WEBVTT - Bloomberg Talks: Apollo CEO Marc Rowan Talks Banking (Podcast)

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<v Speaker 1>Well, it's time for our daily Wall Street Week conversation,

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<v Speaker 1>and today we're focusing on structural changes within the financial industry.

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<v Speaker 1>Mark Owen he is Apollo Global Management co founder and CEO.

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<v Speaker 1>He spoke with Wall Street Week host David Weston yesterday

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<v Speaker 1>at the Milken Institute Global Conference in Los Angeles.

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<v Speaker 2>It is absolutely the driving force. I mean, this is

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<v Speaker 2>focusing on the urgent, which is what we were talking

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<v Speaker 2>about before we came on era versus the important. This

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<v Speaker 2>is the important thing that's happening in our business. At

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<v Speaker 2>our recent partners off site, I put up a slide

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<v Speaker 2>that said, in two thousand and eight Apollo forty billion

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<v Speaker 2>of AUM twenty twenty three, six hundred and fifty billion

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<v Speaker 2>of AUM. We grew fourteen times. We outgrew Apple, we

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<v Speaker 2>outgrew Amazon, we outgrew Microsoft. Pretty impressive stat next slide

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<v Speaker 2>where we lucky or smart? We were lucky. You can't

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<v Speaker 2>possibly plan on growing your business fourteen times, but you

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<v Speaker 2>can position the business in a way that you take

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<v Speaker 2>advantage of powerful tailwinds or trends. What were the tailwinds?

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<v Speaker 2>Two thousand and eight, we had a financial crisis which

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<v Speaker 2>pushed most financial institutions in the Western world on defense.

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<v Speaker 2>We built and formed a financial institution called Athene in

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<v Speaker 2>two thousand and eight. That company went from a startup

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<v Speaker 2>to today three hundred and sixty billion dollars offense could

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<v Speaker 2>never have been done but for the macro environment. The

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<v Speaker 2>other thing that happened is rates went to zero. People

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<v Speaker 2>who had made promises to retirees, to pensioners, and had

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<v Speaker 2>other obligations that were fixed, all of a sudden needed

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<v Speaker 2>to look elsewhere for rate of return. They were willing

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<v Speaker 2>to consider that perhaps private markets offered an alternative. Okay,

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<v Speaker 2>those tailwinds powered us through two thousand and eight. Now

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<v Speaker 2>I sit in twenty twenty four and I say, what

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<v Speaker 2>are the tailwinds. This tailwind of dbanking, of having investors

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<v Speaker 2>do more and banks do less absolutely happening and happening

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<v Speaker 2>everywhere in the world. Does not mean banks will shrink.

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<v Speaker 2>It just means on the margin, growth is going to

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<v Speaker 2>come in the investment marketplace, in the banking marketplace. Second retirement. Unfortunately,

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<v Speaker 2>we're getting older. Every Western society is getting older. We

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<v Speaker 2>as societies have done a terrible job with guaranteed lifetime income.

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<v Speaker 2>Everyone will need more guaranteed lifetime income This is a

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<v Speaker 2>fixed income product. It is powered by highly rated fixed

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<v Speaker 2>income so called private investment, great big growth market. High

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<v Speaker 2>net worth institutional investors used to be the dominant forces

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<v Speaker 2>in our industry. We're at the very beginning of high

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<v Speaker 2>net worth investors exploring private markets. This is going to

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<v Speaker 2>a trend that's going to take place for the next

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<v Speaker 2>twenty years. And finally, indexation and commoditization of markets. If

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<v Speaker 2>you're an active manager of equity, you failed to beat

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<v Speaker 2>the market better than ninety percent of the time for

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<v Speaker 2>twenty years. I don't think you got stupider. I think

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<v Speaker 2>these firms are actually really good. But the structure of

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<v Speaker 2>markets changed. And this gets to the notion of if

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<v Speaker 2>four thousand public companies is not enough for diversification, we

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<v Speaker 2>have to find a way to participate in private markets.

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<v Speaker 2>All four trends power not just to follow about our industry.

