Good morning and welcome to Apollo Global Management's 2015 Third Quarter Earnings Conference Call. During today's presentation all callers will be placed in a listen-only-mode and following management prepared remarks the conference call will be opened for questions. This conference call is being recorded. I would now like to turn the call over to Gary Stein, Head of Corporate Communications.

Thanks operator and welcome everyone. Joining me today from Apollo are Josh Harris, Co-Founder and Senior Managing Director and Martin Kelly, Chief Financial Officer. Earlier this morning, we reported non-GAAP economic net income of $0.26 per share and distributable earnings to common and equivalent holders of $0.36 per share for the third quarter of which $0.35 per share was declared as a cash distribution. Before I hand the call over to Josh, I wanted to remind you that today's conference call may include forward-looking statements and projections, and we ask that you refer to our most recent SEC filings for factors that could cause actual results to differ materially from these statements and projections, as well as risk factors relating to our business. We don't undertake to update our forward-looking statements or projections unless required by law. We'll also be discussing certain non-GAAP measures on this call, which are reconciled to GAAP figures in our third quarter earnings presentation. This conference call is copyrighted property and may not be duplicated, reproduced or rebroadcast without our consent. As usual, if you have questions about any information in the earnings presentation or on this call, please feel free to follow up with me or Noah Gunn. With that, I'd like to turn the call over to Josh Harris, Co-Founder and Senior Managing Director of Apollo Global Management.

Thanks Gary and good morning, everyone. Despite a challenging and complex market backdrop during the third quarter in which we saw weak equity markets, SMP down 8%, sluggish credit markets with leveraged loans and high yield down low to mid single digits and ongoing volatility in energy with oil down 25%. The funds we managed performed relatively well and we continue to identify opportunities for growth at Apollo. I would like to focus my remarks this morning on providing you with an update on a few key business drivers and some of our active strategic initiatives. Starting with fund raising we generated inflows of approximately $3.3 billion during the quarter, which came from a variety of our investment strategic across the Apollo platform and reflect a continued growth and diversification of our business. We received $1.3 billion of commitments from the first closing of our second natural resources fund in private equity, which remains in the market and already exceeds the total size of our first natural resource fund. As announced previously, we received another $500 million from our strategic relationship with Texas Retirement System towards a $1 billion credit mandate. Our success in delivering differentiated returns through customized managed accounts led to two new credit mandates in the quarter from two large non-U.S. pension funds totaling approximately $540 million. In addition, existing mandates added $150 million to their accounts. We had a $450 million final close to our third structured credit recovery fund, bringing the total fund size to approximately $1.2 billion meaningfully larger than its predecessors. We also continue to see net inflows into some of our open ended strategies including our credit hedge fund and total return fund. The public commercial mortgage REIT we manage ARI raised $350 million in a private stock transaction with a sovereign…

Thanks Josh and good morning again, everyone. Starting with our economic earnings for the quarter, in the Management business we earned $79 million of economic income down from $92 million in the prior quarter. The sequential decline was primarily driven by the absence of some non-recurring transaction fees earned in the second quarter as well a modest increase in compensation cost as we continue to build out the platform. We currently expect to incur placement fees in the range of $6 million to $8 million in the fourth quarter, principally related to our second natural resources fund. Third quarter non-compensation expenses included various deal related expenses totaling $5 million related to our previously announced transactions with AR Global and RCS Capital. The closing of these transactions remain subject to the satisfaction of a number of conditions. We incurred $4 million in the second quarter and we expect to incur additional expenses in the fourth quarter relating to these transactions. Turning to the incentive business, in private equity the 3.7% depreciation in core funds during the quarter was driven by 13.5% depreciation in publically traded portfolio company holdings, partially offset by 2.3% appreciation in private holdings. Excluding energy related investments, the most significant of which is EP Energy, the publicly traded holdings of our private equity funds would have been flat for the quarter and the overall portfolio would have appreciated by approximately 3%. In credit the investment performance of the funds we manage was modestly negative during the quarter down 80 basis point on a gross basis and down 90 basis points on a net basis excluding the non-sub advisory assets of Athene. If we excluded energy-related unrealized losses from the Apollo managed funds within credit for the quarter, performance would have improved by approximately 100 basis points. Due to…

The floor is now open for questions. [Operator Instructions] Your first question comes from the line of Ken Worthington of JPMorgan.

