Apollo Global Management, LLC Class A Stock

Good morning, everyone. Thank you for joining us, and welcome to BofA's 31st Annual European Financial Services Conference. This is Craig Siegenthaler. I run the North American diversified financials vertical. And I'm very pleased to introduce Marc Rowan, Chairman, CEO and Co-Founder of Apollo Global Management. Marc co-founded the firm in 1990, and he served as CEO since 2021. He's also a thought leader across financial services and a pioneer of the alt insurance model, which its largest competitors have replicated. Marc, thank you for joining us in London.

Pleasure, always.

So Apollo was founded in 1990 with a focus on private equity, but actually initially a little more of an investment banking focus. The firm now has evolved into a diverse global alternative asset management firm with scale across all 3 channels: Institutional, individual and their leading insurance platform. Apollo pioneered the retirement model with the creation of Athene and is also a first mover in investment-grade private credit and is also capitalizing on the industrial revolution. The firm now manages more than $1 trillion in AUM and is one of the 5 largest alt managers in the world across all metrics. So with that, let's get started.

We'll get started with the macro. The macro backdrop has definitely been more resilient than many expected, yet uncertainty remains geopolitically, fiscally and also in the rate trajectory. Marc, how are you reading the environment right now? And what does it mean for Apollo's outlook and portfolio position?

So the fundamentals are actually quite positive. Everyone has a job. There is no immigration. Let's talk U.S. first, which is the largest market. Everyone has a job, no immigration. You have a massively accretive CapEx cycle, which is creating demand across lots of different sectors. You have the government policy incredibly accommodative. Capital markets are wide open. And so valuation aside, I think it will be difficult to cause a U.S. recession over the near term. The companies have been shocking resilient. Earnings are up. And generally, credit performs well if the economy is good, absent specific risks or stupidity.

So Apollo is growing one of the largest alt managers in the world, yet the business model remains underappreciated by some investors. Can you frame the big picture for us? What differentiates Apollo versus peers? And why should investors be paying attention to this now?

So I start with our industry. In our industry, 95% of the firms literally want the world to stop changing until they retire. And that does not surprise me because the size of the private markets are much bigger than any of us thought it was going to be, and people have created a lot more wealth than they otherwise thought they were going to create. And it is very difficult to kill these firms because they bleed down over a long period of time, making very few decisions each year.

In our industry, a handful of firms, fewer than 20 have decided to evolve their business model to serve the new environment. And by my calculation, 10 have succeeded. We're one of those 10. And then you now get down to unique foci of each of the individual firms and what we're trying to do. So if I look at the big macro that applies to all of us, we are a source of excess return per unit of risk. If we ever lose focus on that, there's little value in wanting to be in private markets versus public markets.

The second is we are being driven forward as an industry by this global industrial renaissance, which is happening everywhere in the world and the scale of it is off the charts. And the third is we are increasingly being sought out as a means of diversification versus public markets where the S&P 10 companies are 50% of the S&P, all levered to the same trend. And you're seeing the same thing happen in credit markets.

And so those 3 macros are driving our business. I'd say on a more Apollo basis, we have -- we've always, as an industry, been serving one client, the alt bucket of institutions. And we are fortunate we have 5 new clients. We have individuals, we have insurance companies. We have the debt and equity bucket of institutions. We have traditional asset managers, and we have 401(k) DC in all forms of retirement. That first client, the alt bucket, started with a business model that was based on funds. And it turns out that none of the 5 new customers are natural investors in funds.

That doesn't mean they won't come to us in semi-liquid format. But in size and scale, I do not believe they're going to come and fully get the benefit of integration in private markets and that we are going to have to go to them. It's a big differentiator of what we're doing versus everyone else. What does that mean? That means daily NAV. We are now daily NAV across our IG suite of products as of 6/30. We will be daily NAV across the entirety of our credit business September 30. It means everything has a CUSIP or an ICE ID, ICE being the owner of the New York Stock Exchange, not the immigration enforcement. Things trade.

We've traded north of $30 billion so far this year. We'll be $50 billion by the end of the year. And the last piece will be regular way settlement, and I think we will get to regular way settlement by next year. And so if you think about what that means, we will need to go to those clients and become part of their operating infrastructure as opposed to asking them to come to us. And I think you're seeing the beginning of this, not just in the things I've just mentioned, but also in the product structures. And I'm happy to delve into that, but I don't want to take too much time on one question.

So Marc, you always kind of mentioned that the bottleneck of the business is origination. So I'm curious how your origination platform has evolved? What does the ecosystem look like today? And where are you investing in origination for the next leg of growth?

So look, we -- having started Athene from scratch 2008, 2009, we discovered pretty quickly that if we wanted to succeed we could not rely on public IG markets. Definitionally, the public IG market is beta. It is 100% beta. There's no alpha left in it. And if a big determinant of the profitability of a retirement insurance company is their ability to have asset alpha, we needed investment grade because that's what belongs in a regulated balance sheet, but we also needed alpha. And so we began the origination business.

Origination initially started out as platforms only and then a little bit of calling on corporates. And now it's a full-fledged servicing of this global industrial renaissance. And so if you think about where we're building, we're building in the places that are necessary to provide capital. And the scale of capital is really hard to appreciate. In the U.S., $4 trillion plus. Canada, for those who watch the Canada Investment Summit, they're looking for $1 trillion. The Gulf, $1 trillion. Who knows, even Europe might actually get going.

And so it's energy, it's energy transmission, it's energy transition, it is infrastructure, it is next-gen manufacturing, it is defense and it's AI and data. And it's all happening at once and it's happening at a scale. And so the places we're investing enable us to take advantage of that. And we're seeing it across the globe. If I just tick off the big issuers, certainly the issuers here, BP, Shell, AB InBev, Air France, EDF, RWE, AT&T, Caterpillar, NVIDIA, Broadcom. It is not what most people expect in the private market, the names that they expect to hear. And what's happening is corporate CFOs around the world now understand that if they want something that is short dated, there is no better place than the banking system. The banking system is the most efficient provider of short-term capital because it funds itself with deposits.

The banking system is not a great provider of really long-term capital because that is an unnatural act. We're watching, if something is really straightforward and can be done in 10-year final, 3-year, no call, the public markets are an amazing place to get low-cost capital and the calendar of those who watch this market is off the charts. If you want anything other than those 2 things, you're now coming to the private market. And most of what's coming to the private market is investment grade, although it's not entirely investment grade. And for us, we like it because the credit market is a fundamentally different beast than the equity market.

In the equity market, you will take concentration because you have unlimited upside. In the credit market, you only get your coupon and your principal. You will not take concentration unless you are offered more compensation and more safety. And so that's the market we're in. We're providing concentrated amounts of capital primarily to investment-grade companies. And while they have alternatives in public markets, the scale of capital required is causing them to not just offer more compensation, but more safety.

And the way I describe this in its simplest form, every IG deal is unsecured holding company. In a world that's changing fast, that's not where I want to be, especially for no compensation. Almost everything we do is at the asset level and secured. That is how we pick up the margin of safety. And then compensation speaks for itself. If you have the full faith in credit of an investment-grade borrower through guarantee or otherwise, that's one spread. If you're being asked to do something more complicated, that's another spread.

So let's focus on AI adjacencies for a moment. So Apollo has been one of the most active financiers of AI infrastructure, and you've had several marquee announcements with xAI, Broadcom and NVIDIA. How are you sizing the origination opportunity? And what concerns around overbuilding and a potential bubble, how is Apollo really insulating itself for that scenario if that would come to pass?

So AI data is not one thing, and it's not one risk. So if I dimension the bets, there's energy. And I'll again speak in the U.S. context. The U.S. has not built energy of any appreciable amount for 20 years. We are short energy. Energy is fungible. As long as it is costed in the right way. I do not think of the risk of financing energy as the same as financing a data center. So we've been financing a lot of energy. The second is chips. The chips that are going into the data center represent generally the largest cost of a data center.

One can actually look out over the next 5 years and understand the capacity of the world to manufacture chips for data centers and come to some pretty healthy conclusions that there's not going to be lots of capacity coming online. So massive amounts of capital can be safely deployed against chips where the costs amortize down over a 4- and 5-year period to 0, where the chip manufacturers take residual risk or you're getting the upside on residual risk, but with some amount of downside protection.

And so again, I think you can divorce the success or failure of the data center business from a chip financing. And then ultimately, there's the financing of data centers, which come in a variety of flavors. If Microsoft wants a data center built or Amazon or Meta or Google or anyone else of that caliber and they are prepared to be your offtake provider, you can finance that project as if you're financing one of those companies as a project finance, but at a wider spread.

On the other hand, if you are being asked to finance something that envisions utilization and renewal rates and offtake rates on a merchant basis, I don't know how you do that. And so the large bets we've been making are energy bets and they are chip bets. And with small amounts of equity out of a risk bucket, equity, we are an investor in the equity of data centers. We own something called Stream. We build data centers, but it's a relatively small piece of the portfolio.

And so from a safety point of view, I think data centers is just a big term. I think there are lots of ways to pick apart the collateral to get where you need to get to deploy large amounts of capital. And the 3 you mentioned are all secured financings against chips.

Marc, let's talk about the divergence between -- or the convergence between public and private. So over the last 12 to 18 months, Apollo's announced several initiatives, market making, daily pricing, and ICE IDs. That speaks to a broader convergence between public and private markets. Strategically, what are you trying to accomplish? And how do these initiatives fit together as part of Apollo's longer-term vision?

So this is -- they're all pieces of serving the 5 new markets that I mentioned earlier. I do not -- yes, I think the attractiveness of private markets will cause or motivate people to come to private structures would be they semi-liquid structures or fully illiquid structures. And they've done that in size, as you've seen in the, what I'll call the traditional retail high net worth business. On the other hand, the wholesale broad adoption, I do not think is going to come other than if we meet people where they are. And most people -- most infrastructures are set up as public market infrastructures.

If we remain as we have a big portfolio and then we do this private thing off to the side, I think the business will not achieve its full potential. And so all of the things you mentioned, along with settlement, I believe, are steps in that direction to make the product more uniform. And I will take a minute and just talk about the evolution of product. So the way people think about the product set today is in semi-liquid format. That's mostly how the high net worth, which is the most prominent of these new markets, is adopting it.

But if you think about -- I'll take Apollo's business, we're circa $1.150 trillion (sic) [ $1.15 trillion ] , $300 billion of equity, $850 billion of credit. And so changes coming to credit first. But the way you've accessed our credit business over the past any number of years has been in a vertical strip. Sometimes you buy the short duration IG, sometimes the core IG, sometimes the asset-backed, sometimes the levered lending, sometimes the European levered lending, sometimes Caesars, sometimes credit strategies, 16 different flavors of vertical strip. And you can buy the semi-liquid fund, the drawdown fund or the managed account.

But it's still a vertical strip. And when you buy a vertical strip, you are subject to the liquidity of that strip. So in core IG, 100% of your money every 30 days. In levered lending, 5% of your money a quarter. What if we took our whole $850 billion business and we dumped it into a big bowl and we sliced it horizontally instead of vertically. We had an investment-grade piece. We had a below investment-grade piece, and we had an equity piece. With any of those 3 pieces in different combinations, you could replicate all 16 strategies. You would not be in a fund, you would be in CUSIP securities that are rated, that are fully transparent, that trade that have a daily NAV, daily price that settle. That's AMAPS.

$30 billion later, $40 billion by the end of the year, my guess is double that the following year, plus we will do our best to incent some of our competitors to issue MAPS as well, you are essentially allowing people to access private markets in a way that is closer to how they experience public markets. It is not an exact replica of each of these 16 strategies, but they can get excess return per unit of risk. They can diversify. And if they change their mind on Tuesday, they can sell it.

I think we need to have a better imagination of how private markets are going to evolve rather than just the structures that exist today and assume that these structures will be the structures that dominate our industry over a period of time. We will raise 3x as much money this year in MAPS as we will in retail. And we want to do both.

So let's talk about capital formation. So you've grown AUM at a very remarkable clip, the last decade. Numbers are very large now. On the other hand, you talked about now you have 6 buyers of your origination. Can you expand on each and how large they might get?

So you start with the institutional alternative bucket, which is the structure of our -- the whole underpinning of our industry. Generally, that is the smallest allocation of our institutions. Think of it as 10%. I think from all the numbers I've seen, the retail market should be the size of the institutional alternative market. The debt and equity bucket of our institutions dwarfs their alternative bucket, insurance, 401(k), traditional. And I've been at the forefront of saying this, and it's what I believe, I do not believe over any intermediate term that capital formation is our issue.

I think we will need to straighten out our product sets as an industry to make the product set more attractive to those 5 new buyers. But I do not believe this is the fundamental issue. I think there's plenty of capital formation to do. I think the issue comes down to origination. At the end of the day, the promise of private markets starts with excess return per unit of risk. If you are not successful in originating, I don't care if you have the best retail sales machine, the best MAPS sales machine, institutional sales machine or otherwise, there's just no -- there's no raw product for the mill. It doesn't matter what the refined product is on the other side.

And so I think what we set out 2.5 years ago to lay out a 5-year plan, we envisioned a business that would grow 20% a year for the next 5 years. I don't think our industry will grow to the sky. I think our industry will need to evolve and create other profit streams around the business, so it is not just fully origination dependent. Although for the time being, I think origination, given the scale of global industrial renaissance is a really powerful trend.

So let's talk about private credit and wealth, which received an exhaustive amount of media attention in the last 12 months. There's a lot of debate around credit quality, the cycle, new entrants with less discipline, 2021 vintage. I'm wondering if you could hone in on your product, ADS. How is its underwriting approach different? And what is your outlook for this one?

So I'm going to do it in reverse order. Let's start with outlook. So across the entirety of the industry without regard to credit quality, you have gating. The normal expectation you would have when an investor group says that it wants its money back is you would expect the underlying asset spreads to widen. That's exactly what hasn't happened. Spreads have tightened. And it shows that there is institutional demand, CLO demand that is more than offsetting the lack of demand on the high net worth side.

So this is not a question of product. The other thing I think we need to do is we need to put this in perspective. The private equity industry is more than 40 years old. It experienced a massive spurt of growth. Over the last decade, it has been flat to sideways. Why would the private credit industry as you're using it, direct lending, levered lending, why would we expect it to be anything other than flat? I think that's what we're seeing. The size of the market is flat. And so you're seeing spreads tighten. And I believe what we witnessed over the last decade was more bank retreat from the market and direct lenders filling their share than some bonanza in the marketplace.

It is now a mature market and that you're seeing the dynamics of that play out. Not everyone in the market will be treated the same way. And this will go to your -- the first of your questions. You had a choice when you entered the high net worth marketplace as to how to market yourself to consumers since none of the consumers know anything about any of the brands, like we're important, but just to ourselves, Blackstone and KKR, TPG, Iceberg, Steinberg, no one knows. And you were selling a dividend and a risk award. And if you decided to sell a high dividend, you work with a lot of leverage, you invested more in technology, you did more PIK, you went smaller companies because that's where you got excess compensation.

On the other hand, if you were approaching this as a principal where it was just a piece of your business and you own everywhere across your structure, you did large cap, you did first lien only, you did cash pay and you went with low leverage. That's the choice we made. Others made other choices. And I think what you'll see over time is you'll see a divergence in performance as people figure out, as consumers figure out who is who in this crisis.

Every time we've seen a financial crisis or a financial setback or market correction, the responsible players tend to pick up share. We view ourselves as a responsible player in the marketplace. We're not the only one. And I think we'll do just fine. And the product is performing and doing what it needs to do. But I'll end where I started. The fundamentals of the market are not driven by the queue of investors at high net worth who have asked for their money back. The fundamentals of the market are driven by tightening spreads and the demand for a flat product from CLO and from institutions because it still represents a better risk reward than high yield and a better risk reward than BSL. And that's been the history over the last decade.

So Marc, your presence in Europe has been growing. You announced several marquee acquisitions, including Atlético de Madrid. Can you give us an update on where your European business stands today and what it could look like in 5 years?

So I'll start with, if you think about the big trends driving the world, they require lots of capital. And I've said this and Jim and others have said this, I think that Europe, writ large, will be the best private credit market in the world on a percentage basis because Europe needs to do and is interested in building everything that the U.S. is doing, but it starts from a more constrained position. Governments are more constrained. The financial system is more constrained. The investor marketplace is more limited. The banking system is full and much more dominant here and not the right direct lender of capital.

And so on a percentage basis, Europe will grow faster in direct lending, not levered lending, but mostly investment grade than anywhere else in the world. And the other benefit is you're seeing the borrowers, they're quasi sovereign. Yes, Air France is an independent company. EDF is an independent company. RWE is an independent company, BP, Shell, but they are so intertwined with the business of their home country and state and local municipality that it is very difficult sometimes to separate the creditworthiness and the scale of capital that is needed is off the charts.

And so I think this is a matter of education, whereas CFOs in the U.S. in capital-heavy industries fully understand the 3-product dynamic of bank, public and private. Europe is a little bit behind in that understanding. And the more time we spend here, the better. A couple of marquee deals is the single best way to market. The other is you have difference in regulatory approach in insurance regulation, which has made the guarantee market in Europe for guaranteed lifetime income and guaranteed income of any kind, very hard to deal with. And so we have increased our presence particularly in the U.K. with the acquisition through Athora of Pension Investment Corp. (sic) [ Pension Insurance Corp. ]

And we see the market pretty much in the same way we've seen in the U.S. market, which is if you have product that fits matching adjustment that is of the right credit quality, you can provide significant value to the consumer and increase your presence and market share in a market that is already going through significant growth of restructuring of the retirement system. The same thing is happening in Germany, but not through insurance, it's happening through noninsurance PRT. And so any amount of time we spend here is generally productive.

Marc, if you had to identify the single biggest catalyst for your business in Europe over the next 3 years, would it be an acquisition? Is it regulatory? What could it be?

I think it's passage of time. I see it every day in our business. And it's an interesting thing. And again, I may have said this to some of you, but I'm old and start repeating myself. We did a media event last night where we had a lot of the U.K. press, particularly the financial press. And the financial press refers to the entirety of our industry as private equity. And I said what percentage is private equity of our business? The numbers were like 40% and 50% as opposed to like 8%. And I joke with the reporter from the FT. It's like referring to the FT as a conference company.

You picked the small part of their business, and that's what how you define it. And so it is our job now to define what private markets are in the context of Europe, where there's not a tremendous amount of knowledge of private markets. And what they do know is all about buyouts and leverage and transactions, and that's what the financial media wants to cover as opposed to a solutions provider for a fundamental missing piece of capital. And you've had the Draghi report, you've had any number of other respected individuals weighing in.

This is neither a positive nor a negative on the European choices, but Europe is much more dependent on its banking system than the U.S. is. In the U.S., banks are 25% of lending, investors are 75%. In Europe, it's pretty much reverse. Given that the missing piece of capital is an investor piece of capital, it's not going to come from the public markets. Europe is going to need to make its peace with private markets. And part of that is firms like ours spending real time here, putting real European leadership in place and making sure that we are adding to the value of what they need to achieve as a country -- country by country.

So your retirement business in Europe is called Athora. It's Athene of Europe. You announced a landmark deal, PIC in the United Kingdom recently. Is that transformational? And how do you think about the U.K. market versus some of the other countries in Continental Europe in terms of growth?

Well, if you think about what Athora is, Athora has 2 sizable markets. Athora has the Netherlands and it has the U.K. The Netherlands, the local company in the Netherlands is growing very fast. It is among -- I believe it has the largest market share of the pension risk transfer market and new business in the Netherlands and is doing great. We have, in the U.K., a forecast of a really significant shift from corporate pensions to pension risk transfer over the next decade. The U.K. has expressed a strong preference not to have that done through reinsurance, to have it onshore.

And so we had served this marketplace primarily from Bermuda in offshore reinsurance structures, while collateralized, the regulatory preference is that we do it onshore, and we've added a significant amount of capital to PIC. We have significant capital available to do it. If there is good business to do at reasonable spread, the business can be done onshore. Now what's interesting is this is -- this will force us to rapidly scale our U.K. origination.

At the end of the day, these businesses are totally also origination dependent. If you do not have excess spread of investment-grade product, you cannot do appropriate business. And so it's forcing a renewed focus on Apollo to make sure we originate sufficient matching adjustment U.K. eligible assets to serve the U.K. insurance market. And we won't just serve ourselves, while we will be the largest participant, we will serve U.K. institutions and other U.K. insurers, which we do already.

So I want to hit on NAIC offshore regulation and capital arbitrage. You've been kind of very vocal on highlighting this. You're seeing this now with the Caymans. What do you think is the outlook for some of your peers and other insurance companies that are doing business there? What do they have to change? And does this create opportunities for Apollo?

So I think I'm going to give you a little more than you want because it's come up a lot in our private meetings today. The business is fundamentally 4 things. It is can you get a return on assets? Do you have origination? Do you have a good source of stable liabilities at a reasonable cost? Do you have reasonable OpEx? And do you have capital? So if I work up in that order, if you work on OpEx, Athene's OpEx is like 16 basis points now. It is orders of magnitude better than all the established companies and orders of magnitude better than any newcomer. From a liability origination, the cheapest source of liabilities today is organically originated liabilities that you originate in channel because they come with new surrender charges and they are now priced less than things you buy in the secondary market, which have degraded surrender charges.

We haven't done an acquisition of note for a long time, not because they're not available because the cost of funds associated with acquisitions is not attractive. And if you are a new entrant and many of the incumbents, you lack the capacity to generate sufficient IG assets because that's not what you've done historically. So if you don't have any of the 3 indicia of success and what you have is capital, what you've done to try to get to scale in your business over the near term is you've taken your business to Cayman where you don't have to put up the same amount of capital and can take a little more risk.

That is a gaping hole in the U.S. regulatory system to the extent certain providers get to hold -- are forced to hold certain amounts of capital and you can move offshore to jurisdictions that are nonreciprocal. I believe the NAIC and the regulatory bodies know this. The federal regulators are concerned about the size of this. The recent NAIC pronouncements tell me that this is about to be closed. Very significant movement by the NAIC to address this regulatory arbitrage and the race to the bottom. And by the way, it is not just with Cayman, you have a few U.S. states that in order to make their local companies more competitive, have kind of done onshore Cayman, and I believe that you will have that, too.

The other piece of -- and so we're very focused on this, and we're focused on it selfishly. We are, in our industry, the largest -- and so when Lindberg, for those of you, when we have this situation in North Carolina, where someone steals and commits fraud with their company and goes under, we write $150 million check because we are the largest contributor to the guarantee association. We don't like writing $150 million checks. And therefore, allowing capital arbitrage where we are the guarantor makes little sense to us.

The other piece we have is a bit from the speech I gave at the NAIC regulators convention this year. If you think about the positioning in our industry, we serve retirees and our market is going to keep growing until 2050. We are among the only sources of guarantee and guaranteed income and from an investment point of view, we are perhaps the largest pocket of long-term debt capital in the world. We should be financial giants striding the globe. Instead, we are dealing with the potential of loss of trust. Loss of trust comes from regulatory arbitrage. It also comes from allowing situations like have happened with Delaware Life.

If one was not aware of affiliate transactions relating to 3 high-profile sports teams that we can all name, what are you doing as a regulator? And then we have pending in front of us a long-time transaction of a company that has had its issues, which is Brighthouse, also pending in Delaware. So I believe that this has been a wake-up moment for the U.S. regulatory system where it has the opportunity to really make sure the industry gets the benefit of where it sits today, which is a very, very positive place.

So we have time for, I think, one more question. I do want to get to your new Austin, Texas office. But before I do, I just want to see if there's a question from the audience. So if there's any questions, please raise your hand. But if not, we'll jump into Austin. Okay. So you have a new office in Austin, Texas. I believe it's focusing on AI and innovation internally. What is this office? Who works there? And what are you guys working on?

So we are opening in Austin, Texas. It will be a second headquarters for us, and most of the growth of the firm will take place in Austin. It will give us, in our opinion, access to a differentiated talent base that was not available with, for instance, some of your East Coast locations, even though they're easier for me. I think if you think about our business and about change coming, we're going to experience more change as an industry over the next 5 years than we have for the last 10. And if you think about the technology wave, almost everyone in Apollo can envision how technology shift will make their current job easier, and we're doing that.

A large percentage of the people can actually envision how technology shift, software becoming virtually free can envision adjacent products and services and enhancements. Very few people can do their day job and envision wholesale change. In Austin, what we're trying to do is to isolate people and let them pursue wholesale change. What are the big opportunities around our business that are made available from technology, but they're not really technology opportunities. And if I give you a couple, like we already are a massive trader of private product. I think doubling down on the capacity to provide liquidity in the private markets and also adding capital to that, I think, gives us another profit center without adding new assets.

I think a massive expansion of our lending business. Right now, you can borrow from Apollo programmatically against our nonequity product at 35% LTV at fixed rates over a number of years. How do we do that more broadly for the private asset industry? I think we need to build the capacity to do at the custody level. I think lending will be a big potential source of origination, again, without adding new assets. And if I think about the future of retirement, annuities, variable annuities, RILA, they are complex products that the vast majority of consumers are not capable of picking apart and really understanding the nuances of, those are products.

Maybe the business eventually ends up as solutions. Maybe it's guaranteed 3x MOIC and that's the product or guaranteed lifetime income, and that's the product. To do that, we will need new ways of approaching it, new ways of marketing, new regulatory approval. And for me, that's where I think the future is. We've committed to the market when we lay out our 5-year plan to grow our asset management business at 20% a year, grow our retirement business at 10% a year and essentially $5 billion of earnings from each over the 5-year period. And we're on track to do that.

We have the luxury now of asking what comes next. Is it more of the same? Or do we have the opportunity to innovate and create new revenue and profit sources around the business that we already do so well and have a right to win in? I think it's the latter. I think it's not just more of the same. I think it is the opportunity to innovate. And as I said, 95% of the companies in our industry literally don't want the world to change until they retire.

It's a very small group of companies that is seeking to innovate. And we believe different things, and we're each pursuing different strategies. And maybe it will be a rising tide lifting all boats, but maybe there'll be more differentiation in our industry as well.

Well, Marc, thank you for sharing your perspective on the future. And on behalf of all of us at Bank of America, thank you very much for joining us.

Thank you. Appreciate it.

Thank you.

