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Speaker 1: We are at Apollo HQ, and a place to say

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Speaker 1: that joining us now is Mark Rowan the c eoh market.

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Speaker 2: Morning's you, Good morning all.

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Speaker 1: Great to thank you for coming, great to be here,

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Speaker 1: and great to have you with us. So let's just

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Speaker 1: go straight to the top of this conversation, private markets

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Speaker 1: versus public markets and why you believe the big opportunity

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Speaker 1: right now is in the former and not the lasser.

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Speaker 3: Look, we've had a C change, not just over a year,

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Speaker 3: We've had it over fifteen years. So much of our

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Speaker 3: public markets are indexed and correlated. Eighty percent of volume

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Speaker 3: S and P five hundred sixty percent of the market ETFs.

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Speaker 3: One hundred percent of our returns this year are from

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Speaker 3: ten stocks, which constitute thirty five percent of the S

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Speaker 3: and P that traded an average PE of fifty How

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Speaker 3: many of us come in every day looking to buy

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Speaker 3: fifty PE stocks?

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Speaker 2: Not many.

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Speaker 3: And I guess what I'm suggesting to you is that

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Speaker 3: if you public markets, they are so correlated and indexed

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Speaker 3: to interest rates and to money flows that if you

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Speaker 3: actually want alpha our performance, you need to step away

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Speaker 3: from public markets. And I think that's happening because we're

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Speaker 3: also revisiting the notion of public being safe and private

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Speaker 3: being risky.

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Speaker 2: This is the framework we used to be in.

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Speaker 3: Private meant venture capital, hedge funds, private equity.

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Speaker 2: Now it just means less.

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Speaker 1: Liquid Is that not inherently a risk in your mind? Liquidity?

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Speaker 3: Liquidity is a risk to everyone, but in different degrees.

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Speaker 3: So if you are a retirement plan or a retirement system,

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Speaker 3: you know your liquidity requirements for the next ten years.

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Speaker 3: So if you can get paid for ill liquidity, why

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Speaker 3: not get paid for ill liquidity?

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Speaker 2: If you're a wealthy.

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Speaker 3: Individual, how many of them need one hundred percent of

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Speaker 3: their money on Tuesday? If they don't, they should get

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Speaker 3: paid for ill liquidity. And we're seeing that in the

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Speaker 3: performance data. If you look at the active management active

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Speaker 3: management has failed to beat the index eighty five percent

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Speaker 3: of the time for twenty years. And I think it's

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Speaker 3: going to get harder, not easier, to beat the index

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Speaker 3: as more and more of the market is indexed. Very

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Speaker 3: little money is left to actually make up what needs

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Speaker 3: to be done in acting management.

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Speaker 4: What is the single operational distinction between Drexel, Burnham Lambert

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Speaker 4: and your apollo? What is the micro idea you can

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Speaker 4: give us of them versus now.

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Speaker 3: Not just I'll give you Drexel, I'll give you Lehman Brothers,

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Speaker 3: I'll give you bear Stearns, I'll give you SVB, I'll

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Speaker 3: give you First Republic. The financial institutions tend to die

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Speaker 3: of one of two causes, heart attack or cancer. Heart

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Speaker 3: attack is funding risk. They borrow short and they lend long.

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Speaker 3: Cancer is the slow edition of poor quality assets, which

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Speaker 3: over time undermine the system.

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Speaker 2: So you look at all of those firms, All.

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Speaker 3: Of those had an element of both heart attack and

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Speaker 3: cancer funding risk as well as asset risk.

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Speaker 2: You look at what we're doing.

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Speaker 3: We are borrow borrowed long, and lent long. Everything is matched,

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Speaker 3: everything is in a fund. There is no daily liquid,

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Speaker 3: quarterly liquid money at Apollo. We are ideally situated to

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Speaker 3: take advantage of less liquid assets. We've structured ourselves that way.

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Speaker 3: And then you look at the totality of what we do.

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Speaker 3: Equity is a risk business. Equities go up and down

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Speaker 3: every day. You can lose money in public equity, you

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Speaker 3: can lose money in private equity.

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Speaker 2: In the credit business.

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Speaker 3: The vast, vast majority of what we do is private investment.

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Speaker 2: Grate.

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Speaker 4: When I look at the risks out there and A

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Speaker 4: translated into NA seeing teleb and all the work you

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Speaker 4: did in quant with black Swan. What are the tail

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Speaker 4: risks you see right now for private equity? I mean,

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Speaker 4: are you hedged perfectly? Is there next to no deelta

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Speaker 4: where you feel so comfortable? Or are there actual tail

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Speaker 4: risks at a BOLLO.

