Good morning, and welcome to Apollo Global Management's First Quarter 2022 Earnings Conference Call. During today’s discussion, all callers will be placed in listen-only mode and following management’s prepared remarks, the conference call will open for questions. Please limit yourself to one question and then rejoin the queue. 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 also 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 of any Apollo fund. I would now like to turn the call over to Noah Gunn, Global Head of Investor Relations.

Thanks, operator, and welcome again to our call this morning. Earlier today we published our new earnings release and financial supplement on the Investor Relations portion of our website. We will also post a financial supplement on the Athene Investor Relations website in the coming days, which provides historically disclosed information on Athene’s balance sheet and investment portfolio. Additionally, we plan on publishing a new quarterly investor presentation on our website in the near future. As you can see, our first quarter results reflect our post-merger financial construction illustrating the strong combined earnings power of Apollo and Athene. For the first quarter, we reported fee-related earnings of $310 million or $0.52 per share and spread-related earnings of $670 million or $1.12 per share. These two earnings streams combine to total $980 million in the first quarter or $1.63 per share as the business demonstrated strength and resilience amid a period of macro volatility. We also reported normalized spread-related earnings of $488 million or $0.81 per share to provide a supplemental view of this important and valuable earnings stream. As we move into a new era of financial reporting post-merger, we noted in a recent 8-K filing that we were going to rename our primary non-GAAP metric from distributable earnings to adjusted net income. This name convention better aligns with our dividend policy, as well as the broader financial services universe. This change had no impact on our historical financial results or construction of what has historically been DE. For the first quarter, we reported adjusted net income totaling $915 million or $1.52 per share. Joining me this morning to discuss our strong results in further detail are Marc Rowan, CEO; Scott Kleinman, Co-President; and Martin Kelly, CFO. Given that we published a new package for you this morning, and our prepared remarks, they run a bit longer we will do our best to be as efficient with your time as possible and look forward to answering all your questions. With that, I’ll now turn the call over to Marc.

Thank you, Noah, and good morning to all. Needless to say we are pleased with the first quarter results. As you know, during the quarter, we completed the merger with Athene. In a period of great volatility, the merger preceded seamlessly as did the closing of the financial statements. As Noah mentioned, the first quarter results showcased the combined earnings power of the business. The trends that we are seeing in the marketplace, specifically rates up and volatility historically have been very good for our business, particularly as it relates to spread-related earnings, which is biased to the upside with rising rates as I am sure Martin will detail in his remarks. FRE, SRE, spread-related earnings and robust inflows position us to meet or exceed our 2022 financial targets in the aggregate, and each of the pieces. Martin again will take you through that in detail in his section. So as I’d like to think about the strength of the alternatives business, the purpose of the alternatives business is to produce excess return per unit of risk. For us, purchase price matters as an investment philosophy permeates everything we do. Pricing and valuation are important for return generation really for the first time in about 14 years. As you see in the results, our PE portfolio was up 8% versus minus 5% for the S&P 500 and minus 9% for the NASDAQ. The era of being able to achieve results on the back half of declining rates and increasing liquidity I believe to be at an end separating alpha from beta. Our approach on purchase price matters is resonating with clients in this macro backdrop. Purchase price matters is not only a tool that we think about in the equity business. As I suggested it permeates everything we do. In…

Thanks, Marc. Our business is built to withstand and even thrive in times of macro volatility and market disruption. This was most clearly demonstrated by our strong first quarter investment performance, which is underpinned by purchase price discipline and downside protection, as well as a focus on investments in companies with strong cash flow generation. As Marc mentioned, our overall private equity portfolio outperformed the S&P 500 by 12% in the first quarter and our long-term track record remains very strong across our flagship strategies. Fund IX appreciated 15% during the quarter, which was substantially all driven by EBITDA growth. Similarly, on a life-to-date basis, approximately 90% of the value creation achieved by Fund IX has been from EBITDA growth. As of quarter end Fund IX’s inception-to-date performance is a stellar gross IRR of 52% and 34% net showcasing the significant alpha we are capable of generating for our clients. As it relates to Fund X fundraising, we continue to feel very confident in meeting our $25 billion target. Despite some congestion in the private equity fundraising market others have cited, as well as the impact of the denominator effect on LP appetite for additional private equity exposure, we are still seeing solid support from our existing LP base and new commitments from an array of investors including the global wealth community. We believe our differentiated strategy and strong investment performance are setting us apart in this current volatile markets backdrop. Additionally, yield strategies held up very well during the quarter amid higher rates and wider credit spreads with direct origination and corporate credit strategies outperforming their benchmark indices by 350 basis points and 70 basis points respectively. This outperformance was driven by both higher allocations of floating rate securities, as well as superior individual credit selection. We continue to…

