Apollo converts to C-corp as it passes $300bn AUM mark – updated

The firm is the latest in a string of private market money managers to make the change, citing an expected increase in its share liquidity.

Apollo Global Management has joined the ranks of its fellow publicly-traded alternative asset managers in converting from a partnership to a C-corporation, the firm said in its first-quarter earnings announcement.

In an investor presentation, the New York-based firm cited the expectation for a broader eligible shareholder base and enhanced liquidity, along with the potential for index inclusion. In addition, Apollo expects the conversion to limit its stock price volatility as a result of the potentially expanded pool of stockholders.

The change is expected to become effective during the third quarter of this year; the specifics of the conversion are still subject to the approval of federal regulators and a subcommittee of Apollo’s board. The firm said there would be no change to its dividend policy.

Ares Management, KKR and Blackstone have all also changed to C-corporation status following the passage of a massive package of tax cuts US president Donald Trump signed into law in late 2017.

On its own first-quarter earnings call earlier this week, KKR provided an update on its conversion, noting that the aggregate number of shareholders expanded and that the number of mutual funds and index funds holding its stock increased notably. Blackstone also made the switch this quarter, when it announced the move alongside its earnings results two weeks ago.

Private equity performance

Apollo’s private equity dry powder stood at $35.7 billion, more than 77 percent of the total $46 billion dry powder across all asset classes, as of 31 March. Almost 15 percent of its ninth flagship fund, which raised $24.7 billion in 2017, has been invested, including for the acquisition of Cox TV from the Koch brothers, as well as retail grocery chain Smart & Final, the firm said on its first quarter earnings call Thursday.

There has been very little distressed investing in private equity for some time; almost two-thirds of Fund VII was invested in distressed assets, while Fund VIII deployed only around 5 percent in the segment. However, given that the economy is in its 11th year of recovery, there is “reasonable probability” that in the course of Fund IX’s deployment, there will be heavier emphasis on distressed assets, the firm said.

Apollo’s private equity team has been reviewing hundreds of companies in industries it follows and expects distressed assets to become much more active in the next two to three years.

The firm said it is “premature” to think of timing for Fund X, but Apollo is “incredibly opportunistic” and will watch the market for the right time for the next fund.

Private equity management fee revenue increased 51 percent to $525 million over the 12-month period ending 31 March, compared with $348.5 million in the prior 12-month period.

Realised performance fee revenue fell 43 percent to $226 million over the same period, compared with $396.5 million in the prior period.

For its first-quarter results, Apollo reported $303 billion in assets and a net income of $315.6 million, or $0.67 a share. The jump in AUM from $280.3 billion came as it pulled in $24.9 billion, mainly driven by inflows of $21 billion from its Athene insurance arm.

–This story was updated to reflect comments made by Apollo Global Management on its Q1 earnings call Thursday.