Good afternoon, everyone. Welcome to our next afternoon session. I'm Ben Budish. I cover the U.S. Brokers, Asset Managers and Exchanges here at Barclays.

And delighted for our next fireside chat to have from Apollo, Scott Kleinman, Co-President of the Asset Management side of the business. Scott, thanks so much being here.

My pleasure.

Good to see you. Likewise. Maybe just kicking it off with a macro question. Rates seem biased higher for longer, geopolitical uncertainty remains high, fiscal deficits are in focus. Inflation concerns persist. On the other hand, economic growth remains pretty strong. Corporate earnings are robust. Spreads are around all-time tight. So with that as the backdrop, maybe share Apollo's top of the house macro perspective.

Sure, sure. Look, I'll start, obviously, with the caveat that nobody has a crystal ball. But -- we've been saying for a couple of years now this higher for longer, and I think it's certainly playing out that way. Everything we looked at, whether it's the strength of the economy, the persistent low-level inflation really pointed towards rates staying up.

Add on top of that, just the AI CapEx build-out and the amount of IG issuance that is, quite frankly, crowding out treasuries is pushing -- is continuing to hold rates higher. So everything points in that direction.

I was chatting with Torsten, our Chief Economist at the end of last week and asked the question, what is his estimate of recession in the next 12 months? And he put it south of 20%, somewhere between 10% and 20%. So just all indicators are pointing to continuing to chug along, right? As long as the U.S. consumer keeps spending and the AI build-out keeps happening, things continue to motor along. And while the tail risks keep growing, geopolitical instability, domestic political questions, the trade war, inflation, energy prices, market doesn't seem to care as long as those 2 things of consumer spending and AI build-out continue forward, market -- the underlying economy and therefore, the markets keep powering forward.

Okay. Great. You mentioned AI. Let's jump right into it. So can you talk a bit about how Apollo is approaching the AI infrastructure opportunity? And with yields on some of the public hyperscaler bonds widening and some concerns emerging that the surge in investment here could lead to an overbuild. How do you think about protecting Apollo against potential downside scenarios?

Yes. I'll start just by pointing out, I spent the last couple of hours here at the conference meeting with a variety of shareholders and the like. And 95% of the questions were AI-related. I've come to the conclusion that these meetings were more about helping folks figure out, little factoids that might affect their AI portfolio rather than their old portfolio.

But to answer your question more specifically, look, there are lots of ways to play this AI cycle. And there are lots of perspectives on the AI cycle. Our belief for sure is that the volume of AI, goods and services is only going up and to the right at a pretty aggressive pace. How that gets valued, where the value resides in the value chain, I don't know. There are people who are making that figuring that out. But our perspective is how do we sell the pickaxes of the goldminers as opposed to being the goldminers ourselves, like how are we finding ways to finance this massive, massive opportunity and/or structurally invest in it without necessarily having to be the marginal equity dollar on what is the ROI on a data center or a TPU or something like that?

And so we have really picked our spots. Apollo's -- one of Apollo's real strength is the ability to muster large amounts of capital in very creative fashions. And that's what we've been doing here. And so finding interesting ways to partner with large IG counterparties. The biggest players, as we've been saying for some time, but it's become very clear now, the amount of capital needed for -- I mean we're talking about the AI build-out, but you can go from the digital infrastructure to energy infrastructure to industrial infrastructure, defense infrastructure. I mean the amount of capital needed over the next 3, 5, 7, 10 years, is truly, truly extraordinary, like once in a generation type scale.

And companies are figuring out that they can't just have the equity markets, they can't just have the public bond markets. They need an all-of-the-above strategy, and that includes various forms and shapes of private capital. And so that's the approach we're taking, working with and creating very bespoke solutions for some of the largest players in the AI space.

And maybe staying with this topic. So you made some significant announcements recently with Broadcom, NVIDIA. What should we know about this? I think a key question for a lot of investors is a pretty simple question like what does it mean for the P&L, but I'm sure there's a lot of components to these transactions. So what else should we know about these kind of like big marquee deals that we've seen?

Yes. Look, they are highly structured. They are structured in a way to be investment grade. And as you would imagine from any Apollo transaction, very protected when it comes to what type of risk we're taking and not taking. And then therefore, as a result, what type of returns we can expect to achieve versus not expect to achieve. And while we haven't gone into all the details of these things publicly for a reason, these are like I said, highly structured and there I use the term trade secrets. But to some extent, some proprietary structuring.

We -- it follows the mantra and the ethos of what I was just describing, where they benefit, they benefit Apollo in terms of interesting assets that we can put on our own balance sheet, interesting assets for our client balance sheets, interesting assets for our syndication partners. So really, as we've said for years and years now, right, the lifeblood of our business, is origination is being able to access interesting transactions, and these are certainly the interesting transactions of the day.

I'd ask you where these transactions end up, but I've heard Marc say enough times 25% of everything, 100% of nothing. So I think that's fair to assume that's sort of the case, the framework?

That is true, subject to the scale of some of these things are getting to the point where, we obviously have single issuer limits and subsector concentration and things like that. So we're obviously super thoughtful balance sheet by balance sheet where this stuff goes. But you should assume a meaningful piece of everything we do end up on our own balance sheet.

Makes sense. You mentioned origination. You guys have often said origination is the arbiter of growth. Beyond AI infrastructure, what other geographies or sectors are you currently seeing the most opportunity in?

Yes. Look, the opportunity sets like what I talked about, while the digital build-out is obviously the thing that catches a lot of the news. The energy, both traditional and renewable, we've done numerous structured financings and structured transactions across North America and Europe there. Transportation and logistics infrastructure is also a huge base. Then also just the traditional corporate with so much -- so many corporate assets in the hands of sponsors now not being a little bit stuck lots of creative ways to bring financing, hybrid and structured financing. So lots of different opportunities there.

So really across the gamut from an industry and owner standpoint, both corporate and sponsor, I would say geographically, we're leaning in, obviously, in North America, that's always been our sweet spot, but we are really leaning extensively right now into Europe. Investing in people and country offices because Europe has the same capital need issues that the U.S. does perhaps even more so because they're just coming from a place even further behind. And so and European corporates are really opening up.

Whereas U.S. corporates have been open for a little bit longer, European corporates are really opening up in the last year alone, whether it's EDF, BP, Air France, RWE, I mean you go down the list, we've just been doing transaction after transaction with these folks. Sometimes series multiple transactions because they're having to play the all-the-above strategy as well. And local capital markets are just not even as robust as they are here and so private capital is having to play an even bigger role and will have to play an even bigger role going forward in Europe.

You highlighted a number of transactions, I think, are examples of this. But over the past several years, you've been talking more and more about your high-grade capital solutions platform within the origination ecosystem. So maybe talk a bit about the opportunity set there? The extent to which these solutions are becoming more widely accepted by corporate buyer -- borrowers?

Yes. It's funny. It's a few years ago when we invented the asset class sounds a little bit presumptuous. But when we -- because private notes to -- insurance companies were doing that 30 and 40 years ago before the high-yield bond market and before there was institutional capital market insurance companies were issuing private notes to companies all the time.

But what we really saw was a new feature, a new facet, which is can we work with large corporates, large investment-grade corporates, who otherwise historically might not have interacted or transacted within Apollo before, certainly from a financing or structural financing standpoint, but bring features to the company so that they can access pools of capital that they might not have been able to access in the past. And often get features that gave them more flexibility than what a traditional IG bond issued on an IG debenture might have given them doesn't mean more risk. It just means different features.

And so have the ability to be more bespoke with that counterparty. And we started doing these little by little. And as they became more understood, CFOs would talk to CFOs and we got in front of more companies and folks started realizing, this is actually pretty interesting, pretty creative capital.

Today, we've done more than 200 of these type of transactions, plus or minus $150 billion of capital in these high-grade capital solutions, far more than any of our competitors. And we have just built the infrastructure on our side to be able to do this. This is not as easy as just showing up and making a commitment and writing a check. There's a lot of structuring involved, a lot of creativity, a lot of understanding on the ratings advisory side, working with the rating agencies in full transparency to make sure we're getting the treatment the company needs, providing the features that the rating agencies want to ensure we get that type of rating.

So it really has become a highly customized but a very interesting part of the capital. And we're fortunate that it coincided with this need that the global industrial renaissance, this massive need for CapEx by companies because companies are now recognizing, like I said, that they've got to look at all -- it's an all of the above strategy. It's not just one or the other. It's -- companies are looking at all of these solutions.

Got it. When we think about the Apollo P&L. So ACS, it's been a clear bright spot. You hit a new high last quarter. You now had, I think, 5 consecutive quarters over $200 million. How should investors think about the link between origination and your ACS fees? And kind of given your optimism here, what does that mean as we think further out? I know you've given some longer-term guidance, but something people are always thinking about.

Yes. Look, I'll go back for a second. I've said this a few times at various points. We built the ACS business because it was a utility that allowed us to source better assets. First and foremost, right, the ability to understand what's going on in the debt markets, in the equity markets in a better way, allowed us to finance our private equity portfolio, better allowed us to provide better financing solutions to companies because it allowed us to speak for whole transactions when we may not have wanted the entirety of the transaction for our own balance sheet. And so having those capabilities were very, very valuable. And it's part of the reason why we've been able to do what we've done is because we had those capabilities.

Secondly, it's been an amazing tool for us to be able to get closer to our clients. In addition to just being able to provide periodic products, now we have a reason to be touching our clients on an almost daily basis, certainly many of our clients and even start to access market participants that weren't historical clients of Apollo, where we now have interesting things to be transacting with them on a very regular basis.

I'd say last on the list was we can do all these things and find ways to make some incremental revenues along the way. And so that's been the value proposition along the way. But it really has been in that order. Now I know we try to sort of give guidance over the years.

Fortunately, for us, as we've scaled this business, this ACS activity, it has mirrored the growth in our business overall. So as we've added capabilities across asset classes, across sectors, we've been able to be more effective in syndicating and marketing more and more product that way, which has given us a breadth and diversity there in ACS.

And so our ACS revenues now represent hundreds and hundreds of transactions in any given year. And so I think it's without sort of saying anything beyond the public guidance we've given, this is an incredibly important part of what we do and will continue to be because of the skills and tools that it brings Apollo.

And I really do believe we have a differentiated utility inside of Apollo that nobody else has built the capabilities and strength and caliber of like the boutique investment bank, if you will, that we have inside of Apollo.

Got it. Maybe moving on to capital formation and kind of the market evolution. So starting on the capital side, thinking about fundraising, the institutional channel has been a pretty big source of strength for you guys. Talk a bit about what's driving that? And where are you seeing the strongest demand from the LP side?

Yes. Look, we're having just a banner here on the institutional side. Really across the board, we raised a bunch of hybrid capital earlier this year. We are continuously in the market with a variety of credit products. I think most folks know, we are in market now with our flagship private equity product. All of those fundraisers have been going quite well.

There is massive institutional capital demand for private assets right now. Even on the private equity side, where you have heard about certainly the troubles in the private equity market in general have been well publicized. Institutional clients are not pulling away from private equity, they're just tending to now go back to a little bit of the level of selectivity that they had maybe in years or decades past.

Look, to be honest, right, the last 15-plus years allowed a lot of managers to grow in scale pretty dramatically. A lot of new managers to come out of the wood work, some of which have been great stewards of capital, others of which you're probably looking back at the question. And it will -- you will watch and see many of those managers start to shrink back down or go away. It takes a while for that to work its way through the private equity system. But I have no doubt as to institutional capital for private equity for years to come. But more broadly than zooming out from private equity, yes, lots of institutional demand for private equity. I mean, for private capital across a variety of products.

You mentioned Fund XI. So you're currently in the market with that. Just curious, especially given what you just said about private equity. Wondering if there's any update you can give on that one in particular? Any LP feedback you've received thus far? You mentioned people are being more selective. So how are they looking at you?

Yes. So we announced in our last quarterly earnings, we had our first close. We launched in January with Fund XI. We had our first close last month. We announced $12 billion so far. And feeling very good about our path to our target over the course of the remainder of this year and into the first half of next year.

I would say our strategy is certainly resonating with investors, having been a little bit more disciplined through the last cycle has allowed us to monetize our investments along the way at a higher pace than much of the industry, our returns for that, call it, '17 to '22 vintage are robust and remaining robust. We're not carrying that portfolio at unrealistic valuations and as a result, that's allowing us to monetize the portfolio in real time as opposed to holding out for hopefully, higher valuations that may come in the future.

And so yes, I'd say we feel cautiously optimistic on the fund raise and everything we've described from a guidance standpoint, it feels like it still remains.

Maybe just digging further out, how do you think about the future of the traditional private equity business? What changes do you see coming for the industry?

Yes. Well, look, I started to allude to it. I do think you will see a squeezing of the number of managers and maybe some of the managers that grew really rapidly over the last decade will have to contract back down as a result of just not being able to return capital or having the investments in growth of your sectors that just turns out we're more dependent on 0% interest rates than they were on anything else. And so I think that will be the natural outcome of that. But looking back to the '08, '09, GFC that took a while. That takes a number of years for that to play through.

Look, I do think you are continuing to see evolution in just private equity and equity in general, whether it comes down to how investments are made, CFO or other structures, I think like every other asset class, the financialization of everything, the ability to break things into risk and return layers and provide more creative financing or capital solutions to different asset classes. I think you're going to continue to see that.

I also think we've started to talk about this concept of owning companies for longer. I mean this concept of -- it sounds a little bit like maybe a decade ago, folks were talking about core private equity. Core private equity was potentially a concept, but that got for lack of a better word, bastardized because folks tended to use it just to pay more for assets, put more leverage on it because they were "more stable assets. "

We see a direction to travel in a different direction where good assets that might be want to be held for longer, why don't you put less leverage on it, more stable, deliver private equity style oversight and an operational improvement, but on a more lower levered capital structure with a certain subset of companies that have potential ownership in staying power for decades to come. And so I think you're going to start seeing just more different flavors of the equity ownership.

Put another way, what is active equity management meant not actively picking stocks per se, but actively owning and managing companies the way private equity actively owns and manages but in a more market-like format, with market level leverage, and something that might be more tradable than traditional private equity. So these are just some of the innovations that I think are coming down the pike.

Got it. So something you're cooking up at a Apollo or just more pontificating on...

We're always cooking at Apollo. We're always cooking at Apollo.

Fair enough. Maybe moving to the fixed income side. Where would you say we are in the fixed income replacement journey? Are you seeing more tangible signs that allocators are rethinking their portfolios like on a first principles basis?

Yes. We are just pulling out a New York Harbor like heading into the Atlantic Ocean, right? It is still early days when it comes to true fixed income replacement, right? The -- I think you're seeing early adopters see the value of what private assets can bring to a fixed income portfolio. But whether that's on the corporate side or the asset-backed side. But it is still, like I said, in the first -- I don't even want to say the second inning, the first inning of what is a massive, massive journey. And -- but the rewards are also massive. The rewards are also massive.

Every time you see another pension fund, or institution talk about TPA or total portfolio solutions. That's another way of thinking about fixed income replacement. How do I stop fixating on asset class by asset class, by sub-asset class and start thinking in terms of factors like risk and return and duration and liquidity and look at all the things that might meet those and how do I triangulate on a formula of different assets that give me that type of set of outcomes that I'm looking for. That's what fixed income replacement is built for.

And as models of private assets become more pervasive, as TPA becomes more pervasive, I think you're just going to see more and more and more of this. So we're really excited about it. I do believe it is -- I mean, it's not going to entirely replace obviously. But even if it captures 10%, right? 15% of the fixed income market, it is a massive, massive TAM. And I feel like we're well on our way to head down that path.

Got it. Let's talk about the wealth business for a second. So I guess first, I think ADS is coming to the end of its tender period for U.S. investors. Just curious, based on what you've seen so far, I'm curious in particular about the mix of U.S. versus onshore, how do you think redemptions are trending over the next few quarters? And on the sales side, what do you think is required to reaccelerate inflows?

Yes. Well, let me take a step back. A lot of ink has been spilled and a lot of stage time has been given, I know, over the last couple of quarters to the private credit, the semi-liquid private credit market. I guess what I'll say there is it's actually not a huge surprise that there was a bit of a slowdown or a backup in this market, right? Enormous amount of capital has been raised over the last few years from the semi-liquid market in private credit. There are times where you would expect to see redemptions, right, i.e., when you're in a credit cycle.

As we started this conversation, we are not in the credit cycle. And so at some point, we suspect the wealth market will start to see. We're not in the credit cycle and that demand will start to reignite. We certainly know we're not in the credit cycle, I mean, we see where credit spreads are. We see the underlying credits we look at. We know institutional capital is actually accelerating into private credit and direct lending. And so there is good reason to believe that the wealth market will start picking back up again.

I do think the system has constructed actually worked largely the way it was supposed to, right? The redemption caps were not a bug. They were a feature of this. I mean there was no magic to 5% a quarter other than the industry convention sort of formulated around, trying to find the right balance between the rights of redeeming investors and the rights of remaining investors and 5% a quarter felt right.

And as far as I can tell, the system is working, right? The system is working and there was an initial spike. It's working its way down. I would imagine over the -- and we are continuing to see that clear itself. Over the next couple of quarters, I would think that starts to turn itself back around again. So that's my time line.

Obviously, this is all conjecture. I have no crystal ball on that, but it does feel like that's the direction that things are moving.

Any color on U.S. versus offshore?

No. Look, they ebb and flow at different times and offshore tends to be a little more volatile or in some cases, a lot more volatile. But at the end of the day, it's responding to the same stimuli just in different orders of magnitude. And so -- but yes, directionally, I think it's all moving in the right direction.

Maybe on the innovation front, so you guys have been busy between market making, daily pricing. I think recently, you announced the partnership with ICE along with the same lines. So let me talk a bit about us -- the good us. Intercontinental Exchange, if anybody is just wondering.

So what do you think the ultimate benefits of these innovations are going to be? What are you trying to accomplish? And at the end of the day, how does Apollo benefit?

Yes. Look, the purpose of focusing on daily pricing, on greater transparency of creating an ICE ID, similar to CUSIP. All of these things is really about trying to recognize that -- we -- there is a massive, massive market opportunity as we and others have talked about as 401(k) starts to open to private assets, as traditional mutual fund long only starts opening to private assets.

Going back to fixed income replacement, as the traditional -- as the fixed income and public equity buckets of institutional investors start opening to private assets. The rationale for why private assets should be part of those portfolios is enormous, right? The public equity markets, for example, right, are growing more concentrated. They represent a smaller and smaller percentage of the GDP of employment, et cetera, et cetera. And what even if you don't believe that private assets deliver excess return, which obviously, I do believe that private assets deliver excess return for every equivalent asset category.

But even if you didn't, just the diversification effects alone, the need to build a more diversified portfolio should lead you towards private assets. I think historically, our industry has taken the position that, great. We have these great private assets. We're originating amazing private assets. So all of those other buckets, you come over here and take these private assets like we're happy to sell to you but you've got to come here.

And I think it's becoming apparent in our dialogues, in our travels, in our discussions with all of these players that it's ultimately incumbent upon us to meet some of those buyers closer to where they are, start to package and create these products in ways that look and smell and feel more like the type of products they're used to buying. And that does involve having things be daily, liquid, having there be more transparency, having an ICE identifier, which provides multiple fields of other information that they can go look at and understand.

And if we do that and do that right, we believe that this will accelerate the opening of that ginormous TAM that we're all as an industry talking about. Now it's interesting because I think a lot of our industry, a lot of our peers are just taking a wait-and-see approach. And that's never really stopped Apollo. When we have conviction about something, we march towards that until facts dictate that we should take a left or a right turn. And that's what we are doing.

And I think you're going to continue to see us drive in that direction. We've made commitments over the course of this year as to what portion of our book is going to be priced on a daily basis. I think that will continue to expand in time. That may or may not lead to certain categories moving from daily pricing to daily liquidity. We are really trying to explore all of these things and seeing what is going to resonate with these potential buyer universes. And what can we do to make these products more understandable to those markets.

Okay. Maybe with a last bit of time, talk a little bit about the Athene. Maybe first, I want to ask you about AMAPs. So you guys have been quite clear about migrating Athene's CLO exposure over to this product. So maybe just for investors who are less familiar, what is AMAP? Can you give us a little color on third-party receptivity? And how are regulators looking at and thinking about this product?

Yes. Yes. So what is AMAPs? AMAPs is, we would say, just the next evolution of a CLO-like product for the market. Just as a quick refresher right, CLOs over the last, call it, 30 years have grown to be a $1.5 trillion product. They're consumed all around the financial system. No surprise, excess spreads have really been squeezed out of that market. But -- what's interesting about CLOs or the way they've been structured and optimized, I would say they've really been built around really optimizing for that top of the capital structure, that AAA piece. They're built to optimize for big money center banks that are looking for AAA paper. That's the fattest tranche of the CLO. It's got very, very tight pricing, which makes the rest of the CLO work very attractively.

We looked at that and have watched that market compress and felt like, well, what if we were able to create an asset category that was not optimized for the AAA but optimized, say, for the single A, where you had which is where insurance companies, credit investors often like to exist. And so we structured an instrument that had that type of structuring.

In addition, we said, well, what if instead of using 100% subinvestment-grade collateral, what if we put much higher quality collateral in the box? And so AMAP thus far has been roughly 50% IG collateral. So improve the underlying credit quality, fatten the parts of the capital stack that are most interesting to credit investors and can we create a very interesting product that way. And so that's what we've done. We've now done 5 issuances of these, about $25 billion.

Our own balance sheet has taken about half of that, meaning third-party investors have taken the other half. It's been a pretty interesting diversified group of buyers who have been buying that. And we think we are in the early days of what -- I mean whether it gets to $1.5 trillion asset class, TBD, we'll check back in 30 years. But it certainly, I think, has a lot of legs to grow.

We're starting to see interesting receptivity from other issuers. We are going open source on the technology of this. So sharing this with other originators of credit because we'd love to see this market develop. We don't obviously have 100% market share in origination. And so we'd love to access other people's MAPs products to the extent there producing MAPs. And so yes, we'll see where this goes.

So the comment or question about on the regulatory side, of course, every step of this journey has been in lockstep with our regulators, making sure they understand the product. And have come along with them, have responded to their feedback and made adjustments along the way as such.

I want to squeeze in a little bit of a multiparter, but with a little bit of time we have left. Just thoughts on increased competition in the industry and how you see Athene's competitive advantage standing up?

And then there's sort of another question on AMAPs. Given what you've observed in the CLO market, investors sort of think about like Athene's long-term spread opportunity. Do you see that perhaps stepping up structurally as AMAP becomes a bigger portion of the whole? Or does it make you more competitive and it sort of gets reinvested in the pricing. So I know there's a lot in there, not a lot of time left.

In my 57 seconds, I'll see what I can do. I would say from a competition standpoint, like I'll just repeat what our CEO, Grant Kvalheim at Athene says all the time, which is the annuity market has always been competitive, right? The fact that some financial players have come in and crowded out some traditional players. This has always been a competitive market, and you have to win based on client service, better products, better pricing, better excess spread delivery. So where we are today, I think, is no different than where we've been at various points over the last couple of decades in the annuity space.

As far as AMAPs affecting spread, we are always on the hunt. I mean, that's, again, the lifeblood of what we do is keep moving the origination boundary, keep coming up with better structural solutions, keep coming up with ways to create excess spread without taking excess risk. AMAPs is one piece of that, but it is not the only piece of that. And yes, of course, our journey, we've seen spread compression just over the last couple of years given the markets in general.

I think we've reached an inflection point. Again, third time I'm saying it, no crystal ball. But it does feel like things are starting to improve, just perhaps because of some of the interesting credits that are going on the Athene book because of AMAPs because of other things. But this is a battleship that moves sort of -- you don't sort of whipsaw up and down. On our balance sheet, things move deliberately and a little bit at a time. So feeling cautiously optimistic there.

Okay. Great. Well, unfortunately, we're out of time. Scott, thanks again. Thanks so much for being here. What a pleasure to have you.

My pleasure. Thank you.

Good morning. My name is Melissa, and I will be your conference operator today. I would like to welcome everyone to Athene's Fixed Income Investor Call. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn the call over to Jeanne Hess, Vice President of External Relations at Athene. Please go ahead.

Thanks, Melissa, and welcome, everyone. We must remind you that today's call may include forward-looking statements and projections, which do not guarantee future events or performance. We do not undertake any duty to revise or update such statements to reflect new information, subsequent events or changes in strategy. Please refer to Athene and Apollo's most recent quarterly and annual reports and other SEC filings for a discussion of the factors that could cause actual results to differ materially from those expressed or implied.

We will be discussing certain non-GAAP measures on this call, which we believe are relevant in assessing the financial performance of the business, and you'll find reconciliations of these metrics within our materials available at ir.athene.com. Additional information on the business and this quarter's results are available in the latest fixed income investor presentation posted this morning to our IR site. There, you will also find our latest corporate structure deck, which provides detailed disclosures on our Bermuda operations.

Joining me today are Grant Kvalheim, CEO; Jim Belardi, Executive Chairman and CIO; and LJ Tanguy, Chief Financial Officer. During today's discussion, Grant will cover our organic growth engine, commitment to transparency and the opportunity ahead. Jim will take us through the asset side of the balance sheet, including year-to-date deployment, and Louis-Jacques will then discuss financials and capital.

With that, I will now turn the call over to Grant.

Thanks, Jeanne, and good morning, everyone. The second quarter for Athene was all about momentum. We generated $22 billion of total inflows, underwritten at target returns while delivering record spread-related earnings. The $22 billion of organic volumes in the quarter were driven by activity across retail, flow reinsurance, funding agreements and new markets. In retail, inflows totaled more than $12 billion in the quarter, the second highest to date, reflecting strong demand for our retirement solutions across all product categories. Fixed index annuities, MYGAs and RILAs, we saw higher volumes quarter-over-quarter with RILA sales reaching a new high with nearly $1 billion in sales. On a year-to-date basis, RILA volumes totaled $1.5 billion, already exceeding total volumes written in 2025 as we continue to envision significant upside in this product category.

In the funding agreement channel, we delivered almost $6 billion of volumes in the second quarter, reflecting issuances across our FABR and FABN programs. We did our first syndicated FABN issuance since last September, given material improvement in our credit spreads. Inflows from flow reinsurance were the second highest on record at almost $4 billion, which were primarily driven by strong volumes from U.S. clients as well as a new product with a new APAC client. Asia remains a target market for Athene given the favorable demographics and the need for retirement savings. Earlier this summer, we announced that Larik Hall joined the company as Head of Athene Japan. His strong track record of building retirement businesses and meaningful experience leading large-scale insurance platforms in the Japanese market makes him exceptionally well-suited to expand Athene's footprint locally.

