Private wealth product could become Apollo’s ‘largest fund’ – Marc Rowan

Apollo Aligned Alternatives seeks to eliminate friction points that have stopped high-net-worth investors from embracing alternatives, CEO Marc Rowan said on the firm’s Q2 earnings call.

Apollo Global Management’s global wealth platform, Apollo Aligned Alternatives, launched at the end of the second quarter with $15 billion of invested or committed capital, the firm said on its Q2 earnings call on Thursday.

“What we seek to do in AAA is to produce equity-like returns with fixed-income-like volatility,” chief executive Marc Rowan said, adding that he sees the product as a “replacement” for S&P 500 exposure in the equity portfolios of retail investors.

“If you think about what we as an industry have offered the global high-net-worth community thus far, we’ve offered them… essentially the same product set we have offered for more than 20 years. Not much new has been created to support this market,” Rowan added.

“Our desire here is to be positioned in this market as a thought leader and as an innovator, and to create products specifically for this channel that really seek to eliminate friction points that historically have kept this channel from… embracing alternatives.”

Based on early conversations with investors, Rowan said AAA has the potential to be “the largest fund across the Apollo platform by this time next year”.

AAA was launched with $10 billion of capital off the balance sheet of Athene, Apollo’s retirement services business that was formed as a result of a merger finalised in January this year, and $5 billion from institutional investors.

“What was interesting is that although we designed this product for retail, along the way to the retail launch, three very large institutions… have concluded that this actually meets all of their needs,” he added.

The benefits aimed at individual investors include diversification, a lack of J-curve, a single layer of fees and no capital calls, Rowan said.

It’s early days for AAA, which means limited information is available on its composition or proposed fund investments. According to the Q2 earnings call materials, the product will co-invest alongside Apollo’s balance sheet, making use of its existing portfolio of alternative assets.

Apollo has been contacted for comment.

Other private equity firms have launched their own private wealth products in recent months, including alternatives investment firm AXA IM Alts, which partnered with fintech platform iCapital in the second quarter in a bid to increase wealth managers’ access to private market opportunities. To begin with, the partnership will focus on investments in healthcare and biopharmaceuticals, before expanding to real estate, infrastructure and private debt. AXA’s network of wealth managers and HNWIs will access such investments via a customised white label solution provided by iCapital.

High-net-worth investors have long struggled to gain access to private markets as a result of the high entry minimums, unwieldy investment fees and being generally overlooked because of the comparatively low investments they’re able to provide.

“Tapping into a market that is largely unserved for that strategy is obviously a huge opportunity,” Laurent Capolaghi, partner and private equity leader at EY Luxembourg, told Private Equity International last month. “In a world where the macro indicators are not as perfect as they could be… the retail distribution seems to be one of the factors in increasing fundraising.”

To access more Apollo insights, analysis and data, click here