Apollo Global Management, Inc. (APO) Earnings Call Transcript & Summary

[Operator Instructions] So it's my pleasure to welcome Apollo's Co-President, Scott Kleinman. As many of you know, Apollo is a roughly $500 billion assets under management alternative manager primarily focused on all things, private credit, but with strong private equity real asset businesses as well. Given the recent merger with insurance company Athene, they have almost a completely new story to tell, which I think is a particularly interesting opportunity at these valuations. So thanks for coming, Scott.

My pleasure.

So we've had the pleasure of having most of the senior executives from the large public alts here. So I've been starting most of these conversations with similar macro questions. The Federal Reserve has never really been able to tackle inflation like this without causing a recession, and the market is clearly saying that they see that outcome. Your CEO, Marc Rowan, is on the record as being fairly negative, I think about the direction of markets from here. So within that context, what economic trends are you seeing across Apollo's strategies, especially given the strong 1Q performance?

Yes. And I've been fascinated to actually listen and read what some of my peers have been saying because there's been more of a dispersion than I would have expected, given the facts that we see. But just maybe to answer that question, you have to back up a little bit, right? For 14 years, we've lived in a world where interest rates have gone to 0 and stayed at 0. And when you have that type of environment, asset valuations for all types of assets, whether it's corporate assets or real assets or credit assets, they go up and they go up and they go up, right? And typically speaking, if you bought decent assets and didn't screw them up over this timeframe, you've probably sold them for more than you paid for it. But what happens after years and years of financial repression, of money printing, right, is eventually, you have to pay the piper. And that's the moment where we're sitting in today. I'm personally shocked it took 14 years, but it has. And so sitting here today, the pay the piper is inflation, right? We are seeing inflation. It is very real, it's wages, it's materials, it's logistics, but the reality is those cost input inflation is being passed along to end customers without it really affecting volumes, right? And even if you look at the public companies who have reported, no one's really reporting soft earnings yet. They're reporting an expectation that earnings might soften over the course of the year. And we're seeing the same thing in our own portfolio. And that's why the Fed is freaked out, right? When you have this type of inflation and it's not affecting volumes, that is an inflation spiral. And the Fed has been very clear that they would sooner take a recession rather than allow [ '70s-tyle ] runaway inflation. So look, no one's got a crystal ball, it's hard to predict. But certainly, the rates markets are saying, you've got another 200-plus basis points of rate movement over the course of the year. The Fed is going to keep going until they get a signal to stop, right? What's their signal to stop? Probably that the economy is in a recession. And so we just are preparing for likely recession in '23, because it's just hard to see how the numbers work any other way. The -- I looked on Bloomberg before I came over here, the expected inflation as of year-end is still around 5%, right? So we're at -- so maybe we've peaked in our inflation, but the markets are saying, well, inflation is still going to be 5%. The Fed can't let off the gas at that point. They're going to have to keep going. Otherwise, you're going to see inflation climb back up. And so you put all that together and then you asked the second part of your question, which I think was just how does that affect investment strategy of the portfolio. Look, this is Apollo's market, right? For the -- we are a firm that really prides itself on value orientation, on purchase price matters. For the last 14 years, we've probably worked much harder than we needed to, to find those good companies at reasonable prices so that we can earn really high-quality returns. I think in these periods of transition, these periods of certainly a rising rate or slowing economy and then even a recession, that is the time when Apollo typically shines across the platform, equity, hybrid, credit and we can get into our retirement services platform as well.

Yes. On that point, I think there's a view in the marketplace that private equity and maybe alternatives more broadly is among the most negatively exposed verticals to higher rates inflation, recession, whatever poison you pick. With the potential for higher discount rates and lower multiples that kind of make sense, obviously, but how should we expect the portfolio to perform through that kind of backdrop?