Since our first transaction with Japanese cedents in 2020, we have reinsured more than $20 billion in assets across 8 transactions, helping insurers manage risk, operate with greater efficiency and innovate in service of policyholders. Overall, we are pleased with the strong momentum at midyear, and we're on pace to achieve 10% spread-related earnings growth, assuming an 11% Alts return and our full year new business volumes target of $85 billion.

The new business we have written year-to-date reflects strong demand for guaranteed income products and our ability to help meet the needs of retirees and the institutions that serve them. As I have said before, we are in the trust business. When individuals invest their hard-earned money with us, they make a long-term commitment. We take very seriously that our first obligation is to meet the promises that we've made to policyholders and to do so in a clear and transparent manner.

This is why we lead in areas like disclosure, and we encourage the industry to do the same. This is also why we believe it is important for the industry to operate on a level playing field. Collectively, it is our job to maintain and preserve trust. For this reason, we are encouraged by the NAIC's recent proposal that takes meaningful steps to address offshore regulatory arbitrage. In this proposal, NAIC leadership has directed the Life RBC working group to develop a capital charge for reserves ceded outside of reciprocal jurisdictions and to modify the life formula to account for business ceded to reinsurers with lower financial strength ratings.

We are also seeing and encouraged by the increased focus by governments, particularly the Caymans, to cleaning things up. We are unwavering in our desire to see the industry operate on a level playing field. Until then, we will continue to make the distinctions between what we do and how others in the industry operate unmistakable. In addition to raising the bar for disclosure and calling for an end to regulatory and capital arbitrage, we remain committed to achieving a ratings upgrade to AA.

As an industry, we have an opportunity to solve the societal need for guaranteed income in retirement. Populations are aging. Annuities offer the unique ability to provide guaranteed income for life, not for 10 years, not for 20 years, but for as long as you live. And the industry has not gotten its rightful share. Part of that is because these products can be overly complex and the benefit annuities provide, including principal protection and tax deferral, are not broadly understood.

When compared to CDs, for an example, annuities offer meaningfully better returns, better liquidity, principal protection and tax deferral. We believe there's a big opportunity to unlock demand across the industry by improving the customer experience for retirees and financial advisers by making the product set easier to understand and access. One way we are pursuing this is by modernizing the buying process to make it simpler. At Athene, nearly 90% of annuity applications are processed electronically and the ones in good order are issued the same day, dramatically improving speed of issuance. We see a future where investments in technology will reduce the time between application and issue to a matter of minutes.

With that, I'll hand it over to Jim.

Thanks, Grant, and hello, everyone. I'd like to offer perspective on what we're seeing in terms of asset deployment opportunities across our portfolio as well as how we think about affiliate assets. In the first half of the year, we invested nearly $70 billion. Within this activity, there is more than $40 billion of proprietary investment-grade credit directly originated by Apollo. These assets came with an attractive excess spread of approximately 180 basis points above comparably rated public corporate benchmarks, driving our ability to produce profitable growth. The most attractive opportunities for deployment year-to-date were in asset-backed securities, mortgage loans and corporates. First, asset-backed purchases accounted for 30% of the total and included $8.5 billion across 3 vintages of AMAPs. In comparison to CLOs, the AMAPs construction has a thicker equity tranche while still being approximately 85% investment grade.

And while CLOs are almost entirely comprised of single B broadly syndicated loans, the underlying collateral in AMAPs is significantly more diverse and approximately 50% investment grade. The most recent AMAPs issuance came to market with 4 public investment-grade ratings from Moody's, S&P, Fitch and KBRA. In addition, we converted the private letter ratings on 2 earlier issues to public. In its June 30 report on AMAPs, Moody's highlighted diversification as a key credit strength. The report also noted the identified underlying portfolio's largest single obligor is expected to comprise less than 5% of total assets and the largest industry sector around 13%. According to Moody's, this broad diversification mitigates idiosyncratic risk.

With each AMAPs vintage, we invest less and syndicate more. We expect our AMAPs holdings to continue to increase over the coming months and replace what we would have otherwise invested in CLOs on the margin. CLOs have become commoditized and over the last 18 months, Athene has significantly reduced its allocation by nearly 40% on a gross basis. Mortgage loans represented 30% of year-to-date deployment with a higher allocation to CMLs that included $9 billion of loan purchased from Apollo Commercial Real Estate Finance, or ARI. As a reminder, this transaction was a unique opportunity to source commercial loans that we know very well with attractive yields and conservative LTVs. All in, these assets offer excess spread in size for many credits we already own pieces of or know versus new issue CMLs today.

Finally, in addition to mortgage loans and ABS, we also purchased Corporates and Treasuries, which represented 40% of our total, consistent with our conservative posture. The origination pipeline for the remainder of the year is robust and reflects the wave of investment in the industrial renaissance that needs to be financed. Hyperscalers and tech issuers are accessing both the public and private investment-grade credit markets in scale. And through our alignment with Apollo, we have access to the full spectrum.

When evaluating opportunities in AI infrastructure financing, Athene invests primarily in secured investment-grade debt. The underlying credit exposure is predominantly to hyperscaler and semiconductor companies, which are large investment-grade businesses with established track records of cash flow generation that predate the current AI cycle. Athene incorporates counterparty and other risk limits when evaluating debt used to finance AI infrastructure, recognizing that counterparties and investment structures across the sector present distinct risk profiles. This includes considerations for issuer concentration across the sector as well as construction and operational risks.

As Grant mentioned earlier, industry-leading disclosure is one of the ways we differentiate ourselves in the marketplace. Our dedicated presentation on affiliate or related party assets was first published a year ago last August and updated in May. We remain the only company to disclose this level of detail on the topic. While the label will sound technical, the concept is simple. In most cases, the labels apply because Apollo manages a legal entity that issued investment-grade debt secured by unaffiliated assets. Apollo does not own the underlying business, it manages the structure, which is what makes these assets secured. Asset-backed financing, which is extended to investment-grade companies, provides us with additional control over the sourcing, selection, documentation and servicing.

As of year-end, 13% or $49 billion of Athene's gross invested assets have the classification of related parties. 60% is secured debt issued by an entity managed by Apollo, but with unaffiliated underlying collateral or borrowers. These assets are primarily investment grade, typically with significant third-party ownership that validates the attractiveness of the assets. An example of this is AMAPs. 35% is equity in an affiliate or an Apollo fund with significant third-party participation. The majority of this category is Apollo Aligned Alternatives, AAA, a pooled investment vehicle with 43% third-party ownership. Importantly, historical impairments on Athene's related party assets have been de minimis at 2 basis points over the last 5 years compared to 10 basis points for all other assets. These are some of our favorite assets because we have deeper perspective on the underwriting and relative value.

I'll now turn it over to LJ to cover our strong financial results and capital position.

Thank you, Jim, and good morning, everyone. We delivered another strong quarter of financial results that reflect the momentum in the business and our ability to originate new organic volumes in line with our long-term ROE targets and historical averages. Looking ahead to the second half, we expect to continue writing the good business we want and are maintaining our full year target of 10% SRE growth, assuming an 11% return.

Turning to our financial performance. Strong net organic growth drove spread-related earnings to $877 million in the second quarter, a new record. Second quarter net spread improved to 114 basis points from the 97 basis points in the first quarter. SRE included a 9% return on Athene's Alts portfolio, a sequential quarter improvement due to a strong performance by the AAA, along with appreciation at Athora. Going forward, we expect further gains in organic growth and returns at Athora as the peak integration progresses and the asset portfolio is optimized. When considering our 11% return expectation on the alternatives portfolio, second quarter net spread would have been 10 basis points higher. Adjusting for this, the net spread is in line with the 120 to 125 basis points outlook that we provided for the year.

On a core basis, the net spread improvement resulted from a rising fixed income yield as we continue to source attractive investment-grade assets, including the commercial mortgage portfolio we acquired from ARI, as Jim mentioned earlier, along with lower expenses and interest cost. Partially offsetting these positives was the lumpy asset roll-off from the previously announced Intel repayment, along with the normal course rise in cost of funds as the portfolio continues seasoning into the prevailing rate environment. Importantly, we recognized a gross realized gain of almost $700 million within GAAP results or about $400 million net of NCI and taxes due to the Intel repayment, which also benefited capital.

Our capital position remained robust as of June 30 with $37 billion of gross regulatory capital. Total deployable capital was $6.1 billion, which includes excess equity capital, untapped leverage capacity and available undrawn capital at ACRA. Our sidecars are key to our business model, and we plan to continue to use this on-demand long-term equity capital provided by third-party investors as an efficient way to fund growth while maintaining balance sheet strength. Excess equity capital was $1.4 billion as of June 30 compared to $1.7 billion as of March 31. As Grant mentioned earlier, retail volumes of $12 billion represented the second highest quarter on record, and we allocated the capital required to support it.

Last week, we enhanced our balance sheet by successfully raising $1 billion of 10-year senior debt at 155 basis points over Treasuries to help fund future growth. We upsized from initial expectations given strong demand from a high-quality order book. We intend to continue accessing the capital markets to help fund or prefund growth while observing the upper limit of our adjusted leverage ratio.

In addition to our strong capital position, we had nearly $80 billion of available liquidity as of June 30, which includes cash and equivalents, highly liquid assets, committed repo lines, the holding company credit facility as well as the liquidity facility plus untapped capacity at the FHLB. We are one of the few companies that have amassed about $35 billion in cash, Treasuries and agencies, positioning us flexibly to be opportunistic amid a tight market backdrop.

As Jeanne mentioned earlier, we recently published the fourth annual update of our corporate structure deck, which provides detailed disclosures on where capital, assets and liabilities reside across our structure, including Bermuda. We are often asked why we operate in Bermuda. The answer is simple. It provides access to third-party capital that supports growth and long-term commitments to policyholders. Importantly, Bermuda is recognized as a reciprocal or equivalent jurisdiction by U.S. and European regulators. That means capital adequacy is measured through established risk-based capital frameworks, regulatory standards and supervisory review by the Bermuda Monetary Authority. Reciprocity also means transparency with Athene's primary U.S. regulator in Iowa, maintaining full access to detailed reporting and oversight.

Thanks in part to the invested capital we access in Bermuda, our policyholders benefit from the $37 billion of regulatory capital across our business and ample excess capital and liquidity supporting the promises we make to them. This policyholder-first mindset is embedded in Athene's culture of risk discipline where risk management is embedded into every core function of the business. In the near term, we intend to publish our eighth annual asset stress test, a continuation of our regular IR programming.

I'll now hand the call back to the operator and open up for any questions.

[Operator Instructions] Our first question comes from the line of Peter Troisi with Barclays.

You mentioned the large gain on the Intel Fabs asset in the quarter. So just curious if that gain was captured in the $877 million of SRE this quarter.

Right. Let me take that. This is LJ. So just a reminder, SRE is an accrual metric. In some way, it's recognizing the running accrual value of our assets net of cost of funds. So SRE in effect is removing, out of GAAP earnings, the volatility from unrealized assets carried at fair value into income and the asymmetric accounting we may have on the liability side. So SRE does not account for realized P&L and unrealized P&L. So in the case of Intel, to your question, the prepayment generated $700 million of gross GAAP income, but that did not flow into SRE. It, however, was accretive to capital. It was accretive to stat capital.

Yes. That makes sense. Makes the 22% increase in SRE this quarter even that stronger. My second question was just on ratings. I think that the management team has talked about getting second or third ratings on securities that only have, say, 1 or 2 ratings now. So can you talk a little bit about progress that you've made there?

It's a work in process. I mean, I think Jim mentioned the evolution of going from private to public on AMAPs, and we're in process in some of the larger private transactions, but I couldn't give you percentages.

Our next question comes from the line of Ryan Krueger with KBW.

I had a question about the retail annuity market. You pulled back some in the first quarter. I think you and others cited elevated competition. You definitely leaned in more in the second quarter. How would you characterize what led to the change in the attractiveness of the market going from the first to the second quarter? Was it more changes in the competitive environment or better asset opportunities or maybe some combination?

Yes. Thanks, Ryan. I think it's the latter. It's some combination. We did launch some new products. We updated our RILA and that launched in the quarter. That was helpful. We brought out a new FIA in the IMO channel, Aviator, and that's off to a good start. We did have better asset opportunities. As Jim mentioned, we think we're looking at a historic pipeline. So it was the case, and I think you need to be nuanced by channel, but we were much better positioned in the bank and the broker-dealer channel in the second quarter. Still the case that in the IMO channel, particularly in MYGAs in the IMO channel, it's extremely competitive. But we felt very good about our positioning across channels in the second quarter.

And just a quick follow-up on RILA. I think it's taken a while to gain more shelf space in that market, but you seem to be making a lot more progress now. I guess what do you think is leading to that? Is it just the long kind of blocking and tackling of getting on the shelves? And do you see the momentum continuing from here?

I think it's some of that, and we do see the momentum continuing. We still need access to some of the bigger distribution outlets. And we've had a couple of big wins. They're not public yet, but we'll be going live in a couple of big distributors here in the next couple of months that we're very excited about. So it sells primarily in the BD channel, and a lot of those relationships are relatively new for us. So you don't always start with your full product suite, but we got a lot of focus on RILA. We enhanced our wholesalers. We hired a number of new wholesalers at the beginning of the year to focus specifically on the BD channel. And I think all of those factors are paying off.

Our next question comes from the line of Patrick Davitt with Autonomous Research.

I think you stole my thunder a bit in your prepared remarks on this, but a prominent think this week about the big announcement NVIDIA financing joint venture and is picking on you and Athene, Apollo and Athene specifically, and putting out a flow chart suggesting that Athene annuity holders will be financing all that risk through AMAPs. I think AMAPs is only 3% of your portfolio. So that alone suggests this argument is probably off base. But I'd be curious to get your thoughts on how much exposure through a deal like NVIDIA AMAPs could have? And then more broadly, take that as an opportunity to expand on how you're managing the broader exposure to data centers and the AI build-out given Apollo is clearly planning to do a lot more there.

I think, look, we've been pretty vocal about AMAPs is a CLO replacement. It's a better version of CLO. We talked about the metrics during my script, thicker equity tranche, 85% investment grade compared to CLOs. So it's a better mousetrap. We're proud to partner with Apollo on a lot of noteworthy, highly profiled, high publicity transactions. I mean, Athene has anchored multiple of those with Apollo this year, just to name a few, Paramount, Broadcom, we mentioned the commercial real estate earlier, Linde, Valor, MidCap. There's 2 large deals with our warehouse financing entity, Apollo's Atlas. These are noteworthy transactions in the news, and I mentioned the industrial renaissance. These are all consistent with being front and center and helping finance that.

We're sticking to our metrics on AMAPs and the high-quality collateral that it has. So I wouldn't be worried about any cross pollution on these from what you just mentioned. Plus we have guardrails in place for AMAPs in working with our regulators. That's been a big issue for them as well. So there are guardrails in place that prohibit the creation of any direct or indirect circularity via the AMAPs structure. For example, funds that have received investments from one AMAPs are not allowed to invest in any AMAPs vintages as well as against cross-pollination, meaning one AMAPs is not allowed to invest in equity debt of another AMAPs. And we're partnered at the hip with the regulators on those safeguards.

I would just add, Patrick, I mean, we have single name limits for all issuers. And when you think about some of these AI infrastructure deals, the ones that we've been most prominent in are relatively short-term deals. A lot of them are taken directly, not through AMAPs. So yes, I saw the chart you're referring to. I think it's a bit of hyperventilating and not really based in reality.

[Operator Instructions] Our next question comes from the line of Wilma Burdis with Raymond James.

Can you talk about the fluctuation in other spread products, which went from $1.3 billion last quarter to $300 million this quarter? And what are the drivers there?

Is that a reference to new markets? Look, it's just a new business. These are relatively newer businesses, start-up in nature. I think you should expect that there'll be more volatility in volumes quarter-to-quarter as we kind of get those things up and running. But we said at the beginning of the year that we thought we'd generate $5 billion over the course of this year, and we still feel confident in that number.

Yes, we did a big deal in the first quarter, which was a new transaction type for us in the stable value area, and it didn't replicate in the second quarter again. So there's just kind of -- there'll be lumpiness as these things are getting up and running. We think things are going great. Really proud of how much progress we've made in the structured settlements area. I think we're sort of the second largest provider year-to-date there. So feeling good about the initiatives and thinking there's upside, but it will be lumpy quarter-to-quarter.

Okay. And then this is sort of a broad question, but maybe you can talk a little bit about we saw that you published the more recent just consolidated capital numbers across the entities, and there's been quite a few different short reports or whatever you want to call it, that just discuss this topic. So just kind of curious, I would love to hear an overview.

So we've been very transparent with respect to our excess capital and our RBC excess over 400 RBC. So I don't know if you make reference to the various decks that we published recently. I mean, we always lean towards more transparency and more focus into what we can provide publicly in terms of the asset type, the details of our asset landscape and where it's domiciled either on AHL's balance sheet or Bermuda. As it relates to our capital base, we have effectively a large excess capital base. We have capacity to redeploy. We tapped the market last week, as I said, to the tune of $1 billion, where initially the plan was considering $500 million. So that was an opportunistic move for us to prefund for growth for the remaining of the year and next year. I think we're in a very good place. Grant, do you want to add anything?

That covers it. Does that address your question, Wilma?

Yes.

Our next question comes from the line of Tracy Benguigui with Wolfe Research.

I would like to touch on your current risk transfer appetite. You've already done deals where you keep the investment spread risk and retrocede the biometric risk. What is your appetite to apply that same approach to a long-term care block?

I mean, we've looked at it. We haven't looked at anything recently. The economics just haven't made sense to us. But if we could convert a long-term care block to something like a kind of known spread for a known period of time, we'd be willing to look at it. But it just hasn't been anything that made sense to us. We've seen some transactions occur in the marketplace, and we've looked at them. But I would say it fits in the -- we look at everything inorganically, just long-term care. We've looked at the universal life with secondary. We've looked at more exotic liability types.

But it is the case as it has been for quite some time that we don't like the -- the pricing at which inorganic deals are trading is below the price and the returns we can get on originating organic business, and that seems inverted to us. It seems like -- because there's always unknowns when you do inorganic business, they ought to be underwritten to higher returns to account for the unknowns that you learn about after you own it. And that is not the current case in the inorganic space, which is why you see us not doing anything there. We look at everything, but we're not transacting, because others are willing to pay higher prices.

Okay. And I'm curious then what is the universe of reinsurers that may be willing to do these retrocessions?

That's not for me to comment on.

Our next question comes from the line of Taylor Kraemer with Aegon Asset Management.

My first question was on the residential mortgage loan portfolio. It looked like there was some deterioration in the delinquencies and nonaccruals. Just curious if you can comment on what's causing the increase, how widespread those issues are? And maybe if you can give some color on the average LTV of the troubled loans, that would be helpful as well.

On some of the specifics, we probably have to get back to you on, but yes, we focus on it. We think we have a high-quality portfolio. It's almost all RMLs 1s and 2s. There have been some delinquencies, but in the scope of a $400-plus billion balance sheet, that's to be expected and a very small percentage of the total. So I don't think anything has changed. Our underwriting rigor as has been. But there have been a couple of missteps, but nothing sizable that would give us worry. But we can give you the precise LTVs of the problems offline.

Okay. That would be helpful. Next question was just on the office CRE exposure increasing again. Just curious, is this just driven by the ARI transaction? Or are you guys also looking to grow your office CRE exposure organically again? And if the latter, I'm just curious kind of what you're seeing that gives you comfort to kind of step back into the market.

Well, we're paid to look across sectors and see what's cheap, weigh in on things that are cheap and pretty protected. No, we don't have a concerted strategy to increase our office exposure. If there are one-off opportunities that we think make sense and we think that we're secured enough, then we'll be serious about it. But we're not trying to grow our office portfolio. And in fact, any time we've done a deep underwriting position by position of our CML portfolio, one conclusion that we come to every single time is happy we're not in the equity. And that's still the case. But even in the debt on some of these office things, we don't want. But when there's individual positions that can make sense for us given some downside protection, then we'll look at it.

I appreciate that. Makes sense. Last question is just on the desire to get to the AA rating. I guess what do you guys need to do to get there? Is it just simply about a matter of time? Or I mean, do you need to make an acquisition to diversify your liabilities or geographic risk profile to get there? I guess, how do you think about kind of making that happen with an acquisition versus simply just kind of going about how you've been operating historically?

Yes, Grant, I'll start with that one. Look, we've been running the company to at least AA standards for several years. So our desire to have AA rating is just get what we deserve. If you run the company to a certain standard, you should have that. Look, not having a AA from the 3 major rating agencies does not stop us from doing anything we want to do. But everything we do would probably be cheaper and easier with a AA. We consistently have AA or better capital levels, the most important single factor in the rating agencies.

The thing that's holding us back is diversification. The rating agencies want us to diversify in businesses that we don't want to go into. But the prospects to grow our non-U.S. business, as we're doing in Japan, grow our exposure in Europe is a good thing for them and new markets. As that grows, those are all diversifiers that the rating agencies welcome and would see as a real positive. But yes, we're frustrated by not being AA when we think we should be right now, but we're going to keep at it because I just want to get what we deserve.

Our next question comes from the line of Jason Domina with Longfellow Investment Management.

I was hoping we could get an update as of the second quarter as to where levered lending is in the overall book. And if there are any plans potentially to report on a quarterly basis where private credit is within the Athene portfolio as other competitors are doing?

Well, levered lending, I mean, I'll just give you the stat. I mean, our high yield to invested assets percentage is 5% to 6%. So no change there. We're underweight high yield. We're underweight credit risk in general. Historically and even currently, we'd rather take complexity and structure risk than more credit risk, and that remains the case today, and I don't see that changing any time. So I don't think there's anything to report there. On the amount of private credit we have in the book, we could talk about -- I don't know what we have posted on that, but our posting is the most transparent of any company in the business. So I think you can find what you need.

Yes. I'll help out there, Jim. So we said 20% is private credit. We've also said we wish we had more of it, because those are the best origination that we get from Apollo. And as Jim mentioned, the impairments we've had on that portfolio are quite de minimis. So we report regularly on that. I don't know who you're referring to in terms of quarterly reporting, but I'm not aware of that. So I'd be interested to know who you think is doing that.

And can I just remind the fact that in last quarter, we published a full deck, we call that the asset compendium, which provides a deep dive and a full transparency on asset type. So that's available, and we led the industry. I don't believe anybody has actually published this level of transparency.

Right. No, I get all that. But that compendium was -- those numbers, if I recall, was as of year-end '25. And there are several competitors that are producing where their levels are each quarter. So my only question is really, would you do it regularly each quarter as to where those levels are? That's really just all the question is about.

We'll take it under advisement. I don't know what our plan is. I mean I would imagine that as we've done with other decks that we put out, we've tended to update them annually. I don't know that we're going to go to a quarterly format.

Our next question comes from the line of [ Steve Sun ] with JPMorgan.

My first question, just a little bit more detail on your AMAPs investments. And what is your total investment so far? And do you guys only invest in the highest tranche or the A tranche? Or do you also invest in the Bs and the Cs? And any color there would be helpful.

Sure. Athene's AMAPs exposure as of June 30 is $13 billion on a gross basis, $10 billion on a net basis. With each AMAPs vintage, Athene invests less and syndicates more. Third-party capital is a key ingredient in our strategy, and it reflects the demand for the same assets we're buying by others. And again, AMAPs are our CLO replacement strategy, and you'll see our AMAPs investments grow over time, but in a prudent way. And essentially, it's all investment grade. When there is the equity or even noninvestment-grade pieces of those, that typically would reside in our AAA entity, Apollo Aligned Alternatives, which is half owned -- close to half owned by third parties.

So which means that you also invest down to the B tranche from what you're saying, not limited to A tranche. The B tranche is still to be rated as still investment grade?

Yes. Yes. The bulk of what -- most everything that Athene is buying is investment grade on the AMAPs, but there are smaller slivers of noninvestment grade and/or equity. And when placing those would be AAA, our entity that houses our alternatives would be the buyer of those if we decided to do that.

And 75% of the AMAPs structure is the A-rated tranche.

So are you buying the [indiscernible] proportionate to that 75%?

No, we don't buy the full A tranche, if that's the question.

No, we're not buying the full -- I'm just saying, of the capital stack, we're overwhelmingly in the A tranche, because it's 75% of the capital stack. We're not necessarily buying a vertical strip of the capital structure either.

What Jim is saying is we have some de minimis exposure to the equity because AAA buys the equity, and we own roughly half of AAA. So on a look-through basis, we have some exposure to the equity, but Athene is buying primarily the A tranche and the BBB tranche.

Okay. My second question is on your funding liability side, really on your funding agreement backed repo, which are backed by collateral. So you mentioned you guys put the policyholder interest at top, look at the 60. But how do you address the criticism your FABR are backed by collateral. So those collaterals basically sit higher than the policyholders. If you're in trouble, the policyholders really have no access and the basic policyholders are subordinated. So how do you address that criticism?

Policyholders subordinated to whom?

Backed repo, which are collateralized. So if you are in trouble, the collaterals belong to the counterparties of funding agreement backed repo counterparties, they don't belong to the policyholders. The policyholders have no access to that collateral if you are in trouble, of course.

We conduct cash flow testing as required by the regulators for every legal entity on a quarterly basis. It excludes anything that's pledged. It assumes we actually have no equity. So it just looks at the cash flow of our assets, unencumbered assets and says, can we pay off all liabilities in various interest rate scenarios. And we pass every scenario in every legal entity every quarter by quite a bit of margin.

Our next question comes from the line of Chad Stogel with Spectrum.

First, just a clarification. On Page 12 of the supplement, you show some of the asset mix in the alternatives bucket and I noticed that the equity piece has gone up. It's not a material number relative to your overall sheet, but just that it's gone up materially. Is that AMAPs related?

