1 00:00:00,240 --> 00:00:03,360 Speaker 1: Under savannahs this morning, it's the future of private credit. 2 00:00:04,640 --> 00:00:08,440 Speaker 2: Private credit is undergoing I think a real sea change 3 00:00:08,920 --> 00:00:11,920 Speaker 2: since the GFC, banks have continued to back out of 4 00:00:12,000 --> 00:00:15,440 Speaker 2: lending money into the middle market, and so private investors 5 00:00:15,440 --> 00:00:18,680 Speaker 2: and asset managers have really stepped into that into that void. 6 00:00:19,000 --> 00:00:22,360 Speaker 2: I don't see that reversion. I think that this asset 7 00:00:22,360 --> 00:00:25,000 Speaker 2: class is going to continue to grow and it's going 8 00:00:25,040 --> 00:00:27,240 Speaker 2: to go from direct lending which has been into the 9 00:00:27,240 --> 00:00:29,680 Speaker 2: middle market, to now asset based finance. 10 00:00:30,520 --> 00:00:33,120 Speaker 1: So here's the lass this morning. Apollo Global second quarter 11 00:00:33,120 --> 00:00:35,880 Speaker 1: profit coming in just short of estimates, while assets under 12 00:00:35,920 --> 00:00:39,239 Speaker 1: management and fee related earnings rose. Apollo Asset Management Co 13 00:00:39,280 --> 00:00:41,480 Speaker 1: President Jim's out writes in this we expect to see 14 00:00:41,479 --> 00:00:45,199 Speaker 1: continued strong growth in private credit, including asset banks finance, 15 00:00:45,400 --> 00:00:48,879 Speaker 1: and expect to see continued demand to access this market, 16 00:00:48,960 --> 00:00:51,800 Speaker 1: partnering with banks more than ever as companies look to 17 00:00:51,800 --> 00:00:54,480 Speaker 1: finance themselves with long term capital. Jim's with us around 18 00:00:54,520 --> 00:00:56,000 Speaker 1: the table here in New York. Jim, good morning, it's 19 00:00:56,000 --> 00:00:56,480 Speaker 1: going to see you. 20 00:00:56,480 --> 00:00:57,880 Speaker 3: Good morning, going to see both of you again. 21 00:00:57,920 --> 00:00:59,360 Speaker 1: You've got a good story to Tam. But before we 22 00:00:59,400 --> 00:01:01,480 Speaker 1: get into that good story, just short of Vestimate's here, 23 00:01:01,600 --> 00:01:03,320 Speaker 1: what's how bank profits in the last quarter. 24 00:01:04,000 --> 00:01:06,720 Speaker 3: Well, listen, I think the firm is really firing and 25 00:01:06,800 --> 00:01:10,119 Speaker 3: all cylinders. It was a great number, record FI performance, 26 00:01:10,800 --> 00:01:14,679 Speaker 3: record deployment, record origination, and the flywheel that we've described 27 00:01:14,680 --> 00:01:16,720 Speaker 3: over the last three or four years is coming into place. 28 00:01:17,680 --> 00:01:20,080 Speaker 3: Economic cycle is slowing down a little bit. But from 29 00:01:20,120 --> 00:01:23,080 Speaker 3: a firm perspective, we couldn't be happier with whether the 30 00:01:23,120 --> 00:01:25,760 Speaker 3: firm is positioned. We couldn't be happier with the trajectory 31 00:01:25,800 --> 00:01:28,520 Speaker 3: of the outcome in the quarter, and see a very 32 00:01:28,600 --> 00:01:31,240 Speaker 3: very bright year in terms of our backlogs and our pipelines. 33 00:01:31,319 --> 00:01:34,360 Speaker 1: You seem super confident as you say, record quarter of deployment, 34 00:01:34,440 --> 00:01:37,240 Speaker 1: fifty billion dollars of debt origination. I want to talk 35 00:01:37,280 --> 00:01:40,120 Speaker 1: about one deal in particular. It's the eleven billion dollar 36 00:01:40,160 --> 00:01:43,880 Speaker 1: investment for Intel, helping them to fund this CAPEX opportunity. 