Apollo Investment Fund VIII is about 50% deployed

The firm, which posted a loss in the first quarter, had one of its busiest capital deployment quarters ever.

Apollo Global Management has invested about half of its latest private equity fund, Apollo Investment Fund VIII.

Across the firm, Apollo had one of its busiest capital deployment quarters ever, despite volatility in the public markets, deploying or committing nearly $8 billion in aggregate. In private equity, it also invested in Fresh Market during the first quarter.

Fund VIII held a final close on $18 billion in commitments in December 2013 and was at the time the largest private equity fund.

There were 16 investments in the fund as of the end of March. One of the most recent was the purchase of home-security monitoring company ADT Corporation for a total price tag of $6.9 billion, including debt.

Fund VIII has been producing a positive net internal rate of return, according to Martin Kelly, Apollo’s chief financial officer, speaking during the firm’s first-quarter earnings conference call last week. However, the fund is not in a carry earning position yet, meaning that the fund’s positive performance is not yet being reflected in the firm’s income statement. Kelly noted that the fund only needs to appreciate by another 5 percent for it to begin accruing carry.

“The gross returns are starting to go up in Fund VIII and obviously, it takes you a little while, because of the J Curve, to getting to carry, but we're heading there very quickly,” he said.

Apollo posted an economic net loss came of $72.9 million in the first quarter, down from an economic net income of $32.8 million in the fourth quarter and an ENI of $93.5 million in the first quarter last year.

Apollo’s private equity segment posted an economic net loss of $79.6 million in the quarter, down from a $50.5 million loss in the fourth quarter and an ENI of $53.6 million in the first quarter last year.

Limited partners in Fund VIII include California Public Employees’ Retirement System, Canada Pension Plan Investment Board, Florida State Board of Retirement, Kansas Public Employees Retirement System, ATP Private Equity Partners and Altamar Private Equity, according to PEI’s Research & Analytics.

Although the performance of Fund VIII was up 9 percent during the first quarter, Apollo Investment Fund VI and Apollo Investment Fund VII were both down 5 percent each in the quarter.
Fund VI closed on $10 billion in 2006 and has about $3 billion of unrealised investments, 75 percent of which is publicly traded. There is about six investments remaining in the fund, the largest of which being Norwegian Cruise Lines, which represents about 40 percent of the fund’s remaining value.

Fund VII closed on $15 billion in 2008 and has more than $4 billion of unrealised investments. There are about 12 investments remaining in that fund, the largest of which is McGraw-Hill Education, which has filed with the US Securities and Exchange Commission for an initial public offering.

As far as fundraising goes, Apollo collected $4.5 billion in the first quarter, bringing inflows in the past 12 months to $23 billion. It received $800 million for managed accounts from undisclosed LPs, and $200 million for its second natural resource fund, Apollo Natural Resources Partners II, which now has about $2 billion in commitments and which continues to raise capital. ANRP II is targeting $3 billion.

During the first quarter, Apollo also held a first close on $250 million for its Apollo Special Situations Fund, which is targeting $750 million for investment opportunities that fall outside of existing fund mandates such as royalties, infrastructure and minority investments.

“In terms of size, I don’t think we’re expecting this to be a massive number in Fund I, but we’re excited to spend it quickly and then go back for more,” said co-founder Leon Black, during the conference call.

Apollo had $172.5 billion in assets under management and $26 billion of dry powder as of the end of the first quarter.