Hi, good morning. In terms of MidCap, I guess maybe how should we think about the growth their going forward and is Athene maybe a good analogous situation where kind of shut out with an idea in assets it grows through some big chunky deals where was the GE transaction and growth for GE and that type of growth kind of a one-off? And then maybe talk about next steps for MidCap, does it go out and raise equity right now and wait to set out the next deal or could there be other steps? Thanks.

Yeah, I think it is somewhat -- it’s hard to predict large chunky acquisition, but there are some out there. Clearly GE was a very large chunky transaction and maybe the largest and highest quality, but there is definitely a step out there. It is an analogous situation in terms of there just being lots to do and lots of growth and certainly we're going to continue to rise. There is a lot of interest in MidCap from our investors and this is -- this plays on a lot of things we've been talking about, which is that the banks to a largest extent are moving back from the space which is middle market, senior secured lending and so MidCap is stepping right into that void and between the returns that you can earn on the assets and a little bit of a leverage you can get, you can generate very, very attractive returns for investors. And so the investors are interested in supporting that and so we will -- and the platform that we’ve designed is an advantage over others trying to get in space. So I think we’ve got a critical mass. We have a great Management Team. We have lot of investor interest and there are lots of people getting out of the business. So I think all of that will allow us to grow their platform quickly.

Thanks and then maybe in terms of your thoughts on capital return I think this is something that you've been maybe contemplating, the stock price is depressed, KKR just kind of re-jiggered its way of returning capital to investors. So as you kind of think about where the stock price is, how much cash you're generating and what the opportunities are, any thoughts is there -- do you think there is still merit in maybe contemplating a change or is the current path really the obvious right path? Thanks.

We've thought about buybacks a lot and there are some pluses and minuses from our point of view. On the one hand, our stock is clearly undervalued with really no value. The way I think about it there is no value ascribed in the incentive business at this point. That’s not withstanding $80 billion that we can put in some of which is in the money and generally we’ve gone to these cycles before and I know it all it may a unnerve everyone when you see us go out of -- go into escrow, but the reality is we've seen this multiple times before and I have to really scratch my head and think about any situation. There is a very few situation where we haven't ended up and carrying these funds because this is what we -- this is what do and this is what we're good at. And so the fact that there is no value to our incentive business is very frustrating and therefore, the stock is undervalued. So we have to consider buybacks. On the other hand we have a number of potential strategic uses for our cash and while we have $850 million of cash on our balance sheet, we currently need $650 million to fund the future commitments. And I appreciate those commitments are over time, but we like our ratings on that and we're going to be managing the AGMs balance sheet fiscally prudently and look to not have downgrade and so therefore, we’ve got all these opportunities to substantially grow the platform strategically and we don’t have an endless supply of cash. And so we have to balance our opportunity set with our buyback and in addition we've been working to increase our profit flow, which is now at 30% and…

Awesome. Thank you for the comments.

Thanks Ken.

Your next question comes from the line of Michael Carrier of Bank of America, Merrill Lynch.

Thanks guys. Just on the distribution may be outlook I just wanted to get your thought when you think about the funds that are in escrow versus looks like the management business we're seeing more growth than we have over the past maybe two years. And then even on the incentive business just wanted to give your thoughts on like what portion of that particularly maybe on the credit side that could be viewed as more like recurring where you don’t have to sell something to drive that on it could be like interest dividends versus something that is going to be like transaction oriented.

Sure, so Mike its Martin. I'll answer that. I guess there is three components to the distribution as you know. So firstly on the management business, I think we've pretty clear about our focus on, on growing management company revenues, maintaining or improving the margin over time and increasing the cash earnings coming out of the Management company in sort of predictable manner that creates a source to the yield. So that’s management company fees. So on GE Funds, the surety of the funds we have is all quite different from each other. Funds VI as in escrow, it’s got a small handful of investments that are barbell in terms of their performance and I really expect the Funds VI in escrow for quite some time. If we sell as I think as I think you know Escrow is affected by changes in value and the sequence in which you sell assets and whether those assets are sort of above cost or below trust. And so as we look forward, and our view changes from time to time as we look for Fund VI is probably in Escrow for the foreseeable future. Fund VII is a different story. Fund VII in escrow last quarter was above 130% and it dropped to 110% this quarter, really for two reasons. One was marks on the public’s mostly ET which dropped by 10 points and then we get a dividend recap on wholesales which was sort of the high value to loan cost sale. And so it’s 110%, it could easily come out escrow based simply on marks. And then its $5 million of running in the ground in fund seven to the highest over time. 70% of it is private and so there is a much larger number of companies in the…