No, it's not. I can take that. So maybe just to put in relative terms, the performance in the quarter. I think Alts return was 9% annualized in the quarter, and that compares to shy 7% for the rest of the peers, and some of those are laggards. And if you recall, alternatives really represents 5% of Athene's portfolio, and it's mostly senior secured private credit and origination platforms, so not equity better. And those investments are very well diversified. So they are very well-diversed portfolio, the vast majority of which sits in AAA where we have very much third-party investors. The rest of that portfolio is Athene invested into what we call retirement services platforms, which we have Venerable and Athora to just name two.

So the AAA actually has produced in Q2 roughly 11% and is bang on our long-term benchmark. And going forward, what we see is some further gains in organic growth and returns at Athora as the peak integration progresses and the asset portfolio is optimized. So we reaffirm effectively our long-term view of 11% as being a reasonable normalized assumption. And that's effectively the way we look at this portfolio.

And within that, I just see structured equity and other jump from year-end from about 7% to 20%, just so I can classify what that refers to within that investment.

Yes, that's the increase. That's pretty much all it is.

Okay. Got it. Okay. And then just within AMAPs, on the slide deck that you provided a few months ago, there was a comparison, obviously, the CLOs and the advantages. When you referenced that a vast majority or a significant amount of AMAPs is truly investment-grade exposure within the structure, what are some examples of those investment-grade assets that sit within the AMAPs vehicle?

We can get back to you with specific examples of some of the underlying credits, if that's what you're asking.

That's helpful. And then just last on that since it's related. You mentioned you don't necessarily take a vertical slice. Who are typically the buyers of the equity? You said it's -- I mean that would be syndicated. Who would be the largest buyers of the residual piece of something like that?

Existing LPs of Apollo. We haven't disclosed who the buyers are. It's existing Apollo relationships.

I just wanted to expand on -- there was a question earlier about levered lending, and I mentioned our noninvestment grade asset exposure in general, which I said was 5% or 6%. But on specifically levered lending, we have 40 basis points of exposure to levered lending, and software levered lending is 10 basis points of exposure. So de minimis, very low. I just want to make sure that's answered on point. Sorry, go ahead, operator.

Our final question comes from the line of Patrick Davitt with Autonomous Research.

Sorry if I missed this earlier, but I think in the past, you have given a quarter-to-date organic flow number. Are you willing to do that today?

I don't have it off the top of my head. I would say the quarter is going reasonably well. Still seeing good flows in retail. But I don't have that number off the top of my head. I would say we're expecting -- we're about halfway through the year. And obviously, we're about halfway to that $85 billion number. Still confident that we're going to get there and still seeing retail strength in the third quarter.

If I could have a quick follow-up then. There was some concern last week on your relationship with FWD, given news that China was cracking down the use of foreign annuity products. Could you address any exposure to that issue, either through your equity position in FWD and/or annuity flow agreements with FWD?

It's not an issue for us. I mean, as I understand that, it's primarily inside China. We don't operate inside China. The relationship we have with FWD is kind of across the region, but the reinsurance deal that we did with them was in Japan.

Ladies and gentlemen, that concludes the question-and-answer portion of today's call. I'll now turn the floor back to Jeanne Hess for any additional or closing comments.

Thanks, Melissa, and thanks, everyone, for joining us for today's call. If you have any follow-up questions, please don't hesitate to reach out.

Thank you. This does conclude Athene's Fixed Income Investor Call. Please disconnect your lines at this time, and have a wonderful day.

Good morning, and welcome to Apollo Global Management's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] 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 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 in any Apollo fund.

I will now turn the call over to Noah Gunn Global Head of Investor Relations.

Great. Thanks, operator, and welcome again, everyone, to our call. As usual, joining me to discuss our results are Marc Rowan, CEO; Jim Zelter, President; and Martin Kelly, CFO. Earlier this morning, we published our earnings release and financial supplement on the Investor Relations portion of our website. As you can see, our second quarter results demonstrate the momentum we are seeing across our business. We generated record fee-related earnings of $785 million or $1.26 per share and record spread-related earnings of $877 million or $1.41 per share. Combined, these core earnings streams drove total earnings or adjusted net income of $1.3 billion or $2.11 per share.

Across key business drivers, including investment performance, origination and capital formation, these results highlight the tangible execution we're delivering against our business plan and the targets we've set.

I'll now turn it over to Marc.

Thanks, Noah, and good morning. Second quarter was really all about momentum. FRE, as Noah suggested, $785 million 25% year-over-year, 8% quarter-over-quarter management fees 23% year-over-year, 5% quarter-over-quarter. ACS, $277 million, the fifth straight quarter greater than $200 million and as you will hear from Jim and Martin increasingly durable and directly tied to our level of originations. SRE, $877 million on an adjusted basis, 11% at 11%. It added about $76 million, also a record. The results were 5% up quarter-on-quarter, 11% year-over-year on the same basis.

Strong organic growth in line and slightly improved core spreads. In short, we're seeing momentum across the business. As you know, we believe that almost everything starts with origination. Origination here was a very strong quarter, $74 billion. Just to give you some perspective, that does not include [ Broadcom ] the largest origination in our sector ever or a number of others. We account for and record the results when they close, not when they are announced. And so $50 billion of signed and announced in Q2 will benefit coming quarters. The pipeline has never been stronger, reflecting the global industrial renaissance that we've been speaking about. But most importantly, it's coming at consistent spread, 340 basis points over treasuries off an average rating of BBB.

At the end of the day, people are in this asset class for excess return per unit of risk and that is what we need as a principle, that is what our investors need, and that is what we are trying to deliver. The reward for good performance is, of course, more to do capital formation, record for the quarter at $60 billion of organic inflows, $38 billion in Asset Management, $22 billion in Athene. In short, we believe that our '26 growth outlook is on track for FRE and SRE. The trends in the business remain favorable. And it's up to us now to balance the desire for growth while the vast opportunity to invest in our business.

Talk about our business a little bit. Our industry is in the midst of unprecedented change certainly no different than the kind of change we've seen, but coming in a slightly different way. Just for some perspective, Apollo and its peer group in 2008, roughly $40 billion of AUM. Almost all of us were $35 billion of private equity and $5 billion of something else. Today, we're closer to $1.050 trillion, led by the growth for a product set that none of us envisioned when we were back in 2008 investment grade. And we have built a dominant IG origination franchise, supporting the global industrial renaissance, our peers are just now discovering that IG is actually a source of growth.

We've seen this coming, and we're happy to have led them here. The growth in our sector continues to be driven by the need for capital in the global industrial renaissance, the need for yield from retirees directly and indirectly and by the need of investors to take -- find diversification from increasingly crowded and correlated and indexed public markets. Recall that some 10 stocks are nearly 50% of the S&P. And when things go poorly, they go poorly all around. Private markets now offer the kind of diversification that investors used to expect in public markets when there were 8,000 public companies versus the 3,800 public companies we have today.

The future for the industry, I also believe to be increasingly bright. As we've discussed in prior quarters, the entirety of our industry was built from 1 investor, 1 source of demand. This was the alternative bucket of our institutional clients. And today, we have 6 sources of demand. That first plus individuals plus insurance companies, plus the debt and equity bucket of our institutional clients plus traditional asset managers and plus 401(k) and D.C. All of that, I believe, bodes very well for future demand for private assets from a number of new investors, each of which has the opportunity to be the size of the first investor.

I think the thing that we have seen perhaps differently than most of our peer set is we do not believe that, that -- those 5 new investors are coming to us in private markets in the structures that exist. If we want to serve them and increasingly have access to the full TAM that should be available to us, we are going to need to go to them. They have grown up as public market investors. The more that we can bring the origination from the private organs, but the packaging that they expect, the more I believe we will grow the asset class, and we will be more accepted and have greater sources of demand for our product.

What you see going on in our business today is us pursuing this strategy. The changes we've made in estimated daily value, our ICE joint venture, our focus on settlement mechanics and on market making are all efforts to bring us closer to these 5 new buyers. It's not to say the rest of the industry is ignoring this. It's just no 1 is fully committed to what we see as this big trend that is taking place in our industry and will increasingly shape our future. Just a couple of milestones. We went live with estimated daily value, estimated daily NAV on 7/1 for our entirety of our fixed income investment-grade suite of asset products. By 10/1, we expect to have daily pricing for all of our credit assets. That will be quite an accomplishment. Understand that the drive to estimated daily value is very investor friendly. It is very transparent, but it also forces massive change internally. It forces us to digitize. It allows us to put our data in a form that increasingly allows us to take advantage of new technologies, new sources of information, new sources of efficiency. So this is a win-win. It's good for investors, and this is good for us.

The partnership that we've announced with ICE is also driving change. It is now live. There are more than 2,000 ICE IDs. We expect the entirety of our product set, debt and equity over time to have ICE IDs. We expect ICE IDs will do what QSIPs have done for public credit. We are increasingly attaching data and data fields to these ICE IDs and ultimately, this will help in settlement and in market making. In Market Making, greater liquidity has expanded the opportunity set for every asset class that we have seen anywhere around the globe. We are now more than $30 billion treated.

Volume continues to double, and we see really strong growth. People want to trade these assets, but they've never been in a form where liquidity has been available in a fair way at a fair price and a reasonable amount of time to settle every day this franchise gets better and improves. The kinds of the things that I've talked about in market making, estimated daily value settlement are a piece of what we need to do to serve these 5 new asset classes. Regulatory and transparency are another piece of this, particularly in the insurance industry we have been leading regulatory change, more disclosure, more transparency, no guess work required. Full transparency on related party affiliate and Apollo originated assets, full transparency on top holdings with case studies, full transparency with credit quality and ratings granularly dissected.

We believe transparency helps all constituents grow. We have nothing but an amazing opportunity in retirement. The world is getting older. The world is in greater need of retirement income. We, the industry, have an opportunity to serve it and to grow through 2050. Very few industries can look out and see a demographic pattern as positive and is shaped just the way we see it and it is our job to maintain and preserve trust. Increasingly, the industry is of the same mindset. Just this past week, the NAIC has put forward proposals to take meaningful steps toward address offshore regulatory arbitrage.

We are also seeing increased focus by new governments, particularly in the Caymans, committed to cleaning up this sort of regulatory arbitrage. Payments has done an unbelievable job for the funds industry and does not want to be thought of as a lesser place when it comes to insurance regulatory. And we will wait and see whether they actually move toward the kinds of steps that would grant them reciprocity and eliminate the regulatory arbitrage, which endangers the trust to the entire insurance industry. We are unwavering in our desire to see the industry operate on a level playing field, equal capital for equal risk. As I've mentioned previously, we are pushing hard on AA. We believe we are capitalized for that. It is not that we need it. We want to make the distinction between what we do and many others in our market, unmistakable.

In short, the future that we see is incredibly bright. It is, as we suggested, tied toward origination, but it is also tied to meeting our clients, particularly our new clients, where they are, not where we wish they would be. The steps our industry needs to take will cause profound change in the way we do business and in each of the firms, and I welcome it. I think those firms that address this in the right way and the right time are going to separate themselves from the 95% of the firms in our industry who simply want the world to stop changing until the principles can retire.

Part of this commitment to change and commitment to meeting clients where they are, is to recognize that we also need to change. We confirmed yesterday that we will be opening a new office in Austin, Texas. And unlike a new office that simply how is more of the same, we are increasingly going to use Austin as a place to really focus on change to build the businesses of the future, to build the processes of the future to get access to a workforce that is different than the workforce that is currently the vast majority of our industry. We're excited about what we can achieve there. We're excited about the environment in which we get to operate there. It is also home to some of our strongest LP relationships and 1 of our largest fundraising ecosystems.

In short, second quarter was about momentum, incredibly pleased at how the year is shaping up, embracing and leading and changing and we're planning to win.

With that, I'm going to turn the call over to Jim.

Thanks, Marc. We spend a lot of time thinking about the future of our industry and the change that we've taking place. Historically, the market looked at scaling in private equity or private credit and in particular, private direct lending as the sole signpost for success. When you step back and observe what's going on in private markets and where the industry is heading, there is a common thread forming. The opportunity in private ratings, daily pricing, transparency and market making, all of these forces are working in tandem to massively expand our TAM. To sustain our growth and capture the opportunity ahead, we must remain focused on what's most critical delivering excess return per unit of risk.

Strong investment performance builds that trust and fuels growth over time. Across our platform, we are delivering. In private equity, our differentiated approach has stood out with Fund X generating a 21% net IRR, well ahead of the index of the industry at 14% for the 23 vintage. In hybrid, our hybrid value strategy has generated low to mid-teens returns at inception and is clearly scaling the opportunity set. And our AAA strategy is continuing its exceptional run with positive performance in 45 of the last 46 quarters, including 25 consecutive with low volatility.

Broadly in credit performance remains strong with all major strategies up 7% to 11% over the last 12 months and a mid-hightened investor dialogue, ADS, our nontraded BDC has continued to performed well with an annualized 8% inception to date return versus 4% for the high-yield index. To put the outperformance in perspective, $1 invested in ADS has returned nearly double the safe public high-yield and leveraged loan indexes since inception. Simply put, this outperformance is exactly why investors are attracted to private assets. With respect to origination activity for the second quarter totaled $74 billion, bringing first half volumes to nearly $150 billion and volume over the last 12 months to nearly $320 billion.

Across our activity for the quarter, $68 billion was in debt, comprised basically 75% IG with an average rating of BBB+ and 25% sub-investment grade with an average rating of single B. Consistent with recent quarters, we observed relatively stable spreads across our platform volumes. On our investment-grade origination, we generated excess spread of 280 basis points over treasuries or approximately 200 over comparably rated corporates. On our sub-IG origination, we generated excess spread of 440 basis points over treasuries or approximately 150 basis points over comparably rated corporates.

I'll highlight a few examples that demonstrate the breadth and the leadership of the flywheel we've built. In health care, we provided a EUR 3 billion minority equity financing per buyer through a JV, which will manufacture and produce certain core consumer products. This large flexible financing solutions enables buyer to strengthen this balance sheet while also retaining full operating control over this core business. In Power and Infrastructure, we participated in the $5.3 billion financing in support of Williams Companies development of behind-the-meter gas-fired power projects which will supply dedicated power to meta data centers under long-term take-or-pay contracts. And alongside co-investors, we also committed over $2 billion of capital to acquire 40% interest in Pembina Gas Infrastructure the largest independent gas processing platform in Western Canada.

In the sports ecosystem, we led a structured investment in Pickleball Inc., the new parent company of the PPA Tour and Major League Pickleball creating the largest platform in the fastest-growing sport in the country. This follows recent investments in Atlético de Madrid, Wrexham AFC and MARI and collectively driving billions of origination through our Apollo Sport Capital platform. And finally, as you know, during the quarter, we announced our marquee partnership with Broadcom, where we led a $35 billion financing in support of their new AI XPV platform which will enable significant compute capacity for leading future AI labs. This marks the largest private credit financing ever and demonstrates the core benefit of our flywheel sourcing, structuring, principal investment in syndication.

Unlike anyone else in our industry, we purposely designed and built our business to lead on large-scale opportunities exactly like this. As we've all come to realize the sheer size of the AI infrastructure build-out is unprecedented. Cumulate through the cycle, more than $8 trillion of capital is expected to be invested a staggering sum. We see an enormous opportunity for private capital to finance a portion of this along public capital, and we see ourselves playing a critical role in partnering with the leading firms and providing this flexible scaled solutions to support their needs.

Our market-leading high-grade capital solutions business has now originated over $130 billion across 190 transactions with the majority of the issuance in the last 2 years. If you are a CFO, you need to come to Nine West for a conversation. Having seen several cycles before, we are on the lookout to ensure we are protecting ourselves from underwriting investments with equity-like risk and debt-like returns. This leads us to be highly deliberate in our underwriting focusing on secured investment-grade credit quality, amortizing structures that seek to eliminate residual value risk and thoughtful counterparty selection. The opportunities we pursue to date are emblematic of these important criteria and we expect that to continue.

Alongside the scaling of our origination ecosystem, our ACS business becomes an increasingly important component of the flywheel. In particular, our ability to provide scale solution depends on our ability to have strong syndication network as well. ACS is that connective tissue and continues to expand its capabilities. Over the last 5 years, what was once a small [ SWAT ] team has gone into a comprehensive coverage model. And in the first half alone, we distributed over $30 billion of syndication opportunities up 50% versus the full year of 2025, reflecting the engagement with nearly 1,000 potential buyers for syndication opportunities.

Turning to capital formation. We generated $60 billion of total inflows in the quarter with asset management delivering $38 billion and Athene contributing $22 billion. Inflows from asset management during the quarter were split approximately 70% from credit-oriented strategies and 30% from equity-oriented strategies with contributions across client types and geographies. Our institutional business had an excellent quarter with broad-based strength across hybrid, multicredit asset-backed finance, direct lending, performing credit and flagship private equity. Institutional demand for our AMAPS product remains very strong. And in the second quarter, we completed 2 issuances driving the total AMAPS program to $25 billion in less than 12 months.

In direct lending, we see institutional investors leaning in. And as a result, we pulled forward the fundraising of our turn vintage, we expect -- which we expect to be larger than its $5 billion predecessor. In flagship private equity, we launched Fund XI earlier this year in calendar '25, and we are pleased with the reception in the market thus far and excited to announce that through July, we have surpassed $12 billion. We are seeing strong support across geographies from both new and existing investors with contributions from the institutional and wealth channels. The investor appetite with Fund XI is indicative of the deeper support we're seeing across our largest institutional relationships.

For example, compared to levels observed just a few years ago, our penetration has nearly doubled with our top strategic LP relationships around the globe. Supporting by these strong trends, we expect our institutional business to deliver a record fundraising year. Our Global Wealth business had a solid quarter as well with fundraising totaling $3 billion and despite a softer backdrop, flows continue across semiliquid and drawdown strategies. While ADS has faced similar redemption dynamics of the industry and it's still earn in the current window period, we're seeing a lower rate of requests thus far in Q3 than we saw at this point in 2Q.

Individual investors remain meaningfully underallocated to private markets and we believe the longer-term tide is moving in our favor. We have high conviction this period of time will drive performance dispersion across managers and ultimately provide our franchise with an opportunity to differentiate itself and gain market share.

At Athene, inflows in the quarter totaled $22 billion. In particular, retail and flow insurance had exceptional quarters with inflows of $12 billion and $4 billion, respectively, marking the second highest quarter on record for each segment. With a total of $42 billion in the first half, Athene remains on pace to achieve our $85 billion target for the full year, and continues to cement its vision as the leading retirement services platinum.

In summary, we had a strong quarter across investment performance, origination and capital formation and entering the second half with active pipelines and meaningful momentum across all of our businesses.

With that, I'll turn it over to Martin.

Great. Good morning, everyone, and thank you, Jim. Our second quarter results reflect the sustained momentum, as you've heard that we're seeing across the business and disciplined execution across our long-term objectives. I'll briefly walk through the quarter's financials and the key drivers. In Asset Management, our business delivered another quarter of record earnings, supported by broad-based growth. Fee-related earnings of $785 million marked a new high, up 25% year-over-year and 8% quarter-over-quarter with AUM and fee-generating AUM up 25% and 34%, respectively.

Perpetual Capital continues to underpin that durability and representing 60% of total AUM and 70% of fee-generating AUM. Two drivers of the FRE growth stand out. First, management fees grew 23% year-over-year driven by third-party fundraising across credit and equity strategies, strong capital deployment in both e Ethane and Athora as well as Apollo acquisition of Bridge. Quarter-over-quarter management fee growth reflects an initial contribution from PIK and continued strong third-party credit flows partially offset by lower management fees on ARI as well as realization activity.

Looking ahead, we're armed with $82 billion of dry powder, the most we've ever had, including $62 billion of future management fee potential. Approximately 70% of which is in credit. The earnings impact of this capital once deployed, is approximately $400 million of annual management fee income. And second, capital solutions fees of $277 million, as you heard, reached a new high with contributions from over 100 discrete transactions across many underlying businesses underscoring the growing diversity and durability of this revenue stream.

Activity was split roughly 2/3 credit and 1/3 equity, consistent with the mix we've observed in recent years. Capital Solutions revenue is driven by origination activity, which is growing as a result of the increasing scale of cross-sell trillion dollar-plus platform. Activity now runs across virtually every part in our credit and equity platform not concentrated in 1 or 2 businesses and increasingly expand geographies. That breadth is a large part of why we produced 5 consecutive quarters above $200 million of fee income even as the mix of underlying activity shifts from 1 quarter to another.

And when you look at how this revenue has moved over the past 3 years, our capital solutions fees have been among the most stable in the industry. Supported by broadened origination across our footprint, Capital Solutions increasingly behaves like a recurring franchise-level revenue stream in its own right, 1 that we expect to keep broadening and deepening from here. It's worth noting that we are starting to see financing solutions that fund and recognize fees over multiple quarters or years rather than all upfront. In the case of Broadcom, for example, we'll record the originating funding volume and recognize the associated fee revenue as the $35 billion is drawn down over a multi-quarter time frame, when they're weighting towards the fourth quarter of this year and the first 3 quarters of next year.

Fee-related expenses grew 19% year-over-year in the quarter, reflecting the addition of Bridge and continued investment in the firm's long-term priorities. Our FRE margin reached 58.5%, up roughly 80 basis points sequentially and 120 basis points year-over-year. Positive operating leverage from record fee-related revenue against measured expense investment. Year-to-date margin expansion of about 90 basis points is tracking in line with our baseline expectation of roughly 100 basis points for the full year 2026. Importantly, forward earnings indicators, including our capital formation and origination pipelines, committed capital not yet earning management fees and signed originations with future syndication fees are all very strong and continue to build, providing confidence that we will hit our 20% plus FRE growth outlook for the year as well as establishing embedded momentum for 2027.

Moving to Retirement Services. A key enabler of the flywheel is retirement services, where we generated a record $877 million of SRE this quarter. Ethane's gross invested assets grew by 14% year-over-year to $414 billion. Year-to-date, inflows have been very strong at $42 billion and we've continued to originate new organic business in line with our long-term ROE and historical average targets. The reported net spread was 114 basis points versus 97 basis points last quarter and adjusting to our 11% long-term return expectation on the alternatives portfolio, net spread would have been 10 basis points higher and in line with our previously communicated full year outlook of 120 to 125 basis points. The sequential improvement in the alternatives performance was driven by AAA along with better results at Athora where we expect further gains in organic growth and returns as we move deeper into the PIK integration and optimize the asset portfolio.

On a core basis, the improvement in net spread was driven by a rising fixed income yield as we continue to source attractive investment-grade assets, including the commercial mortgage portfolio we acquired from ARI combined with lower expenses and interest costs. These positives were partly offset by lumpier asset roll-off from the previously announced Intel repayment along with the normal course raising cost of funds as the portfolio continues seasoning. Regarding Intel itself, we recognized an almost $700 million realized gain within Athene's GAAP results, which also benefited capital. As we head into the back half of 2026, we expect Athene will continue performing as expected, and we are maintaining our full year target of 10% SRE growth, assuming an 11% bolt return.

Finally, turning to capital. Our approach remains consistent. We intend to grow our dividend by roughly half the rate of FRE growth over time, and we use share repurchases both to offset equity-based compensation and opportunistically when we see dislocation in our stock price. Consistent with that, we repurchased approximately $100 million of shares this quarter. Over the last 12 months, we've returned $1.6 billion to shareholders through dividends and buybacks combined while allocating nearly $500 million to strategic growth initiatives, including an investment in Athora earlier this year.

With that, I'll hand the call back to the operator. We appreciate your time, and we welcome your questions.

[Operator Instructions]

Our first question is coming from Steven Chubak of Wolfe Research.

So I wanted to start just on the transaction fee outlook. I was hoping to get your perspective just on the durability of the ACS fees given the strong momentum at the start of the year, it looks like for the first half, you're already run rating above your 5-year revenue target that you laid out at Investor Day, so roughly 3 years ahead of schedule. And just given a lot of the comments on the call, whether it's a staggering some of the money needed to finance the global industrial renaissance, the strong origination pipelines, the differentiated high-grade capital solution. How does all of that collectively speak to your confidence level in terms of your ability to continue to grow off the current base? And how do you envisage the revenue potential of this business over the medium to long term? .

This is Jim. Let me start off real quickly and then I'll pass over to Martin for more detail. But I think you've hit on something that we think is a theme. We talked about this origination focus. We've talked about the flywheel and now we're really seeing it hit in multiple stages. And I think what you're seeing, Broadcom is a good example where I think we've shown the discipline and the strength of our platform and be very thoughtful about the long term -- I don't want to say predictability, but the long-term durability of that stream. The other comment that I would make is the marketplace, I think, in aggregate is making a mistake by just thinking global industrial renaissance is AI and data centers.

As we're sitting here in August of '26, I suspect 12 to 24 months from now, we will be talking about the onshoring re-onshoring of industrial basis of the U.S. defense, more energy transition and so yes, I think what we're seeing is the durability, the breadth and the power of incumbency in this business, which are all themes we've talked about before, but you've hit on a very critical point that was an idea 6, 7 years ago, came into becoming became a robust business. And now it's really certainly durable and sustainable over time. .

Yes. And I'll just -- I'll add, Steven. Look, we believe that this earnings stream has more value than is generally appreciated. And so we are very focused on making sure we can build a durable base of origination that support it. And if you step back, origination fuels all forms of revenue growth. And so a consequence of origination is management fee growth for the asset manager, it's spread earnings growth for Athene and its ACS earnings growth. And so it's all connected. And so we are every business within the firm is now contributing to the growth of this business by producing origination, which is in part syndicated to third parties. And every new business that we look at is expected to do the same.

And then I would combine that with partnerships with others, banks and other asset managers where we are also sort of creating channels by which we can create originations. So we do think there's upside. At the same time, we're mindful of creating a base that we can invest against, which is high conviction. And so that's sort of how we think about the business. .

The other 2 points I'd add just to pile on, is that if you look at the equity research analysis of the breadth of counterparty sales that these companies need to do, whether it's ships or otherwise, there is successive financing going to occur in several years from now. The second is, we believe in open architecture and the economics of sharing of fees across the ecosystem is going to continue. And finally, I do think that when Marc talks about 1 ecosystem of of clients turning into 5, ACS touches all of those as well. So there's a massive multiplier effect, which you're touching on. And we see -- and again, I think the mistake that folks are making are really thinking this is really only an AI data center opportunity. If you look at our pipeline, I would tell you a very different story.

The next question is coming from Craig Siegenthaler of Bank of America. .

