Apollo Global Management, LLC Class A Aktie

All right. Good morning, everyone. Thanks for sticking with us here on day 2 of Morgan Stanley's Financial Conference. I'm Mike Cyprys, equity analyst covering brokers, asset managers and exchanges for Morgan Stanley Research, and we're excited to have with us for our next session, John Zito, Co-President of Apollo Asset Management. John, thanks so much for joining us here this morning.

Sure.

With nearly over $1 trillion in assets under management and Apollo is one of the world's largest alternative asset managers. So John, let's open with your thoughts on the macro, which feels increasingly bifurcated with higher for longer interest rates, inflation concerns, fiscal deficits, geopolitical fragmentation, yet we still have a robust corporate earnings environment, very strong economy, particularly here in the U.S. spreads remain tight. So can you share with us some of your top-of-house perspectives?

I spend very little time thinking about most of the things you just brought up. I think -- I'm not joking. I think the only really thing that matters is whether or not what's going on with Anthropic in the labs is real or not. Like that, it's so dwarfing to what is going on in the world. Obviously, I'm not trying to discount what's going on in both wars. Inflation, if AI is real, it's so hyper deflationary to so many things over the long term that it's really hard to take risk.

And it's probably as hard. I've been managing third-party money for almost 25 years. I think it's as hard of an environment to probability weight what the world looks like in 12 months to 24 months as it's been in a really long time. And that's not like -- that's not for credit. That's not for -- I mean, it's just generally, really, just a really difficult environment because you go to the valley and even just Anthropic as -- even if I was here in December, I would have told you, much more sanguine about what's going on, but Anthropic doing $60 billion of ARR and $80 billion and $200 billion in their latest filing for what they'll look like in a year, it just dwarfs everything we're doing. I mean Palantir took 17 years for Palantir to get to $1 billion of revenue.

And so what that means for risk taking, what that means for default rate, what that means for businesses, I think some businesses are going to massively thrive, just grow most of the enterprise -- most of the efficiencies from what happens will be driven towards the big scale players.

And you've seen what we've done kind of top down, obviously, with our $36 billion announcement yesterday on Broadcom and $15 billion for SpaceX and close to -- we'll do close to $10 billion in sports, tons of critical infrastructure, derisking by going senior on kind of less exposed businesses, massively underweight software, everything comes from the same place, which is trying to be super humbled about what's going on in the world. And navigate the balance sheet to protect ourselves.

If you look at what we're doing on our own balance sheet really for the last 18 months, derisking in the context of much more treasuries, much more hard assets, a big push into asset-backed and things that are going to be much more inflation protected in whatever regime that looks like. Look, we're doing everything from a lens. I grew up as a principal. I grew up as a manager of vehicles and really grew up at Apollo that way. And that's how we think about our own balance sheet, too, is principal first.

And you really have to have a view like the biggest thing in credit and the biggest thing and just risk markets generally is you can't -- you have to avoid the bad neighborhood at all costs. You can't be in the center of the storm. And there's a long history.

You've covered financial institutions for a really long time. It's like if you're in the bad neighborhood, there's not much you can do. If you're not diversified, there's not much you can do. And so that's been my focus, I think, from a risk management standpoint. But the pace of change is as hard to accept and acknowledge as any time I've been investing. And I think probably -- I mean, I'd struggle to find something that's moving this quickly and getting taken up as quickly as it is.

But at the same time, doesn't that create significant opportunities for active managers?

Yes, for sure. I mean that is going to be -- I think you're going to have the haves and have-nots in a big way. I think, obviously, for our business, there's huge tailwinds in that we've got a little bit lucky that we kind of went all in on credit and what's needed more than anything else is credit, right? And so you have super long -- the capital needs, I mean, I kind of feel like I'm in some fake reality movie or something when I go to the valley now and everybody wants to be our friend and they didn't have the time of the day for me a couple of years ago. So we love them. We love them. I don't mean that way. But they're figuring out the future. We're just financial providers.

But like just you take the 2 labs, they need $1 trillion in chips. I mean you see the OpenAI announcement last night with NVIDIA, NVIDIA is trying to -- I mean the scale of that Ohio project that got rumored last night is $500 billion. I mean, it's very [ Masa ] announcement. But the scale, if you just look at the basic assumptions in the 5-year plans of these businesses, $1 trillion is just for chips.

Like that's -- for us, when you look at that gets us excess spread, that gets us additional FRE that gets us on the mezz and whole business side, we get potentially like infra like assets, like it's -- and only a handful of people can show up and be able to execute a $36 billion deal. I think there's 1 or 2, but probably. And in this case, it was in partnership with Blackstone. So I don't think there's a lot of people that can do it.

With those dollars that you mentioned are just gargantuan, do you worry that the token costs are going to be just as enormous, folks are not going to want to spend and then you...

I think token maxing and token talk is for -- it's a lot of BS, honestly. Like, if you look at per unit of knowledge and cost per unit of knowledge, prices are collapsing. Prices are collapsing per unit of IQ, if you did it that way. And so you have to bifurcate different types of compute into inference compute, which is most of us, like my IQ is not high enough to be able to use what Mythos 2 will be powerful enough.

We're not smart enough. I mean there's only a handful of people that are smart enough to use these cutting-edge frontier models that need 180 IQ, 24/7, like the problem to solve for that, that's where you're seeing the prices go up. Our IQs are so low that we're actually using that IQ to do like check out the recipe for the french toast and we're spending tons of money. And so like, okay, so we have to figure that out clearly. So that we can manage case.

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Yes, that's exactly. Like it's okay, we can admit that what we use our things for. Like glorified, like 120 IQ is good for me. Maybe 130 is good for my french toast. But -- so what you're going to see is like a whole new economy around how you direct the ask onto the right chip, like the AMD chip, the NVIDIA chip, all these different chips will be used and optimized for a certain use case to solve the spend problem. And then you're going to have the 180-plus Citadel, Jane Street, all the high octane quantum, that's going to be really expensive, but the ROI is going to be massive.

Right now, everyone just views all of it in the same bucket. And so I worry more is just how do we -- there's only a handful of credit providers. Obviously, it's getting diversified. I think what's -- the problem is ROI is so high and everybody assumes compute will be demand and that -- so everybody is just building and buying and building and buying because if they say they don't need it, they'll sell it to someone else.

It's very bull market is that part. And so -- and we're in the public markets where rate of change matters a lot. And so if you have any slowdown, once these companies are public, if there's any slowdown and it's growing at 100% a year and it grows at 80% a year, the market -- the stock goes down 50%. So you'll have that moment. I don't know when that moment is going to happen. It's going to happen in the next 2 years at some point where people say, wait a second, the growth isn't as much or the ROI isn't as much, and maybe it just benefits the consumer. I don't know. I don't know where it lands.

But everything is very -- whereas bull market is where you say like there's 10 guys that are building data centers and that everybody can build a gigawatt data center. It's just not true. You're going to see guys -- I think you'll have companies that don't deliver on their promise and they have leases canceled and people are like, oh, wow, what happened here? And not each developer is good. Not each neo cloud is great at providing efficiencies of clusters of chips. There's a lot of nuance that's going on. The bull market elements of it is that everybody thinks that everything is just commoditized, and it's not. There's going to be a lot of dispersion amongst it.

Let's shift gears and talk about your role as Co-President of the Asset Management business at Apollo. Talk about some of your key priorities right now, where you're spending most of your time? And what are some of the key challenges that you're tackling?

Yes. I mean, look, we have 2 big things at the asset manager. Obviously, we have -- our own balance sheet is half the capital and half the capital is third party. Most of my time is, well, first off, risk management and making sure we don't do anything stupid in a time where I think is uncertainty is higher than usual. So that's been going on for a while. Optimizing our own balance sheet and making sure we're in the right neighborhoods, much more infrastructure, much more around everything that's growing really quickly that clearly needs demand, building out Europe, building out ancillary-type businesses, building out our CLO replacement strategy. And I think creating new structures that are good for everybody that actually can earn the appropriate rate of return. And just trying to avoid making any big mistakes because I think there are elements of the balance sheet for that.

I think on talent management, continuing to just get the best people in. But like we've kind of set our plan with -- our credit business obviously drives it. But between hybrid, our equity franchise, which we're in market this year, raising, which in a pretty difficult backdrop for PE. Our team has done an amazing job there just historically in terms of not getting in these bad neighborhoods and sticking to our knitting.

But hybrid is a huge grower. I think infra is a huge grower. How we handle sponsor solutions and secondaries, I think, could be a big grower. People think we're really big and really penetrated. I think there's a lot of upside in certain markets that we have not penetrated and some of our competitors have done a much better job. So I think there's upside in there. We just have to continue to just perform well. And I feel pretty good about that. But I spend most of my time worried as opposed to just making sure we don't -- that's kind of been -- that's how I grew up here.

Which markets stand out, would you say, where competitors have done well and you see significant uptake.

I mean, look, you can see the numbers. I mean we've dominated the credit ecosystem. In other parts of the ecosystem, we've been underweight. I view -- anything that we're under market on, I view as a huge opportunity because I feel like the investment regime is changing where we -- having this open architecture that we have is going to be a huge competitive moat.

And if you look at what's happening with the Mag 7 and to compare the Mag 7 to financial institutions, I know it's a hard one, but they're all going balance sheet heavy. And there was like a 20-year, 25-year environment where the public markets and everybody wanted everybody to be asset-light. It was ARR, asset-light, ROE, everything else. What if the regime is changing a bit to be more asset heavy and that the return is going to shift to capital. You're seeing it with the manufacturers. You're seeing it with the intels of the world that actually make their own stuff. You're seeing the large companies all go much more balance sheet heavy and capital intensive.

And maybe the value framework for financial institutions, something that public markets have not loved about us is our balance sheet heaviness. Maybe that's going to be our strength in this environment. Maybe that enables us to win deals and be more strategic partners. And should we be really leaning into that more? I think that's -- like if I look at other industries, you're seeing value shift to capital. It still hasn't happened in asset managers yet, but I'm probably more excited about that than I've been since I've been at Apollo.

Let's talk about private credit, which continues to be a topic...

I try to get through every 30 minutes without talking about private credit, but let's do it.

All right.

Because I get asked about it 9 times a day, so I have to like -- it's like I can't talk about a much -- such a boring safe asset class so much, but it's so exciting for everyone.

Well, I think that's part of the debate. People don't perceive it to be. But that's what I want to get to in some of these misconceptions here, right? So I think there's been a lot of focus on the direct lending space, which is a small part of Apollo's business, but the emerging debate around the risk profile in private investment grade private IG, which is a bigger part of your business to the sponsors. So I guess where do you see the most common misconception around private IG?

I mean, look, I think the biggest misconception is that we're misaligned in any way and that we're using structure to take a lot more risk. This idea that you could have made that argument maybe when we weren't merged with Athene and that most of our compensation wasn't in the equity of Apollo, which is subordinate to policyholders.

So when we merge those businesses, we effectively said what we're doing in the credit business is good risk, and we want to own all of it. And so this idea that we use structure or private for opacity and lack of transparency is something we just totally disagree with. It is not how we behave or operate. And no matter how much transparency we give to the market, they seemingly -- I think private just feels risky to people.

And so valuations is obviously a big part of that, and there's an intersection there that's gotten in the news, which we're trying to take a lead in terms of setting market-to-market on that. But look, private credit is -- private markets, not private credit. All of private markets are disproportionately exposed to services businesses, asset-light businesses, health care and software.

So private markets have some probability of not doing as well or having defaults that are high. Now the LBO market and the BSL market has a big percentage of software and services and asset-light businesses because levered credit typically went there, too. So lots of companies in the public markets are asset-light services company.

So I think we're going to go through a cycle potentially. It's not about private credit. Private credit is a derisking trade. Private credit is going up in quality, up in seniority closer to assets typically and senior. Listen, some are more exposed than others. Some have more concentration than others. They're going to figure it out.

But I think the much bigger conversation is around the subordinated parts of the capital structure. And so I think you're starting to see that with some of the other headlines going on. And I don't know, cross your fingers. It feels like people are getting bored about private credit, but maybe not.

Most of us, and private credit business is a pretty cottage industry. There's not a lot of -- there's a handful of us that grew up in the business for over 20 years and all know each other. And it's different than the private equity business in that you're kind of either in a deal with someone else or you're going to be on the other side of someone else. But generally, it's not zero sum. And we're all definitely not used to being in the press as much as it's been.

So hopefully, it calms down because the business is supposed to be a pretty boring business. It's supposed to lend money at par, get money back at par, make your coupon and move on with your life and be pretty low ball in terms of what the asset quality of the asset is and the underlying likelihood of default. So hopefully, we'll get back there.

Look, I think the -- I'd like to say nice thing, but redemptions are high right now. There's no way to hide from that. They're all -- you can see them in the headlines. You can see what's going on with some of the interval funds. You've seen what's going on with all of our vehicles, generally speaking, and the structure. And the nice thing is no matter how much you've attacked the private debt business, there's been no run. There's been no SVB. There's been no financial institutions failing. The structure is right. Like could it improve 100%? Can we talk about different ways? Sure.

It's kind of nothing. We're giving back the -- we raised -- we have 5% redemption, which is $750 million. We take in $750 million that quarter. We're -- it's -- we have $5 billion of liquidity on a vehicle that needs to redeem $750 million in a bunch of broadly syndicated loans. The assets pay income and the income matches the distribution yield. The average life of the asset is 3.5 years. The average liability structure is 3.5 years, fully matched. It's for credit, it's a really actually appropriate structure. So I don't fully get it, but we'll keep talking about it, I guess.

All right. The other hot topic is software and Apollo was early to identify potential AI disruption risks in software, and you entered this period with amongst the lowest exposure to software relative to peers in the space. So maybe just share your latest views on software. Is it too early to step in here? Are you seeing some interesting opportunities emerge?

I've had every software sponsor come and pretty much send me hate mail at this point. So I've tried to go on my apology tour. I...

Buy what's in the portfolio companies...

No, it's not soft. I think a lot of comments that we make sometimes get taken out of context. Software by all of us will be used, I don't know, 1,000x in the next 10 years. Like it's not about whether or not software is going to be used or not. It's the price we pay. And if you're a new business, are you going to build something from scratch? Are you going to go pay someone to do it? If you feel like you could probably build it 90%, 95% close to what an off-the-shelf solution does at 90% cheaper. What are you going to do? And that's the debate.

And we spent 8 years, the average multiple software business went from 10x to 31x. The average ARR went from 2 to 3x to 15x. You're paying 15x revenues for business. You guys are all in the markets, you know. You're assuming that like the assumption embedded in there was 100%, 99% retention rate, 90% plus margins and significant growth until the end of time. That's how you grew into the valuation because you viewed it as a utility.

And now that paradigm has shifted. And so the question is price, earnings power, margin, all those things where you have a lot more competition in a much different framework. And so I think it's much more about what's the appropriate price for these businesses.

Analytical software, you're going to use an LLM to do. Analytical software, the LLMs are really good at analyzing big swaths of data. Critical infrastructure software where like the state of record and very important data that you're going to use to build on other software probably goes up the data bricks of the world, and there's some massive winners in the software space. I'm just not sure it's the vertical software company that does analytics or does surveys. It's just not -- those companies are not going to do as well.

I don't think what I'm saying is controversial, but apparently, some people do. I think it's kind of just what's happening. And it's just going to flow through the market over time. The public markets moved first, then they moved to the BDCs that have a lot of exposure. The BDCs are the least of anybody's concerns, given you had 15 companies go from $500 billion to $1 trillion in 60 days this year and the total size of the entirety of the BDC market is sub-$500 billion. So in the context of a $80 trillion equity market and a $230 trillion net worth market for U.S. households, the $400 billion BDC market, which has 30% exposure to software is really the least of anybody's concerns.

Shifting gears to origination. It's been a core differentiator for Apollo. Can you talk about how your approach to origination is evolving in the current environment and where you find some of the most interesting opportunities?

Yes. I mean, listen, we've never been in the origination business as a calling effort business. We've been in the ideas business where we cover sectors. We have no walls between our equity and debt business. We assess what we think the appropriate solution is for the company, and we go in with product agnostic. So we're going have 20 products off the shelf, whether it's an investment-grade revolver, investment-grade term loan, high-yield, pref, take private, hybrid, you name it, infrastructure, off-balance sheet, lease.

We probably have the most broad creative front end that actually is proprietary and can commit to risk where we actually have a view. We've gone from originating $50 billion to $75 billion of what we call excess spread assets. We'll originate somewhere between $300 billion and $400 billion this year. We've grown from $50 billion to $100 billion to $200 billion to $300 billion to $400 billion without losing spread despite spreads going tighter, which if you asked me 5 years ago, we would be able to do that? I would have said no.

And we just keep going after new asset classes and creating new asset classes out of really consistent cash flows. The -- I'd say the benefit of the AI boom is all of this, you can create lots of investment-grade collateral at excess spread because of the supply-demand dynamic going on. There's a lot of demand for capital, and we're going to raise more investment-grade debt in the syndicated market than the actual government market, which has never happened. So there's just so much new supply, which is keeping spreads wide, which is great for our spread business at Athene.

And high-grade capital solutions appears to be the fastest growing of those platform.

Yes, that's there -- obviously that's there's been 125 high-grade deals. We've done over 100 of them. We've been a disproportionate market share there. It's getting a little bit more competitive, but still need to be really big size, really creative, permanent. Our funding structure and our front end are competitive moats on that business. A lot of people want to get in that business. It's a really hard business. We have hundreds of people that are dedicated to that, because if we had just a third-party business, we would have never gotten in that business.

We would have just kind of been a traditional credit manager. But because we get hundreds of dollars on excess spread, we really invested in that business over the last 10 years to build it out and have a really commercial and creative front end that's totally tied to our total asset manager, and that's created products on the back of that, not the other way around.

A lot of people go into businesses and say, we're going to create a product because a client wants it. We're usually the first client. So it's a very different mindset. And when people -- when we bring people -- and we've hired a lot of people over the last couple of years. When we hire people, they're shocked as to how that mindset is totally different from how we think about product and risk taking. It's much more principal heavy all the time, not the other way around.

How big can that business get? And what do you see as any sort of key gating factors?

I mean you're seeing a lot of new sectors. Health care is getting into it. Europe is a huge opportunity. Asia has not yet done that market because of the banking -- I think over time, a huge market. We'll spend $1.1 trillion this year in infra in the U.S. Asia and Europe combined are $300 billion. They need to do trillions of spend that they're backlogged on in terms of infra spend. So I don't know. I think if we keep that share, it's super accretive to all parts of our business, both third party and the balance sheet.

Another -- you mentioned innovation, another area where we're seeing some innovation is daily pricing where you guys are pushing ahead trailblazers here across the industry and privates, pushing for that greater liquidity, greater transparency in private credit. So what are you ultimately trying to accomplish with your efforts there?

No. This is just acknowledgment that many -- some of us decided to go from drawdown funds into evergreen funds where money could come in and out. And listen, if money comes into a product and is in and locked up with all the investors and then comes down at the end of life, the marketing methodology is not impacting is not unfair to any one client. Once we decided to allow money to come in now, you have to make sure that everything is transparent and has some level of -- there's some element that we're acknowledging that some of the assets have some level of volatility.

And so this is just about expanding the marketplace. Marc talks a lot about all of our new clients in the form of individuals and 401(k). Those clients are used to much more of public markets dynamic in terms of NAV and require more daily pricing. And the product design that is required to service those clients is much more of a daily pricing construct. And so this is -- at the end of the day, it is about trust and transparency, and we've tried to lead with that out of Athene with our multiple 200-page decks that we put out, which I make you read.

My favorite weekend read.

There you go. There you go. But like we're trying to just from a very good place, be as transparent as possible. I know that sometimes for whatever reason, people find it hard to believe, but we're just trying to be a market leader in terms of transparency. And we ultimately think that will lead to much more trust over time, and it enables us to actually build our business at the scale that we want it to be. Look, if we wanted to -- it was a lot easier to just be super narrow and service a much smaller corner office and alternatives and we have obviously more ambition for that.

And if you're ultimately successful in bringing more liquidity transparency here to the private credit markets with daily pricing, I guess, what are the implications for excess spread? Does that ultimately compress? And how do you think about the implications of the value proposition in private credit and the premium there?

Listen, again, I grew up in the public markets, and then I've been here 15 years. So I view the value prop of a credit manager to always -- has always been to be the credit underwriting, the credit picking and avoiding defaults. That's kind of like step one. Step 2 is the relationship with the issuer. And if you're actually originating your own product, a lot of the excess spread is from that origination spread, not from illiquidity spread.

People can call it illiquidity spread if they want, but there's different components of excess spread. There's a liquidity spread and then there's origination spread. If you have your own origination, our view has been always that your excess return will, over time, as assets get more liquid. And again, every asset has gotten more liquid over time, and this is just part of the evolution of markets that the originator will retain most of the excess spread, which means our client and our balance sheet will retain most of that excess spread. And it won't be about liquidity or illiquidity excess premium.

And how much should that excess spread be over time? Like what do you think is ultimately sustainable.

Again, all of that -- I don't know if like historically, it was 150 to 200. It will go down, but I don't know by how much, maybe it goes to 100 to 150. But again, if people trust us more, does our funding spread go down. So it's not as easy as -- it's not as simple as saying, okay, if spreads go down, that disproportionately will happen. I think if we're a market leader in transparency and we're a market leader in and trust that our overall cost of capital should go down over time, too.

And then how do you think about the components of that excess spread over time today versus like 5, 10 years from now? Does that mix change? It sounds like it does your thinking maybe.

I think it's going disproportionately from historically what people deem to be -- I think it's a little bit of a fallacy to say that it was all an illiquidity spread, but let's just say it was. It will go to predominantly origination spreads. So you're going to have to control origination to actually maintain any sort of excess spread.

Okay. We're almost up on time, but I wanted to talk about the institutional part of the business. Institutional fundraising has remained resilient, perhaps more resilient than people had feared just a couple of months ago. So talk about what you're seeing that's driving the strength today? How durable is that? And where are you seeing some of the strongest demand across client type geographies?

Yes. Look, our shareholders have loved what's happening in the wealth channel. The -- up until whatever, let's say, the last 6 months, and that, by the way, I think, is going to prove to be more resilient than people think over time. The overwhelming macro on that business is people are still massively under invested in alternatives. And over time, it's hard to debate that more people won't be in private, but we're going through our little test here in private credit. Institutions thought they were getting crowded out, right, by wealth. So they didn't like that. They kind of are secretly rooting for more dispersion in local channel because I think it makes them the star of the show again. But they want to take risk, right?

So like the amount of conversations I'm having on the institutional channel on direct lending, they're just waiting for spreads to go wider. They want more of it. They're still underweight. And many of the large institutions are still not at their target bogey for anything in private debt or credit or hybrid. They're just not there.

So I think when they see the headlines, they're like, great, this is going to create a bunch of excess spreads for us to put some money to work. And they actually want to get out and they're more underweight the equity side of their business, and they've been low on DPI and everything else. So they've been -- every money -- every distribution they get from their equity business, they're plowing back into either infra, hybrid or credit.

So I think we'll launch our third direct lending fund soon. I'm more excited about that part of the business just because I feel like the headlines actually inspire the institutions to go in. They tend to be more countercyclical.

So you're seeing a more...

I mean more demand, which is not consistent with the headlines that you would think, but the institutions will take the other side of that.

Right. Well, I'm afraid we'll have to leave it there. John, thank you so much.

Thanks, Mike. Appreciate it.

Good afternoon, everyone. I'm Patrick Davitt, the U.S. asset manager analyst here at Autonomous. It's my pleasure to welcome back Apollo's President, Jim Zelter.

As a reminder, if you have any questions you'd like me to try to throw in, you can submit them through the Pigeonhole portal, and I will get them here on the iPad and try to throw them in as time allows. So Jim, thanks again for joining us.

Always a pleasure being here. I appreciate your interest and the folks in the audience learning more about our company.

For sure. And it does feel like a broken record at this point when we're sitting at this event in terms of another winter and spring of volatile events.

So as I do, given we have most of the major alternative managers at this conference, I want to start with some higher-level macro questions. So we've got a private credit freak out, concerns about sticky inflation, higher-for-longer rates, risk of slower growth. Do you agree with all of these concerns? And what is Apollo's and your current thinking on inflation rates in the economy?

Well, I think that -- just taking a step back, I think every investor in credit post-GFC has a greater ear to the ground on the global macro. The interconnectivity of all these markets is critically important. And you and I spend a lot of time, and I'm happy to talk today about some of these big trends, whether it's the global industrial renaissance or the evolving banking system.

But yes, I do think that we've been pretty consistent in the last year or so about higher for longer. Torsten has been very public. Marc and I have been very public about the concern about inflation was much more concerning and pervasive than the concern of just lower rates, notwithstanding a lot of the talk about from the administration.

So I use the analogy of golf. I said in the middle of fairway, things are nice, massive CapEx cycle, a big M&A cycle, risk on equity mentality, good corporate profits. The challenge is -- and in the rough, inflation, global fragmentation, the crisis in the Middle East. The problem is that fairway is getting narrower, and it feels like it's the narrowest fairway we've had in a long time. And I just think that when you think about tail risk, not only is it a higher degree of tail risk, but when tail risk comes, you have a higher degree of potential impairment and loss.

And so putting those together, I just think you have to be very vigilant about how you're investing today. And you have to be very thoughtful about trying to predict the future in terms of these big trends. And so I do think we are in the business of putting money to work.

But again, a lot of it depends on the liability that you've been given. If you've been given a PE mandate and your liability is 25%, 30%, having a little bit of equity on top of a levered balance sheet, you better be pretty sure right now. But if you're investing with investment-grade companies that are taking some of the best business models of all time, you want to be their partner.

So again, this all depends. But I think it's -- the idea that this is a surprising environment, I think you've sort of been asleep if you think it's surprising. I think there's a lot of disruption happening around the globe. And I think you just need to really prepare. And you can't predict it, but you can prepare for it.

That's helpful. And kind of following on that, I think Marc's prepared remarks on the last quarterly call were particularly pointed with the suggestion that Apollo is positioned for some fairly significant social and economic upheaval in the coming years. Could you expand on what exactly you're seeing that has you guys concerned? And how is Apollo positioned with this seemingly quite dour outlook?

I think if you have an environment where government balance sheets around the globe are pretty well hocked, you have a rising K economy, you're having arguments about access to opportunity, you have access to -- education is prohibitively expensive, you have to assume a different administration and leadership is going to create different regulatory environment.

So for us, it's in a world where technology and AI is disrupting and you don't know what the truth is. Things such as brand, reputation, really high ratings, a fortress balance sheet, I think those are strategies that will win in many cases. And so tying those together as you execute your business strategy is really important.

Okay. So let's switch gears to the investment environment. You posted a very strong origination quarter, and Marc's constructive on how things are tracking in 2Q. How would you characterize the origination platform? And where are you seeing the most compelling opportunities?

Yes. So from our Investor Day, we talked about the ecosystem which we've created, and we called it our Mona Lisa. We talked about bank partnerships, our origination platforms, and then what Apollo does on our own, our CRE lending, our CLO lending, our high-grade capital solutions.

The area that's the most profound with the pipeline right now is the area of our HGCS, our high-grade capital solutions. There's -- we've talked about this industrial renaissance, investment-grade-led companies in a variety of industries and geographies. And those companies are really where we're spending a tremendous amount of our time.

So if there was one contributing factor to a bit more bottom line origination and spread, it would be that high-grade capital solutions. A handful of deals to date already this year in the second quarter, but a very -- probably, the deepest pipeline we've had historically in that high-grade capital solutions as we sit here today. And some in the next 2 to 4 weeks, some in the next 2 to 4 months. But certainly, I think they will have an impact on the second and third quarter in our volumes and numbers.

So that's a good -- that dovetails nicely, I think, with capital solutions fees or transaction fees, which I think are somewhat tied to what you just said on the high-grade capital solutions. That result was much better than I think anybody expected given the environment in the first quarter. So how should -- through the lens of what you just said about the pipeline, how should investors be thinking about the trajectory of that fee stream given the kind of uptick in the pipeline?

Yes. I think I alluded to a couple of years ago, trying to turn that business -- I use the analogy Goldman Sachs to the Bank of New York. Less lumpy, more predictable, more longer term, more consistent. Maybe not at the same growth rates, but less volatility.

And I think we're doing that right now. I feel more comfortable with our long-term objectives of what that number could go to. And I feel more confident in terms of the -- I hate to use the word predictability, but the comfort that investors should be accustomed to and our ability to do that.

And I think that a lot of it is tied to the breadth of the business. We don't want it to be 4 or 5 large transactions. We'd like to make it 20, 30, 40. And so the volume and the spread of those volume is consistent with that. So I think we feel -- I'm sitting here today, basically end of May. I feel confident about our ability for this quarter and the rest of the year to produce those results.

Great. Moving to capital formation. As it seems like pretty consistently now, you gave very constructive comments on the broader-based capital formation environment you're seeing across the business. How should we think about capital formation evolving within your 6 big channels that you've highlighted on the recent calls?

Yes. If I say -- I know everybody in the room is focused on global wealth, global wealth, which I'm happy to talk about. But I would say that institutional is back. Like its demise was predicted and it's not happening.

So when we think about the 6 channels, whether it's insurance, fixed income replacement, traditionals and otherwise, I definitely think that institutional demand is very strong across credit, infrastructure and hybrid. We're getting a good take-up in our private equity vehicles. I think that's the dividend of good discipline over the last several years. So we feel exceedingly strong about the year-over-year growth in our broad institutional businesses and the variety of other channels that go along with that.

I think to global wealth, certainly, one product, the non-traded BDC, has come under some scrutiny more for perceived concerns than actual performance. So the headlines are certainly louder than the spread widening. But that being the case, you saw elevated redemptions in the first quarter. I suspect you will over the next couple of quarters. I don't think it was a one shot. That being said, I think you're finding underlying performance in March and April and May be solid and consistent. Maybe that will dampen down some of the redemption.

But what you're also finding in global wealth is there's differentiating -- differentiation going on between different channels, between the wirehouses, the RIAs and other independent wealth channels. Some tend to be, depending on the geography, a bit stickier, some depending on the channel and the manner in which you have one decision maker or many decision makers. So I think we're learning where -- who are our longer-term friends and who are the shorter-term tourists.

So on that, how would you characterize the pipeline mix of the redemption requests we've seen thus far?

Yes. I would say I suspect you're going to see -- it's still early. The way our vehicles work, you really don't know until basically this week, in a few weeks.

So I'm predicting, but having done this long enough, I would not suspect a dramatic decrease. I would suspect a maintenance of the levels of the past, maybe even a little bit of an increase as people want to game the system. So I think that's -- my professional judgment would say don't -- we're not through the turbulence yet.

I meant more like which pipeline is proving to be less sticky, I guess?

I think it'd be inappropriate before I get the numbers. But I do think there's certainly channels that are much more focused on a portfolio solutions than a product solutions. And those that are much more focused on portfolio solutions tend to be stickier.

Got it. So staying on the wealth topic, obviously been a lot of noise on one kind of specific part of the market, direct lending or non-traded BDCs. What are you hearing from your distribution products and partners in wealth? How is it impacting their view of increasing allocations to these products?

I think they all believe that their penetration is still low versus institutions and the long-term penetration will get higher. I think they look at this as a pebble in the shoe. It's a little bit painful in the short term. But sooner or later, you'll take the shoe off and get rid of the pebble.

And so I do think there will be a variety of product expansion and innovation. And I think there will be, over time, some winners and losers. So I just think these periods of disruption create a bit of a moat of intermediaries that aren't as sizable and scaled to participate. You need to have a lot of resources to be able to respond and engage and educate, and the requirements are just getting more and more. So I think they're looking for long-term partners.

So through that lens, it stands to reason, the real winners in that channel are probably already decided, and you'll be one of them?

I think if you've not really established a large distribution platform, large partnership, education, academic institute, online technology and a broad suite of products, I think it's very hard to break in now. It's almost like the bulge bracket banks. It's very hard to disrupt the incumbents.

Now I don't think all the seats have been taken, but I think a variety of seats have been taken. Now you can lose a seat. You can lose a seat from performance or brand or not delivering what you've said, but I think it's very hard to gain a seat.

Got it.

Much easier to lose a seat than gain a seat.

One more quick one on wealth. I think a few years ago, you were talking about launching 1 or 2 products a quarter. You've kind of stuck with that, and you have a nice suite. Are there still any kind of pockets on the wealth side that you think you need to be launching new products for? Or is the suite pretty well established?

I think we're pretty well established. There's no -- the decisions we've made to not do certain products were conscious decisions. But I don't think -- notwithstanding some of the more recent fundraising, I think those will be products that still undergo some degree of scrutiny or volatility. And if anything, I'm more focused on brand and the client experience than ever before. I think that returns are very important, but there's a variety of other factors that are pretty important as well.

So I think we're really in execution mode right now. I think there's times when there's market disruption and it's just really about education, communication and performance. And I think we're at that period right now, especially in the non-traded BDCs.

So I think we've hit all the kind of concern points out there right now, so let's move kind of to the growth algorithm for Apollo.

I like that. You did 12 minutes on the problems and 34 minutes on the opportunity. There you go.

Trying to stay positive.

Yes, yes.

So you had a great first quarter result, reiterated 20% plus FRE growth for this year and for longer term. So for those that might not be familiar -- as familiar with your story, maybe quickly unpack the key building blocks to that industry-leading view? And to what extent this year's volatility has made you more or less confident in hitting those targets?

Yes. So for those who are less familiar, we really have -- with the holding company, it's public, 2 real operating subsidiaries. Apollo Asset Management, that manages all the assets on behalf of third parties as well as our regulated balance sheets. That's the fee-related earnings and the performance incentive income, the PII, so 2 parts of our business.

The other part of our business is our regulated balance sheets, Athene, Athora, PIC and otherwise. That's spread-related earnings. The FRE has historically grown in excess of 20%. The Athene SRE, we signed up to long-term growth around 10% on a compounded basis, both compounded. We've exceeded both of those targets historically. We've -- on virtually every occasion, every quarter, exceeded the FRE. There's been some quarters where long-term trend is on SRE growth.

I think the fundamentals on the asset management side, you're hitting on it. We see, as our business has expanded from our private equity business to private equity, mostly a credit product set, but with infrastructure and real assets, massive institutional demand around the globe, massive demand from third-party channels, from traditional asset managers, from insurance companies, from what we call fixed income replacement. So a lot of drivers to that around the globe.

And as the demographics of pensioners and retirees gets older, there's a greater desire to derisk the equity and put more into fixed income and credit. So we're getting the benefit of that along with secular trends about the banking system and the role that private capital plays. So just a tremendous amount of drivers from the demand side of our -- of those products.

On the other side of the equation at Apollo Asset Management, companies right now, we're in this middle of this global industrial renaissance. The amount of companies that are looking for large-scale solutions that they can get done in the IG market, in the bank market and private credit. None of those markets are big enough on their own to solve all these problems. And I think there's a greater awakening that the CapEx needs are so great, it's a combination of those things.

So to your point, all the demographic trends, all the secular trends and the execution of our model is hitting all strides on the asset manager. And I think that the perpetual capital benefit of our vehicles, people are seeing the benefit of that flywheel in our AAM business.

On the other side of the business, the regulated balance sheet spread-related earnings, there's more -- annuities do well. They've done well the last 10 years. They continue to fulfill a need for a population that's getting older. Some [ pot pour ] of it's getting wealthier and they want more predictable income, and annuities are a great product there. We're the leading annuity player in the U.S. with the leading market share, low double digits. And so our ability to bring in liabilities from retail, from PRT, pension risk transfer, as well as the FABN fixed annuity-backed notes or repo, those all increased. So a lot of just great demographic drivers to our business.

Now on the balance sheet side, on the SRE side, slower growth because of the regulatory capital that's needed. And you're just talking about a smaller margin business of -- you're trying to make 120 to 130 basis points on the annuities. And so -- but very good demographic drivers. I do believe that the ability for the asset management and the retirement services business to create products in the future between the chocolate and the peanut butter. And I think that's still very early days.

And I think that when we think about one of the big challenges around the globe is we've done a terrible job in dealing with preparing retirees, broadly speaking, for post-retirement. Yes, people are getting older. Some countries have done a good job, Canada, Australia in terms of the superfunds, the other pension vehicles. But post-retirement, how is that dealt with? How do you deal with guaranteed lifetime income? How do you really prepare people to be comfortable to spend what they've saved without running out of capital? I think there's a whole host of growth options there.

But the businesses you described right in front of us -- and I try to describe Apollo in a very simple fashion is we're the box in the middle between companies needing to raise capital for growth, expansion, diversification and retirees around the globe that need either pension or retirement solutions. And both the left side and the right side, we have a great secular tailwind to our back. So I think that's what we make our business much better, but we also have to execute, and that's the secret sauce.

So on the insurance points, Apollo and Athene, for better or worse, receive a lot of attention in the press, and in some ways, I think, are seen as the poster children for the alts and insurance business model. To your credit, you've been kind of an industry leader in terms of transparency and disclosure, and there's a lot of presentations on both Apollo and Athene's website. As you read through this barrage of press, what are the major misperceptions from your point of view? And do you have any incremental thoughts on what else you guys could do to help assuage those concerns despite already doing a lot?

Yes. I think that -- let me tell you what I think we're doing that I think that we're -- you can either fight the conversation or engage in the conversation. And we probably try to do a bit of both, but first engage.

So to your point, about 3 or 4 weeks ago, we put out on a Friday, what I would think is the seminal piece on the portfolio breakdown of the Athene book, all the sub-asset classes in granular detail. We put out a second piece on our alternatives book, the granular detail. And the third piece was all the affiliated or related parties.

So the compendium of all 3 was a -- I don't want to say a shot across the bow, but it was our attempt to say, listen, let's -- if you want to shed light on it, let's shed the light on the facts. And we've had a universal great response from regulators, from industry consultants and folks that are in the know on really what matters.

I'll give you a great example. On the related party transactions which sound like really bad, a lot of the transactions we've done, Intel, per se, that we actually issued and actually monetized to a great return, because we couldn't own the whole thing for good diversification reasons, that gets tied up in the related party transactions because the strip of the investment is equity, and we needed to account for that. So a lot of times, it's actually not a flaw. It's an attribute. And so I think our choice has been just to really engage.

Now in the world that we are in today, a lot of folks who cover these complicated businesses don't have the historical benefit -- and I'm being very polite here -- to understand really how these businesses work. I think that if I could push back on one thing, I would push back on PE-controlled, the idea that Apollo happens to be an alternative manager. We happen to have a PE business. But the idea that the PE funds control our insurance activities, that couldn't be further from the truth.

So I just think it's a massive amount of education. We spent a lot of time talking about private credit. We think we wrote the seminal white paper on private credit. Most people define private credit as non-investment-grade direct lending. We think that's a historical term that's not really relevant today, but it's a name that the moniker has stuck. We talk about private credit being the investment-grade $40 trillion activity set. But I think that it's going to take just time and more folks to get up to speed and educated.

I mean, I have the good fortune of going through been a junk bond trader, and then I was a high-yield trader, and then I was in leveraged finance. My job didn't change, but the nomenclature of my job changed.

Fair point. You touched on retirement a little bit. I want to unpack it a bit more. You've obviously put a lot of material out there kind of citing this $45 trillion global retirement market, 1 billion people worldwide reaching retirement age. How more specifically is Apollo and Athene pursuing this opportunity? How does that differ across the different regions? And given you always say the real constraint on your growth is the ability to originate good assets, are there even enough good assets out there to truly address the volume of TAM you're talking about here?

No. But I think that the -- to answer your question directly, there aren't enough good assets, but we're not in the market share game. We're just trying to make sure those investors that we offer a retirement solution for, that we have the tools of our origination at their disposal as part of their proposal, part of their portfolio.

Not all of their portfolio, but a portion of their portfolio. Turn a 5% to 6% distribution rate into a 6%, 7%, 8%, and that's real dollars and cents for your average retiree around the globe. So I do think that working with the embedded infrastructure of Australia, the U.S. and Canada, our move in the U.K. on PIC to be part of the pension risk transfer market, there's no one solution that's the silver bullet around the globe, but it's really working within different countries, different geographies, different regulatory regimes to be part of that.

But our biggest focus is on the U.S. is on the U.K., a bit of Western Europe, Korea, Hong Kong, Singapore and Australia. That's really where -- we're not spending a lot of time trying to figure out retirement solutions in Latin America, which is really a very robust marketplace and a lot of reforms taking place. We're not -- we are spending some time in Japan, but we're not spending time in China. We're not spending time in Eastern Europe or Southern Europe. So I do think we just -- we choose with our locations, yes.

Got it. So the most kind of tangible impact on your results from the insurance business is spread earnings. And the tone on the earnings call I think suggests that maybe we've turned a corner after some challenges that business faced over the last couple of years. So could you walk us through the underpinning assumptions and confidence behind the new outlook there?

Yes. I think that we had a swath of some very high spread business that we originated in COVID that between the product set, happened to roll off, and we had a compression of spreads. But when we think about our ability to, during either Liberation Day or other periods of time, either use a variety of market moves to actually source a variety of assets or our origination kicking in, I think we feel comfortable that we are in a more balanced situation now and have gone through that a little bit of that pig in the python in terms of the marginal returns being a little bit lower than our long-term average.

So I think we feel comfortable with it right now. It is a more competitive space with folks entering the marketplace. I find it strange that people celebrate their entry into the marketplace and not their success at the marketplace. But I think over time, you need to generate mid-teens return on your ROE or the capital you have is going to disappear. We have the success of doing that.

And I think that we're not in the view that we have to grow at all cost. It's actually smart growth and shrewd growth. But I think that our model has shown that we've been able to generate that kind of spread return and make it appropriate. The other thing I would say is by deciding how you want to issue business, that does release some capital so we can be thoughtful about releasing capital if the growth options aren't as profound.

On the competition issue, Apollo has been quite vocal about the capital arbitrage in the Caymans, which I imagine is helping those more marginal players stay more competitive with Athene. Is that a fair view? And what are you doing to raise the issues with regulators?

Yes. I think we've been very transparent and very public how -- equal capital for equal risk. And we see the long term -- I mean, like the banking system, those that are large and well capitalized, we pay the bills when someone else goes off the rails. And so we've gotten bills in the last couple of years when folks -- when insurance regulators in North Carolina or other states have to come on in and we prefer not to pay those bills.

And so no different than the incumbent large financial institutions, i.e., banks, when they bark about an unlevel playing field, which I would say we actually are regulated. This idea that we're not regulated is not correct. But certainly, when we see what the regulatory arbitrage with the Caymans is, we don't think that's, long-term, healthy for our business. It allows incremental capital that's not as deep and broad and experienced to compete, and there will be a time when that's a problem. And we will certainly be called on to fix it. So we prefer to snuff it out before it becomes too big of a problem.

But we've been -- Marc has been very vocal. In our allocation of responsibilities, Marc takes more of the regulatory. I do as well, but not to the degree. But he has certainly been a leading voice in that mantra.

And do you think there's movement on that issue? Or is it hard to say?

I think that regulators, you first have to engage in them. I think you have to dialogue with them publicly and privately. I think regulators going after regulators is probably a hard thing for them to do.

So I do think that, yes, I'm optimistic, but I'm not optimistic in the next quarter. I think it's going to -- it's a longer term. I think we're on the right side of history. It's always nice to be on the right side of history, but I don't think it's going to happen tomorrow.

Last point on kind of the spread earnings build. There's obviously kind of, I guess, perennially a lot of focus on the alts return, the 11% target. Could you kind of walk through again what caused that to come so far below target in the first quarter and why you're still confident in kind of hitting that 11% long-term target?

Yes. I think that we're not immune to market moves. I think we buffered the moves that were -- because of some of the volatility in the equity market. We hit a lot of those air pockets. But I think that if you look since origination day 1 or AAA since day 1, we've been able to exceed that target. I think we've been very thoughtful about in the protective nature of having a lot of liquidity and a lot of excess capital to make sure that we don't get off sides, we maybe were a little bit too protective, but I still feel that the objective is appropriate for the long term.

Got it. Okay. One of the more interesting announcements on the call was your new AMAPS product. Created a little bit of buzz, at least in my conversation. So I think it would be helpful to quickly give this audience an overview of: one, what exactly the product is; two, how big you think this opportunity is; and three, how it differs from CLOs; and four, how it provides excess spread without incremental risk?

Yes. So just to level set for the room, CLOs, collateralized loan obligations, that really has, over the last 10 to 20 years, has developed into $1.5 trillion asset class that really is the home for a lot of the broadly syndicated loan activity coming out of the banks for the buyout activity. And it's the rigorous rules around the CLO market and bank balance sheets that led to the direct lending market, but that's another story.

So over the last 7 to 10 years, Athene, desiring to not just buy corporate investment-grade debt -- we bought a lot of CLO liabilities that through the GFC were never really impaired, but they were all rated as structured credit, AA, A, BBB, et cetera. And the marketplace has gotten so large and vibrant and so efficient and the pricing of the liabilities on the debt side has come down that it's driving a pricing down in the broadly syndicated loan market to SOFR 300 or so on an asset that probably should be priced wider, but there's lots of demand.

So last 10 years, Apollo has been a big -- Athene and Apollo have been a big buyer of these CLOs. We were doing some work last year and said, wait a second, isn't this strange that after 20 years, the application is only on the underlying assets, B and some BB rated loans? What if we could expand the purview of the assets of a structured vehicle like that, some investment-grade, some noninvestment-grade, some public, some private? Instead of operating at 10x levered, operate like at half the leverage. So broader diversity, less leverage.

And what if we could create the debt stack that works more for insurance companies rather than banks? The way a CLO works is a AAA piece is what the banks want, 0 to 65, about 125 over. Great for banks, not for many other folks. So we went to the agencies and said we have this idea. We worked with them. We structured one that worked on paper between less leverage. The tranching that we liked, it worked for an insurance company. And putting it into a variety of evergreen products at Apollo, that led to a lot more diversity.

Agencies gave us a sign-off, signed off on all the ratings. And then we went to a partner and said we want to do 4 or 5 of these over the next year, $5 billion a clip, will you be our 50-50 partner? They said yes. And so as of today, we've done 4, we call it AMAPS, Apollo multi-asset portfolios. And we then, in the last month or 2, have gone out to syndicate the investment-grade and other rated pieces. A bunch of banks have come in. And we've gone out to say you all should do this for other managers. This is a better application of the CLO engineering. And we believe this is where CLO market could go and be CLO 2.0 for a broader application.

So I'm happy to report in the last couple of months, a bunch of banks who've come in and help participate on these debt pieces. We've kept our pieces. We've taken our direct CLO exposure down from $46 billion to about low $30s billion. And we've said to a lot of the banks, you all should go out and do this with many of our peers. Like let's get -- it's a new marketplace. We feel like we're a leading player, but we don't want to be as Apollo, go to B, go to C, go to A, go to K, and they should do it as well.

And so we think it's a great product. We think it has a lot of applicability. We think the banks should like it because they get to underwrite and trade more. And there's a lot of second and third -- I'll use the word second and third derivative applications. Probably not appropriate in this audience, just let's absorb the idea first. But I think there's just a lot of applications how this could really expand how we capital raise and how people get access to private credit.

Interesting.

Exciting time.

Yes. So apart from AMAPS, I think the other big news coming from the call was your plan to provide daily pricing for all of your credit positions. Some of...

All the IG stuff.

All the IG stuff. Okay.

Yes, yes. By June 30.

Okay. I thought the September date...

September 30.

It doesn't include everything.

Well, by September 30, it will include a broader array. I think some of the non-investment grade direct lending will take a bit longer, but it's probably in that ZIP code.

Okay. Yes. So since most private credit is designed to be held to maturity and generate excess yield for investors, I think it would be helpful to get an update on why you believe this is the right path forward and what you're ultimately trying to accomplish?

