Am I on? There we go. All right. Good afternoon, everyone. Welcome to our next afternoon session. I'm Ben Budish. I cover the U.S. brokers, asset managers, and exchanges here at Barclays, and delighted for our next fireside chat to have from Apollo, Scott Kleinman, Co-President of the asset management side of the business. Scott, thanks so much for being here. My pleasure. Good to see you. Likewise. Maybe just kicking it off with a macro question. Rates seem biased higher for longer, geopolitical uncertainty remains high, fiscal deficits are in focus, inflation concerns persist. On the other hand, economic growth remains pretty strong. Corporate earnings are robust. Spreads are around all-time tights. With that as the backdrop, maybe share Apollo's top of the house macro perspective. Sure. I'll start obviously with the caveat that nobody has a crystal ball. We've been saying for a couple of years now that this higher for longer, and I think it's certainly playing out that way. Everything we looked at, whether it's the strength of the economy, the persistent low-level inflation, really pointed towards rates staying up. On top of that, just the AI CapEx build-out and the amount of IG issuance that is, quite frankly, crowding out Treasuries, is continuing to hold rates higher. Everything points in that direction. I was chatting with Torsten, our Chief Economist, at the end of last week and asked the question, what is his estimate of recession in the next 12 months? He put it south of 20%, somewhere between 10% and 20%. Just all indicators are pointing to continuing to chug along. As long as the U.S. consumer keeps spending and the AI build-out keeps happening, things continue to motor along. While the tail risks keep growing, geopolitical instability, domestic political questions, the trade war, inflation, energy prices, the market doesn't seem to care. As long as those two things of consumer spending and AI build-out continue forward, the underlying economy and therefore the markets keep powering forward. Okay, great. You mentioned AI. Let's jump right into it. Can you talk a bit about how Apollo is approaching the AI infrastructure opportunity? With yields on some of the public hyperscaler bonds widening and some concerns emerging that the surge in investment here could lead to an overbuild, how do you think about protecting Apollo against potential downside scenarios? Yeah. I'll start just by pointing out, I spent the last couple of hours here at the conference meeting with a variety of shareholders and the like, and 95% of the questions were AI related. I've come to the conclusion that these meetings were more about helping folks figure out little factoids that might affect their AI portfolio rather than their alt portfolio. To answer your questions more specifically, look, there are lots of ways to play this AI cycle. There are lots of perspectives on the AI cycle. Our belief for sure is that the volume of AI goods and services is only going up and to the right at a pretty aggressive pace. How that gets valued, where the value resides in the value chain, I don't know. There are people who are making bets figuring that out. Our perspective is, how do we sell the pickaxes to the gold miners as opposed to being the gold miners ourselves? How are we finding ways to finance this massive opportunity, or structurally invest in it without necessarily having to be the marginal equity dollar on what is the ROI on a data center or a TPU or something like that? We have really picked our spots. One of Apollo's real strengths is the ability to muster large amounts of capital in very creative fashions, and that's what we've been doing here. Finding interesting ways to partner with large IG counterparties. The biggest players, as we've been saying for some time, it's become very clear now, the amount of capital needed for I mean, we're talking about the AI build-out, but you can go from the digital infrastructure to energy infrastructure, to industrial infrastructure, defense infrastructure. I mean, the amount of capital needed over the next three, five, seven, 10 years is truly extraordinary. Like, once in a generation type scale. Companies are figuring out that they can't just tap the equity markets. They can't just tap the public bond markets. They need an all of the above strategy, that includes various forms and shapes of private capital. That's the approach we're taking, working with and creating very bespoke solutions for some of the largest players in the AI space. Maybe staying with this topic. You made some significant announcements recently with Broadcom and NVIDIA. What should we know about this? I think a key question for a lot of investors is a pretty simple question like what does it mean for the P&L? I'm sure there's a lot of components to these transactions. So what else should we know about these kind of big marquee deals that we've seen? Yeah. Look, they are highly structured. They are structured in a way to be investment grade. As you would imagine from any Apollo transaction, very protected when it comes to what type of risk we're taking and not taking, and then therefore, as a result, what type of returns we can expect to achieve versus not expect to achieve. While we haven't gone into all the details of these things publicly for a reason, these are, like I said, highly structured and, dare I use the term trade