Thanks. Our question is on M&A. Can you update us on the M&A outlook, both at the Apollo corporate level and also at Athene and Athora post the PIC and bridge deals, PIC is helping you accelerate your growth in the retirement business in the U.K., do you see other potential targets like this 1 that help expand the retirement business in Europe and Asia? .

It's Marc. I'll take a shot, and then I'll turn it to Jim. As you know from prior quarters, we have not been big proponents of asset manager M&A. When you look at some of the businesses we've built and for instance, take sports, the magnitude of what we're doing in sports, if you look at what we've announced and the pipeline versus buying, for instance, a sports-focused firm, we just didn't see the mileage we would get. Every 1 of these asset manager purchases is, yes, it can be accretive. Yes, you probably have to pay twice, both to the equity owners and then to the employees.

But most importantly, it gets you more of the same. We're growing so fast from originating good transactions that we debate in a negative way the utility of just more of the same as opposed to using excess capital in our business to diversify the business in adjacencies that will provide recurring fee revenue, whether that is in market making, whether that is in growth in our equity business, whether that is a reinvention of retirement, whether that is a real expansion of lending against private assets. I think you are more likely to see us go in adjacent directions than you are to see us go by buying another asset manager simply to consolidate in given the brain damage associated with people businesses. .

The only thing I would add is consistent with that, what Marc laid out is we find ourselves when we have grown, you can go 2 ways in your business. You can become more siloed or you can be more integrated. We're clearly going to more integrated approach. That's when you see the results of ACS, that provides that example. And by buying something universally they'll want to get siloed, they'll want to control their destiny. So as Mark said, I think anything you see us do we'll be expanding the sandbox, not just taking more space within the existing envelope and sandbox.

The next question is coming from Alex Blostein of Goldman Sachs. .

A little bit of a bigger picture question, Marc back to the daily value sort of discussion. All of what you're describing makes a lot of sense. I'm just curious what pools of investing capital -- do you think this will open up for Apollo and perhaps some of the others that is not already available as you and maybe some of the others move closer to providing daily NAVs on private credit. .

So if you segment the -- look, I give my view and Jim and Martin will weigh in. Go back to the way this industry started, draw down funds out of institutional alternative buckets. Generally closed end product, no 1 cared how things were marked. It was all about what you were getting in the beginning and what you ended up at the end. And as long as the end result was good, everyone was fine. And there was no presence to an investor because everyone was entering and leaving at the same time. Now you move within that same investor, you move to their debt and equity buckets. Let's start with their debt bucket. The fixed income manager at a large institutional client does not think of fixed income as a locked up investment. They think of fixed income as securities. So when they have the opportunity to buy the Intel public, and we offer them the opportunity to buy the Intel private. We're not talking to them about coming into a fund. We're talking to them about buying the security.

They are making an explicit trade-off in whatever view they have is to the secured private or the unsecured public. The negative of it is they have historically had less liquidity and less ability to see daily evaluation. The fact that Apollo market makes in that and that there are trades in that and that Intel itself public bonds trade, give us a proxy by which surprise these things. So all of a sudden, they are making a much better trade-off. They no longer need to demand as much excess spread for holding the private instrument versus the public instrument. Further, from a settlement point of view, they are used to buying CUSIPs. They don't want to hear about documentation and long form and other types of things, giving them an ICE ID is very similar to CUSIP.

Today, if you are an investor in our investment-grade fixed income product, -- every single day, you can call up and find out where your holdings are trading, every single day, you can get an F. You get it actually as -- you log into your connection with Apollo and you do that. You want to see a run of where things are trading in the morning. you get that run. This is building transparency. You could see, for instance, all of the work that's been done with traditional asset managers. Most of the announcements that our industry has made with traditional asset managers have focused on unique product that are not necessarily a regular way.

But why can't a fixed income public product? Why can't there be a 10% or 15% private bucket as a return enhancer, -- look at what we've done so far with State Street. The State Street ETF (PRIV), which involves public and private is a top decile performer. It has seasoned now, it's, I believe, crossed the $1 billion threshold. And we now have opportunities to show proof of concept that we can not only give you daily pricing, but we can actually create and redeem in line with public funds. The more we do this the more we will make ourselves acceptable to 401(k) to DC, traditional asset managers to individuals and otherwise.

The most recent discussion that's had across our industry on liquidity has been in a negative context, of the gating of direct lending funds over the past few months. And I think what Jim and I have taken away from this, the desire for these assets has never been stronger. And you see that in the statistic Jim gave, which is you simply get twice the return. However, not everyone loves the wrapper. Some, the highest net worth clients will come into a wrapper that is restricted in its liquidity and will continue to come into a wrapper that's restricted in its liquidity. But imagine if they had access to private markets without restriction and liquidity and in ways that did not create mismatches of the funds.

That is what we're trying to do. That's what's happening in market making. That's what daily NAV is about. It's even what the beginnings of AMAPS are about and more to come. I think you will see our industry move toward the indicia of public markets while retaining the private market origination. That doesn't mean they're going to be the same. But the closer we get for providing the tools and the surrounding atmosphere of how things settle, how things trade, how things their price, how much transparency, how much disclosure, the less the risk premium, the greater the acceptance.

Thank you. The next question is coming from Glenn Schorr of Evercore ISI. .

Thanks very much. I'll squeeze 2 very short ones together because it's the same concept. Monetizations were slow, but markets at all time highs M&A and IPO picking up. I'm curious if you could drill down on your slowest comment there. At the same time, you've recently been talking about a lot of competition in the retail annuity space, yet your production, your annuity generation was great. So I was just curious, both of those kind of sound the same to me is a little bit different than what we're expecting. .

Well, why don't we divide and conquer that. Why don't I take -- Jim, I'll take the retail annuity -- so if you step back, we have an intense amount of competition that has come into the retail annuity business. I believe by late discount, there are 36 now asset management entries into retail annuities. And I remind you that the basis of competition in this business so far, has been, can you find assets that generate a spread and are acceptable from a capital return? Can you generate liabilities organically or inorganically that allow you to invest against in a stable way. Do you have an overhead structure that allows you to do the business in a cost competitive way and then capital and management.

Almost everyone who's come to this marketplace does not have anything other than capital. And so they don't have a mature origination machine to generate IG risk. They do not have a liability structure or a liability region queue that allows them to generate stable liabilities to invest they do not have sufficient OpEx. And generally, the management teams are untested and unseasoned. Yes, they have capital. And so what we've seen take place is in the absence of any of those competitive advantages, we've seen new entrants in particular, used jurisdictions like Cayman to not put up as much capital to hold other types of assets that allow them to try and build a bridge into their business.

I think that's getting harder and harder because the NAIC regulatory body understands that, that's an existential risk to trust in the entirety of the industry and the proposals we've seen this week go along with indicating to the industry that, that is not going to stand. For us, it has been about competing in channels in which many of these new entrants do not have a significant presence. Most of the institutional channels away from independent advisers are very ratings conscious, are very domicile conscious. And yes, we compete, and we have really tough competitors of the traditional companies but you eventually have to earn a spread. And sometimes we use more fabs or more favors or more [ mogas ] or more FIAs or more of this or more of that. And you'll see the mix of product in this quarter actually reflects the markets and the products where we felt in this quarter, we could earn the right amount of spread.

Now I would be less than fully transparent if I didn't say the origination pipeline and the strength of the origination pipeline is allowing us to create the kinds of -- create the kinds of spread and return in a competitive market. And while we are not ceding the independent channel to new entrants, the independent channel is less focused on ratings and area of domicile and much more focused on just price. It is still an important channel, and we come in and out of that channel as we think we can earn spread. We are here to earn spread.

Sometimes spread is abundant and will grow even faster, sometimes not so much. right now, management feels that it can deliver the plan, at the spread, at the returns. And if that changes, they'll do less business externally, and they'll bring more of the existing business in-house to meet their 10% SRE target. If it widens, the company is well positioned to capture that. We are 1 of the few companies in the industry that at this point in time, has been building a treasury and an agency portfolio as a means of future earnings growth against competitive or opportunistic marketplaces. Almost everyone else has had to go all out to kind of earn spread in a tight market, origination origination, origination lens. .

Yes. I'll just quickly comment on the monetization. We would say that of all of our numbers, the most volatile and returns is the PII number from our business. I guess I would hang my hat on the fact that over any 12- to 14-month period or 16-month period, we feel pretty good about the aggregate numbers, not quarter-to-quarter. Monetization is 1 litmus test of success. The other is your investor response when you offer a new product. I mentioned the Fund XI demand that we've captured so far over $12 billion. So as a value investor over many decades, that has suited us well. I would say that the -- if you look at the monetization of the equity IPO market in the last quarter, year-to-date, a lot of it has been on a lot of growth versus value, but we're not concerned on a quarter-to-quarter and really from us, we feel that the strength and the breadth of our business is what's outstanding.

Thank you. The next question is coming from Mike Brown of UBS.

Great. Marc, Jim and Martin. I wanted to ask on expenses here. So you guys continue to generate good operating leverage here, but you continue to really invest in tech daily pricing infrastructure, market making, new distribution capabilities and other headquarters. So I just wanted to touch base on how is the expense outlook from here? Can you still deliver continued margin expansion as you continue to invest in the business? Any color there would be helpful.

Mike. Yes I mean the quick answer is yes. The way we are planning the period ahead of us is really no different from what we've been doing. And that is you should expect that we will create 20% FRE growth over the cycle, anchored by sort of mid- to high-teens revenue growth and sort of double digit -- low double digit, low teens expense growth -- and so everything we do as we prioritize our investment spending is anchored around that. So I wouldn't look at the quarter as indicative of a trend, which is different on a long-term basis. There's some nuances in there, which we can get into. But think about it in the same rubric, and we're very mindful of funding new talent, new people in your businesses and then so the infrastructure to support all of that was the pricing on anything else that we do. And so AI is a part of it. Cost efficiencies are part of it. We're mindful of sort of extracting efficiency where we can. But that all goes into how we plan our expense load against the growing revenue base.

And I would just add, if you -- what we've been saying the excitement that you're hearing about our business and the breadth of the growth opportunities, we want to make our numbers plus some, but also invest in this bright future. I mean, it's never been so exciting from our perspective. So if you think -- if you had that principal mindset, this is what you would like us to do with shareholders.

Thank you. The next question is coming from Patrick Davitt of Autonomous Research.

Marc a follow-up on the regulatory arbitrage point you made earlier. Good to hear there's movement there. So I'd be curious to get -- any updated thoughts on how meaningful you think cleaning up these disconnects could be for the competitive environment? And to what extent you've actually tried to peg specifically how much spread pressure has been driven by those players that are taking advantage of that arbitrage to more aggressively write new business?

No, it's -- I always look at my calendar as to whether I'm having impact. This year, I was the invited guests at the NAIC Conference in D.C. And they kind of knew what I was going to say. So they clearly wanted me to say it. And what we've seen come out over the past few weeks and from the conversations I've had with other CEOs, everyone understands that we have, as an industry, an amazing opportunity. The world is short guaranteed lifetime income. The populations are aging. Almost no one else offers guarantees. The global industry of renaissance is giving us long-dated fixed income to support these guarantees. We should be giants straddling the financial world. And instead, we, as an industry, have not, in my opinion, gotten our rightful share. Part of that is product modernization. And the products right now are hopelessly complex, and you will hear over quarters that we will simplify this product base, and I believe others in the industry will as well. But part of it is about trust.

How many institutions are you going to give your retirement savings to? One of the reasons we're very focused on AA on credit quality, and we're also focused on the industry because we are only as good as the perception of the industry. We pushed the industry in terms of disclosure and transparency. And now we're pushing the industry in terms of regulatory. We do not want bad outcomes of comp competitors in any jurisdiction because ultimately, that's negative for the trust of consumers but it also is a financial penalty to us, the most successful company in the industry because we operate an industry-funded on the margin guarantee Association, and we are just tired of making good on guarantees for a visible risk.

So what we've seen over the past period of time is business has gone to primarily came in Cayman has grown very, very fast. And that has not only put pressure on the companies who are there. But if you are a U.S.-based company that otherwise would be inclined to do the right thing. You are going to your local regulator and you're saying, it's really hard to compete with these companies in Cayman, and we've seen a number of U.S. regulatory jurisdictions that have given special dispensation to allow some of the Cayman rule creep to come into the U.S. That is a very early warning sign to the regulatory body that they need to do their job and clean this up and to maintain trust because otherwise, they risk a race to the bottom.

What we saw over the past week is a series of proposals that really talk about nonreciprocal jurisdictions. It is not all about the competition you have to be onshore, you have to be this. You just have to live with a set of rules that are reciprocal with the U.S. That is not a lot to ask. So I believe this growth phase that we've seen in offshore regulatory arbitrage is coming to an end. And that companies are going to be really unhappy with the bill they're going to get from capital additional capital that they will likely be required to post. In terms of spread pressure, I don't have the stats in front of me, but the easiest way to look at this, and we can certainly do this and Noah has the information. is to look at the differential in funding costs in the broker channel versus some of the other channels and just how much people are paying for money. It will surprise you as to how little spread companies are willing to take to try and enter a business without any of the fundamentals that will allow them to succeed on the long term, which is asset origination franchise, liability resignation franchise and OpEx.

So look, we live in a competitive world where we have all the things we need to compete. Some of the things we see are warning signs, not just for us but for the whole industry, which is why it's getting good industry support. And I think the industry is woken up and is acting.

Thank you. The next question is coming from Bill Katz of TD Cowen.

I just want to come back to the opportunity to sort of achieve the 11% return for the alternative sleeve within Athene. Can you give us an update on the opportunity with PIK in the European footprint, if you will, and how you might sort of see the trajectory of improvement there? Particularly given your comments, Marc around just sort of the evolving regulatory landscape and the capital arbitrage? .

So we -- as you know, we just closed or very recently closed on the PIC and PIC involved a very substantial new fundraise into Athora and that new fundraise would not have happened without investor belief and our belief that we will achieve mid-teen rates of return for Athora on a go-forward basis. We have if you look at the trajectory of Athora, very good early returns stagnant for a period of time and now set up for other returns. And some of this is just the nature of the growth cycle of these companies. We, at Athora incurred a decent amount of overhead, building up the business to be able to support the next level of acquisition. We had thought we were going to make that acquisition on the continent. And we ended up delayed in doing that. So we basically carried excess overhead for about 18 months that overhead has now been folded back down and into the operating subsidiaries of the 2 the largest are the Netherlands, which operates a holistic business and PIC, which operates a holistic business.

And so the holding company and expense at Athora is increasingly minimized as we review our participation in some of the smaller markets like Germany, which have been the subject of rumor. So I am -- it is not guaranteed, but I am optimistic that we are now set up for mid-teens rates of return on our Athora investment, and that's the basis on which we raised the dough successfully in pretty large quantity. The other large investment is in AAA. AAA has been really close I agree, it should be returning more into 10%, not 11%. As Jim suggested, we're 45 or 46 quarters or 44 or 45 quarters positive results in nearly 25 quarters. We have made a decision there. If you look at how we run the business, we run the business with in AAA in a leveraged share class and an unlevered share class.

Athene owns the unlevered share class. And for the most part, the AAA structure is not levered like PE. It's a very likely leverage structure. To make it comparable to PE or more comparable to PE, we also offer a levered share class that leverage share class is now $0.75 billion and has produced mid-teens rates of return on a much more consistent basis than PE and so for us, our belief is that we can, on an unlevered basis, without the volatility, introduce magnifying leverage, we believe we can get there. It may take us another quarter or 2 to get there. But this is a very, very long-term investment. So you know we've been doing this for 17, 18 years. The returns have met our benchmark over that long period of time, but we've been through a little bit of a desert of return here. And I think we're getting close. .

Look, the 1 thing I'd add, Bill, is the contract with PIC the acquisition and the integration has been really well done. It's been a very smooth process. The construct for buying pick was to create an organically growing business. within Athora. And we've seen just in July a $6 billion pension transaction with a U.K. blue-chip company. So -- and a healthy pipeline. So the thesis is starting to play out that this will become a growing business that we can add to over time.

Thank you. The next question is coming from Brian Bedell of Deutsche Bank. .

Great. Maybe just come back to the ICE JV and the private credit trading. Can you talk about what you see as the sort of realistic intermediate to longer-term addressable market in terms of what type of entities are trading this. The momentum sounds good sounds like you're a $30 billion traded since you started this. I think I sorry, 2025, I think it was $10 billion, so good to see the momentum. Maybe just sort of comment on how you see that momentum improving? And how important is the acquisition proposal of market access for ICE in terms of actually trading this. I assume all of this comes into ACS, but please let me know if there's other areas that impact the P&L? .

I would say it's -- you've tied a lot of the thread together, but it's early days. As I said, all the things that we've talked about on this call today and when Marc talks about the 1 market going to 6 this is just a tool. We're a pioneer. It's been a fivefold increase in the last couple of years in trading volumes. And if you're 1 of these big banks, you look at the number of leases have thrown out and they say that's a nice week or a nice couple of days. But this is very early. It's pioneering activity. The good thing is we're well above -- ahead of everybody else. And I suspect that this will be a broad utility this part of the ecosystem of transparency and daily pricing and industrial liquidity and investor confidence.

So again, I feel like when we look back at these activities in '28, '29 and '30, we will all be talking about the revenue that's been created and the robust nature of that. But -- we have very, very high expectations. If you look at what goes on in the municipal market and you look at the activity by some of the public companies and they have 15%, 20%, 25% market shares in the technology behind those. These are hundreds of millions of revenue. So again, early days. It's not going to move the needle on our '26 FRE and SRE numbers, but I suspect if we're here in 2 or 3 years, it will have a more meaningful number.

The next question is coming from Ben Budish of Barclays. .

Maybe following up some of the spread discussion at Athene, it sounds like a lot of good momentum. You talked about maybe that with the Intel piece coming out. There's a bit of a headwind removed, but you talked about improvements at Athora, the introduction of the ARI portfolio. So I guess just putting it all together, you've maintained the SRE guide for the year. What's the sort of implied expectation for your normalized net spread? And how should we think about that going into 2027?

It's Martin. I'd assume the same. I think the -- in the quarter besides what I mentioned, there's nothing to call out. I think it's sort of normal portfolio behavior, if you like, in terms of the impact on the gross returns and gross cost of funds. And so we're in the ZIP go of the range. I would expect that, that will that will be maintained as we look into next year. And that's sort of informed by where we're writing new business, which is above that and behavior of the in-force business. So stick to the range until we advise otherwise

Thank you. The next question is coming from Brennan Hawken of BMO Capital Markets. .

Jim spoke to the institutional and wealth management reception on Fund XI. Could you maybe give us an updated expectations for the timing of the first close and when you should think about management fee activization. And are you -- we're hearing about some headwinds to fundraising for equity. Are you seeing any of that? And does that impact any of your expectations? .

We've been very pleased with the fund raise. So Jim mentioned the number it's $12 million. That's a very healthy first close for the fund, and that will continue. The timing of the fund sort of quite turning on fees ultimately depends on when Monte is fully invested. And so that's a variable. I would currently -- we're assuming it's first half sort of back part of first half for planning purposes and we will obviously know more as we get closer to that date. But I would assume it's back to the back part of the first half and the fundraising is going well, and it at of strong performance of its predecessors in terms of returns and DPI metrics. .

Yes. I would say this is a continued view of dispersion. It is a tough fundraising environment. We're fortunate that if you look at our institutional business, we're basically -- have almost double last year's production through 6 months. So if you produce for investors and you've had a consistent dialogue, you're garnering share and you're garnering dialogue and confidence with the largest, most sophisticated folks around the globe. That's not every GP. And so what we're seeing is the folks that have had the track record, have the innovation and have the success of investing you're going to get a larger share as the largest LPs around the globe really want to concentrate their activities.

So we feel great about the momentum of our aggregate institutional business. We feel great about the momentum of our equity franchise in aggregate, we feel great about things going on in hybrid and others. So we're a winner, but we recognize that not everybody has had that same experience.

The next question is coming from Wilma Burdis of Raymond James..

Are there any time contains on assets held in conservative securities such as treasury before you may deploy some of those assets depending on the duration of matching liabilities. Just trying to ask about, I guess, the ability to deploy additional funds from here to generate for the uplift. .

No, there are no constraints. We don't use it as part of ALM.

The next question is coming from Michael Cypress of Morgan Stanley. .

Just wanted to ask about evergreen funds and tokenization, just given some of your experiments with tokenization. Just curious what learnings you've had where you're seeing greatest utility. And ultimately, could tokenization prove as important for private markets as ETFs were to public markets. And if so, what is the next generation of Evergreen and semiliquid products look like? And what might some of the innovation look like in the years ahead. .

Well, Mike, is it's safe to say that a lot of work is going in the lab. And I don't think we have enough evidence right now to have a clear pathway of the future other than the themes we've talked about this morning it would lead all of you to take away that we're not going to be tied explicitly to exactly how the rails have worked in the past. We want to continue to reinvent. Obviously, things like the ICE identifier make a lot of other activities in the future, very, very great potential activity. I think there is a lot of operational and regulatory limitations that you have to be very careful about.

We want to make sure we're working within the system of the regulatory dialogue and work within the system of the transfer agents and trustees and such. But I don't think this is the -- it's a longer conversation. I think we have learned a lot, but it's still very early days. And yes, we share the same view that if you think long term about the delivery mechanism what's going on with ETFs. There's a lot of disruption going on in the ETF world in the last few weeks with some folks around the globe, in particular, was listed in the last couple of days. So we believe and we see the potential opportunity -- but I don't know we have enough evidence to clearly say what the path may look like. We respect it, however.

The next question is coming from Crispin Love of Piper Sandler. .

I share the latest on your well flows on some others in the space in the most recent quarter, some redemptions improve, but ADS did increase and still remains somewhat elevated. So -- what are the most recent trends you're seeing? And then also how are conversations with financial advisers and then also just financial advisers and their end clients just given much of the noise that we've seen so far this year.

Well, I will answer like Marc already said it, let's just start with performance. The last 11 quarters in the nontraded BDC space the dispersion of managers was about 1% from top to bottom. The last 2 quarters, 4% and 2.5%, and we were in the top quartile. And so our view is, well, it's going to keep doing what we've been doing thoughtful, diversified, high-quality portfolio, that's going to pick up share over time. That's what happens in every other asset class. So again, I think we've seen -- it's early when we think about our onshore and offshore redemption windows when we look at what we were last quarter versus this quarter, acknowledging it is a bit early in the queue, we're seeing half the redemption we saw last time.

So I think you're going to see a dissipation. Again, we go with the view that if you can -- dollar in the ADS at the beginning turned into $1.40, high yield and leveraged loans would be $1.20. The performance works. So I think that's with the thoughtful investors and thoughtful FAs are seeing. Certainly, there's regional hotspots that had a different objective, and we've appropriately dialogue with those. So we feel very good about the breadth of the overall momentum and the product set and the education that we bring to the equation.

Thank you. The next question is coming from [ Brian Sebaski ] of RBC Capital Markets.

Great. Just wanted to follow up on the Athene organic inflow discussion. So thanks for the color on retail annuities. I was wondering if you could unpack a bit what you're seeing in floor reinsurance funding agreement, how overall ties in to your outlook for the $85 billion origination -- sorry, inflow target this year and maybe get an early look into how you're thinking about 2027.

We're right on track for the year, $42 billion for the half, $85 billion for the full year. That's what we expect to hit. We've messaged through cycle over a 5-year period, $85 billion. So just use that as an anchor point for next year. And the mix of business this quarter was reflective of where we saw pricing in the marketplace. So we issue -- we -- Marc spoke to this, we issued about $12 billion of annuities in different flavors, Migos and FIAs principally. And then we were able to access the funding agreement market in different ways. And then we had a healthy flow deal in the quarter. So it all contributed to the $22 billion that we printed for the quarter, pretty much in line with in aggregate, what we did in Q1, but the mix was different. And I'd expect a similar type of pacing from here on out for the balance of the year.

Thank you. That concludes the Q&A portion of today's call. I will now turn the call over to Noah Gunn for closing comments. .

Great. Thanks again to everyone who joined the call this morning and for your interest. As usual, if you have any questions regarding what we discussed on the call, please feel free to reach out to us, and we look forward to speaking with you again next quarter. Thank you.

All right. Good morning, everyone. Thanks for sticking with us here on day 2 of Morgan Stanley's Financial Conference. I'm Mike Cyprys, equity analyst covering brokers, asset managers and exchanges for Morgan Stanley Research, and we're excited to have with us for our next session, John Zito, Co-President of Apollo Asset Management. John, thanks so much for joining us here this morning.

Sure.

With nearly over $1 trillion in assets under management and Apollo is one of the world's largest alternative asset managers. So John, let's open with your thoughts on the macro, which feels increasingly bifurcated with higher for longer interest rates, inflation concerns, fiscal deficits, geopolitical fragmentation, yet we still have a robust corporate earnings environment, very strong economy, particularly here in the U.S. spreads remain tight. So can you share with us some of your top-of-house perspectives?

I spend very little time thinking about most of the things you just brought up. I think -- I'm not joking. I think the only really thing that matters is whether or not what's going on with Anthropic in the labs is real or not. Like that, it's so dwarfing to what is going on in the world. Obviously, I'm not trying to discount what's going on in both wars. Inflation, if AI is real, it's so hyper deflationary to so many things over the long term that it's really hard to take risk.

And it's probably as hard. I've been managing third-party money for almost 25 years. I think it's as hard of an environment to probability weight what the world looks like in 12 months to 24 months as it's been in a really long time. And that's not like -- that's not for credit. That's not for -- I mean, it's just generally, really, just a really difficult environment because you go to the valley and even just Anthropic as -- even if I was here in December, I would have told you, much more sanguine about what's going on, but Anthropic doing $60 billion of ARR and $80 billion and $200 billion in their latest filing for what they'll look like in a year, it just dwarfs everything we're doing. I mean Palantir took 17 years for Palantir to get to $1 billion of revenue.

And so what that means for risk taking, what that means for default rate, what that means for businesses, I think some businesses are going to massively thrive, just grow most of the enterprise -- most of the efficiencies from what happens will be driven towards the big scale players.

And you've seen what we've done kind of top down, obviously, with our $36 billion announcement yesterday on Broadcom and $15 billion for SpaceX and close to -- we'll do close to $10 billion in sports, tons of critical infrastructure, derisking by going senior on kind of less exposed businesses, massively underweight software, everything comes from the same place, which is trying to be super humbled about what's going on in the world. And navigate the balance sheet to protect ourselves.

