Speaker 1: Well, it's time for our daily Wall Street Week conversation,
Speaker 1: and today we're focusing on structural changes within the financial industry.
Speaker 1: Mark Owen he is Apollo Global Management co founder and CEO.
Speaker 1: He spoke with Wall Street Week host David Weston yesterday
Speaker 1: at the Milken Institute Global Conference in Los Angeles.
Speaker 2: It is absolutely the driving force. I mean, this is
Speaker 2: focusing on the urgent, which is what we were talking
Speaker 2: about before we came on era versus the important. This
Speaker 2: is the important thing that's happening in our business. At
Speaker 2: our recent partners off site, I put up a slide
Speaker 2: that said, in two thousand and eight Apollo forty billion
Speaker 2: of AUM twenty twenty three, six hundred and fifty billion
Speaker 2: of AUM. We grew fourteen times. We outgrew Apple, we
Speaker 2: outgrew Amazon, we outgrew Microsoft. Pretty impressive stat next slide
Speaker 2: where we lucky or smart? We were lucky. You can't
Speaker 2: possibly plan on growing your business fourteen times, but you
Speaker 2: can position the business in a way that you take
Speaker 2: advantage of powerful tailwinds or trends. What were the tailwinds?
Speaker 2: Two thousand and eight, we had a financial crisis which
Speaker 2: pushed most financial institutions in the Western world on defense.
Speaker 2: We built and formed a financial institution called Athene in
Speaker 2: two thousand and eight. That company went from a startup
Speaker 2: to today three hundred and sixty billion dollars offense could
Speaker 2: never have been done but for the macro environment. The
Speaker 2: other thing that happened is rates went to zero. People
Speaker 2: who had made promises to retirees, to pensioners, and had
Speaker 2: other obligations that were fixed, all of a sudden needed
Speaker 2: to look elsewhere for rate of return. They were willing
Speaker 2: to consider that perhaps private markets offered an alternative. Okay,
Speaker 2: those tailwinds powered us through two thousand and eight. Now
Speaker 2: I sit in twenty twenty four and I say, what
Speaker 2: are the tailwinds. This tailwind of dbanking, of having investors
Speaker 2: do more and banks do less absolutely happening and happening
Speaker 2: everywhere in the world. Does not mean banks will shrink.
Speaker 2: It just means on the margin, growth is going to
Speaker 2: come in the investment marketplace, in the banking marketplace. Second retirement. Unfortunately,
Speaker 2: we're getting older. Every Western society is getting older. We
Speaker 2: as societies have done a terrible job with guaranteed lifetime income.
Speaker 2: Everyone will need more guaranteed lifetime income This is a
Speaker 2: fixed income product. It is powered by highly rated fixed
Speaker 2: income so called private investment, great big growth market. High
Speaker 2: net worth institutional investors used to be the dominant forces
Speaker 2: in our industry. We're at the very beginning of high
Speaker 2: net worth investors exploring private markets. This is going to
Speaker 2: a trend that's going to take place for the next
Speaker 2: twenty years. And finally, indexation and commoditization of markets. If
Speaker 2: you're an active manager of equity, you failed to beat
Speaker 2: the market better than ninety percent of the time for
Speaker 2: twenty years. I don't think you got stupider. I think
Speaker 2: these firms are actually really good. But the structure of
Speaker 2: markets changed. And this gets to the notion of if
Speaker 2: four thousand public companies is not enough for diversification, we
Speaker 2: have to find a way to participate in private markets.
Speaker 2: All four trends power not just to follow about our industry.
Speaker 3: You mentioned pensioners retirees, and as you say, I certainly
Speaker 3: am getting older while volunteer for that is this part
Speaker 3: when we talk about pensioners or retirees, there's a big
Speaker 3: looming problem. Obviously, as people advancing age, they need retirement
Speaker 3: income is private. Part of the solution of that problem.
Speaker 3: Are you going to help us get out of this jam?
Speaker 2: It's a part of the solution. So we have we
Speaker 2: have an actual experiment. We can look at Australia. Forty
Speaker 2: plus years ago, Australia adopted superannuation, which sounds like a
Speaker 2: fancy solution, but what is it. It literally just gave
Speaker 2: normal investors who needed returns access to private markets through
Speaker 2: supervised supervision, and Australia has been the most successful retiring
Speaker 2: retirement investment market anywhere in the world. What do we
Speaker 2: do in the US? Yes, we have to find benefit plans,
Speaker 2: but defind benefit plans are shrinking, not growing. Most of
Speaker 2: our retirement money is in four oh one k twelve
Speaker 2: to thirteen trillion by some estimates. What are these people
Speaker 2: invested in? They're invested in daily liquid funds for fifty years.
Speaker 2: Why are they invested in daily liquid fund for fifty years?
Speaker 3: I don't know.
Speaker 2: Well, because public was safe and private was risky. It
Speaker 2: will not surprise me, and we're already seeing the beginnings
Speaker 2: of it. Retirees who are thinking in twenty and thirty
Speaker 2: and forty year timeframes having access to private markets. That
Speaker 2: doesn't mean private equity, That doesn't mean venture capital or
Speaker 2: hedge funds. That means the whole swath of the economy
Speaker 2: that is just not publicly listed.
Speaker 3: So Mark, let me shift a different subject here. You
Speaker 3: started as a media banker.
Speaker 2: I think unbelievable.
Speaker 3: Hard to know. You talk about disruption. I mean, having
Speaker 3: spent some time in media, including on the business side,
Speaker 3: there's a huge disruption of media right now. Can you
Speaker 3: compare what we're seeing that shifts the fundamental shifts in
Speaker 3: media with what we're seeing in the move to private
Speaker 3: from public. Is it a similar sort of fundamental shifting
Speaker 3: of the ground under us I do.
Speaker 2: I think there's a wholesale rewire if you think about
Speaker 2: where people used to spend their time in media and
Speaker 2: how they consume media. I joke with my kids, who
Speaker 2: are somewhat older this time, what do the numbers two, four, five, seven, nine,
Speaker 2: eleven and thirteen mean? They look at me like they
Speaker 2: must be prime numbers or something like that. I'm like, no,
Speaker 2: they're channels. That's how people used to consume me. We
Speaker 2: had a time, we watch something at a time. All
Speaker 2: bets are off, not only in terms of how media
Speaker 2: is delivered, but how it's created. The easy which is created,
Speaker 2: and so on and so on. Financial services, we are
Speaker 2: going through that same sort of revolution in a much
Speaker 2: more regulated business, so it will not happen as fast.
Speaker 2: It is not just about public and private markets. It's
Speaker 2: about security, it's about who provides our services. We have
Speaker 2: a whole group of tech companies who are encroaching on
Speaker 2: the turf of the banking system. We have banks who
Speaker 2: are living in a more regulated paradigm but are nonetheless
Speaker 2: the key gate keepers to services. So I look at
Speaker 2: our industry, what is our job and our job at
Speaker 2: Apollo our job is to match long term liabilities and
Speaker 2: long term assets to provide read to return to investors
Speaker 2: access return per unit of risk.
Speaker 1: And that of course was Mark Rowan, Apollo Global Management
Speaker 1: co founder and CEO, and of course Wall Street Week
Speaker 1: host David Weston