Great. Thanks, Scott. Our first quarter results represent a really solid foundation for our next chapter as a large and more profitable monopoly. Following our merger with Athene, our earnings power is greatly enhanced. The durable and recurring nature of fee and spread-related earnings is a powerful and highly valuable combination that we believe will be increasingly appreciated as we execute on the interactive financial plan we presented last October. For the first quarter, we reported fee-related earnings of $310 million or $0.52 per share, which increased modestly year-over-year reflecting higher revenues and increased cost associated with investing in our business for growth as both Marc and Scott mentioned. Importantly, fee-related revenues from professional capital represents over 50% of our total fee revenue providing enhanced durability and compounding growth potential of this viable earnings stream. Management fees increased 11% year-over-year, driven by robust and broad based inflows from retirement services, institutional and retail clients, as well as strong deployment activity in funds that earn management fees on invested capital. While the quarter included some catch-up fees in yield, we expect further management fee growth for our yield strategies over 2022, driven by our focus on origination of differentiated assets through our platforms. We held the final close for our Griffin acquisition last week which adds two integral funds totaling approximately $6.5 billion of fee-generating AUM. Griffin has continued to see growth in total sales from its real estate and credit funds since the acquisition was signed last December. First quarter advisory and transaction fees of $64 million increased 16% year-over-year, but faced some sequential pressure from low overall capital markets activity in the first quarter as Marc mentioned. Capital Solutions activity has picked up so far in the second quarter with transaction fees runrating at a higher level compared to…

[Operator Instructions] Our first question comes from the line of Glenn Schorr from Evercore ISI. Your line is now open.

Hi. Thank you. I just want to touch on one of the last things you mentioned and get the big picture and just need a little more color to fully understand the big picture of what you are moving in the $5 billion from power management to Athene to funds? What is happening and what does that do for you at the highest level?

So, hey Glenn, it’s Martin. It’s not $5 billion, it’s much less than that. It’s a portion of the existing GP investments. You will notice that the balance sheet went down significantly. Most of that drop is related to the merger. The investment we had in Athene obviously goes away on consummation of the merger. So, what we are moving is a majority of the GP sites that we are in funds that we manage and then moving to a vehicle which we expect will occur in the second quarter to support a third-party capital-raising initiative.

Thank you. Our next question comes from the line of Finian OShea from WFS. Your line is now open.

Hey everyone. Good morning. Can you talk a bit about how the – how rising interest rates is impacting the outlook for high-grade origination?

Look, it’s Marc, I’ll start with the balance sheet and then we’ll talk about origination. So, as Scott mentioned in the call, when Athene or quite frankly any other retirement services company assumes a liability, it matches it with assets and we so-called AOM matching. There is a portion of that that needs to be reinvested over a period of time representing the profit on the contract. When people talk about AOM matching, they are talking about matching an asset and the liability, but profit to some extent is unhedged and therefore if you are putting assets on the books in a rate environment that are higher than the rate environment when you assume the liability that is generally a positive. In addition, what we’ve seen is, a benefit from floating rate. Now your specific question as it relates to origination, generally what we have seen is the – at the newly underwritten product is being underwritten in the context of higher rates and yet our funding cost on these platforms are relatively sticky, so we’ve seen expanding margins across the platform. To the extent rising rates, and just to give you a sense in the – through I guess, the last week, the investment-grade market was off 17%. It’s made people gunshot and we’ve seen this across most public credit markets to the extent there is dislocation in public credit markets, we are a better more secure, more definite source of capital. All of those things benefit on average we are better off with rising rates.