If you look at what we're doing on our own balance sheet really for the last 18 months, derisking in the context of much more treasuries, much more hard assets, a big push into asset-backed and things that are going to be much more inflation protected in whatever regime that looks like. Look, we're doing everything from a lens. I grew up as a principal. I grew up as a manager of vehicles and really grew up at Apollo that way. And that's how we think about our own balance sheet, too, is principal first.

And you really have to have a view like the biggest thing in credit and the biggest thing and just risk markets generally is you can't -- you have to avoid the bad neighborhood at all costs. You can't be in the center of the storm. And there's a long history.

You've covered financial institutions for a really long time. It's like if you're in the bad neighborhood, there's not much you can do. If you're not diversified, there's not much you can do. And so that's been my focus, I think, from a risk management standpoint. But the pace of change is as hard to accept and acknowledge as any time I've been investing. And I think probably -- I mean, I'd struggle to find something that's moving this quickly and getting taken up as quickly as it is.

But at the same time, doesn't that create significant opportunities for active managers?

Yes, for sure. I mean that is going to be -- I think you're going to have the haves and have-nots in a big way. I think, obviously, for our business, there's huge tailwinds in that we've got a little bit lucky that we kind of went all in on credit and what's needed more than anything else is credit, right? And so you have super long -- the capital needs, I mean, I kind of feel like I'm in some fake reality movie or something when I go to the valley now and everybody wants to be our friend and they didn't have the time of the day for me a couple of years ago. So we love them. We love them. I don't mean that way. But they're figuring out the future. We're just financial providers.

But like just you take the 2 labs, they need $1 trillion in chips. I mean you see the OpenAI announcement last night with NVIDIA, NVIDIA is trying to -- I mean the scale of that Ohio project that got rumored last night is $500 billion. I mean, it's very [ Masa ] announcement. But the scale, if you just look at the basic assumptions in the 5-year plans of these businesses, $1 trillion is just for chips.

Like that's -- for us, when you look at that gets us excess spread, that gets us additional FRE that gets us on the mezz and whole business side, we get potentially like infra like assets, like it's -- and only a handful of people can show up and be able to execute a $36 billion deal. I think there's 1 or 2, but probably. And in this case, it was in partnership with Blackstone. So I don't think there's a lot of people that can do it.

With those dollars that you mentioned are just gargantuan, do you worry that the token costs are going to be just as enormous, folks are not going to want to spend and then you...

I think token maxing and token talk is for -- it's a lot of BS, honestly. Like, if you look at per unit of knowledge and cost per unit of knowledge, prices are collapsing. Prices are collapsing per unit of IQ, if you did it that way. And so you have to bifurcate different types of compute into inference compute, which is most of us, like my IQ is not high enough to be able to use what Mythos 2 will be powerful enough.

We're not smart enough. I mean there's only a handful of people that are smart enough to use these cutting-edge frontier models that need 180 IQ, 24/7, like the problem to solve for that, that's where you're seeing the prices go up. Our IQs are so low that we're actually using that IQ to do like check out the recipe for the french toast and we're spending tons of money. And so like, okay, so we have to figure that out clearly. So that we can manage case.

[indiscernible]

Yes, that's exactly. Like it's okay, we can admit that what we use our things for. Like glorified, like 120 IQ is good for me. Maybe 130 is good for my french toast. But -- so what you're going to see is like a whole new economy around how you direct the ask onto the right chip, like the AMD chip, the NVIDIA chip, all these different chips will be used and optimized for a certain use case to solve the spend problem. And then you're going to have the 180-plus Citadel, Jane Street, all the high octane quantum, that's going to be really expensive, but the ROI is going to be massive.

Right now, everyone just views all of it in the same bucket. And so I worry more is just how do we -- there's only a handful of credit providers. Obviously, it's getting diversified. I think what's -- the problem is ROI is so high and everybody assumes compute will be demand and that -- so everybody is just building and buying and building and buying because if they say they don't need it, they'll sell it to someone else.

It's very bull market is that part. And so -- and we're in the public markets where rate of change matters a lot. And so if you have any slowdown, once these companies are public, if there's any slowdown and it's growing at 100% a year and it grows at 80% a year, the market -- the stock goes down 50%. So you'll have that moment. I don't know when that moment is going to happen. It's going to happen in the next 2 years at some point where people say, wait a second, the growth isn't as much or the ROI isn't as much, and maybe it just benefits the consumer. I don't know. I don't know where it lands.

But everything is very -- whereas bull market is where you say like there's 10 guys that are building data centers and that everybody can build a gigawatt data center. It's just not true. You're going to see guys -- I think you'll have companies that don't deliver on their promise and they have leases canceled and people are like, oh, wow, what happened here? And not each developer is good. Not each neo cloud is great at providing efficiencies of clusters of chips. There's a lot of nuance that's going on. The bull market elements of it is that everybody thinks that everything is just commoditized, and it's not. There's going to be a lot of dispersion amongst it.

Let's shift gears and talk about your role as Co-President of the Asset Management business at Apollo. Talk about some of your key priorities right now, where you're spending most of your time? And what are some of the key challenges that you're tackling?

Yes. I mean, look, we have 2 big things at the asset manager. Obviously, we have -- our own balance sheet is half the capital and half the capital is third party. Most of my time is, well, first off, risk management and making sure we don't do anything stupid in a time where I think is uncertainty is higher than usual. So that's been going on for a while. Optimizing our own balance sheet and making sure we're in the right neighborhoods, much more infrastructure, much more around everything that's growing really quickly that clearly needs demand, building out Europe, building out ancillary-type businesses, building out our CLO replacement strategy. And I think creating new structures that are good for everybody that actually can earn the appropriate rate of return. And just trying to avoid making any big mistakes because I think there are elements of the balance sheet for that.

I think on talent management, continuing to just get the best people in. But like we've kind of set our plan with -- our credit business obviously drives it. But between hybrid, our equity franchise, which we're in market this year, raising, which in a pretty difficult backdrop for PE. Our team has done an amazing job there just historically in terms of not getting in these bad neighborhoods and sticking to our knitting.

But hybrid is a huge grower. I think infra is a huge grower. How we handle sponsor solutions and secondaries, I think, could be a big grower. People think we're really big and really penetrated. I think there's a lot of upside in certain markets that we have not penetrated and some of our competitors have done a much better job. So I think there's upside in there. We just have to continue to just perform well. And I feel pretty good about that. But I spend most of my time worried as opposed to just making sure we don't -- that's kind of been -- that's how I grew up here.

Which markets stand out, would you say, where competitors have done well and you see significant uptake.

I mean, look, you can see the numbers. I mean we've dominated the credit ecosystem. In other parts of the ecosystem, we've been underweight. I view -- anything that we're under market on, I view as a huge opportunity because I feel like the investment regime is changing where we -- having this open architecture that we have is going to be a huge competitive moat.

And if you look at what's happening with the Mag 7 and to compare the Mag 7 to financial institutions, I know it's a hard one, but they're all going balance sheet heavy. And there was like a 20-year, 25-year environment where the public markets and everybody wanted everybody to be asset-light. It was ARR, asset-light, ROE, everything else. What if the regime is changing a bit to be more asset heavy and that the return is going to shift to capital. You're seeing it with the manufacturers. You're seeing it with the intels of the world that actually make their own stuff. You're seeing the large companies all go much more balance sheet heavy and capital intensive.

And maybe the value framework for financial institutions, something that public markets have not loved about us is our balance sheet heaviness. Maybe that's going to be our strength in this environment. Maybe that enables us to win deals and be more strategic partners. And should we be really leaning into that more? I think that's -- like if I look at other industries, you're seeing value shift to capital. It still hasn't happened in asset managers yet, but I'm probably more excited about that than I've been since I've been at Apollo.

Let's talk about private credit, which continues to be a topic...

I try to get through every 30 minutes without talking about private credit, but let's do it.

All right.

Because I get asked about it 9 times a day, so I have to like -- it's like I can't talk about a much -- such a boring safe asset class so much, but it's so exciting for everyone.

Well, I think that's part of the debate. People don't perceive it to be. But that's what I want to get to in some of these misconceptions here, right? So I think there's been a lot of focus on the direct lending space, which is a small part of Apollo's business, but the emerging debate around the risk profile in private investment grade private IG, which is a bigger part of your business to the sponsors. So I guess where do you see the most common misconception around private IG?

I mean, look, I think the biggest misconception is that we're misaligned in any way and that we're using structure to take a lot more risk. This idea that you could have made that argument maybe when we weren't merged with Athene and that most of our compensation wasn't in the equity of Apollo, which is subordinate to policyholders.

So when we merge those businesses, we effectively said what we're doing in the credit business is good risk, and we want to own all of it. And so this idea that we use structure or private for opacity and lack of transparency is something we just totally disagree with. It is not how we behave or operate. And no matter how much transparency we give to the market, they seemingly -- I think private just feels risky to people.

And so valuations is obviously a big part of that, and there's an intersection there that's gotten in the news, which we're trying to take a lead in terms of setting market-to-market on that. But look, private credit is -- private markets, not private credit. All of private markets are disproportionately exposed to services businesses, asset-light businesses, health care and software.

So private markets have some probability of not doing as well or having defaults that are high. Now the LBO market and the BSL market has a big percentage of software and services and asset-light businesses because levered credit typically went there, too. So lots of companies in the public markets are asset-light services company.

So I think we're going to go through a cycle potentially. It's not about private credit. Private credit is a derisking trade. Private credit is going up in quality, up in seniority closer to assets typically and senior. Listen, some are more exposed than others. Some have more concentration than others. They're going to figure it out.

But I think the much bigger conversation is around the subordinated parts of the capital structure. And so I think you're starting to see that with some of the other headlines going on. And I don't know, cross your fingers. It feels like people are getting bored about private credit, but maybe not.

Most of us, and private credit business is a pretty cottage industry. There's not a lot of -- there's a handful of us that grew up in the business for over 20 years and all know each other. And it's different than the private equity business in that you're kind of either in a deal with someone else or you're going to be on the other side of someone else. But generally, it's not zero sum. And we're all definitely not used to being in the press as much as it's been.

So hopefully, it calms down because the business is supposed to be a pretty boring business. It's supposed to lend money at par, get money back at par, make your coupon and move on with your life and be pretty low ball in terms of what the asset quality of the asset is and the underlying likelihood of default. So hopefully, we'll get back there.

Look, I think the -- I'd like to say nice thing, but redemptions are high right now. There's no way to hide from that. They're all -- you can see them in the headlines. You can see what's going on with some of the interval funds. You've seen what's going on with all of our vehicles, generally speaking, and the structure. And the nice thing is no matter how much you've attacked the private debt business, there's been no run. There's been no SVB. There's been no financial institutions failing. The structure is right. Like could it improve 100%? Can we talk about different ways? Sure.

It's kind of nothing. We're giving back the -- we raised -- we have 5% redemption, which is $750 million. We take in $750 million that quarter. We're -- it's -- we have $5 billion of liquidity on a vehicle that needs to redeem $750 million in a bunch of broadly syndicated loans. The assets pay income and the income matches the distribution yield. The average life of the asset is 3.5 years. The average liability structure is 3.5 years, fully matched. It's for credit, it's a really actually appropriate structure. So I don't fully get it, but we'll keep talking about it, I guess.

All right. The other hot topic is software and Apollo was early to identify potential AI disruption risks in software, and you entered this period with amongst the lowest exposure to software relative to peers in the space. So maybe just share your latest views on software. Is it too early to step in here? Are you seeing some interesting opportunities emerge?

I've had every software sponsor come and pretty much send me hate mail at this point. So I've tried to go on my apology tour. I...

Buy what's in the portfolio companies...

No, it's not soft. I think a lot of comments that we make sometimes get taken out of context. Software by all of us will be used, I don't know, 1,000x in the next 10 years. Like it's not about whether or not software is going to be used or not. It's the price we pay. And if you're a new business, are you going to build something from scratch? Are you going to go pay someone to do it? If you feel like you could probably build it 90%, 95% close to what an off-the-shelf solution does at 90% cheaper. What are you going to do? And that's the debate.

And we spent 8 years, the average multiple software business went from 10x to 31x. The average ARR went from 2 to 3x to 15x. You're paying 15x revenues for business. You guys are all in the markets, you know. You're assuming that like the assumption embedded in there was 100%, 99% retention rate, 90% plus margins and significant growth until the end of time. That's how you grew into the valuation because you viewed it as a utility.

And now that paradigm has shifted. And so the question is price, earnings power, margin, all those things where you have a lot more competition in a much different framework. And so I think it's much more about what's the appropriate price for these businesses.

Analytical software, you're going to use an LLM to do. Analytical software, the LLMs are really good at analyzing big swaths of data. Critical infrastructure software where like the state of record and very important data that you're going to use to build on other software probably goes up the data bricks of the world, and there's some massive winners in the software space. I'm just not sure it's the vertical software company that does analytics or does surveys. It's just not -- those companies are not going to do as well.

I don't think what I'm saying is controversial, but apparently, some people do. I think it's kind of just what's happening. And it's just going to flow through the market over time. The public markets moved first, then they moved to the BDCs that have a lot of exposure. The BDCs are the least of anybody's concerns, given you had 15 companies go from $500 billion to $1 trillion in 60 days this year and the total size of the entirety of the BDC market is sub-$500 billion. So in the context of a $80 trillion equity market and a $230 trillion net worth market for U.S. households, the $400 billion BDC market, which has 30% exposure to software is really the least of anybody's concerns.

Shifting gears to origination. It's been a core differentiator for Apollo. Can you talk about how your approach to origination is evolving in the current environment and where you find some of the most interesting opportunities?

Yes. I mean, listen, we've never been in the origination business as a calling effort business. We've been in the ideas business where we cover sectors. We have no walls between our equity and debt business. We assess what we think the appropriate solution is for the company, and we go in with product agnostic. So we're going have 20 products off the shelf, whether it's an investment-grade revolver, investment-grade term loan, high-yield, pref, take private, hybrid, you name it, infrastructure, off-balance sheet, lease.

We probably have the most broad creative front end that actually is proprietary and can commit to risk where we actually have a view. We've gone from originating $50 billion to $75 billion of what we call excess spread assets. We'll originate somewhere between $300 billion and $400 billion this year. We've grown from $50 billion to $100 billion to $200 billion to $300 billion to $400 billion without losing spread despite spreads going tighter, which if you asked me 5 years ago, we would be able to do that? I would have said no.

And we just keep going after new asset classes and creating new asset classes out of really consistent cash flows. The -- I'd say the benefit of the AI boom is all of this, you can create lots of investment-grade collateral at excess spread because of the supply-demand dynamic going on. There's a lot of demand for capital, and we're going to raise more investment-grade debt in the syndicated market than the actual government market, which has never happened. So there's just so much new supply, which is keeping spreads wide, which is great for our spread business at Athene.

And high-grade capital solutions appears to be the fastest growing of those platform.

Yes, that's there -- obviously that's there's been 125 high-grade deals. We've done over 100 of them. We've been a disproportionate market share there. It's getting a little bit more competitive, but still need to be really big size, really creative, permanent. Our funding structure and our front end are competitive moats on that business. A lot of people want to get in that business. It's a really hard business. We have hundreds of people that are dedicated to that, because if we had just a third-party business, we would have never gotten in that business.

We would have just kind of been a traditional credit manager. But because we get hundreds of dollars on excess spread, we really invested in that business over the last 10 years to build it out and have a really commercial and creative front end that's totally tied to our total asset manager, and that's created products on the back of that, not the other way around.

A lot of people go into businesses and say, we're going to create a product because a client wants it. We're usually the first client. So it's a very different mindset. And when people -- when we bring people -- and we've hired a lot of people over the last couple of years. When we hire people, they're shocked as to how that mindset is totally different from how we think about product and risk taking. It's much more principal heavy all the time, not the other way around.

How big can that business get? And what do you see as any sort of key gating factors?

I mean you're seeing a lot of new sectors. Health care is getting into it. Europe is a huge opportunity. Asia has not yet done that market because of the banking -- I think over time, a huge market. We'll spend $1.1 trillion this year in infra in the U.S. Asia and Europe combined are $300 billion. They need to do trillions of spend that they're backlogged on in terms of infra spend. So I don't know. I think if we keep that share, it's super accretive to all parts of our business, both third party and the balance sheet.

Another -- you mentioned innovation, another area where we're seeing some innovation is daily pricing where you guys are pushing ahead trailblazers here across the industry and privates, pushing for that greater liquidity, greater transparency in private credit. So what are you ultimately trying to accomplish with your efforts there?

No. This is just acknowledgment that many -- some of us decided to go from drawdown funds into evergreen funds where money could come in and out. And listen, if money comes into a product and is in and locked up with all the investors and then comes down at the end of life, the marketing methodology is not impacting is not unfair to any one client. Once we decided to allow money to come in now, you have to make sure that everything is transparent and has some level of -- there's some element that we're acknowledging that some of the assets have some level of volatility.

And so this is just about expanding the marketplace. Marc talks a lot about all of our new clients in the form of individuals and 401(k). Those clients are used to much more of public markets dynamic in terms of NAV and require more daily pricing. And the product design that is required to service those clients is much more of a daily pricing construct. And so this is -- at the end of the day, it is about trust and transparency, and we've tried to lead with that out of Athene with our multiple 200-page decks that we put out, which I make you read.

My favorite weekend read.

There you go. There you go. But like we're trying to just from a very good place, be as transparent as possible. I know that sometimes for whatever reason, people find it hard to believe, but we're just trying to be a market leader in terms of transparency. And we ultimately think that will lead to much more trust over time, and it enables us to actually build our business at the scale that we want it to be. Look, if we wanted to -- it was a lot easier to just be super narrow and service a much smaller corner office and alternatives and we have obviously more ambition for that.

And if you're ultimately successful in bringing more liquidity transparency here to the private credit markets with daily pricing, I guess, what are the implications for excess spread? Does that ultimately compress? And how do you think about the implications of the value proposition in private credit and the premium there?

Listen, again, I grew up in the public markets, and then I've been here 15 years. So I view the value prop of a credit manager to always -- has always been to be the credit underwriting, the credit picking and avoiding defaults. That's kind of like step one. Step 2 is the relationship with the issuer. And if you're actually originating your own product, a lot of the excess spread is from that origination spread, not from illiquidity spread.

People can call it illiquidity spread if they want, but there's different components of excess spread. There's a liquidity spread and then there's origination spread. If you have your own origination, our view has been always that your excess return will, over time, as assets get more liquid. And again, every asset has gotten more liquid over time, and this is just part of the evolution of markets that the originator will retain most of the excess spread, which means our client and our balance sheet will retain most of that excess spread. And it won't be about liquidity or illiquidity excess premium.

And how much should that excess spread be over time? Like what do you think is ultimately sustainable.

Again, all of that -- I don't know if like historically, it was 150 to 200. It will go down, but I don't know by how much, maybe it goes to 100 to 150. But again, if people trust us more, does our funding spread go down. So it's not as easy as -- it's not as simple as saying, okay, if spreads go down, that disproportionately will happen. I think if we're a market leader in transparency and we're a market leader in and trust that our overall cost of capital should go down over time, too.

And then how do you think about the components of that excess spread over time today versus like 5, 10 years from now? Does that mix change? It sounds like it does your thinking maybe.

I think it's going disproportionately from historically what people deem to be -- I think it's a little bit of a fallacy to say that it was all an illiquidity spread, but let's just say it was. It will go to predominantly origination spreads. So you're going to have to control origination to actually maintain any sort of excess spread.

Okay. We're almost up on time, but I wanted to talk about the institutional part of the business. Institutional fundraising has remained resilient, perhaps more resilient than people had feared just a couple of months ago. So talk about what you're seeing that's driving the strength today? How durable is that? And where are you seeing some of the strongest demand across client type geographies?

Yes. Look, our shareholders have loved what's happening in the wealth channel. The -- up until whatever, let's say, the last 6 months, and that, by the way, I think, is going to prove to be more resilient than people think over time. The overwhelming macro on that business is people are still massively under invested in alternatives. And over time, it's hard to debate that more people won't be in private, but we're going through our little test here in private credit. Institutions thought they were getting crowded out, right, by wealth. So they didn't like that. They kind of are secretly rooting for more dispersion in local channel because I think it makes them the star of the show again. But they want to take risk, right?

So like the amount of conversations I'm having on the institutional channel on direct lending, they're just waiting for spreads to go wider. They want more of it. They're still underweight. And many of the large institutions are still not at their target bogey for anything in private debt or credit or hybrid. They're just not there.

So I think when they see the headlines, they're like, great, this is going to create a bunch of excess spreads for us to put some money to work. And they actually want to get out and they're more underweight the equity side of their business, and they've been low on DPI and everything else. So they've been -- every money -- every distribution they get from their equity business, they're plowing back into either infra, hybrid or credit.

So I think we'll launch our third direct lending fund soon. I'm more excited about that part of the business just because I feel like the headlines actually inspire the institutions to go in. They tend to be more countercyclical.

So you're seeing a more...

I mean more demand, which is not consistent with the headlines that you would think, but the institutions will take the other side of that.

Right. Well, I'm afraid we'll have to leave it there. John, thank you so much.

Thanks, Mike. Appreciate it.

Good afternoon, everyone. I'm Patrick Davitt, the U.S. asset manager analyst here at Autonomous. It's my pleasure to welcome back Apollo's President, Jim Zelter.

As a reminder, if you have any questions you'd like me to try to throw in, you can submit them through the Pigeonhole portal, and I will get them here on the iPad and try to throw them in as time allows. So Jim, thanks again for joining us.

Always a pleasure being here. I appreciate your interest and the folks in the audience learning more about our company.

For sure. And it does feel like a broken record at this point when we're sitting at this event in terms of another winter and spring of volatile events.

So as I do, given we have most of the major alternative managers at this conference, I want to start with some higher-level macro questions. So we've got a private credit freak out, concerns about sticky inflation, higher-for-longer rates, risk of slower growth. Do you agree with all of these concerns? And what is Apollo's and your current thinking on inflation rates in the economy?

Well, I think that -- just taking a step back, I think every investor in credit post-GFC has a greater ear to the ground on the global macro. The interconnectivity of all these markets is critically important. And you and I spend a lot of time, and I'm happy to talk today about some of these big trends, whether it's the global industrial renaissance or the evolving banking system.

But yes, I do think that we've been pretty consistent in the last year or so about higher for longer. Torsten has been very public. Marc and I have been very public about the concern about inflation was much more concerning and pervasive than the concern of just lower rates, notwithstanding a lot of the talk about from the administration.

So I use the analogy of golf. I said in the middle of fairway, things are nice, massive CapEx cycle, a big M&A cycle, risk on equity mentality, good corporate profits. The challenge is -- and in the rough, inflation, global fragmentation, the crisis in the Middle East. The problem is that fairway is getting narrower, and it feels like it's the narrowest fairway we've had in a long time. And I just think that when you think about tail risk, not only is it a higher degree of tail risk, but when tail risk comes, you have a higher degree of potential impairment and loss.

And so putting those together, I just think you have to be very vigilant about how you're investing today. And you have to be very thoughtful about trying to predict the future in terms of these big trends. And so I do think we are in the business of putting money to work.

But again, a lot of it depends on the liability that you've been given. If you've been given a PE mandate and your liability is 25%, 30%, having a little bit of equity on top of a levered balance sheet, you better be pretty sure right now. But if you're investing with investment-grade companies that are taking some of the best business models of all time, you want to be their partner.

So again, this all depends. But I think it's -- the idea that this is a surprising environment, I think you've sort of been asleep if you think it's surprising. I think there's a lot of disruption happening around the globe. And I think you just need to really prepare. And you can't predict it, but you can prepare for it.

That's helpful. And kind of following on that, I think Marc's prepared remarks on the last quarterly call were particularly pointed with the suggestion that Apollo is positioned for some fairly significant social and economic upheaval in the coming years. Could you expand on what exactly you're seeing that has you guys concerned? And how is Apollo positioned with this seemingly quite dour outlook?

I think if you have an environment where government balance sheets around the globe are pretty well hocked, you have a rising K economy, you're having arguments about access to opportunity, you have access to -- education is prohibitively expensive, you have to assume a different administration and leadership is going to create different regulatory environment.

So for us, it's in a world where technology and AI is disrupting and you don't know what the truth is. Things such as brand, reputation, really high ratings, a fortress balance sheet, I think those are strategies that will win in many cases. And so tying those together as you execute your business strategy is really important.

Okay. So let's switch gears to the investment environment. You posted a very strong origination quarter, and Marc's constructive on how things are tracking in 2Q. How would you characterize the origination platform? And where are you seeing the most compelling opportunities?

Yes. So from our Investor Day, we talked about the ecosystem which we've created, and we called it our Mona Lisa. We talked about bank partnerships, our origination platforms, and then what Apollo does on our own, our CRE lending, our CLO lending, our high-grade capital solutions.

The area that's the most profound with the pipeline right now is the area of our HGCS, our high-grade capital solutions. There's -- we've talked about this industrial renaissance, investment-grade-led companies in a variety of industries and geographies. And those companies are really where we're spending a tremendous amount of our time.

So if there was one contributing factor to a bit more bottom line origination and spread, it would be that high-grade capital solutions. A handful of deals to date already this year in the second quarter, but a very -- probably, the deepest pipeline we've had historically in that high-grade capital solutions as we sit here today. And some in the next 2 to 4 weeks, some in the next 2 to 4 months. But certainly, I think they will have an impact on the second and third quarter in our volumes and numbers.

So that's a good -- that dovetails nicely, I think, with capital solutions fees or transaction fees, which I think are somewhat tied to what you just said on the high-grade capital solutions. That result was much better than I think anybody expected given the environment in the first quarter. So how should -- through the lens of what you just said about the pipeline, how should investors be thinking about the trajectory of that fee stream given the kind of uptick in the pipeline?

Yes. I think I alluded to a couple of years ago, trying to turn that business -- I use the analogy Goldman Sachs to the Bank of New York. Less lumpy, more predictable, more longer term, more consistent. Maybe not at the same growth rates, but less volatility.

And I think we're doing that right now. I feel more comfortable with our long-term objectives of what that number could go to. And I feel more confident in terms of the -- I hate to use the word predictability, but the comfort that investors should be accustomed to and our ability to do that.