I don't think all private credit is created to hold to maturity. I think private credit has been created to offer issuers an alternative to the public IG issuance market. And in turn, it offers investors an ability to harvest extra yield if they don't need all the liquidity that they might need out of the most recent IBM bond.

And I think that what investors do realize that while there may be a CUSIP on a variety of their investment-grade debt, it's not as liquid. Not every investment is as liquid as they may perceive it to be. And so I think we have found a variety of investors who think like us that have said, let's take a portion of that IG bucket, let's trade for liquidity that's not there and make an incremental yield. And they like that idea, but they don't want to sign up to something that potentially could be mismarked, i.e., if it trades down or should trade down because of spread or trade up shouldn't be this marked at par forever. I think that people are questioning just because it's private, does that mean it has to be held at par forever.

So we're challenging some of the assumptions. I think that if you look at any asset class over time, broadly syndicated loans, CLO liabilities, the more the transparency is on pricing, maybe not liquidity, but if nothing else, pricing, I think that gives investors more confidence they know what's going on. More investor confidence means more capital coming in. And I think that we, as a participant in that market, benefit from more players than we might have in the past.

So I think this is just the natural evolution of time and markets and how they operate. And so we think this is good for our position. We think this is good for the breadth of the markets and investors' confidence. And I think that when you dissect what we're doing, we're on the right side of history. It's like what happened, as I said, in other asset classes.

So there are some folks that are very focused on the noninvestment-grade private direct lending that want to hold on to the concept that the issuers don't want that to happen. I think that's not incorrect. But I think that over time, it's the investors that will demand how the market operates rather than the issuers.

On that, I've sensed at least that there are some or maybe many investors that see the lack of visibility on markets as a feature more than a bug. So are you concerned at all that there could be some investor backlash from providing this?

Yes. I think that those investors who just thought the real benefit is low or no vol, I'm not sure that that's a robust argument over time. And I'm not suggesting there has to be volatility, I'm just thinking that I think the product set will benefit from a greater degree of transparency and education. The idea of taking asset from par to 0, I think, is an unsettling one. And I don't know anybody that would advocate that's a good prudent management.

Yes. Fair. So in the vein of everything we just talked about, Apollo, I think, has been one of the most innovative asset managers out there. You were a first mover on high-grade solutions, to your point, hybrid strategies, AAA, which is now, I think, your largest strategy.

AAA and ADS are both $25 billion. $30 billion.

And now AMAPS, what we just talked about. So you probably don't want to show all your cards, but is it fair to assume there's a pipeline of these in the lab?

Yes. I think we are focused on market-moving impact ideas. And you can only come up with so many in the course of a year or so. So I think AMAPS and AAA are two good ones for right now. I think there's a lot of things we're doing in terms of thinking about in a world of disruption, in a world of what's the truth and what really withstand that type of environment. I think things that are more infrastructure, equity that turn into more like yield products are one.

But yes, I think that we've always we've always been on the cutting edge. It's sort of our curious creativity that drives us. There are not a lot of patents on Wall Street. I think there's a lot of folks in our industry that would like time to stand still. I think that's a romantic concept, but I don't think it's practical. And the reality is, as a public company, you have to think about the evolution of creation and how to evolve.

And I got to Apollo 20 years ago, we were a PE firm that had a credit business. And now we're a much different firm 20 years since. And I think that there will be a time in the future where people might say, wow, they actually started out as a PE firm. Oh, I didn't know that. So that's not our objective, but I just think that's reality about where the industry is going and the solutions that we can provide on both sides of the equation.

That's helpful. Before I get to my concluding questions, I want to make sure I address the last one on the iPad from the audience, which, as I read it, I think is probably more focused on kind of the on direct lending-type loans. But this person wants you to expand on kind of the private credit loans we've been seeing and what Apollo is expecting in terms of loss rates going forward.

Well, I think that this idea that -- I expect -- there's lots of predictions from the big banks about where high yield and loan defaults will be over the next 3 to 5 years. And I'd use those as a starting point. And just because of the nature of direct lending and it was concentrated in software, I think you probably got to add a few hundred basis points of potential losses in direct lending to the high-yield and loan markets.

Now I would say the high-yield and loan markets have been pretty benign the last several years, and there's a massive CapEx cycle. So I think there was some estimates that -- I think one of the banks, UBS said 15%. That just seems extreme to me. So I suspect the disruption will cause a variety of defaults across all 3 product sets, high-yield, BSLs and direct lending. But I think if I had to guess if the 30-year average is around 3%, 3.5% default rates, the likelihood of the 5-year trend being higher than that long-term trend is probably in the cards. But I don't have enough to say that it's going to be dramatically higher than that right now.

Got it. So a couple more before we finish. On capital, can you refresh us on the capital allocation framework? What would allow you to lean in more heavily on share repurchases? And in terms of inorganic opportunities, where you're most focused?

Well, I still think we put out our 5-year plan a few years ago with increasing our dividend, buying back our stock as the two priorities and buying back our stock with immunizing our stock from stock-based comp as well as other areas. So I think right now, we're focused on those two at this point in time.

We did a small acquisition last year in Bridge. I think acquisitions are hard. I think there may be some things that merit it. We're not saying no to it, but we want to make sure that we are very focused on capital allocation at the holding company with the dividend and stock buybacks, and that's our primary focus right now.

Makes sense. So to conclude, your culture is well known across the business. Your team recently posted a culture deck for investors. What do you think are the most important takeaways for the investor community on your culture and how it differentiates from the industry?

I think how we operate and how we manage is the same. We talk about clean sheet thinking, right over easy, no walls. All those things are how we operate. And that's easy because you don't have to translate how you operate to how you manage and how you integrate with the outside world. So I think we find it a very consistent strategy. I think it's going to be more important how you recruit and retain individuals in a world of technology disruption.

And so I think it's very, very important. It's very consistent. And we love all our investors, and our clients to know how we run our business. So it's sort of consistent with open architecture and alignment long term. So we're very proud of it. And the more people that read it, the better off -- we like it. We like it. So thank you.

Thank you for the time, Jim.

Appreciate it. Appreciate your audience time. Thank you.

_Good morning, and welcome to Apollo Global Management's First Quarter 2026 Earnings Conference Call. [Operator Instructions] This conference is being recorded.

This call may contain forward-looking statements and projections, which do not guarantee future events or performance. Please refer to Apollo's most recent SEC filings for risk factors related to these statements. Apollo will be discussing certain non-GAAP measures on this call, which management believes are relevant in assessing the financial performance of the business. These non-GAAP measures are reconciled to GAAP figures in Apollo's earnings presentation, which is available on the company's website. Also note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any Apollo fund.

I would now like to turn the call over to Noah Gunn, Global Head of Investor Relations.

Great. Thanks, operator, and welcome again, everyone, to our call this morning. Joining me to discuss our results and the momentum we're seeing across the business are Marc Rowan, CEO; Jim Zelter, President; and Martin Kelly, CFO. Earlier this morning, we published our earnings release and financial supplement on the Investor Relations portion of our website.

As you can see, our first quarter results set a strong tone for the year. We generated record fee-related earnings of $728 million or $1.17 per share, spread related earnings of $719 million or $1.15 per share and total earnings or adjusted net income of $1.2 billion or $1.94 per share. We also declared a common dividend at our new higher rate annualizing to $2.25 per share and reflecting a 10% growth rate year-on-year.

Lastly, I would flag that we published several presentations on Athene's website last Friday, that provide in-depth insightful information about the asset portfolio. This effort highlights our continued commitment to lead with transparency and be responsive to market feedback.

And with that, I'll turn the call over to Marc.

Thanks, Noah. Let me start where Noah ended. Strong results set a tone for a strong year. FRE of $728 was up 30% year-over-year and 6% quarter-over-quarter. ACS fees, $246 million for the quarter, the fourth straight quarter over $200 million. And just to spend a second there, ACS fees being strong means origination has been strong, not just in the quantity of origination but in the quality of origination. No one pays a fee for a normal core CLO, which many people count as origination.

Origination for us comes from our syndication activities which is also how we expand our client base and many of our syndication partners turn into management fee over time once they see repeatable transactions. We continue to build businesses on this basis and use ACS fees and origination as a diagnostic of just how strong the business is. SRE of $719 at our long-term Altreturn of 11% would have been $907. On that basis, 2% quarter-over-quarter, 6% year-over-year, strong organic growth and in-line core spreads, the alts portfolio, low for the quarter, but doing exactly what it is supposed to do. The quarter -- S&P was off 17%. The Russell was off 16%. Levered equity, private equity, which is the strategy that most of our industry uses in their alts portfolio would have been worse down north of 20%. We were up 6% for the quarter. While this is not in line with our long-term expectations, this is not a miss. This is entirely how we invest. AAA, which continues to constitute the vast majority of Athene's alts portfolio is now the largest fund at Apollo, north of $27.5 billion, 12% net returns since inception. We are, in short, exactly where we want to be.

We're seeing momentum across the business. Origination for the quarter was a particularly high quality, $71 billion. Based on the pipeline we see, I expect origination in Q2 to be even stronger. Recall that our record quarter for origination ever has been $97 billion. Whether we get all the way there or not will depend on how hard the team works, but I think we have a shot doing something very close to that. Origination is not just about numbers, it's about spread. Here, origination for the quarter was 350 basis points over treasuries with an average rating of BBB, and I'm sure Jim will spend more time on that in his remarks.

Capital formation also really strong, $115 billion for the quarter, of which $50 billion was organic and $65 billion was the closing of the Pension Investment Corp. transaction for Athora. To break down the organic, asset management was $30 billion, Athene $20 billion. Based on what we're seeing for the first quarter and what we see in the pipeline for the year, we're reaffirming our 26% outlook of 20% FRE growth and 10% SRE growth, and the business trends continue to be highly favorable.

The business, of course, is dependent on the macro environment. and the macro environment, notwithstanding the noise of what's happening geopolitically continues to be consistent with how we view the business over the past few years. Jim and I, each of us have now worked more than 40 years and for the vast, vast majority of that time, we have seen and managed our business and managed our investments with the notion that 95% of the outcomes will occur on the playing field and not outside the sidelines. And sometimes, we like what's on the playing field and sometimes we don't in terms of rates and economic cycle, but we know how to navigate that. And we never spent much time thinking about the small chance of out-of-box results because if I go through at least my career, 1987, 1990, 1997, 2000, 2001, 2008 and COVID. Almost every out-of-the-box event was unpredictable, uncorrelated and not something you could have spent your time preparing for. We have a little bit different situation today where I don't know, 65-35, 70-30 , we just have a much greater chance, in our opinion, of out of sideline results.

Everything we see in front of us is actually quite strong. Everyone has a job. Employment stats are good. CapEx cycle is awesome. Government policy, incredibly accommodative. Capital markets, wide open. Why do we think that we have a greater than average chance of out-of-the-box results? Well, geopolitical reset is taking place around the globe, not just talking about what's happening with Iran, it's a total geopolitical reset. Again, maybe much needed. But nonetheless, has the potential to cause out-of-line results?

Second, almost everything we're doing, whether intentional or not, has the potential to be inflationary at least in the short term. restricting the supply of goods, restricting the supply of labor and the free movement of goods and labors, maybe for good and valid reasons that need to be done are all inflationary in the short term, even if we are not seeing signs of it.

Third, we are seeing the most comprehensive tech cycle we have ever seen or certainly I've ever seen in my career. This will be very, very far reaching. Almost every job will be enhanced or replaced. We're going to see, in our opinion, a complete flip of blue collar ascendancy and white collar stress. The political and other consequences of that, I just think, are unknown.

And finally, consumers and businesses are actually in great shape. Governments, not so much. And this is not just a U.S. What is the natural reaction to this higher percentage of out-of-the-box results? Well, for us, it's to be defensive and continue to be defensive. That doesn't mean we're not investing, but it means we're investing with an eye toward protecting our capital and making sure that we are here to ride through cycles if there are corrections, which we quite frankly expect. That leaves us positioned well and ready to play offense. How does that play out in practice? Well, look at our equity business.

In our equity business, whether it is the Private Equity business or the Hybrid Equity business, 0 exposure to software. Hybrid value results for the last 12 months plus 16%; private equity results Fund 10 -- 20% net IRR, 0.4 DPI versus 0 for the industry. In equity, again, that's how this defensive posture plays out. In credit, almost everything we've done recently is upmarket, moving more toward investment grade, moving more towards structure, moving more toward protection. Recall that better than 80% of what we originated last year was investment grade. If you look across the entirety of our credit business, sub-2% software exposure, all buckets of credit up 8% to 11% LTM, credit AUM is now vast majority investment grade.

Let me flip now to discuss private credit. The market, actually, the press remains fixated on a $2 trillion slice of this market, which properly should be called levered lending. Most of the financial press treats this as if it is the entire story of what's happening in private markets, and it is far from it. The investment-grade private credit market, which is being driven by the global industrial renaissance is a $38 trillion market. Therefore, the total opportunity in private credit is some $40 trillion. The obsession with this very narrow corner of the market, this $2 trillion slice, levered lending, is frankly a failure of imagination.

Credit in any economy only comes from 1 of 2 places. It comes from the banking system or the investment marketplace. There is no third choice. If levered lending is risky, do we want it as a policy matter inside the banking system or do we want it in the investment marketplace? I think the market has spoken, I think regulators have spoken. Does that mean that risk has been transferred to investors? I don't think so.

What has happened in our marketplace and the growth of levered lending, particularly exposure to BDCs is a rational move by investors who are looking to derisk. Why do I say derisk? Because most of the funds, investors have invested in levered lending have come from the sale of their equity portfolio. Investors rationally have decided that they can earn equity-like returns from first lien risk rather than by holding equity for a portion of their more speculative exposures. This is not people who have taken their treasury portfolio or their investment-grade portfolio and gone into levered lending. This is people who have sold their equities to go into levered lending.

The notion that alone is somehow riskier because it wasn't originated by a bank is not a coherent argument. Private credit is just credit. You underwrite it well and it performs. You underwrite it poorly and it doesn't. If you are concentrated in one industry and you are seeking very high returns and you do things other than first lien, and you do things that are highly pick and highly structured with smaller companies, you will suffer losses in pursuit of higher returns. If you run a large cap only, first lien only, cash pay only, less levered credit book on a fully diversified basis, you will not suffer losses absent a massive credit cycle, in which case credit everywhere in the economy will be affected. The origination channel is relevant, the jockey, not the horse.

All of this is about risk management, and Jim will reinforce this and discuss ADS, our flagship, including recent performance. But the cycle we've been through in the press and the cycle we've been through explaining actually reinforces something that we've been doing over the past few years, which have not always made us popular in our industry. Trust and reputation, now more than ever, necessitates greater transparency on fund pricing for fund investors. New buyers particularly want more transparency around private assets.

Last year, we launched the notion of estimated daily value as a pilot for our investment-grade fixed income suite of products, and we validated our asset pricing methodology for our platform, which is the largest private credit platform in the world by 6:30, our investors will have daily pricing for all corporate investment-grade fixed income assets. By 9:30, all investors will have daily pricing for direct lending and asset-backed finance also. That essentially means the totality of our credit business will be 100% daily pricing by 9:30, 100% daily pricing by 9:30.

How does this work in practice? And what have we been doing to date? Because technique and process vary across our industry. If I take our direct lending business, our levered lending business, ADS, even in this market, we are focused on transparency and consistency, and we run a rigorous process with discipline. When public markets reprice, private markets should too. In ADS' case, the rules of the road are as follows: If we hold a position with anyone else, we take the lowest mark always whether we agree with that mark or not because that is indicative of where someone might sell the position, and therefore, we market to the lowest price.

We map the entirety of our ADS book to the broadly syndicated loan index industry by industry. If any sector of the broadly syndicated loan industry is down more than 2.5%. At a minimum, we reflect 50% of the value, but it causes us to reanalyze 100% of our exposure in that. There are layers of analysis here about fundamentals, cost of capital, public comps and market trades and we marked to current information, not to hope. Whether we agree or not with these marks, just as we sometimes agree or disagree with public marks, we reflect them because private markets need to move when public markets move to the extent they reflect a broader consensus of spread or risk or other things.

Another place we've seen noise in private markets is the noise around day 1 markups and secondaries, particularly on some of the calls for some of our peers. Let me address this directly in how we think. From our point of view in an evergreen format, this practice makes no sense. This leads to mispricing on a short-term basis, which was not that important in institutional funds where investors were not coming and going, but turns out to be very important in funds on an evergreen basis where investors have the opportunity to receive at least a portion of liquidity on a quarter-by-quarter basis.

Across the totality of our $1 trillion platform, secondaries that have been marked up round to 0. To give you a sense of revenue for 2025 as a result of this markup for the year 2025, revenue was sub-$3 million. We're not sure this accounting practice makes sense, although it is what is currently demanded by the marketplace. And we are part of a group seeking to bring common sense and common sense marketing to this practice because we believe that this reflects reality.

Market Making is another part of transparency. The continued convergence of public and private assets ultimately requires more liquidity. We have never seen a market where enhanced liquidity and enhanced transparency does not result in tremendous growth for the asset class. Last year, we started really pushing on Market Making in private markets. From a cold start, we are now north of $13 billion of traded assets. This quarter was exceptionally strong, particularly as fund managers now recognize that we are the leading source of liquidity and for private market assets, particularly credit assets. On top of that, our venture with ICE will bring greater transparency and consistency of data to this market. Every private asset in the Apollo portfolio going forward will have an ICE ID, possibly in addition to CUSIP. This is the beginning of standardization across this marketplace. It also gives us a tremendous amount of information on real-time pricing and helps inform our estimated daily values across our credit portfolio in particular. Enough on asset management for the moment, let's flip to Retirement Services. It is clear to us that there is significant demand for guaranteed lifetime income and for retirement income in all forms. The global retirement crisis gets clearer day by day, and we believe this is one of the biggest secular opportunities out there.

Against that backdrop, we tap a portion of this market through Athene. '25, as you know, was a record year with $82 billion of organic origination, and we expect and plan to do more of that in '26. In Q1, we did see lots of competition in our view, irrational competition of people putting business on the books at ridiculously low spreads. We did the business we wanted to do and not anymore. Fortunately, we had a very strong and rich origination pipeline, which allowed us to continue to preserve spread against this competitive backdrop. Cash now in the Athene ecosystem is circa $40 billion, along with our treasury and our agency portfolio. This gives us a significant amount of dry powder, along with a robust origination pipeline tells me that we are on a better trajectory. Lots of noise around the industry, particularly with the words private credit. This is not about PE-backed insurers, it's about insurers. For us, no Cayman, no collateral loans, no games, just straightforward business. What we are doing is totally transparent, no guess work is required. As Noah mentioned, we put out 3 decks consistent with our policy of providing the greatest degree of transparency in our industry. If you find that we have not met that standard, please give Noah a ring. I don't know of any other insurer or any other financial institution that puts out the kind of data that we do, whether it is liability data for granular data on our asset portfolio. We have the luxury of doing this because we are not concerned about transparency. We have amassed the second largest capital base in our industry, some $35 billion, and we are committed to pursuing our AA rating.

Why are we focused on rating? Well, because not everyone in our industry is doing what they should do. Not everyone runs their business the way we have run our business. We do worry about contagion. And again, this is not about PE-backed insurers. This is about insurers. Some of the more egregious practices we have seen across our industry do not come from some of the new players. They come from incumbents. What we can do is be transparent, be committed to higher ratings, build our capital base and run the business for the long term like principles because we are. Anyone out there pedaling false narratives about Athene. You now have all the information that you need. Athene has a fortress balance sheet with 95% fixed income, of which 90% is investment grade. Our exposure to levered lending, which people sometimes call private credit is de minimis, rounds closer to 0 than to 1%, Cayman in at 0.4%. Our exposure to software, 0.1%. Less asset impairment than our peer group, full transparency on related party affiliate and Apollo originated assets. We celebrate Apollo originated assets because that means we are controlling the risk and controlling the spread. Full transparency on top holdings with case studies, full transparency on credit quality and ratings.

Interesting statistics in the materials that we've done on ratings. People can now draw conclusions as to whether any of the rating agencies are more or less leaned I challenge you to come to a conclusion that any one rating agency is better or worse with respect to credit quality than another rating agency. Public ratings and private ratings, these are the same analysts at the same firms in the same team, rating in many instances, the same company. There is no difference that we have seen between public and private ratings other than whether they are publicly available and most times, they are not publicly available. It is at the request of the issuer.

In every instance we hand, we're in the process of going back and getting a second rating for places that we only have one rating that are private and continue to think this is best practice for the industry and challenge anyone find what we have yet to disclose or anyone in the industry who's doing better than we are doing with respect to disclosure. The same risk off defensive mentality that we talked about in our Asset Management business applies to our retirement services business. One of the ways we earned excess spread over a really long period of time, were the investment-grade tranches of CLOs going back 17-plus years. Investment-grade tranches of CLOs have outperformed investment-grade corporate bonds with respect to defaults and recoveries for the last 26 years. That is not a widely understood fact, but it is, in fact, a fact.

They have also offered excess return because of a perception that somehow structured products are more risky. We had, at one point, on Athene's balance sheet, north of $40 billion of investment-grade tranches of CLOs, some 11% of Athene's balance sheet, by the way, 99.8% investment grade. What we saw, the market began to see. And over time, the spread available on CLOs vis-a-vis corporate bonds became challenged and declined. We have, as a result, run off our book and CLO exposure is now down below 8%, and we expect it to be even lower in the coming quarters. Recall that this book has an average life of less than 3 years in current market environment, and we expect the vast majority of this book to repay simply in the normal course.

And to AMAPS. We are in the business of innovation and continuing to originate AMAPS, Apollo multi-asset prime securities essentially takes the benefit of CLO and adds greater number of issuers, less leverage better structure for investors with a FIC single A tranche versus a skinny single A tranche and 40% to 50% investment-grade assets. We believe, again, this is risk reduction. Oh, by the way, greater spread than the A tranche of a CLO. The way we view this is we are taking the 0 to 75 risk, which is equivalent in a CLO to AAA and AA and getting paid more than A pricing for a more diverse, more highly rated structure simply because it is new.

Athene now has $11 billion of investment-grade exposure or 3% of the portfolio, essentially making up the decline of our CLOs. We would expect this to double over the coming months. as our CLO exposure comes down. You can see in real time us derisking the portfolio while preserving spread, and we are also seeing increased demand for this product across the marketplace as other insurers and other investment-grade accounts begin to appreciate a new structure, but new structures always take time, and we will garner the lion's share of this asset for the foreseeable future.

Innovation is not just about assets, innovation at Athene is about liabilities. Recall that new markets, which was a very small contributor to volume in 2025, less than $1 billion. We expect to be north of $5 billion this year and ultimately to make up as much as half of Athene's new business. In Q1, it exceeded $1 billion for the first time in terms of liability generation from new markets and momentum is building, and we expect this to go up over time. Retirement is not just an issue in the U.S., retirement and retirement income and the need for it. is as much an issue in Europe. Athora this month closed the Pension Investment Corp. transaction. Pension Investment Corp. doubled Athora's assets to $125 billion, and also presents us another market of organic growth in addition to the Dutch market.

In connection with this purchase, another EUR 3.5 billion of equity was raised for PIK. Total common equity inside Athora today is in excess of EUR 9 billion. And just like Athene, focused our energy around originating investment-grade product denominated in dollars appropriate for a U.S. regulated balance sheet. PIK in addition to the other assets within other franchises within Athora now requires us to expand our efforts to generate pound-denominated assets that are appropriate for U.K. regulated balance sheets.

Let me now bring it home. We've been leading our industry into the future. Not everyone is doing what we're doing. Most of our industry started life as private equity firms. They then branched out into real estate and infrastructure and even private credit, but still in the structure of private credit for -- private equity firms inside of funds in relatively slow-moving businesses where money was raised by investors in fund format and now evergreen fund format.

We are revolutionizing how and where capital, wealth building and retirement solutions are delivered. As we scale, which is a difficult thing, it is crucial to define and maintain what makes Apollo, Apollo. Some of the most important work Jim and I and the team have done is now on our website under our employment pages that's now been downloaded either on LinkedIn or from our website nearly 100,000 times, defining what makes Apollo, Apollo. This is our way of explaining to new hires and to new partners who have joined us, not just what the business norms are here, but what the cultural norms. As the world changes and as we are all confronted with new technologies and new ways of doing business, it is, in our opinion, the strongest cultures that are going to survive and adapt.

We now have everything we need in front of us to achieve our 2029 targets to keep our edge and continue winning, we need to be uncompromising about who we are. We are now focusing our energies on building what comes after 2029. And we are purpose built for exactly this kind of environment, and we are leaning in.

And with that, I'll turn the call over to Jim.

Thanks, Marc. Let me take a step back and start with the big picture. Apollo sits at a unique intersection, what I like to call the intersection of first in Maine. On one side, we're fueling the historic capital needs of the global industrial renaissance such as AI, energy transition, defense and holistic infrastructure. On the other, we're providing retirees around the globe with retirement income solutions they need to fund the next chapter of their lives. And Apollo sits at this intersection delivering capital to where it's needed and generating returns for people who depend on them. Our scale and expertise on both sides of this intersection is unparalleled making our model more relevant than ever.

We find ourselves in the middle of more conversations with CEOs, CFOs and CIOs than at any point in our history. Through close collaboration with our partners internally, we are pushing scale and transparency, driving innovation and reimagining how our industry delivers value. Our 35-plus year franchise is built on trust and reputation, and that, combined with our capital and our creativity is our moat. It's what allows us to deliver quality at scale, and you can see it in the momentum across origination and capital formation this quarter.

Origination activity totaled $71 billion, representing 25% growth year-over-year and driving total volume of nearly $325 billion over the latest 12 months. Our activity in the quarter was $61 billion of debt comprised approximately 75% investment grade with an average A rating and 25% sub-investment grade with an average rating of B. With respect to spreads in the quarter, our investment-grade origination, we generated excess spread of 290 basis points over treasuries or approximately 210 basis points over comparably rated corporates.

On sub-IG origination, we generated excess spread of 470 basis points over treasuries or approximately 170 over comparably rated high-yield corporate indexes. We continue to observe stable spreads consistent with recent quarters and noteworthy in an environment where public market spreads remain near multi-decade tights. Maintaining excess spread and quality at scale is not only made possible by the breadth and selectivity of our embedded proprietary origination ecosystem.

I'd like to mention 2 recent transactions that demonstrate this scale. First, we provided a $19 billion bridge commitment in support of Paramount's acquisition of Warner Bros. This transaction reflects the sheer capital and scale that we've been able to provide in support of large-scale M&A and our ability to partner with banks to meet the needs of the marketplace.

Secondly, in February and April, we led 2 AI-related financings totaling more than $8 billion to support a client's acquisition and lease of data center infrastructure to a large investment-grade counterparty. These types of franchise transactions for next-gen AI infrastructure not only highlight our leadership role in providing flexible capital solutions they showcase our principal versus agent mindset that underpins our patient approach. While others may have rushed to print their marquee AI infra transaction, we have been methodical on structure, partner selection and underwriting risk. We are at the forefront of opening up a new funding market that is financing the picks and shovels going into data centers and doing so with IG counterparty risk and amortizing structures. Across the 5 primary hyperscalers, CapEx investment of AI infrastructure is estimated to exceed $800 million this year and almost $1 trillion next year.

Against this back up of enormous and historic CapEx spend, we have a variety of touch points with this ecosystem, including data centers, powers and chips and it's clear for us to private capital has a major role to play in this ecosystem. High-grade capital solutions has become a critical piece of our origination toolkit. We've led the creation of the structure and to name more than 150 transactions and $80 billion in volume since 2020. And our current pipeline is broader and deeper than the totality of what we've done to date. Intel and AB InBev are 2 examples that have gone full cycle from origination to repayment.

On Intel specifically, they came to us with a need, we solved it as principal. And as their financial position evolved, they repaid the financing, netting a $3 billion gain for us and our clients. This is our model working. And in these types of situations, we are able to provide critical tailored capital that can be paid off as the client needs grow and evolve in time. In return, we get access to attractive investment-grade opportunities that offer excess spread.

Turning to capital formation. As Marc mentioned, we generated $115 billion of total inflows in the quarter, including $65 billion from the [indiscernible] acquisition of the PIC. Of the $50 billion of organic inflows in the quarter, Asset Management delivered $30 billion, while Athene added $20 billion. Of the $30 billion of inflows in Asset Management during the quarter, approximately 75% went to credit-oriented strategies and 25% to equity-oriented strategies supported by strong demand across client types and geography. And as Marc highlighted, we have been active in the marketplace with the creation of the maps structured solution and the product continued to grow successfully during the quarter, generating $5 billion of inflows.

Our institutional business had a very strong quarter as well. with hybrid value, in particular highlight, closing on a $1.5 billion in the quarter to reach a final close of $6.5 billion, exceeding its target. It's worth noting that approximately 1/3 of those of that capital came from new investors a clear sign that demand for hybrid offerings, the sweet spot between debt and equity is attracting greater interest in client portfolios. I'll also mention that [indiscernible] also hit a final close of $1.9 billion, and Athora closed $3.5 billion of new equity commitments with strong institutional support in the purchase of PIC.

Importantly, what we're seeing on the ground right now as the institutional investors are not pulling back. And if anything, the volatile backdrop is drawing interest in institutions actively looking to deploy in a variety of precincts in credit and the level of engagement remains high globally. Our Global Wealth business had a solid quarter against a particularly challenging backdrop with fundraising totaling $4 billion, only modestly lower quarter-over-quarter. And consistent with industry trends within BDCs, we saw an uptick in redemption requests at ADS, though it's worth noting that 94% of the fund's investors did not submit a redemption request. The fund had net flat flows for the quarter and performance remained strong with preliminary April performance indicating of approximately 80 basis points. Beyond ADS, our diverse suite of semi-liquid and drawdown offerings continue to resonate as inflows remain consistent with recent quarters in aggregate.

Looking ahead, the long-term wealth opportunity over a long cycle remains unchanged. What has changed is that we're entering a period where selectivity, underwriting discipline and origination quality are going to matter far more they did during the long, low volatile period that preceded. Previously, the primary way to differentiate one's product in the channel was dividend yield and some stretch to achieve this with higher leverage, more pick and moving down the capital structure and diversify -- higher exposure rather than diversified exposure. We expect that we will see dispersion across managers and believe investors now see who has been managing portfolios prudently for the long-term risk-adjusted returns. We see this as an opportunity for differentiation and share gains for our franchise.

At Athene, inflows in the quarter totaled $20 billion, driven by activities across retail, flow reinsurance and funding agreements. And as Marc noted, new markets volumes are gaining early momentum, led by stable value and structured settlements. We continue to observe the broader demographic trend tailwind is real, demand for retirement income solutions is global and growing structurally around the globe and Athene remains well positioned to grow. The strength that we are seeing in our capital formation is being fueled by 6 diverse sources of demand. One, fixed income replacement. Two, the wealth channel. Third, third-party insurance. Four, traditional asset managers. Five, the DC 401(k) or the Department of [indiscernible] proposals helps pave the road for private assets in a greater manner and importantly, the traditional alts buckets with institutions are historic strength. The momentum is real, it's diversified and it's accelerating.

Martin will now walk you through the financials.

Good morning, everyone. Thanks, Jim. Clearly, it's busy around here. I'll try to be brief and touch on the key points. In Asset Management, AUM and fee gen AUM grew by 31% and 40% year-over-year, respectively. And as you know, total AUM close to $1 trillion. Clearly, a significant milestone in the context of trust that our clients continue to place in us as we provide excess return per unit of risk at an even greater scale. You heard the fee-related earnings of $728 million in the quarter reached a new high of 30% on the year and 6% on the quarter. And within that, we saw a 24% year-over-year growth in management fees, driven by third-party fundraising across credit and equity strategies, strong capital deployment and continued growth from Athene.

Capital Solutions fees reached a new high and we're the fourth consecutive quarter above $200 million, as you heard, with contributions from approximately 90 discrete transactions in the quarter. Activity this quarter was led by opportunistic credit with the mix driven approximately 80-20 credit to equity and that compares with our 3-year average of approximately 60-40 across those 2 segments. While there's directional alignment between the volume and our capital solutions fee mix, the quality and mix of activity matters. And this quarter, we saw strong contributions from hybrid capital solutions as well as structured finance, both high-quality origination channels. Fee-related performance fees grew 19% year-over-year, reflecting continued growth across diversified Global Wealth products, including bridge and perpetual capital vehicles. This was sequentially lower in the quarter due to the absence of certain crystallizations which benefited Q4.

Lastly, 27% growth in fee-related expenses reflects predominantly the addition of bridge as well as continued investment to support the firm's strategic growth initiatives. Our FRE margin reached 58% in the quarter, expanding approximately 50 basis points year-over-year, reflecting positive operating leverage on record quarterly fee-related revenue and expense discipline. In terms of our compensation philosophy, we firmly believe in the benefits of utilizing stock as an alignment tool within the TAM. In the first quarter, stock-based comp increased resulting from the vesting for several long-tenured employees who are retiring from the firm and the industry as well as the impact of seasonal annual grants. We manage comp on an after stock-based comp expense basis and expect the annual stock-based comp impact to continue to approximate 10% of fee-related revenues, well below the industry average of 15%.

On the revenue outlook, we expect Athora's PIK acquisition to begin contributing in the second quarter at an annualized rate of approximately 20 basis points initially. We're excited by the opportunity ahead for Athora given its scale and strong positioning in the U.K. market. Our Asset Management business continues to execute at a high level, and we are reaffirming our 20%-plus FRE growth outlook as you heard this morning. Underpinning this view are expected strong inflows and a robust origination pipeline, broadening across all parts of our business, both of which will benefit our ACS business. And as an example, we are increasingly providing multiple draw financing solutions, which create better line of sight to future ACS revenues beyond the current pipeline.

Moving to Retirement Services briefly, Athene's net investment assets grew 14% year-over-year to $300 million, and we generated $719 million of SRE for the quarter. The alternative investment portfolio return for the quarter was 6%, strong in the context of an exceptionally weak market backdrop. AAA, which is approximately 80% of the portfolio, delivered a positive annualized return in line with this level. The return on our alts portfolio would have been even stronger were it not for Atlas' recognition of an idiosyncratic impairment and Athora's capital raise associated with the PIK acquisition, which resulted in a flat mark quarter-over-quarter. The combination of these 2 items, which we do not expect to repeat, approximated 3.5 to 4 percentage points of annualized return in the quarter.

The blended net spread across Athene's portfolio was 97 basis points versus the 120 basis points in the prior quarter. When considering our 11% return expectation on the alternatives portfolio, the net spread in the first quarter would have been 25 basis points higher. Adjusting for this, the net spread is in line with the 120 to 125 basis point outlook that we provided for the year. We continue to originate new organic business consistent with our long-term ROE targets and in line with historical averages. As we progress through the year, we continue to expect net spread stabilization as headwinds from asset prepayments continue to dissipate and the roll-off of profitable post-COVID businesses also dissipates, all in line with our update last November.

As we execute on our 2026 plan, we do so with tangible momentum across our retirement services business, and we are reaffirming our previously communicated guide of 10% SRE growth, assuming an 11% alts return.

With that, I'll hand the call back to the operator. We appreciate your time, and we welcome your questions.

[Operator Instructions] Our first question today is coming from Alex Blostein of Goldman Sachs.

I was hoping we could start with some comments on the durability of the origination volumes and the transaction fees you guys are seeing. So obviously, a record quarter in what's been a volatile and tough backdrop for the market broadly. So maybe talk a little bit about how your sourcing is evolving between different origination platforms? How is the syndicate composition changing as well? And I know you mentioned that the second quarter is likely to be strong as well, so maybe you could expand on that a bit as well.

Yes. I think when you take a step back, I think the growth and the momentum you're going to see is going to be in a variety of originations directly happening from the Apollo ecosystem rather than the platforms per se. Even this week when you saw the numbers on the hyperscalers, I mentioned, $800 billion and you go through the numbers and the source and uses has been well documented, 1/3 is going to come from cash flow of the company, 1/3 from the IG market and there's a large gap of funding, that's the private credit IG market that we are primarily focused on. And so we were not a name of a financing source a decade ago. The last 5 years, hundreds of dialogues with these companies where this is not a recent phenomenon. So the brand is really focusing on that infrastructure across the board. And I think the comments that Marc made and I made, it really is going to be in this -- the picks and shovels of a variety of the CapEx of the AI infrastructure. It's not just going to be on the data center per se, but also in defense as well as broader infrastructure.

So the lessons and the history of what we did with Intel and AB InBev, the ability for those companies to actually redeem that when they got into a different situation. It's really happening on the Apollo side, but it's also happening in partnership with banks. The activities we do, even though Paramount per se is not the type of transaction that we are involved with day in and day out, that puts us in a unique spot of being able to be a holistic solution provider in scale that really is unmatched today.

Yes. I would just add, this is not just an AI story. This is a global industrial renaissance story. This is infrastructure. This energy. This is energy transmission. This is energy transition. This is advanced manufacturing. This is defense and its AI and data. And it's not just a U.S. story, this is a European story. The U.S. clearly is out front. The recent week a number of us spent in Silicon Valley was informative. Here, we have the most prominent growth ecosystem anywhere in the planet and they have never been capital intensive before. We are going to see the growth ecosystem dominate debt issuance over the next 5 years. Today, the 10 largest issuers of IG are mostly financial institutions. Going forward, probably be the 5 largest banks and the 5 largest growth companies.

Europe is going to be on a percentage basis, in our opinion, the strongest investment-grade private market in the world. Europe needs to do everything that the U.S. is doing. It's banking system, its capital markets are just not as developed. And while there's historically been hostility towards private capital and private solutions, we find ourselves in dialogue with quasi governmental entities who are addressing fundamentals. How do we restart the Hinkley nuclear plant? How do we provide for a massive upgrade for our grid? How do we provide inventory for our defense munitions and other things on a 1-year annual budget cycle when we know these core munitions are going to be needed over decades. These are the questions we are helping answer. But keep in perspective, we are, at the end of the day, a relatively small player in the credit markets. The totality of assets under management just crossed $1 trillion, of which $800 billion is credit and about $600 billion-ish is investment grade. This is not even relevant in the scale of this marketplace. And when you talk at some of our public markets, peers who are $14 trillion and more, we have a long way to go here and we are mindful that our job is not to be the biggest. Our job is to grow profitably and to make sure we maintain underwriting discipline and spread.

Our next question is coming from Steven Chubak of Wolfe Research.

So I wanted to ask on the private credit marketplace. Given one of the bigger concerns on private credit relates to opacity of the asset class. I was hoping you could speak to how the launch of Delhi pricing later this year might change the perceived riskiness of private credit, your approach to validating the pricing is really like this whole market maker in terms of the breadth of assets you're hoping to price and how you might frame the revenue opportunity from this business as it continues to scale.

Let me start, and I'm sure Marc will add a few comments, but I think there's a threat here. I think Marc's comments about the private credit conversation being in a narrow corner, we just see it as a lack of imagination and it ties back to the prior question. The big growth in private credit is going to be in the IG universe. And interestingly, those investors are used to a bit more liquidity and certainly a lot more transparency. This is going to be driven by the investor universe. And we are -- whether it's our short duration vehicles, all of our fixed income asset classes that we've created a product suite for them to be able to allow private credit to be a major part, this is going to be standard operating procedure. And we've said consistently, the thread is the benefit of the larger spread is on your origination, not the fact that it is private and where it will be private for a while. Private does not also mean -- means it's market power forever.

And so the infrastructure that we've created and the thread of the conversation being much more global, much more investment grade, that's the critical aspect. And again, I think you're seeing it tie through. There's a reason why origination ACS capital formation, Marc's original comment. ACS has allowed us to take our 3,000 LPs and turn it into thousands upon thousands of conversations. That's the open architecture at work. That's how we're reinventing the business model. And certainly, that's what gives us the enthusiasm and excitement in terms of how the business all works in concert.

So I'll give you a little more, and it's going to require a little bit of -- we fundamentally changed our financial system. And particularly the large banks, investment banks were encouraged to deemphasize market making. In our equity markets, we had 4 firms step forward, led by James Street and Citadel, who now provide liquidity. The New York Stock Exchange, the London Stock Exchange are buildings. They are not sources of liquidity. And we have real liquidity in our equity markets. In our fixed income markets, no one stepped forward to provide liquidity. Fixed income trading capital in the world is now 10% of what it was in 2008 and the market is 3x its size.

The entirety of the market, whether you are investment grade or below investment grade is just not that liquid. It just appears liquid on good days. We have already seen wholesale breakdowns in the liquidity of this marketplace during COVID and during U.K. LDI, and I expect that we will see this again. When you look at the quote of a piece of public fixed income, be it a bond or alone. Are you actually seeing liquidity? Or are you seeing dealer estimates? You're seeing a dealer estimate. The vast, vast majority of issues do not trade, have not traded and are quoted 1 by 1 or 5 by 5, they're not quoting on a liquid basis. But yet, we sleep at night. This has never happened before in the private markets because private was not tradable and was not indicated. And so a year ago or more than a year ago now in connection with the support of State Street's product that mixed for the first time public and private investment grade, we began market making. And we didn't just begin market making by holding on to the information. We created a data warehouse. We made that data available to all other dealers. We are not the only market maker. And what is going to happen is the same thing that happened in the levered lending market, the broadly syndicated market. We've gotten the market going, but ICE IDs, data repositories, standardized data and ultimately, jealousy are going to cause market-making competition. No one wants to see Apollo earning widespread. You have already seen in other markets, other dealers come in anywhere we can get other dealers to come in, we will. I don't know exactly where we'll end up this year in terms of market making. But every quarter on quarter, it just gets bigger. And we're starting to see third parties, other competitors make markets as well.

Some in our industry are resisting this transparency. I just don't think that makes sense. And I think the recent press around marks is just driving us to the solution, and I expect regulatory interest to follow, which will also drive toward this solution. We use the same methodology that many public companies, many public asset managers use with respect to setting prices on a daily basis. We observed trades. We observe comparables. We observe trades and other issuers of the same issues that are public. We look at general market trends, and we will produce a price. That is the same price in many instances that you see for public securities. And every day, it gets better. That does not mean perfect, but our job is to try and make it better every single day, and we win in our opinion, if we have more transparency and more liquidity.

The next question is coming from Bill Katz of TD Cowen.

Marc, you mentioned in your prepared comments that you have everything you need to sort of meet your 2029 goals, which is great to hear. I guess the question is you also mentioned that you're sort of thinking now through the next decade. As you think about your footprint today, obviously, you had a lot of buyback this quarter against some of the elevated issuance. How are you prioritizing capital return from here? Should we assume you have enough organic growth to get there? Or do you need to now be a bit more acquisitive? Or could you start to return more capital to investors as you continue to scale the business.

Okay. So we have a 5-year plan. And that 5-year plan is the one we laid out in Investor Day. And when I referenced the 2029, I'm talking about that 5-year plan, which in round numbers gets us to plus asset management and a $5 billion retirement services business. The question Jim and I are asking ourselves is what comes next? Is it more of the same? Or is it something that is additive to that? I do not believe that we need to do anything from an acquisition point of view to meet our 2029 goals. Anything we choose to do will be accretive to the strategy and to the growth long term because buying more of the same just doesn't do anything for us. It actually creates noise and makes integration harder at a point in time when we are going through this massive productivity change.

And this is the backdrop that we're thinking. We have everyone in our firm can actually envision how the addition of technology is going to make their current job easier, faster, better, stronger, less expensive. Most people can also envision how software and data going to free will allow them to evolve their current business into something that is more productive for serving their clients. Very few people can imagine that the cost of now building challenger businesses, particularly in areas where we have core strengths has gone to 0. The bar for buying something is just really high. because the embedded value of existing franchises, unless they are truly unique and have unbelievable staying power just doesn't add all that much to us.

So we are mindful of our cost of capital and where our stock trades. We, as you know, have a dividend policy where we go up half of the FRE growth of the business, which we've done over the past 5 years. And when the market is in a risk-off mode, given that our business has not really cycled, we have been aggressive buyers of our stock. And we continue to think about it in that trade-off. If something is truly a catalytic to a strategy and can be another $5 billion business for us, yes, we'll entertain that. But to do more to integrate to buy more asset management. I just don't think we have any jealousy, any regret. We watch what's being purchased around our industry, and we kind of shrugged our shoulders and just say, like, did we miss it. And we haven't -- I don't think we've missed anything yet. The bar is really high for spending capital other than on stock.

The next question is coming from Glenn Schorr of Evercore ISI.

I'm fascinated with the daily pricing thing. So I have a couple of very quick follow-ups. One, does -- how do you think that translates to anything in private equity and hybrid lands kind of get there to Two, how does it inform how you build your secondaries business? And then three, the biggie is what does that mean for the illiquidity premium, your ability to produce alpha and ultimately charge fees for how this industry was built.

Let me start again. I want to make sure we frame this -- what we're talking here. Whenever we talk about the journey of transparency and daily pricing, it starts with the investment-grade private credit universe, the $38 trillion. Somehow the headlines and the dialogue always then goes to the $1.7 trillion. We'll get to the $1.7 trillion, but I want to really focus on the $38 trillion first. And that's where if you go back to what Marc mentioned, go back to the bank loan mark in the early '90s. Many banks did not want the agent to provide that transparency. Evolution took over, education took over, more investors came in.

So I do think, Bill, I think that again, it ties back this origination. The premium that you are able to extract is upon the origination because you're providing a holistic solution to an issuer in addition to what they can do day in and day out with a public IG issuance. You're going to see cap tables of very large established companies having public IG debt in the cap table along with a private originated IG transaction or tranche. It may be an asset, it may be a geography, it may be a subsidiary. That's what Intel and AB InBev. Those companies had public and private origination and debt in their capital structure on the cap table.

So we're going to start there, as Marc mentioned, we will evolve into the noninvestment-grade direct lending, leverage lending universe. But that's the prioritization in our view. But again, I go back, the premium that you're going to create is from the holistic solution you come as the provider of the capital in one fell swoop because most have to realize most origination that occurs in the leveraged loan market between high yield and leverage lending and IG is not on an underwritten basis. That's on an Asian basis. When we can act as principal, that's where it allows us to create that spread opportunity.

So I'm going to hit it on its head, maybe a little more. When we originate something in the private market, today, investors demand 150 to 200 basis points. We end up with a management fee, and we end up sometimes where we don't manage the assets with an ACS fee. The more liquidity and the more transparency, why will the premium always be 150 to 200 basis points that investors demand. The originator should get to control more of the profit if, in fact, we are originating good risk. We do not view the "illiquidity premium" as the basis on which you get paid. It is what is currently demanded by investors for holding it. And yes, for the broader market that does not control origination, I expect that there will be a narrowing of spread. And therefore, we have been consistent for the past 5 years, measuring our industry on AUM is imprecise at best and foolhardy at worst. We measure our capacity to generate investments that are worth doing because that is ultimately what has value. The ability to get the entire firm focused on origination is how we run the business on a day-to-day basis. AUM is what follows as a result of having lots of good origination.

Unlike a public asset manager that can buy everything that exists and can take any amount of money at any point in time, and therefore, AUM is a productive measure, AUM here and the chasing of AUM can be very degrading to a franchise if it exceeds your capacity to originate. And just to complete the thought because I want to say, Jim is right, we are at 6:30, 100% of our investment-grade corporate franchise, 9:30, the entirety of our credit franchise. I doubt in 2026, we're going to make progress around hybrid or private equity other than with respect to the techniques of valuation in the secondaries market. I believe the days of buying something at 70 and writing it up to par during an end.

Ultimately, good investors should be able to make money in the secondaries market by superior underwriting and superior access to information. I'm not sure the day 1 pop is something that is ordained publically.