Yes, I would just chime in that, yeah, as Marc said, the origination teams are as busy as they’ve ever been. So, the rising rate environment, the tightening of the liquidity environment is making things even more attractive.

Right, with further benefits that are seen with the floating rate assets and higher rates increases the origination of annuity products. So, it’s a benefit around the whole system.

Thank you. Our next question comes from the line of Alexander Blostein from Goldman Sachs. Your line is now open.

Hey, good morning guys. Thanks for the question. Also maybe a little bit of a bigger picture question around just capital allocation priorities here. The stock have been under considerable pressure here relative to kind of either the insurance comps at or the asset management comps at. You guys are generating substantial amount of capital and have lots of excess capital. I heard, both Marc and Scott talk also about different kind of new investment opportunities and I guess, sounds like acquisitions maybe on the asset management side or in the origination side. I guess, how do you weigh those inorganic opportunities against the buyback at these share prices?

Let’s do it at the highest level and just to give you – it’s Marc, by the way, context from the Investor Day. We said at Investor Day that we expect to generate $15 billion of excess capital over the next five years. $5 billion to support what we’ll call the base dividend, $5 billion for investment in the business and $5 billion that we would use opportunistically either to invest or for buybacks or for dividends, I think Martin said it best given where the stock is, we expect to use a portion of that to buy back stock. The stock is very attractive from our point of view. Now, one needs to actually generate the $5 billion to be able to spend it, but one can argue that probably the highest and best use of our excess capital is our own stock.

Thank you. Our next question comes from the line of Michael Cyprys from Morgan Stanley. Your line is now open.

Hey. Good morning. This is [Indiscernible] here standing in for Michael. I just wanted to ask a quick question about – get an update on retail and get an update from the resources you are deploying in the channel and how you anticipate those results and the headcount expanding from here, maybe talk about the folks that come across from Griffins. So how to expect that to trend from here?

Yes, sure. Look, as Marc mentioned in his comments, we’ve seen over the last year headcount go from about 25 to about 145. That gives us a really strong footing for both our high net worth as well as RIA channels to be able to – to support that, as well as the product development capabilities, you heard Marc talk a bunch about the new products that we are going to be bringing. All of those things right, the pipes, the product and the technology are critical to being successful in the retail and global wealth channel. From here, we will continue to grow as appropriate, I think the rate of change will come down meaningfully, but there is still more ground to cover as we are learning there is always more ground to cover in the retail channel. But couldn’t be more excited about where things are headed and I would expect quarter-after-quarter you are going to see new product announcements from Apollo and the scale of capital raising continuing to ramp in that channel.

Thank you. Our next question comes from the line of Patrick Davitt from Autonomous Research. Your line is now open.

Morning, everyone. A follow-up on that you said one to two products a quarter over next 12 to 18 months. Should we think that to mean there is an expectation that these new products will have a media distribution and placement in wire houses et cetera? Or should we expect the usual lag to getting those products placed?

Look, I think you are going to see the product set have immediate distribution placements. Some will be directly into wire houses, some will be directly to RIA. And I think, the thing I want to make sure I communicate is, a view that – we really, we view this as really the first inning. What’s happened to-date across the entirety of our industry has been the repurposing of existing products for this channel at institutional fees. The next phase of this is products created specifically for this marketplace that deal with the unique needs of this marketplace, diversification, no J curve, no double fees, no capital cost, semi liquid, full alignment. That’s where we believe this market is going and again, I’ll come back. We have as alternative managers often talked about our business in historical context where we are in the small alternative bucket be it private equity and a number of things like it. At our Investor Day, we sought to broaden that definition to show you that we view alternatives, particularly in the yield marketplace to include investment grade. I believe the way we think about the product and the way we communicate the product is investors have had a relatively benign experience over the past decade against the backdrop of money printing which has existed since 2008 and falling rates. On a go-forward basis, to the extent the market does not look like that, I believe that there will – investors will be challenged and will be revisiting in wholesale, the notion of 60-40, 40-60 portfolio. Our ambition is not to just serve a traditional alternatives bucket, it is to serve stable value, investment grade, total return, opportunistic, REIT, BDC, hedge and equity and to offer a complete alternatives ecosystem guided by the notion of excess return per unit of risk.