Let me just give my take on it like outside simplified it is $81 million of carry eligible AUM. We have all this in our earnings release. Round numbers a third of it is currently generating carry. Round numbers a third of it is un-invested and round numbers a little less than a third or the balance is not currently generating carry. Most of that is likely to generate carry. So I think fund 6 is a successful fund, its largely realized, its relatively small. So again just having lived through cycles before I’d be very surprised if ultimately a lot of that doesn’t generate carry and so I view this to a large extent as temporary. I remember where our funds were marked during the financial crisis and it was -- this is not even -- it was wildly significantly more below carry hurdle and all of those funds ended up generating carry. And when you’re a contrarian investor and again there is no -- I can’t predict the future, but when you’re a contrarian investor and you're buying into debt guess what happens? You actually have some mark-to-market losses and that affects the value of your funds. And so this is just what we do and so but -- so we'll just have to prove it over time. But we’ve done it for the last 25 years and it’s one of the reasons why our returns are consistently above our peers and why our LPs consistently come back to our funds.

Okay. That’s helpful and then just on the -- I guess on the deployment side, this quarter activity picked up and then it looks like even the pipeline is pretty active. Just wanted to get your sense, it seems like the credit markets or the financing markets are a little bit more challenging. Just wanting to get your sense both because on the private equity side and the credit side you’re active just what you guys are seeing and when you’re deploying that capital how the terms are shaping out?

Yes both the high yield market and the bank debt market backed out. Certainly the high yield market has come back a bit and -- during the volatility in the high yield market and even the bank debt market backed up it hasn’t really retraced that much. That unnerved a bunch of people and so it led to a bunch of investments and even distressed, which has been not very interesting, I'll be honest with you. It took a leg down. A bunch of credits that were on above or took a leg down and we’ve been buying for the first time really -- we’ve been dipping in tail in distress and buying some stuff. And so you are -- the volatility in the credit markets is allowing us to put capital to work in more interesting situations. I think from our point of view, we would rather have another leg down that would be helpful. And so it’s not -- it's certainly not the flood gates haven't opened in distress but we’re starting to see some interesting stuff final. And what needed to happen is a bunch of the people that have short term unlocked up capital needed to be cleaned out and lose money. And I think that’s happened. I think particularly in energy and natural resources, when you look at it there was a leg down in oil, everyone ploughed right into some of the stress credit names and guess what? The leg down continued and got worse and people lost a bunch of money and so that let to unwinding of certain things and not only in energy but across the Board and you saw some larger financings and I want to comment on specific names get backed up. And so we’re sitting there with a lot of capital waiting and when things get backed up today even in the double BB space they get backed up materially because the liquidity in the system if you will is lower and so they have to back up into opportunistic territory and so things can go from a 6% price tag to 10% price tag pretty quickly. And that’s where BB credits and that’s where things get interesting and so we’re seeing some of that, but the reality is the last week or two of the markets have been this month's been a rally. So again you’re seeing volatility and so forth and so on and we’re just -- we’re taking advantage of it where we can on a daily basis and certainly it does help our deployment.

Okay. Thanks a lot.

Your next question comes from the line of Luke Montgomery of Bernstein Research.

Hey, good morning guys. Just coming back to the comments you made just a second ago about the deployment in the energy sector, if I hear you correctly you think we’re now in the cusp of the credit problems you wanted to see to accelerate your interest in the space. And then I guess along with that, assumingly you are there, how would you think about allocating those deals to fund 8% beside natural resources fund you just closed?

Yeah, well first of all, we never wish credit -- credit woes on anyone, but I think the market volatility in energy, which has gone on for longer than people expect it. So I would say here is what I would answer which is the price of oil went down a lot more than the price of debt and the price of assets and the cost of debt and the price of equity. And so what you saw last year was almost a halving of the price of oil, but yes the equity markets and the debt markets didn’t react to it and there was a lot of issuance and that allowed many of the companies to mandate their liquidity needs and for some period of time the people that actually bought all that have been really -- that has -- that's been marked down pretty materially. And so the markets to a large extent now are much more discerning about energy names and so we are starting to see more interesting things happen, but again it’s not -- it’s not a full flood gate yet, but we’re starting to see it and the capital intensity of these companies is large enough that they have to keep either selling assets or issuing debt or equity to survive or if you can’t slow down your capital programs enough in many cases to outrun those needs without really hurting your business. And so certainly it’s helping us and it’s helping us not in the U.S. the two funds you managed are private equity funds and it’s pretty simple with those funds. In the case of those private equity funds, they buy private equity or they buy distressed for control and in the distressed for control space in energy it’s still -- it’s…