Our next question is coming from Patrick Davitt of Autonomous Research.

For PIC, how should we think about the incremental expense on that 20 basis points? And should we assume the 20 basis points trend upward as you reposition the portfolio into higher-yielding assets?

I'd say, Patrick, it's one very small because we have an established ecosystem in Europe in London today that manages Athora and it's very scalable. And so I would not expect much, if any cost against that revenue pull through. And then in terms of revenue potential, yes, the 20 bps is a starting point. And the balance sheet will require pretty extensive repositioning, but that will take a bit of time. And so we're very focused on that. But you should expect to see incremental management fee growth from here as we reposition that balance sheet. And that's all in accordance with PRA regulatory framework, which is quite distinct from the framework that's existed up until now for Athora being a EU balance sheet.

The next question is coming from Mike Brown of UBS.

Great. I want to ask on sure. You reiterated the 10% growth for the year. So I just wanted to think through the puts and takes to asset yields and also kind of the higher cost of funds as we move through 26. Maybe just expand on how we should think about the spread dynamics. Can you still be in that $120 million to $125 million range. And then you mentioned, Marc, that the trajectory is improving. Can you just unpack that a little more, maybe just touch on annuities where the growth seems to be a bit tougher near term? And maybe could we see PRT coming back more in a bigger way in 2026?

Mike, it's Martin. I'll hit the first point. So -- and I commented on this a bit in the prepared remarks. We're right in the middle of the range that we indicated last quarter for the year. And as far as the first quarter is concerned, we certainly expect that to be the case for the balance of the year. So $120 million, $125 million is the is the spread range assuming [indiscernible] 11%.

As far as the quarter, we were pretty prescriptive last November in laying out the drivers of the spread progression over time. And if we look at what has happened in the quarter, it's very much in line with that. And so there's nothing -- there's no change to that. We continue to see some prepay headwinds, as expected, prepays, we believe, peaked in Q4. They were less in Q1. We expect that to dissipate over time, partly because of the CLO dynamic and the running off of that book. And then we are defensively positioned. We have -- between cash and treasuries on hand at the end of the quarter, we had close to $40 billion. And so that's an opportunistic sort of cost, if you like, to being ready to be more offensively positioned, partly in view of the market, probably in view of the pipeline of origination that we see in front of us.

Our next question is coming from Ken Worthington of JPMorgan.

So we've mentioned the $40 billion of cash in tertiary at Athene a couple of times. So Athene is very liquid. Spreads widened out in March, they've narrowed a bit in April. Is the market environment we're seeing today attractive enough that you'd expect those cash levels to be falling you really earmarking the excess cash for more opportunistic opportunities and maybe we even see seen cash levels build as you await those opportunities?

So it's Marc. I'd say almost all of the spread widening we saw take place, took place in the media and did not take place in the market with the exception of below investment-grade software and IG software to some extent, where we did see spread lining where we just do not have nor do we want meaningful exposure given the diverse set of outcomes that can happen with respect to credit.

So I would say in the marketplace, we have not seen the kind of spread widening to be interesting for us to go all in. It is our job to create. And the pipeline that we see coming together is really, really strong. Starting with the ARI commercial mortgage pipeline, moving into the AMAPS pipeline, as Tim said or I said earlier, we're $11 billion at Athene invested in AMAPS right now. We'll be double that by the end of the year. And that will, in part, be making up for CLO runoff, but part will be growth of the book. But we are holding cash and we do not account on the market bailing us out. This is all about self-help and originating volumes of liabilities consistent with the origination volume that we are able to bring to Athene, again, IG, and I am very optimistic and -- confident in the second quarter and optimistic for the balance of the year. that we have the kind of pipeline that is necessary to allow us to deliver on the targets that we have set out, both in terms of volumes and in terms of spreads.

The next question is coming from Michael Cyprys with Morgan Stanley.

I wanted to come back, Marc, to your commentary on the technology cycle and your views around it being very far-reaching, whether it's throughout AI, blockchain tokenization and so forth. I was hoping you could talk about the positioning of Apollo how you're positioning Apollo to navigate, what challenges and risks do you see ahead? How do you think about insulating the business either through organic or inorganic steps as you look out? And what are some of the most exciting opportunities that you see for Apollo to capture in the midst of these developments?

That sounds like the whole call. Look, this is -- we are -- there are just so many angles to this, Michael. It starts with the impact on the portfolio. which is -- and I'll go back to what John Zito and others were saying 18 months ago. Software is the ground 0 for issues around AI. That does not mean every software company is at risk. In fact, some may be enhanced. But our view was in the credit market, we are not paid to figure that out. The best you can do in credit is to get back your money and your interest on time in the amounts you've been agreed. And therefore, since there was no benefit to owning binary outcome software loans, who were bad, we sold them.

If you just discovered 6 or 8 weeks ago that AI could impact enterprise software, what were you doing for the past 2 years? We don't know. And so it starts with asset selection. And obviously, it is not just enterprise software, it is other businesses that are vulnerable to services. It informs our underwrite of investment grade and where we choose to extend credit. Jim focused on this notion of picks and shovels. There are those who have made big bets on the future value of compute, 5 and 6 and 10 years from now. And I have no doubt that some of those bets are going to pay off really handsomely. And some of those bets are going to be disastrous. We have appropriate -- not done single-asset bets. We have spread across with the right structures and the right protections with the right risk award to kind of create convex upsides while getting some amount of downside protection and some notion of our money back. This informs our underwrite. So this is the asset side of our business.

Internally, I said on the last call, we are circa 4,000 people in asset management, circa 2,000 people in our retirement services business. I will be surprised if other than on a short-term basis, we end up has more than that. Now I think that jobs are going to change, people are going to change. But the ability of our industry, which, for the first time, is at scale to not be so dependent on legacy systems that we can take advantage of new systems and new ways of doing things, I think, is extraordinary. Some of our industry will do this really aggressively. We will be among them, and some will not because their business is just not demanding enough and it's a pain in the butt to do.

So I do expect this will give us opportunity to redeploy margin, redeploy people and whether we choose to take that as additional margin or whether we invest that in growth in the business is a choice we'll make quarter-by-quarter as we think about what is best for the organization over the long term. And then you've got to look politically. We are going to go through wholesale change. If you are an ideally graduate who's in the liberal arts and certain things, you're 10 years out of school, you're making $60,000. If you can level a concrete floor, you're making $250,000. That is a dynamic that we have to be really attentive to because we have no political history of blue-collar workers ascendant and white collar workers under pressure. And many of these white-collar jobs are going to be resident in blue cities. That's where the knowledge workers are. And so we expect some amount of political upheaval both here and in Europe as this transition takes place and as we see. And we are mindful of that in terms of our overall defensive posture. I don't know if you want to add.

I guess, that's good.

The next question is coming from Brennan Hawken of BMO Capital Markets.

You spoke earlier on the spread in Retirement Services. I'm curious about the flow dynamic. I was a bit surprised that the funding agreement flows were so resilient given the spread dynamics in the quarter. So curious about how you think about your expectations just from a volume perspective on the funding agreement side? And then also on the retail side, it's been a little lighter in the last few quarters. We hear about the competition. You spoke to the cost side before, but just curious from a volume perspective, what your expectations are. Is this the right volume level if you think about retail as we go forward.

So Brennan, a couple of questions there. One is on the funding agreement side. We did no public funding agreements in the first quarter, given where spreads were. And given where spreads are today, they've come back in meaningfully from the wides, but they're still not the level. They're probably 15 to 20 basis points wide of where they need to be, depending on the tenor for us to find that attractive. We were, on the other hand, able to access private funding agreements in a way that compensated for that attractive spreads. So that's the funding agreement dynamic.

The retail annuities is like -- as we've referenced a couple of times, the market has been competitive. That has eased somewhat and we had a stronger April. But I would expect sort of that to be a base level plus or minus relative to where we expect the immediate quarters to land. And so we think while PRT remains a channel which is not open, we're accessing the other channels, but we're balancing spread, and we're balancing return on equity and relative to the cost structure of the firm, which is a competitive advantage, clearly, and the origination capabilities that we have.

The next question is coming from [indiscernible] of Piper Sandler.

I appreciate the question. I know it's the narrow corner of the market, but can you discuss the opportunity in direct lending today as well as some of the risks out there just cutting through some of the noise and headlines are you seeing increased interest from institutions, given some dislocations there? And then just on the retail side, how are the conversations with advisers and maybe more importantly, advisers and their end clients on the asset class and then confidence in adding alters exposure beyond just direct lending.

Yes. I would say to the specific question, the area of pricing for new product in that direct lending market is a SOFR 450 product plus or minus. And I think many originators in light of the last activity the last couple of months with headlines were widening out indications to issuers. And the reality is the flow has been pretty light because of the strength of the broadly syndicated market and the high-yield market. And so that's an alternative financing vehicle and financing avenue.

So from a product volume side, it's been a little bit lighter. But I would say many, many folks, including ourselves, for good quality direct loans that we believe, have robust business models, there's plenty of access. And it actually may result in industries or names that are not software or AI disruptable to trade actually a little bit of a tighter level. As we mentioned in our broad comments, institutions are looking at it as an opportunity to deploy even in bulk secondary opportunities or new primary mandates.

Your third question is really about the adviser. I think, listen, there's been a tremendous amount of dialogue and insight and the degree of education on portfolio construction is really coming home to light, and we are spending a tremendous amount of our time on that. To say when the redemption cues and the redemption volumes, we really won't know for the next 4 weeks or so -- or next 2 weeks internationally and then 4 weeks domestically. I mentioned our preliminary numbers for April are strong. That, at the end of the day, will rule the day in terms of the asset class performance over time. So I think the headlines have dissipated a little bit. As we mentioned as well as a few of our peers, the redemption requests have not been wide across the investor universe. It's been a bit narrow based on a few distribution channels in a few geographies. But it's too early to tell exactly how that works in the next few weeks. But the reality is, this is a very robust asset class. For 10-plus years, it returned plus 300 or so versus public safe, high-yield and leveraged loans. So institutional investors have benefited. Global wealth investors have benefited from inception-to-date returns. And this is a period that we need to get through.

The next question is coming from Wilma Burdis of Raymond James.

Can you talk about the opportunity -- market opportunity in Japan. We know Apollo is very strong there, and there's fewer competitors. And we've definitely seen an uptick in activity with Aflac and Prudential doing some deals. So can you just talk about what we can expect there going forward and if there's a good amount of volume.

We've been very public, broadly speaking, on our constructive approach to what's going on in Japan. We actually took all of our 190 partners there in January for our biannual partners off-site for a strategic review of our business, but did a deep dive in Japan. I break it down into 3 areas: private equity area. We've been active with 4 to 5 carve-outs that really plays into our business model of corporate carve-outs in industrialized companies. That's number one.

Number two is the distribution of yield product into their insurance and other retirement products vehicles, which we've continued to add dramatically in that space. Third is working with a lot of banks and helping them augment their excess capital and that's excess reserves in dollar-based assets. And the fourth, as you said, mentioned about the insurance business, we typically to date have been a reinsurer, but a lot of activity going on to see how we can use our competitive asset management and origination capabilities to compete to a broader degree. I think it'd be inappropriate to talk about any one transaction. But we're excited about what we see broadly speaking. And I will add that we brought on a very senior individual to run our Asia business, our Asia Pac business based in Japan, Ueda-san, who after a long career at Goldman ran GPIF as a CIO for 5 years, so incredibly well positioned, and it's really a statement of our view on the opportunity set in that country in that region.

The next question is coming from Bart Dziarski of RBC Capital Markets.

I wanted to ask around Athene. So thanks for the enhanced disclosure. I do agree. I think it's the best disclosure out there for life insurance. And I wanted to ask sort of your view today on the regulatory temperature, if you will. So the NAIC is looking at CLO capital charges sound manageable for you guys. And then last week, the U.K. PRA. So they're looking into Bermuda-based funded reinsurance transaction. So just curious how you guys are thinking about the regulatory environment as it's evolving.

It's going to be -- we'll see how you take this, it's going to be kind of an interesting dialogue. So we have been very engaged regulatory over a long period of time. We benefit from a good, robust set of rules that make sense. And the reason is that we are the largest factor in this industry. And like some of the largest, most dominant banks, we are indirectly responsible for the poor behavior of others. Every once in a while, when someone does something silly, a bill is delivered to the industry, and we are the largest participant in the paying of that bill, and we are tired of writing $100 million and $150 million checks for the stupidity of others. And so we have been consistent with our regulatory focus, equal capital for equal risk. The CLO project is a project that we have supported and helped on for a long period of time. It is ultimately up to the regulators to do the work that they need to do, informed by data, to come to the notion of equal capital for equal risk as opposed to an inherent bias for or again structured or for or against corporate securities. So in that regard, we're happy to see it.

The other thing that's going on is there is an increased focus on offshore jurisdictions. Let's start with the U.S. The U.S. understands that to the extent massive amounts of money are being moved to the Cayman Islands and the Caymans are not as transparent that the U.S. system is on the hook. Every one of them understands is there is heightened exposure around Cayman. And this is not to say that Cayman itself is a bad place, but in the current regime, without the same protections that places like Bermuda or otherwise have done, they are not reciprocal jurisdictions and are under intense scrutiny. And it will not surprise me to see increased amounts of regulatory scrutiny and perhaps increased request for capital for those people who have made extensive use of Caymans, which, by the way, are not just new entrants. There are lots of established entrants who also have positions in the Caymans.

With respect to the PRA, there is also a focus on offshore funded reinsurance. I believe the rules or the proposed rules that have come from the PRA are beneficial to people who are actually running a proper business. I expect them to be helpful to what we're trying to do. I also expect the same to come from the Japanese marketplace. In Japan, we have seen, like in many other jurisdictions, companies make use of offshore funded reinsurance in some places with credit counterparties who are not quite where they should be. Just like for the PRA, this is a concern for the Japanese regulator, and I would not be surprised to see formal or informal pressure brought around that.

I come back to the competitive dynamic. Very few people have been able to amass the kind of capital base we have. The reason we've been able to do this is because we manage ROE, we write business that makes sense for us as principal and as a result, our investors allow us to retain the capital in the business and to compound that capital over time. Almost every other company in our industry pays out 90-plus percent of their earnings and does not grow their capital base. Over time, the ability to guarantee outcomes, we believe, is going to be more and more important. We are not shying away from the guarantee business. We like the guarantee business. We just want to be paid appropriately for what we're doing and continue to manage the business around robust ROEs, and we welcome the regulatory intensity. When we produce the kinds of decks you've seen for Athene, every regulator has them. We asked the question that you would logically ask, why isn't everyone required to do this?

And again, there should not be just a focus on new entrants. This is a problem for the established insurers as well. There are a number of really good companies out there. We do lots of business with them, and there are a number of people who are cutting corners, and I do not believe are ultimately good players and good participants in the industry in their current form.

Thank you. This brings us to the end of today's question-and-answer session. I would like to turn the floor back over to Mr. Gunn for closing comments.

Great. Well, we appreciate everyone's time and extended attention this morning. As always, if you have any follow-up, please feel free to reach out, and we look forward to speaking with you soon.

Ladies and gentlemen, this concludes today's event. You may disconnect your lines at this time or log off the webcast, and enjoy the rest of your day.

Good morning, ladies and gentlemen. First of all, thank you for joining us after we have broadly talked on Friday. However, we have accomplished results over the weekend that I think I really want to share with you. And so I'm very happy to report that we have signed an agreement to sell our Interiors business to Apollo. So we signed the deal on the expected terms that we have communicated in spite of a challenging environment through the Middle East crisis. So we can attain out of that transaction an enterprise value at EUR 1.82 billion and the anticipated net debt reduction of at least EUR 1 billion.

Olivier Durand, our CFO, is with me, and he's going to share some further financial details in just a second. The project is obviously subject to works council consultations that we have started this morning and then also the customary regulatory approvals. I'm convinced that this project is possible because it reflects on the strength and the leadership of FORVIA Interiors as well as the expertise and the commitment of our global interiors teams.

So it highlights the business group's very solid industrial base, its market positioning and the good value creation potential that the acquirer sees in FORVIA Interiors. So it goes without saying that this is a key milestone in the execution of our IGNITE strategic road map that we discussed during the Capital Market Day on February 24. It is, in fact, sharpening FORVIA's focus on high value-add technology-driven activities. And as well, we strengthened our financial structure by paying debt down, as I commented earlier on.

And at the same time, for the Interiors business going out, the business is gaining a very dedicated ownership and Apollo has a very strong sector expertise and an active ownership approach to their automotive activities. So that's going to support the future development and the transformation of the Interiors business in a consolidating market environment. So Olivier, why don't you share the numbers that are now associated with that transaction?

Happy to. Good morning, everyone. Thank you, Martin. So let me provide some color on the key financial terms of the transaction with Apollo. So as mentioned, the agreement implies an enterprise value of around exactly EUR 1.82 billion. This is corresponding to 3.1x the adjusted EBITDA under IFRS of the business. Another data point is to mention that if you take a kind of proxy of the U.S. GAAP, i.e., excluding R&D capitalization and lease, which is more the type of comparison to assess the multiple of a transaction, in fact, the multiple will stand at 4.8x.

We confirm the expected net debt reduction of at least EUR 1 billion. And I want to stress that the bridge that we are talking about between enterprise value and net debt reduction is comprehensive. It's taking all items into account, including transaction costs and including the consolidation of the cash of joint ventures in which we have a majority stake.

So it takes into account the deduction for minority interest in the joint ventures that we have inside this business. It takes into account the debt adjustment, including the pension liabilities, and it includes all carve-outs and tax cost of the transaction before and after closing. Given the cash position and the distribution of the cash inside this business, the gross debt reduction will be actually higher. It will exceed EUR 1.4 billion. And this is, in fact, the relevant metric to use in order to assess the reduction in financial cost that this transaction entails.

On a run rate basis, this reduction will be around EUR 50 million to EUR 70 million in lower financial expenses per year. We expect the closing to happen by year-end subject to the customary conditions precedent, including regulatory approvals.

I want to stress that this is a definitive transaction, excluding those basic regulatory approvals. We will continue to manage Interior as a FORVIA business group until that date, and we will benefit from the net cash flow generation that this business has until the actual closing of the transaction, which is most of this year.

All proceeds will be allocated to debt reimbursement and which means that, in fact, with the combined -- with the expected organic cash flow generation in '26, we expect to reach a financial leverage of 1.5x, and we expect a net debt to reach EUR 4.5 billion at year-end as we communicated during the Capital Market Day. This means a division by 2 of both the leverage and the level of net debt compared to the initiation of the acquisition of HELLA back in '22. This transaction, therefore, support the full restoration of FORVIA financial structure and is totally aligned with our IGNITE framework, which targets ultimately a leverage ratio of 1.2x by the end of '28.

And on this note, I return to Martin.

Yes. Thank you, Olivier. And before talking about the next step, I would like to thank, first of all, Michel de Rosen, our Chair and the entire Board for the support of the project. And then most importantly, also all Interiors employees for their commitment and contributions. And we have seen very good contributions really when it comes to the operational business, but also in terms of preparing this transaction.

So again, we expect a close of the project by the year-end, and when the financial effect should kick in as well. And you can imagine what kind of an important milestone this transaction is for the group and for our IGNITE strategy. So I look forward to finishing a successful year together with the colleagues in Interior because the numbers that you have heard about are also considering on the cash side, still the incomes from the Interior business this year.

So when looking forward, I mean, it's exciting around for FORVIA. We have our 2 clusters, the growth and the value clusters that are nicely complementary in nature and that we are going to develop. And we have our 3 strategic priorities with best-in-class performance, business transformation, the announcement today falling into that priority and invigorating our culture.

So the compass is clear. And then it go without saying on the next 2 pages, also in light of that Interiors transaction, I want to explicitly confirm all elements of our 2026 guidance.

And on the next page, we are reiterating also our 2028 ambition. And you can imagine now with that first important step in terms of portfolio transformation, we are obviously also confirming all ambitions and all numbers around 2028. So we are getting ready to unlock what's next. And at the same time, we drive what matters so much every single day.

And with that, I would like to open up for questions.

[Operator Instructions] The first question comes from Ross MacDonald of Citi.

Congrats on getting this deal done. I think a lot of investors had assumed this would be second half business, so very impressive. I have 3 quick questions. I think we touched on one previously, just around dis-synergies. So I'm thinking about your business going forward, specifically for things like Interior lighting and seating. How do you think about the loss of the Interior business and the potential dis-synergies over the midterm from a revenue perspective for those businesses? Is it something that customers typically expect for it to bring Interior seating as a combined package? Or do you think that there's limited headwinds from the loss of Interiors from a synergies perspective? That's question number one.

First of all, and thanks for rejoining second day, second workday in a row. On a product level, on a top line level, we are not expecting any dis-synergies. And I tell you what we observed over the last couple of years. FORVIA has strongly driven the concept of cockpit of the future, interior of the future. And you could see in some of the trade shows that we really animated and designed complete interiors of vehicles to give the customers ideas of what's possible.

At the same time, we have never come really to combined sourcing of our OE customers. In other words, they buy seats separate from the Interiors. So whereas this engineering exercise, the design exercise helped to position both interiors and seating products, it would never ended up in combined deals and therefore, synergies. What we intend to do on a way forward, we have a unit that's called the XLAB. And the XLAB is basically combining engineers from all of our business groups, and we will retain Interiors' expertise on that XLAB, so that we can continue to create new experience for Interior. But then after the transaction, we are going to fully focus on selling the seating products. And again, that traditionally has been independent from interior product sales.

And my second question is just around the employee transfer. And if you can maybe just confirm how many employees were within Interiors, I had 31,000 in my mind. Will all of those employees transfer over? And you mentioned the Works Council approval. Is that something that we should think of as a formality here? Or is there a potential roadblocks around Works Council as it relates to this deal?

Yes. No, we are selling ultimately the entire business. So all Interior employees one by one are going to go over into the new company. So that's clearly agreed with the buyer. And as far as the Works Council approvals or consultations are concerned, it's a consultation, and that's very well defined in French law. So we started that this morning. We informed the Works Council, and we expect the period of conversations and discussions. We expect that to find a good way towards the deal. So no deal breaker expected as of now.

And then you also will have the regulatory approvals, foreign direct investment and so on with different jurisdictions. Given the nature of Apollo's business and ours, also here, as of now, we do not expect roadblocks.

Maybe a final one and just a strategic one. Obviously, you've done this deal at a very challenging time in the automotive supply chain. Is there anything when you look at the business as it stands going forward, excluding Interiors, is there anything within the value clusters that you think actually -- given the valuation we're getting for Interiors, which looks attractive, is there anything within the group that you would think could be further monetized by FORVIA? I know you want to keep the value versus growth segments, but just curious if the opportunity presents itself, if you would look to monetize other parts of the group given the valuations that you're achieving today?

Yes. No, whereas we do not pursue concrete ideas or projects at this point in time. We discussed that during the CMD, right, saying both the organic deleveraging and now in particular, the Interiors deal, we do not have the same pressure as of before. So there is nothing concrete in the make. At the same time, it is an option for the value cluster if opportunities should present themselves.

The next question comes from Stephen Reitman of Bernstein.

So congratulations on the deal. Again, I mean, it was very much following on from the questions that Ross was asking really about the overlaps. I think, you made that very clear that there isn't -- you have been running these separate businesses. But again, on sourcing really, could you just give a little bit more about that, just to sort of reassure us already that the scale impact [indiscernible] going to suffer from the loss of scale.

Yes. No, good question, Stephen, and welcome back to the call this morning. There is obviously lots of plastic material sourcing happening around the Interiors business. And then the second big consumption we have on plastics parts is on the lighting side. So it is important to look at the concrete plastic resins that we purchased for both. And there is only limited overlap, right? You can imagine between the screens of a headlamp and what we put into a door panel, it's quite different materials. So the dis-synergies are going to be very limited in that regard. We estimated it, call it, single million euros of dis-synergies possible on the purchasing side.

[Operator Instructions] Mr. [indiscernible], there are no more questions registered at this time.

All right. We check into the online questions. Just give us a second.

Okay. So we have a few questions on the chat. Let me take the first one. What is the effective economic date of the transaction? And to what extent may the price be adjusted for cash flows between now and completion?

So first of all, it's a firm deal. Now, they have the process of regulatory approvals and the transfer. So we expect the transaction to get to closing by the end of the year, probably fairly Q4 of this year. The price of 1.82 [indiscernible] Interior is part of the company until the closing, i.e., the cash flows of the Interior business are part of the evolution of the company. So in terms of IFRS of '25, it will not appear in terms of the operating metrics. That's why our guidance are totally unchanged. But in terms of the net debt reduction, this is part of the net debt reduction we expect during the year. To keep things [indiscernible] if you take the average of the last 2 years, '24 and '25, you are getting at [ 150 million EUR].

The second question, EUR 1.82 billion is corresponding to a 3.1 multiple of the EUR 582 million of adjusted EBITDA IFRS of '25. Is that not a bottom line factor for a company of this size. And between buckets, the notice factor 3 is more for low and medium-sized companies. What about account receivables minus accounts payable inventory, which should be added to the 3.1 multiple of the adjusted EBITDA? Thanks for your feedback.

So on the data, you are totally correct, [indiscernible] 582 is what is reported. If the IFRS [indiscernible] of the company exactly the perimeter and the enterprise value is EUR 1.82 billion. Regarding working capital, we have taken into account variations that can happen and this is how it leads to it's incorporated in all the adjustments we are showing you in the bridge. Let me stress once again that the bridge is really reflecting all the adjustments. In fact, the impact of the fact that part of the business is joint ventures. So EUR 1.82 billion is at 100% ownership of everything. So we have to take into account that we don't own 100% some of the companies and a few in particular in China. This is taking into account the debt adjustment of different nature and all the transaction costs, carve-out, separation, fees of the different advisers as well as the tax cost of the transaction.

And maybe another element in M&A world in terms of evaluating companies, people are more used to use U.S. GAAP or proxy of U.S. GAAP, which in this case would be the EBITDA excluding R&D capitalization, amortization and lease. If you take this differential, which is more comparable on the worldwide basis, actually, the multiple is 4.8x, which I think is more reflecting, in fact, the value of the deal itself.

Do we have some questions on the call itself before we take more questions on the chat?

[Operator Instructions] I confirm Mr. [indiscernible], we had no more questions registered at this time from the audio call.

Well, then we continue with the online questions.

No problem. Next question, what will be the new company brand name managed by Apollo?

And that is an answer we cannot share yet. So there will be a new name, and it's going to be published then on time.

The next question is what's the exit window of time frame strategy for a PE like Apollo? And will there be another divestiture from Apollo to another [indiscernible] strategic entity as buyer?

The thing that we can say is Apollo is in the automotive business for quite a while and have created a fairly large position with the different acquisitions they have done in the last few years, Panasonic, TI, Tenneco. It's becoming a large, in fact, automotive supplier group of companies. So I think this is the strategy they have and to develop the business and to have, in fact, the means to develop this business. We have no other information.

The next question, I think FORVIA has around EUR 2.4 billion debt coming up in '26 and '27. And correct me if I'm wrong, but you are mentioning a EUR 1.4 billion gross debt reduction from this asset sale. So can you please explain how you managed to reduce interest costs when you will need to refinance some debt in '26 before they fall current?

So in terms of the different items of debt maturities coming '26, '27, we will have EUR 1.4 billion coming from this transaction. We will have another EUR 0.5 billion from the business itself. And we continue our work of cash [indiscernible] and simplification of our flows. You have seen that we have reduced the gross cash a little bit last year. We expect to reduce excluding, in fact, this transaction, the gross cash even more, which means that in terms of new -- in terms of refinancing, we expect limited activity. The exception to it is there is inside those numbers, a bond in HELLA, which is maturing in January 2027, and HELLA will probably refinance part of it in over the course of this year. So that will be the main refinancing transaction.

We will monitor, of course, the evolution of interest rates and remain opportunistic on this in the different markets from a credit world in which we operate since we are now having access not only to eurobond [indiscernible] U.S. bonds and smaller activities, Japan, China.

Next question. What amount of pensions factoring and reverse factoring, respectively, will travel with the entire business?

So in terms of pension is actually EUR 69 million. In terms of factoring, it will depend how we will finish, but it's -- you have seen that we reduced, in fact, the factoring balance by EUR 100 million overall before the transaction itself. And I would say that this is -- we will not reconstruct a position anyway and maybe going further down. And in reverse factoring is actually a small number that is going with this business, EUR 50 million, EUR 70 million in reverse factoring position.

Do we have other questions on the call?

[Operator Instructions] Mr. [indiscernible], there are no questions registered at this time.

So I continue and complete the chat. How much of your existing business was tied into your Interiors offering? Is there a risk of losing any seating electronics business now?

No, that is an answer we had with Stephen's question and Ross's question. Basically, there is no business that we are going to lose. We are excluding from the Interiors business, the MATERI'ACT perimeter. Remember, MATERI'ACT is the company where we develop and produce sustainable plastic materials. That's going to stay with FORVIA. And there, we have already today a supplier relationship in place with the Interiors business, and that's going to be written over to the new company. So we continue to supply of these sustainable materials to the new company.

Next one, congratulations on the deal. Could you give us more details on the use of the proceeds?

So it will be fully used for that reimbursement. And from a financial debt perspective, it will be on maturities, '27 and '28. And we will see which choice will be the most attractive.

Next question, can you please remind us the P&L impact from discontinued operation in '26?

Frankly speaking, it's not a reminder because we did not mention this one. But what we can say is that we -- during the Capital Market Day, we mentioned that as part of the operation, some of the costs, including the tax cost upon closing could not be booked in '26 -- '25, sorry. And we expect this to be around EUR 150 million. Vice versa, Interior is contributing to the net income. So you should expect a bit less than this EUR 150 million in terms of the net P&L impact in discontinued [indiscernible] something should be around the number, but there are some accounting aspects that can provide some volatility on this.

The next question is what is the best estimate of the minority P&L and minority dividend you can give for '26.

I assume that the question is not related to the transaction itself. But before answering this one, let me mention that as part of the transaction, we simplify, in fact, our structure and we have less joint ventures as a consequence, meaning that the leakage in terms of minority dividends and minority P&L is reduced. Minority P&L is something like EUR 30 million plus that is going away, in fact, with this transaction starting therefore in '27.

In terms of minority P&L for the company itself as a whole, we are in the EUR 100 million, EUR 120 million range, no change on this type of aspect.

Next question. Do you expect any rating action following that business reduction in scale, but that is also reducing basically the rating unchanged?

I think the rating agencies are fully informed of this transaction coming. We will have communication with them. I think it's a confirmation of executing our plan after in terms of rating evolution, it's, of course, a decision that they take. But clearly, the profile from a debt perspective, from a cash management perspective is improving significantly with this transaction. So I think it's a good element in terms of the financial structure and the credit view of the company for structure.

Next question. What will be the impact of the support service function currently being provided by GBS to the Interior activity? Will this support continue as is? Or are there any changes being planned?

Yes, very good question. I mean we are going to hand over an independent self-sustained company to Apollo, which means that we are also going to provide functions and the employees performing these functions in terms of corporate services. So that's going to happen now as part of the separation process that we clearly identify, resources personnel that goes over with the business.

So to the earlier question, we are going to transfer all employees that are associated with the Interiors business directly, plus those corporate services that the company will need to operate. Olivier, do we have another question on the chat?

We do. Could you quantify the bridge element in Slide 3, which is the slide of the bridge. Regarding the debt adjustment aside from the EUR 69 million in pension, what are the other parts of this?

So we are showing in the bridge, in fact, 3 big blocks. So the first block is minorities. Our minorities is coming from the fact that 1.82 is at 100%. We have some companies in which we own less than 100%. And therefore, there is a deduction for the value of those one as well as the fact that we have some cash position inside those companies and mechanically, since -- and we consolidate those cash position today at 100% when you have the sale, you are paid for the part of the company you actually own.

So this is on the first block, and that's -- so that's why it's significant. It means also once again that the complexity of the company will be reduced by this transaction. The second block is debt adjustment in which there is the pension. There is also some working capital and miscellaneous financial adjustment that are taken into account inside this block. And the last one is all the carve-out separation cost. This is also the tax cost of the transaction. We had some tax costs in terms of verticalizing the legal structure according to this perimeter, and we will have a little bit of tax cost mainly in China in terms of tax on capital gains in some jurisdiction, a few of them, as you can imagine, but in China, this is the case.

So this bridge once again is providing full view of the impact really of all items so that there is transparency to you, to all related parties, investors and regulators about what is net-net, the debt reduction that this transaction entails.

I have another question, I think, which is, can you please quantify some of the elements in the bridge, mainly minorities and debt adjustment?

So this is what I mentioned. The 3 blocks are not exactly of the same size, but with the biggest of the 3 on the tax and carve-out and separation cost. And I see no more questions, at least on the chat.

Okay. Then question to the operator, any live question left?

There are no more questions on the web -- on the audio call.

All right. Then let me summarize. First of all, thank you very much for your great interest today that led to a lively session. And you think -- I think you could convince yourself that IGNITE is now in full swing, 2 months after we announced it. And from here, the full attention at FORVIA goes into execution. And that happens on 2 levels. We are delivering the year. That's utmost important. And then we drive the Interiors business to transaction close by the end of the year as well.

So thank you very much for your continued interest, and I look forward -- we look forward to talking to you soon. Thank you.

Good morning, everyone. We're going to get started. Thank you all for joining BofA's 34th Annual Financial Services Conference. This is Craig Siegenthaler, North American Head of Diversified Financials at BofA. It's my pleasure to introduce Jim Zelter. Jim oversees Apollo's strategic initiatives across its asset management and retirement businesses, and he serves on its leadership team and Board of Directors. He joined Apollo in 2006 and led the broad expansion of Apollo's largest business, credit.

Jim, thank you for joining us today.

Always glad to be here. Thank you. I see a bunch of friends and shareholders. So always enjoy being in this forum.

So Apollo was founded in 1990 with a focus on private equity. The firm has since evolved into a diversified global alt manager with scale across all 3 channels, really the 3 eyes. Institutional and individual and the leading insurance platform. Apollo pioneered the alternative insurance model with the creation of Athene and many of its large-cap peers have since replicated this strategy. The firm now manages more than $900 billion in assets under management and is one of the 5 largest alt managers in the world. With that, let's get started.

So Jim, we have entered year 4 of the bull market. IPO and M&A is expected to accelerate. The Fed has been cutting. There might be a few more cuts this year. The economy continues to be resilient. On the other hand, spreads are pretty tight, and I know that matters for you guys, and geopolitical risks are heightened and private equity realizations remain muted. How do you see this macro backdrop unfolding in 2026?

Well, I think it's a marketplace where the 3 big drivers, especially domestically, but also globally are a bit interest rate insensitive. You've got the massive AI build, the massive global industrial renaissance and the benefits from One Big Beautiful Bill. And those are very powerful forces. I would say this is my 41st year in the business. You always -- if you use the analogy of golf for the golfers in the audience, if you can stay in the fairway, you're probably better off than being in the rough. And right now, the fairway looks pretty good. You've got an administration that is very pro-growth, very much trying to remove regulatory barriers and you have a massive CapEx cycle, you have an M&A cycle, you have a monetization cycle, a lot of great things in the fairway.

The problem is we're playing in the U.S. open. So the fairway is very narrow and the rough is very severe. And I don't know if I would say that typically, it's a 90-10 split, but it does feel to us, and Mark, myself, Zito, Scott, we've all been very consistent about 1 year, 1.5 years ago, while we love being in the fairway, the risks of being in the rough are pretty punitive right now. And so I'm a bit more skeptical on the equity monetization cycle. I think it's going to be slower than people think. I don't think it's going to be as large as people think. And I always love to run numbers. If you look at the robust IPO market in the U.S., depending on X or including SPACs, it's a $250 billion, $300 billion number. The PE asset class is $5 trillion to $6 trillion you've got to monetize $500 billion to $800 billion a year. And so the equity market is only a small portion. So you really need strategic M&A.

So back to your original question, yes, I mean, in the fairway, the market is pretty robust, but we've continued as the cycle has gotten more and more elongated, and we really have not had a credit cycle for close to 18 years when you really add up the numbers, 17 years, you have to be much more thoughtful about how you're investing a broad, diverse portfolio. But in the fairway, things look pretty good.

So let's flip it up to private credit. It got a lot of media attention last year, while credit quality across the industry really wasn't that bad. It was pretty good. And returns across private credit look pretty good, too. I know you just put out a white paper, private credit factor fiction. Probably many of us didn't check that out yet, so we can after this meeting. But maybe just summarize the house view and what's going on in private credit.

The house view is that the definition of private credit, there's 60 of us in the audience. If we ask everybody, we'd probably have 70 different responses what private credit really is. Private credit, in our view, is simply anything that historically possibly had been on the bank balance sheet or historically was not in a liquid marketplace. And with the dominance in the last 10 years, of the private direct origination in the non-investment-grade world, basically 0 to about $2 trillion, that has dominated the headlines rather than the broader conversation of private credit.

And let's just break that down for a moment. I grew up in the junk bond market in the mid-80s. If you were a private equity sponsor, you grew your business by financing with high-yield bonds and then leveraged loans. In 2014, '15, a few smart folks said, wait a second, we don't need a rating, and we can go give a private equity sponsor a direct loan, do it in size and certainty. And so it became the third leg of the noninvestment-grade financing world. Investors wanted yield. It grew from 0 to $2 trillion between high-yield loans and direct lending. It's a $5 trillion asset class.

And those 3 products make up the noninvestment-grade world, but they only make up a small portion of what we would call private credit. The bigger opportunity in private credit has been really the evolution of the banking model post the GFC. Many financial institutions, including the largest, most robust, most profitable in the world, BofA being one of them, JP being the other of the big 4, clearly have continued to refine their business model. And as a result, a lot of activities were not accretive in the regulatory or ROE model. And as investors around the globe diversified their curiosity, they ended up playing a larger role in commercial real estate debt, resi real estate debt, ABS. And so when we look around, we see private credit really is a $40 trillion asset class, much, much broader, much more relevant and much more embedded than the direct lending activities.

And so for us, it really is an education and dialogue. We had our 200 partners in Japan last week. Usually, I meet with all the mega banks, I did again, the trading companies. And so this is not a recent phenomenon. But clearly, the conversations, which I'm sure you'll ask me about, I think there's been some questions about software lately, I believe. Just a few. Those questions really are focused on the non-investment-grade direct lending area of private credit. Now it's going to have an impact because of the AI cycle on investment grade, which we can talk about.

But I think the real message here is, there is a -- if you are a participant in diversified asset managers and you really don't understand the story that I just spoke about in terms of the breadth of this opportunity, you're really missing a massive tectonic plate in how the business is run. It's the idea that private credit is going to stall and it's going to stop. That's just having a deaf ear to what's going on in the broader economy. And I would say that as we travel around the globe as one of the thought leaders in credit and private credit in addition, many government leaders, regulators want to talk to us because I don't think it's any coincidence that the U.S. marketplace and the U.S. economy has been a real bulwark of growth around the globe because of the relevance of private credit, which is a much longer conversation.

So Jim, Apollo has grown exponentially since the global financial crisis, like well north of 10x. As you sit here today, what are your strategic priorities as President of Apollo? And what do you need to get right to keep this growth momentum continue?

Yes. Well, I would say about 3 years ago, we, as a leadership team, really started to publicly dialogue about the growth and the importance of origination to these models. We're fortunate we have a great brand. We've had great success. The limiting factor of our long-term success was clearly the input on great investments, not our ability to raise capital. And so we've been working on this since we created Athene 2010, 2011. So internally, we've spent billions on these origination platforms, on the role that we play as a financial provider of capital solutions from investment grade to noninvestment grade. And that's been very successful for us.

I would say that in the last -- when we did our Investor Day last fall, we talked about a number of themes over the next 3 to 5 years. We talked about the global industrial renaissance really wanting to fund that, which is origination. We talked about feeding the individual investor through retail. We talked about the public-private convergence, and we talked about different types of replacement around the globe. And all of those are the 4 main factors. So personally, I spent a tremendous amount of time on origination. How we're taking that show more broadly around the globe. And so again, I think we've been very clear about looking through the windshield, not the rearview mirror.

And so when we like -- we love the alternatives business, but we just -- as we talked about in our call on Monday, we see those themes that I talked about, the industrial renaissance, the public-private convergence, the whole idea of wealth and individual investors. We see ourselves feeding those not through the traditional alts business, but through individuals with retail, through traditional managers like we announced with Schroders, what we're doing with insurance, what we're doing in 401 DC. So it really is taking our business model and taking that sourcing and that packaging and delivering it through a variety of other channels of distribution.

Jim, where are we in the secular growth of private investing, private companies, public-private convergence? And do you think that private credit will begin to trade and kind of look a little more liquid? And wouldn't that essentially lead to tighter credit spreads in the future?

Yes. So a lot of questions there. I guess the audience is probably thinking, wait a second, if something is private, it must have a wide discount. And therefore, when it becomes tradable, that discount gets compressed. And there's some degree of truth to that. But what we've -- there's -- what people have not connected is the growth of private credit solutions and our focus on origination. When you look at various industries and how they're going to get funded, private credit, depending on corporate asset based or different types of real estate are going to need different sources of capital. And from our perspective, it's the premium that one achieves by offering a private solution in scale to a company that is part of the company's financing. We believe that premium will retain even if there's a degree of liquidity and transparency.

Now there's a bunch of themes crashing here together. For those who are real students of history, there was a time in 1990 where loans did not trade. I was a trader at Goldman Sachs. We traded bonds. We hired this individual. We're going to trade loans. Well, banks didn't want you to trade loans. They were held on their balance sheet. There were regional banks. There were money center banks. There was banks in Boston and New York and various others. They did not want their loans to trade. There was a huge pushback. Sound familiar. As you brought more activity into that asset class that was deemed private and illiquid and the embedded holders of those loans did not want the mark-to-market, now you have a couple of trillion dollar leveraged loan market that is relatively liquid, BKLN and various other ETFs and such.

Our view is the investment-grade side of the marketplace, you will have companies like Alphabet that yesterday went out and raised $30 billion in IAG financing, but they will also, depending on their CapEx schedule, whether it's a data center facility, an energy facility, they will find private solutions as well as they need every pocket of capital to fund this growth. And so yes, there will be -- that's on the origination side.

At the same time, on the investor side, depending on institution or other channels, price discovery, information, education, that will be part of the dialogue. So we've been very active in many of these large high-grade capital solutions for Sony, for Intel, for many others. We make markets in those such that if investors are sophisticated and they want to log on to our site, and we've shared this information with firms like BofA and other intermediaries, we want investors to be able to have liquidity. So last year, we traded a shade under $10 billion of these assets.

So I think this is just evolution. If you are a historian of markets and you understand how capital flows work, and how education and dialogue brings in more investors, I think that the capital needs are so large that many, many more companies will think about their capital structure as I have public or private equity, I have some public bonds, I have some private financing, and it's a toolbox that companies will use to finance.

Jim, your CEO and Co-Founder, Mark Rowan, has consistently identified investing deployments as the bottleneck of the model. I know you've built out many asset origination kind of platforms. You have well north, I think, of 15 now. I'm wondering, do you need to keep building this out? And what are some emerging areas of opportunity?

I think the answer that I would say to this whole question is we've been on a very strong trajectory of growth. And it's really now about making sure we maintain the excellence and the quality at scale, growth with intention. And we've listed the spreads of our origination over the course of the year, the $306 billion, the different geographies, the different quadrants, but it really is making sure we grow and maintain that scale. So we have 16 of these origination platforms. There's a handful that are quite large and have been quite successful. Those would be names like Atlas, MidCap, Redding Ridge. In our view, we're going to continue to refine those business models. They may geographically expand, but they're going to be really focused on the product set, which they do.

And Atlas is a very good example. When we purchased Atlas from CS, it had about a $60 billion balance sheet. We purchased, we got out of some agency businesses and businesses that were really balance sheet heavy, but poor ROE. We slimmed it down to 25. We've worked it back up to 60 now. We've gotten our cost of financing down. So of the 16, we probably have 7 to 8 to 9 that are really at scale and the other 6, 7 are in a development mode. And some of those will either merge together. We've in the past sold them. We sold a mortgage originator a few years ago. And so I think this theme with those is to take them a bit more global. I don't think we need -- we don't have a voracious appetite to own 30 of them. I think it's really about growth with intention and scaling them so they have a reason to win.

But I think the question really on the origination the answer for our strategy is going a bit more global, expanding more into Europe, more into Asia. We had all of our 200 partners in Japan last week, amazing hybrid opportunity. And so our origination has been very focused on investment-grade debt and debt overall, i.e., credit. It will continue to be focused on that. But I think you'll see more growth globally, more growth in some of these emerging platforms as well as a degree of expansion. Our hybrid business is really a $20 billion origination business now. I think easily, it could be much larger, a transaction we announced yesterday for Clear Channel.

So we see a dramatic opportunity to take a very U.S.-focused strategy, a bit more global and go deeper with what we have already succeeded in.

Jim, let's talk about AI, artificial intelligence for a moment. There's been a number of very high-profile AI infrastructure financing transactions out there. You just announced one with xAI. So the question is, how is Apollo approaching the AI infrastructure opportunity? And what type of deals are you looking for? What type of deals are you trying to avoid?

When I take a step back and you think about the analysis that's been done on the amount of capital needed for AI infrastructure, the market is somewhere $5 trillion to $7 trillion over the next 5 years. When you break that down, about 1/3 of it will get funded by operating CapEx of these companies, operating cash flow, about 1/3 in existing investment-grade markets and such. And then the third is like a question mark. And I'm rounding for general numbers.

So in the last 12 to 18 months, as the market was very, very red hot last summer, the issuers were very smart and they had an infrastructure marketplace, a real estate marketplace and a corporate marketplace, all competing for product to fund these businesses. We've tried to take a step back and say, where can our capital be structurally advantaged and where are we actually a bespoke value-add versus a commodity. And again, I think so just like various other industries, what we did for Valor and xAI was really -- it was a very interesting sale leaseback of chips with a 4-year duration. We took negligible residual risk. And so we're not counting on some trend to continue for us to have a successful outcome. And so we're humble enough to know that there's various outcomes in 3, 5, 7, 10 years that we don't know. And we don't want to be in financings where we're betting on a trend or a pricing umbrella or something to continue. We'd rather get contractually paid back our capital.

So that's a long answer to say we're not chasing every financing in that sector. With $5 trillion to $7 trillion, you can be picky. We want to make sure that we have our fair share. Our advantage is the duration of our capital, the geographic expansion of our capital in Europe because of PIC, U.K. because of PIC. And where banks are very good 2, 3, 5 years, we want to augment that 10, 15, 20 years. So we're trying to find areas that we're not assuming future trends where we can actually differentiate our capital and where we're not really competing with a variety of asset classes for one specific outcome. But there's plenty to do, and there will be plenty to do.

And I would say from mid last year, mid-June, July, August, when the market was extremely white hot to what has gone on in the last 6 months, 3 months in particular, the pricing has widened out. Now it's interesting to see how early in the last 2 weeks, 3 weeks, even in light of all the noise in the marketplace, Alphabet with a mega deal on Monday, Oracle with a mega deal last week. These companies are still -- the top 6, the hyperscalers are still having great access to capital, but the public markets is deep and as broad as they are, they are not large enough. And if you really look at the IG index over the next 10 years, there's no doubt that technology that is like a 1% exposure will go to high single digits and have a large impact on the IG marketplace. So with those big trends, we feel pretty good about our differentiating strategy, and I think it's a large growth engine of the firm.

Jim, let's talk about the private wealth channel for a moment. This has been a real success story for Apollo. ADS and private credit has done really, really well, probably ramp faster than anyone expected. AAA has done really well, too. As you look at your offering today, where would you like to expand further on the product front and also on the distribution side?