Thank you. Our next question comes from the line of Robert A Lee from Keefe Bruyette & Woods. Your line is now open.

Great. Good morning, thanks for taking my questions. Maybe the first one, this is going to be a alternative investment portfolio, so, and just maybe digging a little bit deeper, with the 46% of the assets that are being in some type of platform whether it’s the retirement services origination platforms, is it reasonable to think of the SRE from those or the earnings from those platforms just being actually pretty stable quarter-to-quarter over time. So that there is actually a pretty healthy kind of – you always had a pretty healthy stable base of revenues that throughout the last – at least by that 46% allocation?

Yeah. That’s exactly the point. These platforms are businesses that – that are producing origination flow for the underlying retirement services, fixed income portfolio and then the equity of those platforms are what’s in the alternatives portfolio. As those businesses continue to grow, as we continue to invest in those platforms, you are seeing just pretty stable scaling earnings growth in those platforms. You can see as some of the trends we’ve highlighted a few on Page 16 of the earnings slides.

Thank you. Our next question comes from the line of Rufus Hone from Bank of Montreal. Your line is now open.

Great. Good morning. Thanks for taking my question. I wanted to come back to the global wealth business and it sounds like you expect a pretty meaningful inflection in the rate of growth there over the next call it, two to three years. And with a lot of new product launches in the pipeline, will most of these be in the broader retail or its definition you mentioned? Or will it be in the more traditional retails bucket? Or that’s slightly more competition like private BDCs and private REITs and so on? And do you expect this will primarily still be a high net worth market in three to five years or do you think the market opens up more substantially over time? Thank you.

So, it’s Marc, I’ll start and then I’ll hand it to Scott. All I can say is, yes. I know that that’s not clarity, but recall how – in Investor Day, how we based our business. We’ve set out a five year plan which includes raising a total of – having total AUM of roughly $50 billion at retail over the five year period. I believe that target is a very conservative target and I am optimistic on our chances to be able to exceed that. How the market develops? I think we have to have some bit humility in looking forward. Product launches are notoriously complicated and we will see broad market acceptance. If you ask us for opinion, I think the market will be in the short-term high net worth. It will be balanced between or the competing traditional definition of alternatives as well as newer definition of alternatives. And it is our job to differentiate our products on the competitive marketplace around the way we offer these products, the creativity with which we offer these products, the alignment that we will have with retail investors around these products. And as Scott mentioned, purchase price matters. To the extent we have a vision of alternatives making up a much larger portion of a portfolio that will necessarily include the expanded definition of alternatives and consumers, be they high net worth or otherwise we will need to see all that they are making secure choices and not buying just volatility.

Yeah, no, I would just add what Mark was alluding to, right, as this market develops, of course, it’s going to start with the traditional definition of retail products that are truly institutional quality products, but offered to retail in a more attractive fashion. But we have something that others don’t have which is the combination of Apollo and Athene bring together balance sheet and alignment, product development capabilities that are extremely suited to the retail environment and those are the type of products that you are going to be seeing in the short to medium term, as well as some of the more traditional retail products. So, I hate to repeat Marc, but the answer is yes. It’s an all of the above answer.

Thank you. Our next question comes from the line of Gerald O'Hara from Jefferies. Your line is now open.

Great. Thanks. I think, Marc, you actually touched on a little bit within the SRE construct, but perhaps you can help us unpack a little of the kind of thematic drivers of the almost 8% private equity carrying value return in the quarter, obviously quite strong and just would like to hear a little bit about how that tend to be? Thank you.

Yeah, yeah, look, this goes back to purchase price matters, right. Our PE business has built its portfolio along the lines of acquiring good cash flowing businesses where we can drive real tangible value to those businesses through earnings growth, through cost savings, through cash flow. And so, and not really dependent on rising valuations to get out at meaningfully higher values than where you entered. So, in Q1, we saw exactly that, notwithstanding inflation that is very real in the economy. Wage inflation and materials inflation, logistics inflation, the underlying strengths of the underlying businesses allowed for price increases to continue to offset that inflation and continue to grow output. So, I mean, that’s the fundamental strategy that Apollo has been pursuing for the last decade. It hasn’t been sexy over the last decade, but certainly as we enter this new economic regime change, where you can’t just rely on declining or 0% rates to allow you to exit at ever increasing multiples. This is exactly the type of performance I would expect to be seeing in this type of environment.

