Good morning and welcome to Apollo Global Management’s 2017 First Quarter Earnings Conference Call. During today's presentation, all callers will be placed in a listen-only mode. And following Management's prepared remarks, the conference call will be open for your questions. This conference call is being recorded. I would now like to turn the call over to Gary Stein, Head of Corporate Communications.

Great. Thanks, operator. Welcome to our first quarter 2017 earnings call and thanks for joining us. Joining me this morning are Josh Harris, Co-Founder and Senior Managing Director; and Martin Kelly, our Chief Financial Officer. As a reminder, this call may include forward-looking statements and projections, which do not guarantee future events or performance. Please refer to our most recent SEC filings for risk factors related to these statements. We’ll be discussing certain non-GAAP measures on this call, which management believes are relevant to assess the financial performance of the business. These non-GAAP measures are reconciled to GAAP figures in our earnings presentation, which is available on the Apollo website. Earlier this morning, we reported non-GAAP economic net income of $0.82 per share for the first quarter ended March 31, 2017. Apollo also reported distributable earnings to common and equivalent holders of $0.57 per share driving a cash distribution of $0.49 per Class A share. If you have any questions about the information provided within 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 thanks to you all for your continued interest in Apollo. As we reflect this morning on the momentum in our business, we wanted to share our perspectives on a few significant trends. First, we've experienced significant growth in the most stable and predictable earnings stream of our business. Over the last twelve months we generated $1.38 of fee related earnings or FRE per share, nearly a three-fold increase from just five years ago. Our growth in FRE has been driven by the increasing scale of our fee generating assets and both metrics have grown at a compound annual rate of more than 20% during the last five years. Asset growth has been augmented by an ongoing focus on efficiency and cost discipline, which has resulted in significant operating leverage and margin expansion across our platform. Second, following a year of record deployment in 2016 totaling $16 billion, we are continuing to find opportunities to put capital to work despite the high valuation and low rate environment that exist, by leveraging our deep industry expertise and our direct origination capabilities and credit. Third, with respect to private equity we are beginning to see early signs of a realization cycle which is paving the way towards a more balanced mix between harvesting and deployment. And finally, we continue to strengthen our balance sheet which is not only an important source of liquidity but also increasingly a significant contributor to our overall financial performance. Moving to the specifics of the quarter, I'd like to begin with our investment performance. We pride ourselves on delivering high risk adjusted returns to our investors and once again the funds we manage generated positive results across all segments for the quarter. In private equity, the healthy portfolio appreciation of 8% was driven by 7%…

Thanks Josh and good morning again everyone. Our strong first quarter results capped a twelve-month period of significant earnings growth. Total economic net income of $1.4 billion for the twelve month period ending March 2017 was more than six times the amount of the preceding twelve month period ending March 2016. During that time we delivered strong investment performance across all segments, resulting in 60% growth in our base of carry-generating AUM. We grew fee-related earnings significantly and we received meaningful contributions from our balance sheet investments. It's clear that the breadth and scale of our platform continues to expand as we grew our total asset base of assets under management by 14% year over year to $197 billion, much in closer to our previously stated longer term goal of $250 billion to $300 billion. Focusing on the financial performance of the first quarter, we generated total ENI of $332 million or $0.82 per share. Pre-tax, our economic income was $390 million or $0.97 per share, driven by the following key components. FRE contributed $134 million or $0.33 per share. Private equity net carry contributed $189 million or $0.47, including $0.24 from Fund VIII. Athene contributed $57 million or $0.14 per share between our balance sheet investment and carry arrangements. And the balance sheet ex-Athene contributed $34 million or $0.08 per share. Starting with FRE, $134 million or $0.33 per share for the first quarter was up slightly quarter over quarter and up meaningfully year over year due to continued growth in management fees and cost discipline. Included within FRE this quarter is a non-recurring $17.5 million insurance recovery related to a previously disclosed item that reduced FFRE in a prior period. Looking a bit farther out, we would expect the step function of FRE growth to occur when our…

[Operator Instructions] Our first question comes from the line of Bill Katz of Citigroup.

