form of support to defined contribution or in the form of providing private assets to the coming with public assets that they provide. Others are doing similar things with partnerships. I think you'll see this as an area that continues to evolve, because the opportunity, the investors that sit behind these large distributors, traditional asset manager firms, are vast. Early days, early days. I days. I think you'll see us work with others. I think you'll see us bring more product to market in a similar form. This is the whole notion of what we're calling new markets and being a solutions provider to companies that can access private assets that can't otherwise. You did mention target date. Retirement space comes to mind with that. Retirement space today, 401(k) remains largely out of reach for alternative investments. How might that be unlocked? Talk a little bit about the approach and what products could make the most sense. How do you see this sort of playing out? Could this even be a 2025, 2026 event? Yeah. Very topical. Certainly in the news a lot even this week. There is a conversation around what's the appropriate set of products. There is a conversation about how is there an acceptance of those products by plan fiduciaries to avoid litigation risk around adopting products in plans. Our opinion is we should start with credit products, which have a more predictable range of outcomes and a generally sort of a higher quality product in terms of the risk-reward trade-off. Our focus is on bringing credit products to the marketplace. There are ways that you sort of teed it up with the question. There are ways that you can do that absent a change in guidance or regulation or legislation. I think there is probably a short-term, medium-term, and a long-term answer to the question. The short-term answer is I think the Department of Labor is focused on this and focused on the absence of individuals being able to access private assets. Guidance by the Department of Labor or an order from the White House could provide short-term comfort, if you like, to people that this is an appropriate asset class and that plan sponsors and plan fiduciaries can offer it as part of their plan offerings. That is a short-term, which is certainly possible. We had that back in the first Trump administration. We did. That was not enough back then. What might be different? Then what's the next step? The next step would be regulation by the Department of Labor. There's guidance, and then there's regulation, and then there's legislation in that order. That's the short-term, medium-term, and long-term. Legislation is obviously a longer-term lift. It would require a bill to go through the Congress. That's more difficult to handicap. I think guidance followed by regulation is certainly what I think is possible. Could we get there without legislation, though? I think we could. Obviously, legislation would provide the most definitive comfort and is much more difficult to overturn. Regulation can be overturned with the next administration. I think it depends. I think there is an increasing viewpoint that the asset class is needed and it is an appropriate asset class. How you define the asset class is, there is a range of views on that. I think acceptability of the asset class, I think, is becoming more apparent. It then becomes a question for sponsors and fiduciaries as to whether they are willing to take that on with either guidance or DOL regulation. Certainly, I think possible that both happen. Legislation would be obviously the most definitive. Okay. We saw a recent announcement from Apollo that created a new markets division to reach everyday investors. Can you elaborate on the thinking here, your approach, what metrics to define success? Yeah. Neil Mehta, who has run strategy for us, a longtime PE partner of the firm, is now running this. This is a coordinated effort across the firm to bring more structure around what we think are really significant opportunities to grow. This is an extension of what he'd been doing in his strategy role. What Neil is doing is focusing on bringing an effort to product innovation and creating sort of a structure around innovation that is resonating with third parties. He and his team were responsible for the ETF development. It's partnerships. It's sort of legs four and five of the one through five fundraising or capital formation landscape that I laid out a little while ago. It is working on developing partnerships with traditional asset managers and bringing solutions to them, including model portfolios, including ways that we can commingle our private assets with their public assets. It is also bringing an effort to coordinate access to DC, access to 401(k), to the prior question, more development of tax-advantaged products, which includes Athene, and then helping to develop the next generation of products for Athene beyond the current lineup of fixed annuities, funding agreements, and PRT. It is really thinking ahead to where can a relatively immature offering of products for retirees move to in a tax-advantaged form through the retirement services marketplace. It is a pretty broad waterfront. It is intended to really sort of commercialize innovation around the firm and bring sort of scale and structure to those efforts. Speaking of Athene and insurance, why don't we dig in there a little bit? Flows were very strong in the first quarter. Let's just start with the outlook for annuity sales and demand this year, how that might evolve as the interest rate backdrop may shift. At the beginning, you outlined expectations for a little bit higher for longer. Maybe that's supportive. What if actually rates come down a bit more in line with the forward curve that maybe are a bit different than your base case expectations? Just curious how you think about sort of annuity sales in different environments. More broadly, which channels are the