Apollo Reports Solid Quarter, Completes Raising Capital for Massive $25 Billion Private Equity Fund

Apollo reported a solid second quarter, and we plan to maintain our $28 fair value estimate. We’re most pleased to see the completion of capital raising for the massive $25 billion private equity fund, Fund IX, the largest in the industry’s history. The earlier success of the Fund VIII, raised in 2013 and generating net internal rates of return of 16% to date in a high-valuation environment helped attract LPs to this new fund, in our view. We would expect fees from the new fund to start contributing in 2019 and 2020, after the firm has put meaningful capital to work, as it does still need to invest about a quarter of Fund VIII still. Apollo’s current private equity investment pace of $6.7 billion over the last 12 months is a little over five years of investment activity given private equity dry powder of $36 billion. The end result means Apollo will need to source bigger private equity deals than it has previously, in our view. In addition, fund performance remained strong with the private equity funds appreciating 20% in the last 12 months, while credit has generated a net return of 9%. Overall assets under management now stand at $232 billion, up from $197 billion in the first quarter, while distributable earnings improved to $246 million from $233 million over the same time frame due to higher management fees.