Why don’t we just start on the – Josh, maybe talked about DRE. Can you flush that out little bit, maybe talk about the total addressable market that you could foresee for that business and then maybe the flow-back of economics that would be there for Apollo, I presume you're inferring the US allocations as well as advisory fee, so wondering if I am thinking about that correctly.

So you broke up – are you saying AAME? Is that what you are asking about?

Yes.

Yeah, I mean – look, I think obviously we've raised capital and we're looking to deploy that capital with the buying books of insurance liabilities in Europe and in much the way that we did in the US. We haven't really -- there's certainly a much Apollo through it, AAME, and throughout our asset management and we will be managing a portion of those assets. We haven't really disclosed yet exactly the economics of all of that and so we'll probably hesitate but if you think about, is that going to be -- if you think about conceptually what we did with Athene, that's probably a pretty good way to think about it, although obviously they're totally different markets and how all of the economics will work will be different, and the margins will be lower.

And we know there's a lot of acronyms and – so AGER – which is Athene, Germany, AGER, that's the attitude to raise the capital €2.2 billion of initial equity capital, that can be levered up quite meaningfully in the European markets. And as Josh mentioned, AAME will be investment advisor for the assets within that AGER entity.

So you think of AGER as Athene and you think of AAME as AAM, and we apologize for how confusing it is, it confuses even us, we are open to suggestions. That's the way that we've set it up, so AAME, E is Europe, AAME. I don't know if that gives you about as much color as we can give you I think at this point.

And I would just say it’s early stages for AGER, they just quote – just raising the capital but now well capitalized to go out and look for opportunities to acquire books of business –

But if you think of $2 billion of equity capital, I mean I think you're aware -- I mean insurance companies can be levered and that gives you a lot of buying power.

And then my follow up question, nice theme of questions this morning, Josh spent some time talking about the strength in your balance sheet some; can you about a little bit how you think about that a de novo basis versus maybe through acquisitions particularly since receipt going on Gary Clark on to your sort of leadership teams well.

Yeah, I mean I would say that obviously we're completely flexible to all of that depending on what the best value from our point of view is. Clearly doing acquisitions – I mean we’ve done a relatively -- Stone Tower was really successful, an acquisition called Gulf Stream was really successful, we've had some other methods but we sort of bring the same value discipline around acquisitions as we do in our private equity business. So the stars and moon aligning and getting something that is strategic for us and it's the same type price well -- they come to you in arbitrary but we're clearly lucky and certainly Garry Parr will be adding to that capability but we're also finding relative to these strategic capital platforms whether it be Athene or Athene Europe, AGER, or any number of other ideas that we have, that mid-cap which you also know about, like that these require some amount of capital contribution from us. So the capital loss would be used for that. And then there's also the ability to organically bring in teams. So I think all of those things are on the table and we're looking at a lots of different, certainly Gary adds that was one of the significant reasons we did bring in Gary – and capability.

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

Could you maybe – maybe adding some color on fund raising, for fund -- I guess it’s Fund 9, just kind of at this point sense is you're seeing kind of the mix of LPs; does it predominantly kind of – existing KLP. Or resigning or are you seeing kind of broadening of your LP investor base on nine?

I think, this is what I would do, because I can't -- unfortunately I don't want to comment specifically on fund 9, but I can comment generally around fund raising which is to say the following. Certainly there's a broadening globalization of the investor base. What we're finding is that all of our -- and certainly we're seeing consolidation at the investor base, existing relationships and so we're benefiting from those trends. So we're finding our -- all pretty much all of our LP is getting larger with us, or the vast majority with options but at the same time certainly in Asia, the Middle East, Europe even and we're certainly seeing the globalization. So if you look at the overall percentage from North America, it's fallen a bit relative -- even though it's grown on an absolute basis it's fallen a bit over the last five years and it would sort of be no probably under 50% at this point, just the shy under 50%. And you’d see regional growth in all of those different regions. I would say we're finding -- in terms of institutional versus retail we're seeing so -- I mean retail is growing in absolute dollars but it remains between 10% and 15% of our overall business excluding Athene. And you can kind of -- I don't know what to characterize that, that could be characterized as retail or it. And we're finding that -- truthfully there's so much demand from our institutional clients that we're not -- we have so much capital that we're limiting how much capital that we make available to retail, basically, in a sense that we’re trying to satisfy our institutional fans by the best and after that. That might make us a little bit different than others. So we're still growing in absolute dollars, that affected our overall platform. So that would be like -- I don't know if that's not enough color but that's sort of the color that I would offer.