37 00:01:43,920 --> 00:01:45,760 Speaker 1: And I want to put together that deal with some 38 00:01:45,800 --> 00:01:48,640 Speaker 1: of the quotes that we've heard from the tech titans 39 00:01:48,640 --> 00:01:51,400 Speaker 1: in the last week. Alphabet's saying the biggest risk here 40 00:01:51,800 --> 00:01:55,600 Speaker 1: is under investing, not overinvesting. Mark Zuckerberg of Meta is saying, 41 00:01:55,640 --> 00:01:58,360 Speaker 1: at this point, I'd rather risk building capacity before it's needed, 42 00:01:58,840 --> 00:02:01,240 Speaker 1: rather than being too late. Can we take a step 43 00:02:01,240 --> 00:02:03,920 Speaker 1: back here and just frame how big this opportunity is 44 00:02:04,200 --> 00:02:06,640 Speaker 1: in front of us and how long the runway is too. 45 00:02:07,360 --> 00:02:09,200 Speaker 3: So I think it's a great question, and I think 46 00:02:09,200 --> 00:02:12,000 Speaker 3: it's so much more of a secular opportunity than the 47 00:02:12,040 --> 00:02:14,600 Speaker 3: conversation about to fed this quarter of this meet week. 48 00:02:15,880 --> 00:02:20,920 Speaker 3: Certainly from our perspective, we see a secular global industrial 49 00:02:20,919 --> 00:02:24,000 Speaker 3: renaissance going on. And people talk about AI, but it's 50 00:02:24,040 --> 00:02:27,240 Speaker 3: also in power, it's also in sustainable energy, it's in 51 00:02:27,240 --> 00:02:29,840 Speaker 3: the auto sector as well. And when you look at 52 00:02:29,840 --> 00:02:33,840 Speaker 3: the breadth of capital that's needed from these high quality companies, 53 00:02:34,200 --> 00:02:36,480 Speaker 3: it really reckons back to what happened in the US 54 00:02:36,480 --> 00:02:38,480 Speaker 3: in the nineteen twenties and thirties in the build out 55 00:02:38,480 --> 00:02:43,680 Speaker 3: of railroads and industrial America. So we see the Intel 56 00:02:43,720 --> 00:02:49,280 Speaker 3: transaction is really a highlight of the future opportunity and 57 00:02:49,320 --> 00:02:52,360 Speaker 3: the secular change. And what's really going on in the 58 00:02:52,400 --> 00:02:55,239 Speaker 3: last decade or two with the advent of private credit 59 00:02:55,760 --> 00:02:59,720 Speaker 3: is the breadth of available capital from traditional financing sources, 60 00:03:00,200 --> 00:03:03,280 Speaker 3: which with indexes and ETFs is all focused on short 61 00:03:03,360 --> 00:03:08,200 Speaker 3: term liquidity. There's a real lack of capital to invest 62 00:03:08,280 --> 00:03:10,480 Speaker 3: and be a partner with these companies over ten to 63 00:03:10,480 --> 00:03:14,280 Speaker 3: fifteen years. So I think that's we at Apollo certainly 64 00:03:14,320 --> 00:03:17,680 Speaker 3: are big believers in that our phone has been fortunately 65 00:03:17,760 --> 00:03:21,240 Speaker 3: ringing off the hook since the Intel transaction. And again 66 00:03:21,280 --> 00:03:24,480 Speaker 3: it's really the example of the complete transformation of our 67 00:03:24,520 --> 00:03:26,960 Speaker 3: firm as a capital solution provider. 68 00:03:27,200 --> 00:03:30,800 Speaker 4: Apollo has seven hundred billion dollars of asset under management 69 00:03:30,840 --> 00:03:33,079 Speaker 4: pretty much. It raises a question of whether you're dealing 70 00:03:33,120 --> 00:03:34,640 Speaker 4: more with the Intels of the world and say, the 71 00:03:34,639 --> 00:03:35,440 Speaker 4: family dollars. 