Yes. Look, I think the market thinks that because for traditional private equity, that typically is the case, right? Traditional private equity is dependent upon a couple of things, a predictable and growing earnings -- corporate earnings stream and lose liquidity from leverage providers, right? When you enter these type of markets that we just talked about, you lose that. And so when you've been paying 15, 20, 25x for companies with 8, 9, 10x leverage, and rates go up 200 or 300 basis points, and now the clarity around earnings sort of moving and, by the way, valuations start coming in, like I can see why the market's taken negative bent towards Alt players. I think Apollo fundamentally is just very different, right? So like I said, we've always had a focus of value orientation purchase price matters. Our current fund, our current PE fund, for example, it's essentially fully invested at this point. We created that $25 billion fund at about a 6.1x multiple of enterprise value. We're sitting with less than 4x leverage today on the portfolio. Heading into a recession, okay, I feel like the portfolio is going to be as strong as any portfolio can be. And certainly, I don't lose much sleep about making it through to the other side. From an opportunity set standpoint, this is where it starts getting really exciting for -- from a deployment standpoint. So for Apollo, like this is about as good a prime time slot as we get. So I'd say, unlike traditional alts, I think this really is our time to shine.

So on that point, you have a lot of dry powder, your competitors have a lot of dry powder. Given headlines, it seems like deal activity is holding up pretty well relative to maybe what we would have expected in a period of this amount of volatility. How are you guys navigating this crowded investment market with all the dry powder? What kind of deals are you underwriting to? What are the key kind of themes you're underwriting to?

Yes. Actually, I think private equity M&A volume is actually down a fair bit versus, say, last year, maybe versus -- what you said versus what it could have been, it's probably still doing a little...

Yes, I think more relative to expectations just yet.

Fine. I'd say for us, we've been super, super busy. So Q1 in private equity, we committed to 5 transactions, about $4 billion of equity. Again, as valuations started to move, our pipeline today is about as busy as I can remember it in many, many years. So I think there's a sense that, okay, maybe market participants aren't -- companies haven't capitulated yet. And I guess if your baseline as well, this company that wanted 20x earnings are 25x now, we want to offer 15x, yes, they're not really there. But lots of other companies, the types of companies we're looking at I think they're seeing exactly what I just described to you that it's going to be a rough couple of years and now may actually be a good time to get out of the public markets or sell that division to shore up capital and do some things. And so we're seeing a pretty busy pipeline on the PE side. When I think about some of our other businesses like our hybrid business or our direct lending, like that's equally as busy as liquidity is drying up elsewhere from traditional lenders as people -- as companies maybe don't love their current stock prices, something like hybrid value, this is really hybrid's time to shine as well. So we're pretty active. I mean, it's about as active as I can remember it being for some time, maybe back to late March of 2020.

Are you surprised by how active it is? Or...

For us, no, because this is exactly what we expect. When the market gets choppy, traditional buyout pulls back, and that's because of our ability to sort of value things on an intrinsic basis, put the right type of capital structures in place, that's where we really get particularly busy.

Got it. Moving to the private credit, it's been a huge success story for you and a huge success story for your peers. But I think there's this view in the market, it's a very sticky view in the market that the private credit or shadow lending is this kind of credit bomb that has a lot of systemic risk embedded in. And I sense from all of you that you're very frustrated with this view. So how would you refute that view? And how do you think performing through a real credit cycle could play out?