I think we feel on the basic product set, of global wealth, we started this journey 5, 6 years ago. I've often said we were a bit arrogant. We thought it was all about performance. We quickly pivoted 5 years ago and built out a broad product set with education, i.e., Torsten, technology, feet on the street. And I feel we have the complete product offering right now when you look at our product set vis-a-vis our peers. And I believe the trend that you saw happen in nontraded BDCs with ADS and a handful of others capturing a big share. I believe that will be in the ABS market, asset-based securities, asset-based finance and our lead product, we have the flagship vehicle. It's still sub-$5 billion, but it's still quite large. It's the biggest and largest out there. That will be our next franchise to ride, if you will. But we have 8 that are over -- raised more than $500 million a piece last year.

So I think on the individual commingled products, we have the product set. I think what you're going to see happen quickly in Global Wealth is it's going to continue to evolve from some investors want an individual product to some want a broader product set where an asset manager or an adviser will co-mingle a variety of products under an umbrella product, if you will, more of a solution, a private credit solution with a handful of managers. Also, if you have to look at what's going on in the models industry with the growth of models in Global Wealth and the role we play there.

So I think it really is -- really ties back into the answer we said the other day on the call is it's really taking this alts business and taking it not only just to Global Wealth, but this whole idea of replacement with traditional managers, things we're doing with Schroders, things we're doing with State Street with PRIV. So it's not one solution, but I feel that we are of all the folks fairly on the cutting edge of trying to really listen to product solutions and be thoughtful about things that have great convexity. And I think those products, which I just mentioned, have great convexity.

So Jim, I think a lot of us are looking forward to the Fund XI raise. You have the best private equity performance among kind of all your large-cap peers. A lot of them have pivoted more towards the growth side. You've stuck to your guns, purchase price matters, something Mark always talks about more of a value fund, your DPIs are healthy, your track records are healthy. How do you think about the timing and sizing of this fund?

Yes. We started the official kickoff late last year at January. We've gotten a great reception, as you said, as many other -- when you think about mega PE managers, there's a handful that have been very consistent in their strategy over decades. We're one of those. There are not many that are also in our ZIP code. So as the questions regarding credit and software will leak into equity returns. I suspect that Fund XI will get a -- we've gotten a great reception. We'd like to replicate what we did for Fund X. So low to mid-20s, we think that's very much very reasonable. I think you'll have a first close before the midpart of the year. It will probably leak into 2027 to some degree. But really, it's a sweet spot between the end of the first quarter and the first quarter of '27. I feel very comfortable and confident of our ability to raise that $22 billion to $25 billion.

So let's move into the retirement services business, focus on North America. Athene has been an incredible success story. You guys were the first to kind of start this business well earlier than peers. What gives you confidence that Athene can sustain this impressive growth trajectory, especially as the competitive landscape gets a little more crowded?

Well, I think in the core business of what Athene does today, really in the fixed annuity business, we are a market leader between fortress balance sheet, high rating, low cost of executing our business plan, i.e., our OpEx and the distribution that we have, we feel very comfortable with our ability to maintain our share in that business. And our view is that rates will be a bit stickier than others think and people like to buy annuities in this marketplace.

So the core business, there are many folks -- and for those in the room who are students of Athene, we have a variety of channels to raise capital. We have 4. We have the M&A business, which has been a bit quiet, which many of the larger newer players are buying business at rates of return that we think are really not great. There's your retail business, which is your organic business. The first is your inorganic and your organic business. We obviously are a pioneer and leader in the FABN market and the FABR market, fixed annuity-backed repo, fixed annuity-backed notes. And then fourth is PRT. The amount of players that can do all 4 of those globally in Japan with a very highly rated balance sheet with a public currency with low OpEx, there's a grand total of less in your hand. So while there's hundreds of players, like the CLO market, there's a handful that dominate the marketplace.

So we feel very comfortable with our core competency in those 4 products in the variety of channels. We are spending a tremendous amount of time when you think about a retiree today, the last 50 years in the U.S. with what's going on between DB and DC, there is a retirement crisis. Unfortunately, we are in a business that gets better every day. People get older and their certainty of future income away from social security is not a robust answer to the solution -- to the problem, excuse me.

And so coming up with ways to offer a better return, if you have that lump sum of $250,000 as a retiree and you spend 4% or 6%, there's various outcomes in terms of your likelihood of outliving your savings, the ability to embed guaranteed lifetime income or other wealth builder products, that is just very logical. And again, I think that investors take a very short-term view of Athene. And if you really take a step back, we've built an amazing machine that's been able to weather market volatility, a massive change in rates, and we've done so in a very methodical way. And so I think people are discounting our ability to continue to reinvent ourselves.

So we're incredibly excited by the future of -- that Athene has in front of us. Obviously, the Athora purchase of PIC was a great example of an amazing business over in Europe. Obviously, Athene owns a bit of Athora and in turn, owns the exposure to Athene or to PIC. But again, I think solving this retirement conundrum around the globe in scale, the post accumulation, whether it's in Australia, whether it's in the U.S. or other markets, we couldn't be more excited about the future of those. And while you may not be able to pencil out in a model, we think those are all upside opportunities for us in the future.

So you covered a little bit of my next question. So I was almost debating skipping it. But I wanted to talk about the retirement business outside the United States. And I don't think you mentioned Japan, but like as you look outside the U.S., what markets are you -- do you see as most attractive for 5- to 10-year growth?

Well, I think that Athora's purchase of PIC in the U.K. The U.K. has a very well-defined market on the whole pension risk transfer, and we're excited about the opportunities once that has been closed and has all the approvals from the regulators. Certainly, in Asia, we have a variety of activities in Japan, more so on the reinsurance side with Athene. The backup in rates has changed investors' desire for a variety of products. We think we're going to be part of that conversation. Certainly, in places such as we have some activity in Taiwan with FWD. But I think there's a handful of geographies, Japan, Korea, Taiwan and Australia that we think in Hong Kong that are the areas of growth for us. And then Western Europe, there's a variety of solvency rules that make some geographies very attractive, some less so. I think you're going to see us do more in the U.K.

Great. Jim, with that, we're out of time. So on behalf of all of us at Bank of America, I just wanted to thank you for joining us. I hope to see you next year.

I appreciate it. Thank you.

All right. Hello. I'm Mike Brown, the U.S. Asset Management and broker analyst here at UBS. It's my pleasure to introduce you to Martin Kelly, the CFO of Apollo Global Management. Apollo today is one of the world's largest alternative asset managers with AUM totaling $938 billion. So Martin, thank you so much for joining us here in Florida.

Good morning, Mike, and thanks for having us. I appreciate it. I was actually telling Mike, I've been coming to this conference for so long that I've stayed in the same room more than once. .

Well, Martin, why don't we start on the macro front. It's certainly been an interesting start to the year, a lot of disruption in the market. But as you think about the path of interest rates, inflation, some of the geopolitical noise, what is kind of Apollo's view on the outlook here?

We're seeing all the same data that you all are -- we also have the benefit of what we see at our portfolio companies, which is pretty consistent actually with the broad macro themes that you've seen and you read about it is a bit mixed for sure. But the tailwinds certainly would point in the direction we think of higher rates not lower rates and higher inflation over time. So I think the K-shape economy is definitely real. That's -- we all see that. The fiscal stimulus that is more ahead of us than behind of us, particularly as it relates to the consumer. We'll probably put some upward pressure on inflation. And then there's a whole series of tailwinds, which create sort of upward pressure on both rates and inflation we think.

So deregulation, the tax bill, which the CapEx deductions broadly defined, so the AI spend, cheap dollar just the need for capital, the amount of government debt that's required and private financing all puts up with pressure on rates. So we're in the camp that rates are a question whether we see further rate cuts from here. There's 2 in the curve at the short end question if that will actually happen or if we'll actually see upward short-term rates and then long-term rates are probably based to the up net-net given all of those dynamics. And so that's the macro picture. We see the same in the portfolio companies. What does it mean for us as a firm activity levels are really high.

All of the demand for capital is just creating activity levels and pipelines that are really robust. And so we see it as a benefit for the phone.

Great. So Apollo reported earnings yesterday. And on the call, you affirmed 20%-plus FRE growth 10% growth. Can you maybe just summarize a couple of the key kind of takeaways from the earnings print yesterday? What were some of the main headlines there?

Sure. We finished off a really strong year. We came into the year on the asset manager side, suggesting mid-teens FRE growth. We printed 23% and I think the most gratifying part of the results was the breadth of origination across the business. And we effectively achieved our 5-year target in year 1 with an origination of $300 million. And that was about 40% driven by what we call our platforms, our lending businesses. about 40% was our credit businesses very broadly defined. And the other 20% was hybrid equity and our high-grade lending businesses. And so it was broad. It was geographic. And I think what was really particularly evident was the connection between that and the impact it has on earnings.

So it drove management fee growth higher. It drove a syndication flow through our Capital Solutions business. So we had a very high year. We had an $800 million year in ACS which exceeded our expectations. But it's linked. It's like to origination. And it also created attractive spread assets that guide Athene's growth rate up above what we had indicated about 6 months ago. So there's lots to like about activity levels of the fund. But I think there's a distinction to our strategy to focus on origination and the benefits that, that provides. And I think that, that was really clear in the numbers that we pointed and announced yesterday.

Great. And one of the positive surprises from the results yesterday that I wasn't quite expecting was the strength on the realization and the performance income side of the P&L. So there's certainly a lot of optimism in the market about the capital markets recovery here. How do you think 2026 could really progress for the industry and then for Apollo specifically as we also kind of take into account some of the recent volatility and could that have a bit of a cooling effect on capital markets activity?

So it's interesting, most of the upside and the realizations was actually driven by our credit business. And so PE was a component of that, and I'll talk about that in a minute. But we had a really strong year in credit and our -- and most of the funds in credit to pay carry have an annual payout and so it happens in the fourth quarter, and so that's what we saw. So our credit businesses were up between 8% and 12% across the board, really strong. And so the earnings that we reported in our Principal Investing segment were principally driven by that. We also had Fund X, our currently active investing PE flagship rise over its ESCO threshold, which means it was allowed to distribute carry, which was related to prior exits.

And so it was less a function of in-quarter realization activity than it was sort of a catch-up of -- an appreciation in value in the fund that allowed us to distribute. All that said, we had a decent year in realizations in PE, and that's what we see ahead of us. We're cautiously optimistic. It's hard to handicap. But it would feel like activity levels in the market and certainly speaking to all the M&A bankers that we do, everyone is really busy. But whether that comes through a public exit through an IPO process or through it's sale to a sponsor or a strategic remains to be seen. But I think if you go back a year, this time last year, enthusiasm was high then we hit liberation day. And so that sort of set the time for the rest of the year.

I think as we come into this year, I think the knowns and the unknowns about policy are more known and more accepted, and I think people are more inclined to get on with it. And so I would expect to an uptick. But it's -- as I said on the call yesterday, it's the hardest part of the business to predict. But I think we're coming off the lows, and we should see modestly at least higher activity from here.

Okay. Great. If we change gears to inflows. So in the fourth quarter, you saw $42 billion of inflows, $220 million for the year. As we look ahead to 2026, it seems to be a bit of a story of continuing broadening out of your breadth of your inflows. Maybe just talk a little bit about how you think about the channels in '26 versus '25 and where the flows will come from?

Yes, it can expect to origination actually. So everything has a connection point back. But the short answer is we expect it to be higher. We expect wealth to continue to increase. And so we have 12 products, 7 $1 billion, and we continue to focus on the wealth channels as a really important way to access individuals and that's with different access points, it's in all geographies. It's building on our team, it's building out the structure that we bring product to market in that's appropriate regulatorily for local markets, wherever that is. And so wealth was $18 billion of capital raise in '25, we expect it to be higher than '26.

Institutional capital raise, we expect to be meaningfully higher than we raised in '25 driven by Firstly, we're in market with our new PE flagship Fund XI. So that will have some closings this year. It won't activate until next year. But by dollar value, it's actually, I think, more driven by credit in all forms, asset-backed, direct lending, investment-grade forms of credit. AES is a part of that. And then infrastructure and sort of equity adjacent businesses. So we're pretty optimistic about the environment, and it's really being driven by -- we've started to articulate these 6 markets that we are attaching origination to third-party insurance, sort of the notion of replacement, fixed income replacement and equity replacement. And and partnerships with traditional asset managers is all relevant to the capital raise. And so it's -- can we originate the right products? Can we get it in the right format, including what we call building blocks to access the 6 forms of capital that we raised.

Great. Great. Maybe just one quick follow-up there on the third-party insurance opportunity. It seems like it was a big step forward in 2025. You guys have been really telling a very compelling story about the alignment with Athene there, and that seems to be really resonating in the market. What's kind of next there? Maybe can you talk about some of the key drivers in 2025 that really allowed you to take that step forward?

We approach third-party insurance, both through managed accounts and through syndicating flow activity to mostly investment-grade debt business to third-party insurance clients. And if it's attractive to Athene, it will most likely be attractive to third-party insurance clients. So we're very happy to syndicate to what may be considered to be competitors of Athene. And we do that frequently. And then we have strategic relationships with clients that are giving us money to manage. And then we manage that money in an account like any other LP. So it's -- it aligns with our principal mindset.

If we are prepared to win the risk ourselves, through ethane, then that sets a strong foundation for the underwriting of that risk and it sort of sets benchmark, I think, against which third-party insurance look at and say it's good quality risk. So we think -- again, coming back to origination, if we can originate the right product with the right risk return attributes and certainly in the context of an insurance company that has the right capital charges associated with it and earn return on equity, then it's attractive business, and we will continue to grow that business. And so we have a team focused on that. They've had some great success last year, and I expect that to be greater in '26.

Great. And then if we switch over to the wealth side of the story there. So the redemptions in the nontraded BDCs was certainly a big theme that we saw play out in the fourth quarter. The ADS fund has a lower level of direct lending exposure. So is that something that you believe that the broader wealth channel fully kind of understands and appreciates and is that starting to really resonate in this moment in time? And maybe can you just touch on what you're seeing and hearing from your partners in the wealth channel currently?

Sure. So flows, as you'd expect, flows were a bit later across the whole industry and in Q4, and we saw that. And we've seen this in certain times before when slows can temporarily slow down. Redemptions picked up, generally speaking, across the industry, below the gates, but sort of into the 3% to 4% annualized area. And so I do think we've been very clear about the risk profile of our BDC, ADS relative to the PS. And so I do think that this is really an opportunity which we're leaning into, as you'd expect for that to differentiate itself. So it has a very attractive return on a comparable basis. but has lower everything that you care about, lower leverage, lower PIC, lower software, lower ARR software, lower pick software.

And so I think this is a moment when the risk -- the return to the risk profile of that vehicle really should differentiate itself. And so we should start to see a pickup in market share. So I'm optimistic. But the -- what you're seeing in the industry tends to be washing over the whole industry at the moment.

Okay. Great. And then the growth of the wealth platform was certainly a standout in 2025. And so certainly, the industry could face some pressures near term. But as you continue to monitor the health and strength of the Apollo Wealth business. What are some of the key KPIs that you track there? And what are some of the impediments to the growth of the wealth business near term? What are some of the key constraints there?

The most important KPI is the return that investors on over a period of time. So [indiscernible] back to the prior question and the comments around ADS. So ultimately, you have to have a trusted product. You have to have reputation and credibility that you can deliver a product which is valuable to individual clients that's accepted by whatever the distribution point is. And so if you can't deliver on that, then you're not going to do well over time. So it all comes back to origination and underwriting and making sure that the risk return is, we think, appropriate for the customer.

Assuming that is the case, then it's a really interesting but also a really complicated ecosystem. And so we continue to build out the teams. It's one of the less than a handful of areas where we continue to make really significant investments that will again be the case and it's not just having the product. We have 12 products, but it's a question of getting the product in the right format for the jurisdiction that's being sold into retail investors in different jurisdictions have different requirements, set the LTIF in the -- in Europe as an example, but it's different in Asia, and it's different in other jurisdictions. So it's product, it's relationships with the wirehouses, the private banks, our RIAs to get access points. It's the structure of the products, it's the technology to support all of that. and it's people, it's teams on the ground who are doing the work and building out the network.

That's in the U.S. It's been building out in Europe and parts of Asia and it's increasingly now in Canada and Latin America. So we have the markets covered that we want to cover. We're continuing to build out the teams but this is a long term. At the end of the day, individual investors need alpha in their portfolios. And so private assets are the way to deliver that. And so the thesis remains intact. It's just -- it's a complicated ecosystem to build out, but one that we think has enormous runway ahead of us. And that's why we continue to invest and prioritize that.

Can you maybe just touch on what the next chapter of growth here will be you talked about the fact that there's an opportunity to continue to invest in people. Continue to add more maybe wrappers for kind of the international markets. But as you think about really what's the next growth path here? Is it -- it doesn't sound like it's necessarily launching new product, but is it continuing to expand geographically? Is it continuing to deepen with the wires? Is it new channels, like the 401(k) market? Do you think perhaps that's kind of the next frontier here?

I do. I think we have the right product line up more or less. We have 12 products. There may be 1 or 2 more, but we have different forms of credit covered. We have infrastructure, secondaries, we have AAA as a really interesting equity replacement product. There's 1 or 2 other things that are sort of in the lab, if you call it that, which may be relevant. But for the most part, I think we're covered. And so it's doing everything that we're doing. I think asset-backed as a fund is the most likely next products to get real traction and it's been increasing quarter-by-quarter.

It's really attractive and high-quality products, meaning investment grade with a good excess spread. And so it has a home in people's portfolios. But as we've seen from some of our competitors, you need -- you can have 1 or 2 products that just take off. And so we'll see. So we continue to do everything I just described. The DC 401(k) is also really interesting. It's -- we had the guidance. We have a process that's sort of working its way through right now. It's iterative I think we're optimistic that, that will provide more clarity. And so that will give more sort of comfort to [indiscernible] that private assets have a home.

But again, it comes back to -- you have to get it in a format which is easy for plan sponsors to take. And so it's not obviously asset by asset, but you have to have a building block of that goes into a fund that is understandable. So it could be short duration IG as an example or it could be an asset-backed fund. But it needs to be something that's sort of comprehensible. And then it needs to be in a format like a CIT, which is acceptable to a plan sponsor. And then it needs -- ideally, it needs to be a -- become a default allocation through a model versus it being a choice that individual investors in 401(k)s make because that won't get the traction that's needed. So all of that is playing out. All of it has, we think, massive potential, but it will continue to take a bit more time.

Great. Why don't we come back to the discussion on private credit. That obviously continues to be a very topical focus for investors these days, and it really kind of picked up in terms of the focus back in the fall and it continues to kind of pop up in conversations now. We talked a little bit about the wealth angle, but I wanted to hear maybe the perspective from the institutional side. Have you seen any slowdown from your institutional investors or LPs there in terms of their continued allocations to private credit? What are some of the conversations been from that cohort?

So this gets back to the definition of private credit, which is -- which requires going to be careful about how you define it. So private credit sort of typically find is below investment grade. That's been the focus of the nontraded BDC space. And that has been a sort of a wealth-oriented product. Our definition, as you know, is investment grade in a much, much larger marketplace, and that's been the focus of all our origination efforts. And that is where we've continued to grow the sort of the top line originations up to now $300 billion in the last year. The demand for investment-grade private credit continues to increase.

And we saw that again in the most recent quarter. We certainly saw that last year. And it all comes down to where can you originate product and how does that compare with what you could buy alternatively. And if you look at -- we gave some stats on the call yesterday, we originated in the most recent quarter, and it was similar for the last year. investment-grade credit at 290 basis points over treasuries. And so if you look at where the BBB index is, that's a 200 basis point pickup relative to where you can buy an equivalent bond and so that's obviously a huge differential. And in the noninvestment-grade space, it's more pronounced.

It's for [indiscernible] of a comparable high-yield bundle mix. And so it's more than 200 basis point pickup. So if you're able to create products that has that return outperformance and it's appropriately structured and it's diversified and it's rated and is, therefore, appropriate for not just insurance company buyers but all forms of investment-grade buyers, then it's a very attractive asset to [indiscernible] and so that's, I think, our edge. Our edge is our ability to create volume like originating in real size, most of it is investment grade. And most of it is what we call private credit, but it's investment a private credit and it's inherently attractive given its return profile so we see demand increasing.

That's what we saw last year, and we see that looking ahead. And if you come back to the question you asked on capital formation and where do we expect to raise money this year? That's a key driver of money that we expect to accumulate this year driven by that origination capability.

So let's go to origination. That was kind of where you led with in the beginning of our discussion here. And Apollo has really built a very differentiated ecosystem. You have 16 origination platforms I think nearly 4,000 employees across that space. What's really the next phase of expansion there? What origination engines do you expect to maybe be bigger drivers of asset growth in '26 and '27. Maybe just touch on Atlas specifically?

Yes. Atlas has been a terrific platform and still has, we think, a lot of potential to grow. So I'll talk about the platforms and I'll talk more broadly because I think it's both relevant. So platforms are about 40% of our origination. Atlas is by volume, the largest originator. To date, the majority of that has been U.S.-based business. And so for most of our platforms, the potential exists, certainly within the case of Atlas, to grow its footprint outside the U.S. And so Atlas originates in Australia, for example, has some origination in Europe. But the potential to grow that business more geographically is real.

And so could Atlas sort of grow from a $40 billion, $50 billion a year business to a $100 million business quite conceivably hopefully quite easily. So that's one piece of it. There are other platforms that are as important, mid-cap, Redding Ridge and then you go down through the asset classes that we have. And so they're all -- and so they're all relevant and I think many of them can grow outside their current sort of mostly domestic footprint. So then you move into, okay, when we set up a new business, and I think this is where the market will go, this is certainly how we're thinking about the market.

The business of raising a fund in a particular area and having the size of the opportunity being attached to the size of the fund, maybe with some spillover for large coinvest, we think is sort of behind us, and if you take infrastructure or sports as 2 examples, they are both businesses that, in one case, we're in infrastructure, in one case, we're raising a sports fund. But the scale of the opportunity around origination for both those businesses is much greater than the size of the fund. And so -- and we're seeing that in infrastructure. Infrastructure, which is sort of the data center power supply, ecosystem and all of the financing that's required around that is much more than just the infrastructure business that we have today, represented by Evan.

So we originate a lot of infrastructure assets. They go in different places. They go to the sixth channels that require supply. And you'll see the same in sports. Sports is a really interesting ecosystem that's sort of underpenetrated in terms of financing. And you'll see us, over time, create an origination capability in sports that's much greater than just the size of the fund. And so I think as we as we continue to grow parts of our business, hybrid is actually another example of it. We have a hybrid value fund. It's $4 billion or $5 billion. We originate much more than that in hybrid origination. It's in that $300 million number, and that product goes into managed accounts and others that want that type of product.

So that's the evolution in the market that we see, we're origination-led and yes, part of the origination is supported by the fund that you raised with the purpose to invest in that. But a lot of it is either syndicated or put into other accounts that want the same risk return profile. So that's the future of the business that we see. And that's why we keep coming back to origination is the most important thing that we do.

I wanted to ask you maybe a follow-up on the origination theme. And what thing I was trying to unpack here as we continue to move into 2026 and spreads stay quite compressed across industry, certainly some recent movement there. But do you think the origination platforms kind of gain more of an incremental advantage, a big trend that we've seen across the ADF space is a lot of these flow partnerships with the banks. But what we're hearing more is that banks are retaining more loans and competing more effectively. So I'm assuming spreads will start to really come down on that side of the kind of flow side of ABF. So just curious your views on that.

We're not seeing it. The relationships with banks and the partnerships we have on flow are important to -- it's an important source of supply for us. And so banks want a certain type of asset on their balance sheet and they don't want other types of assets on their balance sheet. So anything that has duration is much more appropriate outside the banking system. And so there's all sorts of ways you can allocate flow to achieve that purpose. Often in partnership. Often, it's pro rata or it could be you sort of truncate the cash flows and the duration and the banks take the short end, we take the long end. There's ways that you can do it that achieve objectives for both.

And it sort of -- it comes back to the demand for financing is enormous and growing all over the world. And now we're seeing -- we're really seeing it in Europe with defense spending and data and power supply. And so the capital that's required is more than the banking system can provide. And so we're happy partners with the banks. We have some very valuable relationships. And I don't see -- if anything, it becomes more of a buyer's market as the supply of financing to the market steps up. And so there should be spread relief versus spread tightening, I think, as we look ahead.

Okay. Great. So let's talk about the private equity business a little bit here. You talked about that when we were talking about flows, that [indiscernible] will be back in the market this year. And just wanted to hear a little bit about the sentiment across fundraising and private equity land these days. We haven't seen a whole lot of realizations coming through for the industry. Performance in some places has been a little bit spotty. So maybe just touch on how is LP appetite for private equity funds and for Fund XI specifically?

So we -- well, I'll talk about the industry first. It's the most bifurcated market, I think, that exists out there. And so if your returns are strong and your [indiscernible] and your scale and your brand is strong, then you're having a much easier time raising the next one. If you don't check those boxes, then you're not. And we're seeing some recent large fund sizes done relatively quickly by plan sponsors that have those characteristics. So we believe we fit in the same category. We have -- we are out now with Fund XI.

We have a target size of $25 billion. We are marketing off very strong track records for the 2 predecessor funds, both in IRR and DPI. And so I think all of that is really important to LPs. And so we have -- we've been at this now for 35 years. Our returns speak for themselves across that whole period of time. And I think if you look at what we've paid for investments that we've made in our funds, it really hasn't changed. We pay about 6x cash flow in Fund I at 6x cash flow in Fund IX, 6x cash flow. And so if you have a sort of a value orientation, then it's just easier to monetize assets when the markets get more difficult, and that's being reflected in our DPI, which is it's 0.3 for Fund X, it's 0.6 for Fund IX, both well above where the industry is.

And so if LPs see strong performance and they're getting cash back then -- and you've been a good long-term partner, then they're going to trust you to sort of take money for the next one. So we're pretty optimistic.

So you've got a differentiated result on performance, returning cash to investors. How do we think about the size of Fund XI versus Fund X?

We're aiming for the [indiscernible] so we'll see. We've just started marketing. Early dialogue is favorable, but these things. It will take a year plus to get this done. .

Okay. So on the FRE margin side of the story here, it's certainly topical as we move into 2026. You talked a little bit about it yesterday on the earnings call. Maybe just back a little bit more. What are some of the puts and takes here as we think about the potential for margin expansion? You've got bridge that came in at a lower margin and kind of mixed the firm level margin down, but you're continuing to get a lot of benefits of scale on the operating leverage side. So maybe talk about where the margin can go? And maybe if you could also tell us about what the margin would be excluding bridge or what that margin expansion could be?

Sure. So we focus much more on FRE dollar growth than we do the margin. So it's not a primary metric by which we try to manage the business. And the reality is there is so much that can be invested to grow each of the 6 distribution points and the complexity around them. And so we're, I think, very disciplined. We have a very thoughtful process around how we set up the span not for -- just for the current year, but for the next couple of years. And so -- and we look at the investment -- the OpEx investment that's required to get a return on that. And you're always investing now for revenues to come a couple of years from now. .

So -- and that's the judgment that you have to apply to the process. So all that said, I think having operating margin expansion is a good discipline. And so that's what we target. So I mentioned yesterday that ex Bridge, we're up by 50 basis points on the margin. were flat, including bridge and for 2026, we'll be up about 100 basis points inclusive of bridge. So -- but that reflects a really thoughtful allocation of investment spend to grow Global wealth to grow our distribution points around replacement, partnerships, product design. And then ultimately, as we evolve the ecosystem, will require a form of daily pricing. If we were to provide private products to institutional investors, then they will require a form of daily pricing and a form of daily trading.

And so that's a really important part of being able to deliver on that. That's also really complicated. So our businesses, I think, are deceptively complicated once you get under the hood. And so yes, we're trying to be more efficient. We're trying to embrace AI, we're going to do everything we can to create efficiencies in the process. But the opportunity set that we see ahead of us to create real growth in revenues not just this year, next year, but over the next 5 years, place, is real. And so that's the balance that we look at each year as we go through this process.

So if we shift gears to Retirement Services. You guys gave a very comprehensive presentation back in November. Yesterday, as I mentioned at the beginning, you reiterated the 10% SRE growth for 2026. I would still say there seems to be some investor skepticism about that kind of 10% level. But it seems to be related to competition in the market, the tight spreads declining base rates, which maybe everyone has some different views on. But just a number of headwinds that kind of impact that 10% level. So maybe just talk a little bit about that and what gives you that confidence.

Yes, we're very confident. And so we did a lot of work ahead of the November session, and we were with a lot of positive feedback about the sort of the depth that we went into to articulate the business. So 10% is the combination of 2 things in really simple terms. One is the sort of the headwind of the roll off of the existing portfolio, and it's where you're writing new business and at what spreads you're writing it. And so when you combine that, you get to the 10% dollar growth rate or you get to a spread rate of between 120 and 125 basis points. And so -- we have modeled -- we articulated the headwinds on the business as being rates down spreads in, meaning refis on our CLO portfolio, mostly and then the roll-off of the sort of very profitable business that we wrote post-COVID, that's very modelable and you can sensitize that for different assumptions that you make, and we've done all of that work.

And then you look at where do you think you can write new business at what spreads, supported by the origination back to the very first point and what you earn on the capital that you have supporting the business, and that lends to that rate. So we're obviously confident we've been very clear about it. We laid it all out. And so that's what we're focused on achieving.

Great. Great. Okay. Let me pause there. And if anybody wants to submit a question, you can do so through the app or through the web. We could also take any live questions in the room, if there are any. No one's willing. We'll see if they come through. But while that -- while we wait there let's talk about AI. I think one thing that I'm kind of interested to hear about is how Apollo is using it in your investment process and you as a CFO, how do you think about where the opportunities are to perhaps kind of maybe then the cost curve, where can some of the leverage come through? Could it help slow some of the head count growth in certain areas of your business?

Yes. So we're spending a lot of time on this. We are focused on a couple of different things. One is actually before you even get to that, how could AI disrupt our business. And so including where could it impact the current portfolio of assets that we own. So part of our risk management stress testing is an AI stress and looking at businesses that are either impacted by negatively or actually levered to, meaning upside to AI. And so that's something that we run across the business across all our portfolios. .

In terms of the opportunity, we have a group of senior people who are spending a significant amount of time focused on how we embrace AI to impact the decision-making process or just the gathering of information to AI to make the judgment around an investment decision through to how we operate the business more efficiently. And it's interesting, it's much less about the AI app and the opportunity and what it does to you then making sure that you have a process from front to back organized and someone actually owning it and the data in the right place that allows you to be efficient. So our viewpoint is that the judgment that's required is unlikely to be disintermediated but the way you get the information to make the judgment will be.

And we're definitely seeing that there's all forms of apps that we have around the company that people are using to make their lives more efficient. And then to get real synergies, which is what I focus on, like how do you bend the cost curve, when do you extract efficiencies. It's having a single person owning front-to-back process and really applying apps at all parts of the process. And unless you have your -- and that doesn't mean just someone in finance or someone in ops, it means someone who runs the business from the very front end sourcing through the very back end client reporting owning everything about the business. And if you don't have yourself organized that way, then you have handoffs, but you have breaks in the chain where you don't get that benefit all those synergies. So it's interesting.

Everyone has their own viewpoint on how quickly this will play out. but it does really seem real. And we have -- we have 95% of our company who are using apps every day. And so the adoption rate is high, but we're really focused on organizing end-to-end processes to get the efficiencies on.

Okay. Great. That's probably as good as any -- as a spot to stop. So please join me in thanking Martin. Martin, thank you.

Good morning, and welcome to Apollo Global Management's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]

This conference call is being recorded.

This call may include forward-looking statements and projections, which do not guarantee future events or performance. Please refer to Apollo's most recent SEC filings for risk factors related to these statements.

Apollo will be discussing certain non-GAAP measures on this call, which management believes are relevant in assessing the financial performance of the business. These non-GAAP measures are reconciled to GAAP figures in Apollo's earnings presentation, which is available on the company's website.

Also note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any Apollo fund.

I would now like to turn the call over to Noah Gunn, Head of Investor Relations.

Thanks, operator, and welcome again, everyone, to our call. Joining me to discuss our results and the momentum we're seeing across the business are Marc Rowan, CEO; Jim Zelter, President; and Martin Kelly, CFO.

Earlier this morning, we published our earnings release and financial supplement on the Investor Relations portion of our website. And our apologies for the later earnings date this quarter, this was principally due to our Partner Summit, which was a fantastic event that we held in Tokyo last week.

As you can see, our results reflect the broad-based strength across the business and our team's exceptional execution throughout the year. For the full year, we generated record combined fee-related earnings and spread-related earnings of $5.9 billion, which drove adjusted net income of $5.2 billion, up 14% year-over-year or $8.38 per share. And so given the strength of these results, I've asked the guys to keep our remarks on the tighter side this quarter. But of course, we make no promises.

And with that, I'll hand it over to Marc.

Thanks, Noah. I will do my best. I have doubts about Jim and Martin.

Again, an exceptional quarter capping off an exceptional year. FRE for the year, $2.5 billion, up 23% year-over-year. SRE, $3.4 billion plus -- normalized plus 9% year-over-year.

Business is firing on all cylinders. Origination, record volume across the $300 billion mark. More importantly, robust, consistent spread, 350 basis points over treasuries, with an average rating of BBB. Capital formation, record inflows, $228 billion, both Athene and Asset Management; ACS, third straight record year.

Most important to us, this is all done with strong investment performance without reaching. To give you a sense of just how strong, all buckets of credit up 8% to 12%, hybrid value up 16% for the year. Fund X, our most recent vintage Fund 23, 22% net IRR, strong DPI versus industry DPI that rounds closer to 0.

Looking forward, all of the drivers that powered us in '25 are going to power us in '26. In fact, I would say that they're more mature. And if you think about what's happening in our business, we are going from serving one market, institutional alts portfolios, to serving 6 markets. We now serve individuals, we serve insurance. We serve the debt and equity buckets of our institutional clients. We serve traditional asset managers. And we hope to serve more robustly the 401(k) market. Each of these markets has the ability to be roughly the same size as our original market, which power the entire industry.

Understanding that, these markets require different products, different product structures, different access points, different investments in technology to serve. And you will see these markets mature more and more over time. And so as we look forward, we think the trends that are showing up in '25 will show up even more in '26 and again in '27.

To give you a brief sense of progress, in the individual market, more than $18 billion of inflows, now 9 strategies in excess of $500 million of annual fundraising. Insurance more than $15 billion of third-party insurance with a very active pipeline. Increasing growth in our fixed income replacement business. And what we see is a number of the leading investors in the world moving to this notion of total portfolio approach.

Total portfolio approach essentially opens up the debt and equity buckets of these institutions to private assets in competition for what has historically been a 100% market share for public assets. Traditional alt managers, you saw the announcement with Schroders this morning, which I expect to grow into a multibillion-dollar partnership, and PRIV, our ETF with State Street, now approaches $700 million in size. And more importantly, it's among the top performers of investment-grade ETFs everywhere. Again, proving that private can be both liquid and illiquid. In this case, private investment grade being fully liquid.

We're also seeing progress in our DC and 401(k), products in motion with State Street with Empower, with One Digital and with 1 very large RIA. Everything we're talking about ultimately comes down to the promise of private markets, which is excess return per unit of risk. And our ability to generate assets or originate assets with excess spread at scale is becoming more and more important. And our historical investment in origination has given us a bit of a competitive moat that others are trying to catch up to.

Outlook in '26 for Asset Management, which will not be a flagship fund year, continues to be 20%-plus FRE growth. In Retirement Services, the demand for retirement income has never been higher. The global retirement crisis is coming much more into view. We as a world and we as societies are starting to deal with the consequences of this. You saw more than $80 billion of inflows in '25; you should expect approximately $85 billion of inflows in '26. And more than $5 billion of this will be from markets that we were not in 18 months ago and that I believe will turn out to be a very large share of our business.

Our November [ teach-in ] set a very clear path. The SRE growth remains durable. We expect 10% SRE growth in '26. And we reaffirm the 10% growth on average through '29 assuming we do what we're supposed to do in the alternatives.

We step back and we think about macro, all of this comes down to a focus on risk and reward. Each of us has our own way of expressing what it is we're doing. The way I like to express it is to talk about markets that essentially exists on a playing field. For most of my career, 95% of the outcomes have been on that field and very little has been outside that. In fact, it was such a small percentage that we never really thought about it that much and didn't really hedge. And sometimes, we like what was in front of us in terms of valuation, in terms of liquidity, in terms of economic outlook, and sometimes not, but we knew how to navigate those cycles.

What we're watching now is just an increased percentage or increased probability of outcomes outside of established lanes or an established playing field. And one needs to take those factors into account as you invest, as you think about risk and award.

And what's becoming clear in our industry is the notion of having a principal's mindset versus an agent's mindset. A principal's mindset approaches every asset and every asset class as if they're going to own it for the long term because they do. An agent's mindset responds to the [ hot dot ] in the marketplace and ask more fundamentally, is can the asset be sold, is the asset popular. I believe a principal mindset will serve us very well.

Jim will give you some notion of software, and I will steal only a little bit of his thunder. But in our PE business, our software exposure rounds to 0. In our Athene balance sheet, our software exposure rounds closer to 0 than to 1. In ADS, half the exposure of our large peers.

Software is an amazing business. The market's overreaction to software is extreme. But clearly, factors have changed, and we have good software companies and bad software companies and good valuations and bad valuations. If you were aggressive at a point in time when valuations were very high and not a lot of diligence was being done and people were expecting growth forever, you're playing defense now. I assure you, we are on offense, and software will be a very attractive sector, albeit not at the valuation levels and with the kind of underwriting that has been done previously.

To give you a sense of how this principal mindset plays out, take our largest private markets direct lending vehicle, ADS, now more than $25 billion. For the quarter and for the year, approximately 8% return, lowest leverage, private capital structure, large company, no pick [indiscernible] I assure you ADS is on offense.

In hybrid, our largest vehicle there is AAA, which now exceeds some $25 billion. AAA, 12% inception-to-date return, very low volatility, 43 of 44 positive quarters, including 23 consecutive positive quarters. This is the perfect strategy for institutions who are thinking about total portfolio approach in that, on a risk-reward basis, it has outperformed almost everything else in their book.

In our equity business, with 39$ gross and 24% net return for our PE flagship funds over the last 3.5 decades; just can't be matched.

At Athene, while others have reached for spread, we have been positioned defensively. We've built $24 billion position of cash treasuries and agencies. While this is a short-term drag, we are always willing to sacrifice short-term profitability for doing the right thing, and gives us significant firepower to redeploy. Athene maintains plenty of flexibility, and some of the levers that we've seen even industry leaders undertake, whether it's the move to Cayman or asset risk taking, we have simply not had to do, nor will we do. When you come to work each day with a principal's mindset, you just approach business very differently. Athene is a very tough competitor with numerous advantages.

Let me just wrap up by saying, last week we had a chance to spend time in Tokyo with our 200 partners, an unbelievable cultural moment. The theme of playing to win, tremendous excitement, not just about what's happening, but what is in the kitchen that we're working on, which we expect to roll out over the next 6 months. Real focus on what makes Apollo, Apollo, and responding to the cultural moment and not simply growing our business for the sake of growing our business, but growing our business at scale, with quality and with intentionality.

Jim, over to you.

Thanks, Marc. Over the past several years, we've talked about Apollo's individual capabilities: our credit platform, our equity franchise and balance sheet, each strong on its own. But I want to take focus for a moment today on how those pieces work together in an integrated system, the connection between origination and capital formation and why that matters more than ever to date.

At scale, investing does not get simpler. It gets more complex. What differentiates Apollo is that we built a system designed to absorb that complexity and convert it into consistent, high-quality outcomes for our clients. That is our long-term moat. Origination today is no longer a standalone function. It's bespoke investing. The flywheel that powers our business is now origination, product and investing in teams working in sync across the firm. And capital formation is not something that happens at the end of the process; in many ways, it shapes what we originate upstream.

Understanding this connection between origination and capital formation allows us to deliver the right cost of capital to the right opportunity quickly and at scale, while maintaining discipline and alignment. At the end of the day, our job is to make money for our clients. And that's precisely what we did in 2025 with our scaled, connected platform generating over $60 billion of value to our investors.

We've been running our business with the same patient, purchase price matters discipline that has driven our investing success through various cycles over the last 35-plus years. That discipline is particularly evident in areas like software where we estimate it represented approximately 40% of all sponsor-backed private credit and 30% of all PE deployment for more than a decade. As Marc mentioned, our positioning is amongst the lowest in the industry and it's really a situation of selectivity versus exposure. Today it represents less than 2% of our total AUM. In private equity, 0 exposure to grow software. On Athene's balance sheet, we have de minimis exposure of 0.5%, which is virtually all IG-rated, with hyperscalers such as Microsoft and Oracle. And I'd further add that software investments within our credit business, excluding Athene, represent less than 4% of AUM. And within ADS's relative proportion is amongst the lowest, as Marc mentioned, amongst our peers.

We have managed ADS, our flagship credit vehicle, in a prudent manner with lower than market leverage, low pick and all first lien exposure.

In summary, we see parallels between software and prior cycles, where an influx of capital fuels over-allocation, dispersion follows and patience is rewarded. We believe we're well positioned for this moment.

Turning to origination. In 2025, the strength and breadth of our capabilities were on full display. As Marc noted, we originated over $305 billion of assets, up nearly 40% for the prior year. And incredibly, that was really the first year of our 5-year plan that we presented in Investor Day just 18 months ago.

Across that activity, $282 billion was debt comprised of approximately 80% IG, with an average rating of A and 20% sub-investment-grade rating with the rating of B. Within core credit, volumes were led by large cap direct lending, commercial mortgage lending, residential mortgage lending and fund finance, a large growth area.

Across our platforms where volumes increased over 30%, the activity was led by our 3: Atlas, MidCap and Redding Ridge. The scaling that we've seen has been facilitated by a broadening of our offering, expanding our capabilities and redefining our opportunity set.

Our success within the sponsor ecosystem is a clear example. We identified sponsors as an opportunity several years ago and, in 2022, it generated $20 billion in volume across mid-cap and large-cap direct lending. Through the broadening and deepening of our sponsored toolbox, which now allows us to offer comprehensive full-service solutions, origination volumes in this area totaled nearly $80 billion in 2025, quadrupling in 4 years.

Numerous noted transactions could be put forth, but I'll mention 3 quickly. In December, we led a $3.5 billion capital solution to support Valor's $5.4 billion acquisition and lease of data center infrastructure to a subsidiary of xAI. This franchise transaction for the firm in the AI space underscores our role as a leading provider of flexible, asset-based capital for the next generation assets.

In January, we led a $3 billion convertible preferred financing for QXO, a building products distributor led by Brad Jacobs, a proven allocator with a phenomenal track record. And we were tapped to bring together a blue-chip investor group to provide flexible capital to support the company's long-term strategy of growth.

And lastly, our hybrid and credit franchise delivered $1.2 billion in strategic financing for Russell Investments, providing long-term capital and enhanced balance sheet flexibility to support their continued expansion.

Double-clicking and providing context on the origination spreads for the year, our investment-grade origination, we generated excess spread of 290 basis points over treasuries or approximately 220 basis over rated corporates in the index. On our sub-IG origination, we generated excess spread of 490 basis points over treasuries or approximately 200 basis points over comparably rated high-yield rated corporates.

Again, and importantly, we observed stable spreads quarter-over-quarter over the course of the year, noteworthy in a market environment where public spreads remain near multi-decade highs. Generating excess spread at broad scale while maintaining quality is a clear testament to the breadth and depth of our solutions offered by our origination systems.

Simply put, 2025 was an outstanding year where we focused on scale, but also maintaining quality.

Turning to capital formation. Our fourth quarter results punctuated a record year across the firm. We generated $42 billion of inflows in the quarter and $228 billion for the full year. Asset Management delivered $100 billion of organic inflows and $45 billion of inorganic inflows, while Athene added $83 billion. Across the firm, we generated record organic inflows during the year totaling $182 billion, approximately 2/3 of which were attributable to third parties, a focused growth over the last several years.

Similar to origination, the definition of success within Capital Formation has expanded with the addition of new capabilities and new sources of demand. The scaling that we have seen in capital formation has been driven by moving from a sole source of demand, as Marc mentioned, the alts buckets with institutions, to 6 pockets of demand, with new sources including fixed income replacement, wealth, third-party insurance, traditional asset managers and 401(k).

Of the $100 billion of organic inflows into Asset Management during the year, approximately 75% went to credit-oriented strategies and 25% to equity-oriented strategies, supported by strong demand across multiple client types and geographies. Our institutional business had a phenomenal year posting the strongest year of fundraising on record outside of a flagship year.

Within institutional, third-party insurance was a particular highlight with $15 billion of new mandates. And when combined with $16 billion of growth in our third-party side cars during the year, this brings our third-party insurance platform to more than $135 billion across 30 strategic and SMA mandates.

We continue to see growing engagement from insurance who value our origination capabilities and the complete alignment that [ come ] with our balance sheet. This is translating into robust and expanding pipeline around the globe, but with particular focus in Europe and Asia.

Our Global Wealth business had an excellent year with fundraising totaling $18 billion, up nearly 50% year-over-year. As Marc mentioned, to illustrate the increased diversification of the activities, 9 strategies raised more than $500 million and 3 raised more than $1 billion.

ABC filed last year's quarter -- record quarter with another $400 million in raise, and we believe sustained investor interest reflects the conference in our origination advantage in the asset-based finance as investors look to diversify away from corporate credit. Our global wealth offering is resonating and partners are increasingly engaging Apollo as a full-service solution provider rather than just for individual strategies.

At Athene, full year inflows were a record $83 billion, driven by robust retail inflows of $34 billion, record funding agreement issuance of $35 billion and strong reinsurance of $12 billion and a modest contribution from the pension group annuities as well as a variety of new channels. The global retiree wave continues to build and Athene remains uniquely positioned to meet the growing demand for long-term security. We did not get here by accident. Years of hard work have established us as the industry leader with multiple competitive advantages, allowing us to serve retirees and increasing scale.

Overall, the road ahead for capital formation is full of opportunity, is global, and the momentum we're seeing gives us confidence we'll see meaningful, more organic inflows across asset management and Athene in every channel in 2026. With that, I'll turn it over to Martin.

Thanks, Jim, and good morning, everyone. So our fourth quarter results capped a very strong year of performance and demonstrate sustained execution against our long-term strategy. Particularly evident this year is the earnings flywheel benefit of origination, driving inflows to create management and performance fees, syndication volume to create capital solutions fees and spread assets to create spread-related earnings.

In Asset Management, we generated increases in AUM and fee gen AUM of 25% year-over-year to $938 billion and $709 billion, respectively. This helps drive record fee-related earnings of $2.5 billion in 2025, up 23% year-over-year. I would note that this level of FRE growth was among the best in sector for 2025.

In the year, we delivered 22% growth in management fees with underlying strength driven by increasing contribution from third-party asset management inflows into both credit and equity strategies as well as strong capital deployment and robust growth at Athene.

Capital Solutions fees of $226 million reached a new high in the fourth quarter and drove the full year results to exceed $800 million. The underlying activity driving capital solutions fees is increasingly diversified with more than 125 transactions in the fourth quarter and approximately 430 transactions during the full year, with full year transaction activity approximately 60% credit-driven. This is a strong validation of how our proprietary origination capabilities are continuing to broaden and deepen, resulting in greater fee generation opportunities for ACS.

Fee-related performance fees grew by 28% year-over-year, reflecting continued scaling of diversified wealth products and perpetual capital vehicles, led by ADS and with additional contributions from Redding Ridge, MidCap and other platforms.