And then maybe as a follow up; in terms of thinking about current and future deployment, I mean obviously you've been active in in Europe. But one of the things I get -- to them feel like we hear too much about -- maybe relative some of your peers is the deployment or investment activity for you guys in Asia. Now understanding your peak your funds can kind of go anywhere but I mean do you feel you have the kind of Asian footprint you'd like or is that an area of focus where you think you need to kind of put more emphasis?

Yes, less than 3% of our overall investing is outside of Europe and the US -- North America and so it is for sure that we do have an office inn Hong Kong and Singapore and we have people in Australia but we are -- truthfully and so we have a footprint there. But in Mumbai, actually in Shanghai but we're not finding the risk return to be as attractive as we're finding in our core markets. If we're going to go into a market that is foreign to us and have to pay a higher price and have to deal with lack of transparency in the financial statements and possibly in markets that are a minority, in many cases they want to sell control. It has not been a deep value opportunity, Mark. If you look at what most others are doing in Asia, it's been a lot more relative to growth activity at much higher prices. And so that's not really what we do and so we continue to look in Asia but we can then have a presence in Asia. It's not that we don't do anything in Asia certainly, it was -- did a real estate transaction in Thailand. But we haven't seen the opportunities and that is different than and refining much more opportunity in our core market and it probably has to do with our differentiated south, we just are not there to pay high prices. And so that limits what will do.

Our next question comes from the line of Mike Carrier with Bank of America.

Josh, maybe first on your commentary, just on the shifting from deployment to realizations. I know trying to time or gauge realization activity is tough for you guys and us. But when I think about it may be Fund VIII funny and I look at the performance versus the seasoning, he is still relatively young. How does that compare to maybe some of the past fund when we start to think about the potential that we could see healing cash realizations over the next two to three years?

Yeah I think obviously and we have the new disclosure, you can see it, if the average life of our investment is 1.1 years, clearly we made a lot of money in the fund on the buy. So as we've mentioned to you before, we have acquired the fund from between 5 and 6 times cash flow which is well south, like five multiples south, the private equity averages and about that same amount south of the public markets if you were to express the public markets in terms of EBITDA multiple. So there are three ways to make money; in equity there's buying, right there they are right and there's adding value along the way. Much of what we're doing in the portfolio and so a lot of our money, a bunch of the money, was made on the buy and now we're busy adding value and in many cases we’re building platforms unlike ADT, or we’re doing -- turning around company, all other fresh markets, or we’re repositioning and divesting certain things, Rackspace, many of these companies have been public and getting out of certain businesses and emphasizing other businesses. And so the ultimate exit sometimes does require -- it does require a bit of seasoning and you need to do see -- not only if you can find the right, it’s great but then you need to do the active management of it. And so I think it is still early. Having said that we are incredibly focused on monetizing the portfolio, because to a large extent we believe that we're heading into the ninth year of an economic recovery. Financing markets are appealing and equity markets are aggressively pricing things in most cases. And so we're doing everything we can. A lot of what we've been…

And then Mike, maybe just put a bit of context around the potential Fund VIII relative to the private funds. Appreciating that the construction is different, Fund VI created -- which was a $10 billion fund created about 270 of net carry for IPO after profit share. Fund VII which was a $14.5 billion fund created about 440 [ph]. And so if we can create a double on VIII then that's around $5 of net cash carry to come out over the next number of years.