And I think that a lot of it is tied to the breadth of the business. We don't want it to be 4 or 5 large transactions. We'd like to make it 20, 30, 40. And so the volume and the spread of those volume is consistent with that. So I think we feel -- I'm sitting here today, basically end of May. I feel confident about our ability for this quarter and the rest of the year to produce those results.

Great. Moving to capital formation. As it seems like pretty consistently now, you gave very constructive comments on the broader-based capital formation environment you're seeing across the business. How should we think about capital formation evolving within your 6 big channels that you've highlighted on the recent calls?

Yes. If I say -- I know everybody in the room is focused on global wealth, global wealth, which I'm happy to talk about. But I would say that institutional is back. Like its demise was predicted and it's not happening.

So when we think about the 6 channels, whether it's insurance, fixed income replacement, traditionals and otherwise, I definitely think that institutional demand is very strong across credit, infrastructure and hybrid. We're getting a good take-up in our private equity vehicles. I think that's the dividend of good discipline over the last several years. So we feel exceedingly strong about the year-over-year growth in our broad institutional businesses and the variety of other channels that go along with that.

I think to global wealth, certainly, one product, the non-traded BDC, has come under some scrutiny more for perceived concerns than actual performance. So the headlines are certainly louder than the spread widening. But that being the case, you saw elevated redemptions in the first quarter. I suspect you will over the next couple of quarters. I don't think it was a one shot. That being said, I think you're finding underlying performance in March and April and May be solid and consistent. Maybe that will dampen down some of the redemption.

But what you're also finding in global wealth is there's differentiating -- differentiation going on between different channels, between the wirehouses, the RIAs and other independent wealth channels. Some tend to be, depending on the geography, a bit stickier, some depending on the channel and the manner in which you have one decision maker or many decision makers. So I think we're learning where -- who are our longer-term friends and who are the shorter-term tourists.

So on that, how would you characterize the pipeline mix of the redemption requests we've seen thus far?

Yes. I would say I suspect you're going to see -- it's still early. The way our vehicles work, you really don't know until basically this week, in a few weeks.

So I'm predicting, but having done this long enough, I would not suspect a dramatic decrease. I would suspect a maintenance of the levels of the past, maybe even a little bit of an increase as people want to game the system. So I think that's -- my professional judgment would say don't -- we're not through the turbulence yet.

I meant more like which pipeline is proving to be less sticky, I guess?

I think it'd be inappropriate before I get the numbers. But I do think there's certainly channels that are much more focused on a portfolio solutions than a product solutions. And those that are much more focused on portfolio solutions tend to be stickier.

Got it. So staying on the wealth topic, obviously been a lot of noise on one kind of specific part of the market, direct lending or non-traded BDCs. What are you hearing from your distribution products and partners in wealth? How is it impacting their view of increasing allocations to these products?

I think they all believe that their penetration is still low versus institutions and the long-term penetration will get higher. I think they look at this as a pebble in the shoe. It's a little bit painful in the short term. But sooner or later, you'll take the shoe off and get rid of the pebble.

And so I do think there will be a variety of product expansion and innovation. And I think there will be, over time, some winners and losers. So I just think these periods of disruption create a bit of a moat of intermediaries that aren't as sizable and scaled to participate. You need to have a lot of resources to be able to respond and engage and educate, and the requirements are just getting more and more. So I think they're looking for long-term partners.

So through that lens, it stands to reason, the real winners in that channel are probably already decided, and you'll be one of them?

I think if you've not really established a large distribution platform, large partnership, education, academic institute, online technology and a broad suite of products, I think it's very hard to break in now. It's almost like the bulge bracket banks. It's very hard to disrupt the incumbents.

Now I don't think all the seats have been taken, but I think a variety of seats have been taken. Now you can lose a seat. You can lose a seat from performance or brand or not delivering what you've said, but I think it's very hard to gain a seat.

Got it.

Much easier to lose a seat than gain a seat.

One more quick one on wealth. I think a few years ago, you were talking about launching 1 or 2 products a quarter. You've kind of stuck with that, and you have a nice suite. Are there still any kind of pockets on the wealth side that you think you need to be launching new products for? Or is the suite pretty well established?

I think we're pretty well established. There's no -- the decisions we've made to not do certain products were conscious decisions. But I don't think -- notwithstanding some of the more recent fundraising, I think those will be products that still undergo some degree of scrutiny or volatility. And if anything, I'm more focused on brand and the client experience than ever before. I think that returns are very important, but there's a variety of other factors that are pretty important as well.

So I think we're really in execution mode right now. I think there's times when there's market disruption and it's just really about education, communication and performance. And I think we're at that period right now, especially in the non-traded BDCs.

So I think we've hit all the kind of concern points out there right now, so let's move kind of to the growth algorithm for Apollo.

I like that. You did 12 minutes on the problems and 34 minutes on the opportunity. There you go.

Trying to stay positive.

Yes, yes.

So you had a great first quarter result, reiterated 20% plus FRE growth for this year and for longer term. So for those that might not be familiar -- as familiar with your story, maybe quickly unpack the key building blocks to that industry-leading view? And to what extent this year's volatility has made you more or less confident in hitting those targets?

Yes. So for those who are less familiar, we really have -- with the holding company, it's public, 2 real operating subsidiaries. Apollo Asset Management, that manages all the assets on behalf of third parties as well as our regulated balance sheets. That's the fee-related earnings and the performance incentive income, the PII, so 2 parts of our business.

The other part of our business is our regulated balance sheets, Athene, Athora, PIC and otherwise. That's spread-related earnings. The FRE has historically grown in excess of 20%. The Athene SRE, we signed up to long-term growth around 10% on a compounded basis, both compounded. We've exceeded both of those targets historically. We've -- on virtually every occasion, every quarter, exceeded the FRE. There's been some quarters where long-term trend is on SRE growth.

I think the fundamentals on the asset management side, you're hitting on it. We see, as our business has expanded from our private equity business to private equity, mostly a credit product set, but with infrastructure and real assets, massive institutional demand around the globe, massive demand from third-party channels, from traditional asset managers, from insurance companies, from what we call fixed income replacement. So a lot of drivers to that around the globe.

And as the demographics of pensioners and retirees gets older, there's a greater desire to derisk the equity and put more into fixed income and credit. So we're getting the benefit of that along with secular trends about the banking system and the role that private capital plays. So just a tremendous amount of drivers from the demand side of our -- of those products.

On the other side of the equation at Apollo Asset Management, companies right now, we're in this middle of this global industrial renaissance. The amount of companies that are looking for large-scale solutions that they can get done in the IG market, in the bank market and private credit. None of those markets are big enough on their own to solve all these problems. And I think there's a greater awakening that the CapEx needs are so great, it's a combination of those things.

So to your point, all the demographic trends, all the secular trends and the execution of our model is hitting all strides on the asset manager. And I think that the perpetual capital benefit of our vehicles, people are seeing the benefit of that flywheel in our AAM business.

On the other side of the business, the regulated balance sheet spread-related earnings, there's more -- annuities do well. They've done well the last 10 years. They continue to fulfill a need for a population that's getting older. Some [ pot pour ] of it's getting wealthier and they want more predictable income, and annuities are a great product there. We're the leading annuity player in the U.S. with the leading market share, low double digits. And so our ability to bring in liabilities from retail, from PRT, pension risk transfer, as well as the FABN fixed annuity-backed notes or repo, those all increased. So a lot of just great demographic drivers to our business.

Now on the balance sheet side, on the SRE side, slower growth because of the regulatory capital that's needed. And you're just talking about a smaller margin business of -- you're trying to make 120 to 130 basis points on the annuities. And so -- but very good demographic drivers. I do believe that the ability for the asset management and the retirement services business to create products in the future between the chocolate and the peanut butter. And I think that's still very early days.

And I think that when we think about one of the big challenges around the globe is we've done a terrible job in dealing with preparing retirees, broadly speaking, for post-retirement. Yes, people are getting older. Some countries have done a good job, Canada, Australia in terms of the superfunds, the other pension vehicles. But post-retirement, how is that dealt with? How do you deal with guaranteed lifetime income? How do you really prepare people to be comfortable to spend what they've saved without running out of capital? I think there's a whole host of growth options there.

But the businesses you described right in front of us -- and I try to describe Apollo in a very simple fashion is we're the box in the middle between companies needing to raise capital for growth, expansion, diversification and retirees around the globe that need either pension or retirement solutions. And both the left side and the right side, we have a great secular tailwind to our back. So I think that's what we make our business much better, but we also have to execute, and that's the secret sauce.

So on the insurance points, Apollo and Athene, for better or worse, receive a lot of attention in the press, and in some ways, I think, are seen as the poster children for the alts and insurance business model. To your credit, you've been kind of an industry leader in terms of transparency and disclosure, and there's a lot of presentations on both Apollo and Athene's website. As you read through this barrage of press, what are the major misperceptions from your point of view? And do you have any incremental thoughts on what else you guys could do to help assuage those concerns despite already doing a lot?

Yes. I think that -- let me tell you what I think we're doing that I think that we're -- you can either fight the conversation or engage in the conversation. And we probably try to do a bit of both, but first engage.

So to your point, about 3 or 4 weeks ago, we put out on a Friday, what I would think is the seminal piece on the portfolio breakdown of the Athene book, all the sub-asset classes in granular detail. We put out a second piece on our alternatives book, the granular detail. And the third piece was all the affiliated or related parties.

So the compendium of all 3 was a -- I don't want to say a shot across the bow, but it was our attempt to say, listen, let's -- if you want to shed light on it, let's shed the light on the facts. And we've had a universal great response from regulators, from industry consultants and folks that are in the know on really what matters.

I'll give you a great example. On the related party transactions which sound like really bad, a lot of the transactions we've done, Intel, per se, that we actually issued and actually monetized to a great return, because we couldn't own the whole thing for good diversification reasons, that gets tied up in the related party transactions because the strip of the investment is equity, and we needed to account for that. So a lot of times, it's actually not a flaw. It's an attribute. And so I think our choice has been just to really engage.

Now in the world that we are in today, a lot of folks who cover these complicated businesses don't have the historical benefit -- and I'm being very polite here -- to understand really how these businesses work. I think that if I could push back on one thing, I would push back on PE-controlled, the idea that Apollo happens to be an alternative manager. We happen to have a PE business. But the idea that the PE funds control our insurance activities, that couldn't be further from the truth.

So I just think it's a massive amount of education. We spent a lot of time talking about private credit. We think we wrote the seminal white paper on private credit. Most people define private credit as non-investment-grade direct lending. We think that's a historical term that's not really relevant today, but it's a name that the moniker has stuck. We talk about private credit being the investment-grade $40 trillion activity set. But I think that it's going to take just time and more folks to get up to speed and educated.

I mean, I have the good fortune of going through been a junk bond trader, and then I was a high-yield trader, and then I was in leveraged finance. My job didn't change, but the nomenclature of my job changed.

Fair point. You touched on retirement a little bit. I want to unpack it a bit more. You've obviously put a lot of material out there kind of citing this $45 trillion global retirement market, 1 billion people worldwide reaching retirement age. How more specifically is Apollo and Athene pursuing this opportunity? How does that differ across the different regions? And given you always say the real constraint on your growth is the ability to originate good assets, are there even enough good assets out there to truly address the volume of TAM you're talking about here?

No. But I think that the -- to answer your question directly, there aren't enough good assets, but we're not in the market share game. We're just trying to make sure those investors that we offer a retirement solution for, that we have the tools of our origination at their disposal as part of their proposal, part of their portfolio.

Not all of their portfolio, but a portion of their portfolio. Turn a 5% to 6% distribution rate into a 6%, 7%, 8%, and that's real dollars and cents for your average retiree around the globe. So I do think that working with the embedded infrastructure of Australia, the U.S. and Canada, our move in the U.K. on PIC to be part of the pension risk transfer market, there's no one solution that's the silver bullet around the globe, but it's really working within different countries, different geographies, different regulatory regimes to be part of that.

But our biggest focus is on the U.S. is on the U.K., a bit of Western Europe, Korea, Hong Kong, Singapore and Australia. That's really where -- we're not spending a lot of time trying to figure out retirement solutions in Latin America, which is really a very robust marketplace and a lot of reforms taking place. We're not -- we are spending some time in Japan, but we're not spending time in China. We're not spending time in Eastern Europe or Southern Europe. So I do think we just -- we choose with our locations, yes.

Got it. So the most kind of tangible impact on your results from the insurance business is spread earnings. And the tone on the earnings call I think suggests that maybe we've turned a corner after some challenges that business faced over the last couple of years. So could you walk us through the underpinning assumptions and confidence behind the new outlook there?

Yes. I think that we had a swath of some very high spread business that we originated in COVID that between the product set, happened to roll off, and we had a compression of spreads. But when we think about our ability to, during either Liberation Day or other periods of time, either use a variety of market moves to actually source a variety of assets or our origination kicking in, I think we feel comfortable that we are in a more balanced situation now and have gone through that a little bit of that pig in the python in terms of the marginal returns being a little bit lower than our long-term average.

So I think we feel comfortable with it right now. It is a more competitive space with folks entering the marketplace. I find it strange that people celebrate their entry into the marketplace and not their success at the marketplace. But I think over time, you need to generate mid-teens return on your ROE or the capital you have is going to disappear. We have the success of doing that.

And I think that we're not in the view that we have to grow at all cost. It's actually smart growth and shrewd growth. But I think that our model has shown that we've been able to generate that kind of spread return and make it appropriate. The other thing I would say is by deciding how you want to issue business, that does release some capital so we can be thoughtful about releasing capital if the growth options aren't as profound.

On the competition issue, Apollo has been quite vocal about the capital arbitrage in the Caymans, which I imagine is helping those more marginal players stay more competitive with Athene. Is that a fair view? And what are you doing to raise the issues with regulators?

Yes. I think we've been very transparent and very public how -- equal capital for equal risk. And we see the long term -- I mean, like the banking system, those that are large and well capitalized, we pay the bills when someone else goes off the rails. And so we've gotten bills in the last couple of years when folks -- when insurance regulators in North Carolina or other states have to come on in and we prefer not to pay those bills.

And so no different than the incumbent large financial institutions, i.e., banks, when they bark about an unlevel playing field, which I would say we actually are regulated. This idea that we're not regulated is not correct. But certainly, when we see what the regulatory arbitrage with the Caymans is, we don't think that's, long-term, healthy for our business. It allows incremental capital that's not as deep and broad and experienced to compete, and there will be a time when that's a problem. And we will certainly be called on to fix it. So we prefer to snuff it out before it becomes too big of a problem.

But we've been -- Marc has been very vocal. In our allocation of responsibilities, Marc takes more of the regulatory. I do as well, but not to the degree. But he has certainly been a leading voice in that mantra.

And do you think there's movement on that issue? Or is it hard to say?

I think that regulators, you first have to engage in them. I think you have to dialogue with them publicly and privately. I think regulators going after regulators is probably a hard thing for them to do.

So I do think that, yes, I'm optimistic, but I'm not optimistic in the next quarter. I think it's going to -- it's a longer term. I think we're on the right side of history. It's always nice to be on the right side of history, but I don't think it's going to happen tomorrow.

Last point on kind of the spread earnings build. There's obviously kind of, I guess, perennially a lot of focus on the alts return, the 11% target. Could you kind of walk through again what caused that to come so far below target in the first quarter and why you're still confident in kind of hitting that 11% long-term target?

Yes. I think that we're not immune to market moves. I think we buffered the moves that were -- because of some of the volatility in the equity market. We hit a lot of those air pockets. But I think that if you look since origination day 1 or AAA since day 1, we've been able to exceed that target. I think we've been very thoughtful about in the protective nature of having a lot of liquidity and a lot of excess capital to make sure that we don't get off sides, we maybe were a little bit too protective, but I still feel that the objective is appropriate for the long term.

Got it. Okay. One of the more interesting announcements on the call was your new AMAPS product. Created a little bit of buzz, at least in my conversation. So I think it would be helpful to quickly give this audience an overview of: one, what exactly the product is; two, how big you think this opportunity is; and three, how it differs from CLOs; and four, how it provides excess spread without incremental risk?

Yes. So just to level set for the room, CLOs, collateralized loan obligations, that really has, over the last 10 to 20 years, has developed into $1.5 trillion asset class that really is the home for a lot of the broadly syndicated loan activity coming out of the banks for the buyout activity. And it's the rigorous rules around the CLO market and bank balance sheets that led to the direct lending market, but that's another story.

So over the last 7 to 10 years, Athene, desiring to not just buy corporate investment-grade debt -- we bought a lot of CLO liabilities that through the GFC were never really impaired, but they were all rated as structured credit, AA, A, BBB, et cetera. And the marketplace has gotten so large and vibrant and so efficient and the pricing of the liabilities on the debt side has come down that it's driving a pricing down in the broadly syndicated loan market to SOFR 300 or so on an asset that probably should be priced wider, but there's lots of demand.

So last 10 years, Apollo has been a big -- Athene and Apollo have been a big buyer of these CLOs. We were doing some work last year and said, wait a second, isn't this strange that after 20 years, the application is only on the underlying assets, B and some BB rated loans? What if we could expand the purview of the assets of a structured vehicle like that, some investment-grade, some noninvestment-grade, some public, some private? Instead of operating at 10x levered, operate like at half the leverage. So broader diversity, less leverage.

And what if we could create the debt stack that works more for insurance companies rather than banks? The way a CLO works is a AAA piece is what the banks want, 0 to 65, about 125 over. Great for banks, not for many other folks. So we went to the agencies and said we have this idea. We worked with them. We structured one that worked on paper between less leverage. The tranching that we liked, it worked for an insurance company. And putting it into a variety of evergreen products at Apollo, that led to a lot more diversity.

Agencies gave us a sign-off, signed off on all the ratings. And then we went to a partner and said we want to do 4 or 5 of these over the next year, $5 billion a clip, will you be our 50-50 partner? They said yes. And so as of today, we've done 4, we call it AMAPS, Apollo multi-asset portfolios. And we then, in the last month or 2, have gone out to syndicate the investment-grade and other rated pieces. A bunch of banks have come in. And we've gone out to say you all should do this for other managers. This is a better application of the CLO engineering. And we believe this is where CLO market could go and be CLO 2.0 for a broader application.

So I'm happy to report in the last couple of months, a bunch of banks who've come in and help participate on these debt pieces. We've kept our pieces. We've taken our direct CLO exposure down from $46 billion to about low $30s billion. And we've said to a lot of the banks, you all should go out and do this with many of our peers. Like let's get -- it's a new marketplace. We feel like we're a leading player, but we don't want to be as Apollo, go to B, go to C, go to A, go to K, and they should do it as well.

And so we think it's a great product. We think it has a lot of applicability. We think the banks should like it because they get to underwrite and trade more. And there's a lot of second and third -- I'll use the word second and third derivative applications. Probably not appropriate in this audience, just let's absorb the idea first. But I think there's just a lot of applications how this could really expand how we capital raise and how people get access to private credit.

Interesting.

Exciting time.

Yes. So apart from AMAPS, I think the other big news coming from the call was your plan to provide daily pricing for all of your credit positions. Some of...

All the IG stuff.

All the IG stuff. Okay.

Yes, yes. By June 30.

Okay. I thought the September date...

September 30.

It doesn't include everything.

Well, by September 30, it will include a broader array. I think some of the non-investment grade direct lending will take a bit longer, but it's probably in that ZIP code.

Okay. Yes. So since most private credit is designed to be held to maturity and generate excess yield for investors, I think it would be helpful to get an update on why you believe this is the right path forward and what you're ultimately trying to accomplish?

I don't think all private credit is created to hold to maturity. I think private credit has been created to offer issuers an alternative to the public IG issuance market. And in turn, it offers investors an ability to harvest extra yield if they don't need all the liquidity that they might need out of the most recent IBM bond.

And I think that what investors do realize that while there may be a CUSIP on a variety of their investment-grade debt, it's not as liquid. Not every investment is as liquid as they may perceive it to be. And so I think we have found a variety of investors who think like us that have said, let's take a portion of that IG bucket, let's trade for liquidity that's not there and make an incremental yield. And they like that idea, but they don't want to sign up to something that potentially could be mismarked, i.e., if it trades down or should trade down because of spread or trade up shouldn't be this marked at par forever. I think that people are questioning just because it's private, does that mean it has to be held at par forever.

So we're challenging some of the assumptions. I think that if you look at any asset class over time, broadly syndicated loans, CLO liabilities, the more the transparency is on pricing, maybe not liquidity, but if nothing else, pricing, I think that gives investors more confidence they know what's going on. More investor confidence means more capital coming in. And I think that we, as a participant in that market, benefit from more players than we might have in the past.

So I think this is just the natural evolution of time and markets and how they operate. And so we think this is good for our position. We think this is good for the breadth of the markets and investors' confidence. And I think that when you dissect what we're doing, we're on the right side of history. It's like what happened, as I said, in other asset classes.

So there are some folks that are very focused on the noninvestment-grade private direct lending that want to hold on to the concept that the issuers don't want that to happen. I think that's not incorrect. But I think that over time, it's the investors that will demand how the market operates rather than the issuers.

On that, I've sensed at least that there are some or maybe many investors that see the lack of visibility on markets as a feature more than a bug. So are you concerned at all that there could be some investor backlash from providing this?

Yes. I think that those investors who just thought the real benefit is low or no vol, I'm not sure that that's a robust argument over time. And I'm not suggesting there has to be volatility, I'm just thinking that I think the product set will benefit from a greater degree of transparency and education. The idea of taking asset from par to 0, I think, is an unsettling one. And I don't know anybody that would advocate that's a good prudent management.

Yes. Fair. So in the vein of everything we just talked about, Apollo, I think, has been one of the most innovative asset managers out there. You were a first mover on high-grade solutions, to your point, hybrid strategies, AAA, which is now, I think, your largest strategy.

AAA and ADS are both $25 billion. $30 billion.

And now AMAPS, what we just talked about. So you probably don't want to show all your cards, but is it fair to assume there's a pipeline of these in the lab?

Yes. I think we are focused on market-moving impact ideas. And you can only come up with so many in the course of a year or so. So I think AMAPS and AAA are two good ones for right now. I think there's a lot of things we're doing in terms of thinking about in a world of disruption, in a world of what's the truth and what really withstand that type of environment. I think things that are more infrastructure, equity that turn into more like yield products are one.

But yes, I think that we've always we've always been on the cutting edge. It's sort of our curious creativity that drives us. There are not a lot of patents on Wall Street. I think there's a lot of folks in our industry that would like time to stand still. I think that's a romantic concept, but I don't think it's practical. And the reality is, as a public company, you have to think about the evolution of creation and how to evolve.

And I got to Apollo 20 years ago, we were a PE firm that had a credit business. And now we're a much different firm 20 years since. And I think that there will be a time in the future where people might say, wow, they actually started out as a PE firm. Oh, I didn't know that. So that's not our objective, but I just think that's reality about where the industry is going and the solutions that we can provide on both sides of the equation.

That's helpful. Before I get to my concluding questions, I want to make sure I address the last one on the iPad from the audience, which, as I read it, I think is probably more focused on kind of the on direct lending-type loans. But this person wants you to expand on kind of the private credit loans we've been seeing and what Apollo is expecting in terms of loss rates going forward.

Well, I think that this idea that -- I expect -- there's lots of predictions from the big banks about where high yield and loan defaults will be over the next 3 to 5 years. And I'd use those as a starting point. And just because of the nature of direct lending and it was concentrated in software, I think you probably got to add a few hundred basis points of potential losses in direct lending to the high-yield and loan markets.

Now I would say the high-yield and loan markets have been pretty benign the last several years, and there's a massive CapEx cycle. So I think there was some estimates that -- I think one of the banks, UBS said 15%. That just seems extreme to me. So I suspect the disruption will cause a variety of defaults across all 3 product sets, high-yield, BSLs and direct lending. But I think if I had to guess if the 30-year average is around 3%, 3.5% default rates, the likelihood of the 5-year trend being higher than that long-term trend is probably in the cards. But I don't have enough to say that it's going to be dramatically higher than that right now.

Got it. So a couple more before we finish. On capital, can you refresh us on the capital allocation framework? What would allow you to lean in more heavily on share repurchases? And in terms of inorganic opportunities, where you're most focused?

Well, I still think we put out our 5-year plan a few years ago with increasing our dividend, buying back our stock as the two priorities and buying back our stock with immunizing our stock from stock-based comp as well as other areas. So I think right now, we're focused on those two at this point in time.

We did a small acquisition last year in Bridge. I think acquisitions are hard. I think there may be some things that merit it. We're not saying no to it, but we want to make sure that we are very focused on capital allocation at the holding company with the dividend and stock buybacks, and that's our primary focus right now.

Makes sense. So to conclude, your culture is well known across the business. Your team recently posted a culture deck for investors. What do you think are the most important takeaways for the investor community on your culture and how it differentiates from the industry?

I think how we operate and how we manage is the same. We talk about clean sheet thinking, right over easy, no walls. All those things are how we operate. And that's easy because you don't have to translate how you operate to how you manage and how you integrate with the outside world. So I think we find it a very consistent strategy. I think it's going to be more important how you recruit and retain individuals in a world of technology disruption.

And so I think it's very, very important. It's very consistent. And we love all our investors, and our clients to know how we run our business. So it's sort of consistent with open architecture and alignment long term. So we're very proud of it. And the more people that read it, the better off -- we like it. We like it. So thank you.

Thank you for the time, Jim.

Appreciate it. Appreciate your audience time. Thank you.

_Good morning, and welcome to Apollo Global Management's First Quarter 2026 Earnings Conference Call. [Operator Instructions] This conference is being recorded.

This call may contain 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 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 in any Apollo fund.

I would now like to turn the call over to Noah Gunn, Global Head of Investor Relations.

Great. Thanks, operator, and welcome again, everyone, to our call this morning. Joining me to discuss our results and the momentum we're seeing across the business are Marc Rowan, CEO; Jim Zelter, President; and Martin Kelly, CFO. Earlier this morning, we published our earnings release and financial supplement on the Investor Relations portion of our website.

As you can see, our first quarter results set a strong tone for the year. We generated record fee-related earnings of $728 million or $1.17 per share, spread related earnings of $719 million or $1.15 per share and total earnings or adjusted net income of $1.2 billion or $1.94 per share. We also declared a common dividend at our new higher rate annualizing to $2.25 per share and reflecting a 10% growth rate year-on-year.