In the fourth quarter, growth in fee-related expenses was driven by several factors, including the full quarter impact of Bridge, continued investment in our team, with key senior hires, including our new Head of Strategy in Asia, as well as infrastructure investment particularly on next-generation technology platforms, data and AI initiatives, and further, normal course fourth quarter seasonality and some nonrecurring noncomp costs.

For the full year, our FRE margin was approximately 57%, stable year-over-year and consistent with our previously communicated target.

In the first 4 months post acquisition, Bridge contributed approximately $105 million of fee-related revenue and $60 million of fee-related expenses to our 2025 results. And quarterizing that contribution is a reasonable way to estimate the run rate contribution over the near term. Excluding the impact of Bridge, our full year FRE margin grew by about 50 basis points inclusive of the cost of significant investments in our platform.

Moving to Retirement Services, Athene's net invested assets grew by 18% year-over-year to $292 million. We generated $865 million of SRE for the quarter with an additional $28 million at our long-term 11% return expectation on the alternatives portfolio. The alts return for the quarter came in slightly higher than our pre-estimate due to favorable late quarter pricing adjustments. The blended net spread ex-notables was 120 basis points in the fourth quarter, versus 121 basis points in the prior quarter, primarily reflecting asset prepayments and mostly offset by new business growth and higher return on the alt portfolio. When considering our 11% return expectation on the alternatives portfolio, the net spread in the fourth quarter would have been 4 basis points higher. Both the fourth quarter and the full year SRE landed slightly above our previously communicated expectations.

We continue to originate new business that meets our long-term ROE targets, and that is in line with historical averages supported by our origination capabilities and highly efficient cost structure. The recently announced transaction with Apollo Commercial Real Estate Finance, ARI, is one such example where Athene will acquire, subject to ARI stockholder approval, $9 billion of commercial mortgage assets with attractive yields and conservative LTVs. These assets offer approximately 50 to 75 basis points of additional spread versus new issue CMLs today. And importantly, Athene already knows the portfolio well given nearly 50% ownership overlap with the underlying loans.

Turning to principal investing, realized performance fees of $588 million in the fourth quarter were driven by carry from several strategies. Fund X appreciated above its escrow ratio for the first time, allowing us to receive a catch-up of carry previously accrued. Accord+ completed a full portfolio monetization following the 1 year anniversary after its investment period and our credit hedge fund credit strategies recognized its annual crystallization upon generating very strong performance.

Our operating tax rate in the fourth quarter benefited from large deductions related to employee stock compensation due to a higher stock price on delivery. We continue to expect our multiyear tax rate to be approximately 20% subject to quarterly variability.

On capital allocation, we've returned approximately $1.5 billion to shareholders via dividends and repurchases during the year, while also allocating capital to strategically invest in future growth. With respect to dividends, we intend to increase the annual per share [ amount ] by 10% from $2.04 to $2.25 commencing with the first quarter of 2026. This continues our commitment to returning capital through dividends, which we intend to grow approximately 10% annually or roughly half the growth rate of FRE, as well as share repurchases to [ immunize ] equity-based compensation.

As we enter 2026, we do so with significant embedded momentum across the platform and a clear line of sight to continued earnings growth. As we previously communicated, we expect FRE to grow by 20% plus with 75% of the revenue contribution coming from well-established core businesses such as asset-backed finance, direct lending, multi-credit and hybrid as well as the annualization of growth already in the ground. The remaining 25% of top line growth we expect to come from euro initiatives such as Apollo Sports Capital and Athora's pending acquisition of PIC.

Specific to FRE expenses, we expect low double-digit growth in non-comp costs, inclusive of a full year of Bridge. Compensation cost growth will reflect investments in the build-out to support the 6 markets and further senior hires in specific areas as well as a full year of comp costs associated with Bridge. In sum, growing at a high teens growth rate.

For SRE, we anticipate 10% growth and assuming an 11% alts return or approximately $3.85 billion in 2026. This outlook is consistent with our detailed Retirement Services business update from last November.

Since the merger with Athene, which closed at the beginning of 2022, we have generated compound annual growth in adjusted net income of 17%, more than double that of S&P 500 companies over the same period. As we enter 2026, we are extremely well positioned to continue delivering durable performance and compounding value for our shareholders.

And with that, I'll hand the call back to the operator. We appreciate your time, and we welcome your questions.

[Operator Instructions] Our first question is coming from Mike Brown of UBS.

So I wanted to start on, Martin, you commented on the ARI transaction. I actually wanted to start there. Can you just unpack a little bit of the implications to SRE here? Just looking at the loans, they have a nice high yield of about 7.7%. So just thinking through that, how can that help with the spread? Can that drive spread higher? Or is it something that kind of just helps drive growth for Athene? And then what are some of the offsets that we need to consider when we think about how that could play through for SRE?

So it's Marc to start, and then we'll get to the specifics of your question. If you think about what's going on, institutions are looking really hard for durable spread, safe yield, if you will. Individuals, for at least retail investors and stocks, trade these vehicles at a discount. The notion of us continuing to invest into vehicles that don't create value to shareholders didn't make a lot of sense to us. And so for us, the best outcome was to transfer the portfolio at fair market value from the public company, which is trading at a discount to NAV, to primarily Athene, but will ultimately be other third-party buyers for loans that they already know that offer them spreads in excess of what's available in the current market. This is just, for us, just common sense.

Again, just to focus, and we see this across our business, the structure of some of these vehicles, particularly the closed-end vehicles, just historically have traded at discounts, at a point in time when the assets themselves are very scarce. As we transfer those assets to Athene, it will not be a full net benefit of, for instance, $9 billion with excess spread because we maintain a diversified portfolio, it will displace other forms of SRE lending. And Martin's comments on our confidence in the 10% SRE for the year embeds the notion of this portfolio as opposed to it being additive. I don't know if either Jim or Martin, you...

Yes, I think Marc has captured the philosophy of getting the right cost of capital and the right investor capital on certain assets. And again, this is just a basic philosophy about how we approach all of these vehicles. And so the idea of having a pool of assets that are institutionally in high demand in a vehicle trading at a historic discount does not make philosophical sense for it. So it goes into a principal mindset and alignment at the core of what we do. And I'll let Martin talk about the philosophy and the specifics, excuse me.

Sure. So it's -- I think it's clear, Mike, that our objective here is to deliver 10% SRE growth. And so this transaction, while not contemplated in the prior guidance we gave, sort of helps derisk the year. And so that's -- I would view it as a part of [ steps ] delivering 10% history growth, but don't assume it's more than that. We're focused on 10% annual growth over time.

The next question is coming from Alex Blostein of Goldman Sachs.

I was hoping we could spend a minute on dynamics in the nontraded BDC space and ADS and your comments there specifically. So obviously, it's been a little bit more turbulent with redemptions picking up and gross sales have generally slowed down, and that's really even before all the software headlines from the last week or so. To your point, ADS, I think, is in mid-teens exposure to software, and you talked obviously about other features that make the product perhaps less risky than what's out there. Is that resonating with advisers in the channels? How do you think the competitive position of ADS will look over the next sort of 6 to 12 months from a net flow perspective when it comes to this part of the market?

Yes, Alex, it's Jim. Yes, there's no doubt that what's happening today, we have been consistent for the last 24 months, if not longer, about the philosophy in terms of portfolio construction with regards to ADS. 100% senior secured, first lien, no PIC, no ARR. And all of those themes have resonated historically, but certainly resonating currently as well.

We had a net -- even though with a small below-the-line redemption in the fourth quarter, net new assets were up every quarter last year, over $5 billion of net inflows. And yes, it's resounding to many of the distribution channels that it's the alignment and philosophy, but it's return without reaching.

So yes, we expect -- the numbers, as you mentioned were a little bit over double digit in terms of aggregate software exposure. But when you really take -- again, it's really more about selectivity than it is real exposure. And when you look at our software PIK exposure, negligible; when you look at our software ARR exposure, negligible; when you look at our pre-'21, '22 software exposure, negligible. And so those folks who really are students of the product are able to really differentiate. And we expect to be picking up share in that product.

But also, we've been clear in the last 24 months that investors should diversify away from their corporate exposure in terms of a broader portfolio approach, and that's why we're so excited about ABC, really the flagship vehicle in the marketplace in terms of asset-backed portfolio construction. So we couldn't be happier about our current position and feel like we'll accelerate, capture greater market share. And investors are really seeing that rather than chasing the hot dot.

Our next question is coming from Glenn Schorr of Evercore ISI.

Just continuing on your ongoing theme of the total portfolio approach, excess return per unit of risk. I would imagine at times like this, we're going to see some really differentiated performance. That goes across all your asset classes. So I guess I'm curious, maybe more on the institutional side, what was the interaction with LPs over the last week or 2? And where I'm coming from is, are there any bigger implications from what happened, meaning are LPs rethinking size of allocation to privates in general or just maybe a switch in terms of structure and having more liquid vehicles as part of their mindset? I'm just curious if you'd opine on that.

So it's Marc, Glenn, and then I'll turn it over to Jim after. A lot of what's playing out is playing out in the public markets. Recall, and I know the concern on BDCs and private credit and direct origination as it relates to software. But I always remind people that that is first lien. Most of the investments that are made into these private BDCs are derisking for the individual making the investment. They are not selling their treasury exposure. What they're doing is they're selling their equity exposure and they're making an intelligent decision that they can earn roughly long-term equity returns in first lien debt versus an equity.

The equity exposure and the pricing of what's happened in software-related and other related has been extreme. We're talking, in some instances, quality companies down 50% to 70%. This is why people are in first lien to begin with.

When you translate it over to the institutional side, you have a little bit of the same phenomenon. And so I do think that there is going to be increased dispersion amongst managers. It's been easy for a really long period of time, and as Jim suggested, in private markets, particularly private equity, it had been almost 30% of the -- software has been over 30% of the market for a decade. Software is still an amazing business, but you may not like the purchase price at which you entered because you get to now look at the same companies down 50% to 70%. And that's the public companies. And I have to believe the private markets with leverage will go down equally as much. And so I expect that we will be, along with a handful of other managers, prettier, than we have been historically.

The other thing to think about is so much of the conversation has taken place around the alternative bucket. And what we see, the vast majority of growth going forward is going to take place outside of the alternative bucket. Some of the wins in fixed income replacement, some of the wins into PRIV, some of the wins into AAA are institutional. And we see -- and I think you will see an acceleration of the institutional business going forward.

I'm going to belabor this a little bit because this will be a theme across our business. Going back to the 6 markets, the first, of course, is the institutional alternatives portfolio business. The second has garnered most of the attention, which is the wealth business. But if you think about the other buckets, insurance, that's an institutional business. If you think about the debt and equity portfolios of institutions, that's an institutional business. The serving of traditional asset managers is an institutional business. 401(k), while we think retail is making a choice, it's actually not. It's an institutional business, because it's being made primarily by trustees and by consultants and by other forms of gatekeepers.

I think you're going to see a change in the dialogue amongst the managers of private assets as they fully embrace this, which is not that wealth is not important, not that it's not going to grow. It's just the most visible. These other markets have every bit as much opportunity. And I continue to come back to the theme I've been on for quite a while, our business at the end of the day will vary from quarter-to-quarter, but it is not ultimately constrained by capital. There's plenty of demand for private assets. What it is constrained by is the ability to originate things that are worth buying. We are so focused on getting this origination side, right, not just in terms of volume but with a principal mindset where we're originating risk we are prepared to own, turns out clients like when you are side-by-side with them as opposed to selling to them.

I'd also add, I think there's -- I'm taking a step back here, but so much of the conversation in the last several weeks has been about a quick reset of prices in the public equity market and then the impact to non-investment-grade software lending, which has been particularly focused well by the nontraded BDCs. We put out a deck in December and all the conversation recently has been about the narrow sector, the $2 trillion to $3 trillion of private credit, and it's really not touching the $35 trillion to $40 trillion opportunity in investment-grade private credit.

In the last 18 months, short duration IG vehicle, a strategy we really started 18 months ago, is up to over $7 billion in assets. And again, that's private investment grade across the board a variety of industries. And so it just seems like the headlines are focusing on the small pond. And there's no doubt there's going to be dispersion among various debt and equity managers who have pursued growth in technology in the last several years. Our Fund XI, Fund X/XI are going to be big beneficiaries of the value versus growth mentality. But again, I really think taking a step back and really understanding how the big boulders are moving. This is a discussion when we talk about nontraded BDCs. That's about pebbles, what Marc is talking about, about boulders. It's much more thematic and it's truly what's driving our business over the next 5 to 10 years.

The next question is coming from Patrick Davitt of Autonomous Research.

I have another question on the total portfolio changes. And I agree that that could be a big opportunity for alternatives and specifically Apollo. Big step last year with CalPERS announcing their shift. So curious to what extent you're hearing other large pensions planning to follow suit. And how quickly do you think we'll start to see meaningful reallocations of that capital around the new approach?

I would just say it's really important, when Marc laid out the 5 additional channels, the speed at which they all individually and collectively adopt is going to be start-stop. The public institutional marketplace is not known to be a business where those who are in charge take historic institutional risk. And so it's going to be measured. It's going to be -- that's why we're focusing on all 6, not just one.

But I'll give you one example, like the conversations that have been going on in the industry, and in particular with us, with our Apollo Sports Capital, those are areas where institutions are trying to figure out where the opportunities are, not in the narrow definitions of asset classes. What we've done in the insurance, Athene, Sidecar ADIP, those are all areas where institutions have said, how can I make sure that the normal definitions of equity and fixed income traditionally are not going to limit my ability to perform? And I think whether it's family offices, whether it's institutional buyers, whether it's those, the traditional asset managers, they're all trying to find areas outside the norms of the boundaries, and that's what's going to drive this over time. It's really about how to create better risk-adjusted returns and not being a prisoner to the barriers of adoption in terms of your mandate.

If anything is going to speed it up, Patrick, it will be volatility. Public market volatility is ultimately a significant imperative, we're seeing an accelerant to people's changing up mindset. Trustees and heads of plans who have watched assets grow, pretty consistently over a long period of time, get a little bit of shock when they see the kinds of volatility in their portfolio and in public markets, and they look for the same return or more return but with less risk.

The next question is coming from Bill Katz of TD Cowen.

I wanted to maybe tie some big picture, some of the boulders together, to use Jim's analogy. I like that one. Could you talk a little bit about where you might be on the origination opportunity clearly running, what, 4 years ahead of schedule already, how that may influence the opportunity set in ACS? And then maybe how we should think about the margin profile as we look into '27 and '28 FRE margin profile.

Great. So I think, Bill, the way -- you just went and answered that, is if you look at the $305 billion last year, $245 billion was really North America: $40 billion Europe, $15 billion, $20 billion in Asia, we're taking this strategy global. The answer to your question, big picture, is we're going to take a very successful strategy of integrating origination to every aspect of our business. We're taking it global. And we're going to make sure that in Europe and Asia Pac, that the same tools, the same partnership, the same platforms are executing in that part of the globe. But we're really focused on quality as well as scale. We certainly have shown an ability to originate scale, but it's really growth with intention. And so I want to make sure that we're not overemphasizing the growth in this point. We have a ton of robust yield, robust spread, and that's what we're trying to do.

So in my mind, it really is the globalization of the strategy. And it's also into these ecosystem activities like you see in Apollo Sports Capital, I would suspect to see a handful more of those ecosystem strategies where we can be completely relevant in terms of the cost of capital and the toolbox to the companies embedded in that ecosystem.

And why it works so well for sports is very simple. It's one where the quality of cash flows are not in a regular manner. They are regular cash flows. There's been a tremendous amount of growth in valuation. There's a limitation to the actual funding and lending in the area as many so many have focused on the equity returns. And so we're just finding with a holistic toolbox, like we did for sponsors, there's a great deal of reception. So the answer is global. The answer is focusing on quality and as well as scale in these focused ecosystem strategies.

I'm going to just take the liberty of maybe going off-piece a little bit. We've seen over the past month or so a number of acquisitions in our industry. And I want to say that from our point of view, if you think about where our business is going, it's all about origination and having the product and then building the capabilities to serve 5 markets, that we've never served before as an industry. So all of the firms were built to serve the institutional alternative bucket, draw down funds, product-specific sales forces, relatively slow moving, fine with quarterly marks.

These 5 markets are totally different. You're seeing some of the firms build out significant wealth strategies. But you have yet to see the rest of the industry build out to serve the other markets that are now available to us.

And so when you think about what we're trying to do, we're trying to make sure that we don't grow too fast, that we can only grow as fast as we originate. Therefore, if we want to grow, we have to originate that scale in quality. At the same time, we understand that every time you buy something, it comes with people. And integration on a cultural basis is very difficult. And so unless something is exceptional, we just prefer to build it ourselves.

Sports Capital is a really good example, not to say that there are not -- there's not value in acquisition, if you need to. But the ability to put a team on the ground in an industry that is very valuable, growing very fast, that produces uneven cash flows, therefore, is not industry to bank or for public markets, in addition to deploying the $6 or so billion in the Sports Capital fund, I believe this ecosystem will generate $30 billion to $50 billion of origination opportunities. I think you are more likely to see us grow, as Jim said, globalizing what we have and then building organically the platforms that we need to, to penetrate industries that require specialized knowledge and deserve a specialized pool of capital.

And so we often say the strategy here, let's look through the windshield, not through the rearview mirror. We have so much white space in front of us. It's up to us to now prepare the business, not just to hit the 5-year plan, but for what comes next.

And Bill, let me address here you're talking questions on margins because it's important, obviously. So you should expect a FRE margin expansion over time. And we're always balancing, as you know, investing in new capabilities to build the platform with extracting efficiencies from the current business. So I would think something like 100 basis points annually as we go forward, that's sort of the guidepost that we set for ourselves, with the puts and takes netting into that.

The next question is coming from Michael Cyprys of Morgan Stanley.

I wanted to ask about fundraising. You've had a very strong year in '25, about -- over $180 billion organic inflows. I think you mentioned you're targeting $150 billion on an annual basis. So just curious how you think about the outperformance this past year relative to that $150 billion guide. To what extent does that make sense? What might be areas where flows could be slower, I guess, if that does make sense? But then at the same time, it sounds like you're pretty confident in '26, maybe even being better, particularly in the Athene. So maybe you could speak to the confidence there. What you see contributing? And maybe you could elaborate on what's in the kitchen in terms of things that might be rolling out.

Yes. So Mike, I would say we feel like we have a tremendous wind in to our back across the -- let's separate Athene and Apollo Asset Management for a moment. On the Apollo Asset Management side, global wealth prime for continued growth. And on the institutional business, we do have Fund XI in the marketplace. But also when you think about the product set of the asset-backed ecosystem, the hybrid ecosystem, Sports Capital and such, we believe that this year will be the strongest year on record for us in that area. So we're unambiguous about our ability to outshine on the Apollo Asset Management side.

Again, on the Athene side, strong numbers across their 4 channels. We expect that to replicate it. So when you do -- when you add those 2 together, we're solidly north of $150 billion again for the Apollo and Athene side in collective shape.

I would say we feel like we're actually grabbing our fair share in a variety of asset classes that we had not done before. When we think about our whole fixed income replacement product suite, things like the short-duration IG vehicle, core IG, the asset-backed area, amongst many, we're just seeing a variety of ability for us to pick up. And again, that's the conversation we want to be having with this group. As you talk about private capital and private credit, the natural tendency is to focus on the small noninvestment-grade $2 trillion pond. I urge all of you on this phone call, focus on the $40 trillion. That's the opportunity set. That's what's driving volume. That's what's driving profitability. That's what's driving scale.

And so I know it's great headlines about the software bump in the road. But there will be dispersion, but there's a bigger, bigger picture and don't miss that.

The next question is coming from Ken Worthington of JPMorgan.

As we think about performance fees for 2026, you highlighted in the deck that 2025 was light in part to sizable PE and hybrid activity that was prudently delayed. With market conditions better, can you help us think about your pipeline of deal activity should market conditions remain accommodative, and how you see this flowing through into carry and performance fees?

The most unpredictable part of the earning stream, that's the multiple, Ken. I think we see the optimism in the marketplace, particularly with the bank community. Activity levels are high. There's different ways to exit assets. Going through a public process is one, and private processes are more complicated. So I would say we are more cautiously optimistic as we sit here now about the year ahead. But it's difficult to predict. And so it's -- that's why we have anchored ourselves to a long-term guidepost around [ PAI ] of [ $500 million]. That remains our target. But it's not going to be a straight line clearly to get there.

I'd say this in the portfolio. Fund X, which is the most recent fund is already 0.3-plus DPI versus an industry that rounds to 0. At the end of the day, when you buy things at reasonable multiples, you can sell them at reasonable [ multiples]. That's what we've seen and that's what we've experienced, that's what I continue to experience. We are not stuck with a portfolio of things that were purchased at very high prices that now have been reset in the market where they're going to go into perma hold. We're in the business of creating value and moving it out. If the market is accommodative, we're going to make it happen. The market is not accommodative, we will, I believe, do better than everyone else.

I would just add this, our performance in '26 is not going to be market-dependent on the equity market or the equity capital markets.

The next question is coming from Ben Budish of Barclays. .

I wanted to ask maybe a 2-parter on just some of the dynamics going on in Athene. I guess, first, in the pension risk transfer segment, it looks like there's been some positive momentum with a number of the cases out there. Any thoughts on your expected contribution from that channel in particular in '26? Or does that require a little bit more time? And then just curious your latest thoughts on competition in the retail side, it feels like 3 or 4 quarters ago, that was a bigger issue. It doesn't seem to have -- been bearing its head as much more recently, but similar, high-level thoughts on the current state of competition in that channel.

So the volume targets for '26 are not dependent on PRT picking back up. You're right, the legal situation around PRT is improving. However, this is all about spread. We do not underwrite the volume; we underwrite to profitability. If you underwrite to profitability, you get to keep doing business. So I think we have more than enough at bats, lots of new initiatives, broad distribution. I believe the target we've set out, which is roughly $85 billion, will be the target that we deliver. Demand for retirement products is off the charts, but it has to be done at a margin that makes sense.

In terms of competition, we continue to see interesting competition in some of what I would call the lower-quality broker channels, which are not as credit dependent. As I've warned on prior calls, the business is only about earnings spread. Spread is created by having an asset origination machine, by having a liability origination machine at a low cost and by having a low OpEx. Most of the companies competing in this industry, including the established players, with very few exceptions, do not have origination of appropriate assets. They do not have a low-cost liability -- [ factory], and they do not produce at an efficient level. The only way return can be achieved is by giving away asset management fees and by moving the business offshore to Cayman, to places like that, that do not require capital.

This is not a recipe for success. Ultimately, I believe that will end badly, hopefully not badly for the industry. And I do not believe that many of these firms will hit escape velocity, because they will ultimately need to come back on more capital.

Athene is a really tough competitor. And as Jim said, this is something we've worked on for the better part of 15 years with Athene to put it in a position it's in. I like our chances. Martin gave the guidance for '26, and we're working hard to achieve what we've said we're going to do.

The next question is coming from Wilma Burdis of Raymond James.

Just following up a little bit on the last question. We did see a -- it looks like an improvement in PRT volume for the first time in 2 years. Maybe you could go into a little bit more detail there. And then as sort of a second part of this question, if you could talk a bit about the [ FAB ] environment and the lower flows there. And any drivers, whether it's credit spreads or anything else you're seeing in the market?

So again, this is a story of assets and of liabilities. On the asset side, it's all about the capacity to originate. As Jim suggested, this year was a very strong asset origination year, which led to the outperformance of the target. I expect based on what we've seen thus far, '26 to be an equally strong asset origination year, augmented or, I should say, protected by the ARI transaction, which will give us some initial excess flow early in the year.

On the liability side, having multiple channels is a godsend. There are places sometimes you don't want to do business. I personally don't think we've missed much in PRT over the past year. Not only have there been fewer transactions, but the spreads on those transactions, when one ultimately shines a light on them, are poor. Winning business is not about volume. Winning business is about capturing profitability. At every point, we're offered the opportunity to do something that's expedient versus something that will build the book of business over the long term. Having a principal's mindset is a very, very healthy way to run the business.

The next question is coming from John Barnidge of Piper Sandler.

My question is focused on being on the offense. If we can go back to software, digging on that a little bit more could be interesting. Maybe is it private equity, credit, both? And kind of what areas of software do you find appealing?

Yes. I'm just going to answer that generically. We've historically -- if you go back in our 35 years, whenever there's an over-allocation of capital, we tend to be defensive. And whenever there is a withdrawal of capital, we tend to be on our front foot. If you look at the brief pricing that's happened very, very quickly in the equity market, the valuations are certainly lower, but they're not cheap. They're still very, very high from an earnings multiple and such. But many companies had plans to either grow because of organic cash generation or equity origination, and those companies may not be able to do so.

So there's no doubt that our screen of opportunities from the world of equity, particularly from the world of hybrid and, in some degrees, in the world of credit, we are as busy as we've ever been because there will be a dispersion of returns. Some business models will continue to thrive. Some will be more challenged. But what Marc talked about earlier, I'm just going to remind folks on this call, you had companies in this sector that were priced or purchased or valued at 15x revenue several years ago, maybe even 20x revenue, and now they're trading at 12 to 16x earnings. And so there's a very large difference in that valuation gap. It doesn't say they're not good companies, but the growth trajectory and the capital availability of them to acquire capital to grow was changed.

So yes, there's no doubt that we're going to be much more on the offense, but there's nothing that's going to happen tomorrow that we're going to announce. This is just more of a dispersion over time and plays into how we want to be a real partner, whether it's a sponsor community or the corporate community as they need capital.

The next question is coming from Brennan Hawken of BMO Capital Markets.

I just had a couple on spread within SRE. I want to follow-up from Mike's question. You spoke to the 50 to 75 basis points greater spread versus new issue. But how should we think about that on the net spread as you reported? We appreciate that it fits into the 10% total expectation for the year. And also maybe a bit more broadly, how should we think about the cost of fund side? It sounds like there's a great deal of optimism on the origination and the asset side. Cost of funds though has steadily gone up. We hear about competition in some of those markets. And so is the expectation that the cost of funds increases will stop? Or is it more around the ability to outpace it on the asset side?

So it's Marc. I'll give you a business side and then Martin will dig in a little bit. Cost of funds is ultimately a function of bond yields. Historically, it's that, it's moved around the BBB corporate spread. Having said that, in individual channels and individual times and individual quarters, tightens are loosened.

We run a business that is competitive in the marketplace with the highest-quality companies and liability side spread in mainstream markets are market-determined. Most of the new entrants who are paying significant premiums for their cost -- in their cost of funds, and you can see this in any industry publication, are in the broker channel. And so it will not surprise you that as a percentage of our business, we do less in the broker channel.

At the end of the day, the ability to have a low OpEx and higher-than-average asset spread allow us to win a fair share of business that we want to win, and we want to win it in a mix. We want some long-dated business, some short-dated business, some policyholder dependent business, behavior dependent business, some nonpolicy-holder dependent business. And ultimately, as I suggested, this iteration of the business of the retirement is a fascinating business.

Retirement products are in amazing demand. Having said that, the next leg of this business is not the product set that exists today. It is creating the product set that serves the needs of retirees that is simpler, easier to deliver and that relies more heavily on the things [ we do well ], OpEx and the origination of spread. Building out unique or less traffic liability channels is something that we're focused on that will be important not just over the next 5 years, but for the 5 years after that.

On the spread question, Brennan, we operate the business on a net spread basis. So the cost of where we write liabilities and the associated cost of funds is connected to where we can invest against that. And we create a net spread, which after costs and [indiscernible] return on an equity basis gets to a mid-teens return.

So in terms of guidance, we were quite specific at the November Day on where we expect the spread to come out, assuming alts are at 11%, and that was 120 to 125 basis points. That's what we printed for Q4, at 124 basis points. And given the comments that we've made about ARI earlier on the call, I would assume that the same holds through for the year. So in the 120 to 125 ZIP code on a reported net spread basis and where we write the business and we invest against it.

The next question is coming from Brian Bedell of Deutsche Bank.

Great. Maybe just shifting to the 401(k) market, Marc, if you could just talk about what kind of progress you're seeing in the DOL and for plan sponsors in terms of their appetite to adopt alternative products. And then if you can add in your strategy with collaboration with different managers. You had the Schroders announcement this morning, obviously, Lord, Abbett and State Street as well. Should we expect more of the types of announcements? Or do you view yourself as sort of an open architecture collaborator, if you will? Or do you feel like you've got the partners you need for the future game plan here?

So let me work backwards in this. We are open architecture, and we are a product supplier to numerous traditional asset managers, particularly through our ACS business. That is one level of collaboration with traditional asset managers. The next level of collaboration is the creation of a partnership and the serving of joint -- creation of joint product. I think you're starting to see that, and in a couple of partners, you've [ mentioned it]. I think we're going to continue to see that blossom.

Having said that, we're all learning right now. And what has to happen in the business is we, as an industry, we need to adapt our business to the way traditional asset managers work. Moving your business to daily NAV is a big deal for our industry. We are in the process of moving, as I suggested on our last call, particularly our high-grade credit business, to daily NAV. That is an unlock, providing liquidity in markets, which many in our industry have spoken against, is an unlock for traditional asset managers.

And so I expect, and I've said this previously, I think traditional asset managers done well could be the single largest opportunity, and I expect them to be among the largest buyers. Some of that will be in the existing mutual fund complexes and ETF complexes. Some of that will be through new products. And some of that will be through 401(k).

On the 401(k) specifically, the big volumes in 401(k), in my opinion, are not going to come until there is a rule making or at least guidance that will give more clarity to the executive order that has come down. Having said that, Jim and I are the recipients of numerous call reports. If I had to give you my e-mail inbox, the amount of activity taking place in D.C. in all its quadrants is just off the charts. Every conference, every industry get-together is literally just overwhelmed with the discussion of private assets, and for very good reasons. The addition of private assets to a portfolio, given the length of time these employees will be in these plans, are 50% to 100% better outcomes.

And the other interesting piece of this is, and not so much focused on in the executive order, is the opening of 401(k) to guaranteed income, particularly guaranteed lifetime income. We moved as a world for something that was really good for employees. We've moved from defined benefit. Employees loved it, guaranteed lifetime income. Companies hated it. We then moved to a world of defined contribution, where all of the risk was essentially on the employee and not on the company. It's been great for companies, but not so good for employees. Most employees have not made a proactive investment decision within their 401(k) ever. They are guided by the alternatives provided by the trustees of that plan.

I believe the world we're heading to is a more of a hybrid world, to use a term that we use a lot around here, where we will end up with something that looks more closely to defined benefit, but will not be provided by the employers. It will be provided by the marketplace. Right now, we're in the baby step space where every day we're making progress. It will be north of $1 billion this year. It might have even been, I don't have the number in front of me, north of $1 billion last year. But I can see it taking shape.

And just like the comments around traditional asset managers, these people need to be not just daily NAV, they need to be daily liquid. The ability to do this, the ability to create the structures, the ability for our indices, not just for us, to adapt our product set to serve these markets, in addition to the rule making or guidance, is going to be what unlocks this opportunity. But you can hear from what we're doing and from the comments around margin, we've gone from a business with 1 market to 6 markets. The problem is where the opportunity is, 5 of those markets require different product set, different delivery mechanisms and different surroundings in terms of daily NAV and liquidity. And how fast our industry and our firm pivots to that is going to be how fast we're able to grow, along with Jim's comments around origination at scale, but with quality.

At the end of the day, the thing that is not changing here, we come at this business with a principal's mindset. Whether you are an institutional client, a retail client, a 401(k) client, an insurance company client, you are side-by-side with us. We're eating our own cooking. It keeps us really focused on the quality of what we do. There is no amount of fee that we can make from an asset that will overcome a bad principal decision. We reinforce that every day. It's why we're going to be on offense in software. It's why we have the opportunity set we have today. I couldn't be more enthusiastic.

Thank you. That brings us to the end of the question-and-answer session. I would like to turn the floor back over to Mr. Gunn for closing comments.

Great. Thank you, everyone, for joining us this morning and for all your time, your spending with us. If you have any follow-up questions, as usual, please feel free to reach out on anything we discussed. Thank you very much.

Ladies and gentlemen, this concludes today's event. You may disconnect your lines and log off the webcast at this time, and enjoy the rest of your day.

Okay. Well, great. Good morning, everybody, and welcome to the second day of Goldman Sachs Financial Services Conference. I'm Alex Blostein, and I lead the capital markets research here at the firm. We really appreciate everyone's time, attention. And hopefully, today is going to be just as productive and as informative as yesterday.

To kick things off, it's my pleasure to introduce Marc Rowan, CEO of Apollo, one of the leading global financial services companies with robust capabilities across private markets and insurance. 2025 is shaping up to be another record year for the firm, and based on recent origination and fundraising activity, Apollo's momentum into 2026 also appears quite robust. So thank you, Marc, as always, for being here. It's a pleasure to have you here.

I think there's plenty to cover. So we'll just jump right in. Perhaps not surprisingly, my first question is probably going to be around private credit. And while I think you and many of your peers have addressed this at length really over the last couple of months, the market still continues to be a little jittery on this topic. So first, and I guess acknowledging that Apollo's activity is actually an investment-grade space for the most part, I'd still love your perspective on current state of private credit markets broadly. How are these headlines impacting LP appetite? And as part of that, maybe we can talk a little bit about the BOE and what the regulators are trying to do in sort of stress testing and how helpful might that be to the marketplace?

So look, we live in, I'll call it, mediatization of financial markets. And one of the things that's been frustrating to us is we have this term private credit and no one actually knows what it means. Everyone uses it differently. It covers a broad range of asset classes. And as I suggested to you before we came on, you're going to get a Christmas gift from us. It's going to be a giftwrap book. It's the definitive book of private credit. It will be on our website. So all of you will have access to it. And the first page says, why are we getting this wrong? Well, first is no one knows what private credit is, so we have to define it. And the second is people misunderstand private credit in the sense they don't understand the difference between a bank and an investor. So let me start from the investor point of view.

Private credit direct lending, levered lending was a better business 4 years ago. It was a better business 3 years ago. It was a better business 2 years ago. It was a better business last year. But I also wanted to buy Navidea 4 years ago and 3 years ago and 2 years ago, and this is all about relative value. If you have an opportunity to move your money out of a high-priced equity market that is concentrated around 7 stocks and earn roughly long-term equity returns for first lien risk, that is a derisking trade for investors. That is what we're seeing. And when people say, well, there's risk in private credit. Of course, there's risk in private credit direct lending. We're lending to BB companies. Some number of these companies will default. But it's a fraction of the risk of equity, and it's a fraction of the risk of public high yield.

So this is always about alternatives. People are not moving their money out of their treasury portfolio and into direct lending. They're moving it out of equity. And so what -- I think the market broadly does not understand is this is a derisking trade for the market. And I think the derisking trade is going to continue, particularly around equity volatility so long as private credit returns are good. Will there be defaults? Yes, there will be defaults. There have always been defaults. Will there be defaults in high yield? Yes, there have always been defaults in high yield. Not much has changed other than this media lens because what they're seeing is an overlap of "private credit and financial institutions." And that's now the divide. Most of what is inside of financial institutions, be it a bank or an insurance company, is investment grade.

So let's talk a little bit about that. So when you think about the growth opportunities for Apollo, and you made that point a bunch of times, we talked about it on the way in as well, origination. That's really the source of growth for the firm. So when you think about your recent trends, you've delivered really strong origination volumes for 2 quarters in a row with pretty stable spreads, I think, over 300 basis points over treasuries. You've effectively achieved your 5-year targets in the first year on that front. Maybe you're talking about...

You know what that means, of course, they just sandbag the target.

I've heard that. I think I've written that probably as well. Maybe I haven't used that term exactly. But let's talk about what's driving the strength so far? And I guess, looking ahead, when you look at areas that you're most excited about, what does that sort of look like? And what are some of the more emerging capabilities on the origination side that you think will be contributors over time?

So I'll say this. We've been highly focused on origination because we were -- we needed this 17 years ago for our balance sheet. And so we got a big head start on this whole notion of origination. And I think you're going to hear a lot today and if -- and hopefully, people understand, origination is actually the entirety of the business. There's almost nothing else. Yes, there's distribution, there are short-term trends. This is an origination business. The difference between a traditional asset manager and a private asset manager is a traditional asset manager, you give them any amount of money, they will invest it at the market. A private asset manager can only invest as fast as they create, originate.

And so we have been hyper-focused on origination. And we have yet to achieve in the public consciousness this pivot from judging us and judging our industry, not so much on the capacity to grow AUM, but on the capacity to find assets that are worth buying. And so we originate 3 different ways right now. One is we have built a series of platforms, some $12 billion invested now of 5,000 people. That originate granular risk the way AGE Capital used to originate granular risk pre-financial crisis. The benefit of originating granular risk is you end up with higher rates of return and better control of collateral and better control of structure. And so platform origination is almost always our highest quality form of origination.

The second is direct origination in the corporate market around the world. The demand for capital for -- from this global industrial renaissance that we're going through is just off the charts. If Microsoft wants to borrow, the cheapest place for Microsoft to borrow is on their balance sheet, drive by deals, low spreads, any amount, any day. That's not what's happening now. When you're doing data center deals or you're doing power deals or you're building a new defense plant or new manufacturing or infrastructure, these are project finances. Project finance does not generally go to the bond market. When you're talking about project finance in the broadest sense, if it's short dated, you're going to the banking system. The banking system is by far the most efficient place to go execute. If you want something long dated, you're generally coming to the private market. And what's happened is the scale of what we're doing is just off the charts. And everything that we're doing in the U.S., Europe wants to do and is less capable.

And so relative to the size of the private market, we're seeing this massive need for capital that is mostly investment grade, that is mostly secured, that is mostly project focused, that, at the end of the day, ends up as a credit derivative of investment-grade balance sheets, just not on balance sheet debt.

The third way we originate is with the banking system. The banking system has figured out that levered lending aside where the two, private and banks, are competitors, small market. But everywhere else, the banking system has figured out that we don't want their client because we can't monetize that client in any way. We don't offer advice. We don't offer M&A. We don't offer hedging derivatives, foreign exchange, custody, credit cards or any other service, all we want is the loan. And the bank balance sheet is ideally suited to do things that are short dated and highly rated. Our balance sheet is terrible for short-dated, but really good for long. And so we have now more than 20 areas of collaboration with different banks of different sizes to originate. But origination of risk is the limiter of growth in our business, not in the short term because in the short term, you can raise all the money you want, but eventually, if you don't invest it well, your franchise is diminished.

Can we double click into one of these areas, really financing the AI boom. And as you -- the way you and your -- many of your peers had described like this global infrastructure renaissance and that the demand for capital effectively has never been greater. At the same time, there are building concerns around valuation levels and the fact that maybe perhaps too much capital is starting to chase some of these opportunities. How are you navigating these dynamics? And I guess when you think about some of the bigger risks in the AI ecosystem, how would you frame that?

So it's going to be across not just AI, it's going to be across everything right now. There is a difference between a principal's mindset and an agent's mindset. If you are an agent and you are originating anything to do in AI and data today, you have 100% confidence that you can distribute the risk. And we're seeing some of that. If you have a principal's mindset and you're going to own the asset for a long period of time, you look at everything through a different lens. So if you now drill into the notion of AI and data centers, what are we really talking about?

Anywhere we go in the world, heavy users of compute, you ask them, what do they need to move faster? And the answer is always the same, more compute. When are they going to get more compute? No time soon because there are natural limits and there are energy limits, and there are regulatory limits and zoning and everything else. What does that tell you as a credit investor? Wearing my credit hat for the moment. It tells me that the risk I'm prepared to take is lease-up risk. The risk I'm not prepared to take is renewal risk. There's a chart on the wall of my office, which is the projection of energy usage in 2030, not -- and Bain, McKinsey, every great firm, the spread is like a child throwing darts.

If the experts in this have no idea on energy use, much less chip use, compute, the impact of quantum, do I really want to with, my credit hat on, take renewal risk? No. And so this is now, I think, the bifurcation of how you think about AI and how you think about data. With your credit hat on, if you -- there's plenty to do without taking renewal risk. With your equity hat on, initially, you were able to get equity returns inside of a nonrenewal period. That's no longer the case. You are now making fundamental bets on renewal. And I don't think that's either good or bad, but they're bets and there will be high volatility in outcome. And so let's make sure we're looking at this through the right lens.

Credit is credit and the best you do is get paid back. Therefore, it is not a great place to speculate on renewal. Equity has the volatility of upside and the chance of losing everything. And yes, you can lose it all and prices are high. And I think there will be both great fortunes made and lost in the equity of data centers.

Let's talk about fundraising for a little bit. You guys obviously have been doing incredibly well on the origination side. That's driving really strong momentum on the fundraising as well. Embedded in your 5-year targets, I think really continuation of that particularly when it comes to credit management fees. Maybe talk a little bit about sort of sources of demand that are driving this growth, particularly from third-party institutional investors? And how perhaps you've seen the mix of clients and products that they're looking for evolving over the last few years?

So the client base broadly, particularly institutions who now have been in this market the longest period of time see pretty much what I see. We had one buyer of private assets for almost 40 years. And that buyer was the alternative bucket of our institutional clients. And when something is an alternative, you want really high rates of return, you want to watch it closely. You don't want it to be that concentrated. And that sustained the entirety of our industry for almost 40 years. Then we got the second thing called retail, wealth, and that is now going to double the size of the market. Then we got a third thing called insurance companies. People watch what we did and understood that the ability to own certain types of private assets inside an insurance company made sense. Three markets. Then we got a fourth market, which are institutions looking at their debt and equity bucket, understanding that private no longer meant alternative, that private was just private and could be investment grade or not. Then we got a fifth market, accelerated by BlackRock's purchase of HPS and Preqin, which are traditional asset managers who are looking for the next thing because active management has not been a great market, very difficult to sustain performance in active management, and they are hoping that the blend of public and private will help produce returns that beat indices.

And then I think we're going to get a sixth market already indicated by the executive order in 401(k). So I see a building source of demand for our assets. And I come back to, over the short term, fundraising is really important. Over the medium term, I don't think it's going to be. I think we're going to figure out as an industry that we are not ultimately limited by capital. We are going to be limited by our capacity to originate risk that is worth originating.

Any asset we originate today has multiple buyers, multiple times over. And that's the reality of where we are. And so fundraising is a derivative of our capacity to originate. The fact that we're at our 5-year target tells me we're -- so long as we sustain it and grow it, we should be able to fundraise as opposed to the other way around, which is how most of the world still thinks about asset managers, which is you raise the money and then you go find the asset. And I think when you see the evolution of our business in '26, as we peel back more and more layers of what we're doing, this notion of asset driven rather than fundraising driven business, I think it's just going to become clearer and clearer to people.

Yes. That makes a lot of sense. Why don't we spend a couple of minutes on the channels, the wealth market being obviously one of the more important growth drivers for you guys and the industry broadly. Apollo is making great progress here running at about $20 billion on annual -- in terms of annual flows. EDF, your direct lending fund has probably been one of the bigger drivers of that. A couple of questions there. How have the media kind of barrage of headlines around direct lending, impacting financial adviser appetite for your product and direct [ lending ] products broadly? And how do you think that the sort of $20 billion pace of wealth flows will evolve over the next couple of years?

So let's start. I think wealth is going to grow. I think we're at the beginning of a really long trend. Headlines obviously have impacts. But I think we're going to see, and I think we will benefit from a more of a flight to quality. We have positioned ourselves in the wealth market, particularly as it relates to credit as less levered, no PIK, 100% first lien large companies. That does not result in the highest dividend. We proudly say that. That's not the business we're building. If I wanted the highest dividend, I would be more growth, more PIK, more subordination, higher leverage. These are just choices. And to date, investors have not had -- and advisers have not had to figure out which firm is which. They're just all private markets firms.

I think moments like this will help us define in the eyes of the advisers and the eyes of investors who we are as a firm. But I think -- and I want to -- I'll say this with the most respectful tone, I think we're looking at it on a really short-term basis. We are -- we and the other large firms are beneficiaries of a trend today, which is wealth. And the reason we're beneficiaries is people are buying wealth products like stocks and bonds of old. And only the large firms have the capacity to create the systems, the infrastructure, the support necessary to do this. I don't think that's the last stop though.

At the end of the day, I think no one buys stocks and bonds in the public market anymore. They buy exposures. I think they're going to buy private market exposures. And the moment we switch from buying it like stocks and bonds to buying exposures, I think the growth in our industry is going to accelerate because each individual sale is an individual sale. The moment it becomes a 10% or 20% or 40% allocation, it's going to go through the roof.

Now on the one hand, that is not going to -- that's going to reduce the power of the large firms that have invested in infrastructure. On the other hand, it's going to put power in the hands of firms who can originate. Everything in my opinion, will come back to your capacity to originate risk.

The channels, and I said this to you walking in, I would bet that we will do more volume next year in 4 trades with traditional asset managers than we will in thousands of trades in the wealth channel. We're so fixated on wealth because it's just the thing that's in front of us as opposed to stepping back and saying, there are 6 markets. Each of those markets is in different stages of maturity. They're all going to go through their own change. There's fundamentally good demand. This is ultimately about product and origination. And I think brand is going to be important for a period of time, but I think brand as an investor is actually going to become more important.

You spoke a little bit about that on the last earnings call as well. So maybe we can drill down into the opportunity you're seeing with traditional managers. On the one end of the spectrum, I totally get it, right? Like this could enhance returns for a lot of the traditional products. There are limitations, most [ 40th punk ] can only own up to 15% of liquids, most will probably not go quite that high. How do you, I guess, envision the commercial model for something like this working? And how do you, I guess, expect that part of the market to develop?

So we -- if you look at every -- I'll say it slightly differently, and then I'll come at the market. Put yourself in our shoes. If you think of this -- if you think of our industry as limited by assets, we should want to put our assets -- first, we should be diversified. The second is we should want to put our assets where we realize the highest net fee. And the third is we should want to be where money is sticky. So we don't have to keep doing it, and we have good stability of flows. If I think of it in that basis, it kind of gives you the revenue model for traditionals. The serving of individual clients, whether they are institutional clients or wealth clients is actually quite expensive. To the extent we are relieved of that, should I be willing to share some amount of the top line fee with the traditional, of course, I should. I'm interested in running a net profit business off of assets that are stable. It will be interesting to see whether, in fact, those assets become stable. 15% in a mutual fund bucket, if most mutual funds got to 10%, do the math what that would imply for this industry.

We, as an industry, cannot originate enough to serve all 6 channels. I believe we are heading for a world where there is more demand for quality private assets than there is supply of quality private assets. I think over time, that will generally give us some amount of pricing power so long as we originate good risk. And we will be very careful not to abuse that pricing power because we will want to do it with people who are partners over cycles and who are easy to serve. In the institutional market, I believe we will have fewer clients in 5 years than we have today. And those clients will be larger, they will be more partner like. In the retail market, I believe that we will be -- end up in a position where the big wealth firms probably don't sell individual products. They sell blended products of multiple exposures. I'm all for that world, although I'm a beneficiary of the world that exists today.

In insurance companies, there is nothing, but demand because assets that historically insurance companies might have seen spread in CLO, spreads have completely and totally compressed, and there is no mean reversion. You look at our book, and we were very -- we benefited greatly from this. We had a $40 billion CLO book. That book has run down to $30 billion, and my guess is it will run down to $20 billion. Spread is just not attractive in this market. Insurance companies worldwide are desperate for assets that offer excess return per unit of risk. You cannot run an insurance company successfully and profitably if your only access is what exists in the public market or what is readily available like CLO in the private market. Traditional asset managers just getting started. And if 401(k) happens, which I believe it is going to in some form or fashion, I think we're going to find out very quickly that our bottleneck is origination.