Sure, sure. So first, we have to start, I think, is by defining private credit, right? Because private credit means a lot of things to a lot of people. I think what you were referring to is what I'll call the traditional definition. So the alternative to levered loans, high-yield bonds, so the noninvestment grade portion of the private credit universe. And I'll come back to the investment grade side of that because that's quite frankly, particularly more interesting for Apollo. But the private credit, the noninvestment-grade private credit universe, you're right, has really dramatically increased in scale over the last 5, 6, 7 years. That's kind of on purpose, right? So I want to go back to a word you said, you said systemic. In '08, '09, there was systemic risk in the system. Why? Because banks which were levered 20-plus times had hundreds of billions of levered loan, the noninvestment-grade lending sitting on their books that started to call the question like the solvency of the banking system, right? Dodd-Frank and a number of other regulations basically focused on getting the -- much of that off of bank balance sheets and into permanent lenders like ourselves. And so it's no surprise that the nonbank lending space really scaled because for us, to be able to raise pools of capital to -- or our peers to raise pools of capital to lend where you had the investors in that space actually wanting to own those products, not just be in the moving business of getting it off your books quick because you're levered 20x, like that's just a difference. So I see no systemic risk because the private lending market has ballooned to a fairly large size because it's working the way it's supposed to work. Now does that mean -- how is it going to fare through a credit cycle, that's a different question, right? It's going to fare, I think exactly the way the high yield and levered loan markets fare in a credit cycle, right? Just because it's private doesn't mean some loans have been made to good companies or smartly, some loans have been made in excess to companies. And you're going to see some companies certainly over the last few years in the zeal to put capital out. I think you saw a number of players in the private credit space in the non-IG private credit space, just push volumes, I think way beyond kind of the safety zone. And so you'll see that play out. Now maybe you have a little bit longer of a grace period because this is private credit. It's not -- there's not a market you can go see on your Bloomberg. But guess what, if we actually hit a recession and people start trading this private credit, you'll see marks. You maybe won't see them as easily on Bloomberg, but you'll know marks. And so I do think you'll see stuff shake out the way it's supposed to, right? Thankfully, we live in a country where we have a bankruptcy system that allows that type of stuff to work out, companies to rightsize their balance sheets if they've taken on too much leverage at the wrong time. And that will play out just the way the bond or levered loan market plays out in any type of recession. So that was a long-winded way of saying, no systemic risk. I do think you'll see stuff get restructured because you don't -- you have private credit as opposed to public credit, it doesn't mean you're a company that's immune to restructuring. Now, the second part of that, that I want to come back to and what Apollo has really been focused on, yes, we have some of that non-IG private credit. But again, in that space, credit selection is really, really important, just like it is in any bond or levered loan space. A big part of Apollo's push over the last several years has been in what I'll call the investment-grade private credit or what we call fixed income replacement. So really helping IG -- holders of IG find excess spread through a variety of direct origination platforms. And so that's been the big focus. But when you look on Apollo's book, Athene's book, it is largely that IG side, which I think is going to be much more protected from a credit cycle.

And we'll get to that, I guess, finishing up the non-IG side, I feel like I've heard kind of the same message across the space this week that it's not us. So is there any way where you do see excess leverage?

Yes.

Like we -- like everybody is kind of pointing the finger somewhere else. Like where do you think the excess leverage really is?

I'll give you a clue. Like start with companies that are 10x levered. And maybe go to 9x levered and maybe 8x levered. And that's probably a good -- that's certainly how our distressed credit analysts are looking...

W So who's lending there?

Where are they going to be feeding from over the next 12 months.

So who's lending to those companies? Because it's not you. It's...

I'm not -- I mean the broader direct lending universe.

Fair enough.

Some of the guys who probably have said they're not, but yes.

Fair enough. So moving back to Apollo, how then do you generate all of this excess spread without taking incremental risk, without getting into the non-IG space?

Yes. So we've built a huge business around trying to create these direct origination platforms for our Athene -- it started out for our Athene balance sheet, right? So for the last 7, 8, 9 years, we have been very focused on how do we generate more spread for our platform without taking on more credit risk. And just to put it in context, when you look at Athene's balance sheet, which is about $200 billion, a little over $200 billion. 95% of that is fixed income and 95% of that is IG fixed income. So that space, that being able to generate excess spread in that space is absolutely critical for the success of that platform. So when you think about how do you generate excess spread, right, you can do it in 1 of 3 ways. Well, you can take more credit risk, you can go down the credit curve. On a retirement services, balance sheet, that's a bad place to do it, maybe a hedge fund or other things, that's a good place to do it. On a retirement services balance sheet, that's a bad place to do it. You can go out on the duration curve and just take more duration. But for us, we run a very tightly matched asset liability duration mix, meaning when we take on new policies, new blocks of business, we immediately match it with a duration match set of assets. So we don't want there to be any mismatch between asset and liabilities from a duration semen. So we're not going to play that game. But we do have a secret asset. That asset is duration, right? Our liability footprint is typically about 9 years in the U.S., 12-plus years over in Europe. That's incredibly powerful. So what that gives us is the ability to take illiquidity premium, right? And so with those facts, and with those facts, we set out to say, well, where can we where can we find this type of IG return where we can get excess spread by utilizing that asset. And so we found that in a few places. One of the big places we found it were in some of the, I would say, direct origination platforms around things like asset-based style financing. So fleet finance and plane finance and franchise finance and trade finance, things where, again, you can't go to a bank, trading desk and get quotes in this and that, but where you need a specialized sales force, a specialized underwriting team to be able to do this. We went out and have found, in many cases, 30-, 40-, 50-year-old businesses that have been doing this and only this, where we've been able to acquire those platforms and then help continue to grow and scale those. That's one really fantastic way that we've been able to do this. And it's incredibly powerful. It's got a bit of a protected moat. We don't really see lots of other people, our -- these are businesses that historically commercial banks might have been in or others, because of capital constraints, other things, these are the businesses they've gotten out of, but they're still really attractive businesses. If you have the right liability side to match against that asset side, which we do, that's incredibly powerful, and that's what really has allowed us, as an example, to generate this type of excess spread. For us, on those type of assets, we're looking to generate an extra 100, 150, 200 basis points of excess spread over the equivalent corporate AA, A, BBB underlying indexes. And across the Athene portfolio, because this only makes up a portion of Athene's asset base, we're really only looking for about 50 basis points of outperformance on the asset side, which moves us from a mediocre to best-in-class ROE on that business. Did that make sense?

