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Apollo Global Management announced a historic $559 million in fee-related earnings for the first quarter, but its extensive Athene insurance operations impacted profits more than analysts anticipated.
The US private investment titan, managing $785 billion in assets, achieved its best returns from a strategy aimed at refinancing under-pressure buyout deals or providing financial aid to public companies needing to stabilize their finances.
Apollo’s “hybrid value” funds, established six years back, recorded a 3.8% rise in the first quarter and a 19.3% increase over the last year, making them the top-performing strategy within Apollo.
These returns are nearly three times higher than what Apollo’s leading buyout funds earned, which only saw a 6.6% rise over the past year. Meanwhile, Apollo’s credit funds, which form the bulk of its assets, achieved returns between 7.7% and 11.8% over the same period.
Overall buyout fund performance has declined across the sector due to rising interest rates and sluggish deal-making activities, resulting in a bottleneck of unsold private equity assets.
However, the returns from Apollo’s hybrid funds indicate that some smart investors are starting to reap substantial rewards by navigating through these tough conditions.
Apollo has channeled its hybrid funds into companies like grocery chain Albertsons and waste management company GFL Environmental, assisting them in reducing debt and strengthening their balance sheets.
These funds have also supported significant continuation funds and made non-controlling investments in companies that competing private equity firms prefer not to fully divest while waiting for prices to improve.
Nonetheless, the same difficulties that led Apollo’s competitors to seek financial support from the New York-based firm also affected its earnings.
In the first quarter, Apollo managed to earn merely $14 million in performance-based profits, also referred to as principal investment income, which fell well short of analyst expectations because it struggled to sell many investments at a profit.