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Speaker 3: I don't think there are tail risks, and I don't

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Speaker 3: think there are tail risks in private equity. I think

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Speaker 3: private equity is a risk taking activity. But each of

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Speaker 3: the companies, each of the situations is idiosyncratic onto itself,

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Speaker 3: and over time, private equity has proven to be a

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Speaker 3: very good asset class, recognizing that in certain markets you

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Speaker 3: will lose money, just like in certain public markets you

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Speaker 3: will lose money.

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Speaker 4: You had a test here with the way interest rates went,

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Speaker 4: You had a four or five six standard deviation shock.

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Speaker 4: How did your risks perform given the shock of higher

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Speaker 4: rates the glide path of that?

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Speaker 3: How is it along the way a single best year

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Speaker 3: in Apollo's history, earnings, asset performance our platform, as you

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Speaker 3: think about it, we are around six hundred and fifty

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Speaker 3: billion of assets under management in our asset management business.

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Speaker 3: Five hundred billion of that is credit. We generally benefit

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Speaker 3: from rising rates. Yes, on the equity side, some equity

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Speaker 3: will be worth less than it was. But as a

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Speaker 3: general rule for Apollo, credit rates going up is very

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Speaker 3: strong on the retirement services side of our business, which

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Speaker 3: is the Athene business just gone through the roof Athene

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Speaker 3: is up thirty percent year over year.

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Speaker 5: So I'm going to steal a page from this guy

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Speaker 5: because he's been talking about his epic a lot, and honestly,

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Speaker 5: I think that it's important for us to talk about it.

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Speaker 3: Are you telling me something that it's absolutely not?

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Speaker 1: And I just suggest I'm not saying that anyone is

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Speaker 1: onto zepic.

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Speaker 5: We're talking about this is a game I want to

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Speaker 5: make the especially no one here is on a is

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Speaker 5: epic and we're not making any not that there's anything

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Speaker 5: wrong with it. Whatever, Let's move on. Here's this question

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Speaker 5: about how much that transforms life expectancy, how much that

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Speaker 5: transforms some of the investment thesis from your perspective and

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Speaker 5: for retirement.

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Speaker 3: Look over time, you would expect improvements in health care,

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Speaker 3: improvements in health technology to improve life expectancy, but.

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Speaker 2: Not by all that much.

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Speaker 3: We tend to find other things that are bad for

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Speaker 3: the human body. As one thing does not kill us,

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Speaker 3: another thing does so. But I would expect the trend

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Speaker 3: to continue. We are just to be clear, we are

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Speaker 3: not in the insurance business. We are in and we

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Speaker 3: are an insurance company that is in the retirement services business.

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Speaker 3: We make money by guaranteeing people's retirement and we earn

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Speaker 3: money by earning more on our assets than we pad

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Speaker 3: on our liabilities, very little exposure to longevity or any

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Speaker 3: other what you would consider biometric or typical insurance risk.

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Speaker 2: There's a real question here.

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Speaker 5: We'll focus on income and you've been talking about that,

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Speaker 5: how there is risk and equity, but not necessarily the

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Speaker 5: same type of thing that you see in credit.

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Speaker 2: And we just saw credit.

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Speaker 5: Outperform private credit outperform private equity pretty meaningfully. Are you

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Speaker 5: going to shift away from private equity more and more

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Speaker 5: and just focus purely on the more credit business.

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Speaker 3: No, this is the answer, But we have to step

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Speaker 3: back and go back to what our business is. Our

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Speaker 3: business at Apollo and for most people in the alternative

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Speaker 3: asset management industry, we're not in the asset management business.

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Speaker 3: We're in the excess return periodit of risk business. And

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Speaker 3: then I ask myself where can we get excess return? Well,

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Speaker 3: in equity, we've gotten to one hundred and fifty billion.

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Speaker 3: Is it going to grow? I think it will grow,

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Speaker 3: really grow multiples. I don't think so. I think the

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Speaker 3: nature of the business, if we're true to ourselves of

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Speaker 3: just focusing on access return is slower growth. I look

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Speaker 3: at the credit business. The credit business is nearly five

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Speaker 3: hundred billion today. We're not relevant in the scheme and

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Speaker 3: the scale of these markets. Five hundred billion is not

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Speaker 3: a relevant sentiment. I assure you when you speak to

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Speaker 3: all the big bank CEOs today, they don't wake up

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Speaker 3: every day wondering what the mighty Apollo is doing.