secrets, but to some extent, some proprietary structuring. It follows the mantra and the ethos of what I was just describing. Where they benefit, they benefit Apollo in terms of interesting assets that we can put on our own balance sheets, interesting assets for our client balance sheets, interesting assets for our syndication partners. Really, as we've said for years and years now, the lifeblood of our business is origination, is being able to access interesting transactions, and these are certainly the interesting transactions of the day. I'd ask you where these transactions end up, but I've heard Marc say enough times, "25% of everything, 100% of nothing." I think that's fair to assume that's sort of the case, the framework. That is true, subject to the scale of some of these things are getting to the point where we obviously have single issuer limits and sub-sector concentration, things like that. We're obviously super thoughtful balance sheet by balance sheet where this stuff goes. You should assume a meaningful piece of everything we do ends up on our own balance sheet. Makes sense. You mentioned origination. You guys have often said origination is the arbiter of growth. Beyond AI infrastructure, what other geographies or sectors are you currently seeing the most opportunity in? Yeah. Look, the opportunity sets, like what I talked about, while the digital build-out is obviously the thing that catches a lot of the news, the energy, both traditional and renewable, we've done numerous structured financings and structured transactions across North America and Europe there. Transportation and logistics infrastructure is also a huge phase. Then also just the traditional corporate with so many corporate assets in the hands of sponsors now, being a little bit stuck. Lots of creative ways to bring financing, hybrid and structured financing, so lots of different opportunities there. Really across the gamut from an industry and owner standpoint, both corporate and sponsor. I would say geographically, we're leaning in, obviously in North America, that's always been our sweet spot, but we are really leaning in extensively right now into Europe. Investing in people and country offices because Europe has the same capital need issues that the U.S. does, perhaps even more so because they are just coming from a place even further behind. European corporates are really opening up. Whereas U.S. corporates have been open for a little bit longer, European corporates are really opening up. In the last year alone, whether it is EDF, BP, Air France, RWE, I mean, you go down the list. We have just been doing transaction after transaction with these folks, sometimes series, multiple transactions, because they are having to play the all the above strategy as well, and local capital markets are just not even as robust as they are here, so private capital is having to play an even bigger role and will have to play an even bigger role going forward in Europe. You highlighted a number of transactions I think are examples of this, but over the past several years, you have been talking more and more about your high-grade capital solutions platform within the origination ecosystem. Maybe talk a bit about the opportunity set there, the extent to which these solutions are becoming more widely accepted by corporate borrowers. Yeah. It is funny. A few years ago when we invented the asset class, sounds a little bit presumptuous. Insurance companies were doing that 30 and 40 years ago before the high yield bond market, and before there was an institutional capital market, insurance companies were issuing private notes to companies all the time. But what we really saw was a new feature, a new facet, which is can we work with large corporates, large investment-grade corporates, who otherwise historically might not have interacted or transacted with an Apollo before, certainly from a financing or structural financing standpoint. But bring features to the company, so that they can access pools of capital that they might not have been able to access in the past, and often get features that gave them more flexibility than what a traditional IG bond issued on a IG debenture might have given them. It does not mean more risk, it just means different features. Have the ability to be more bespoke with that counterparty. We started doing these little by little, and as they became more understood, CFOs would talk to CFOs and we got in front of more companies, and folks started realizing, wait a minute, this is actually pretty interesting, pretty creative capital. Today, we have done more than 200 of these type of transactions, ± $150 billion of capital in these high-grade capital solutions, far more than any of our competitors. We have just built the infrastructure on our side to be able to do this. This is not as easy as just showing up and making a commitment and writing a check. There's a lot of structuring involved, a lot of creativity, a lot of understanding on the ratings advisory side working with the rating agencies in full transparency to make sure we're getting the treatment the company needs, providing the features that the rating agencies want to ensure we get that type of rating. It really has become a highly customized but very interesting part of the capital. We're fortunate that it coincided with this need, the global industrial renaissance, this massive need