Okay. Thanks, really helpful. And then I realize it’s still very early days, but as you said with the AR Capital acquisition for bit longer, has anything changed in your thinking about strategic possibilities and how that will help you scale on real estate? What challenges are you working through and then any thoughts on inorganic opportunities get more involved in opportunistic real estate equity.

Yeah, thanks for the question on AR, I'll just say that at this point as we noted in our prepared remarks, the deal is still subject to a number of closing conditions and so really can't say anything beyond what was said in the press release and the presentation that we posted back in August in terms of opportunistic real estate. Take that one Josh.

Yeah, opportunistic real estate, we continue to find opportunities in various platforms Apollo whether it would be certainly I’d say the most interesting part from our point of view of opportunistic real estate we’re finding in Europe in commercial real estate where large portfolios of assets are being solved at discounted Cap rates because of some of the regulations that are hitting the banks there. And so your ability -- so we have the ability to transact across dozen 100s in some cases thousands of properties at the same time. We have that capability and so as a result of being able to buy in bulk, we’re getting pretty discounted Cap rates. I’d say in the U.S. there is selective opportunistic real estate opportunities. Some of the core markets are getting at this point in the cycle as you might expect relatively fully valued who are playing in some cases we think the arbitrage between some of the core markets and some of the secondary markets is interesting and we’re looking at some of those secondary markets.

Okay. Thank you very much.

Your next question comes from the line of Robert Lee of KBW.

Thanks. Good morning. Thanks for taking my questions. The first one I guess is simple kind of big accounting question from Martin just those to get in the quarter, the other payables to drive the distribution were essentially zero compared to where they had been running kind of year-over-year. So is there -- should we expect that there will be a step-up in that in Q4 that obviously would have some impact on the Q4 distribution?

Thanks Ron. I guess there is a couple of factors that go into the difference that you know. The primary one is balance sheet returns. So when we earn money from our own balance sheet, we tend to not distribute that, but hold it to reinvest back in the cycle. And during the quarter there wasn’t much of it. So that drove a high fair rate on distributable cash flow. I think over the time, I would refer to a more normalized payout rate or sort of low 90s, 90% low 90s but we don’t target a payout rate. Necessarily we just look at it in terms of balance sheet returns and then hold them back and that derives it.

Actually I think I was actually referring to and I apologize for not being clear on Page 10, where you go through the shareholder distribution, the taxes and payables, last year they were $68 million. Year-to-date this year they're essentially zero. So those kind of roll down to the dividend the distribution, so should we think there will some step-up in that?

Yes, so that goes to our overall tax profile which, I guess the difference year-on-year is two things. And it affects both our ENI tax rate and our cash tax rate. One is last year as you recall we were running a significant transaction fee from Athene which was non-cash but taxable. So we had to pay taxes on that. We don’t have that this year and then this year we have a series of deductions for compensation that was awarded to employees many years ago back when the 144A transaction was done and it's just finally sort of investing in being delivered and it's tax deductible now. So there is -- there is a skew between the two years for that reason. Going forward I go back to the comments we made at the Investor Day, which is turn all the time. ENI tax rate I would expect to be in 10% to 20% range and the cash tax rate high single digits to sort of light double.

Okay, Thanks and then maybe as a follow up, I guess I apologize, I think I missed Josh’s comment earlier, but I guess I am trying to understand the write up and being in the quarter, particularly since if I look at AAA it was actually down, understanding there are two different securities, but since AAA still a predominant asset, it is being I guess I was a little surprised it would be that write up in the quarter.

So a lot has happened at Athene in a short space of time and all the factors that Josh outlined in his prepared remarks around the Management Team ratings from the three agencies accessing the new distribution channels first funding agreement bank notes and catching up the financial segments and so the state of the company has evolved from a rolled up series of blocks into a operating company that’s preparing for an IPO. So we moved off what we had --- the method we use to value Athene which was embedded value to a book value and multiple and so all of those factors combined to create that surplus in the value.