It does. So a lot of -- you mentioned fixed income replacement and I think a lot of the impetus for this demand for fixed income replacement has obviously been 0% rate. So how should we think about the appeal for fixed income replacement in a higher rate environment?

Yes. No. It's a fair question. The -- so we started down this path because we had been building this Athene balance sheet. And so we had an internal need for this type of product. And we kind of guarded that product very zealously and we were consuming most of it. We've now scaled that business to a point where we can comfortably feed our own balance sheets and still have access to now provide to third parties. And third parties see what we're doing, particularly those type of third parties that have a similarly situated balance sheet and want access to this. So this has started to become and will continue to be an important part of Apollo's growth as well. And when you step back and ask the question, well, we're not talking about underlying rate, right? We're not talking about the risk free rate. As the risk fee rate goes up, that's great. But presumably, the cost of liabilities goes up roughly in line with that. This is about excess spread. So any time once you start showing people that there's a better way to earn excess spread at any underlying rate environment, of course, they want it. When you say do you want the one with the more spread, same credit risk, more spread or less spread, they're going to take more spread. And so there is an ever-increasing demand for us as we continue to scale this business.

So to your point, a lot of this has been built to service Athene, and it's still early days, obviously, since the merger at the beginning of the year. But could you share any anecdotes, maybe around how the combination has gone and maybe even how the combination has led to opportunities maybe that you wouldn't have had before the merger?

Yes, sure. So look, I'll start just anecdotally. Look, the Athene merger has gone incredibly well just from an operational standpoint, but we had no expectations that it would be anything but otherwise. When we help found Athene 13 years ago, it was built to be a symbiotic platform with Apollo. So things weren't done in 2 places, either they got done on the Apollo side or they got done on the Athene side. So bringing these 2 companies together didn't really change much or any of that. It just brought it under one roof and simplified a lot of the plumbing. So from that perspective, I think anecdotally, the merger went exactly according to plan. To your point about well, where are we taking it, what are some of the things that we're able to do here, I'll just sort of rattle off a few. On one, just from a new product development standpoint, we are in the process of developing and soon to be rolling out a number of products, particularly for the retail market, we're bringing the Apollo platform and the Athene platform together, the best of the Athene structuring, the tax efficiency of products, the Apollo asset management side, we're able to produce some truly bespoke products that we think are going to be incredibly attractive to the retail space. And you'll be seeing that coming out in the coming quarters as we start to roll out the beginning -- the first of those products as an example. Another example is capital efficiency. So I hear a lot in some investor meetings and things, well, does this now make Apollo capital heavy in this combination. And there's an interesting nuance dichotomy that you really have to understand here, while Athene has obviously a balance sheet and asset and liability side of their book, they're constant -- they're investing that balance sheet in, like I said, 95% fixed income, 5% Alts. Those Alts, we need to keep finding good Alts for that book. As we develop those Alts on the Apollo side, that just becomes a great place for Athene to get its Alts exposure and us to be able to be very aligned in those products with our other investors. So incredibly attractive. That frees up capital on the Apollo Holdings platform to be able to invest in other things in new platforms in new concept, higher ROI-type project. So it's incredibly symbiotic from a capital standpoint. So lots of really amazing good things sort of coming out of the combination.

On that point, you've recently announced that you're doing an Athene specific Investor Day, for lack of a better word, a little over a week. What do you think you have to say that you haven't already said? And what's the purpose of this?

