Athene drives Apollo’s ENI loss

Much of the credit manager’s decline in performance revenue was attributed to unrealised mark-to-market in the insurance company.

Apollo Global Management posted a $406.1 million economic net loss for the fourth quarter – or $1.01 per share – driven by a depreciation in Athene, the asset management behemoth’s insurance arm.

Gross returns for the New York-based firm also fell, decreasing 2.1 percent for the quarter, to give Apollo a positive gross return of 2.2 percent for 2018. The firm posted a GAAP net loss of $377.9 million, of which $196.4 million – or $1.00 per share – was attributable to Apollo Class A shareholders.

Despite the lacklustre earnings, the firm’s assets under management continued an upward trend, growing to $280.3 billion, with almost half ($136 billion) of it coming from permanent capital vehicles.

Almost all the permanent capital comes from credit vehicles: $108.79 billion attributed to Athene; $8.77 billion to MidCap; $4.5 billion to Apollo Investment Corporation (AINV) and CION Investment Corporation, a private business development company Apollo sub-advises; $404 million from Apollo Senior Floating Rate Fund; and $365 million from Apollo Tactical Income Fund.

On the fundraising side, the firm said it collected $3 billion for its debt-equity investment vehicle, Apollo Hybrid Value Fund, and locked down $2.5 billion for its Apollo Structured Credit Recovery IV fund.

Management fees for the firm grew slightly to $344.71 million from the third quarter’s $339.91 million and up by more than 22 percent from the $280.92 million reported at the end of 2017.

Performance fees plunged by $518.75 million, driven in part by the 22 percent fair value quarter-over-quarter decline of Athene. Some $0.82-a-share of unrealised mark-to-market losses drove the decrease in performance fees. The firm also saw a $0.05-a-share loss for net realised performance fees. Those losses were partially offset by an $0.21-a-share gain from an unspecified “other” bucket.

MidCap, one of the firm’s mid-market lending vehicles, was a bright spot in the quarter’s returns, finishing up 4 percent for the fourth quarter and 19 percent for the year. One executive on the call said the firm’s default rates were in the low single digits. AINV saw its returns fall 22 percent in the fourth quarter and 18 percent for the year.

The firm also increased its share repurchase plan by $250 million, with firm co-founder and senior managing director Josh Harris noting management thought the firm is “significantly undervalued”.