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Speaker 1: There's a phrase I've used twice already this morning, in

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Speaker 1: the last forty minutes one hour, the banking, And every

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Speaker 1: time I've used it, I've had pushed back around this table.

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Speaker 1: Why don't we like that price the bankking?

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Speaker 2: I personally like that phrase, Jim Zelter.

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Speaker 3: It will cost me twenty dollars for just saying the

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Speaker 3: word debanking, but I'm happy to pay it. I think

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Speaker 3: the world is debanking, and I say it this way.

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Speaker 3: Every economy, every regulatory scheme, credit is tied to GDP

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Speaker 3: and regulators have only two choices as to where credit

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Speaker 3: comes from. It can come from the banking system, or

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Speaker 3: it can come from the investment marketplace. There's no third choice,

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Speaker 3: and everyone around the globe has made a different decision.

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Speaker 2: But if you look at the trend, with the exception.

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Speaker 3: Of China, everywhere in the world regulators are favoring investors

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Speaker 3: over banks. That does not mean we're going to see

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Speaker 3: a sunshift. That does not mean the banking business is

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Speaker 3: going out of business. On the margin, though, the growth

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Speaker 3: is going to take place in the investor marketplace rather

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Speaker 3: than in the banking system, for good and valid reasons

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Speaker 3: and for regulatory choice, not because the banking system is unsafe.

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Speaker 5: So, given that you said you don't see a lot

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Speaker 5: of upside in terms of growth, tremendous amount of growth

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Speaker 5: and the equity side, you said you're relevant with five

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Speaker 5: hundred billion dollars?

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Speaker 1: How big?

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Speaker 2: How relevant could you become?

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Speaker 3: Well? I sat next to a senior executive from Blackrock

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Speaker 3: last night at dinner and they had food in front

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Speaker 3: of them, and I had no food, and I said.

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Speaker 2: How how big do you have to be to get

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Speaker 2: food in front of you? And he said potentrillion so

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Speaker 2: that's what.

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Speaker 5: You're aiming for tenrillion dollars, that's what you.

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Speaker 2: Say look for us.

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Speaker 3: For us, this is about excess return per unit of risk.

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Speaker 3: Our business plan calls for a doubling of our business

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Speaker 3: and at the end of the doubling, liking who we

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Speaker 3: are as a culture. Our limitter is not capital raising.

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Speaker 3: Our limitter is not size of aum. Our limitter is

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Speaker 3: making sure we get excess return per unit of risk.

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Speaker 3: So finding assets and making sure we like our culture

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Speaker 3: at the end of the day a.

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Speaker 4: Power of global management. We welcome all of you right now,

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Speaker 4: Lisa Bramowitz, John Farrell, myself for a delicate conversation with

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Speaker 4: Mark Rowan, chief executive Officer of Apollo, and we all

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Speaker 4: bring to this our childhoods. My childhood was a white

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Speaker 4: Anglo Saxon Protestant grandmother John after her third Scotch who

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Speaker 4: would talk about how Jews couldn't go to a certain

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Speaker 4: school in Massachusetts. Most of them ended up at Lisa's

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Speaker 4: University of Chicago. That was a different battle. Now there

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Speaker 4: is a new battle, and we address this with Mark Rowan.

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Speaker 4: I am stunned at what I see at these schools,

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Speaker 4: and particularly at your University of Pennsylvania. You've been vocal.

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Speaker 4: What is the dialogue you're having right now with the

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Speaker 4: leadership of University of Pennsylvania as they deal with this

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Speaker 4: new anti semitism.

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Speaker 3: There's no dialogue with leadership at the moment. Leadership is

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Speaker 3: on their way or in DC for a series of

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Speaker 3: congressional hearings. But the underlying culture that permitted this to

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Speaker 3: happen is just so strong, and until there is a

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Speaker 3: moment of self reflection where we're not dealing with just

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Speaker 3: anti Semitism, we're dealing with the culture that allowed this

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Speaker 3: to happen, there really is going to be no progress,

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Speaker 3: and to date there's been no progress.

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Speaker 2: So what is progress right?

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Speaker 5: Because there's a real question around free speech versus something else.

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Speaker 5: What is this something else that you're looking for some

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Speaker 5: of these universities to target.