No. It's -- look, we've been living with Athene for 13 years. It's very mom and apple pie to us why we do what we do, how -- the mousetrap we've built and why we're so excited about it. I think in talking to investors over these last 6 months, it's just very clear that there's not as deep an understanding of what Athene does and how Athene does it to our Apollo's investor base, Apollo's shareholder base. And so our goal for that date, just like we did with our Investor Day on Apollo's, whatever it was, 6 or 8 months ago, is to be able to really and clearly lay out this is what we do on the asset side, really give people comfort what's in there. We know exactly -- we've put every single asset on that balance sheet, so we know exactly what's in there. And we want our investors to feel very, very good about what's in there. Here's the liability side. This is the type of policies we issue, we buy. Here's why we feel really good about this, understand the spread lending business that we keep talking about, that this is really just a spread lending platform. And therefore, what does that mean about its the durability and stability of its earnings stream so that our investors can see why we're so confident about that spread -- that SRE that we keep talking about and why we think that's just so misunderstood by the market. So it's really a learning session to really just be as open kimono and transparent, to allow investors to see how we look at Athene and why we think it's so incredibly valuable.

Great. Looking forward.

It's June 13, if folks want to know that.

June 13. So you touched on how this idea of fixed income replacement direct origination is kind of feeding the spread needs of Athene and other insurance companies. you mentioned planes, trains, automobiles, I think the list goes on and on. Is there any limit to the number of asset classes that can be lent against in this kind of fixed income replacement opportunity?

Yes, sure. Look, there's ultimately some logical limit, but I think we still have a lot to scale there. This is -- today, -- let me back up. At Investor Day, we talked about our direct origination platform being about $80 billion run rating. Today, in Q1, we announced it was about $100 billion -- we scaled that about $100 billion. Our 5-year plan has us taking it to about $150 billion of annual run rate. So that gives you an order of magnitude of where we see these types of direct origination, whether it's the asset based off or some of the other high-grade alpha or other products in the Apollo portfolio.

Is there any like one asset class that you think you have more opportunity to expand than others or that there's like a much bigger addressable market?

Look, I think it's going to be more of the same other sort of niche spaces, trade finance were relatively small, and we just -- the more we unpack that, there's enormous opportunity there. Where we can be super creative and thoughtful around that. I'd say the further you get to Europe to Asia, the more this is still a bank-dominated market. And so I think as players like us get into those markets, you'll see some of that market share shift from banks to us as well. So that will be part of the 5-year agenda as well.

Got it. So let's move to the kind of insurance market share growth opportunity. I think there are kind of 2 sides to this, right? One, insurance companies outsourcing their asset management capabilities to asset managers; and then two, insurance companies simply needing higher yields without taking more risk, right? And you touched on that. What inning do you think we are in both of those trends playing out? And then through that lens, what is the opportunity for Apollo, Athene and even Athora in Europe?

Yes, yes. So look, I think there's a combination of insurance and other market players selling some of their businesses, which is a little bit different than just outsourcing the asset management, some whole. I think the ability to continue to access more and more of what we do that's the sky is the limit. We're going to scale that direct origination and a big chunk of that is going to be through third-party mostly other insurers who want that type of asset management product. But to answer your question, where I think you were going, if we're going to use the baseball analogy, I guess we've got to break it down by region. So I would say in North America, we're probably in the early middle innings, in that there's still so much more growth to do in being able to sort of push on that. In Europe, we're bottom of the first. We'll put it that way. And in Asia, they're still singing the national anthem, like it's really, really early days there. And so there's just so much opportunity. I mean, at the end of the day, I think versus our addressable market, we think we're like 2% market share. So huge opportunities to keep scaling on the liability side as well as the asset side.

You mentioned Asia, I think Marc seems pretty giddy about Asia when you meet with him. Could you frame that opportunity in a little bit more detail? Is this something we should think about being similarly sized as the yield franchise you have in the U.S. and Europe?

Look, it's going to take some time to get to something of that scale, right? As I touched on the bank -- the lending market in Asia is still dominated by banks. It's something like 85% versus low double digits here in the U.S., just to put it in perspective. So long way to go, this is a sort of a 10-year sort of plan. But we do just see on both the liability side, so the -- being able to scale up through reinsurance or acquisitions, investments in Asia on the liability side, plus then the yield side, the asset side in Asia is a huge opportunity. And again, we're going to do it very methodically, very thoughtfully. Since we're quoting, Marc, one of his favorite things to talk about, like raising capital is not the limit of our growth. It's finding the good investments to put it in. And that is so, so true. So we will scale as fast as we feel like we have good places to invest capital. Because the last thing we want to do is just put mediocre capital out or even worse. And so it's really about scaling at the pacing of finding those good investment platforms, those good asset platforms. And so that's what we're embarking on.