Okay. Great, and then if I could maybe just one last question, I guess maybe kind of a strategic question, so you talked about some of the initiatives and more liquid strategies with Lockdales, Oppenheimer, K2 as asset growth opportunities. But conceptually, I guess I am thinking there is a open and mutual fund asset or there is a potential for a lot of assets. It’s certainly an inferior asset to all the permanent capital vehicles you talked about more modest feel that's less permanent. Open up to more volatile flows, some extent maybe user's capacity in terms of your team's time. Is it -- how do you really think about that besides obviously the asset growth, but is it really something that you really want to grow a lot or have a nice add on but I guess I kind of struggle with that a little bit.

Yes, Okay. So most of our -- I would say that there are -- most of our capital is in more locked up structures and some of it is stressed to stress like the sort of higher octane moral alpha line and stuff. There is a real opportunity though in the BB, BBB space and we're not subject to like almost none of our vehicles have -- I think I'll actually go sort of none of our vehicle, none, had daily liquidity. So in certain cases the assets that we're buying particularly the higher credit quality assets from our point of view, which are cross over BB, BBB even into single A. Those things actually are quarterly lock-ups for that with some panel but we believe that that structure is logical and makes sense and we think we can make money. So we are not even in the context of some of the small amount of sub advising we're doing with mutual funds, we're pretty careful up to not mismatch the assets that we own and the liabilities and so we’re not really taking the same redemption risk at a mutual fund, risk is -- we're not subjecting ourselves to the type of redemption that a large mutual fund complex would have to deal with.

Your next question comes from the line of Glenn Schorr of Evercore ISI.

Hi, thanks very much, just one quick follow-up on the Athene mark, just curious what book multiple are you using and more importantly will it slow with public comps now quarterly now that you're on that valuation though process.

Hi Glenn its 1.2 times booked and that is benchmarked against public comps.

Yeah, I would point to the AAA financial statements which are posted up on the Apollo alternative assets website the financial proposed last night was actually pretty lengthy description in there about the valuation methodology and the 1.2 times book valuable and that's on Page 34 of the financials.

Okay. No problem. I was just curious on that and then on real estate I think my first glance was well in that market to be up 4.6% and the quarter is pretty good, it is that a function of just being in some of the right REIT sectors, which did well in the quarter just curious what drove the good real estate performance.

It was specific properties that are quite seasoned and are either nearing an exit or this good comps that we can look to value them. So it's not particular to a particular REIT sector, but its individual assets that we earn that is decent transparency around comps.

Your next question comes from the line of Devin Ryan of JMP Securities.

Hi, thanks. Good morning, maybe just a bigger picture question, so first potential of higher interest rates. I know you guys been addressed it but it seems that the market perception is still that higher interest rates will create a headwind for the business in aggregate. So I guess maybe if you can help us walk through some of the various parts of the business that will be impacted and how much Management actually goes around preparing for whether rates will raise or even on the other hand managing for lower for longer environment?

Look again so just going through it in private equity whether it would be real estate or if higher rates mean less about less liquidity and less availability of financing, generally what happens there is that the purchase price multiples like ultimately follow that. A lot of what's driving what is kind of an overvalued environment as actually I believe and have said many times is the excess liquidity in the market starting with the quantitative easing that's going on. And so what even the perception of rates going to go up, creates volatility and pull back in the credit markets which ultimately helps across credit immediately because we buy stuff at higher returns and private equity over time because prices come down and so where would obviously hurt is that. And so if you think -- let me tell you how much management goes into it, the answer is that we've been preparing for it for five basically -- we’re basically through the excess distribution cycle. Now we're in the asset accumulation cycle. And so clearly we’ve been betting that there will be more volatility and lower values over time and clearly lower for longer is not -- we’re a value investor. Lower for longer is not a good environment for value investor tune in for stock. But having said that, our platform -- I’m actually very proud of both what we’ve been able to do in private equity and credit and real estate in terms of accumulating assets at very low multiples and in another ways overvalued environment. Our private equity portfolio, the average -- if you look at our flagship Fund A, the average multiple in the industry and private equity is over 10 times and our multiples pretty much is plus or minus six. So we're sitting there in full multiple point discount. And that I could give you that same story across all of our businesses and so we’re getting better at our graph in terms of being able to navigate through finding areas of arbitrage whether they would be energy or financial services and buying from banks that are getting smaller like within the context of the over-valued environment you have to find things to buy and we’re getting better that. But now we’re saying that it's definitely not the best environment. So again perception versus reality just having done this for 25 years raising rates might create some mark-to-market right downs for us, but generally when that happens, we buy a lot more than we sell and that ends up being very good for value creation.