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Speaker 3: There's really not a question of free speech. This is

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Speaker 3: a question of favored speech and disfavored speech and an

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Speaker 3: institutional psychology and.

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Speaker 2: An institutional culture.

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Speaker 3: So there are places where this is modeled and they're

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Speaker 3: getting it right. For instance, University of Chicago. University of

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Speaker 3: Chicago is getting it right. They are kicking pens butt.

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Speaker 3: To be candid, and it's not that hard. The institution

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Speaker 3: has decided that it is institutionally neutral and that the

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Speaker 3: students and professors and other actors on campus are allowed

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Speaker 3: to have opinions and to speak their opinions within respectful ways.

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Speaker 3: Say what you will, say what you want, allow the

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Speaker 3: other side to speak. That is a culture of free speech.

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Speaker 3: A culture where you shout people down, where you have

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Speaker 3: ninety five percent of the professor or academia speaking in

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Speaker 3: one way, where you permit violent protests, where students aren't

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Speaker 3: able to go to class because there's boycotts or there's

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Speaker 3: pressure or other things, is not a culture of free speech.

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Speaker 5: How do you understand the increase in anti semitism on

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Speaker 5: the left, which is really polarized frankly the Democratic Party

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Speaker 5: and created a lot of sort of soul searching.

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Speaker 3: Look, this is a long time coming, but I'll start

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Speaker 3: with history. The definition of anti semitism, the modern definition,

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Speaker 3: the IRA definition includes anti Zionism as a form of

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Speaker 3: anti semitism. This got through the Senate with many of

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Speaker 3: the current senators. Still they are ninety nine to zero,

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Speaker 3: including most of the most progressive Democratic centers. So what

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Speaker 3: we've seen is we've seen a shift in the mood

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Speaker 3: of the populace, particularly on university campuses. We live in

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Speaker 3: a culture on these university campuses of simplicity. You are

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Speaker 3: oppressed or you are an oppressor. If you are oppressed,

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Speaker 3: it does not matter what you do. You can do

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Speaker 3: no wrong. If you are an impressor facts be damned,

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Speaker 3: it does not matter what you do.

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Speaker 2: You can do no right.

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Speaker 3: In that kind of mindset, it does not surprise me

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Speaker 3: that anti Semitism, anti Zionism has taken hold. And if

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Speaker 3: you give historical context, go to the Holocaust, you have dehumanization,

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Speaker 3: you have delegitimization, and then you ultimately have genocide. Now

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Speaker 3: you apply that to anti Zionism, you have dehumanizing of

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Speaker 3: Israelis and Jews. You have delegitimizing of Israelian Jews, and

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Speaker 3: now with Hamas's attack, you have the beginnings of killings.

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Speaker 3: It's not that hard to see where we are. The

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Speaker 3: only thing that's hard is for the left to recognize it.

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Speaker 1: I have been surprised that people have been so surprised

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Speaker 1: by why some of these campuses are at and I

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Speaker 1: think about the amount of tremendous philanthropy that have come

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Speaker 1: from people like you Saith over the years on these campuses,

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Speaker 1: I do wonder why we allowed it to come to

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Speaker 1: this mock, this fa when we've seen this been building

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Speaker 1: for years and years and years through a whole generation.

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Speaker 3: The answer, I believe is a slow build and it

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Speaker 3: ultimately comes back to governance and leadership. If I speak

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Speaker 3: just about University of Pennsylvania, the governance is actually divided

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Speaker 3: between the faculty and the trustees. Except for the last

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Speaker 3: twenty five years, only one of those two groups has

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Speaker 3: been doing their job. And I put myself in the

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Speaker 3: camp that did not do their job. I was a

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Speaker 3: trustee for a long period of time. The trustees have

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Speaker 3: a very important role to play in setting the strategic

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Speaker 3: direction of the university, permissible and impermissible where we want

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Speaker 3: to go. Except it's not a governing body. Forty seven

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Speaker 3: trustees really can't agree on anything. It's not set up

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Speaker 3: to govern, and there's no history of govern and so

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Speaker 3: in the absence of any leadership, faculty or administration has

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Speaker 3: taken these universities in direction that the alumni do not recognize.

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Speaker 2: When you have a John Huntsman.

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Speaker 3: A Ronald Lauder, a Cliff Astness, and seven thousand other

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Speaker 3: alumni who for their own reasons, their own political persuasions,

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Speaker 3: their own belief system, all don't recognize the university that

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Speaker 3: they loved.

