Apollo in $525m ‘life-settlements’ bet

The Leon Black-led firm is raising a low-fee vehicle with a select group of LPs to buy bundles of life-insurance policies from distressed institutions.

Apollo Global Management wants to raise $525 million from a select group of limited partners to buy bundles of life insurance policies, a strategy long pursued by famed investor Warren Buffett.

The targeted assets, known as life settlements, will be acquired from banks or other institutions that have already purchased the policies from the original holders. The seller gets an upfront payment, and Apollo would then collect upon maturity of the policy when the individual holder dies.

The fund, called Financial Credit Investment I, would be Apollo’s first to focus exclusively on life settlements. The firm, run by Leon Black, has some experience with the strategy as a former portfolio company called National Financial Partners engaged in life settlement transactions.

Apollo declined to comment about the fundraising.

Apollo intends to target distressed institutions looking to offload the life settlements, according to pension documents from the Oregon Investment Council, which became one of the select limited partners in the fund with a $100 million commitment this month.

Pension documents make clear the firm has identified one large portfolio from a “European commercial bank” as a potential acquisition.

“Apollo believes it will acquire the portfolio at an attractive distressed value of the face amount of the portfolio,” OIC said in the documents.

Expected returns from the strategy range from 15 percent to 22 percent IRR with a 5x multiple of invested capital, the pension said. Apollo partners also will contribute about $37 million, or about 7 percent, to the fund.

Financial Credit Investment I will have a “lower than typical management fee for funds of this structure”, the pension said. The fee will be called a “monitoring fee”, based on committed capital. Also, carry will be lower than other private equity funds, the pension said. Specific fee amounts were not available.