Thank you. Our next question comes from the line of Chris Kotowski from Oppenheimer. Your line is now open.

Good morning and thank you. I guess, I wanted to go back to the retirement services and a multi-part question. I mean, first is, what is the rational for reporting on a normalized spread alternative income basis as opposed to just letting the chips fall where they may? And then, secondly, how should we think about the – go back to Robert’s question, the return of the alternatives portfolio over time. In that, I mean, you were up this quarter a number of the other alternatives showed positive returns, so fine. So, this quarter, it was not correlated to the broad markets though when we look back at the first two quarters of 2020, when the public markets were negative, we also saw Athene’s alternative portfolio negatively marked. So we have this situation where sometimes the returns are seem to be correlated – or at least related to the public market comps and other times they are not. So, how should we think about the underlying returns of the old portfolio over time?

So, this is Marc, why don’t I start and then I’ll hand it to Martin. And I hate to be somewhat financially oriented about this. But when Athene or any other retirement services company takes on a liability, it matches it with a portfolio of assets. 94%, 95% of those assets are fixed income and 4%, 5%, 6% of those assets are alternative in a nomenclature. We can debate whether they are alternatives and which definition implies, but call them equity. As a quirk of accounting in the insurance industry, fixed income for certainly for regulatory purposes and otherwise is generally held at market assuming it held at book, held at cost. And the reason for that is simple. Movements in interest rates really assets and liabilities almost equally. And while in some instances, you end up showing the mark the economics and the substance of the underlying is, you are putting an asset a liability matched on to a book over an 8, 10, 12, 15 year period. What happens in any one quarter is actually not really all that relevant. We recorded because that’s what GAAP asks us to do, equity is marked on a quarterly basis. So we show you both. We show you what actually haven’t and then we show you what we think of on a normalized basis, which is how we underwrite to make our spreads work, we assume that we will earn 11% over a very long period of time from this portfolio and we provide you the metrics to judge whether or not we in fact are earning 11% over a long period of time against this portfolio, but truly what happens on a quarterly basis is just not that relative.

I would only add that this is calling practicing the retirement services business and we are being pretty explicit in showing the math to get to non-voice metric, but as Marc said, we are showing both. And I think the chart on 16 is actually pretty instructive and in the sense of, it is – it’s not a volatile portfolio. Look at the show up ratio and look at the deviation relative to the comps that we are showing. It really proves that it’s a very durable portfolio at the time. Thus it’s supporting a durable spread based earnings – earning stream.

Thank you. Our next question comes from the line of Brian McKenna from JMP Securities. Your line is now open.

Thanks. Most questions have been asked, but with respect to private equity Fund IX, there is clearly been a lot of value created and returns are impressive, but the fund is still only about four years old. So how should we think about the trajectory of realizations for this fund throughout the remainder of the year and into 2023? And then, do you have any expectation around the mix of monetizations as it relates to public markets versus strategic sales?

Yes, yes, sure. So, as we look at, we are actively monetizing Fund IX and Fund VIII quite frankly. The Q2 monetizations get – given some of the volatility will probably look a lot like Q1, but based on some sale processes, some signed sale agreements, some signed dividend recap and distribution agreements, expect to see it stepping up in the back half of the year. And as these investments progress, ‘23 and ‘24 are the big harvest years for this fund. So, that’s what the timeline looks like. Obviously, as we get out into those years, market conditions will apply, is it going to skew more towards public or private exit spots. You can see by the returns value was creating incredibly nicely in that portfolio. Again not dependent on big multiple uplift but on real earnings growth. So, feel quite good about that over the next couple of years.

Thank you. Our next question comes from the line of Adam Beatty from UBS. Your line is now open.

Hi, good morning. Thank you. Want to follow-up on the portfolio of companies, appreciate Scott’s comments earlier about inflation and the resiliency of the cash flow there. So just wanted to ask about the other pieces that rising rates and how the portfolio of companies are positioned. Some other firms have mentioned having rate hedges and other things in place at the portfolio of companies allow also. Any details you could provide there would be great. Thanks a lot.

