Apollo’s evolution

Apollo Global Management’s credit strategy has grown to the point where it comprises 56% of the firm’s AUM. 

A lot can change in six years.

Apollo Global Management’s Josh Harris and Jim Zelter are scheduled to deliver a presentation to the Teacher Retirement System of Texas’ Board of Trustees on Thursday that reveals just how rapidly the firm’s strategy has evolved since 2007, when it was still in the process of marketing Apollo Investment Fund VII. 

The firm has dedicated almost 60 percent of its $14.7 billion Fund VII to distressed investments, which include credit and distressed buyouts, compared to just 27 percent and 23 percent in Fund V and Fund VI respectively, according to presentation documents. The previous two vehicles’ composition were dominated by opportunistic buyouts (42 percent; 51 percent), which is unsurprising given the abundance of large-cap buyouts that took place during the investment periods of their vintage years (2001, 2006).

Texas Teachers committed $750 million to Fund VII, which is considered a top-performing fund in the $117.5 billion retirement system’s portfolio, according to the presentation.

That vehicle had generated a 28 percent net internal rate of return as of 31 March, according to a first quarter earnings report.

The firm has seen quite a bit of success in the last 16 months, during which time it has realised approximately $13 billion in proceeds, according to the Texas presentation.

Apollo declined to comment.

The firm has spent much of the last six years transitioning from its traditional private equity business into a broader mandate that includes real estate and credit strategies. Approximately 25 percent ($10.5 billion) of the Apollo’s assets under management were dedicated to credit in 2007, compared to approximately 56 percent today ($63.5 billion), according to documents presented at the Deutsche Bank Global Financial Services Investor Conference earlier this month.

“We’re significantly beating benchmarks,” said Josh Harris during the Deutsche Bank presentation. “When you do that, you’re able to expand distribution channels, sell more to existing clients, expand geographically [and] there’s a lot of different ways that we’re doing it.

“We’re growing as quickly as we can take the money appropriately.”