72 00:03:35,240 --> 00:03:35,720 Speaker 1: Of the world. 73 00:03:35,920 --> 00:03:38,280 Speaker 4: And when you're talking about some of these big transactions, 74 00:03:38,880 --> 00:03:43,520 Speaker 4: is your phone ringing off the hook with calls from Meta, Alphabet, Microsoft, 75 00:03:43,600 --> 00:03:45,840 Speaker 4: all of the big tech giants that are the new 76 00:03:45,920 --> 00:03:49,600 Speaker 4: clients of Apollo, not necessarily the sort of smaller firms 77 00:03:49,880 --> 00:03:50,400 Speaker 4: of tradition. 78 00:03:50,520 --> 00:03:52,520 Speaker 3: Yeah, and the story if you look at our firm 79 00:03:52,560 --> 00:03:55,360 Speaker 3: today seven hundred billion five hundred which is in the 80 00:03:55,360 --> 00:03:58,520 Speaker 3: credit business, and a vast majority of that is investment 81 00:03:58,560 --> 00:04:01,400 Speaker 3: grade risk. So what we've really done in the last 82 00:04:01,880 --> 00:04:05,480 Speaker 3: five to fifteen years is brought our cost of capital 83 00:04:05,520 --> 00:04:08,800 Speaker 3: down dramatically, so we're much more relevant to those companies. 84 00:04:08,800 --> 00:04:11,520 Speaker 3: So all the ones you've mentioned, plus a litany of 85 00:04:11,560 --> 00:04:14,360 Speaker 3: many others. We are the prime candidate to be in 86 00:04:14,400 --> 00:04:17,880 Speaker 3: dialogue with those folks as they embark on massive capex 87 00:04:18,000 --> 00:04:20,440 Speaker 3: changes and they want to do it. Is what's interesting 88 00:04:20,440 --> 00:04:23,840 Speaker 3: about these companies is you identified they're mostly investment grade 89 00:04:23,839 --> 00:04:27,120 Speaker 3: companies and they don't want to really hinder or harm 90 00:04:27,240 --> 00:04:31,560 Speaker 3: their holding company ratings or issue galue to equity. So 91 00:04:31,600 --> 00:04:34,320 Speaker 3: the ability for us to be very very thoughtful, bring 92 00:04:34,360 --> 00:04:37,400 Speaker 3: a lower cost of capital to the equation and match 93 00:04:37,480 --> 00:04:41,760 Speaker 3: that solution need up with investors or pension funds or 94 00:04:41,800 --> 00:04:44,560 Speaker 3: retirees from around the globe. These are the folks that 95 00:04:44,600 --> 00:04:47,800 Speaker 3: are funding that global industrial renaissance and that's really the 96 00:04:47,839 --> 00:04:50,760 Speaker 3: story of the future that we get excited about. And 97 00:04:50,839 --> 00:04:53,880 Speaker 3: it just shows the flywheel of our business. Again, as 98 00:04:53,880 --> 00:04:56,680 Speaker 3: you mentioned, we deployed fifty billion in a quarter two 99 00:04:56,720 --> 00:04:58,520 Speaker 3: hundred billion on a run rate the last couple of 100 00:04:58,560 --> 00:05:01,440 Speaker 3: year last year or two, and from our perspective, this 101 00:05:01,560 --> 00:05:05,320 Speaker 3: is really we can get that kind of return with 102 00:05:05,440 --> 00:05:09,160 Speaker 3: a higher rate environment, which we are clearly in. That's 103 00:05:09,160 --> 00:05:10,800 Speaker 3: really with the story of the future. That's what gets 104 00:05:10,880 --> 00:05:13,680 Speaker 3: us excited about Apollo, and that's what gets excited about 105 00:05:13,680 --> 00:05:15,280 Speaker 3: the flywheel and action at our firm. 106 00:05:15,480 --> 00:05:18,040 Speaker 4: You also just raise thirty four billion dollars in your 107 00:05:18,080 --> 00:05:20,000 Speaker 4: latest direct lending fund, which I believe is the biggest 108 00:05:20,000 --> 00:05:23,080 Speaker 4: ever for that type