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Speaker 2: You have a problem.

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Speaker 1: SI fast move is to step donating. I guess we

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Speaker 1: could disengage, walk away. You seem to be more constructive

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Speaker 1: about the prospective changshade. You think they raise a better

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Speaker 1: path ahead.

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Speaker 3: I think the worst thing that can happen to these

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Speaker 3: universities is apathy. Right now, there's not apathy. Donors are engaged,

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Speaker 3: they want change, they love the place. This goes on

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Speaker 3: much longer, I think we will get to apathy, and

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Speaker 3: once we get to apathy, I don't think the universities

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Speaker 3: can recover from this. And unfortunately, all university presidents that

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Speaker 3: I'm aware of, particularly at the University of Pennsylvania, they

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Speaker 3: seek to wait this out. Maybe this will go away,

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Speaker 3: I won't have to deal with this. That is actually

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Speaker 3: a loss. They haven't internalized that that's a loss, but

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Speaker 3: that is a loss.

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Speaker 4: There's an understanding as a woke adjustment going on right now.

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Speaker 4: We see in Hollywood to collapse of many Disney movies

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Speaker 4: and others that have certain messages that aren't selling to

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Speaker 4: the Public the Ft has an article on your colleagues

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Speaker 4: at Blackrock ESG and how there's a woke adjustment in

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Speaker 4: the ESG. How's this going to adjust the wokeness of

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Speaker 4: these universities? How will it adjust?

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Speaker 3: Look, this is a question ultimately a balance. This is

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Speaker 3: not a question of a pendulum swing all the way back.

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Speaker 3: But right now these universities are out of balance. And

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Speaker 3: I believe that the trustees, the alumni, and by the way,

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Speaker 3: many of the faculty. If we read Bill Ackman's letter yesterday,

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Speaker 3: and the experience I'm having at the University of Pennsylvania

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Speaker 3: is word for word the experience that Bill Ackman is

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Speaker 3: having at Harvard. Professors don't want to be muzzled anymore.

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Speaker 3: They feel that they can't speak out unless they are

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Speaker 3: conforming to the narrative of the university.

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Speaker 2: And the resentment is building.

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Speaker 3: All we've done, all I've done, all Bill has done,

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Speaker 3: is given people an opportunity to speak their minds and

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Speaker 3: guess what, they have a lot to say.

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Speaker 1: Big election next year, let's finish on that. Is this

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Speaker 1: going to change how you approach us politics? Who you

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Speaker 1: would enduce the twenty twenty four.

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Speaker 2: No, it's not going to change.

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Speaker 1: Do you have a favorite candidate.

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Speaker 3: No, it's hard to believe with three hundred and fifty

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Speaker 3: million people in this country that we're down too.

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Speaker 1: You disappointed with these two personally?

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Speaker 2: I'm disappointed.

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Speaker 1: What is it about these two that you find some disappointing.

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Speaker 3: Look, we are we have the single best hand of

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Speaker 3: cards anywhere in the world.

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Speaker 2: We have it all. We just play this hand poorly.

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Speaker 1: What does that mean?

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Speaker 3: Think about it. People want to come here. We have

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Speaker 3: an incredible knowledge base, we have abundant energy, we're leaders

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Speaker 3: in technology, we have a massive domestic market, were the

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Speaker 3: strongest military power, and yet we have challenges that we

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Speaker 3: have not been able to as a result of lack

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Speaker 3: of leadership, as a result of political consensus to address.

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Speaker 3: We have a retirement crisis, we have a healthcare crisis.

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Speaker 3: We have a budgetary crisis. We are inconsistent to our

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Speaker 3: allies around the world. We have important decisions to make

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Speaker 3: without weighing in as to what's going on in Ukraine

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Speaker 3: and what's going going on in the Middle East, all

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Speaker 3: of which seems to be caught in a little bit

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Speaker 3: of a morass.

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Speaker 4: Is United Nations experience important for a presidential.

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Speaker 2: Candidate United Nations.

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Speaker 1: No, okay, it's.

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Speaker 4: Trying to give them to that.

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Speaker 1: That was delicate. It is delicate. That was that was

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Speaker 1: a sensitive side, I thought.

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Speaker 3: I responded, delicate, perfect, Ma, thank you, thank you for

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Speaker 3: having us.

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Speaker 2: It's going to catch out, total pleasure. Thank you very much.

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Speaker 1: Mark Rubbin at the CEO of Apollo,