Makes sense. Let's move to fundraising and fee earnings growth, which is at the core of most investors valuations. Hybrid is your newest segment and obviously, designated as a distinct investment strategy. I guess this suggests you think it should be much bigger than it is currently. So if you -- first of all, to those unfamiliar, could you explain what it is? How it's unique to Apollo relative to the other alternative asset managers? And how big do you think it could be?

Yes, yes. So look, just defining it, hybrid are those family of products that live basically between our lower-risk, low-return yield businesses and our higher returning but higher risk equity businesses. So on the corporate side, that's things like our hybrid value, our opportunistic credit. We had a real asset type products as well that live between traditional real estate lending and real estate equity. And then similarly on our Retirement Services platform, things where you're not investing in the equity of some of these retirement services or insurance things, but you're getting access to the asset and liability spread business in those sorts of ways. Look, for us, the reason why we're so interested in it and quite frankly, when I think about Apollo's $500 billion of assets, some of the best risk return when you measure like how much excess return you're getting for the level of risk you're taking lives in this hybrid, this hybrid space. And the reason for that is based on my description when I just defined, right, it doesn't easily find itself in buckets, right investors like to put things in buckets, equity, credit, real estate, whatever. And by definition, hybrid is the white space that lives between those buckets. And so what you find is a number of institutional investors just don't have a home for it. I mean probably upwards of 2/3 of institutional investors just don't allocate to these categories. And as a result, it creates really interesting opportunities because you have like an artificially constrained capacity in a world where there's too much capital chasing every asset class, these are some of the few asset classes where there's not enough capital. The flip side, this is incredibly flexible capital for companies or assets where it's more flexible than credit, more -- less expensive than equity and really gives you the best of both worlds. And so you have a lot of demand for this stuff to constrained supply allows you to get excess return that you don't really see anywhere else on the platform. So we love these types of spaces, and we keep trying to ferret out more of these types of categories. Today, this is about $50 billion on the Apollo platform. In our 5-year plan, we pegged it at about $100 billion. So we see the ability to double this over the next 5 years.

Got it. Retail is another of the 3 kind of key growth initiatives. Could you update us on the progress, building the global wealth platform, including expanding on the distribution reach, new product creation? And then finally, how does the recent acquisition of Griffin fit into all that and accelerate the growth?

Yes. Yes. So look, retail, there's a lot of excitement about retail because there actually should be a lot of excitement about retail. When you just step back and think about the potential demand case for alternatives from the retail market, it is truly massive. If you think about just over the next coming 10-plus years and the need for that type of exposure to retail investors portfolio as they're preparing for -- now having more than ever have to prepare for their own retirements, there has to be larger and larger retail exposure. For Apollo, look, this is just a sector that historically we had never -- like an asset channel or an investment channel we had never really thought about. And so historically, on any given year, we typically would have raised less than $1 billion a year through the retail channel. We talked about this last year, in our first year, we put this in our 5-year plan. We expected year 1 to be about $6 billion of capital raised through the retail channel. And I feel like we're way on our way. We're not formally raising guidance for anyone in the room, but I think we're going to handily meet that. And in our 5-year plan, by year 5, we had raising about $15 billion a year from the retail channel. And as I see it, this feels incredibly achievable to be able to do that. In order to serve these markets, right, you need product development, right, because sometimes you're just porting existing product over into, say, the high net worth channel. I think Fund X or hybrid value or EPF or our infrastructure, things that are very translatable to or just shiftable to the high net worth channel, the big wire houses, some of the big private banks. Okay, you still need some specialized sales force to do that, but it's very straightforward. Some products or products that you need to take institutional products, but then tailor them for the retail market. So adjusting for liquidity and yield and things like that, again, you need product development people. And again, another specialized sales force to be able to go not only to the wire houses, but to the RAs, a lot of the other channels that serve the retail investor. And then lastly, you have truly bespoke products that are built for the retail community that don't really have a corollary back on the institutional side. That's what I alluded to earlier, some of the things we're working on jointly now that we have Apollo and Athene under one roof. So I see this playing out. I mean just to give anecdotally, 18 months ago, we had 1 professional inside of Apollo who focused on serving the retail channel system. Today, we have about 150. So this is a huge opportunity. We're treating it as such and really leaning in because we are so excited about it.

