Loan Note: Apollo’s $100bn AUM boost, KKR on the Fed, defaults rising

Apollo adds a cool $100bn in AUM during a single quarter, thanks in part to two acquisitions by its insurance units. Here's today's brief for our valued subscribers only. 

They said it

“When we look at small and medium-size businesses across Main Street, where large portions of jobs reside, we can see that the real economy is not on the same path as the market … We believe the Fed has potentially gone too far in one direction and has now indirectly perpetuated a growing bifurcation in the market: big versus small”

Christopher Sheldon in KKR Leveraged Credit’s second quarter letter to investors.

First look

A busy few months at Apollo

There was a lot to digest from Apollo Global Management’s second-quarter earnings call last Thursday. Here are the highlights:

  • The firm added almost $100 billion in AUM, primarily through two big transactions in its permanent capital arm
  • Having “quarterbacked” those two transactions, as co-founder Leon Black (pictured above) put it, fellow co-founder and senior managing director Marc Rowan is taking a “semi-sabbatical”, stepping back from the day-to-day running of the insurance platform
  • In a separate statement on Friday, Rowan said: “Taking a step back from day-to-day operations will allow me to focus my energy on the strategic direction of Apollo and its insurance and financial services businesses in particular. I have the utmost confidence in Apollo’s co-presidents Jim Zelter and Scott Kleinman and the entire senior management team to continue to lead the firm’s strong growth and performance.”
  • Credit AUM is up $91 billion, which includes $6 billion of new commitments raised for Apollo Strategic Origination Partners, and $1.75 billion for dislocation credit vehicle Accord Fund III B
  • Apollo is now in market with the next series of Accord strategies, as well as a second Hybrid Value fund
  • After steep depreciation in Q1, the PE portfolio is up 11.7 percent. Fund VIII is up 17 percent, meaning it’s now out of clawback.

Data snapshot

Default rates rising. Private credit portfolios are seeing rising defaults according to Proskauer’s Private Credit Default Index at the end of Q2. The overall default rate increased to 8.1 percent compared with 5.9 percent in Q1. As the chart shows, smaller firms have been more affected than larger ones.


Getting into credit

Fiera Comox Partners, affiliate of Toronto-listed asset management firm Fiera Capital, officially launched its international private debt strategy in July, according to a statement. The Fiera Comox team is headed by Mathieu Desforges who joined the firm in 2019 from Caisse de dépôt et placement du Québec (CDPQ). The strategy has been initially funded by Fiera Capital and two other investors, and focuses on mid-market private credit investments across the US and Europe.

LP watch

Institution: Pennsylvania State Employees’ Retirement System
Headquarters: Harrisburg, US
AUM: $30.89 billion
Allocation to alternatives: 19.72%

Pennsylvania State Employees’ Retirement System has agreed to commit $75 million to HPS Mezzanine Partners 2019, a contact at the pension informed Private Debt Investor. The $30.89 billion US public pension has a 1 percent allocation to private debt. Its recent commitments have been to funds focused on the corporate sector within Europe and North America.

For more information on PSERS and more than 2,500 other institutions, search the PDI database.

Today’s letter was prepared by Toby Mitchenall with John Bakie and Robin Blumenthal

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