for CapEx by companies, because companies are now recognizing, like I said, that they've got to look at all. It's an all-of-the-above strategy. It's not just one or the other. Companies are looking at all of these solutions. Got it. When you think about the Apollo P&L, so ACS, it's been a clear bright spot. You hit a new high last quarter, and you now had, I think, five consecutive quarters over $200 million. How should investors think about the link between origination and your ACS fees and given your optimism here, what does that mean as we think farther out? I know you've given some longer-term guidance, but- Yeah something people are always thinking about. Yeah, look, I'll go back for a second. I've said this a few times at various points. We built the ACS business because it was a utility that allowed us to source better assets. First and foremost, the ability to understand what's going on in the debt markets, in the equity markets in a better way allowed us to finance our private equity portfolio better, allowed us to provide better financing solutions to companies because it allowed us to speak for whole transactions when we may not have wanted the entirety of the transaction for our own balance sheet. Having those capabilities were very valuable, and it's part of the reason why we've been able to do what we've done is because we had those capabilities. Secondly, it's been an amazing tool for us to be able to get closer to our clients. In addition to just being able to provide periodic products, now we have a reason to be touching our clients on an almost daily basis. Certainly many of our clients. Even start to access market participants that weren't historical clients of Apollo where we now have interesting things to be transacting with them on a very regular basis. I'd say last on the list was we can do all these things and find ways to make some incremental revenues along the way. That's been the value proposition along the way. It really has been in that order. Now, I know we try to sort of give guidance over the years. Fortunately for us, as we've scaled this business, this ACS activity, it has mirrored the growth in our business overall. As we've added capabilities across asset classes, across sectors, we've been able to be more effective in syndicating and marketing more and more product that way which has given us a breadth and diversity there in ACS. Our ACS revenues now represent hundreds and hundreds of transactions in any given year. I think without sort of saying anything beyond the public guidance we've given, this is an incredibly important part of what we do and will continue to be because of the skills and tools that it brings Apollo. Got it. I really do believe we have a differentiated utility inside of Apollo that nobody else has built the capabilities and strength and caliber of the boutique investment bank, if you will, that we have inside of Apollo. Got it. Maybe moving on to capital formation, the market evolution. Starting on the capital side, thinking about fundraising. The institutional channel has been a pretty big source of strength for you guys. Talk a bit about what's driving that and where are you seeing the strongest demand from the LP side? Yeah. Look, we are having just a banner year on the institutional side, really across the board. We raised a bunch of hybrid capital earlier this year. We are continuously in the market with a variety of credit products. I think most folks know we are in market now with our flagship private equity product. All of those fundraisers have been going quite well. There is massive institutional capital demand for private assets right now. Even on the private equity side where you have heard about certainly the troubles in the private equity market in general have been well publicized. Institutional clients are not pulling away from private equity. They are just tending to now go back to a little bit of the level of selectivity that they had maybe in years or decades past. Look, to be honest, right? The last 15+ years allowed a lot of managers to grow in scale pretty dramatically. A lot of new managers to come out of the woodwork, some of which have been great stewards of capital, others of which you are probably looking back at the question. You will watch and see many of those managers start to shrink back down or go away. It takes a while for that to work its way through the private equity system. I have no doubts as to institutional capital for private equity for years to come. More broadly, zooming out from private equity, yeah, lots of institutional demand for private equity. I mean, for private capital across a variety of products. You mentioned Fund XI, so you are currently in the market with that. Just curious, especially given what you just said about private equity, wondering if there is any update you can give on that one in particular, any LP feedback you have received thus far. You mentioned people are being more selective, so how are they looking at you? Yeah. We announced in our last quarterly earnings, we had our first close. We launched in January, with Fund XI. We had our first close last month. We announced $12 billion so far, and feeling very good about our path to our target over the course of the remainder of this year and into the first half of next year. I would say our strategy is certainly resonating with investors. Having been