On that last point, I know you and your competitors all like to keep these things close to your vest until they're ready for prime time. But how should we think about the timeline for getting more color on what's in the R&D phase?

Yes. Well, look, I said on our last earnings call, I think from here forward, you're going to be seeing each quarter, something new coming out that we're launching in the retail space in one of those segments that I was describing, in one of those categories. Sometimes maybe there'll be more than one. But that's the timeline we'd be thinking. And I think that's going to be coming over the next several years.

I want to dig into some of the white space opportunities you talked about on the call, things like secondaries, life sciences and energy transition. Could you expand on that?

Yes. Well, there's a lot there. I'll try to hit them quickly. So GP secondaries, so which is more broadly defined. We've spent a lot of time over the last couple of years exploring the secondary space, watching some of the big transactions that have happened with some of our peers in the secondary space. And the space -- the sector is actually more interesting than it might appear on first blush. The -- when people think of secondaries, they think of traditional LP secondaries, the CIO of a pension fund wants to balance out their portfolio, they're going to take 10 funds and 10 positions and go sell them. That's a part of the business, but that's actually the plain vanilla part of the secondaries market. When you actually start to look at GP secondaries, continuation funds, credit second, new asset classes that are now scaled to the point where you're going to see big secondaries transactions going on like credit secondaries, fund finance right, when you think about how GPs fund themselves, finance themselves lots of interesting and creative ways to do that, we took a step back and said, wait a minute, like Apollo actually does or can do all of this. We have much of the expertise in-house. We can find the expertise we need to add. And so rather than going out and spending billions to acquire a platform, we should be scaling this business ourselves, utilizing our own capital and then bringing in third-party capital to be able to go do that. And so we are in the scaling phase of that right now. I think in the coming months and quarters, you're going to -- we're going to be a little more vocal on some of the things we're doing there. But incredibly exciting, and I think our ability to build a really scaled player in GP secondary -- excuse me, GP, LP ecosystem, I think, is pretty extraordinary. So excited about that. I think the second thing you mentioned was Life Sciences, yes, yes. One of the things that Marc, Jim and I sort of identified over the last 18 months is there are a few places in the economy, I think fintech, think life sciences software, 1 or 2 others where having the right type of expertise in that space is going to pay dividends and punch way above the weight of just that little narrow sector broadly defined. And so when we thought about -- and those are sectors or areas that Apollo historically hasn't had the depth into. So when we thought about that, buy, build or partner, we could have done any of those, right? Obviously, the scale Apollo has. I think the building on something like that is we started to meet some of the leading players in these spaces, it just became clear if we wanted to build that expertise, it would take some amount of time to build that depth of knowledge. We could buy some of this expertise, but we're not like growth equity venture investors. We're not looking to be growth equity or venture investors. What we're looking for is access to that intellectual capacity that we can then bring the Apollo skill set and the Apollo framework around to create new and exciting things around that ecosystem. And so clearly, for us, the best answer was partnering. We did that last summer in fintech with Motive Partners. We just recently announced the Sofinnova partnership in life sciences. And the expectation and goal is Apollo is able to bring its capital formation capabilities, its capital markets expertise to build an ecosystem around this expertise. So in the case of Sofinnova, it's not for Apollo to get into growth investing in life sciences, but Apollo, by the way, has a big later-stage life science investment pool in our credit and hybrid and even some of our equity businesses and having that intellectual expertise, hugely valuable. Being able to say, okay, well, we're also going to build a life science lending business, a royalties platform, an earn-out platform, all sorts of exciting products around that where we can bring all of our knowledge, our partner can bring their knowledge, create real win-win scenarios. And also make sure that we don't change what -- Sofinnova is an amazing platform. They've got a 40-year history doing amazing things. We didn't want to come in and necessarily screw that up or change that, just as they're not going to come in and change the way we invest, but there's so much symbiotic overlap to bring these together. And so that's what we're doing, and you're going to see more of that. We're already seeing the dividends start to pay off on the Motive side, on the fintech side. And so you'll start to see some of that on the Life Science side. And then I think you'll see 1 or 2 other partnerships in the coming months and quarters as well. And then very quickly just on energy transition. I know we're running out of time, but for me, energy transition is probably the most investable megatrend that I can think of, certainly for the next generation, right? When you think about the amount of capital that needs to be invested to move the global economy to a carbon-neutral standpoint, you're not talking tens of trillion, you're talking hundreds of trillions of dollars, right? The -- and this money is going to be invested. It's going to be spent regardless of the economic backdrop, regardless of the interest rate environment, regardless of even the energy price environment right? The world has decided we're decarbonizing, and we're going to do our best to get there. And so the tailwind of that should create enormous, enormous opportunity. Now for us, it's about picking our spots and being really thoughtful about this. Lots of folks think of the energy transition and think about investing in the Whizbang new technology that's going to change the world. And like that's great, that's relevant. And that sort of equity portion of investing will be a portion of the energy transition. But the huge opportunity, the really huge opportunity is bringing the rest of the economy along, right? It's everybody wants to find the next Tesla, but the reality is helping GM and Ford and Toyota transition their footprint from kind of old energy to new energy, like that's the critical piece. And that's true across the energy sector. That's true in auto. That's true in industrial. So huge financing of the energy transition. So I think for our yield platform, our hybrid platform, in addition to our equity platform, huge, huge opportunity, and we're organizing ourselves accordingly to really take advantage of that opportunity.