of fund. It raises this question though, 109 00:05:23,160 --> 00:05:27,520 Speaker 4: of whether private lending has transformed itself from lending to 110 00:05:27,880 --> 00:05:31,520 Speaker 4: riskier and smaller companies from much higher yields to lending 111 00:05:31,560 --> 00:05:34,520 Speaker 4: to safer companies for US higher yield than maybe the 112 00:05:34,520 --> 00:05:37,640 Speaker 4: benchmark Investment Great Index, but not necessarily the double digits 113 00:05:37,960 --> 00:05:40,480 Speaker 4: of your Is that basically what you're telling investors that 114 00:05:40,800 --> 00:05:43,400 Speaker 4: don't expect those type of returns because this is safe 115 00:05:43,440 --> 00:05:45,320 Speaker 4: capital that just invested differently. 116 00:05:45,680 --> 00:05:49,839 Speaker 3: Well, you know you're bringing up the conversation of private 117 00:05:49,880 --> 00:05:54,520 Speaker 3: credit and aggregate versus direct corporate lending for buyouts. We're 118 00:05:54,520 --> 00:05:58,920 Speaker 3: in both those businesses and scale on the private corporate 119 00:05:59,000 --> 00:06:01,800 Speaker 3: lending for buyouts, we're a major player in that space, 120 00:06:01,880 --> 00:06:04,880 Speaker 3: and you're right there's a cycle going on, but that's 121 00:06:04,920 --> 00:06:08,480 Speaker 3: a smaller part in terms of the overall total addressable 122 00:06:08,560 --> 00:06:12,320 Speaker 3: market and certainly direct corporate origination that's going to be 123 00:06:12,560 --> 00:06:16,000 Speaker 3: a long term tool for sponsors to use next to 124 00:06:16,080 --> 00:06:19,720 Speaker 3: high yo bonds and leverage loans. The bigger opportunity clearly 125 00:06:19,839 --> 00:06:23,479 Speaker 3: is what we're talking about right here. The investment grade solutions, 126 00:06:24,000 --> 00:06:27,040 Speaker 3: we really call it fixed income replacement. In the past, 127 00:06:27,080 --> 00:06:30,400 Speaker 3: if you were an investor, a pension fund or an endowment, 128 00:06:30,720 --> 00:06:33,640 Speaker 3: you could go into the liquid investment grade markets, and 129 00:06:33,760 --> 00:06:37,040 Speaker 3: spreads are very very tight there, but you really are 130 00:06:37,120 --> 00:06:39,960 Speaker 3: paying for liquidity that you don't need. Many of these 131 00:06:39,960 --> 00:06:43,320 Speaker 3: investors have long duration capital and they should be investing 132 00:06:43,360 --> 00:06:45,960 Speaker 3: for five or ten years, not for an hour or 133 00:06:46,000 --> 00:06:49,280 Speaker 3: two based on an ETF. And so the whole market 134 00:06:49,360 --> 00:06:53,120 Speaker 3: structure has evolved where it's student body left focusing on 135 00:06:53,160 --> 00:06:56,839 Speaker 3: short term liquidity, and there's big gaps of capital needs 136 00:06:56,839 --> 00:07:01,280 Speaker 3: that have been unresponded to. So we've really firm as 137 00:07:01,279 --> 00:07:03,839 Speaker 3: a few others have as well, to be responsive to 138 00:07:03,880 --> 00:07:08,120 Speaker 3: those longer term capital needs which are not being satisfied 139 00:07:08,160 --> 00:07:11,239 Speaker 3: today in the current debt markets or in the financial 140 00:07:11,280 --> 00:07:12,000 Speaker 3: services sector. 141 00:07:12,040 --> 00:07:12,400 Speaker 4: Overall. 142 00:07:12,520 --> 00:07:14,480 Speaker 1: We've got through much of the first ten minutes without 143 00:07:14,480 --> 00:07:16,080 Speaker 1: talking about the Federal Reserve. So I forgive me, I 144 00:07:16,120 --> 00:07:17,160 Speaker 1: have to bring up the Federal Reserve. 