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Apollo posts record profits after a sales frenzy

Apollo Global Management reported record third quarter earnings, aided by brisk asset sales, as the company began paying out after an unprecedented spending spree that peaked during the pandemic.

Distributable earnings, a measure of earnings that can be returned to the company’s shareholders, reached $ 752 million for the third quarter, compared to $ 205 million for the same period last year.

Results reflect buoyant US financial markets, which have rallied across all asset classes as support from governments and monetary policymakers averted pandemic business failure.

KKR, an investment group that competes with Apollo in markets from real estate and insurance to private equity, also reported positive results Tuesday, with quarterly after-tax distributable income more than doubling to $ 925 million.

Co-chairmen Henry Kravis and George Roberts praised an “exceptional neighborhood” and said they “never felt better when it came to KKR’s positioning.” Last month, Kravis and Roberts resigned as co-directors of the company. She is succeeded by Scott Nuttall and Joe Bae, who oversee a diversified wealth manager with $ 459 billion in assets under management.

Apollo’s results were notable for the oversized contribution of its private equity funds, which contributed more than half of Apollo’s quarterly earnings despite accounting for just under a fifth of the investment group’s $ 481 billion in assets under management.

One of the disposals in the reporting period was a stake in the OneMain Financial credit group, a private credit group that was invested in in 2018.

The sale was so quick that assets under management in the private equity business shrank 3 percent for the quarter, reducing the division’s management fees by 7 percent.

Apollo said the declines are “normal dynamic in times of heightened realizations,” and CEO Marc Rowan added in a statement, “Our business is thriving and we are accelerating on all fronts.”

The company will shortly begin launching a new private equity fund that will be “as big or bigger” than the $ 25 billion vehicle it raised in 2018, Co-President Scott Kleinman told investors last month.

This will be one of Apollo’s biggest fundraising efforts since Leon Black stepped down as CEO this year after an independent investigation into his professional contacts with the late sex offender Jeffrey Epstein.

Some pension funds at the time said they would consider pausing their investments with Apollo. However, analysts believe that Black’s departure, along with the outstanding performance of the private equity business, will allay most investors’ concerns. No malpractice was found on the part of Schwarz.

Apollo’s two most recent private equity funds, launched in 2013 and 2018, were expected to more than double the money they invested, Kleinman told investors.

The 2018 fund achieved a gross inland rate of return of 47 percent at the end of September. This outstanding result on a key financial performance metric outperforms any private equity fund Apollo has launched since 2001, although the number may fluctuate in the future as many of the fund’s investments have not been sold.

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