Okay. Thanks for running through all of that. And then second question just around the conversation on capital allocation there has been an increased focus again around potential changes to tax carry interest. We maybe a long ways away from that if it all, but how important is that favorable tax treatment as a factor and how you guys think about the attractiveness of the outsized dividend that you pay now versus other options for the capital?

It doesn’t effect, okay so changes in carried interest and again like we've tried to communicate that and sometimes we haven’t been successful but changes in carrier interest do not affect the financial statements of Apollo nor does it affect what we pay in dividends. What it does affect is ultimately how much in taxes people that own the carried interest pay. And so the effect would be on employees and then I’ll just kind of answer this second question on your mind, which is I still believe that private equity will be a very attractive place for smart people and young people to work on the margin, could you lose an employee or two over change the carrier interest maybe. But by and large I don’t see it having a significant effect other than the obvious effect, which is people will make less money, but it’s not -- its get a lot of play and discussion then it might and its sort of -- there is lot of noise out there relative to the valuation of the stock and dividends and earnings and it's just not true.

Your next question comes from the line of Craig Siegenthaler of Credit Suisse.

Good morning, guys. I just have a follow up here on Athene, can you remind us what the level of asset sensitivity of Athene's balance sheet and also the approximate duration of its liabilities?

Sure, its structurally short by little foreign change versus private change on the asset and liabilities side.

It's pretty matched.

It’s a little bit short -- it’s a little short.

And then just as my follow-up here on real estate, how do you think about the right sized of this business and scale and I’m sure the answer is larger, but you’d a really strong return this quarter, but the business was still producing a loss. So I’m just wondering like when do you get it scaled in this business.

I would say on the debt side I think we’re scale -- the answer is we’d like to be a lot bigger than we are. I’d say clearly when you look at the size of our private equity business relative to certainly Blackstone but a number of other players, there is a lot of room to go, but it's like everything else. We started from a small base. We’re growing it, but we’re growing off of a small base and so yeah the breakeven nature of it on our financial statements is not lost on me nor on anyone here and we do think that there is leverage ability to the business and it is growing. I would say that when you include other real estate that’s within credit, the business is actually a $17 million business and so it’s not small and we're thinking about how we reflect that part of the business and we're at more accurately on our financial statements and stay tuned on that.

Your next question comes from the line of Alex Blostein of Goldman Sachs.

Hi good morning, everybody.

Hi Alex.

Question for you guys on the management fee business clearly really nice to see the increased focus on that -- on that earnings stream in more I guess kind of subdued carry realization environment. So as we look out over the next year or so, I don’t know if I heard it on the call but anyway you can help us I guess summarize what the pipeline of AUM that's not paying management fees. How quickly you think you guys can deploy it obviously outside of the pending AR Capital acquisition because it sounds like there is a couple of things going on there. So A, the size of that and then the incremental margins that you think that's going to come into the management fee AUM, thanks.

Good morning. So the total amount of AUM fee potential but not earnings management fees today is about more than that, but most of that's in credit. I don’t mind that is in credit. And that's just given the structure of many of the credit funds where we have paid as we deploy versus as we raise capital. So I would look to the run rate of deployment in credit as the best guide to how quickly that's put to work, which is sort of $5.5 million for the last 12 months and so annualizing to about the same number for the first nine months.

Okay. And just the incremental margin on that, is that kind of keeping the roll up fee related margin constant over the last kind of several quarters, so there is pick up on the back of it?

Yes I guess there is a wide range in credit. The types of funds that sort of draw down style funds where we get paid as we invest tend to be higher fees, but then we're also growing out -- the yields are at the tow of the business, which is lot of fees like MidCap and so I guess use a blended average, but it's quite a large spectrum.

Your next question comes from the line of Michael Cyprys with Morgan Stanley.

Hi good morning. Thanks for taking the question. I guess just more broadly on the distribution, how should we be thinking about the potential monetization outlook over the next 12 to 24 months and PE now that Fund 7 is in escrow. And then just also in credit too it looked like the monetization in credit have been specific down in each of the past four quarters. Just any color around that would be helpful.