I really believe -- I would be really surprised -- I mean our average multiple is about 2.4x across all of our finds and just knowing the portfolio Fund VIII and I'm trying to be measured on the call, I would be -- I think two is a low estimate. I mean obviously, if the recession hit or whatever, it might take us longer, but we're well on our way to that. And we've seen in five -- we've seen it be as high as three. So the range really – when you look at the range of our funds, the funds that were the toughest funds, are about two. So six, which is pre-financial crisis before the EBITDA just took a huge hit, that was just about two. And the funds that have done well are approach three or even above three. And so that's how you get to the 2.4. So Martin is giving you appropriately, I think, the more conservative estimate.

Our next question comes from the line of Ken Worthington of JPMorgan.

Hi good morning. In terms of your other clothes and vehicles, if you could, can you talk about how they’re positioned in terms of raising new capital? Is the raising of capital likelihood or possibility over the next twelve months or so? And I was particularly interested in kind of where mid-cap stands and now I assume you can't comment on AINV but if you could -- if you were able to I'd be interested in your thoughts in AINV as well.

I mean, look, to start with mid-cap. Mid-cap -- we raise money when we need to raise money and obviously the middle market origination strategy is working and mid-cap is doing quite well, and our investors are quite happy. And we're up to about 7 billion of assets and we have a capacity just with our existing equity and capital base to put another two to three billion of assets on the books which is how ultimately the fees that flow based on assets. And I think that we will raise money. And I think that I would say that given the success of Athene, and I think this is validated by the recent fund raise with AGER, and people are happy -- our investors are happy with these permanent capital, these strategic capital platforms. And so when we show up with an idea or when we show up and say okay, we need to raise more capital for our existing platforms, we've been met with a good reception, because we've done well by our investors. And so we would expect that to continue. So when, for example, mid-cap needs more capital I would expect they would be able to get more capital. In terms of AINV, which is a public company, I would shy away from speaking for that company publicly. Looking at Gary to see if he has anything to add but our general policy is not to really interfere or get in front of the disclosure of other public companies but certainly we certainly hope that they -- and we work with them disclose things appropriately.

Yes, I think that's right. I don't think we want to speak on behalf of another public company.

And you know our other public vehicles are all out there, they're smaller but certainly our commercial real estate vehicle which is the biggest of those has been successful in raising capital over time.

And Athene continues to do exceptionally well, so this is sort of a question of where things could go wrong. Are there any capacity issues or size constraints for Apollo? So Athene is now at 73 billion, it's an acquisitive company. If it were to do another big deal, Athene could be $100 billion – Athene could be a $100 billion for Apollo and like a heartbeat. So are there any factors that would prevent or limit or inhibit the liability side for Apollo relative to Athene, if Athene keeps growing as has been the case?

The answer is no because -- and just remember the relationship between Athene and Apollo. Athene is his own entity, it’s public. Certainly we own -- when all is said and done, between 10% and 15% of Athene, so we are a large equity holder of Athene. And we also receive fees from Athene for managing the assets of Athene. And so from our point of view, as an interested shareholder certainly, it’s sensible growth from Athene’s point of view and we think they have a great Jim Belardi and the management team, they're quite good, it’s positive. As a shareholder it's also positive to the extent that we continue to manage a greater pool of assets for them. So from our point of view, there's no real risk or concern about the size of Athene. And obviously Athene certainly has to do -- risk manage to do all the things that are good and match assets and liabilities and do all of the good things that other insurance companies do. And we certainly from our vantage point are supportive and think that that's going on right now.

Before we take the next question I just want to say we have somewhat a fairly lengthy queue, so if we could ask the next folks asking questions just limit up to one question, that’s be great. Our prepared remarks were a bit longer than normal just because we have a lot we want to share, thanks.

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

Just a quick one here within credit, fee generating AUM slipped a little bit in the quarter, I think it was down $5.5 billion. But it also looks like $7 billion of AUM which was 250 basis points away from carry generating, which also looks like it came out of liquid and performing. So I just like to get more detail on the downtick in the quarter and then any color on your outlook for I guess that business specifically, maybe ability to get that back into the green.

Sure, Devin, this is Martin. So it was a drop in carry-gens. It's almost exclusively attributed to one fund which we call the credit fund, it's a performing one fund. And its structure is such that it has an annual reset on the incentive which means it has to -- it's pressed every year. And so -- which we did last year and so it was sort of in carry at year end. It came up just shy of a quarter of a full year to promote for Q1. It has clearly the potential to step back in but it has to earn half a years of promote by the end of Q2.