Yes, yes, look, interest rate, interest costs are just less relevant to our portfolio than to many of our peers. Remember, we created Fund IX at an average, even a multiple of about 6.5x, right that’s the leverage level for many of our peers. At the average leverage level is somewhere a little under four times. So, rising rates are interesting, but they are super impactful to the return performance of the portfolio. On average, we are about 50-50 fixed and floating across the portfolio. We are starting to move a little more fixed but again, like I said in the five things that our deal teams think about, interest rates are number seven. It’s just not particularly relevant to the total returns.

Thank you. Our next question comes from the line of Michael Cyprys from Morgan Stanley. Your line is now open.

Hi, thank you very much for taking the follow-up here. I just wanted if you could talk a little bit about your underwriting criteria in the current environment is, obviously, you are speaking a lot about how purchase prices always matters for you, I am just curious how you are flexing the underwriting criteria just in the current environment we are in? Thank you.

Yes. So, look, that’s been the topic of a lot of conversation over the last few months. But frankly, not just in our equity portfolio, but across the entire platform. Back in March of 2020, we did something – we created what we call the common lens where we created a series of scenarios that we asked all our businesses from our equity businesses, our hybrid businesses, our yield businesses, our retirement service platforms to really model their businesses across these various scenarios so that we can start taking a collective look at the risk and opportunities in our business. We have again recently done so with some of the recent economic changes that we’ve all been talking about. And that scenario does show obviously rising rates for sure, but then how does that end? What type of either economic slowdowns or actual recessions we are modeling in. So, the firm is looking at those scenarios and modeling on a very conservative footing when it comes to the course of 2022 and into 2023.

Thank you. Our next question comes from the line of Glenn Schorr from Evercore ISI. Your line is now open.

Hi. Thank you. So, look, I think you had next to no credit losses, but that’s been a great backdrop. But some people are nervous that higher rates and inflation bring recession or other credit issues. You can’t do the whole balance sheet recap here. But you do a stress test for us every six months or so. Can you talk at a high level on the positioning of where you – on the credit you own across the platform, where you are in the capital stack? How subordination, how floating rate helps and why? Just the overall message on why people maybe, should be running to Apollo in this backdrop not running away from Apollo in this backdrop?

So, Glenn, it’s Marc. I’ll start at a high level. First, I will tell you, we intend to announce a day in the near future where we will do a complete balance sheet tutorial for people across Athene and the broader credit business. So that those new – newer to the story can understand exactly how we proceed. We start with a notion that we generally want to be top of the capital structure and investment grade. When we started Athene back in 2008, 2009, it was relatively easy to source that in the marketplace. The markets were chaotic. Recall things like TALF and TARP and other nice initials. Very quickly as the markets heal themselves it became clear to us that we needed to be an originator of credit. We have referred to our business as fixed income replacement. We are generally a replacement for investment-grade fixed income. We are generally top of the capital structure. We are generally senior secured. We do not think a retirement services business or a fixed income replacement portfolio of an institution is a place to take credit risk for equity risk. The risk we see to take is liquidity risk or structure risk. We can afford to be less liquid, because our liabilities are less liquid and the liabilities of sovereign wealth funds, pension funds and otherwise. And so, I step back and I think about the marketplace today and I look at the various alternatives and think about where I would want to be if I were negatively biased. I generally want to be in floating rate. But why we have a lot of that? I generally want to be top of the capital structure with good spread. We have a lot of that. I would probably not want to be subordinated and fixed rate. That’s not where we are. The business that we have built is a fixed income replacement business. That is not to say there are not other good businesses. But it is a very different business than our peer set for better or worse. In some markets, peers may perform better. In a market like this, purchase price matters, being the top of the capital structure matters, being senior secured matters and I think we will fair very well. The stress test, which, as you know our industry does not publish, we run the Fed CCAR, we publish it. We run our risk appetite, we publish it. We run Lehman, we publish it. We will do our best to educate the investor universe that what the risk we are taking is liquidity risk and structure risk and not credit risk.

Thank you. We have reached our allotted time for Q&A. I will now turn the floor to Noah Gunn for any additional or closing remarks.

Thanks everyone for joining us this morning for your continued interest in Apollo.