Apollo raises nearly $2bn to buy life insurance policies

The credit investing giant, based in the Big Apple, has a large presence in the insurance business through Athene, which makes up a substantial portion of the Apollo’s assets under management.

Apollo Global Management’s latest fund investing in life settlements has surpassed the size of its successor, Private Debt Investor can reveal.

The New York-based alternative lending behemoth has rounded up at least $1.91 billion for Financial Credit Investments III, according to a US Securities and Exchange Commission regulatory filing. It also locked down an additional $49.15 million for a co-investment vehicle, FCI Co-Investment III (A), a separate SEC document showed. The firm held a first close for the fund in June of last year.

Apollo declined to comment on a fundraising target and a timetable on a final close. The target for the fund has not been publicly disclosed.

Through the fund series, the firm buys life insurance policies in the tertiary market. The insurance policies bought are typically from banks that are offloading non-core assets, according to an investment note from the University of Michigan’s endowment, which committed $25 million to the predecessor fund, the 2013-vintage FCI II. Tradable high-yielding insurance-linked bonds are also considered.

As part of a life settlement transaction, the buyer, typically an institutional investor, will pay premiums for the life insurance until the death of the insured person, often a high-net-worth individual over the age of 65 who is in poor health. The investor then collects the death benefit proceeds.

Limited partners that made contributions to FCI III include the New Zealand Superannuation Fund, which committed NZ$145 million ($107.88 million, €92.79 million), to the vehicle, according to PDI data.

FCI II garnered $1.56 billion of committed capital, according to Apollo’s first-quarter earnings results and has produced an 11 percent net internal rate of return as of 31 March. The fund’s total assets under management are $2.35 billion, of which $2.02 billion has been invested, also as of the end of the first quarter.

Terms for FCI III were not immediately available, but a September 2010 investment memo from the Oregon Investment Council showed the debut fund for the series, FCI I, had a “lower than typical” management fee that similarly structured funds may charge. It also had a carried interest fee that was lower than the 20 percent fee typically charged by private equity funds, including Apollo’s latest flagship vehicle, Apollo Investment Fund IX.

Apollo has a large presence in the insurance business through Athene Holding, which Apollo subsidiaries manage. Athene Life Insurance Company is within the larger Athene Holding, which itself accounted for $73.1 billion of Apollo’s $197.5 billion in AUM, both figures as of 31 March.