It is very close; I mean literally it's just shy of its hurdle and it could easily go -- tell us what the markets are going to do in Q2, Q3 and Q4.

So just a little bit of mechanical dynamic, that's helpful thank you.

Our next question comes from the line of Chris Kotowski of Oppenheimer.

Yeah, I guess the realized carry at $155 million on private equity was more than we were looking for and a nice surprise. But I guess a couple of questions; one, you said out of Fund VIII it was mainly dividend recaps and I guess you touched on it a bit. But is there more potential in Fund VIII to do -- to generate through dividend recaps or from here should we be looking mainly to sales?

I think it’s going to be all of the above. I don't think we're out of the capacity -- I mean literally if you think about it right you're managing the overall leverage level. And so at the portfolio the EBITDA is going up, and debt is being repaid -- you regenerate the ability to dividend recaps, plus this is only – it was like three or four companies out of, I don’t know, 25. We're not even close but look, I think as time wears on you'll see certainly us doing IPOs and selling more things. But I think that we're certainly not out of capacity.

And then just related to the 20 million of realized carry out Fund VII, I thought that was still in escrow -- and that it wasn't eligible for generating carry?

Yes, so that relates to tax distributions that we received in the first quarter related to Fund VII activity last year.

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

Question for you guys around the credit business and just kind of the carry that's sitting there right now. So roughly $400 million I guess of gross carry, the bulk of that is sitting in a drawdown funds. I guess given your comments around where we are in the credit cycle in general of being likely more of a net seller than a net buyer, how should we think about I guess the pace of monetization of the carry specifically from credit side of the business? The private equity side I guess is a little bit more clear.

Yeah, I'll take a crack, it's hard to frame, Alex. So in the ground today in credit we have $28 billion of money that's in carry and that associated with that is the $400 million gross carry receivable you referenced. In addition to that, there is a trajectory around how and when that gets monetized. In addition to that there's dry powder of about 10, and with fund raising and so that will be on top of that. If you look back in the last couple years the realized credit carry has been quite volatile. Last year it was $150 million. In the first quarter we clipped about 20-odd, so I would say it's likely to be lower than last year. But it really depends on the market environment and putting money to work and raising new capital as much as it does monetizing that one event.

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

Thanks. What are your updated thoughts behind C-corp conversion and what would you need to see from tax reform in order to make the conversion –

We were just like smiling because we knew -- we wouldn't get away with that one. Look, we strictly try not to speculate, I mean obviously the lower the corporate rate goes, obviously the reason for this structure is to avoid double taxation, and to allow for carried interest to flow to investors directly, which I guess is the same thing. The lower the corporate rate goes, the less effective the structure is and you weigh it against the complexity of having the structure. So I think that certainly if the tax -- Trump tax plan as we understand it in the public comes to fruition, certainly we will be looking very hard at that. But that's about all we can say at this point, because it's highly speculative what's going to happen. And secondly, there's a lot of details that matter that aren't out there. So it’s sort of very speculative but certainly the 15% rate is out there and you know that certainly makes us -- will make us look harder at the structure and in of itself.

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

Thanks. As it relates to the balance sheet, you guys mentioned the possibility for M&A opportunities. What is your philosophy there and what kind of things could you guys essentially be looking at?

Yes, our philosophy is we look at -- I mean go back to your finance 101 class, we look at our cost of capital and then we try -- we look at whether an acquisition is accretive financially and then we look at the strategic fit with our platform in terms of either things that we -- teams that we think we can back and create funding for and or things that broaden -- will broaden our overall and be ancillary to our overall relationship with our existing investors. So for example I think we said before that we're really small in real assets and real estate and that's an area that would make sense to add. Certainly in credit, there are lots of different parts of credit which are ancillary to our business where we could add. And then I'd say the last thing -- that's sort of our philosophy on how we approach it both financially and strategically. We've certainly been -- and as someone mentioned before, like we've brought in Gary Parr – we hired Gary Parr, he now works with us and amongst other duties that he has run strategy and we're taking a hard look at a lot of different things. The only thing I’d mention is that we generally shy away from cost driven acquisitions. So in the investment world, not that we don't try to get cost but sort of buying something so that you can cut a lot of cost out of it. By and large our assets are people, that doesn't tend to work that well. So philosophically we're certainly going to look at opportunities where we can buy it well up and adds accretively to revenue. There's not a lot of overlap in cost reduction.