a little bit more disciplined through the last cycle has allowed us to monetize our investments along the way at a higher pace than much of the industry. Our returns for that, call it 2017 to 2022 vintage, are robust and remaining robust. We're not carrying that portfolio at unrealistic valuations. As a result, that's allowing us to monetize the portfolio in real-time as opposed to holding out for hopefully higher valuations that may come in the future. Yeah, I'd say we feel cautiously optimistic on the fund raise and everything we've described from a guidance standpoint, it feels like it still remains. Maybe just thinking farther out, how do you think about the future of the traditional private equity business? What changes do you see coming for the industry? Yeah. Well, look, I started to allude to it. I do think you will see a squeezing of the number of managers, and maybe some of the managers that grew really rapidly over the last decade will have to contract back down as a result of just not being able to return capital or having made investments in growthier sectors that just turns out were more dependent on 0% interest rates than they were on anything else. I think that will be the natural outcome of that. But looking back to the 2008, 2009 GFC, that took a while. That takes a number of years for that to play through. Look, I do think you are continuing to see evolution in just private equity and equity in general, whether it comes down to how investments are made, [GP-led] or other structures. I think like every other asset class, the financialization of everything, the ability to break things into risk and return layers and provide more creative financing or capital solutions to different asset classes, I think you're going to continue to see that. I also think we've started to talk about this concept of owning companies for longer. This concept of it sounds a little bit like maybe a decade ago, folks were talking about core private equity. Core private equity was potentially a concept, but that got, for lack of a better word, bastardized, because folks tended to use it just to pay more for assets, put more leverage on it because they were, quote, "More stable assets." We see a direction of travel in a different direction where good assets that might be held for longer. Why don't you put less leverage on it, more stable, deliver private equity style oversight and operational improvement, but on a lower levered capital structure within a certain subset of companies that have potential ownership and staying power for decades to come. I think you're going to start seeing just more different flavors of the equity ownership. Put another way, what if active equity management meant not actively picking stocks per se, but actively owning and managing companies the way private equity actively owns and manages, but in a more market-like format, with market-level leverage in something that might be more tradable than traditional private equity. So these are just some of the innovations that I think are coming down the pipe. Is it something you're cooking up at Apollo, or just more pontificating on? We're always cooking at Apollo. Fair enough. Maybe moving to the fixed income side. Where would you say we are in the fixed income replacement journey? Are you seeing more tangible signs that allocators are rethinking their portfolios, like on a first principles basis? Yeah. We are just pulling out of New York Harbor, heading into the Atlantic Ocean, right? It is still early days when it comes to true fixed income replacement, right? I think you're seeing early adopters see the value of what private assets can bring to a fixed income portfolio, whether that's on the corporate side or the asset back side. But, it is still, like I said, in the first I don't even want to say the second inning, the first inning of what is a massive journey. But the rewards are also massive. Every time you see another pension fund or institution talk about TPA or Total Portfolio Approach, that's another way of thinking about fixed income replacement. How do I stop fixating on asset class by asset class by sub-asset class, and start thinking in terms of factors like risk and return and duration and liquidity, and look at all the things that might meet those, and how do I triangulate on a formula of different assets that give me that type of set of outcomes that I'm looking for? That's what fixed income replacement is built for. As models of private assets become more pervasive, as TPA becomes more pervasive, I think you're just going to see more and more of this. So, we're really excited about it. I do believe it is It's not going to entirely replace, obviously, but even if it captures 10%, right, 15% of the fixed income market, it is a massive TAM. I feel like we're well on our way to head down that path. Got it. Let's talk about the wealth business for a second. So I guess first, I think ADS is coming to the end of its tender period for U.S. investors. Just curious, based on what you've seen so far, I'm curious in particular about the mix of U.S. versus onshore. How do you think redemptions are trending over the next few quarters? On the sales side, what do you think is required to re-accelerate inflows? Yeah. Let me take a step back. A lot of ink has been spilled and a lot of stage time has been given, I know, over the last couple of quarters to the