145 00:07:17,320 --> 00:07:19,080 Speaker 3: That's Torston. You need torson the seat. 146 00:07:18,880 --> 00:07:21,280 Speaker 1: And Tilson's got a great call and it's still standing. 147 00:07:21,520 --> 00:07:23,440 Speaker 1: Just about your call to the turn of the year 148 00:07:23,480 --> 00:07:25,480 Speaker 1: was that the FED put is back. I just wonder 149 00:07:25,520 --> 00:07:27,480 Speaker 1: how relevant all of that is as a backdrop to 150 00:07:27,640 --> 00:07:28,640 Speaker 1: what we've just discussed. 151 00:07:28,720 --> 00:07:31,520 Speaker 3: Well, I think Torston's call in the beginning of the 152 00:07:31,600 --> 00:07:35,320 Speaker 3: year of no FED cuts, I think it really was 153 00:07:35,440 --> 00:07:40,480 Speaker 3: very prescient about how we thought about deployment, and witness 154 00:07:40,560 --> 00:07:42,960 Speaker 3: what we've actually done year to date because of that call, 155 00:07:44,320 --> 00:07:46,920 Speaker 3: no doubt, the big move, the big secular movement rates 156 00:07:47,000 --> 00:07:48,320 Speaker 3: was the rate. It was the move the last two 157 00:07:48,400 --> 00:07:50,720 Speaker 3: or three years from zero cost of capital to a 158 00:07:50,760 --> 00:07:53,760 Speaker 3: real cost of capital a quarter point move here there. 159 00:07:54,080 --> 00:07:55,720 Speaker 3: We don't spend a tremendous amount of time at a 160 00:07:55,720 --> 00:07:58,080 Speaker 3: power of thinking about the impact on that. We think 161 00:07:58,160 --> 00:08:01,160 Speaker 3: much more about this global industrial n On and Torson 162 00:08:01,240 --> 00:08:03,680 Speaker 3: still may be right. I think we'll see what happens. 163 00:08:03,680 --> 00:08:05,840 Speaker 3: I mean, certainly with the news this morning about the 164 00:08:05,880 --> 00:08:08,800 Speaker 3: Bank of England and other central banks taking action if 165 00:08:08,840 --> 00:08:11,920 Speaker 3: that'll be the one left out. So, but we don't 166 00:08:11,960 --> 00:08:13,240 Speaker 3: spend a lot of time whether it's gonna be one 167 00:08:13,320 --> 00:08:14,960 Speaker 3: rate cut or two for the rest of the year. 168 00:08:14,960 --> 00:08:16,400 Speaker 1: I have to say we probably spent too much time, 169 00:08:16,480 --> 00:08:18,200 Speaker 1: don me, Lisa on that comb side, well. 170 00:08:18,080 --> 00:08:20,560 Speaker 3: There's a better story talking about the flywheel of Apollo 171 00:08:20,600 --> 00:08:22,040 Speaker 3: and the flywheel of Book. 172 00:08:22,280 --> 00:08:24,120 Speaker 4: We're just going to break up the whole show and 173 00:08:24,160 --> 00:08:25,360 Speaker 4: for the rest of the year, we're just going to 174 00:08:25,360 --> 00:08:26,040 Speaker 4: talk about Apollo. 175 00:08:26,160 --> 00:08:28,280 Speaker 3: That's fine, hopefully, Well, we're here to talk about it, 176 00:08:28,320 --> 00:08:30,440 Speaker 3: and it's a great story and a lot, a lot 177 00:08:30,520 --> 00:08:34,080 Speaker 3: of topics. Our private equity business was incredibly active on offense. 178 00:08:34,760 --> 00:08:37,080 Speaker 3: Five transactions in the last couple of months, three in 179 00:08:37,080 --> 00:08:40,240 Speaker 3: the last week, and from our perspective, a lot going on. 180 00:08:40,400 --> 00:08:42,199 Speaker 1: Jim, this was perfect. It's good to see us, sir, 181 00:08:42,240 --> 00:08:44,440 Speaker 1: Thank you, thank you. Jim's out of there of Apollo.