Yes. Let's play this out a little further. So as the end market evolves the way you sort of envision it, and obviously, we've seen that already with individual investors, insurance companies, maybe traditional asset managers, what are your expectations in terms of private markets becoming more of a tradable asset? And what role do you see Apollo and perhaps some of your peers playing in that ecosystem?

Well, we have -- like in every market, we have people who resist change, and I believe change will be visited upon them, and then we have people who are embracing change. I have never seen a market that has become more liquid and more transparent that shrinks. I think growing the market is good for our business because it creates more demand for private assets and that gives more power to the originator. That's it. It's no more complicated than that. And if you're running a business where lack of transparency, lack of liquidity, stability of pricing in a fictional way benefits your business, you're running a short-term business. This is ultimately not going to survive light of day. And so you look at the decisions we've made -- well, I'll go back in history. We don't -- like we have this market, which is the closest analogy to what's happening in private markets called broadly syndicated loans. Broadly -- why broadly syndicated loans trade? They're not securities. The notion that a broadly syndicated loan could trade is a relatively new phenomenon. These were private loans to companies. No company was the same, no standardization, no anything. One bank decided 20 years ago that they wanted to build a market, they made a market. And then lo and behold, we now have derivatives, open-end mutual funds, and we think of these things as securities, even though they're not securities.

The same thing is happening right now in private markets. It's starting with private investment grade. We -- little Apollo, I don't know, we're probably close to $7 billion of trades so far this year, and we're not even a trading firm. Like this is going to be 3x its size next year. And your firm is not going to like that we're earning widespread in this market. They're going to jump in and step in front of us because they're a better trader. And JPMorgan is not going to like that you are doing it, they're going to step in. We're going to see multiple market makers in private investment grade to start. Because what's interesting about private investment grade is most of the issuers are public companies. And you can put the Intel bonds -- public and Intel bonds private side by side. And you would not know the difference in trading volumes, in quotes, in spreads or anything else.

And so I think markets are going to trade. I think loans -- like the difference between direct lending and broadly syndicated is what? It's only whether the holder has chosen to trade it. There's no reason that it can't trade. In fact, I think you've seen in the past 2 weeks some firms lighten up their positions. And lo and behold, they wanted liquidity, they got liquidity. Will trading come to private equity? Probably not so long as it is in fund format. But will equity trade? I think you're going to see evolutions of products. And so I think the thing that we have to keep our eyes on, structures that were developed 40 years ago, like drawdown funds, are not ideal for trading. But the structures themselves are not going to survive the test of time. They were structures put in place during an intense lack of trust because these markets were not markets, they were a black art. And when you don't trust someone, you hold the money until the last second and then you give it to them and then you take it back the next day. The inefficiency of this is unbelievable, but it's custom and changing customs is sometimes very hard.

But I think you're going to see changes in how fund formation works, and that will make these products more tradable. Will they be as liquid as public markets? No, on the equity side. But on the credit side, I could see them rivaling public credit from a tradability point of view, which means poor liquidity because public credit has poor liquidity.

Right. Right. It's fascinating. All right. Let's pivot a little bit. Let's talk about the rest of your business, so private equity and hybrid. You guys have a really strong track record in private equity. You're going to be in the market raising your next vintage next year. Maybe talk to us a little bit about the LP appetite you hear in the market. Obviously, private equity as and asset class has been more challenged over the last couple of years. It's starting to get a little better. So curious your thoughts there. And then secondly, on hybrid, I believe back at the Investor Day, you talked about that being one of your fastest-growing businesses. How do you expect that business to evolve over the next few years?

So I'll start in reverse. Hybrid will be our fastest-growing business. And it just represents the best risk reward. There's just the ability to earn low double-digit rates of return with low vol, just doesn't exist anywhere else. And so it actually has gotten even more attractive relative to credit because credit often prices off of short rates, whereas things like hybrid price off the tenure, which have gone the other way. And so you have 2 phenomenas. One, the capital to companies is more attractive. It is lower cost. It is noncontrol. And that means it's in high demand. And the second is the capital formation is relatively difficult because it doesn't have a bucket. Both of those things together have resulted in hybrid being the best risk reward for the past decade. It is where most of our firm's principal capital is. It's where most of my family office principal capital is because that's just the best risk reward. And I think we're going to grow that market 3x its size. We were circa $100 billion, we'll be $300 billion in hybrid. Matt Nord, who runs this for us will be very busy.

In terms of private equity, private equity, I've said, not everyone loves this, it's not a growth business. We don't see it as a growth business. It's a 40-year-old asset class. It's an amazing business, and we run that business for rate of return. If you took your eye off the ball for the last 20 years, and you plowed in because rates were low and paying high prices, of course, you were going to have a hangover, both GPs and LPs. If you did what we and a number of other firms did, which was treat this like a 20-year asset class where you have to earn really high rates of return, you have reasonable DPIs, you have reasonable rates of return. I don't think there's any mystery to this. Private equity is an amazing asset class. It's just not a growth business. I think you will see us raise $20 billion plus, and we will go back and do exactly what it is we do.

And I think the growth you will see in our equity business will come in 2 places. One will be hybrid. And the second will be a reimagination of what private equity is as an industry. I won't explicate there. We're having a lot of fun with really stepping back and understanding what -- believing what private equity should be as an industry rather than what it is.

Great. Looking forward to seeing that.

That will be fun.

Okay. Let's let's spend a couple of minutes on Athene. You guys recently held a bit of a teach-in and really kind of outlining the growth prospects for the business for the next couple of years. So I wanted to double click on a couple of things you talked about. When it comes to originations with $85 million plus in volume targets in '26, embedded within that, and you talked about some of the new products, new structures, and really opportunities to evolve that marketplace, talk to us a little bit about what that looks like?

So we have this really interesting thing where people have lots of questions about Athene, and why you're in it, it's insurance, it's so complicated, it's capital intensive. And then we have like 100 firms who wish they were in it. And this is where I'd start. Given what we've said about origination and demand for assets, if you are building an insurance business to grow your asset management business, it's asked backwards. You should be able to sell your assets 5x over. And if you can't sell your assets 5x over, putting them in a regulated entity is not a good idea. There's a bit of risk reward. But if you think like we think that we are limited in our growth by their capacity to originate assets, the logical conclusion from that is that we want to earn more money on every asset that we originate. So getting a full fee is the beginning of the revenue stream. We want where it makes sense to earn some portion of the principal profit of every asset that we originate, that's a theme. It is a means for us to earn more money, and sometimes we own 100% of that risk. That's a theme proper. And sometimes we own 33% or 34% of that risk, that's ADIP or the sidecars that we run.

We like all the business. No, we're never going to be 100% principal because of diversification in capital. But as much profit as we can retain given that we are asset limited, we do. Now the prerequisite to that is that you earn adequate rates of return, and adequate rates of return to us are mid-double-digit rates of return. So we've earned north of 15% rates of return for the last 17 years. It comes from having good asset origination, good liability origination, low-cost structure and low vol. I don't see many people able to do that today. I see people with a poor strategic plan, which is basically we need to grow our asset management franchise because FRE is more valuable, and therefore, we're going to give away our asset management fee to subsidize the cost of getting into the insurance business. It just doesn't make any sense.

And so what people are doing is they're taking business offshore to Cayman, where there are fewer rules and fewer capital requirements. Because the business model is challenged, we've now seen 3 bankruptcies in Cayman. We will see more. I do not believe that Cayman will be a viable U.S. jurisdiction over 24 months. And so I come back to, owning more of your profit stream so long as you can own it at double-digit rates of return seems like an intelligent idea. There's plenty of demand for retirement product. And so we're kind of serving 2 markets at 1 time, which is; one, we originate assets to finance the global industrial renaissance, generally investment-grade and long term. Holding those assets unlevered by themselves would not be attractive to us. But we use that to support guaranteed income to retirees and holding the equity of Athene given that we have a perfect package of asset and liability matching gives us double-digit rates of return with low vol. It can be harder, it can be easy, Alex.

Yes. Fair enough. Well, lots more to talk about. But unfortunately, we're out of time. So Marc, thank you so much for being here. Really appreciate it.

Good afternoon, everyone, and welcome. I appreciate everyone who is able to join us in the room. And of course, we'd like to welcome many more who are tuning into the live stream today. I am Noah Gunn, and I have the pleasure of leading the firm's Investor Relations efforts.

Today, we're excited to bring you Retirement Services Business Update 2025. And while some of our content does pick up on tactical business discussions that we've had this year, at its core, we are continuing a longer-term story here, one of tremendous success, profitable growth and value creation, delivered consistently over time. Hosting this session today speaks to our ongoing commitment to educate, provide transparency and offer leading disclosure across many areas that we know the market is focused on. Of course, as we get into it, we encourage you to review our forward-looking statements and reconciliations.

And in terms of agenda, we've structured this afternoon's discussion to have three core segments. Marc will deliver a message on our thoughtful approach to the business. Then Grant will provide an update hitting on Athene's growth capabilities and competitive advantages. And then we'll have a financial update segment with Martin and Athene CFO, LJ, who I would add has a longer and wonderfully sounding name in French, and if I had a semblance of an accent, I would pronounce it for you. We will then close out with some Q&A.

And one final note. If you open the deck that we posted just before we went live, it's about 100 pages. And if you immediately feel tired, I would caution you that about half of it is an appendix that we prepared as a takeaway. We had some fun doing some myth busting, and I think you'll find a lot of the resources that are in there, very insightful.

And so with that, please join me in welcoming Marc.

Thanks, Noah, and thank you to everyone who's come out today as well as the hundreds who seem to be interested. Forgive me, I've been losing my voice having been in Asia all week. But I thought this would be a good day for us to level set. I was reading before I got up here a quote on the madness of crowds that we tend to go mad in herds, but only regain our sanity one by one. Let's have this be the start of that process, including for many people who have covered us, followed us, been engaged with us for a long time. A lot of just basic anchoring that I think needs to be done in an environment that is somewhat speculative.

Okay. How do we do this? Why did we get into this business? What do we think of this business? At the end of the day, you don't get to be large in any market unless you are serving a societal good. We are large, and we are serving a societal good. Everywhere in the world, not just in the U.S., but everywhere you look, we are short guaranteed retirement income. Our market is not going to peak until 2050, and we're going to see a 40% increase in the number of people over 65 between now and then. This should not be a surprise because we're already seeing it. Basically, the trend is playing out. We're up 5-plus times in 12 -- in 13 years. I would expect with some adjustments for interest rates, obviously, things are more attractive when rates are higher, I would expect this to be upward and to the right. And this, again, is not a surprise.

We have been doing this a long time. We were very, very fortunate to have gotten to scale and to have built the origination machinery before anyone even thought about retirement services and linking to asset management. And so I'll go back through what I think is required to succeed in this business.

Number one, you have to be able to originate assets, and they have to be investment-grade assets. There's a separate set of discussions, originating below investment-grade assets is actually not capital productive for an insurance company. The capital charge versus the excess spread you get just doesn't make any sense.

Second, it's just not smart. The ability to originate investment-grade assets is what you need. Second is you need a source of stable liabilities. Almost every liability in this industry is newly issued with a surrender charge or a market value adjustment or locked-in funding. When you originate the liability yourself, you get the benefit of that. When you are forced to buy these liabilities in the secondary market, you are buying degraded surrender charge, degraded market value adjustments. And worst of all, you're forced to deploy assets at one point in time. That means if you don't have massive warehousing, you are going to underperform asset targets that are available.

Three, is you need capital; four, for OpEx in a 120, 130 basis point spread business, the difference between a good and a bad operator in OpEx can be 30 or 40 basis points, a massive amount. And finally, good management. This is a business that requires management. You are forced to make decisions, you are forced to make market calls, you're forced to articulate your risk tolerance. It is not just put the capital in, match the assets and liabilities. It requires constant adjustment and constant refinement.

What's going on in the marketplace? Basically, spread, public fixed income has been declining. And it's not just public IG. In this case, I looked at BBB spreads. The CLO market, in this case, the ACLO market, we've seen declining spreads as a trend other than for a little bit of volatility around COVID for a long time. We're also seeing declining spreads in RMBS. Recall that CLO and RMBS were for us, the major asset classes that we pulled excess spread as we were growing. We should not think as a group, and we do not believe that we are going to get mean reversion. Anyone who's out there talking about how this is a low period, low spread, and we're going to do better next year, I think it's missing a much, much bigger trend that's going on in the business and in the asset management business.

What's happened is we have shown the market that you need these assets, you need to consider things that are private. And I consider CLO paper private, I consider RMBS private. But you need to be able to originate investment-grade assets. And so when people talk about origination, we almost need to refine what they mean by origination. There's easy business. Originating a CLO is showing up and offering a price. Public corporates showing up and offering a price. RMBS, a little bit more work, but showing up and offer a price. Most people -- most of the people in our industry when they are talking about origination, they are talking about those three buckets on the left. Spread is declining and tightening in every one of those markets.

On the right side, you have what I call as proprietary origination, private investment grade, so-called financing the global industrial renaissance. Basically, 50 to 150 basis points better risk. Asset-backed finance off our proprietary origination platforms, more -- again, fund finance. We have spent more than $12 billion, nearly 15 years and have 5,000 people doing this. No one else has done this. No one else is close to it. No one else can originate in size. We get to fish in the largest pool. We get to do the easy business, and we do some amount of easy business, but we can get spread from the hard business, which only belongs to us.

Now we don't just keep 100% of the hard business for ourselves because we are a diversified owner of credit even at Athene. And so in our third-party credit business, we syndicate this. You would not be surprised or maybe you are surprised, there are another 20 insurance companies, all of whom you would consider competitors of ours, who are buyers of pieces of this harder business. We don't think this changes the competitive dynamic because although we're buying at the same time, at the same price and in the same way, we're generally taking 30% of everything, and they're taking 3% to 5% of everything. I like that. I like the risk syndicated throughout the insurance industry. I like that regulators are seeing it not just from us, but from our peers. I like the validation of third-party pricing. I like the tenacity of our teams to have to serve third parties and to build origination and rating systems to serve third parties.

I've said this -- again, but why don't we think spreads are going to return? Well, fundamentally, we started in this industry of private credit, private capital 40 years ago. And 40 years ago, there was one buyer for private assets, the institutional alternative bucket. That was the only buyer. Then we got a second buyer called individuals. Then we got a third buyer called the insurance industry. Then we got a fourth buyer, traditional asset managers. A fifth buyer, the debt and equity buckets of our institutional clients are now open to private assets, particularly as they move to total portfolio approach. And now I believe we will get a sixth buyer in 401(k).

We are seeing immense opening of demand for private assets. So the notion that being private is somehow going -- the pressure is going to let up, I don't think it's the case. I think we have to appreciate that origination of private assets is what has value, particularly origination of private assets that have excess spread and for the insurance industry, origination of investment-grade private assets that have excess spread.

Moreover, if you're Apollo, not just with your Athene hat on, if origination is what's in short supply, if origination is going to be in demand, if our growth is ultimately limited by our capacity to originate assets, I believe the intelligent thing to do is to own more of the economics from every asset that we originate. Not only do we earn a full fee everywhere. But with a large percentage of the assets, we also own 100% of the ups. That's Athene. For another percentage of the assets, we own 33% of the ups or 30% of the ups, that's ADIP.

And then for even a larger chunk of the assets, we sell it just fee released. I believe this enables us to double our profitability without the same work that a fee-only manager would have to do and without taking undue risk, because although we have to put up capital, investors actually pay us for the right to put up 2/3 of the capital side-by-side with us. Think about that. It's so bad to put up capital that people pay us for that right, and we've earned 15% return on capital for nearly 17 years. This is the environment we're in.

Private credit, particularly as it relates to insurance companies, pension funds, banks, this is a $40 trillion market. All of the money, almost all of the industry is private. Everything on a bank balance sheet is private. Most of what we do is private investment grade. 100% of the press is focused on that little sliver at the bottom called levered lending. The problem is one of nomenclature. The media refers to the entirety of the stack as private credit and makes no distinction between the $38 trillion that is no different than public investment grade or what's on a bank balance sheet and the $2 trillion of levered lending, which is a below investment-grade activity.

And what we've seen, does anyone actually know what they're talking about? Go through these headlines. Private credit, banks, insurers will fall under the microscope. U.S. insurers are binging on private credit, the hazard lurking in your retirement fund. The IMF is raising their alarm. I don't know. My eyesight is not as good as it once was, but it seems that's 0.35%. The rest of the balance sheet is invested in investment-grade debt or as you know, we have 5% in alternatives. There's almost nothing about private credit that is on the balance sheet of Athene, is on the balance sheet, quite frankly, of almost all insurers and what the press is talking about in private credit.

This is about myths and reality, and I think it's worth to go through these. So people talk about private credit not being rated, investment-grade private credit is almost always rated. It's opaque. It's not opaque. It's actually totally transparent. You actually get borrower level financials and real due diligence. It's not priced. Nah, it's priced every single day. For the State Street ETF, there's a price every single day on every credit. Elsewhere at Apollo, there's $6 billion of trading that takes place in private IG. If we sent you a trading run for private IG and public IG, you would not be able to tell the difference in market depth, market pricing, market anything.

Not tradable versus strong trading volumes. Not regulated? It's the same regulation as there is for public IG. There's no difference other than an added level of scrutiny on a regulatory balance sheet where you also have the insurance regulatory oversight. And far from being a systemic risk rather than concentrating credit on the balance sheet of government-guaranteed short-dated funded levered institutions, you are now democratizing credit and the need for credit throughout the financial system.

As I said, I think people have really just lost their minds and the headlines get more and more hysterical and have almost nothing to do with the substance.

This is the comparison, and I'm not negative on public investment grade, but public investment grade limited covenants, limited access to management, limited direct diligence and you are essentially buying a portfolio on rating. All of the things that people say they hate you correct for in private. You're doing direct work. You have total access to management. You're covenanting what you need to covenant. And yes, you still have reliance on ratings because almost everything is rated.

Another fact that gets in people's way, almost all the losses in the insurance industry come from corporates and real estate. This is not just us. This is the U.S. insurance industry. These are 3 years, 5 years and 10 years. And you ask why? Well, what's happened over time is we have seen, particularly since 2000, increased pace of change. The problem with individual credits, they are subjected to individual rates of change. Think of what happens when regulations change, when consumer tastes change, when energy prices change, when demand for travel changes, we have seen an increased incidence of single issuer corporate bankruptcies at the investment-grade level. Whereas secured, negotiated asset-by-asset or structured products, just provide different levels of protection and different levels of diversification and have mostly protected the industry versus public corporates and real estate. It almost turns it on its head. What we think is risky is actually less risky and what we think is safe actually has produced almost all the losses in the industry.

What we have focused on is what we believe. We believe our entire industry, not just the insurance industry, but the whole private asset industry, ultimately is limited by our capacity to produce assets that make sense, excess return per unit of risk. We have originated $273 billion of assets in the latest 12 months. $190 billion of those assets are A- rated investment grade at T 280. We have 16 platforms. We originate, like everyone else does through our core credit business, where we get RMBS and CLO paper.

We also individually originate high-grade capital solutions for investment-grade borrowers such as the ones on the page. We originate through bank partnerships. We have been talking about origination for as long as I can remember. The industry is finally coming around to understand that we are, at the end of the day, originators of risk. It is our job to produce excess return per unit of risk. But if we fail to originate, we can't grow or we shouldn't grow is probably the best way to say it.

We are unique in the insurance industry in that Athene and Apollo together have a relationship where Athene can see on a daily, weekly and monthly basis, what the pipeline is. They know if they're coming into a strong origination pipeline or if there's a weak origination pipeline. If there's a strong origination pipeline, they can almost instantaneously step on the gas to produce liabilities. If there's a weak origination pipeline, which happens sometimes seasonally, they can back off. We do not run the business on autopilot. We run the business completely connected of producing spread by matching investment-grade assets, with liabilities that have surrender charge protection or market value of protection or contractual maturities.

We're writing profitable new business and we're growing volumes. You can see the step-up over time and the underwritten IRRs on new business at pricing. It is not all that different today than it's been at any time in our past. Some quarters are better, some quarters are worse. And no, it is not back to the period of time around COVID, where the business was just amazing.

What we're seeing, and what we're seeing in our business is the headwinds that have hit us over '24 and '25 really are beginning to dissipate and the strong pipeline of new business, which has been growing and is profitable, is starting to outweigh the headwinds. This is why we have a pivot point, and you're going to hear a lot more about this from LJ and from Martin. We are -- we faced over '24 and '25, three really significant headwinds. One was interest rates. The second was asset prepayment. Just to give you a sense of scale, we budgeted over the last 18 months, $23 billion of repayments at 6.1%. We got $30 billion of repayments at 6.5%.

When spreads tighten, everything that is prepayable prepays. The good news about that is there's very little left to prepay that is not out of it in its locked period of time. But this is something that we have to watch across the industry that we do budget for, but the spread tightening, we're talking about a generational tight in CLO paper.

The third is this roll-off of exceptionally profitable business when rates were less than 2%. You can see just how much business rolled off in each of the years. And some years, we're even more profitable than others, particularly the roll-off of the COVID business.

What do we expect? We expect what we said on our call, we expect to produce circa $880 million of spread-related earnings in Q4. We expect to grow our spread-related earnings roughly 10% in '26. And we expect to grow roughly 10% on average through '29.

This is a slide about management. And this is a slide about risk and something that I think it's hard to see from the outside. When spreads start tightening, when risk gets dialed up, we had a choice in '24 and '25. We had a choice to take more risk and protect SRE. We had a choice to deliver the underwritten SRE or to act like a principal. We decided and we always will act like a principal. We did a series of things, which Martin and LJ will dimension in terms of cost, that if you own the business for the long term as opposed to any quarter, you just do. We've taken our cash and treasuries, $8 billion to $22 billion. LTV -- low LTV mortgages, $4 billion to $17 billion. We've moved our CLOs up in credit quality. Every single one of these actions was SRE negative.

But in a spread tightening risk-on environment, we take risk-off. We play for the fat pitch. We want to make sure we have ample firepower, ample liquidity if we get a correction or if we see a big sell-off just as a change in the risk mood, but the time to take risk and the time to protect earnings is not when things are frothy when we need to do it. This is how we run the business, and this is why we have so much comfort in our ability to deliver.

As Noah mentioned, you have 50 pages in the back, which we had a lot of fun doing, of market myths, talking about opaque offshore capital, outsized credit risk, private ratings arbitrage and the run on the insurer, all of this should be great fun to read for anyone who's really interested in answers to these topics.

With that, Grant, it's all you.

Thanks, Marc. Good morning, everyone, or good afternoon. So in my new role as CEO, one of the very first things that Marc said to me was, Grant, growth is not an option. I think I already understood that, but it was nice to get clear direction. And so I'm here today to share why we're confident in the future of Athene.

Marc already highlighted the demographics on top of the fact that we have an expanding amount of aging people, quite a lot of them are woefully underprepared for retirement. I get a lot of comments from people in the room and others about the competitive environment that we're operating in. There have always been strong competitors in every aspect of the business that Athene operates in. And yet we've put together the track record we have of profitable growth. And I think we'll be able to continue to do so. We'll talk some more about that.

And in all the things that we're doing in the markets that we're currently in and the new markets that we are entering now, we just have tremendous opportunity. We're spoiled for choice in the opportunities that we have to grow.

You've seen this chart before. We add to it every time we get together. Nobody in our industry can put together a similar graphic. And it's driven by what you see on the right, which is market-leading origination channels, various ways for us to originate liabilities, our retail annuities, flow reinsurance, pension group annuities, funding agreements. We choose which business to write depending on the relative economics in those various platforms. But we've always found a way to continue to originate more while meeting our returns.

We have a self-funded -- a stable funded model. Our assets manage our liabilities. These are persistent, predictable, stable liabilities, average life of about 7 years, 89%, either with set maturities or protected by surrender charges and market value adjustments. We're not in any of the businesses that have caused heartburn for our peers, right? We're not in variable annuities. We're not in universal life with secondary guarantees. We're not in long-term care. The companies we acquired, we acquired after the great financial crisis, everything was mark-to-market. Since then, we've been originating in a relatively low interest rate environment, you won't find a cleaner liability structure in our industry than Athene.

We talk about our right to win. The advantages that we have are really hard to replicate. Marc talked about the asset origination machine. Differentiated assets at better returns per unit of risk, which is validated Athene by our consistently lower impairments over our entire operating life. We think we have about -- and that's, we think, 30 to 40 basis points, better assets, roughly 35 basis points of lower operating costs.

I met with a group of investors last week, and I made a statement that one of them found shocking. We have fewer employees today at Athene than Aviva USA had when we acquired them in late 2000 -- 2012. And at the time we acquired them, the combined enterprise was originating less than $3 billion. Last 12 months, Athene has originated $85 billion. Nobody comes close to the efficiency that we operate with. And when you take one and two together, it's pricing power. So we have the ability to make our products terribly compelling to the consumer. We don't put it all in there. We take part of it and bring it to the bottom line and earn superior returns.

On top of that, we've got great liability creativity and a liability distribution platform that we don't think anybody can match. All of this in the context of #4, what we call a fortress balance sheet, A1, A+, A+, A+ ratings, $35 billion of statutory capital, lower leverage than our peers, access to a large equity sidecar, operating in a heavily regulated environment to the highest standards with the most transparency of anyone in the industry.

And then lastly, we put that all together with a strong performance culture. We play to win. We plan to win, and we execute accordingly. I think it's a powerful combination that makes us an incredibly tough competitor.

Marc talked about the origination machine that Apollo has that Athene benefits from. Athene has created a liability machine to utilize all those great assets. This compares Athene in the dark blue bars to some of the people that we compete against, #2 in our industry and the average of 3 to 5. We dwarf all of our competitors. We're actually originating more on an annual basis than the accumulated balance sheet of quite a few of the competitors that we compete against.

Everything we do has to meet our pricing criteria. We underwrite the mid-teens unlevered returns. And I think across time, we've shown amazing discipline to pull back from business when it's not there. The top example, as you can see that really for almost 2 years, we didn't issue at all in the funding agreement-backed note market because we couldn't earn our returns. There have been periods of time when we've seen in the MYGA market, the multiyear guaranteed annuity market, pricing just gets too tight to make sense for us. And so we've stopped writing business there. And today, we see incredibly aggressive pricing in the pension group annuity business, deals priced to mid- to low -- mid- to high single digits. And we bid on 34 transactions in the last couple of years. And maintained our pricing discipline.

You can also see on this chart that there's periods where there spikes up. So when we see great market opportunities, we also lean in and try to capture them. So despite not reaching for business, we consistently find ways to grow and meet our return criteria.

We write great business. that gives us access to third-party capital. We did ADIP I in 2019, raised $3.3 billion. It's had a great track record. We've returned 70% of the capital, had a very different asset mix, as you can see in the commentary section versus what we've put into ACRA 2. But that meant when we came around to raise ACRA 2 in 2024, we were able to raise $6 billion. And what this allows us to do is figure out how much we want to keep on balance sheet, to Marc's point, how much to share with ACRA and what types of liabilities. So we can move quota shares up and down, we can talk about different kinds of liabilities that make sense at different points in time. I think our track record here will put us in great position to raise ACRA 3, but we still have $3 billion of undrawn capital inside of ADIP II.

I should say the last thing there, we are totally aligned in that Athene is about 1/3 of the capital in ACRA -- ADIP, ACRA, sorry, I'm mixing the two. But they're -- I think most of you know what that means. We're aligned because we are the biggest shareholder within it and that plays well. They are investing alongside of Apollo and Athene.

There's great tailwinds in our business. We've talked about some of them, I'll go quickly on this slide. I think one of the things I'd point out here is, I think we have an ability to expand the size of our market. When you think about the money market and CD markets, there's $10 trillion there, total size of the annuity market, is only -- is a fraction of that. And yet, if you compare CDs to MYGAs, to the multiyear guaranteed annuities, the MYGA offers higher rate, better liquidity and tax deferral. Athene and the industry as a whole, we need to convert that. We need to do a better job of telling our story.

What are the tailwinds for Athene specifically? We've built institutional distribution at Athene over the last decade for our retail annuity business. And we're now on 20 of the top 30 platforms. 10 years ago, that number was 0. We have about 18% of what goes through annuity sales in those institutional channels. But we can think we can capture a lot more. They are relatively new relationships, and over time, we can get more shelf space, and we can activate more people inside of those distributors to sell our products.

For the 10 platforms that we're not on, they sell more than $30 billion of annuities a year. So there's still an existing new distribution opportunity for us, and we're looking to go after that as well.

In the middle part, we are 10% of the fixed annuity market. We are the largest player. I would start by saying, again, that number was 0 when we entered the retail annuity market in 2011. We've grown to be the largest. We haven't capped out what we can do there. But then you look at RILA, which goes through those newer institutional, primarily broker-dealer relationships, we think there's significant upside for us in that marketplace, which is a fast-growing marketplace.

The litigation headwinds for us in PGA are subsiding. And sooner or later, we think that the pricing ought to become more rational. So that would be upside for us. We are expecting nothing in the near term.

We've talked before this year about entering new markets like stable value and structured settlements. We are ahead of plan there. We're really pleased with how that's going. We bought an entity called ARS. We've renamed it Vitera. It's our access point for guaranteed income into 401(k). There's a relatively small amount in our plan from new markets. So we think there's some significant upside to outperforming our expectations.

Just wanted to delve in a little bit more in retail. It's a core channel for us. Ten years ago, it was 100% IMOs. I think the transformation is incredibly compelling. We've gone from that to where we are today where institutional distribution is close to 80% of our total. The IMOs are still really important. If you look at 2015, IMO distribution was $3 billion. It's now down to just 22%, but that 22% year-to-date represents $6 billion of sales, and it just shows the scale of our business. We now have over 200 unique distributors, over 150,000 agents registered to sell our product. We think we have the market-leading technology platform that aids customer service and breeds agent loyalty.

I think probably the most stunning figure on this page is that in 2021, the top 5 institutional distributors that we had, sold $1 billion of our product. Last year, those same top 5 sold $17 billion, tremendous growth.

So just a case study on one of those top 5. We only got on to that platform in 2022. And not uncommonly, they started with three products. In that partial year, we ranked as the third largest carrier on that platform. Every year since we've been able to be the #1 carrier on the platform. We've been adding more products in our volumes from '22 to '25, have gone from $1.5 billion to an expected $5 billion this year. These largest distributors are incredibly powerful and are really driving the change that is going on in the annuity industry.

But I could come up with a lot more examples like this. The pattern is the same. When Athene gets on to a new large platform, we are incredibly successful and the speed of uptake is also quite fast.

We're big in the funding agreement space. We have four channels in the funding agreement-backed note space, maybe one that you're most familiar with, we've sold $13.5 billion so far this year. And yet we've sold 20% less in the core dollar market. We've done a lot more offshore than we have in the past, and we've done that intentionally to try to keep pressure off our spreads in the dollar market.

FHLB, I think you're familiar with that channel as well, totally aligned with the FHLB's mission of supporting residential real estate in the U.S. Athene actually created the FABR market shown here as the dark blue. In reaction to spreads blowing out in the time of COVID, we lost access to the FABN market. These deals are basically structured one-on-one with large banks use collateral, generally structured credit and has been incredibly successful for us as a funding source, now a consistent funding source with more and more banks involved and deal sizes having grown quite a bit.

And the most recent channel we add is what we call direct FAs, where Athene participates by being a funding agreement provider inside of a municipal energy prepay transaction. It's given us access to a new investor base and they tend to have longer maturities, 8, 9, 10 years.

I should say -- I'm going to go back. Two things I would point out, some of the questions we get are, do we have any liquidity issues. We make no assumptions that we will refinance a funding agreement-backed note at its maturity. They will be paid off out of asset cash flows. I think if you go back to the prior slide, we've clearly demonstrated that by staying out of the market for almost 2 years.

And the last thing I would say, we make no use of the funding agreement commercial paper market. So we're issuing term funding agreements and we're assuming they self-liquidate out of asset cash flows.

So our core business, shown here in the blue on the left, will continue to be a major part of our growth over the next several years. New and adjacent markets are going to play an increasing role. It's forecast to be $5 billion of our volumes in 2026, significant uptick on this year, will be led by stable value and structured settlements. We think we'll continue to see additional expansion in Asia Pacific. We've already done $15 billion of transactions there to date.

I mentioned we've entered the DC space with ARS, now renamed Vitera. That is the largest new market opportunity, the most difficult to negotiate the ecosystem but a $12 trillion target market and one that we're focused on. Proud of the track record that Athene has established to date, but the entire management team thinks that the best is yet to come for Athene.

And with that, I'll turn it over to Martin and LJ.

Good afternoon, everyone. Great to see you. So it's been left to the Australian to introduce a Frenchman. So this is Louis-Jacques.

Good job.

He's -- thank you. Thank you. I'm sure you've heard all variations of it. Goes by LJ, thankfully. LJ joined us almost 4 years ago. Actually, he was Chief Accounting Officer for 3 years after the merger. So he sat at the group and then took on the Athene CFO role earlier this year, moved out to the West Coast. In any given day, he's in L.A. or Des Moines, occasionally Bermuda. Teenage kids, high school, short notice, seamless transition. So delighted to have LJ in that role.

So we'll transition to the financial components. I'll frame it and then LJ will add some further dimension to it. If you think back to Investor Day a year ago, we are really being very consistent with the messages that we provided then. So we're underscoring that. We're expanding some of the financial intuition around the numbers. And we're addressing spread. Spread is a newer focus point, and so we're addressing that as a newer topic today. We're very confident in the growth of the business. I think Marc said it, if at times, we will have periods of lower than 10%, you should expect that we'll have times of more than 10% growth. So 10% is the average over time. 10% is what we expect for 2026.

And you'll see that the spreads on the business, whether that's looking at new business spreads or blended spreads across the business, have been very durable across time. There are certain points in the cycle where there are transitory impacts, so the three dynamics that Marc mentioned. But through cycle, the structural advantages that we have, we think, are really powerful and get to that 10% growth rate.

And then finally, we'll address HoldCo Capital and the benefits. We're, I think, even more convinced today that the benefits of the combined firm are massive. And it's the owning economics in different parts of the value chain that contributes to multiple forms of value creation.

So Grant covered growth. Growth is obviously very important. And so we are -- despite the competition, despite tight spreads, nothing has changed about the top line growth of the company. We had said a year ago, expect $85 billion on average over the 5 years, $70 billion would become $100 billion. We are looking ahead to next year, we expect around $85 billion of growth. So in year 2 or 5, we will hit the average.

Outflows remain highly predictable. We've never been surprised by outflows, and we'll dig into that a bit more because it's really important. But you should -- and you should assume that ADIP continues to support 25% of the top line growth of the business is a base planning assumption. That's what we model.

So all of this contributes to get to a low teens growth rate in assets. And then when you run that through the impact of new business coming in, existing business rolling off, you get to the 10% SRE growth rate net of the ADIP contribution.

So we are fortunate to have a business that has a 7-year weighted average life. So when you look at as we're looking at here, you look at the transition point from '25 earnings to what we expect for 2026, the $3.8 billion sort of ending anchor point. There are the runoff -- the decline here is a combination of runoff of the business, very modelable and that's around 11%, which is very consistent with what we've seen in the past. And then a continued tapering of the headwinds that we're seeing this year. And there's a prior year impact and a current year impact to each of this. You need to look at this on a in-year impact to construct the model, that's how we build our models.

And then we look at next year and we look at where we expect to write business at the spreads that we expect to write it in, in the channels, we expect to write the business in, net of the upfront costs and so on. And you get the impact of new business being written next year plus the benefit of business that we know we're walking into next year with having been written this year and annualizing into a full year rate for next year.

So it's quite similar to the asset manager that way. We know walking into the year that a lot of the earnings are in the ground, and we're annualizing the benefit of what was done last year. And that's how we construct our models.

So the balance sheet is really straightforward. Nothing has changed about this. I think you've seen this slide on multiple occasions before, 95% fixed income, 5% alts. Of the 95% fixed income, 97%, 98% is investment grade, $35 billion of statutory capital, which Grant touched on, ALM matched across the board. And so this gives us a very predictable pattern of SRE dollar emergence over time. And so we can construct going forward by quarter, by year, how we expect the SRE to manifest itself in or to emerge in SRE earnings over time.

I'll talk more about the liability side in a minute as I suggested. But on the asset side, assets are either fixed maturity, sort of bullet securities, which have a known and fixed maturity date, so obviously, it's a given, or they're refinanceable or prepayable. And so we model those at tight spreads, which we're seeing today. We model assets that are callable or by the borrower, we assume will be called away at the first call date. And so we're not subject -- if anything, we're subject to extension risk, which will benefit the earnings profile. We're not subject to further prepayment risk. We stress prepayment risk. We suppress the securities that drive refinances of CLO assets. And so that's all part of the work that we do to model earnings. So today's projections reflect today's spreads, first call dates in a world where spreads are tight and close to all-time tights up and down different asset classes.

So on the liability side, we show here a 10-year history. And so we have -- we report this quarterly, as you know. These are the annualized runoff numbers on the liability side of the balance sheet every quarter for 10 years. It's a tight range. And so where do you see -- it's not a straight line. So where do you see deviations and what explains that? It is maturity driven or modelable behavior in each of those instances. Or said differently, the unplanned experience on liability outflows is very, very small. And you can see that number, we publish it every quarter. We actually break that down and show the line. But you can go back in time and look at what the unplanned number is. And it's not 0, but it's a very small and pretty static number.

We believe we're the only company in the space that produces a forecast and then reports against that. And so we plan to continue doing that. We have included what we expect the runoff to be in '26 in the projections that we've outlined, it's about 11%. It's a consistent trend, nothing different from what we've been seeing in the past few years. And we'll publish the quarterly view of that early in the new year.

So let's turn to new business. New business is very simply asset growth at a net spread. And so that's -- it's a function of the two combined. The -- and then we think about it in terms of product spread. So at the margin products, which Grant just walked through and then overall spread, which combines the benefit of earnings on capital, deducts operating costs and financing costs and so on.

And so how can this vary from any one period to the next, and this goes back to a slide that Marc used, competition in the marketplace and pricing behavior. Where we choose, which products we choose to lean into or not in any period of time. And there's a trade-off there between earnings and capital. So higher earnings tends to come with it higher capital. And so we are always optimizing the two to create return on capital.

And then in any one year, you have timing. You can do more business or less business in any one period of time and that has an impact, obviously, on that quarter and the impact going into the following year. But it's quite predictable. It's quite steady. And so just focus on the 1.3% number as the new business number. Over time, you can see -- again, going back 10 years, you can see the quarterly new pricing spreads by quarter. And we've broken this down so that you can see the product spread, which is the dark blue and then the all else, the interest on capital, OpEx, financing costs, which is the -- which is all netted into that lighter blue column.

And so quite tight, but not a straight line, and that just reflects how we write the business. We are responsive to what's happening in the marketplace, competition to pricing to different products and channels and we'll modulate what we write in response to that. This, up until now, certainly reflects current generation of products. It doesn't really reflect any meaningful benefit for what we think are the next generation of products that Grant walked through. And so we do believe that that's an upside to the plan as we look forward.

So that's new business. And then we look at all-in reported spreads over time, and so not too surprisingly, I think you got a similar number. The average reported all-in net spread of all existing business plus new business in any one period averages that same number, 130 basis points. And so -- and the deviations in that are attributed to what we've been calling transitory impacts. So the COVID period of time, both pre and post, and the impact that that's had on the spread performance over time. And we'll unpack this more in a few minutes.

For 2026, relative to the 10% SRE dollar earnings growth, we expect the spread to be in the range of 120 to 125 basis points. And that reflects everything we currently know. What we plan to write, at what spreads, the construction of the new business, the runoff of the old business, what assets we expect to pay down and prepay, it's all contained within those two guide numbers.

So I think also a useful way to think about this, and I'll tee this up for LJ to unpack a bit more as we think about the business as having a structural spread advantage. And so certainly, there's one massive secular benefit for the industry, which is the age of the population and the demand for product. And so aging population, multi-decade dynamic, which will play to the industry's advantage over the next couple of decades.

And then there are several very important much more Apollo-specific structural spread drivers of earnings. One is our advantage in origination and cost structure. And two is what we think is our ability to write and underwrite credit. So that is foundation, that's durable. That's the 130 basis point anchor point over time.

And then there's cyclical impacts. There's rates, which all three of these we've spoken about over the last year or 2, there's rates. And so certainly, the period pre and post COVID and the impact that, that had on the up and on the down, timing and so asset prepayments and returns on the alts portfolio, and then three is business mix. And that's both on the existing portfolio rolling off as well as where we are choosing to write business in new channels for business coming on.

So we think of one -- the bottom part of this as cyclical and that is the reason for the deviation around the long-term 130 basis point created by the structural spread advantages that we have.

So what have we seen from the cyclical impacts. There's the three plus the countercyclical. And we'll just step through these one by one. LJ will put some more dimension to it.

This slide shows the year-over-year impact. So what was the impact in any one year relative to the prior year as a result of each of these components.

Rates, we obviously saw a massive backup in rate in '22, '23, which had a very pronounced impact on the earnings of the company. 500 basis points of short rate increases, followed by ultimately, we're modeling 9 cuts, we're more than halfway through that. And so the turnaround in that rate benefit became a headwind. As we go through '25, this also reflects the timing of the hedges that we put in place. And so this is the net interest rate impact, asset and liability side, net of hedges.

Prepays, Marc spoke a lot about this. We started to see some meaningful headwinds in '24. That exacerbated in '25. We expect that to roll off, particularly in the first half of next year and then to stabilize thereafter.

Profitable COVID business. What is this? This is actually on both sides of the balance sheet. We are seeing -- and we think we're also sort of at the peak of the headwinds on this dynamic, both spread-rich assets and cheap liabilities rolling off at the same time. And so that's a dynamic which is which is creating a headwind, which again will step down in severity next year and then neutralize itself in '27.

And then there's some other components. LJ will dig into it. But countercyclical is really foregoing current earnings by holding more cash and treasuries, just having more liquidity on the balance sheet as well as the cost of hedging the existing portfolio. So that's countercyclical. And then management actions is managing the portfolio. It's making appropriate decisions in the asset side of the balance sheet based on current market conditions and repositioning the existing assets.

So with that, I'll turn it over to LJ.

Thank you. Well, let me say a few things here. First of all, I joined Athene 8 months ago now, and it's been an amazing journey. I joined an amazing team. But more than anything else, I think the alignment with Apollo is really unprecedented. The symbiotic relationship is really harvesting the best of what we have, and the growth story is fantastic, and we're only getting started.

So with that, let me overlay some of the numbers on the back of what Martin has just said, just try to provide more data. So the temporary factors that have influenced spread-related earnings over the past 3 years, you can see them 1, 2 and 3, on top of the table here. Interest rates, number one; asset prepayments, which has accelerated over time, certainly on tight credit spreads and to a lesser extent as well on RMBS or mortgages with rates lower. And we discussed the exceptionally profitable COVID-era business, which also is now decaying and it's coming effectively as a decay in our earning profile.

So all of those are transitory. We've said that, and we see them as decaying. They will decay. And in 2026, we'll see less of that impacting the SRE profile, and we see none of that in '27. Against those, and I'll go into more of the details in the next slide, we'll -- we put some derisking actions. We put some countercyclical to the point that Martin commented earlier and some numbers are on the page here.

But really starting with rates, rising interest rates you see in '23 on the back of rates rising and given the net exposure that we were carrying on floaters, as printed, the effect has generated $800 million plus of SRE in 2023. And at the time, we were very intentional in retaining a large floating exposure. Obviously, at this point in the cycle, this is something that we manage down, and I'll come back to that in a minute.

Asset prepayment, number two, are temporary. They are really a temporary pressure. We had really elevated asset prepayment on the back of really tight credit spread. And we've seen historical types recently. So I'll cover more details in a minute.

And really the third point being the COVID-era business. It was exceptionally profitable to start with because we were effectively harvesting cheap liability. But on top of that, the rates pick up, and I'll go through an example in a minute, really increased further the yield accretion on those payoffs.

So let me start with rates here. We've said that at the earnings release about a month ago, we've significantly hedged and reduced our rate exposure to 2% of invested assets from what used to be 16% in 2020. And again, this is on a much larger balance sheet. So clearly, we reduced our exposure drastically. That's intentional. We aim to hold more floaters when rates are biased higher and fewer when they are biased lower. That's just the strategy. We are just very active managers here. In terms of assumptions, what we have behind that is, forward curve that assumes still another three cuts by the end of 2026, really fully aligned to the forward curve. And that will have minimal impact on SRE. And as mentioned, you can see that at the bottom here, every 25 basis points move in short rates impact SRE by only $10 million to $15 million. So a lot more de minimis than it used to be.

On the prepaid front, you see this slide is showing the prepayment volumes declining and with yields on the asset that prepaid also declining, the joint effect on SRE is actually decaying -- is decreasing. It's reducing the net effect on the SRE impact. In dollar terms, you see prepayment peak in the first quarter of 2026, then normalize. But again, on lower yields. So the joint effect is really going lower and lower and slower and slower. And while elevated prepayments really created some volatility in -- short-term volatility into the earnings, again, those are transitory. They also highlighted the fact that the asset class is liquid, and we've been able to reinvest actively against the cash that we receive.

So as prepayment normalized after Q1 of '26, as you see here, we expect a more stable reinvestment yields and greater earnings predictability. And remember, only a small fraction of the balance sheet is prepaying and it's getting smaller and smaller.

The third point refers to this exceptionally profitable business that we were during the COVID era. So if you recall, we were enjoying very cheap cost of fund and liabilities at that time. But if you look at the left-hand side of this page, we try to illustrate with a FABN and that was issued during the period. And you see that the spread expands from 120 basis points to 190 basis points as rates rose due to our allocation to floaters, which was a higher percentage of the assets at the time.

So as this business is now running off, we see less of this benefit coming into the mix, and that was another headwind that we were facing mostly in '25. This is really running off, burning off and it's not going to be a material impact or create a material impact in '26 and beyond.

So in terms of active management, we are active managers. We manage the book in a very dynamic way. And since we are a principal, we manage the business in ways where we effectively optimize our assets and liabilities. For example, we've executed, to the point that Martin was conveying earlier, countercyclical actions. We retained cash. We increased cash and treasury to preserve the optionality of enter again the market when the market is conducive to it. That's an opportunity that we actually harvested, if you recall, in the early days of April this year. And that's something that we've done now with $22 billion of treasuries.

We also put some portfolio optimization initiatives, including buying a small piece of ADIP I and some active reinvesting of lower-yield corporates into higher yield spreads. So some of that realizing P&L that doesn't flow into SRE that can effectively be invested into higher-yielding assets that are contributing to SRE. Both of those are adding value. And you can see here that in 2026 that should provide $100 million of SRE uplift.

So let's talk about the alts now. So we discussed the exposure to the tune of 5% of our balance sheet, 5% allocation to alts continue to deliver very strong and downside protected returns. And we have intentionally over time, migrated more of the alts towards the AAA and -- because the AAA was delivering stronger returns. Our stake in Athora is the largest piece of outside of AAA. And as the business is in the process of a strategic acquisition that is expected to double the size, we expect this to be a material driver and a more consistent driver of value creation.

So with rates declining and positive development in the portfolio, we expect a mean reversion towards the 11% long-term return that we announced. This portfolio remains very high quality. It's a core component of the strategic asset allocation and is definitely a strong complement to the core spread business that we ran alongside of the alts.

Let me cover the building blocks of our 2026 SRE growth here. This page outlines our building blocks for our 10% growth outlook. All are consistent with what we've said earlier, right? We've been covering the same thing. But the baseline is about growth and organic growth. It's anchored to the $85 billion plus. And zooming in into other key drivers, we see the runoff is very stable and predictable to the tune of 11% to the point that was conveyed earlier.