semi-liquid private credit market. I guess what I will say there is, it is actually not a huge surprise that there was a bit of a slowdown or a backup in this market, right? Enormous amounts of capital has been raised over the last few years from the semi-liquid market in private credit. There are times where you would expect to see redemptions, right? I.e., when you are in a credit cycle. As we started this conversation, we are not in a credit cycle, and so at some point, we suspect the wealth market will start to see we are not in a credit cycle, and that demand will start to reignite. We certainly know we are not in a credit cycle. We see where credit spreads are. We see the underlying credits we look at. We know institutional capital is actually accelerating into private credit and direct lending. So, there is good reason to believe that the wealth market will start picking back up again. I do think that the system as constructed actually worked largely the way it was supposed to, right? The redemption caps were not a bug. They were a feature of this. There was no magic to 5% a quarter other than the industry convention sort of formulated around trying to find the right balance between the rights of redeeming investors and the rights of remaining investors, and 5% a quarter felt right. As far as I can tell, the system is working, right? The system is working, and there was an initial spike. It is working its way down. We are continuing to see that clear itself over the next couple of quarters. I would think that starts to turn itself back around again. So that is my timeline. Obviously, this is all conjecture. I have no crystal ball on that, but it does feel like that is the direction that things are moving. Any color on U.S. versus offshore? No. Look, they ebb and flow at different times and offshore tends to be a little more volatile or in some cases, a lot more volatile. But at the end of the day, it is responding to the same stimuli, just in different orders of magnitude. But yeah, directionally, I think it is all moving in the right direction. On the innovation front, you guys have been busy between market making, daily pricing. I think recently you announced a partnership with ICE along the same lines. Let me talk a bit about- The good ICE. The good ICE. Intercontinental Exchange, if anybody is just wondering. What do you think the ultimate benefits of these innovations are going to be? What are you trying to accomplish? And at the end of the day, how does Apollo benefit? Yeah. Look, the purpose of focusing on daily pricing, on greater transparency, of creating an ICE ID, similar to a CUSIP, all of these things is really about trying to recognize that there is a massive market opportunity, as we and others have talked about, as 401(k) starts to open to private assets, as traditional mutual fund, long only starts opening to private assets. Going back to fixed income replacement, as the fixed income and public equity buckets of institutional investors start opening to private assets. The rationale for why private assets should be part of those portfolios is enormous, right? The public equity markets, for example, are growing more concentrated. They represent a smaller and smaller percentage of the GDP, of employment, et cetera. Even if you don't believe that private assets deliver excess return, which obviously I do believe that private assets deliver excess return for every equivalent asset category, but even if you didn't, just the diversification effects alone, the need to build a more diversified portfolio should lead you towards private assets. I think historically, our industry has taken the position that, great, we have these great private assets. We're originating amazing private assets. So all of those other buckets, you come over here and take these private assets. We're happy to sell them to you, but you've got to come here. I think it's becoming apparent in our dialogues, in our travels, in our discussions with all of these players, that it's ultimately incumbent upon us to meet some of those buyers closer to where they are. Start to package and create these products in ways that look and smell and feel more like the type of products they're used to buying. That does involve having things be daily liquid, having there be more transparency, having an ICE identifier which provides multiple fields of other information that they can go look at and understand. If we do that and do that right, we believe that this will accelerate the opening of that ginormous TAM that we're all, as an industry, talking about. Now, it's interesting because I think a lot of our industry, a lot of our peers are just taking a wait-and-see approach, and that's never really stopped Apollo. When we have conviction about something, we march towards that until facts dictate that we should take a left or right turn. That's what we are doing. I think you're going to continue to see us drive in that direction. We've made commitments over the course of this year as to what portion of our book is going to be priced on a daily basis. I think that will continue to expand in time. That may or may not lead to certain categories moving from daily pricing to daily liquidity. We are really trying to explore all of these things and seeing what is going to resonate with these potential buyer universes and what can we do to make these products more