It's sort of -- we’re largely through them, if you look at our assets in the ground like Fund 7 is like very close to carry, very close to escrow. So one tick up in the marks and you’re not in escrow. I think we lay out in our presentation how close it is and as Martin had said. So I would say that that's a liquidating fund and we expect whether or not we sell will depend on market volatility. So you're unfortunately asking me questions that are very difficult to answer. So that's probably the best that I would be able to do.

And on the credit side?

And again there has been volatility in credit. I would sort of unfortunately give you the same answer, although certainly in credit clearly there is a large amount of interest expense cash flow that's coming out of that portfolio on a current basis. So it’s not really as leveraged if you will or as volatile as the peak. It's much more predictable in many cases just based on interest expenses. But relative to like what we're going to sell or not sell tell me if the market is getting up or down. If the market goes up, we're going to sell a lot and if the market goes down we would be probably be buying more than we're selling, if history is any guide.

Your next question comes from the line of Chris Harris of Wells Fargo.

Thanks guys. The drop in carry that you've been already discussing it, but just wondering if you guys can inform us whether part of that drop was related to performance of energy investments in those funds?

Yes.

Okay. Any color you could share on what the concentration of energy is in those particular funds?

I can give it to you across the platform and so which is probably the best guide. We have about $6 million in the grounded energy today and about 2.5 of that is fee and 3.5 of that is credit. And so we have been actually buying in credit and as the marks have gone down, which is what we do. We also have -- we have a lot of dry powder to put to work which we would do selectively when the time comes, but for sure it’s a about it.

Got it. And real quick any update on quarter day realization?

Today we’ve sold a couple of small investments, but they have not created any distributable cash.

Your next question comes from the line of Brian Bedell of Deutsche Bank.

Hi, good morning folks. Most of my questions have been answered maybe just a different angle on the KKR move yesterday on the distribution side of it moving to a fixed distribution just I guess in picture what’s your view on that? Is that something that Apollo has ever considered and then do you think it opens the debate a little bit more for the alternative firms and putting yourself to look at becoming a C Corp from the partnership structure?

Yeah, obviously we watch all of our competitors very closely and it’s pretty appropriate for me to speculate on why KKR did what they did. Certainly our strategy is very different and there are many roads to run right. Maybe not everyone has the same strategy to be successful. From our point of view, we continue to be an asset light model and we continue to believe that distributing nearly all of our cash flow to our shareholders and generating big dividends is the right strategy for us. And we'll certainly watch what everyone does and if there is -- if its compelling and we’re always looking and researching at better ways to create shareholder value, but right now we’re -- we believe in our strategy.

Okay. That’s helpful. That’s all from me. Thanks.

Thanks.

Your next question comes from the line of Eric Berg of RBC Capital Markets.

Thanks and good morning. Josh in thinking about the building out of the permanent capital businesses as rapidly and as aggressively as you have is this really about at least in part attracting new investors who would like to become owners in your company, but can't stomach the volatility or is this something that your existing shareholders have asked for or both?

I would say that -- certainly I would say permanent capital vehicles are generally -- there are some investment opportunities that are longer term in nature even in longer term than traditional private equities funds, which are quite long term in nature. And so to take advantage of those investment opportunities permanent capital vehicle make sense. Secondly, in many cases there are potential public exits or strategic exits for things that are built up in a company structure at premiums to book value versus in a fund structure and so as a result of those factors, investors and certainly there are investors that prefer those structures for their own reasons. And so for all those reasons it certainly makes sense to consider permanent capital vehicles in the context of all the other tools that you have in your toolbox and in certain situations earlier avail yourself of those tools to generate better returns and more efficient structure for your investors. On the other side, I don’t believe the market yet is recognizing it, but I do believe that it’s having a permanent capital base that's sustainable where you don’t have to even from seeing for supper every five years if you will, I think that that is -- I think that de-risks the entity. And so therefore its puzzling to me that we don’t get any credit for it and no one talks about it. But yes, I do believe it is better. I think we will talk about it increasingly because we think it is something that differentiates us and then investors haven't yet factored it.

Thank you.

Thank you. That does conclude the Q&A portion of today's call. I will now return the call to Gary Stein for any additional or closing remarks.

Thanks operator, and thanks again everyone for joining us this morning. As always if you have any follow-up questions, please feel free to circle back to Noah Gunn or myself.

Thank you for participating in the Apollo Global Management's 2015 third quarter earnings conference call. You may now disconnect.