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Speaker 1: Jim's out.

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Speaker 2: It joins us now the co president of Apollo Global Management.

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Speaker 1: Jim, goodmon, it's here.

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Speaker 3: Good morning, and welcome to a pole.

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Speaker 1: Thank you for having us, Thank you for having us.

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Speaker 3: I said, the coffee is good and the price is

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Speaker 3: even better.

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Speaker 1: Right, the coffee is good and the price is free.

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Speaker 1: And we like that.

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Speaker 3: You see right time tip jerk.

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Speaker 4: Oh, this is called this is the You're you're making

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Speaker 4: the show today from our Contrarian cafes. So we welcome

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Speaker 4: you nice and you have a great line up this morning.

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Speaker 4: So we're excited to have you here and tell you

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Speaker 4: more about our story.

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Speaker 2: That great lineup begins with you. I mentioned a little

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Speaker 2: bit earlier. There is a call on the sitecle that

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Speaker 2: we can talk about. There's also a call on the industry.

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Speaker 2: Let's start with the industry. That phrase I mentioned moments ago,

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Speaker 2: D banking perfect place to start.

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Speaker 1: What is D banking and what does it mean for

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Speaker 1: you in the team?

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Speaker 4: Well, you know, I don't use that term. I really

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Speaker 4: use the evolution of finance. The reality is that we

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Speaker 4: the last forty years we had amazing tail wins with

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Speaker 4: globalization and technology and lower rates. Banks became they were

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Speaker 4: advisors for decades. In the nineties and the two thousands,

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Speaker 4: they became large global institutions. Eight oh nine happens, and

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Speaker 4: there's a tremendous amount of legislation dot frank to change

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Speaker 4: their business model. But at the same time rates were lower,

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Speaker 4: and in the last fifteen years, CEOs, the CEOs you're

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Speaker 4: going to have on today from Wells and from other places,

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Speaker 4: they're focused on ROE and their shareholder return. And as

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Speaker 4: they're focused on ROE and shareholder return, there's a massive

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Speaker 4: gap where companies need to find capital and firms like

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Speaker 4: Apollo we've been at the front of the front of

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Speaker 4: the parade in terms of providing capital across our business

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Speaker 4: and when you put that together with our funding model

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Speaker 4: of LP capital from around the globe plus our retirement services,

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Speaker 4: we're just a very unique player in that's going on.

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Speaker 2: We've got to get into how big the addressable market

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Speaker 2: is and what are private markets. Typically we think of leverage, finance,

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Speaker 2: macro and your colleague it we'll catch up with a

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Speaker 2: little bit later this morning, talks about basically everything that's.

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Speaker 1: On a bank balance shape. How big is this going

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Speaker 1: to be?

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Speaker 4: You know when most people talk about and you did

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Speaker 4: a great job right. They're talking about private capital and

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Speaker 4: private markets. Most people when they talk about private credit today,

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Speaker 4: they talk about direct origination, which is about a trillion

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Speaker 4: five it's about a third of the high yield and

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Speaker 4: loan markets. We think the definition of private capital and

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Speaker 4: private credit is around a forty trillion number, and that

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Speaker 4: would consist of you know, solar finance, inventory finance, trade finance,

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Speaker 4: franchise finance, along with a lot of this corporate lending

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Speaker 4: and investment grade privates that a lot of banks used

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Speaker 4: to hold large chunks on their balance sheet. But again,

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Speaker 4: in their search for roe and appropriate returns, they're not

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Speaker 4: the right place to hold that. They may be the

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Speaker 4: right place to originate it, but they're certainly not.

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Speaker 3: The right place to hold it long term.

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Speaker 5: In that's three hours with you, I think I want

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Speaker 5: to get out of the way right away. The stereotype,

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Speaker 5: it's high falute and fancy derivatives, fancy structures, mezzaning. Everybody

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Speaker 5: walks around says mezzaning that we have mezzoning coffee of

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Speaker 5: mezzoning Danish. But the reality is it's shocking and conservative.

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Speaker 5: On your website, you lead with retirement services. How conservative,

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Speaker 5: how measured, how prudent is Apollo.

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Speaker 4: Well, and the end of the day, we do not

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Speaker 4: like to lose money, and that even means a penny.

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Speaker 4: The reality is, if you look at our firm today,

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Speaker 4: six hundred and thirty billion, about one hundred billion in

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Speaker 4: private equity, about one hundred billion in real estate and infrastructure,

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Speaker 4: four hundred plus billion in credit. A vast mass majority

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Speaker 4: of that is investment grade. And in this year alone,

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Speaker 4: whether it's Air France, Venovia, AT and T, we're loaning

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Speaker 4: money to great companies that are a lot of them

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Speaker 4: are investment grade. And it's interesting, you know, you talk

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Speaker 4: around the globe right now. In the last six seven weeks,

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Speaker 4: you know, buying investment grade debt of companies like Merk

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Speaker 4: and Meta and many many others, you've been making a

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Speaker 4: double digit return between the compression of spreads and otherwise.

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Speaker 3: Now that's in the public markets. But back to the

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Speaker 3: private credit.

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Speaker 4: To your point, we lend to large companies, mostly investment grade,

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Speaker 4: and for our perspective, back to Jonathan's question, it's not

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Speaker 4: a one and a half trillion opportunity. It's really a

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Speaker 4: forty trillion opportunity.