understandable to those markets. Okay. Maybe with our last bit of time, talk a little bit about Athene. Maybe first I want to ask you about AMAPS. You guys have been quite clear about migrating Athene's CLO exposure over to this product. Maybe just for investors who are less familiar, what is AMAPS? Can you give us a little color on third-party receptivity and how are regulators looking at and thinking about this product? Yeah. So what is AMAPS? AMAPS is, we would say, just the next evolution of a CLO-like product for the market. Just as a quick refresher, CLOs, over the last, call it 30 years, have grown to be a $1.5 trillion product. They're consumed all around the financial system. No surprise. Excess spreads have really been squeezed out of that market. What's interesting about CLOs or the way they've been structured and optimized, I would say they've really been built around really optimizing for that top of the capital structure, that triple A piece. They're built to optimize for big money center banks that are looking for triple A paper. That's the fattest tranche of the CLO. It's got very tight pricing, which makes the rest of the CLO work very attractively. We looked at that and have watched that market compress, and felt like, "Well, what if we were able to create an asset category that was not optimized for the triple A, but optimized, say, for the single A?" Which is where insurance companies, credit investors often like to exist. So, we structured an instrument that had that type of structuring. In addition, we said, "Well, what if instead of using 100% sub-investment grade collateral- What if we put much higher quality collateral in the box?" So AMAPS thus far has been roughly 50% IG collateral. So improve the underlying credit quality, fatten the parts of the capital stack that are most interesting to credit investors, and can we create a very interesting product that way? So that's what we've done. We've now done five issuances of these, about $25 billion. Our own balance sheet has taken about half of that, meaning third-party investors have taken the other half. It's been a pretty interesting, diversified group of buyers who have been buying that. We think we are in the early days of what-- Whether it gets to a $1.5 trillion asset class, TBD. We'll check back in 30 years. But it certainly, I think, has a lot of legs to grow. We're starting to see interesting receptivity from other issuers. We are going open source on the technology of this, so sharing this with other originators of credit, because we'd love to see this market develop. We don't obviously have 100% market share in origination, and so we'd love to access other people's AMAPS products, to the extent they're producing AMAPS. So, yeah, we'll see where this goes. To the comment or question about on the regulatory side, of course, every step of this journey has been in lockstep with our regulators, making sure they understand the product. We have come along with them, have responded to their feedback, and made adjustments along the way as such. I want to squeeze in a little bit of a multi-parter, but with the little bit of time we have left. Just thoughts on increased competition in the industry and how you see Athene's competitive advantages standing up. Then there is sort of another question around AMAPS. Given what you have observed in the CLO market, investors sort of think about Athene's long-term spread opportunity. Do you see that perhaps stepping up structurally as AMAPS becomes a bigger portion of the whole? Or does it make you more competitive, and it sort of gets reinvested into the pricing? I know there is a lot in there, not a lot of time left, but In my 57 seconds, I will see what I can do. I would say from a competition standpoint, I will just repeat what our CEO, Grant Kvalheim, at Athene says all the time, which is the annuity market has always been competitive, right? The fact that some financial players have come in and crowded out some traditional players, this has always been a competitive market, and you have to win based on client service, better products, better pricing, better excess spread delivery. So where we are today, I think, is no different than where we have been at various points over the last couple of decades in the annuity space. As far as AMAPS affecting spreads, we are always on the hunt. That is again, the lifeblood of what we do is keep moving the origination boundary, keep coming up with better structural solutions, keep coming up with ways to create excess spread without taking excess risk. AMAPS is one piece of that, but it is not the only piece of that. Yeah, of course, our journey, we have seen spread compression just over the last couple of years, given the markets in general. I think we have reached an inflection point. Again, third time I am saying it, no crystal ball, but it does feel like things are starting to improve, just perhaps because of some of the interesting credits that are going on the Athene book because of AMAPS, because of other things. But this is a battleship that moves sort of slow. You do not sort of whipsaw up and down. On our balance sheet, things move deliberately and a little bit at a time. Feeling cautiously optimistic there. Okay, great. Unfortunately, we are out of time, Scott. Thanks again. Thanks so much for being here. What a pleasure to have you. My pleasure. Thank you.