And our cost structure is industry-leading and is getting efficiency. So with the 25% of inflow financed by ADIP, our sidecar, we maintained really the right balance between growth and capital efficiency here. So if you put that all together, we expect $3.8 billion of SRE in 2026, assuming an 11% alts return.

Let's look at the SRE trajectory over time. You can see that over the past 7 years, Athene has delivered a 16% SRE CAGR and that was across multiple interest rates and credit environment. Some years, we generate more growth. Other years, we generate a little less due to cyclical transitory items that we discussed a little earlier. That's entirely consistent with the way we actually model the business for which the long-term trend is really steady and consistent. So the structural growth is really not affected by those transitory impact or transitory items that we just discussed.

Looking ahead and in line with the 5-year plan, we continue to target the 10% rate that we announced at the earnings release back a month ago. And that will be a 10% on average until or through 2029. And by the way, that projection assumes no benefit from rates, spreads or inorganic growth. It's purely driven by the base case here, the strength and durability of our business model. And I'll come back to some assumptions on our baseline plan.

So let me zoom in into those deviations that we can see around the mean. So why we have some local deviation to the expectation? Why is there a behavior of non-linearity? The SRE pattern can appear non-linear due to some timing differences between asset and liability and the runoff of both. But our disciplined management, reinvestment and a stable liability profile and ALM really are managing those differences over time and really are converging back to long-term prospects.

Variation also arise, as you can see on the page, from new business mix. We have different funding cohorts, and they recognize or they realize rather the spread differently over time based on upfront cost versus not or amortization schedule versus not. Policy behavior as well are something that may impact behavior locally. If you have such actions as post surrender charges that are changing after the surrender period, that can shift the behavior on a short-term basis. So those are really local and temporary effects, and they are not structural changes. The long-term SRE growth profile remains strong and predictable, and all of those are deviations around the mean.

So I mentioned a little earlier some of the aspect of our plan and why the plan was very conservative. Let me just shine a light on a couple of things here. Our plan remains really conservative and deliberately conservative. And above the 10% based on assumption, we potentially have some upside, and those are captured here. We have no assumption for inorganic growth, even though we have both the capital and capability, credit spreads are held flat at historical debt levels. That's the base case.

We also have $22 billion, we discussed that, in countercyclical assets, and those are assumed to be static. So said differently, we have no deployment upside included in the plan for those $22 billion. We also have limited contribution from emerging markets or new products. We've been very nimble in our capacity to harvest some of those new businesses. So -- and the upside here can be very, very material. So in short, there's real upside not captured in the plan. And that would come as a benefit above and beyond 10%.

Let me close on capital generation. Even in our base case, Athene is a powerful capital generator. You see that today, we hold $9 billion of deployable capacity, and that includes $3 billion of excess equity, $3 billion in undrawn ADIP capital through the sidecars, and nearly $3 billion of untapped leverage. And even with a base plan of $80 billion to $85 billion of inflows per annum, we would generate $3 billion of excess capital through 2029, while continuing to pay a dividend to -- an annual dividend to Apollo HoldCo of $750 million. So we're really progressing from a position of strength, self-funded growth and continued returns to shareholders.

And with that, let me pause and hand back to Martin. Thank you.

Perfect. Thank you. So let me just zoom up to the HoldCo, and we'll close it out there. So this is the flywheel. The flywheel -- anyone that follows us knows this, but I think it's such a compelling financial story to convey. We -- and this really explains why do we want to own different pieces of the business. Why do we want to own business through Athene, 100%? Why do we want to own business through ADIP at a percentage of that? And then why do we want to own the asset management fees that derive from all of that?

And it sort of articulates it, obviously, in a return on capital. So if we invest capital and leverage that with sidecar capital, on equivalent terms and then lever it the way that the business is typically levered, then you can see the asset flows that, that creates. And then we earn spread earnings directly on the 100% piece. We earn spread earnings indirectly, if you like, through the ADIP ownership that we have in the wrap fees. And then we earn FRE on all of the above at the same rate. And so at a 25% ADIP support level, that gets to a 20% return on equity at the top of the house. That does not take account of the benefits of growing AAA. It does not take account of ACS fees that Athene pays to the asset manager as does any third party that's syndicating -- that's participating in syndicated debt.

So the alignment story is really strong. The reason to own economics at different parts of the value chain is strong, and we think it really combines itself well into a compelling financial story. This is just a different way of looking at it, but I think it actually might be even more clear.

Capital funds growth. So capital, whether it comes from Athene directly, from ADIP or from the debt capacity that's created as Athene grows, all of that creates both organic growth and inorganic growth, all of which creates different forms of FRE and SRE. Same point as above. That growth itself funds AAA. And so AAA enables growth in other parts of the system. It enables new origination businesses, new platform, new funds, and it allows us to support the capital business. And so that creates earnings in each of the earnings components that we reported.

And then growth in Athene is sized at a sufficient level with earnings -- both capital consumption and usage to fund a dividend each year up to the HoldCo of $750 million. And that itself allows us to fund strategic investments and to build other FRE accretive businesses. So same point said differently, maybe a bit more clearly, but I think it really is a compelling way to look at it.

So let me close it out. So we're in a multi-decade period of growth across the industry. So there's demand for products, current generation. We expect that there'll be more demand for new generation products as they're developed, product design will improve, and then it will address the retirement crisis that we have, not just here in the U.S., but in other countries around the world.

The combination of Athene and Apollo together, the management, the origination capability, the capital, the cost, we think is unmatched in the industry. And so that just allows Athene to be the competitor that it is. You've heard the 10% growth expectation, loud and clear, a few weeks ago and then multiple times today. And then over time, we think there's upside. There's reasons that the -- for all the reasons LJ just walked through that we would expect there to be upside to the plan over time. So -- and that's -- this -- the base plan, as LJ said, is current generation product. We think the really interesting thing is what comes next.

So with that, I will ask Noah to moderate.

So we have about 20 minutes or so of time to take some live Q&A. So if anyone has a question in the room, we'll just call on you. And if you wouldn't mind just introducing yourself, name and firm, would be great.

Bill, why don't we start with you.

Bill Katz, TD Cowen. Thank you for a wonderful update. You talked a lot about the new growth opportunity. I was wondering if you could speak to maybe where you are in the arc of the opportunity in the 10 of the 20 to which you have the larger relationships? What's going to take get on the other 10? And then maybe talk a little bit about the non-U.S. opportunity, if that's not embedded in that 10 to 20?

So that's the institutional opportunity for our retail annuity products. I don't know that we'll ever be on all of those remaining. We're in various states. If you go back to the beginning of the year, Raymond James is a new platform for us this year. Like I talked about success when we get on platforms, we're already selling significant volumes there. So I don't know that we can say, yes, we expect over the next few years to get X out of the new platform. I think there's actually more growth in expanding the ones that we're already on. I talked about additional shelf space and additional activation of people inside of those institutions, just given the scale of the bigger ones, I think that represents more continuing upside than new distribution for retail.

I'll pick up the international piece. So if you think about history, Athene got to be sizable. It's need for investment grade made us a really strong originator. There was an anchor order that needed 30% of everything. Internationally, no one has scale. Let's start with that. PIC, which is what we're in the process of buying, which we hope to have approved, subject to regulatory end of the first quarter next year, on a scale basis, in pound, roughly the same size in the market as Athene is. It's going to make us a really good originator in the pound-denominated business, and you're seeing us make moves there as well.

In the euro market, insurance is a less efficient originator because of the structure of the assets and liabilities. But still, Athora is at scale. And you will see us on the asset management side of the business dramatically grow the capacity to hold and retain assets, probably not in insurance structures, but more likely in commercial structures the way we have in the U.S., like in mid-cap and elsewhere. But I expect there to be more growth on a percentage basis in European markets, let's include U.K. for that purpose than I do in U.S. markets because Europe needs everything the U.S. needs. But its capital markets are not set up the same way. There's just less competition. And so we should expect them to grow very fast.

Chris?

Chris Kotowski from Oppenheimer. A question for Grant, I guess. At the 2021 Investor Day, you had a slide up that said the average duration of your liabilities was 9 years and now it's 7. Did that change because the market dynamics and pricing changed? Or it matches your liabilities better? Or is it the prepays? Or -- why the change?

Good observation. As we've gone into the institutional channels for annuities, those tend to be somewhat shorter duration products. So when we're selling fixed indexed annuities in the IMO channel, they have 10, 12, sometimes 15 year surrender charges. In the bank channel, they have 5. In the broker/dealer channel, they have 7. Part of it is also then the channel mix, right? Our funding agreements tend to be somewhat shorter than our traditional retail annuity business. So it's part differential growth in the different channels, but also the way that we've grown the retail business is into channels that tend to have a little bit shorter life to them.

Patrick?

Patrick Davitt, Autonomous Research. I appreciate that you're not assuming wider spreads, but I think some of the more skeptical investors I speak with, say you should be assuming the opposite just with all the new entrants, the competitive environment in the retail channel is such that spreads will keep coming in. What gives you comfort that, that competitive environment is not one where new origination spreads just keep grinding tighter?

Well, first start on the asset side. On the asset side, we have a number of anomalies taking place and anomalies tend not to persist. So the financing of BB loans, CLOs, is now so efficient, and in some instances, BB has traded through BBB. That won't exist for very long. It just does not make sense from a risk reward, and you can see our CLO holdings coming down as a result. Things that don't make sense tend not to persist forever.

So on the asset side, it's not to say they can't get tighter. It's our job to not assume that this market recovers. And you've heard all the reasons why. Our job is to originate new. We're already originating new. There will be a replacement to the CLO market. It's not going to persist this way, and we will be the ones who lead that replacement to the CLO market. And you'll see us dramatically ramp up the direct originations, which you have already. You saw deals with, for instance, RWE, you saw a deal in the U.K., you've seen a number of others. It's our job to continue to diversify the spread because I don't think spreads are going to come back. And could they get tighter? Never say never. I don't expect them to get tighter for structural reasons.

You want to talk about liability side?

Yes. On the liability side, Patrick, a few reasons that we're optimistic. So the new entrants are really stuck in the independent insurance agent channel. We're already selling virtually 0 MYGAs there, right. As they try to get a toehold in the market, that's where you see it. And that's where we talk about our pricing discipline. But they don't have the credit ratings. They don't have the tech stack. They don't have the wholesaling capability to yet be into the institutional channels. And we're still selling a lot of -- we're on track to sell a record amount of fixed indexed annuities this year. A lot of those are sold in the IMO channel. 70% of them are sold with a bespoke index that they can only buy from Athene, a unique crediting strategy that they can only buy from Athene.

So in the independent channel, we're picking our spots, and we're doing great in FIAs. In the institutional part of the retail market, pricing is more rational and we're selling the full product spectrum and competing very well. So very optimistic about our ability to continue to grow in the retail business, notwithstanding competition.

I'll add two more just to be aware of. When you don't have the asset origination, you don't have the liability production, you don't have the cost structure and all you have is capital. For you to try and build your business, you have to do something. And so what they're doing is moving to Cayman. And they can just hold less capital. I think the one positive or silver lining of all this press attention on private credit, however misguided, it is very clear to me that U.S. insurance regulatory is not going to have reciprocity with Cayman. And if you're in Cayman, you run the risk every single day that you will eventually have to pony up more capital to do that.

The second is how do you fund the equity of these businesses? As you say, one of the things that LJ and Martin didn't really mention, we've hit escape velocity. Not only is the business self-sustaining at $85 billion without new capital, it's cash generative and capital generative. When you're at a small level, and you're trying to grow your business, like $85 billion of origination is more than all the new entrants, the size of every new entrant that we're doing every year.

But when you're trying to grow your business, you either come up with a capital yourself or you raise a sidecar. If you don't have the economics in a sidecar, you have to give away your asset management fee. The wisdom of giving away your asset management fee in a market that is short asset management, one really has to question it. Because you're also transferring FRE into SRE, which, in today's valuation dynamic makes a little sense.

And so I think some of the competitors may hit escape velocity. I'm very skeptical that the vast majority of them hit escape velocity and become self-funding in any way. And we're already seeing some shrinkage, closings, mergers, and I expect to see more of it.

I would just add, at some point to hit escape velocity, you have to have rational pricing. So you can only do loss-leading business get a toehold for so long. Sooner or later, you got to make money on your capital.

Glenn?

Glenn Schorr from Evercore. Some people have the perception that retail deposit is good and funding agreement is not as good or think of more like wholesale funding. I know you manage it more as a balanced mix and managed it over time. But I'm just curious if you can just talk towards that specifically as sometimes competition or whatever, has the retail piece, a smaller piece of the pie. Some people think less good.

So I'll give a little bit of historical perspective. SunAmerica, the most successful company ever, was basically built on wholesale funding. We have an interesting situation that's happening in U.S. and Europe and Japan. The large banks as a result of consolidation, they are deposit-rich and anyone who also covers the bank market knows they're not seeing the same loan growth. We are a really attractive source of loan growth with bespoke the ability to structure duration, collateral, rating and everything else they want, a FABR is an incredibly efficient asset for the banking channel.

So why do we -- why should we like them? Known maturity, no policyholder behavior variation. The simplest product to run from an OpEx point of view and a customer service point of view, basically, no one calls you. No agents involved, no commission, no upfront funding. Financially, it is a better product than any other insurance product. But I will caution you don't get to be large unless you're also doing some social good. And so it always has to be balanced with the provision of insurance to real people. It's no more complicated than that.

The financial makeup, why people don't like this product is because people have used it and funded it with commercial paper. There are companies in our industry that fund short that do this for a variety of different reasons, which make little sense to us, they create funding risk. There's a chart that you'll see in the appendix that we provided that basically says we have 0. And most of the industry has 0. There are 4 or 5 outliers, and most of you know who they are. We did our best not to attach names to the outliers this time. We take too much heat.

And funding agreements have lower capital charges and they have limits from rating agencies. We like all our liability channels. We underwrite them all to the same mid-teens unlevered returns.

Brennan Hawken from Bank of Montreal. So there were two sort of step downs in the pace on both the liability side and the asset side, expected here within either like basically the near term or within a couple of quarters, can you speak to what drives the confidence of that? Is there something -- how much visibility do you have into it? And what kind of underlying assumptions have to embed there?

Again, I'll take the asset side. I think you've heard us on the calls, we have a strong asset origination pipeline. We have a very good sense of where we're going to end up. And we can also see expansion of channels, expansion of demand, expansion of platforms. And we've seen -- at least in the platform space, we've seen almost no compression of spreads. It's a very, very granular business.

The liability side?

We put our best foot forward in the planning process all the time. And then reality is always different. And generally, reality has been better than our plans. But I mentioned one of them. We're making a pretty concerted effort in the RILA spaces. We've hired a bunch of incremental wholesalers. That business is principally through the broker-dealer channel, so we're making a much stronger effort there. We still see underlying strength in our other businesses, and we're getting scale and uptake in the new channels. So pretty confident about what the future holds.

The asset side, we hit our 5-year target in one year on origination at constant spreads. So it's just the momentum. And then we didn't sort of label them as like platforms #17 and so on. But we talked about three or four other initiatives that are sort of platform ask. And so we're adding to the stable and the pipeline to where Marc started, the pipelines are as full as they've been, but that's -- you can see it. You can see it quarter-by-quarter, what we're actually printing.

Alex?

Alex Blostein, Goldman Sachs. I was hoping you could expand on M&A a little bit. That was one of the areas where you brought that up as an area of upside that's not in your kind of core business line. I'm assuming you're talking about something other than PIC. So as you look at the M&A landscape, it's been kind of quieter for you guys on that front for the last couple of years. What looks interesting today? And given your point around excess capital, do you expect to self-fund a large portion of whatever inorganic could be possible or something would require additional capital foundries?

So let's start with the U.S. market. In the U.S. market, there's not much that's interesting. At the end of the day, we look at inorganic, and we compare it to organic. Why would we pay more for something with degraded surrender charges and degraded market value adjustments that comes with overhead concentration risk. It just doesn't make any sense. If you have no presence in the market and you're trying to buy scale, this is what you're forced to buy. And so we have a situation much like I talked about anomalies where BB traded through BBB, acquired business M&A has traded through originated business. So when we can originate $80-plus billion, there's nothing to buy that's $80 billion, particularly with locked-in spread. And we always look at capital against the alternative of just originating it.

And will this persist forever? I don't know. Most of the market has been consolidated. The couple of deals that are pending, I think they're very poor deals. What's below, very poor. Terrible. And I haven't been shy about the point of view.

In Europe, I think more interesting. I would expect it -- I mean I'm -- we'll turn around and we'll buy something in the U.S., but the common sense for me is we will be more active in Europe. Europe regulatory is getting better, not worse. Europe understands that they need to normalize to be competitive with the U.S., you're seeing some fraction of the Draghi recommendations be implemented. You're having a productive conversation for the first time in a really long time about securitized product and capital charges. And you're seeing places like the U.K. really go out of their way to get private capital off the sidelines.

And the other market that we've spent no time in talking about today is Japan. For me, we get all of our partners together somewhere in the world every 2 years. I try to pick the place that I think is going to be the most interesting market. A few years ago, we had them in Abu Dhabi. In February, all 200 Apollo partners will be in Tokyo. I think the Japanese market where we already have a sizable reinsurance presence, $5 billion plus a year, I think, looks really, really interesting.

Steven?

Steve Chubak at Wolfe Research. I did want to ask on ADIP and specifically what is the optimal level of utilization? It feels like it's been a little bit of a moving target. I think the thought was, it would be about 1/3 and that could move higher over time. Now I see the 25%. But I just wanted to get some perspective on how you're thinking about utilizing these third-party vehicles? And what's optimal in your view?

So I think we get to budget it conservatively. The more we own, the more growth rate we get. And so if we budget at 1/3, that would be -- that's where we've been historically. That's a more aggressive assumption. We can always go up and down, as you saw at any point in time where we think the marginal impact of doing new business or doing or inorganic business is not as good as buying back or buying more of ADIP I or ADIP II, we have all these levers that we get to deploy.

And I assure you, we are not going to sit inside of Athene with another $3 billion of excess capital. One of three things will happen in the business, either we will do something inorganic, or grow organically a lot faster and use up that excess capital. Two, we will own a lot more of ADIP I, ADIP II, or ADIP III and therefore, grow faster, or we will move that capital with regulatory permission to the holding company and use it to grow FRE or to buy back stock. But $3 billion is not going to sit idly inside of Athene.

Wilma?

Wilma Burdis with Raymond James. Can you talk about the RILA hedging environment, which appears to be pretty competitive right now. Does Athene have advantages there versus incumbents given the size of its balance sheet?

I would say the RILA market, like all markets, is competitive. And no, I don't think we have any unique hedging advantages. Yes, we have a scaled balance sheet. We know how to hedge. We have some interesting product features. But that's one where we're competing. It is a product, as you know, it's a registered product. It's the first registered product for Athene. I think our growth has been slower there because it's the first time we're competing with a registered product, but I think you'll see us make significant headway in the next couple of years.

Mike?

Mike Brown from UBS. On Vitera, I just wanted to see if you could maybe expand on the opportunity in the guaranteed income for life product market. What's your go-to-market strategy? Do you need partnerships to really execute on that? And just how could adoption grow over time?

I think we've seen the environment -- thanks for the question, Mike. I think we've already -- it's early days is the short answer. I think as we attend conferences talking about guaranteed income or the 401(k) space, clearly, conversation about the need for a guaranteed option has grown dramatically over the last couple of years. Our go-to-market strategy is to have a product that we think is consistent with the way 401(k) plans work. If you think about 401(k) plans when they were first adopted, your employer basically said here, it's all do-it-yourself. And over time, they've kind of -- we characterized it, it's been kind of the DB-ification of DC plans. You hire a new employee today, you automatically enroll them. They have the right to step out. If they don't change anything, they got automatically stepped up. If you think of a target date fund, it's automatic asset allocation.

And we've created a product that is a QDIA that gives them automatic guaranteed income and retirement. And we think that product construct will win. We need to prove it in the marketplace. We've just started our relaunch. But we think that, that putting it in the QDIA is so important because most people, like 70% of people with 401(k) plans never make a decision the day after they set it up. So if you have a product that is relying on somewhere down the road when somebody gets to 55, they're going to switch on income. I think then you're telling people you're offering them the option of guaranteed income, but you're not going to have much uptake. Whereas if it's in the QDIA and they can always opt out, they will by default, get guaranteed income and retirement. Certificatable, they can take it with them when they leave the plan. That's our product.

I'll come back on the other side of it. We're -- I would say this, there is nothing but demand for guaranteed lifetime income. It may not be in the right form, it may not be sold an annuity format. It may be sold either naked as guaranteed lifetime income or as Grant suggested through Vitera. What's the limitation? It's actually assets. The ability to originate long-dated assets with spread is what makes this attractive. So we -- if you look at our product set today, we do it for [indiscernible]. We do it for the product in Vitera and we do it for some amount of PRT business.

But the entire industry, in fact, I would say every asset -- everyone who needs asset, we're all short, really long duration. And really long duration can be risky because you have to be very careful with the counterparty and the projects and everything else. And so we can grow that business only as fast as we grow long-dated origination.

We have time for one more question, we'll take it from Ben back there, please.

Ben Budish from Barclays. Maybe I'll squeeze in two quick ones. Maybe just the first one. So you talked about -- I think it was Martin, if I remember, 10% on average, which means some years might be below, some might be above. It sounds like based on your expectation for normalized 130 basis points of spread that might be a 2027 event, maybe with some more upside from some new business. I'm just curious, is there anything else on the other side of that, I think there's a perception. We talked about this earlier that because funding notes tend to be shorter in duration, you might see a pickup in runoff at some point during the forecast horizon. Just curious how as we get -- think beyond '26, how we might think about the deviation from that 10%, which gets us to the average over time?

It's an average. The -- most of the business we're writing and buying, liability side, asset side is predictable sort of contractual maturity. And so we know volume, timing and yield rate, right? So it's really -- and we've sort of built it from the bottoms up. Where have we been surprised, if you like. It was the slide that Marc showed, which was AAA spreads on CLOs came in so much relative to what we expected, but we're deemphasizing that going forward. And you saw from another side, there's not 0 prepayment risk, but it flattens out and is modeled that way. And so it just becomes less of a factor going forward.

So -- and as we look at the year-by-year progression, we are -- and I said this earlier, we're going through a period of time when we're seeing dual headwinds in the runoff of the business, and they both dissipate both sides of the balance sheet. So that's our current view. That's all the assumptions or the logic that we used to build the model. But we've obviously got a decent amount of confidence behind those numbers going forward.

Great. On behalf of our team, I would just close by saying, we very much appreciate your time and attention this afternoon, during this session. And as always, if you have any questions on anything we discuss, please feel free to reach out. Thank you.

Good morning, and welcome to Apollo Global Management's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] This conference call is being recorded.

This call may include forward-looking statements and projections, which do not guarantee future events or performance. Please refer to Apollo's most recent SEC filings for risk factors related to these statements. Apollo will be discussing certain non-GAAP measures on this call, which management believes are relevant in assessing the financial performance of the business. These non-GAAP measures are reconciled to GAAP figures in Apollo's earnings presentation, which is available on the company's website. Also note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any Apollo fund.

I will now turn the call over to Noah Gunn, Global Head of Investor Relations.

Thanks, operator, and welcome again, everyone, to our call. Joining me to discuss our results and the momentum we're seeing across the business are Marc Rowan, CEO; Jim Zelter, President; and Martin Kelly, CFO. Earlier this morning, we published our earnings release and financial supplement on the Investor Relations portion of our website. As you can see, very strong third quarter results demonstrate the exceptional strength that we are seeing. We generated record combined fee and spread related earnings which drove adjusted net income of $1.4 billion or $2.17 per share, up 17% year-over-year. In addition to the rich commentary, we prepared for you on this morning's call, we'd like to announce that we will be hosting an extended fixed income call session for Athene this quarter on November 24.

And with that, I'll hand it over to Marc.

Thanks, Noah, and good morning. It's a pleasure to be here today and delivering good news is especially fun for me. Results in the third quarter were exceptionally strong. FRE of $652 million was up 23% year-over-year, management fee growth of 22% year-over-year, ACS fees of $212 million, our second straight quarter in excess of $200 million. SRE ex notables $846 million. And for those of you who are focused on SRE and like estimates, we estimate that SRE in Q4 will be approximately $880 million, which will drive estimated full year SRE on a comparable basis to $3.475 billion, approximately 8% year-over-year growth, which will be above the mid-single-digit target we provided earlier.

Financial results are the product of underlying good fundamentals. The most interesting and most important fundamental for us is origination. We believe origination is the lifeblood of our business. Origination for this quarter was very strong. $75 billion of origination led by platforms. It's our second strongest quarter following a record Q2. Average spread on our origination, 350 basis points over treasuries, which was stable quarter-over-quarter, average rating of BBB. The reward for good origination is people want to invest with us. Robust inflows of $82 billion for the quarter, led by asset management of $59 billion, retirement services of $23 billion.

In the asset management number is $34 billion from Bridge. So inflows ex Bridge, $26 billion. Record AUM at the end of the quarter, $908 billion, up 24% year-over-year. In short, the growth flywheel is spinning. Jim and I have a lot of opportunities to discuss why the growth flywheel is spinning. We like and we often say it's a result of good management. And I think this quarter, not by Jim and I necessarily, but by the team, team worked very hard and produced the results you've seen. But we are fortunate to be in an industry that is experiencing very strong demand.

Companies like ours and others in our industry do not get to be big unless we are attached to fundamentals in the economy and essentially are a source of secular growth for our country and for the world. We are fortunate to be driven by 3 incredibly strong fundamentals. Our business is financing the global industrial renaissance, whether it's infrastructure, energy, energy transition, data centers, defense, new manufacturing or robotics, the demand for capital has never been stronger, and it is not a U.S. phenomenon, it is a worldwide phenomenon. These facilities, these investments are long duration in nature and are perfectly appropriate for what we do. And I expect that this will continue for a reasonably long period of time.

The second -- we are facing a retirement crisis, a gap in retirement income almost everywhere in the Western world. We, through Athene, Athora and the other investments we've made as well as our third-party insurance business are helping to close that gap. This is among the fastest-growing sectors of our business, as I'm sure both Jim and Martin will touch on. And third, we provide an alternative to increasingly concentrated, correlated and indexed public markets. If you want to escape the MA 7, but still want to be invested, it is very difficult to do efficiently in public markets. These 3 fundamental goods are really the drivers of our business, and we are fortunate to participate in an industry that benefits from this. We are not the only ones to recognize this.

If you think about the history of our industry, the entirety of our industry up until the last few years was essentially powered by the smallest bucket of our institutional clients called alternatives. The first 35 years of this industry were funded out of this little bucket. More recently, we've been given a second market called individuals. That second market, we expect to be the size of the first market, and I don't think it will take 35 years to get there. We've now been given a third market called insurance. The industry watching what we've done at Athene now understands that insurance company balance sheets are the perfect place to take liquidity risk rather than credit or equity risk and insurance companies are increasingly large buyers of private assets as they seek to earn safe returns consistent with matching their liabilities.

We've also been given a fourth market, and that fourth market comes from our institutional clients who are now considering and actively investing in private assets out of their debt and equity buckets. As we watch total portfolio approach take hold in the asset management industry, we expect this to grow pretty significantly over the years. If that were not enough, I believe we've been given a fifth market. And that fifth market is traditional asset managers, and I think this has the potential to be among the largest sleeves of investors in private assets.

I expect that we will see significant private asset exposure inside of mutual funds, inside of ETFs and inside of products of all types offered by traditional asset managers as there is a rethinking of what active management is, perhaps active management is not the buying and selling of individual stocks and bonds, but it is the addition of private assets to public portfolios. This will allow our industry to reach clients we would never on our own reach and who want exposure to private assets but will not get exposure to private assets directly.

And as all of you on this call know, more recently, a potential sixth market has opened for us in the form of 401(k) and related retirement plans. In short, for an industry that has grown pretty large over the years, we are now anchored by 3 really powerful secular trends that serve a fundamental good, not just in our economy, but in the world. And we don't recognize this by ourselves.

Private assets are becoming more and more acceptable and more and more in demand. What do we worry about? Well, we worry about the things that we've always worried about. I believe our industry will find that it is limited in its growth by its capacity to find good investments rather than by its capacity to raise capital. It is incumbent on us to focus on origination to make sure that we grow origination quarter-over-quarter and that we really do respect the fundamental principle of our industry, which is excess return per unit of risk. This is ultimately why private assets are in demand and why we, as a firm are in.

I also worry about culture. We -- our industry and our firm, we have been preferred employers for the last 35 years. We work very hard day and night to make sure we do not lose the preferred employer status. What do I have the luxury of not worrying about? Well, I have the luxury of not worrying about credit. I thought yesterday's call by one of our competitors did, I thought, an adequate job describing the current credit regime. From my point of view, credit is credit, whether it's originated by a bank or an asset manager. It makes almost no difference to me. There are fundamentally good underwriters of credit, and there are less good underwriters of credit.

The observed outcome of the number of articles and the focus on a couple of isolated incidents in the marketplace is nil. 10 basis points of spread widening is essentially nothing. Jim, I'm sure, will spend some time on this, but I've encouraged him not to given this -- what I thought was a very successful discussion yesterday by one of our peers.

Let me delve in a little bit to asset management. The quarter in Asset Management and the momentum we're seeing starts with performance. All buckets across our firm performed very well. In credit, up 8% to 12% over LTM, 3% to 5% in the quarter. Performance was achieved without reaching. We are at a really interesting juncture of time in asset management and one that we frame really simply for our clients.

We have them ask 3 questions: are things cheap? Resoundingly, no. Do we think rates that matter, long rates are going to plummet. We do not. We think most of what we're doing in the world is actually inflationary rather than contributing to lower rates. And finally, do we see enhanced sources of geopolitical risk, we do. The answer to those 3 questions is yes. The logical thing to do is to take risk down. That is what we are doing as a firm.

That is what we are doing for our clients, and we have been able to do this without reducing our need for return. ADS is a shining example of this. 9% annual return since inception, 2.1% for the quarter, 100% first lien, lower leverage, less PIK, less concentrated, 40% less exposed to software. In our asset-backed retail vehicle, we're now at $1.2 billion, up $425 million in the quarter. 70% of the portfolio is IG, 95% we originate on a proprietary basis. In debt, it's always been clear how one takes risk down. You move higher up in the capital structure. In equity, it is also possible to take risk down. Our hybrid franchise, which is now some $90 billion with nearly $12 billion raised year-to-date. 19% LTM return. The flagship vehicle within hybrid value is AAA, Apollo-aligned alternatives, which is now approaching $25 billion and no doubt will be our largest fund, although there's a healthy competition amongst the various fund managers.

Ultimately, that competition is not fundraising. It's based on performance. AAA now has 42 of 43 positive quarters with a fraction of the volatility of the S&P, roughly an 11% LTM rate of return and 12% inception-to-date return on the strategy. This is the kind of performance that attracts assets and that is consistent with our ethos in this sort of environment of getting returns without reaching. In our private equity business, the focus on cash flow and rational underwriting and avoiding fads and trends has served us very well over the long term.

Our most recent fund, Fund X, 22% net IRR, already 0.2 DPI. Fund IX, the one before that, 15% net IRR, 50% higher DPI than the industry average. The franchise over our history, 39 gross and 24 net. We're excited for Fund XI, which will come beginning of next year. And we will continue to do what we have always done, which is try and produce excess return per unit of risk and be responsive to the environment and be good stewards of capital.

One of the things that we are increasingly hearing in our business is a divide in our industry between agents and principals. The notion of being a principal is that you underwrite a risk that you are prepared to hold. The notion of being an agent is that you underwrite a risk that you think you can distribute. Sometimes it doesn't matter. But when things are priced for perfection, we believe it matters more than ever. The thing that we have done as a firm is to align ourselves with our clients.

The amount of comfort that they take with us as the largest owner side by side in almost everything we do is unparalleled and has really set us apart amongst our peer group. So what does the future hold? The future in asset management is all about innovation. You're seeing plenty of innovation. And on our next call, I would expect that we will focus probably in an outsized way on innovation, whether it is what we're doing in market making, whether it is the new addition of leveraged share classes to many of our evergreen funds and leverage against private assets on a much more permanent and much more attractive basis or it is our reinvention of the CLO market -- and I expect innovation to take place broadly across the asset management franchise.

The outlook for asset management is indeed very bright. And as you will hear from Martin, we expect FRE growth of 20% plus in '26. On the retirement services side of our business, we're seeing the same sort of robust demand. It's very clear that we have a retirement crisis not just in our country but across the world.

The annuity market is a multiple of size versus a few years ago. And while rates are always important, secular demographics or demographics themselves are a driver of growth and everywhere we look, there is a need for guaranteed income. The inflows are literally off the charts. Through Q3 -- first, Q3, $23 billion, year-to-date, $69 billion. We're pacing toward a record year with the PGA market essentially closed for the entirety of the industry.

New business remains in line with our mid-teens ROE target, and we deployed $22 billion in the quarter at 220 basis points over treasuries, almost all IG, very little non-IG exposure on the totality of Athene. There's no secret that the market spreads for the kinds of assets that are appropriate for insurance companies are tight. And without the access to proprietary origination, this would not be the business that it is.

Thankfully, the team at Athene has done an unbelievable job, not just on the origination, but also on the sourcing of liabilities and the discipline to turn off various spigots when pricing does not make sense. And at the end of the day, running an efficient business from an overhead point of view and employing the latest technology allows you to keep ROEs up in periods of time when others are suffering. As I'm sure Martin will touch on and we will discuss on the 24th, the result of running this business over a really long period of time and not being a current period profit maximizer has given us tremendous amounts of flexibility.

When rates are down, massive gains appear in our portfolio, which allow us to recycle securities, which does not produce SRE but frees up capital for investment. And if we are successful in creating origination, allows us to pick up spread. We have lots of tools at our disposal to achieve our SRE and ROE targets that others in our industry do not have.

While the slope of the forward curve can change and as you will hear from Martin, we have significantly reduced our sensitivity to rates to the lowest in a decade. We are just a very tough competitor. And for those who, again, who are interested in SRE, we expect SRE growth year-over-year for next year at 10%, and we expect average growth over the 5-year plan to also be 10%. We become over time at Athene, since the rate of change in our volume is just not as significant going forward as it has been historically, we become a massive capital generator.

One of 2 things will happen with that pile of capital that we either we have been conservative on how much new business we will add at Athene, which is the challenge to the management team on the new product side or we will be able to redeploy that capital elsewhere in our business or to our shareholders. In short, Q3 was an exceptional quarter. We are seeing signs, not just for the current year of very positive things happening, but the seeds being planted for not just Q4, but also for next year. It's just a fascinating time in asset management and retirement.

And with that, I want to turn it over to Jim Zelter.

Thanks, Marc. Having navigated credit cycles for more than 4 decades, I can tell you we've seen this one before. Isolated incidents are nothing new, and they're rarely a signal of broader stress. As we remain vigilant in our underwriting and risk management efforts, what we're seeing is idiosyncratic, not systematic.

Over the years, there has been a propensity to overemphasize short-term technical headlines and overlook the broader direction of travel within our industry. Broad secular forces such as the increasing economic activity generated by private companies, the global industrial renaissance as well as massive capital fueling the global industrial renaissance are driving increased demand for global private credit, in particular, investment grade.

At the same time, demographics and the expanding needs of retirees globally are driving the secular demand. This is the foundation of our business. We've leaned into senior secured top of the capital structure investments to serve a market that we believe exceeds $40 trillion.

As you can see from our growth, that has served us well, and we are just beginning to scratch the surface. Recent events give us a moment to step back and reflect on the marketplace. And I believe there is an important point to be made here, whether a particular transaction is public or private is simply the manner in which the risk is originated.

Ultimately, it is not the litmus test for credit quality. Our disciplined underwriting as an origination principle, not an agent or a tourist across both public and private markets has allowed us to be trusted stewards of our investors' capital through various market cycles and position us for continued success. We look forward to leading and performing in a marketplace with a dispersion of returns.

On origination, let me put the quarter and the origination engine in perspective. As Marc mentioned, we generated $75 billion in the quarter, a remarkable number and second only to last quarter's record. This brings origination volume to over $270 billion for the last 12 months, up more than 40% versus the prior period and effectively achieves our multiyear target about 3 to 4 years early. We're encouraged by the early momentum and the capacity we have to scale. Results like this can only be driven by the full breadth and diversity across our business, platforms, core credit, high-grade capital solutions, equity and hybrid. Within core credit, volumes were led by large-cap direct lending, commercial mortgage lending and residential mortgage lending.

Across our 16 platforms, origination volume increased more than 20% year-over-year, and MidCap was a standout, which continued to perform very well and generated more than 30% growth year-to-date. These are companies who we are providing real solutions at scale. This highlights and connects to our broader sponsor solutions ecosystem, which has more than tripled in recent years, growing from $20 billion in volume in 2022 to nearly $70 billion over the last 12 months.

We believe our offering is unmatched in its scale, speed and ability to deliver full firm solutions. with a toolkit that includes not only direct lending, both large and mid-cap, which is where many of our peers end, but also fund finance, asset-based finance as well as other capabilities. Taken together, our sponsor ecosystem is unmatched in scale and speed and the breadth of the solutions we deliver.

Let me bring this to life with 2 recent examples of our origination leadership. First, in support of Keurig Dr Pepper's strategic objectives, we called a financing solution totaling $7 billion that was announced last week. This was yet another example of our leading position in the high-grade capital solutions and hybrid marketplace by providing flexible capital solutions. The second transaction I'd like to highlight is yesterday's announcement with Ørsted, where our funds will acquire a 50% stake in Hornsea 3, a 3-gigawatt scale offshore wind project for $6.5 billion.

Alongside transactions we announced this year for ED&F, RWE and BP, this is the latest large-scale transaction in Europe, where we are investing behind energy, critical infrastructure and transition assets in the region. Our activity in providing IG capital solutions to large-scale companies in Europe is unmatched.

Looking across all of our origination in the quarter, $69 billion was debt comprised of approximately 70% investment grade with an average rating of A- and approximately 30% sub-investment grade with an average rating of B. On the investment-grade origination, we generated excess spread of over 285 basis points over treasuries or approximately 200 over comparable rated corporate indexes. And in our SIG origination, we generated excess of 400 basis points over treasuries or approximately 220 basis points over comparably rated high-yield corporates. Importantly, we observed stable spreads on our origination quarter-over-quarter, and that's particularly notable in a period where public market spreads are near generational tights. Producing excess spreads at scale is a clear testament to the solutions we deliver.

While our existing origination engine continues to scale and has driven incredible results, we're not standing still. In the past few months, we have added several new resources that will augment, grow and diversify these origination capabilities. Number one with Olympus Housing Capital is a new homebuilder finance strategy sitting at the nexus of multiple secular tailwinds between structural undersupply of single-family homes and demographics. Stream Data center strengthens our presence in digital infrastructure. 1050 is our new European CRE lending platform focused on structurally underserved small- and medium-sized CRE markets.

And finally, we announced the launch of Apollo Sports Capital focused on the sports and live events ecosystem in a market that continues to exhibit strong uncorrelated growth and faces significant capital demands. This will be a permanent capital vehicle primarily focused on credit and hybrid opportunity, and ASC is designed to be a long-term value-added marketplace player, leveraging our infrastructure in credit and media and physical assets. In capital formation, momentum remains exceptionally strong this quarter. We brought in $82 billion, including $49 billion of organic inflows, nearly matching last quarter's record as well as $34 billion from our closing of the Bridge acquisition.

By channel, the institutional channel remains strong, and Global Wealth had another excellent quarter with Athene continuing its remarkable trajectory. Across institutional and global wealth within the $26 billion of organic inflows during the quarter, 80% were focused on credit-oriented strategies and 20% to equity-oriented strategies coming from a broad array of investor classes.

The $5 billion we raised in the wealth channel was the second best quarter on record, bringing year-to-date total over $14 billion, up 60% over the prior year period. And strength in this quarter was broad-based with 6 strategies raising more than $200 million and 10 strategies raising greater than $100 million. With that success, one strategy stood out, as Marc mentioned, ABC, which had its strongest quarter since launch, raising nearly $400 million.

The asset-based focused corporation has all the makings of our next flagship deep expertise, strong performance and accelerating demand. Again, this trajectory reminds us of ADS since ABC is a similar point, but with a major focus on investment-grade counterparty risk. Across wealth, our distribution continued to expand. We launched 3 new LTIPs during the quarter, expanding our lineup and broadening access to Apollo private market strategies across EMEA, Asia and LatAm. It's clear our offering continues to resonate with investors around the globe, and our partners are not simply looking for a good product, they are increasingly looking for a comprehensive holistic solutions provider in constructing portfolios.

Turning to Athene. They had an excellent quarter with $23 billion of organic inflows. Inflows were driven by $10 billion from retail, $10 billion from funding agreements and $3 billion in flow reinsurance. Retail flows saw particularly strength in fixed index annuities and MYGA. Funding agreement issuance was the third strongest quarter on record as we continue to capitalize on the favorable issuance backdrop. While Athene's core products have been the foundation of its impressive growth trajectory, we expect emerging products to widen the funnel.

Products like RILA with over $1 billion of inflows year-to-date and the successful launch of stable value and structured settlements as well as tax advantage and guaranteed income will augment the growth and expand the opportunity set. Globally, the growing retiree population continues to drive significant demand for long-term income solution. And this is a durable secular trend that we're fortunate to have a significant leadership position with meaningful advantage will allow us to continue to grow. The opportunity ahead is massive, and our platform has never been stronger in execution.

With that, I'll turn it over to Martin.

Thanks, Jim. Good morning, everyone. Our third quarter results highlight clearly the accelerating momentum across our platform, reaffirming our ability to execute consistently on our long-term plan. I'll take a few minutes to walk through the quarter's financial performance and discuss the key factors supporting our progress as we close out the year. I'll then share more details on the outlook for 2026 to supplement Marc's comments.

In Asset Management, we generated an increase in both assets under management and fee-generating assets under management of 24% year-over-year to $908 billion and $685 billion, respectively. We generated fee-related earnings of $652 million in the quarter and $1.8 billion year-to-date, up 20% year-over-year in each quarter this year versus the comparable period, evidence of the momentum across the platform and keeping us firmly on pace for a full year growth rate of 20%.

In the quarter, we delivered 22% year-over-year growth in management fees, driven by third-party asset management inflows and record gross capital deployment, particularly across our credit platform as well as strong growth from retirement services. Capital solutions fees of $212 million, as highlighted, represent our second strongest quarter on record. The breadth of origination capabilities was very clear this quarter, with 50% of ACS fees generated by our hybrid value, opportunistic equity, climate transition and real estate businesses, complementing the other 50% from our high-grade and global credit businesses, including Atlas. We generated 28% year-over-year growth in fee-related performance fees, reflecting sustained growth in spread-based income across a variety of our perpetual capital vehicles, led by ADS and complemented by Rating Ridge and MidCap among other platforms.

Growth in fee-related expenses reflects continued investment in hiring and infrastructure to support the firm's global strategic growth initiatives, compensation growth reflecting our performance this year and the inclusion of Bridge into our financial results.

We closed the acquisition of Bridge on September 2, which significantly enhances our existing real estate business, bringing to scale some of the most attractive areas in the market, including multifamily and industrial. Bridge also adds origination capabilities that are highly synergistic with existing asset demand from Apollo's ecosystem, in particular, Athene.

Bridge will initially contribute approximately $300 million of annual fee-related revenues across management fees and ACS fees and approximately $100 million of pretax FRE with expenses principally compensation-based. Bridge will also contribute to SRE growth as an originator of investment-grade spread products as well as principal investing income over time. Excluding Bridge, our FRE margin was stable quarter-over-quarter and expanded approximately 120 basis points year-to-date, demonstrating continued scaling of our business. Including Bridge, we expect our full year 2025 margin to be consistent with 2024.

Moving to Retirement Services. Q3 delivered another strong organic growth quarter, supported by $23 billion of gross inflows. Athene's net invested assets grew by 18% year-over-year to $286 billion. We generated $846 million of SRE ex notables for the quarter with an additional $37 million or 5 basis points at our long-term 11% return expectation on the alternatives portfolio. The blended net spread ex notables in Q3 was 121 basis points versus 122 basis points in the prior quarter, reflecting the effect of roll-off of existing assets and liabilities, offset by new business growth.

Athene's core earnings power is very strong and clearly evident in the third quarter. In a tighter spread environment, we continue to originate new business that meets our long-term ROE targets, and that is in line with historical averages. Athene's competitive positioning is unmatched, is trending higher than our first half average, reflecting the impact of higher new business volumes and our ability to originate attractive investment-grade investment opportunities. Importantly, we believe our spread-related earnings troughed in the first half of 2025.

Looking across the asset and liability profile of the portfolio, we see asset prepayment headwinds peaking through Q1 of '26 and the spread drag from profitable COVID era business dissipating in 2026 relative to 2025.

For the fourth quarter, as Marc suggested, we anticipate SRE ex notables to be approximately stable to Q3 at an 11% return or approximately $880 million with an equivalent SRE spread of 125 basis points. Combined with year-to-date performance behind us, this result would drive full year growth of approximately 8%, ahead of our mid-single-digit target. Importantly, with the business executing at a high level, expectations that headwinds experienced in 2024 and 2025 are starting to dissipate and exposure to floating rates largely immunized, the exit velocity into 2026 is strong.

Turning to our 2026 outlook. We expect 20% plus growth in FRE in addition to the earnings from Bridge. Momentum across our core business is building with management fees showing increasing growth each quarter on an LTM basis. Recent growth initiatives, including across wealth, credit and origination are translating into tangible results, evident in our strong quarterly and year-to-date performance. We expect that roughly 75% of our top line growth in fee-related revenue in 2026 will be attributable to fundraising and deployment from existing well-established businesses as well as the annualization of growth already in the ground coming out of 2025.

The remaining 25% of top line growth is expected to come from new initiatives already underway from Apollo Sports Capital to Athora's pending acquisition of PIC as well as a variety of other new strategies in the pipeline. And to clarify, we expect this 20% plus FRE growth next year is without any contribution from our next flagship private equity fund, Fund XI, which we currently estimate will turn on sometime in the first half of 2027, subject to our pace of PE deployment.

For SRE, we anticipate 10% growth in 2026, assuming 11% alt returns and including notables year-over-year. This outlook is underpinned by strong organic growth and our origination capabilities, which generate high-quality assets with spread. We expect prepayment headwinds to diminish as a result, both of our reduced purchases of CLO assets and the already high prepayment levels we are experiencing at today's very tight AAA CLO spreads. We further expect the headwind from the roll-off of profitable post-COVID business to have already peaked in 2025.

As Marc alluded to, we have various choices and management actions to help us navigate the path forward, such as managing our floating rate position, optimizing our back book of assets, utilizing sidecar capital and prudently managing crediting rates. Our 2026 outlook embeds the current forward rate curve, which contemplates 3 total cuts by year-end '26 and 9.5 total cuts over the cycle and assumes the current tight market spread environment persists. Acknowledging these growth expectations, we expect and caution that there will be normal quarterly deviation around the growth trend line, reflecting the scale of an approximately $400 billion balance sheet.

Looking beyond 2026, we remain confident in our long-term FRE and SRE average annual growth targets of 20% and 10%, respectively, through 2029. We expect the earnings mix shift towards FRE will result in FRE equaling SRE sometime in 2028, a year ahead of our expectation and exceeding SRE thereafter.

Lastly, on capital, we executed over $350 million in share repurchases during the quarter, the majority being opportunistic. The sequential growth in our share count reflects this activity as well as the shares issued in connection with closing the Bridge transaction.

And with that, I'll hand the call back to the operator. We appreciate your time and welcome your questions.

[Operator Instructions] Today's first question is coming from Steve Chubak of Wolfe Research.