Our next question comes from the line of Gerry O’Hara of Jefferies. Gerald O’Hara : Thanks for squeezing me in. Just circling back to AGRE for a moment. Is that something that is -- it seems obviously it's regional in nature but is that something that we could potentially expect to see for other European countries or areas in that area just given the differentiation of strategies rule was, what have you? And also perhaps what you see is attractive in that particular market trade area – maybe you kind of start it there?

Sure. So first of all, I'm not trying to be cute but it's AGER and the reason I am correcting you is that AGRE is Apollo Real Estate. So we're trying to make it wildly confusing to everyone, including ourselves. But in terms of AGER, yes, that's a pan-European platform. The reason that we named it AGER was that we started with an acquisition that Athene made in Germany and they contributed that German asset to the pool, we raised €2.2 billion, we contributed that asset and so we now have a company. But certainly they're going to look at all kinds of different things in Europe and it’s a broad European platform. What makes that attractive is that, that rates in Europe are near zero and very very low and that's putting tremendous pressure on insurance companies that have originated liabilities where they promised their insureds a certain rate of return in the life insurance business. And so because rates have fallen, there's these legacy books of business that are very much hurting the profitability of the insurance companies and the capital ratios of the insurance companies in Europe. And so they're looking for ways to raise capital and so we see it as an opportunity to be -- to buy things at very – buy books of liabilities at very very low rates that that give us sustainable liabilities. And so there's a big I’d say a restructuring going on in that industry that is providing an opportunity for us to in essence create some value.

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

Thanks for squeezing me in here. Just wanted to come back to your points on the direct origination capabilities that, you mentioned Josh as a differentiator. Just curious if you could elaborate on that a bit more just in terms of how you've been building out your direct origination capabilities of US, Europe, any sticks you could share maybe in terms of the size of the keep today versus a couple years ago? And just maybe you could talk a little about how you’re building that out currently than your peers, what's differentiated?

Yes. So I would say that certainly through -- there's Apollo, right and then there's related entity such as Mid-cap that -- and so I would say that when you – problem related entities whether it be feet on the street in terms of originating middle market loans, whether it be our ability to process structured credit and line up liabilities streams like CLO liability, structured real estate credit, whether it be in aircraft, finance, lease team where we can buy aircraft and leave some back or provide Bsing [ph] to earth. So we have these capabilities – whether it be energy credit where we felt the capability to analyse different basins in terms of the geology and the actual natural resources themselves, like we're continually or whether it be in Europe our capability of offering insurance, products to insurance companies because of our knowledge and expertise in that area. We're are and continue to be building out this ability to get out of the firefight with the central banks in terms of zero rates, and the public markets being affected by that. And so when we look at the public markets of credit, it's really -- it's really very very historic lows. And so we're trying to create alpha. There's not -- our ability to life settlements, capability to buy insurance assets. You know, life insurance policies. So we have all these platforms across our credit business that increasingly are specialized in nature and providing this capability. And when you add up all of the origination capability, both inside and outside Apollo where we have perpetual management contract sure in the hundreds. So I think that it's certainly as are greater than 100. I think it certainly is an advantage and I think that we're going to continue to invest and look for opportunities to grow that.

Our final question comes from the line of Brian Bedell of Deutsche Bank.

Yes, I think he dropped. End of Q&A

And that does conclude the Q&A session for today. I'll turn the floor back over to Gary Stein for any additional or closing remarks.

Thanks operator and thanks everybody for joining us today. As I noted previously, if you have any follow up questions, please feel free to circle back to Noah Gunn or me.

Thank you. This does conclude today's conference call. You may now disconnect.