Apollo eyes wealth channel for $80bn capital raise plotted next year

The investment firm expects the wealth channel to account for about 30% of capital raised over time, it said during its latest investor day presentation.

The wealth management channel will become a relevant investor in Apollo Global Management’s capital-raising plans for next year, said senior leaders of the firm during its investor day on Tuesday.

The investment giant is targeting at least $80 billion of fresh capital next year, which includes its 10th flagship private equity fund, according to presentation materials. Scott Kleinman, co-president of Apollo, noted that Fund X – when launched early next year – would “ultimately be as large or larger than its 2017-vintage $24.7 billion predecessor“.

“That will be a factor in Fund X and going forward. Then our retirement services business.” Since March, wealth management has been a big contributor to the firm’s yield and hybrid platforms, he added. “As it scales, it’s going to become a more relevant investor in our equity business as well.”

Stephanie Drescher, chief client and product development officer, said during the presentation that the firm is “turbocharging its commitment to the global wealth channel”.

The firm expects capital raised from the wealth channel – which includes private bank relationships, family offices and registered investment advisers – to grow from 5 percent today to 30 percent or more. Drescher in May was appointed to head up Apollo’s newly established global wealth management solutions unit, which has been staffing up and expects a headcount of 30 people globally by the end of the year.

“Why now? It’s a market that is 2x the size of the institutional [market], yet they’re under-allocated by 2x to 5x to alternatives,” Drescher said. “In addition, as mentioned earlier, the demographics continue to change, especially in relation to wealth transfer, where over time, as baby boomers age, there is an expected $70 trillion that should pass to the next gen.”

Apollo managed $75 billion of private equity assets as of end-June. The firm has committed 75 percent of Fund IX, which has delivered a 49 percent gross internal rate of return and 28 percent net internal rate of return.

The firm also revealed on Tuesday that it could potentially scale up in areas including growth equity, its secondaries-focused GP solutions unit and energy transition.

“Obviously the single biggest white space on the Apollo platform today is growth,” said Kleinman. “It looks like it’s got plenty of room to run. We are really working hard in the lab on that, and you’ll see some things coming in the not-too-distant future.”

He also added that the firm expects to see dedicated vehicles on these strategies in due course, in which the firm can either build those out internally or acquire teams.

Apollo’s equity and hybrid assets under management stood at $133 billion, which it aims to grow to $225 billion in five years’ time. It also expects total AUM to roughly double from just under $500 billion now to $1 trillion by 2026.