So I wanted to start with a discussion just around the origination targets that you unveiled at Investor Day. Annual origination volume of $275 billion, you just reported origination activity at an annualized clip of more than $300 billion. Last quarter's volumes were even better. So taking a step back, as we think about the year-to-date origination strength, which is running ahead of plan, ongoing expansion of origination capabilities with both you, Marc and Jim had discussed in your prepared remarks, has your thinking changed to whether this is still an appropriate target? And just what informs your outlook over the next few years?

Listen, it's an appropriate question to answer or to ask because we've gotten off to such a strong start. I think taking the view that Marc and management have put forth about origination being the key, I think it really ties into our conversation about how the end universe of buyers has expanded from the alternatives bucket to the other 5 that Marc mentioned. And I think it allows us in terms of broader product creation and broader solutions to investors and retirees. But it would be premature while we're very happy with the accelerated success.

And while we see tremendous wins to our back in terms of the solutions we're providing, it'd be a mistake to change our 5-year estimates 9 to 12 months into the plan. So great momentum. We feel this is by no means are we having early wins that are going to take away from future gains. So it is a trajectory. But on this call, we're not prepared to put a new estimate for a 5-year number.

But I do think -- and Martin tied into it, I think it's all about the flywheel. 75% of our growth next year is from existing vehicles, existing funds, existing strategies, which is the flywheel of origination. So it gives us greater confidence in our ability about the excess of 20% FRE growth in the coming years.

The next question is coming from Alex Blostein of Goldman Sachs.

I wanted to start with a question around the wealth market for Apollo broadly. A couple of really strong quarters, $5 billion of flows in the third quarter. You talked about the new product pipeline. And Marc, I was intrigued by your comments around the asset management partnerships broadly. So maybe you could expand a little bit on how you view this $5 billion trajectory from here? How much is likely to come from new products or the existing lineup? And when it comes to the sort of asset management partnerships, maybe expand on what that could look like for Apollo over the next couple of years.

Alex, let me just start out by saying, as you point out, so when we did our Investor Day last fall, we talked about $150 billion within the 5 years in aggregate. So we're still on that pace. But -- and I'll pass along to Marc. But certainly, what we see is the product suite that we've created over the last 24 to 36 months in terms of breadth of products, evergreen, nontraded BDCs, ABC, not only is expanding product set and geographically, but you will see more solutions oriented, but also as we talked about, the 6 channels. And with that, I'll really toss it over to Marc to talk about those 6 channels.

So Alex, think about the following. In the Global Wealth business, at the top end of the Global Wealth business is our family offices. We Apollo and we as an industry have elected to cover these accounts directly and interact with them directly. The next tier down, if you will, in global wealth are high net worth. And this -- the definition of high net worth varies from firm to firm.

For us, think of a client that is worth a financial intermediary, an RIA, a wealth manager advising well. We cover these accounts indirectly by covering the RIA and by covering the wealth manager, but do not cover for the most part, the individual account. We've just talked about a fraction of a fraction of the marketplace because the vast majority of clients are neither high net worth nor are they family offices. Our industry and ourselves, we do not cover these accounts.

And it is my belief and the strategy we're pursuing is not to try and cover these accounts. They are already well covered by their traditional asset management managers. They already have a relationship. In many instances, they are not likely to buy 100% private products, either from lack of knowledge, lack of suitability or lack of available liquidity. I believe that they are going to get exposure to private assets through their traditional asset manager. You watched what we've done with State Street, what we're doing with Lord Abbott, what others in our industry have done.

I believe that you will see a significant uptick in the partnerships, which will not just be new products, you will start to see private assets added to in-place exposures. That will be the fastest uptick in the wealth market as far as we're concerned. And I think it's going to come billions at a time rather than by fundraising quarter-over-quarter.

And so what do we as an industry have to learn, and this gets to innovation. We have to learn that we are living in a public ecosystem. You will find that we are on our fixed income suite of replacement products, daily NAV by year-end. The ability to provide a daily NAV is table stakes to be able to work with traditional asset managers. The work we're doing around transparency and liquidity, which some in our industry oppose because we're shining a light on the assets, the quality, the ratings and the pricing, this is what gives you entry to traditional asset managers.

The more we do that makes private accessible, the more I believe those with origination and those with the capacity to produce it win, I think that's where we are. I'm excited for what's happening. I come back to, I think we have, over time, lots of demand for private assets. I believe increasingly, our dialogue will be focused on the quality and ability to originate -- and then have we, as an industry and as a firm, made the choices and operating techniques required to interact in these other environments.

The next question is coming from Patrick Davitt of Autonomous Research.

I'm sure you've seen, but Colm Kelleher is on the tape this morning warning on private letter ratings arbitrage and U.S. insurance being "looming systemic risk. Firstly, what are your thoughts on that view? And then perhaps more specifically to Athene, can you remind us to what extent Athene is using similar private letter ratings in its own portfolio?

First, Colm is one of the most respected people in the banking industry. I'm sorry, I'm not in Hong Kong this year because normally, I up here right after him, and we like to mix it up in front of the crowd. In my -- this is the background, and I'll speak for Athene and not for the industry. Colm is just wrong. If you look at -- like I'll give you Athene stats. First, Athene does not use Egan-Jones. Let's start with that. Less than 8% of our assets have a rating from Kroll or DBRS. 70% of our assets have 2-plus ratings. S&P, Moody's and Fitch each rate 50% of our fixed income assets. Kroll, 18%; DBRS, 15%.

By the way, DBRS and Kroll have most of the expertise right now in structured products, and they are doing a good job competitively with Moody's, S&P and Fitch close on their heels. So I don't mean to contrast them from the big 3 that they are any less qualified. But I compare the insurance industry to the banking industry. 100% of what is on a bank balance sheet is private credit. Almost nothing has a rating. And so when we talk about private letter ratings, at least it has a rating.

Now in our industry, not everyone has done what we've done. And Colm is not wrong to think about and to talk about systemic risk because like the banking industry, you have really strong players and you have really weak players.

In the insurance industry, you have really strong players and really weak players. I do not believe that private letter ratings are where the focus should be. I continue to believe, as I've said previously, that we have offshore jurisdictions of significant size that have not produced the kind of regime that is consistent with U.S. ratings and U.S. state-based regulatory reform. And we continue to highlight Cayman because it is the largest, but there are others.

So Colm is not wrong at this point in the credit cycle to say that there are systemic risks piling up. I think the deflection from banking to insurance is an easy deflection and something one says at a conference. But if you look at the recent blowups, and we all know the various names, almost all those blowups have taken place in credits underwritten by the banking system. So it is not, as I said, that we have public credit and private credit, we have credit.

The difference between public credit and private credit and bank credit is literally whether it is syndicated or not. There are good banks, there are bad banks. There are good asset managers, there are bad asset managers. There are good insurance companies, there are bad insurance companies. I don't think we're talking about systemic risk. I think we're talking about late cycle behavior and bad actors, I believe, are going to get called out.

One of the things that we do and just like the banking system that has contagion risk from the SVBs and the First Republics of the world, we, in our industry, asset managers, have contagion risk. We need to make sure that we provide the information to our investors and to all of you of how we think about the philosophy of credit underwriting, how we run our vehicles, how we run our insurance company and remind people of what it is we do.

So on our largest balance sheet, Athene, less than 0.75% of direct lending. 90-plus percent investment grade. It's a different environment than the banking system, which is 60% investment grade.

The next question is coming from Bill Katz of TD Cowen.

I just want to circle back on the wealth management opportunity. One of the pushbacks we get for Apollo and the industry at large is just as rates come down, the demand for yield or income will come down and the industry will suffer from rotation risk. I was wondering if you could address what you're sort of seeing and how you think about that. And then as you look out to 2026, I wonder if you could just lay out a little bit more detail the road map in terms of what drives the incremental growth from here.

So it's Marc. I'm going to start with a bit of a philosophical, and then I'm going to hand it to Jim, who really will delve into a little bit more specific. Private lending was a better business 4 years ago and 3 years ago and 2 years ago and last year. By the way, I wish I owned Nvidia 4 years ago and 3 years ago and 2 years ago and last year. This is fundamentally what people fail to understand. The rotation into private credit is a rotation out of equity. That is what investors are doing.

That is what we observe. They are making a decision to take risk off because they perceive the ability to earn long-run equity returns in first lien debt top of the capital structure as an attractive opportunity, but I think we cannot, as an industry, deny that there was more value just like there was more value in the equity market. We're now talking about where we sit in the valuation cycle and the alternatives that we provide.

As I suggested, we believe that prices are high, that rates -- long rates are not likely to plummet and that we have enhanced geopolitical risk. And so as a firm, we are in risk reduction mode. We preach risk reduction. Our balance sheet is in risk reduction mode. And what we see in terms of flows into private credit in a traditional sense, private credit in the form of levered lending reflects investors who are reducing risk and moving money out of equity and into private credit vehicles.

Yes. And I'll add, Bill. Obviously, I agree with Marc's comments. But again, I think a lot of those are to the narrow definition of direct lending with sponsors, which while compressed still versus the safe public markets is still a very wide spread. You're doing -- getting SOFR 450, 500 versus the classic high-yield index inside of 250 over, you're still getting a fair return.

And again, I think the mistake that people are making is the tactical or technicals in the recent market versus the secular change. I just got back from a 2.5-week 9-country tour. Everywhere I went, there was massive need for evergreen compounding retirement income. And that is such a large number. It overwhelms the $1.6 trillion direct lending market.

And again, we just find country after country, region after region, the ability to generate high-quality compounding robust yield is a secular trend. And especially as the rates have gone up over the last 5 to 7 years, as more pensions are fully funded, they're going through a variety of immunization strategies. So yes, on the margin, not as attractive as it might have been 24, 36 months ago. That's why we've been preaching top of the capital structure, no PIK, less software, et cetera, et cetera, but do not confuse that with the secular tailwinds.

The next question is coming from Craig Siegenthaler of Bank of America.

We wanted to come back to Mark's comments on the 6 markets, including several newish markets like the traditional asset management and the $12 trillion U.S. 40(k) channel. What type of share do you think the alts will eventually take of both the traditional and the 40(k) markets? And also, what investments does not just Apollo, but the entire industry need to make in order to prepare the origination platforms to address this much larger TAM?

So I start with traditional asset managers because I think there is a natural limit. Right now, inside of a number of vehicles, you have a 15% limit. And most of the investors do not bump up against this 15% limit. And so back of the envelope, we think that there is potential, which is different than a forecast of roughly 10% of traditional asset managers.

If you look at what some of the traditional asset managers who have been large investors in privates before, they own SpaceX. They own OpenAI. They own a number of the other Stripe. They own a number of the other large-cap growth companies. We have, for a long time, just thought that this applied to this unique network. It doesn't. It will not surprise me to see 20 large industrial companies that stay private for a longer period of time, in addition to all of the credit and other vehicles.

And so I think you will get a good sense of this in the first quarter next year as some of the partnerships that are under discussion begin to get announced and begin to get rolled out. And again, the prize for the industry is not just the creation of new products. And we will create new products as we have and as others have. I think it is getting a share of in-place assets as traditional asset managers compete for rate of return and through performance for clients.

Almost no one else in the traditional asset management industry has the $35 billion that BlackRock has. If you're watching what BlackRock is doing and you're in a traditional asset management mode, you're looking to figure out how you get private market exposure. I believe they will get private market exposure through partnerships, through relationships.

And what we need to do is not just invest in origination. We need to invest in infrastructure. We need to invest in business processes. We need to embrace transparency and disclosure. because traditional asset managers will not move in size into the private marketplace unless we can do things like daily NAV, unless we can provide price, unless we can provide liquidity. A whole new set of skills is going to need to be learned by our industry. And I believe that we have a leadership position in this and have embraced this as a methodology of how do we do business going forward.

Yes, Craig, and I would just add that I think many of us in the industry 2, 3 years ago thought that the promise land was just getting our products on their platform, which they would deliver and distribute. And that's worked for some. It's not worked for many. And as Marc mentioned, when BlackRock made their variety of purchases, there's many income funds, there's many total income funds, total return funds that have a basket, and I think servicing them in partnership.

It's very similar to the bank alternative credit provider. There's a view that it's a black and white war. It's actually much more open architecture. It's much more problem solving together. And this is just one of the many distribution channels that we believe you'll be able to service going forward, just like in a place like a variety of firms that are using models and OCIOs, the ability to cover those folks with actual product solutions as well, not just funds. So it's really a much more open architecture view of how you partner with your origination, which is the scarce attribute.

Our next question is coming from Glenn Schorr of Evercore ISI.

Sorry, one more on this topic because I think it's so interesting. So I'm a believer. I think you infusing some of your private market origination can produce better returns, better diversification, even maybe turn their outflows into inflows for some of these products. My question is, how do you get a traditional manager to give up some of the assets and therefore, some of the fees in order to make this investment and turning around their products or making them more appealing to their investor base?

So Glenn, it's Marc. I'll speak to it. But first, just to -- we were apparently exceptionally long-winded, all 3 of us. So we are going to cut the call at 9:45. Noah tells me. Anyone we miss, we will make it up to you as we go. But I start this way, Glenn. When we cover a client, we cover wealth, we have a massive infrastructure, hundreds of people, lots of expense in doing it.

When we cover a traditional, we're essentially leveraging their distribution. The ability of us to provide a portion of our fee, and you heard me say this on this call, is actually margin accretive for us, and it's margin accretive for them. If we can give them good performance and we can turn outflows into inflows or if we can give them a unique client solution, we can give the client another reason to stay with the asset manager. That's a win. And for us, I think we're going to be in a situation where over time, we have excess demand for private assets versus the supply of private assets.

And we should be looking at balancing and protecting and diversifying our distribution, but also for distributors who can remove cost on a net basis from our system, we should embrace them and pay them accordingly.

The next question is coming from Ben Budish of Barclays.

Just wondering if you could unpack a few more of the details around the 2026 SRE guide. How should we be thinking about gross flows, outflows, the level of spread? It sounds like versus at least prior expectations, the decline in spread over the next couple of quarters should be much lower than expected. So any other details you can share a up utilization just as we're kind of fine-tuning models after the results?

I'll hit top of the wheel, and then I'll turn it to Martin. Recall that this beginning -- the end of last year, beginning of this year, we had 3 unique issues. We were facing rates headwind, a prepay headwind and the roll-off of massively profitable business that as a result of business that we put on at COVID. And as Martin suggested, having now dug in and really understood on a much more granular basis where we stand on prepays and where we stand on the roll-off of business and having immunized rates, we just have a much more predictable and much better understanding of where we're going to be on an SRE basis, subject, again, as Martin said, to the vagaries of having a $400 billion balance sheet.

What we intend to do is on the 24th is to spend more time on this so that you can help build a model. But just to give you top of the waves again, I don't think much is going to change in terms of ADIP utilization and gross flows, inflows or outflows.

Yes. I won't say much more given the 24th, but base assumptions remain unchanged. The one other point, I think, which is relevant is we're clearly outperforming in '25 relative to the prior guide that we indicated, and that also has a run rate benefit jumping off into 2026. And so we've written this year-to-date almost in 9 months, almost the entire volume that we wrote last year we will be likely close to but not quite at the 5-year average on top line growth in year 1.

And when you pair that with a very strong sort of robust origination environment with the spreads that we've been able to achieve and the rate actions we've taken, that all sort of gets to a more healthy jump-off point into '26 with a sort of similar baseline set of assumptions, and we'll unpack that more.

The next question is coming from John Barnidge of Piper Sandler.

With the capital markets world opening up more and OpenAI moving towards an IPO in '26, do you think this open capital markets environment and those companies moving from the private bucket to the public market will cause a natural inflow of public dollars back into those private assets from those asset managers you mentioned?

It's interesting. The last 6, 8 weeks, Amazon, Google, Meta, Oracle and several others have issued jumbo IG issuance. At the same time, we had a record quarter. These needs are so vast and so great and global that temporary flows into the public IG market, which is a necessary portion of the overall multitrillion funding, it's going to be funded by all markets. When you look at the capital structure in the future, you'll have a company that will have a broadly syndicated facility, they'll have public IG, they'll have private IG. That is the way of the world.

And so when a company can and scale issue in the public IG market, they should. But as we've talked about a company that we announced, whether the 2 that I mentioned on the call, Keurig Dr Pepper or Ørsted very unique financing needs that the public market solution is not going to check the box. So it's not a black and white winner take all. It's open architecture like you've seen in other financing markets.

The next question is coming from Michael Cyprys of Morgan Stanley.

I wanted to ask about the partnerships with the traditional asset managers that you were alluding to earlier. I was hoping you could elaborate a bit on how you anticipate these partnerships evolving, what the different flavors might look like and what scenario might it make sense to maybe even acquire in some of those types of firms as opposed to partnering? And then if you could just speak to market making around your aspirations and steps you're taking there as you look to support the development of the marketplace.

Mike, I'm just going to mention a few things we've talked about in the past. I mean you know about how we partner with State Street on the ETFs. You know how we've announced our dialogue with Lord Abbott in terms of the short duration vehicle. I think what Marc and I are describing, what our partners are describing is the evolution. It was really like the idea of private direct lending 10 years ago was an augment to how the high yield and loan markets work. It was a third tool. And I think that a lot of questions today about sizing the TAM, sizing, it's too early to be doing that.

But what we're really trying to do is to really have folks recognize that the only path to Rome is not only just distributing our ADS and ABC, but there's a variety of open architecture solutions that are going to take place and that are going to be evolving as those PMs and those -- there's a lot of trusted investors in some of those traditional strategies. And so again, I think we're still early days. It's our view that we want to be the leading voice of this. We want to be part of the broader dialogue. And I do think it's going to be about brand and scale. And the commentary about market making, in our experience, our collective 80 years between the 2 of us, every time there's been more transparency, information, price discovery and really putting information at the investors' footsteps, asset classes have grown.

I was there in the early days of the high-yield market, the old jump bond market, now is the high-yield market. And every asset class that we have seen in the development of that information and dialogue. So I believe that as we think about stablecoins, as we think about tokenization, there's an ecosystem that will evolve, and we intend to be the leading voice and a leading player in that evolution.

The next question is coming from Brennan Hawken of Bank of Montreal.

I just wanted to ask, I know we're going to get into all the components of SRE on the 24th. But on the alts return, you guys restructured the portfolio about a year ago, laid it out at the Investor Day. The returns have gotten better, but they still have run below that 11% level. I know you guys are assuming a return to the 11% for next year, and it's part of the outlook. So what has constrained it even despite the restructuring from getting to that 11% and maybe even seeing a few quarters above it, which you would think with an average would happen? And what's the confidence of the progression continuing to eliminate that gap?

So big picture, and we will spend more time on this on the 24th. We have 2 components of the alts portfolio at Athene. By far, the largest component is AAA. AAA is, my recollection, 10.9% LTM. And we're -- in AAA, the returns have been just fine. We do suffer a little bit from cash drag, and we have a relatively healthy pipeline, and we expect the cash drag to come down. And we are optimistic and confident subject to market conditions that we will exceed the bogey there.

The other portion of Athene's portfolio of alts, which is outside of AAA, relates to its holdings of other insurance assets, one of which is Venerable, which has quite frankly, more than exceeded by a wide margin, the 11%. And the second is Athora, where Athora has dragged a little bit because, again, we've been holding a decent amount of excess capital. The deployment of the excess capital into PIK should we be granted regulatory approval, which we expect is highly accretive to the Athora investment, and we would expect to see both categories, insurance and AAA be more in line or exceed target levels of return.

We're showing time for one final question today. The final question will be coming from Brian Bedell of Deutsche Bank.

Maybe just back on the 401(k) theme. I guess, Marc, are you seeing any near-term traction from plan sponsors in thinking about adding privates to their portfolios. I know it's a long-term theme, but just trying to get a sense of if we might see some progress actually this year in the industry. And then also on the deaccumulation side, you've talked about the importance of -- or the opportunity for Athene to make its way into the deaccumulation strategies for retirement plans. Is that something that you might see traction in the next couple of years and begin to generate even some upside to that $85 billion run rate that you're running at now for retirement service inflows?

That's the hope. Look, on the -- we are -- maybe taking them in reverse order, we are very focused on the notion of guaranteed lifetime income. Guaranteed lifetime income is the simple decumulation strategy. It's a journey that quite frankly, retirees have been on. If you go back in history, they love their defined benefit plan. They knew exactly what they were going to get. The corporations, not so much. And so we kind of put them in a 401(k) self-directed marketplace, and it turns out very few of them actually make a decision.

Almost all of them end up in the default option selected by their employer. The ability to offer to them guaranteed lifetime income, but this time not provided by the plan, but provided on a commercial basis by third parties is the holy grail for us. It is what we're focused on. I think we will do this a little bit on the 24th, but probably more likely guaranteed income strategy. Again, not in our 5-year plan, but certainly something we're working on and we believe upside to where we are.

The second, in 401(k), we continue to see progress in 401(k). As I've mentioned previously on these calls, we've crossed over a couple of billion in the various managed account platforms and others by people looking to do this. Is it in any way like a groundswell? No. Everyone is in the information gathering phase right now. The guidance that the administration has put out in terms of their desire is actually quite helpful. But I don't think we're going to see massive take-up until we end up with either guidance, which would be something that would be able to happen in the relatively short term or a ruling of some sort, which might take a longer period of time. But this is a time for us to be out educating. And Jim and I get all of these call reports. It is among the most important things that we watch and follow.

We actually are showing time for one additional question. Our next question is coming from Wilma Burdis of Raymond James.

How do you think about the trade-off between higher volumes versus higher spreads in this ultra-tight credit spread environment? And how does that change Athene's capital efficiency or ROE?

So I don't know that it's just an Athene issue. I think it's across the board. We are in the excess return per unit of risk. And so it's not just spread absolute. It's spread in various marketplaces. And so to the extent we can earn excess spread at the A level or at the AA level, we have different requirements than we do having it at the BBB or BB level. So we see this across the board. For Athene, where we are the capital at the end of the day that supports this, we do not think it is fundamentally intelligent to grow the business without adequate spread. If you do this, you will be the only one who supports it.

The reason we have been trusted with the industry's largest sidecar is because investors know that we will not take volume unless we are earning adequate spread. And you bring back one of the theme that I think Jim and I live with. At the end of the day, we and our entire industry are origination constrained. Now the good news is we're doing any number of things to massively scale origination, and there are a number of very positive trends in the world in that regard. But we should not ignore that we are essentially hostage to origination and our capacity to create excess return per unit of risk. That is the promise of private markets.

And I would just add, I think if you look at the last 5 to 7 years, how we've navigated our securitized product CLO holdings, we've constantly upgraded and it's with a view of where we are in a credit cycle. Even though we probably would have on a pencil, we'd have a higher ROE owning more B and BBs, but we've owned a lot more AAs and because of the overriding view on credit. So let our actions speak louder than our statements.

Thank you all. Look forward to next quarter, and thanks for all your support on the call.

Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day.

Good morning, everyone. It's good to see everyone. This is Craig Siegenthaler, North American Head of Diversified Financials at Bank of America.

So we're very pleased to introduce Jim Zelter, President of Apollo. So Jim joined Apollo back in 2006. He ran their most successful business over that period, the credit business. He currently sits on the Board of Directors and the management team. We also have Noah Gunn in the front row, who's Head of Investor Relations.

Guys, thank you very much for joining us.

Glad to be here, and thanks for the great audience this morning. I appreciate it.

So since we're sitting here in London, I thought maybe we could start with Europe. So you've been very public about being active in Europe and the significant investment opportunities that are here. So what are the most -- what are some of the most important changes taking place that you're really excited about?

Well, I would say that the current U.S. administration, politics aside, certainly has sent a pretty strong message about their desire to support other governments around the world in a variety of activities. And so that -- I think that memo has landed on the desk of a lot of leadership across Europe.

And as we sit here in 2025, contrasting the last 25, 30 years, a lot of the growth CapEx in the last couple of decades have been around companies that were -- or industries that were coming out of either regulatory or technology change. Again, the gaming industry, the cable industry, the telecom industry, health care and such, they were all noninvestment grade.

In Europe, you're now looking for the next 3 to 5 years, 10 years of massive CapEx global industrial renaissance of investment-grade companies. And so that's what gets us excited about the ability to bring our toolbox, you need to really have the right long-term liabilities to be able to be an appropriate counterparty for these conversations.

And so whether what we've done for BP, what we've done for RWE, what we've done for Air France, for Vonovia, it's not -- it's private credit, but it's investment-grade private credit. So taking that all what I've just described, it's a tremendous time as the -- in the backdrop of those massive capital needs for the most part, corporates and consumers are in relatively good shape, it's governments that have too much debt right now for the most part.

And so when you're Germany and you're trying to take a $4 trillion economy and turn it into a $6 trillion economy to get back on the growth trajectory, they've been saying that they need almost $1.5 trillion of CapEx, of which the government can do $500 billion to $600 billion. So where is the rest of the money coming from?

So in real summary, we look around the globe right now and in terms of our ability to help fund and finance and be part of those conversations, it's incredibly interesting. We'll see how much the actual reforms go in place, but we're excited. And also the backdrop of how the European banking system, how those banks that are emerging as leaders have refined their business model.

And so the idea of social policy lending or uneconomic activity, that's not existing like it did a decade ago. So the combination of all that is it's just a great place for Apollo to be operating both our origination business, our capital formation as well as our retirement services business.

Jim, sticking with the reindustrialization theme. Are there any particular sectors in Europe that you think are particularly compelling at this moment?

Well, certainly, the overwhelming demand for how Europe responds to AI and data centers, this is not going to be a U.S.-only activity. So that's a big one. Second is utilities and transmission lines, tremendous amount of needs for energy and transmission lines. And a lot of deferred CapEx that has not been spent and invested around the continent.

Certainly in Germany, a variety of defense spending, rearmament of the country. And so I do think that a variety of those will be the starting one. So utilities, transmissions, AI, data, energy sustainability pipelines are all areas of focus and activity.

So as you look at Europe and compare it to the U.S., what are some differences between the capital markets market structure? Does that give you some opportunities in Europe? Does that present some challenges?

When you look around Europe right now, in the U.S., the noninvestment grade corporate lending market is about $4.5 trillion. It's about $1.5 trillion high yield, $1.5 trillion leverage loans and $1.5 trillion private credit direct lending. In Europe, it's about $1 trillion to $1.4 trillion, something like that.

So it's a much smaller addressable market. The European market is -- the U.S. economy is $29 trillion, $30 trillion. The U.S. ABS securitization market is like a $15 trillion market. In Europe, it's a $18 trillion economy with a $500 billion securitization market.

So there are big parts of the marketplace that have not been financed in the markets and are very captive to banks. Broadly speaking, in the U.S. if the banking system provides credit for about 1/3 to 40% of the lending market, in Europe, it's around 70%. So I think there's a long-term generational evolution where private capital, alternative capital, investor capital is filling a larger gap and it depends on the product.

But again, back to the Draghi report, only 11% of the proposals have been put into place. And I think over time, as more of those are put into place, more of our toolbox will be embraced.

Jim, sticking with that, what specific reforms or policy changes do you think have to happen in Europe to really unlock or accelerate this potential?

The easiest one to identify is some of the limitations on securitization and having it be appropriate for the Solvency II balance sheets. I think there's a lot of consternation still amongst the ECB about was it structure or was it underlying assets. I think we've all learned in the U.S. right now that the problems of '07, '09 were not securitization per se, but just really bad collateral in the resi and the CRE space.

And so I think there's been a greater understanding of that. And I don't think it's any surprise that the economy that's growing the fastest and is a capital -- is one that has really embraced the role of private capital across the board. And again, for this audience, I really want to make sure we talk about -- when we talk about private capital, it's not just debt but also equity, but also, it's really far exceeds just the idea of private credit amongst direct sponsor lending.

That's an interesting market. It's a very good tool for sponsors to buy companies, but they're much, much broader, what's really going to create much more economic growth across Europe is the embracing of private capital by investment-grade companies. Obviously, if they can access the public markets and do a public IG deal, a company always should, but depending on the business line, depending on the assets, depending on the scale of economic growth sometimes the public IG markets don't -- just don't embrace that type of activity.

And so companies really need to be able to have the complete toolbox, and it's really the investment-grade side of private credit, which is what's driving the European opportunity.

What does the private IG credit market look like in Europe today? I assume it's a lot smaller than the U.S. Could it benefit by getting a lot bigger? And then also, you've had some recent transactions like with HGCS with EDF and RWE. Maybe talk about why they selected Apollo in each of those transactions?

Well, each one -- and we've actually done -- Europe has been very well represented in our high-grade capital solutions. Naming: Intel, Vonovia, Air France, RWE is just a handful. RWE, large German utility. They, part of the consortium of a variety of companies, own a variety of transmission activities. They're like a 25% owner with a variety of other countries of an integrated transmission lines and they wanted to maintain their 25% ownership, but they didn't really want to fund all the CapEx.

And so our ability to lend money to allow them to fund their appropriate capital call on the CapEx, but to retain their 25% was a very critical attribute. So we were able to actually provide capital that allowed them to, when the capital call came up for their CapEx investment in the Continental Consortium, they could post their 25% and retain the optionality from their ownership, and so that was a very intriguing opportunity for them.

Same with Vonovia. Vonovia is a large commercial real estate firm in Germany. They had funded themselves in a low-rate environment with public IG debt. As the rates have risen dramatically and in real estate values have come down, we were able to attach ourselves to some collateral on their holding company balance sheet and create an SPV, if you would.

So again, there's a degree of flexibility, complexity, duration that the high-grade capital solutions are a tool for other companies. But again, this is, I want to tie it back to our business, no company wakes up saying, "We want to do an HGCS deal." Company wakes up and says, "We have a capital need. We have a CapEx need that we prefer not to fund. We prefer to focus on more growth over here."

So when you're in our business, which is 2 businesses, we're in the asset management business and we're in the retirement services business. When you're in the retirement services business, you can add value with 3 levers. You can add value by originating assets that have a higher spread versus buying public investment grade.

And hence, our huge focus on origination, origination partnerships, origination platforms, anything we can do that does not make us count on buying the Ag at 95 basis points over.

Second area is in your operating costs. What can you do versus your competitors? We believe in the U.S., in particular, we have a 25 to 30 basis point advantage versus our peers.

And then the third is the breadth of your liabilities. How you bring annuities in, how you bring other liabilities in, whether it's retail annuities, whether it's block annuities that you buy, fixed asset -- fixed annuity-backed notes or reinsurance. And you're trying to optimize the lowest cost and the greatest flexibility.

So origination, operating expenses and your liabilities. And so all these things in high-grade capital solutions on the origination side, you try to maintain, you must maintain an investment-grade rated balance sheet. And so in doing so, you go to these larger companies and you try to find financing solutions because what we're able to provide is we don't need the liquidity because of the fixed nature of our liabilities, we can go a bit longer, 5, 10, 15, 20 years versus a typical either mutual fund or a bank that can go 3 to 5 years.

And so it's about having that right capital base from which to offer these solutions. So you need to understand the complete flywheel or else you sort of go down a rabbit hole of like, why would you want to lend money to RWE or Vonovia. If you ran a big public investment-grade mutual fund, that's probably not where you'd want to find because although it's a premium, it might not have the liquidity that you need because you're offering daily liquidity.

So understanding the overall business in terms of how you're trying to outperform and what's going on in the banking system you need to look at it in a holistic manner.

Jim, I want to turn the page over to originations. And in the U.S., I believe you have 16 separate asset origination vehicles today. Can you replicate that playbook in Europe and will it work sort of the same way?

Yes. Well, to be clear, we own 16 origination platforms, 2-3 of them are primarily Europe right now. And probably of the top 4, Redding Ridge, which is our CLO originator; Wheels, which is our auto fleet finance business; ATLAS, which is our securitized products business; and MidCap. Redding Ridge, Wheels and ATLAS all have some degree of activity in Europe.

So you don't need to set up a new platform. The largest 4, it's just how you sort of expand the remit of the ones you have in place today. And the most interesting platforms right now in Europe are activities like in ATLAS, which is securitized products; and then a variety of our CRE, commercial real estate and resi lending platforms in the U.K. and the Netherlands, which are interesting.

And then we have a smaller midsized corporate lender, SME lender in the U.K. that we've owned for a while. So I do think there's opportunity for us to create more origination platforms on the continent. But we need to make sure that there's a reason for them to be able to compete. What is the product that they're offering that takes the incumbents and brings business our way?

Are we going 6 months longer? We just don't want to be just cheaper pricing, that's not really an economic industrial logic. You want to have something that you bring to the table that allows you to create outsized return for unit of risk.

So let's change the subject to the global retirement opportunity. So serving retirees is a massive global opportunity. And in July, Athora announced a transaction to acquire the Pension Insurance Corporation group, PIC. Can you provide an overview of PIC with some high-level metrics and give a sense of PIC's recent trajectory and market share? And also, how big is the market and how fast is it growing?

Yes. So before I talk about PIC, I got to talk about Athene and Athora for a second. So Athene, obviously, it's in the retirement services business in the U.S., a variety of liabilities, which I mentioned, retail annuities, PRT, FABNs and reinsurance.

In Athora, Athora on the continent is really a book of business that buys runoff books of business, mostly in annuities, but also to some degree in life. The only real new annuities that are being written out of Athora today are for the most part in the Netherlands. And also in Europe, on the continent, Solvency II requires you to own a variety of sovereign debt as part of your critical portfolio, 50%, 60%-plus of sovereign debt.

And so the only choice you can make there is, do I want to buy the core or noncore and how much do I want to lever that? So your ability to have a great impact on the outcome on the continent is a bit more limited.

You arrive back at the U.K. U.K. is a bit of a hybrid, a matching adjustment concept with your assets and your liabilities. And we find in the U.K. fairly mature pension system. With the backup in rates, a lot of pension plans are fully funded. And there's been an industry developed with 3 leading players that are all pretty rational in the pension risk transfer and it's more mainstream for corporates and others to sell and to engage in 1 of these 3 players.

So it's a well-established business. It's operated some pretty healthy margins. For us, traditionally, PIC has kept a pretty traditional portfolio where they have not used some of the other tools of origination. And so for us, we see a business that has double-digit growth over the next several years across the U.K. And if you're looking at Athora as a business, we could see the U.K. being a bigger part of that going forward. But certainly, the growth organically of the business is in excess of what we see at Athora today on the continent.

So what do you think are the most compelling aspect specifically of the PIC transaction? What opportunities does this unlock for you, for Athora? And then how could Athora and Apollo-Athene really accelerate the growth of PIC from what it was doing before?

Well, I think what you have, as I said before, I think you get at a point in time right now where government balance sheets are probably have the least amount of flexibility than they had in the past. And so also, if you are a corporate right now, you want to focus on your core activity because of this global industrial renaissance.

And so limiting your need for funding pension obligations is probably not one of your key focus items, you want to remove that. And so in the U.K., it's a very rational business, it's a well-established business. The biggest thing that we can add over time with Athora and with PIC is our asset management skills. Certainly, not wholesale, but on the edge, getting a portion of their book to buy a variety of fixed income, matching adjustment assets that have a higher yield and infrastructure or other activities would be a first-mover opportunity for us.

And we plan to do that in time, but we need -- Athora needs to get approval first, they need to onboard the business, make sure they do it in a very judicious manner, but that's the opportunity for us to outperform.

So the investment came from Athora, but not Athene. So is Athene going to really kind of stay in the U.S. going forward or maybe a little bit Japan and Athora will be all Europe...

Yes. I think you should think about -- we were very clear when we set up Athene to make it very focused on retirement services and insurance. We had opportunities in the past to do other things, whether it was P&C or variable annuities, which we chose not to. We kept a very defined, identifiable business sandbox from which to play in, which they've done very, very well.

And again, in the past, when we bought a book of business -- a broad book of business to be a solution to a seller, we chose to take some of the businesses that we thought were not consistent, i.e., the variable annuity business and we created a sidecar for that called Venerable because it's just a different risk-reward.

And many of our peers have been public about wanting to expand other areas of insurance that they think are easy or adjacencies. And I think you've seen us instill with discipline about what Athene is going to do in the U.S. and what Athora is going to do here in Europe. And we think that clarity of accountability is pretty important.

In the ashes of the financial crisis, Apollo was first with this retirement model. Now you fast-forward to today, and there's different variations of the model. Some look similar to yours, but some are very different. Maybe talk about what you think is most valuable with your model, maybe what's underappreciated and why you think your model is the best?

Yes. What you're really getting at is the -- our model versus one that's just really a third-party manager. And I think we adopt to the and not the or. We are in the third-party business, it's a growing business, it's a growing priority for us. And if you take the premise that origination is key to what you do, you really need to be able to, if you speak and if you understand the dynamics of how this origination occurs and how you really want to use your platform, you have to have the ability to commit.

And running a pure third-party business, some third party, you do have a mandate where you can actually do things without their approval, but a variety of third-party businesses, while you have an SMA, you need the individual entities to approve each transaction, each investment, which we find quite cumbersome.

And so in the ability for us really to outperform on the origination side, it's the ability to -- I don't think it's any surprise that our model is the one, over the last several years, that been the vast, vast leader in making, finding investments in high-grade capital solutions or in platforms that we are able to direct the traffic and call the ball from day 1 rather than lining an opportunity up and calling 10, 20, 30 investors and to see where they care.

So I think is the time frame to actually make commitments, the time frame to actually put assets on your balance sheet, we believe our model through good markets right now, and especially in more volatile markets, that's a very valuable capital box that we'll be able to direct to a greater degree.

So the fact is we've really been operating in a very buoyant credit environment for the last 15 years. Certainly, there's been air pockets between COVID and the euro crisis. But we are supremely confident that over a longer period, there's a great desire for third parties to want to be aligned with us on the outcome.

And I think a pure third-party business; heads you win, tails you win, hopefully, the client does well, we think that's going to be a much more robust alignment to our business over time. So it's a very -- again, we -- just to summarize: It's about being a principal, it's about origination, it's about an and not an or. And I think that business model for us -- again, the last thing I would say is based on how we've used the -- our business model, we've been able to create a variety of origination platforms.

And as you and I have spoken, we've been able to do so in a very capital-efficient manner without issuing equity at the holdco. And so I think that's an underappreciated aspect of our business.

So I have a question here, and I think this is an important one because it's been my biggest inbound from clients for the last couple of months. But after that, we can take a pause and see if there's any questions in the audience.

Now President Trump had an executive order in early August, which is going to have the Department of Labor look at privates entering the 401(k) channel. And this is actually a topic that Apollo and your CEO, Marc Rowan, have been very visible on for a long time. How do you think this plays out? And when do you actually think flows will start to come to private market managers like Apollo?

Well, I'll take a step back. First of all, why does it make sense? The facts are in. I mean, over the last 30 years, having alternatives, whether it's credit or equity or infrastructure, they produce better returns, higher returns and lower volatility. And so this is a product set that if we think about retirees around the globe right now in the U.S. and other places, in the past, the equity market was the great diversifier, but now when you get the S&P, it's 35%, 40% concentrated on one sector, you're really leveraging your retirement system to the success of a handful of companies.

Does that make sense? I don't think so. And so the adoption is logical. And as you pointed out, there's a process that's going on in the U.S. right now. I think the market is underestimating the longer-term impact. I think there's going to be a handful of firms that between brand, technology, product set, investment performance, education are going to be the lion's share winner, and we expect to be part of that.

Is it going to happen overnight? I don't think so. I think it's going to happen slowly and then very quickly over the next 2 or 3 years. And hence, a lot of the investment that we've made, the product creation we've made, the partnerships we've made to be able to respond to that.

And I think that we are -- again, I don't think there's going to be 100 firms that are going to benefit. I think it's going to be a more limited audience. And we have positioned ourselves from the top, but tactically as well to capture that.

Great. So let's see if there's any questions in the audience. Please raise your hand, and we can get you a microphone.

Let me ask a question. I guess, you described it as alternatives and obviously, superior returns from that. I guess with the -- further to the 401(k) question, how big before alternatives become mainstream? And I guess, on the liquidity characteristics of what all currently alternatives going to be acceptable when the asset class becomes so big that it's more mainstream in nature, I guess?

Well, there's a lot in that question. I guess I would say that we look at the way that a 60-40 portfolio right now or even a 55-35-10, where you have 10% traditional alternatives, private equity, real estate, infrastructure, BC. I think you're going to look at a portfolio in the future where you have public equity and equity alpha and equity beta, you're going to have fixed income beta and fixed income alpha and you're going to have a bit of alternatives.

So the things that are going on right now in the asset-based business, asset-based finance, I think that will play a bigger role. So I think there's a lot of questions being asked about in the role of retirement, do you need all this perceived liquidity that's -- that you think you have, but you don't really have and what are you giving up for that?

So it's -- I think it's been embraced that longer-term investors should take some degree of illiquidity in your book. And with real rates being where they are right now, the compounding impact of that is pretty important. So I do think that parts of -- when I -- 20 years ago, when I went to go see investors, it was -- credit was a very binary question.

Is high yield attractive on spread and is it time for a distressed cycle? Now most investors have a permanent allocation in credit. To answer the question, if it is it 5% or 10% or is it 15%, 20%, 25%? So I think it's just a question of, over time -- the bank loans didn't trade 30 years ago, now they trade, now it's part of every portfolio. So it's just a question over time, and I do think investors are going to get used to how much liquidity do I need in my portfolio and what's the right adoption and diversity. So I just think it's a grinding evolution.

There are a lot of developments from a technology perspective, both in terms of GenAI as well as tokenization, DLT, things that will have a lot of potential impact on financial services. Do you see a world in the foreseeable future, so next 5 to 10 years, where Apollo's business and execution model is dramatically different?

It's a provocative comment. I do think that those -- there's many that in our industry that are saying that we're coming up with solutions that there's no problem. I would disagree. I think that as I've seen asset classes evolve in time, whether it's bank loans or securitized product, the more transparency, information, price activity, it's brought more investors into the market.

And certainly, we, to date, there's a few of our products that we've tokenized, where blockchain participants are using some of our interval funds as part of their products offering. So could I see a time in 5 or 10 years, the foreseeable future, where as stocks become more tokenized, as bonds become more tokenized that a variety of our product set could dramatically evolve?

Yes, I do. I think there could be a time in the future that we did start as a private equity firm, that was our roots and I haven't gotten one question today about private equity, which shows the development of our business and certainly the role of retirement services has a profound effect.

But I think it's a question of and, and how we do this, not or. And so we believe, Marc, myself, our leadership team thinks that we want to preserve the attributes of being a very thoughtful, grounded, value-oriented investor, but doing so with a view of disruption coming across not only how we invest, but the packages that we deliver those solutions in.

Great. I'm looking at the desk, do we have time for 1 more? I think, yes.

Okay. Let me ask one. We've seen these partnerships between alt managers and traditional firms emerge. In most cases, from your competitors, we saw one exclusive relationship, but not from Apollo. You've had 4 different partnerships, more of an open architecture setup. Why is this the right path? Why did you choose this path?

I don't think anybody has a crystal ball in terms of exactly how the world is going to work in 3 to 5 years. And so we want to make sure that we are -- have a chip on a variety of tables. And I guess what people thought was going to be the answer 2, 3 years ago is proving not to be the case right now. The view was: let's take a traditional manager, do a venture with an alts manager and that alts manager will distribute their product through our sales force.

Well, I think that that's not really happened to date. Either the sales forces were not motivated, they're not confident, they didn't have the desire or the skills. And so many examples where it didn't get the acceleration of growth. I think what's occurring now is you want to be a potentially a parts provider, let them do what they do best with their clients and increase the ability for us to add products to have their solutions be more competitive solutions with their client base.

So even in the last 3 years, what was perceived to be the game plan and what's evolving is different. And so to do things that are exclusive long term, it will tie you up, I think we've not found the obvious, "Aha, that's going to be the successor," and so whether it was what we did with State Street or what we're doing with Lord Abbett and other platforms, I think that's -- for our shareholders, that's the best interest in hand.

Great. So with that, we will end it there. But Jim, Noah, thank you very much for joining our 30th conference.

Thank you.

All right. Good morning, everyone. Welcome to day 2 of our 23rd Global Financial Services Conference. I'm Ben Budish. I cover the U.S. brokers, asset managers and exchanges here at Barclays.

With us for this next fireside chat. Really delighted to have Jim Zelter from Apollo. Jim, thank you so much being here.

Appreciate it. Always good to be here, and we're not going to let the fire alarm be a distraction, right? Exactly.

Exactly. Well, maybe just to kick it off at a high level, can you share your latest thoughts on the macro environment? How are you feeling about credit quality, origination, transacting activity going into the back half of the year?

Well, if one landed from Mars today and notwithstanding all the headlines, let's take a look at the macro economy. You got a major CapEx cycle. You've got a...

We're all good. So macro economy, you've got a massive CapEx cycle, look at second quarter numbers for the S&P and credit quality, pretty strong. The consensus was up 4%. It came up 11%. Personal and corporate balance sheets are in pretty good shape. You have administration leaning towards deregulation and economic growth.

And you've got an environment where rates are going to be a little bit lower. They're pushing them lower. And you've got an M&A cycle exception of '21, it's the second best year on record. So strong backdrop. So for us, we want to have exposure that the commentary about U.S. exceptionalism being over and the sovereign debt crisis being a massive issue since liberation day, 10-year numbers have been -- 10-year prices are higher and yields lower. So pretty good backdrop of an economy. That being said, I do worry about the inflationary pressures of what's going on with the environment, and you've got pretty high valuations. But we're finding it a good investment environment in the world of credit. If you look at the credit quality of our underlying portfolios -- and again, we've leaned away from direct subordinated consumer risk. That's not what we do. It's all secured consumer or very much asset-based. We feel pretty strong about what we're seeing right now.

So origination, we had a very, very strong second quarter. That pace is continuing for the rest of the year, maybe not quite as elevated and we've not had spread compression. So if you look at our IG book, it's mid- to high 200s. If you look at our non-IG book, it's in the mid-400s. Overall, it's in that 325, 350. And between Athene and our third-party insurance and our third-party clients and ACS indication we sort of have a check the box on all of those pieces. So the FRE machine is firing on all cylinders.

Great. Let me dig into the business a little bit. So one of the big themes we've been hearing from you has been replacement, fixed income and equity, creating this tailwind for private markets to replace a portion of public assets within portfolio allocations. What are the signposts you're seeing? How are those opportunities being prioritized strategically?

Well, in the world of fixed income, it's a longer-term trend. I mean people first, they had their investment-grade allocation in their fixed income benchmark and duration and such. And over the last 10 years, whether it's loans or high-yield bonds, and now private credit, there's more allocations.

And when I got to Apollo 20 years ago, credit was a very binary conversation. It was -- is the market attractive, time to buy high yield or spreads wide enough? Or is it time to do distress at the beginning of the cycle? Now credit is a permanent allocation, and it's a question of how to deliver the breakdown, what's really beta and what's really alpha. And the ability to have ratings is a huge help in that area.

We suspect that what we saw in the area of credit is going to happen in the world.

Now we have a good story about that.

Exactly. So I think what we see going on -- with what's going on -- what's going on with the equity market with such concentration in the S&P. And you also have an environment where less and less public companies, 7,000 to 3,000. So what we see going on right now is what used to be a great diversifier, was equity market exposure is just not as a readily ready tool for exposure to the equity market because of the indexes.

And so our dialogue with investors, whether we have our credit products or our equity products, we just see more and more DC plans, global wealth plans wanting to diversify their exposure. And the whole public private, we are working with State Street. There's a very large private PRIV that they lead. And then we are a parts component in partnership with them. I saw one of our peers is doing something in the CLO liability space, again, as an ETF. So I think there's lots of points that would make us believe that the 60-40 model is going to a model, a 60-40 with alts, a small allocation to an equity alpha, equity beta fixed income, equity and beta and alts. And we're going to have a bigger seat at that table over time. We see it around the globe with asset allocators.