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Speaker 3: So let's talk about where we are.

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Speaker 6: You said, you don't like to lose a petty, and

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Speaker 6: yet you've been focused on investment grade, which is underperformed.

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Speaker 6: High yield risk has done a lot better than lower

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Speaker 6: risk securities. Where are we in terms of where you

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Speaker 6: can make the most money is it's still an investment

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Speaker 6: grade despite where we are right now, Well.

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Speaker 3: It's in higher quality credit. The reality is there's still

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Speaker 3: this debate.

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Speaker 4: You'll have it with Torston later on soft landing hard landing,

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Speaker 4: your friend, mister Slock. But the reality is the economy

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Speaker 4: is we're sort of a little bit in this interesting

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Speaker 4: goldilocks period right now. Concern about a slowdown has been

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Speaker 4: on everybody's mind the last six seven months. Fed's actually

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Speaker 4: done a really nice job of maintaining higher rates. So

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Speaker 4: I would argue that the FED put is back in

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Speaker 4: the market right now. And the reality is you can

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Speaker 4: make as people are worrying about soft and hard landing

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Speaker 4: in credit, You've been making double digit returns in the

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Speaker 4: last six and nine months.

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Speaker 6: So the FED put is back. We can't let that go.

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Speaker 6: What exactly does that Does that mean that we're not

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Speaker 6: going to have the same kind of credit cycle that

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Speaker 6: now you are a believer No on soft landing.

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Speaker 4: I think what you're going to see is you're going

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Speaker 4: to see an economy that there's going to be winners

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Speaker 4: and losers, certainly like in inflation. You're seeing it right

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Speaker 4: now in the goods section, goods area where goods prices

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Speaker 4: are lower but services are a bit higher. And I'm

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Speaker 4: just saying is that is the economy is navigating what's

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Speaker 4: going on right now. The FED is maintained at fairly

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Speaker 4: high rates. The market's gotten ahead of it, if you will,

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Speaker 4: and if there were any kind of challenging economic backdrop,

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Speaker 4: the FED does have a loaded gun that they can

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Speaker 4: use as needed and as appropriate. I'm not assuming it's

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Speaker 4: going to happen. I think you're going to see what

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Speaker 4: we're all expecting. You know, we're students of history. We

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Speaker 4: expect to happen in a way to happen. Again, I

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Speaker 4: don't think you're going to see that happen right now.

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Speaker 4: I think the actually reality is the banking system in

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Speaker 4: the US, the envy of the world, is actually quite robust.

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Speaker 4: There are signs of the economy that are a bit

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Speaker 4: more challenging. There are a lot of bios that have

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Speaker 4: been done that will have a challenging time, but you're

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Speaker 4: just going to have to navigate it with a really

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Speaker 4: broad tool.

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Speaker 5: We mentioned the history on an almost cultural basis. One

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Speaker 5: of my themes is we had seventy three seventy four

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Speaker 5: Pittsburgh rolled up, You and I lived in in western

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Speaker 5: New York. And the bottom line is then we had

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Speaker 5: seventy seven a second leg of a great bullmarket starting

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Speaker 5: into the eighty two expansion. Is that the analog right

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Speaker 5: now that after the gloom of the pandemic and the churning,

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Speaker 5: that there's something new here, constructive.

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Speaker 4: Well, there's no doubt in the you know, if you

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Speaker 4: talk about those four tailwinds that I talked about, globalization,

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Speaker 4: lower rates, deregulation. The fourth is technology, and there are

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Speaker 4: those who know a lot more about it than I do,

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Speaker 4: but they would argue that we are on the precipice

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Speaker 4: with what's going on with AI cost structure, education and

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Speaker 4: the breadth of that that that could have a huge impact.

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Speaker 4: But the reality is the cost of capital is going

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Speaker 4: to be higher for the next five or seven years.

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Speaker 3: We are in a higher cost of capital environment.

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Speaker 4: And it's how you navigating back to your original question, like,

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Speaker 4: the reality is the bank the banking system around the

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Speaker 4: globe is evolving. The US is in the front of that,

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Speaker 4: and as you'll hear about this morning, we think we

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Speaker 4: are the player as that industry continues to evolve.

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Speaker 2: We've got to set it up for the rest of

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Speaker 2: this morning. There will be people at home asking this

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Speaker 2: following question. So how to answer it. Are we not

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Speaker 2: just transferring the risk from banks and the risk they

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Speaker 2: post the economy to places like this, Well.

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Speaker 4: We're actually taking the risk that was consolidated on a

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Speaker 4: bunch of financial institutions and bringing it to a much,

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Speaker 4: much broader system where we're diversifying that risk because our

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Speaker 4: investors at the end of the day are either sovereign

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Speaker 4: or other pension funds that don't own these assets on leverage,

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Speaker 4: or there are other retirement services. So we're going higher

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Speaker 4: quality assets and we're diversifying the risk of the system.

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Speaker 4: It's actually making the system less risky.

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Speaker 1: Jim, this was awesome, Thanks for having.

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Speaker 3: Us, Thank you here. Well, welcome today and we look

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Speaker 3: forward to a great morning.

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Speaker 2: It's going to be fantastic. Jim's down to the of

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Speaker 2: Apollo Global Management