most attractive at this point? Seemed like in the first quarter you leaned into the funding agreement backed notes, FIBN marketplace. Yeah. It's interesting. Annuity sales across the market have almost tripled in the last five years. That's when we're moving from a zero-rate environment to where we are right now. We don't see much likelihood that there's a meaningful drop in rates. I think that's what the market is implying. It's also quite well known that once you buy an annuity, you tend to roll that annuity into another annuity. You want to preserve the sort of embedded gains from a tax perspective and defer them. You tend to roll into another product, which might be the same or it might be slightly different, but it's still an annuity in form. Athene has been the number one writer of annuities. It's without question, I think, that higher rates benefit the industry. There is also a secular change or tailwind, I should say, to the marketplace with the number of people retiring every day. As far forward as we looked at that, that will be the case. There is a large increase in the people nearing retirement or at retirement who need access to different products. There is sort of the replacement of existing products, and there is just the growing marketplace. We see the current pace of annuities is pretty much what we plan for as we look forward. As you recall from the investor day, the $70 billion of top-line growth across the four channels that we have today, we forecast to be about $85 billion on average over a five-year period. There is growth embedded within that. It is not spectacular growth. Quite feasible, I think. Specific to what we did in the first quarter, the first quarter was an interesting environment. Asset spreads got really tight. Competition in the annuity space also was higher. Spreads on funding agreements also got really tight. We saw that as an opportunity to access what we think is really cheap financing, a lot of which we just put into cash as a short-term measure before we deploy it. That was really the opportunity that we saw in the market to access inexpensive financing through the funding agreement channels broadly defined in an opportunity that was there then. We have done this before. There are periods of time when we are quite active. There are periods of time when we do not participate at all in the funding agreement market. It all depends on appetite and sort of supply of capital at that time. Great. I imagine some of those dynamics you just mentioned also impacted your outlook for spread-related earnings for the year, where you mentioned a mid-single-digit growth profile for the year relative to, call it, around a 10% medium-term annual growth outlook. Maybe just walk through some of the moving pieces around that guidance of mid-singles for this year. What are some of the puts and takes around that? How can we sort of monitor to gauge prospects for whether there could be prospects for you guys to do a little bit better than the 5%? Sure. What we laid out, the drivers of the 5% growth and how that changed from the prior guidance were really the components I just laid out. Asset spreads were tight. That affected prepays in the marketplace. I think you saw any and all players that have CLO assets in particular mention the same dynamic in their calls. It was a good environment to write cheap business on the liability side. It was a tougher environment to invest the business for the same reason on the asset side. We wrote business and put it into cash. The pace of that being deployed into higher spread assets will determine the outlook of SRE from here. There is definitely a negative to what would otherwise have been invested on SRE relative to what would otherwise have been invested in spready assets. The rate environment at the time that we provided the guidance had more cuts built in than previously and more cuts than today. You should think of the 5% guidance as agnostic to changes in the rate outlook. If rates change, which they have, then that should be adjusted for in the rate. That could be some upside to that 5% just based on the move. What were you guys expecting at the time in terms of rates? The curve at the time we did earnings, which was sort of close to three and close to five cuts, respectively, by end of this year and end of next year. Okay. The pace of investments you mentioned, that was a bit slower in the first quarter. How has that been trending so far here in the second quarter? Any better? April was a good month to put money to work. You can see its spreads have come back in in May. We are being patient about how we deploy the money. April, for a period of time, and it was weeks, not the whole month, spreads really gapped out. We were very active at putting money to work in that period of time. We are patient. It is interesting when you think of the cost structure advantage we have and the origination advantage we have relative to the competition in the marketplace. I do think it is a period of time. There are periods of time, and we have seen this before, when competition is greater. It is hard to see how people are making their 15% return on equity in an environment when asset spreads are tight and competition for annuities is strong. There is pricing pressure through those channels. At the same time, we have a cost advantage that no one else does. At the same time, I think our origination capability is best in class. It will be temporal, most likely. It needs to sort of play itself out. Over time, the model produces 15% return. There are periods on equity. There are periods of time when it can be higher, which we saw in 2022 and 2023. There are periods of time when it can be a bit lower, which is sort of evidenced by the competition in the marketplace right now. I'm afraid we'll have to leave it there. Thank you very much, Marc. Good. Thnks. Thanks Thanks for your attention. Thank you.