Makes sense. So given everything we've talked about, I'm sure you're frustrated with the valuation of the stock. And I think a key reason it's trading where it's trading is this view from investors that the spread earnings you're getting from Athene's balance sheet is an inherently low multiple earnings stream. How are you guys thinking about valuing that stream especially in relation to how has Athene used to trade on its own? And what do you think Apollo can do to help investors get more comfortable valuing that at a higher multiple?

Yes. Look, the best possible thing we can do is provide some light, right? Because -- and that's really the driver for the teaching we have in a couple of weeks. Again, this -- there seems to be a lot of just bugaboos' concerns about, okay, spread earnings and where does it come from, where does it, how is it generated, what are the risks to it, what are the risks to the Athene balance sheet. And so getting the market comfortable with the rigor at which we manage that Athene balance sheet, the asset side and the liability side, understanding the predictability of what comes out of that spread related earnings, that spread lending differential, all we can do is educate, right? At the end of the day, fundamentally, the market doesn't allow arbitrages to last forever. And when I look at the way Apollo is getting valued or just even the sector with 20-plus times for fee-related earnings and 6x or less for spread-related earnings, like that's just an insane dichotomy that once I think people really understand what's in there, okay, I don't see how that can ultimately -- that differential can stay forever. I mean, to answer your question, do I see fundamental -- if the market had the same level of confidence that we have in the durability of that earnings stream, why -- on a 9-year liability base, why is that any different than a 10-year PE fund, I'm not entirely sure. But particularly when that 10-year PE fund is invested in equity of levered capital structures and this is generating steady earnings from an investment-grade pool of assets, I think the market will eventually see that and figure that out and close that arbitrage. So that's how I see it. I mean, all we can do is educate.

On that point, you hit something I meant to ask earlier, but there is some concern about private equity Fund X, given this crowded fundraising market and the denominator affect at some pension funds. So any update you can give on private equity fundraising more broadly and if -- how Fund X is going?

Yes. Look, all I can say is we launched the fund raise earlier this year, have had amazing conversations with LPs, feel very confident. As I said on our earnings call, super confident on the ability to raise our $25 billion target this year.

So last one to finish back on the stock price. I felt there was a pretty dramatic shift in your tone on capital return priorities on the call. Marc, I think, said that repurchase is now the best use of cash. So is it fair to assume that you guys are in the market now? And remind us how much you could do this year in repurchase?

Yes. Yes. Well...

W Well, not now, today.

I guess you'll have to wait for our next earnings update to get the specifics. But you should assume what markets at $50-ish in the $50s. It's a pretty screaming buy from our perspective. We did authorize earlier this year, a $2.5 billion buyback program. We didn't put a timeframe on that. We're going to be thoughtful. Obviously, we do have growth priorities. We are investing in the platform as well. But I think it's reasonable to assume that there's some of both going on.

Yes. Got it. Thanks a lot.

My pleasure.