Apollo raises $13bn for first flagship buyout fund since Leon Black exit

Apollo Global has raised $13bn for its first flagship buyout fund since co-founder Leon Black left the private equity group last year over his long association with convicted sex offender Jeffrey Epstein.

The group said that by July the fund had attracted more than half of the $25bn in capital it was hoping to raise by year end.

The fundraising, which was announced with second-quarter results on Thursday, is being closely watched on Wall Street as the New York-based group works to move past the exit of Black in March 2021 and attract new money for large scale corporate buyouts.

Joshua Harris, another Apollo cofounder who was behind some of the company’s most successful investments, such as the takeover of chemicals company LyondellBasell, also left during the turmoil after he was passed over to replace Black as chief executive by another co-founder Marc Rowan.

The new fund commitments indicate that institutional investors believe the group’s performance can continue without Black and Harris and under the leadership of a new generation of dealmakers.

In the second quarter, Apollo attracted $36bn in new assets, a figure that did not include the $13bn committed to the buyout fund in July, after the quarter had ended. Those inflows pushed overall assets under management at Apollo to a record $515bn, pushing overall fee-related earnings up 7 per cent to $341mn.

The group’s $639mn in adjusted net income, a metric favoured by analysts as a proxy for the group’s cash flows, represented a 13 per cent increase that slightly beat analyst expectations.

Apollo has succeeded in attracting new assets for strategies that seek to benefit from rising market volatility. It drew in $24bn for funds ranging from those designed to invest in market dislocations, to others that make structured debt and equity investments in companies seeking fresh capital.

Athene, the insurer built by chief executive Rowan in the years following the 2008 financial crisis, raised a quarterly record of $12bn in new money and put inflows to the unit at $45bn over the past year. Athene has accounted for more than 40 per cent of the total $110bn that has flowed into Apollo this past year.

Rowan said Apollo’s more defensive investment style, in which it resists buying highly priced companies in favour of those with misunderstood assets or businesses in need of mass change, appealed to investors looking to navigate a more challenging market.

“Our focus on credit fundamentals and purchase price discipline continues to resonate with clients, as the difference between alpha generation and beta becomes increasingly clear in this environment,” said Rowan in an earnings release.

Nonetheless, Apollo has been unable to sidestep markdowns amid a sharp plunge in global financial markets in the second quarter, as the war in Ukraine, surging inflation and interest rates have battered investors’ portfolios.

Apollo’s private equity funds fell nearly 5 per cent for the quarter, while most of its credit-oriented investment funds also saw declines.

Earlier this year, Apollo merged Athene into its operations, a manoeuvre that combined the group’s fee-based asset management activities with an insurer that manages $189bn on behalf of policyholders.

Those insurance assets have to be marked to market to account for rising or falling interest rates. Owing to surging interest rates during the quarter, Apollo lost $2.1bn, on the basis of generally accepted accounting principles, an unrealised accounting loss driven by rising interest rates.