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<v Speaker 3>You mentioned pensioners retirees, and as you say, I certainly

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<v Speaker 3>am getting older while volunteer for that is this part

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<v Speaker 3>when we talk about pensioners or retirees, there's a big

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<v Speaker 3>looming problem. Obviously, as people advancing age, they need retirement

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<v Speaker 3>income is private. Part of the solution of that problem.

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<v Speaker 3>Are you going to help us get out of this jam?

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<v Speaker 2>It's a part of the solution. So we have we

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<v Speaker 2>have an actual experiment. We can look at Australia. Forty

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<v Speaker 2>plus years ago, Australia adopted superannuation, which sounds like a

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<v Speaker 2>fancy solution, but what is it. It literally just gave

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<v Speaker 2>normal investors who needed returns access to private markets through

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<v Speaker 2>supervised supervision, and Australia has been the most successful retiring

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<v Speaker 2>retirement investment market anywhere in the world. What do we

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<v Speaker 2>do in the US? Yes, we have to find benefit plans,

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<v Speaker 2>but defind benefit plans are shrinking, not growing. Most of

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<v Speaker 2>our retirement money is in four oh one k twelve

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<v Speaker 2>to thirteen trillion by some estimates. What are these people

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<v Speaker 2>invested in? They're invested in daily liquid funds for fifty years.

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<v Speaker 2>Why are they invested in daily liquid fund for fifty years?

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<v Speaker 3>I don't know.

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<v Speaker 2>Well, because public was safe and private was risky. It

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<v Speaker 2>will not surprise me, and we're already seeing the beginnings

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<v Speaker 2>of it. Retirees who are thinking in twenty and thirty

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<v Speaker 2>and forty year timeframes having access to private markets. That

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<v Speaker 2>doesn't mean private equity, That doesn't mean venture capital or

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<v Speaker 2>hedge funds. That means the whole swath of the economy

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<v Speaker 2>that is just not publicly listed.

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<v Speaker 3>So Mark, let me shift a different subject here. You

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<v Speaker 3>started as a media banker.

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<v Speaker 2>I think unbelievable.

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<v Speaker 3>Hard to know. You talk about disruption. I mean, having

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<v Speaker 3>spent some time in media, including on the business side,

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<v Speaker 3>there's a huge disruption of media right now. Can you

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<v Speaker 3>compare what we're seeing that shifts the fundamental shifts in

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<v Speaker 3>media with what we're seeing in the move to private

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<v Speaker 3>from public. Is it a similar sort of fundamental shifting

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<v Speaker 3>of the ground under us I do.

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<v Speaker 2>I think there's a wholesale rewire if you think about

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<v Speaker 2>where people used to spend their time in media and

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<v Speaker 2>how they consume media. I joke with my kids, who

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<v Speaker 2>are somewhat older this time, what do the numbers two, four, five, seven, nine,

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<v Speaker 2>eleven and thirteen mean? They look at me like they

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<v Speaker 2>must be prime numbers or something like that. I'm like, no,

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<v Speaker 2>they're channels. That's how people used to consume me. We

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<v Speaker 2>had a time, we watch something at a time. All

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<v Speaker 2>bets are off, not only in terms of how media

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<v Speaker 2>is delivered, but how it's created. The easy which is created,

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<v Speaker 2>and so on and so on. Financial services, we are

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<v Speaker 2>going through that same sort of revolution in a much

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<v Speaker 2>more regulated business, so it will not happen as fast.

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<v Speaker 2>It is not just about public and private markets. It's

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<v Speaker 2>about security, it's about who provides our services. We have

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<v Speaker 2>a whole group of tech companies who are encroaching on

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<v Speaker 2>the turf of the banking system. We have banks who

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<v Speaker 2>are living in a more regulated paradigm but are nonetheless

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<v Speaker 2>the key gate keepers to services. So I look at

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<v Speaker 2>our industry, what is our job and our job at

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<v Speaker 2>Apollo our job is to match long term liabilities and

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<v Speaker 2>long term assets to provide read to return to investors

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<v Speaker 2>access return per unit of risk.

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<v Speaker 1>And that of course was Mark Rowan, Apollo Global Management

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<v Speaker 1>co founder and CEO, and of course Wall Street Week

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<v Speaker 1>host David Weston