Lastly, I would flag that we published several presentations on Athene's website last Friday, that provide in-depth insightful information about the asset portfolio. This effort highlights our continued commitment to lead with transparency and be responsive to market feedback.

And with that, I'll turn the call over to Marc.

Thanks, Noah. Let me start where Noah ended. Strong results set a tone for a strong year. FRE of $728 was up 30% year-over-year and 6% quarter-over-quarter. ACS fees, $246 million for the quarter, the fourth straight quarter over $200 million. And just to spend a second there, ACS fees being strong means origination has been strong, not just in the quantity of origination but in the quality of origination. No one pays a fee for a normal core CLO, which many people count as origination.

Origination for us comes from our syndication activities which is also how we expand our client base and many of our syndication partners turn into management fee over time once they see repeatable transactions. We continue to build businesses on this basis and use ACS fees and origination as a diagnostic of just how strong the business is. SRE of $719 at our long-term Altreturn of 11% would have been $907. On that basis, 2% quarter-over-quarter, 6% year-over-year, strong organic growth and in-line core spreads, the alts portfolio, low for the quarter, but doing exactly what it is supposed to do. The quarter -- S&P was off 17%. The Russell was off 16%. Levered equity, private equity, which is the strategy that most of our industry uses in their alts portfolio would have been worse down north of 20%. We were up 6% for the quarter. While this is not in line with our long-term expectations, this is not a miss. This is entirely how we invest. AAA, which continues to constitute the vast majority of Athene's alts portfolio is now the largest fund at Apollo, north of $27.5 billion, 12% net returns since inception. We are, in short, exactly where we want to be.

We're seeing momentum across the business. Origination for the quarter was a particularly high quality, $71 billion. Based on the pipeline we see, I expect origination in Q2 to be even stronger. Recall that our record quarter for origination ever has been $97 billion. Whether we get all the way there or not will depend on how hard the team works, but I think we have a shot doing something very close to that. Origination is not just about numbers, it's about spread. Here, origination for the quarter was 350 basis points over treasuries with an average rating of BBB, and I'm sure Jim will spend more time on that in his remarks.

Capital formation also really strong, $115 billion for the quarter, of which $50 billion was organic and $65 billion was the closing of the Pension Investment Corp. transaction for Athora. To break down the organic, asset management was $30 billion, Athene $20 billion. Based on what we're seeing for the first quarter and what we see in the pipeline for the year, we're reaffirming our 26% outlook of 20% FRE growth and 10% SRE growth, and the business trends continue to be highly favorable.

The business, of course, is dependent on the macro environment. and the macro environment, notwithstanding the noise of what's happening geopolitically continues to be consistent with how we view the business over the past few years. Jim and I, each of us have now worked more than 40 years and for the vast, vast majority of that time, we have seen and managed our business and managed our investments with the notion that 95% of the outcomes will occur on the playing field and not outside the sidelines. And sometimes, we like what's on the playing field and sometimes we don't in terms of rates and economic cycle, but we know how to navigate that. And we never spent much time thinking about the small chance of out-of-box results because if I go through at least my career, 1987, 1990, 1997, 2000, 2001, 2008 and COVID. Almost every out-of-the-box event was unpredictable, uncorrelated and not something you could have spent your time preparing for. We have a little bit different situation today where I don't know, 65-35, 70-30 , we just have a much greater chance, in our opinion, of out of sideline results.

Everything we see in front of us is actually quite strong. Everyone has a job. Employment stats are good. CapEx cycle is awesome. Government policy, incredibly accommodative. Capital markets, wide open. Why do we think that we have a greater than average chance of out-of-the-box results? Well, geopolitical reset is taking place around the globe, not just talking about what's happening with Iran, it's a total geopolitical reset. Again, maybe much needed. But nonetheless, has the potential to cause out-of-line results?

Second, almost everything we're doing, whether intentional or not, has the potential to be inflationary at least in the short term. restricting the supply of goods, restricting the supply of labor and the free movement of goods and labors, maybe for good and valid reasons that need to be done are all inflationary in the short term, even if we are not seeing signs of it.

Third, we are seeing the most comprehensive tech cycle we have ever seen or certainly I've ever seen in my career. This will be very, very far reaching. Almost every job will be enhanced or replaced. We're going to see, in our opinion, a complete flip of blue collar ascendancy and white collar stress. The political and other consequences of that, I just think, are unknown.

And finally, consumers and businesses are actually in great shape. Governments, not so much. And this is not just a U.S. What is the natural reaction to this higher percentage of out-of-the-box results? Well, for us, it's to be defensive and continue to be defensive. That doesn't mean we're not investing, but it means we're investing with an eye toward protecting our capital and making sure that we are here to ride through cycles if there are corrections, which we quite frankly expect. That leaves us positioned well and ready to play offense. How does that play out in practice? Well, look at our equity business.

In our equity business, whether it is the Private Equity business or the Hybrid Equity business, 0 exposure to software. Hybrid value results for the last 12 months plus 16%; private equity results Fund 10 -- 20% net IRR, 0.4 DPI versus 0 for the industry. In equity, again, that's how this defensive posture plays out. In credit, almost everything we've done recently is upmarket, moving more toward investment grade, moving more towards structure, moving more toward protection. Recall that better than 80% of what we originated last year was investment grade. If you look across the entirety of our credit business, sub-2% software exposure, all buckets of credit up 8% to 11% LTM, credit AUM is now vast majority investment grade.

Let me flip now to discuss private credit. The market, actually, the press remains fixated on a $2 trillion slice of this market, which properly should be called levered lending. Most of the financial press treats this as if it is the entire story of what's happening in private markets, and it is far from it. The investment-grade private credit market, which is being driven by the global industrial renaissance is a $38 trillion market. Therefore, the total opportunity in private credit is some $40 trillion. The obsession with this very narrow corner of the market, this $2 trillion slice, levered lending, is frankly a failure of imagination.

Credit in any economy only comes from 1 of 2 places. It comes from the banking system or the investment marketplace. There is no third choice. If levered lending is risky, do we want it as a policy matter inside the banking system or do we want it in the investment marketplace? I think the market has spoken, I think regulators have spoken. Does that mean that risk has been transferred to investors? I don't think so.

What has happened in our marketplace and the growth of levered lending, particularly exposure to BDCs is a rational move by investors who are looking to derisk. Why do I say derisk? Because most of the funds, investors have invested in levered lending have come from the sale of their equity portfolio. Investors rationally have decided that they can earn equity-like returns from first lien risk rather than by holding equity for a portion of their more speculative exposures. This is not people who have taken their treasury portfolio or their investment-grade portfolio and gone into levered lending. This is people who have sold their equities to go into levered lending.

The notion that alone is somehow riskier because it wasn't originated by a bank is not a coherent argument. Private credit is just credit. You underwrite it well and it performs. You underwrite it poorly and it doesn't. If you are concentrated in one industry and you are seeking very high returns and you do things other than first lien, and you do things that are highly pick and highly structured with smaller companies, you will suffer losses in pursuit of higher returns. If you run a large cap only, first lien only, cash pay only, less levered credit book on a fully diversified basis, you will not suffer losses absent a massive credit cycle, in which case credit everywhere in the economy will be affected. The origination channel is relevant, the jockey, not the horse.

All of this is about risk management, and Jim will reinforce this and discuss ADS, our flagship, including recent performance. But the cycle we've been through in the press and the cycle we've been through explaining actually reinforces something that we've been doing over the past few years, which have not always made us popular in our industry. Trust and reputation, now more than ever, necessitates greater transparency on fund pricing for fund investors. New buyers particularly want more transparency around private assets.

Last year, we launched the notion of estimated daily value as a pilot for our investment-grade fixed income suite of products, and we validated our asset pricing methodology for our platform, which is the largest private credit platform in the world by 6:30, our investors will have daily pricing for all corporate investment-grade fixed income assets. By 9:30, all investors will have daily pricing for direct lending and asset-backed finance also. That essentially means the totality of our credit business will be 100% daily pricing by 9:30, 100% daily pricing by 9:30.

How does this work in practice? And what have we been doing to date? Because technique and process vary across our industry. If I take our direct lending business, our levered lending business, ADS, even in this market, we are focused on transparency and consistency, and we run a rigorous process with discipline. When public markets reprice, private markets should too. In ADS' case, the rules of the road are as follows: If we hold a position with anyone else, we take the lowest mark always whether we agree with that mark or not because that is indicative of where someone might sell the position, and therefore, we market to the lowest price.

We map the entirety of our ADS book to the broadly syndicated loan index industry by industry. If any sector of the broadly syndicated loan industry is down more than 2.5%. At a minimum, we reflect 50% of the value, but it causes us to reanalyze 100% of our exposure in that. There are layers of analysis here about fundamentals, cost of capital, public comps and market trades and we marked to current information, not to hope. Whether we agree or not with these marks, just as we sometimes agree or disagree with public marks, we reflect them because private markets need to move when public markets move to the extent they reflect a broader consensus of spread or risk or other things.

Another place we've seen noise in private markets is the noise around day 1 markups and secondaries, particularly on some of the calls for some of our peers. Let me address this directly in how we think. From our point of view in an evergreen format, this practice makes no sense. This leads to mispricing on a short-term basis, which was not that important in institutional funds where investors were not coming and going, but turns out to be very important in funds on an evergreen basis where investors have the opportunity to receive at least a portion of liquidity on a quarter-by-quarter basis.

Across the totality of our $1 trillion platform, secondaries that have been marked up round to 0. To give you a sense of revenue for 2025 as a result of this markup for the year 2025, revenue was sub-$3 million. We're not sure this accounting practice makes sense, although it is what is currently demanded by the marketplace. And we are part of a group seeking to bring common sense and common sense marketing to this practice because we believe that this reflects reality.

Market Making is another part of transparency. The continued convergence of public and private assets ultimately requires more liquidity. We have never seen a market where enhanced liquidity and enhanced transparency does not result in tremendous growth for the asset class. Last year, we started really pushing on Market Making in private markets. From a cold start, we are now north of $13 billion of traded assets. This quarter was exceptionally strong, particularly as fund managers now recognize that we are the leading source of liquidity and for private market assets, particularly credit assets. On top of that, our venture with ICE will bring greater transparency and consistency of data to this market. Every private asset in the Apollo portfolio going forward will have an ICE ID, possibly in addition to CUSIP. This is the beginning of standardization across this marketplace. It also gives us a tremendous amount of information on real-time pricing and helps inform our estimated daily values across our credit portfolio in particular. Enough on asset management for the moment, let's flip to Retirement Services. It is clear to us that there is significant demand for guaranteed lifetime income and for retirement income in all forms. The global retirement crisis gets clearer day by day, and we believe this is one of the biggest secular opportunities out there.

Against that backdrop, we tap a portion of this market through Athene. '25, as you know, was a record year with $82 billion of organic origination, and we expect and plan to do more of that in '26. In Q1, we did see lots of competition in our view, irrational competition of people putting business on the books at ridiculously low spreads. We did the business we wanted to do and not anymore. Fortunately, we had a very strong and rich origination pipeline, which allowed us to continue to preserve spread against this competitive backdrop. Cash now in the Athene ecosystem is circa $40 billion, along with our treasury and our agency portfolio. This gives us a significant amount of dry powder, along with a robust origination pipeline tells me that we are on a better trajectory. Lots of noise around the industry, particularly with the words private credit. This is not about PE-backed insurers, it's about insurers. For us, no Cayman, no collateral loans, no games, just straightforward business. What we are doing is totally transparent, no guess work is required. As Noah mentioned, we put out 3 decks consistent with our policy of providing the greatest degree of transparency in our industry. If you find that we have not met that standard, please give Noah a ring. I don't know of any other insurer or any other financial institution that puts out the kind of data that we do, whether it is liability data for granular data on our asset portfolio. We have the luxury of doing this because we are not concerned about transparency. We have amassed the second largest capital base in our industry, some $35 billion, and we are committed to pursuing our AA rating.

Why are we focused on rating? Well, because not everyone in our industry is doing what they should do. Not everyone runs their business the way we have run our business. We do worry about contagion. And again, this is not about PE-backed insurers. This is about insurers. Some of the more egregious practices we have seen across our industry do not come from some of the new players. They come from incumbents. What we can do is be transparent, be committed to higher ratings, build our capital base and run the business for the long term like principles because we are. Anyone out there pedaling false narratives about Athene. You now have all the information that you need. Athene has a fortress balance sheet with 95% fixed income, of which 90% is investment grade. Our exposure to levered lending, which people sometimes call private credit is de minimis, rounds closer to 0 than to 1%, Cayman in at 0.4%. Our exposure to software, 0.1%. Less asset impairment than our peer group, full transparency on related party affiliate and Apollo originated assets. We celebrate Apollo originated assets because that means we are controlling the risk and controlling the spread. Full transparency on top holdings with case studies, full transparency on credit quality and ratings.

Interesting statistics in the materials that we've done on ratings. People can now draw conclusions as to whether any of the rating agencies are more or less leaned I challenge you to come to a conclusion that any one rating agency is better or worse with respect to credit quality than another rating agency. Public ratings and private ratings, these are the same analysts at the same firms in the same team, rating in many instances, the same company. There is no difference that we have seen between public and private ratings other than whether they are publicly available and most times, they are not publicly available. It is at the request of the issuer.

In every instance we hand, we're in the process of going back and getting a second rating for places that we only have one rating that are private and continue to think this is best practice for the industry and challenge anyone find what we have yet to disclose or anyone in the industry who's doing better than we are doing with respect to disclosure. The same risk off defensive mentality that we talked about in our Asset Management business applies to our retirement services business. One of the ways we earned excess spread over a really long period of time, were the investment-grade tranches of CLOs going back 17-plus years. Investment-grade tranches of CLOs have outperformed investment-grade corporate bonds with respect to defaults and recoveries for the last 26 years. That is not a widely understood fact, but it is, in fact, a fact.

They have also offered excess return because of a perception that somehow structured products are more risky. We had, at one point, on Athene's balance sheet, north of $40 billion of investment-grade tranches of CLOs, some 11% of Athene's balance sheet, by the way, 99.8% investment grade. What we saw, the market began to see. And over time, the spread available on CLOs vis-a-vis corporate bonds became challenged and declined. We have, as a result, run off our book and CLO exposure is now down below 8%, and we expect it to be even lower in the coming quarters. Recall that this book has an average life of less than 3 years in current market environment, and we expect the vast majority of this book to repay simply in the normal course.

And to AMAPS. We are in the business of innovation and continuing to originate AMAPS, Apollo multi-asset prime securities essentially takes the benefit of CLO and adds greater number of issuers, less leverage better structure for investors with a FIC single A tranche versus a skinny single A tranche and 40% to 50% investment-grade assets. We believe, again, this is risk reduction. Oh, by the way, greater spread than the A tranche of a CLO. The way we view this is we are taking the 0 to 75 risk, which is equivalent in a CLO to AAA and AA and getting paid more than A pricing for a more diverse, more highly rated structure simply because it is new.

Athene now has $11 billion of investment-grade exposure or 3% of the portfolio, essentially making up the decline of our CLOs. We would expect this to double over the coming months. as our CLO exposure comes down. You can see in real time us derisking the portfolio while preserving spread, and we are also seeing increased demand for this product across the marketplace as other insurers and other investment-grade accounts begin to appreciate a new structure, but new structures always take time, and we will garner the lion's share of this asset for the foreseeable future.

Innovation is not just about assets, innovation at Athene is about liabilities. Recall that new markets, which was a very small contributor to volume in 2025, less than $1 billion. We expect to be north of $5 billion this year and ultimately to make up as much as half of Athene's new business. In Q1, it exceeded $1 billion for the first time in terms of liability generation from new markets and momentum is building, and we expect this to go up over time. Retirement is not just an issue in the U.S., retirement and retirement income and the need for it. is as much an issue in Europe. Athora this month closed the Pension Investment Corp. transaction. Pension Investment Corp. doubled Athora's assets to $125 billion, and also presents us another market of organic growth in addition to the Dutch market.

In connection with this purchase, another EUR 3.5 billion of equity was raised for PIK. Total common equity inside Athora today is in excess of EUR 9 billion. And just like Athene, focused our energy around originating investment-grade product denominated in dollars appropriate for a U.S. regulated balance sheet. PIK in addition to the other assets within other franchises within Athora now requires us to expand our efforts to generate pound-denominated assets that are appropriate for U.K. regulated balance sheets.

Let me now bring it home. We've been leading our industry into the future. Not everyone is doing what we're doing. Most of our industry started life as private equity firms. They then branched out into real estate and infrastructure and even private credit, but still in the structure of private credit for -- private equity firms inside of funds in relatively slow-moving businesses where money was raised by investors in fund format and now evergreen fund format.

We are revolutionizing how and where capital, wealth building and retirement solutions are delivered. As we scale, which is a difficult thing, it is crucial to define and maintain what makes Apollo, Apollo. Some of the most important work Jim and I and the team have done is now on our website under our employment pages that's now been downloaded either on LinkedIn or from our website nearly 100,000 times, defining what makes Apollo, Apollo. This is our way of explaining to new hires and to new partners who have joined us, not just what the business norms are here, but what the cultural norms. As the world changes and as we are all confronted with new technologies and new ways of doing business, it is, in our opinion, the strongest cultures that are going to survive and adapt.

We now have everything we need in front of us to achieve our 2029 targets to keep our edge and continue winning, we need to be uncompromising about who we are. We are now focusing our energies on building what comes after 2029. And we are purpose built for exactly this kind of environment, and we are leaning in.

And with that, I'll turn the call over to Jim.

Thanks, Marc. Let me take a step back and start with the big picture. Apollo sits at a unique intersection, what I like to call the intersection of first in Maine. On one side, we're fueling the historic capital needs of the global industrial renaissance such as AI, energy transition, defense and holistic infrastructure. On the other, we're providing retirees around the globe with retirement income solutions they need to fund the next chapter of their lives. And Apollo sits at this intersection delivering capital to where it's needed and generating returns for people who depend on them. Our scale and expertise on both sides of this intersection is unparalleled making our model more relevant than ever.

We find ourselves in the middle of more conversations with CEOs, CFOs and CIOs than at any point in our history. Through close collaboration with our partners internally, we are pushing scale and transparency, driving innovation and reimagining how our industry delivers value. Our 35-plus year franchise is built on trust and reputation, and that, combined with our capital and our creativity is our moat. It's what allows us to deliver quality at scale, and you can see it in the momentum across origination and capital formation this quarter.

Origination activity totaled $71 billion, representing 25% growth year-over-year and driving total volume of nearly $325 billion over the latest 12 months. Our activity in the quarter was $61 billion of debt comprised approximately 75% investment grade with an average A rating and 25% sub-investment grade with an average rating of B. With respect to spreads in the quarter, our investment-grade origination, we generated excess spread of 290 basis points over treasuries or approximately 210 basis points over comparably rated corporates.

On sub-IG origination, we generated excess spread of 470 basis points over treasuries or approximately 170 over comparably rated high-yield corporate indexes. We continue to observe stable spreads consistent with recent quarters and noteworthy in an environment where public market spreads remain near multi-decade tights. Maintaining excess spread and quality at scale is not only made possible by the breadth and selectivity of our embedded proprietary origination ecosystem.

I'd like to mention 2 recent transactions that demonstrate this scale. First, we provided a $19 billion bridge commitment in support of Paramount's acquisition of Warner Bros. This transaction reflects the sheer capital and scale that we've been able to provide in support of large-scale M&A and our ability to partner with banks to meet the needs of the marketplace.

Secondly, in February and April, we led 2 AI-related financings totaling more than $8 billion to support a client's acquisition and lease of data center infrastructure to a large investment-grade counterparty. These types of franchise transactions for next-gen AI infrastructure not only highlight our leadership role in providing flexible capital solutions they showcase our principal versus agent mindset that underpins our patient approach. While others may have rushed to print their marquee AI infra transaction, we have been methodical on structure, partner selection and underwriting risk. We are at the forefront of opening up a new funding market that is financing the picks and shovels going into data centers and doing so with IG counterparty risk and amortizing structures. Across the 5 primary hyperscalers, CapEx investment of AI infrastructure is estimated to exceed $800 million this year and almost $1 trillion next year.

Against this back up of enormous and historic CapEx spend, we have a variety of touch points with this ecosystem, including data centers, powers and chips and it's clear for us to private capital has a major role to play in this ecosystem. High-grade capital solutions has become a critical piece of our origination toolkit. We've led the creation of the structure and to name more than 150 transactions and $80 billion in volume since 2020. And our current pipeline is broader and deeper than the totality of what we've done to date. Intel and AB InBev are 2 examples that have gone full cycle from origination to repayment.

On Intel specifically, they came to us with a need, we solved it as principal. And as their financial position evolved, they repaid the financing, netting a $3 billion gain for us and our clients. This is our model working. And in these types of situations, we are able to provide critical tailored capital that can be paid off as the client needs grow and evolve in time. In return, we get access to attractive investment-grade opportunities that offer excess spread.

Turning to capital formation. As Marc mentioned, we generated $115 billion of total inflows in the quarter, including $65 billion from the [indiscernible] acquisition of the PIC. Of the $50 billion of organic inflows in the quarter, Asset Management delivered $30 billion, while Athene added $20 billion. Of the $30 billion of inflows in Asset Management during the quarter, approximately 75% went to credit-oriented strategies and 25% to equity-oriented strategies supported by strong demand across client types and geography. And as Marc highlighted, we have been active in the marketplace with the creation of the maps structured solution and the product continued to grow successfully during the quarter, generating $5 billion of inflows.

Our institutional business had a very strong quarter as well. with hybrid value, in particular highlight, closing on a $1.5 billion in the quarter to reach a final close of $6.5 billion, exceeding its target. It's worth noting that approximately 1/3 of those of that capital came from new investors a clear sign that demand for hybrid offerings, the sweet spot between debt and equity is attracting greater interest in client portfolios. I'll also mention that [indiscernible] also hit a final close of $1.9 billion, and Athora closed $3.5 billion of new equity commitments with strong institutional support in the purchase of PIC.

Importantly, what we're seeing on the ground right now as the institutional investors are not pulling back. And if anything, the volatile backdrop is drawing interest in institutions actively looking to deploy in a variety of precincts in credit and the level of engagement remains high globally. Our Global Wealth business had a solid quarter against a particularly challenging backdrop with fundraising totaling $4 billion, only modestly lower quarter-over-quarter. And consistent with industry trends within BDCs, we saw an uptick in redemption requests at ADS, though it's worth noting that 94% of the fund's investors did not submit a redemption request. The fund had net flat flows for the quarter and performance remained strong with preliminary April performance indicating of approximately 80 basis points. Beyond ADS, our diverse suite of semi-liquid and drawdown offerings continue to resonate as inflows remain consistent with recent quarters in aggregate.

Looking ahead, the long-term wealth opportunity over a long cycle remains unchanged. What has changed is that we're entering a period where selectivity, underwriting discipline and origination quality are going to matter far more they did during the long, low volatile period that preceded. Previously, the primary way to differentiate one's product in the channel was dividend yield and some stretch to achieve this with higher leverage, more pick and moving down the capital structure and diversify -- higher exposure rather than diversified exposure. We expect that we will see dispersion across managers and believe investors now see who has been managing portfolios prudently for the long-term risk-adjusted returns. We see this as an opportunity for differentiation and share gains for our franchise.

At Athene, inflows in the quarter totaled $20 billion, driven by activities across retail, flow reinsurance and funding agreements. And as Marc noted, new markets volumes are gaining early momentum, led by stable value and structured settlements. We continue to observe the broader demographic trend tailwind is real, demand for retirement income solutions is global and growing structurally around the globe and Athene remains well positioned to grow. The strength that we are seeing in our capital formation is being fueled by 6 diverse sources of demand. One, fixed income replacement. Two, the wealth channel. Third, third-party insurance. Four, traditional asset managers. Five, the DC 401(k) or the Department of [indiscernible] proposals helps pave the road for private assets in a greater manner and importantly, the traditional alts buckets with institutions are historic strength. The momentum is real, it's diversified and it's accelerating.

Martin will now walk you through the financials.

Good morning, everyone. Thanks, Jim. Clearly, it's busy around here. I'll try to be brief and touch on the key points. In Asset Management, AUM and fee gen AUM grew by 31% and 40% year-over-year, respectively. And as you know, total AUM close to $1 trillion. Clearly, a significant milestone in the context of trust that our clients continue to place in us as we provide excess return per unit of risk at an even greater scale. You heard the fee-related earnings of $728 million in the quarter reached a new high of 30% on the year and 6% on the quarter. And within that, we saw a 24% year-over-year growth in management fees, driven by third-party fundraising across credit and equity strategies, strong capital deployment and continued growth from Athene.

Capital Solutions fees reached a new high and we're the fourth consecutive quarter above $200 million, as you heard, with contributions from approximately 90 discrete transactions in the quarter. Activity this quarter was led by opportunistic credit with the mix driven approximately 80-20 credit to equity and that compares with our 3-year average of approximately 60-40 across those 2 segments. While there's directional alignment between the volume and our capital solutions fee mix, the quality and mix of activity matters. And this quarter, we saw strong contributions from hybrid capital solutions as well as structured finance, both high-quality origination channels. Fee-related performance fees grew 19% year-over-year, reflecting continued growth across diversified Global Wealth products, including bridge and perpetual capital vehicles. This was sequentially lower in the quarter due to the absence of certain crystallizations which benefited Q4.

Lastly, 27% growth in fee-related expenses reflects predominantly the addition of bridge as well as continued investment to support the firm's strategic growth initiatives. Our FRE margin reached 58% in the quarter, expanding approximately 50 basis points year-over-year, reflecting positive operating leverage on record quarterly fee-related revenue and expense discipline. In terms of our compensation philosophy, we firmly believe in the benefits of utilizing stock as an alignment tool within the TAM. In the first quarter, stock-based comp increased resulting from the vesting for several long-tenured employees who are retiring from the firm and the industry as well as the impact of seasonal annual grants. We manage comp on an after stock-based comp expense basis and expect the annual stock-based comp impact to continue to approximate 10% of fee-related revenues, well below the industry average of 15%.

On the revenue outlook, we expect Athora's PIK acquisition to begin contributing in the second quarter at an annualized rate of approximately 20 basis points initially. We're excited by the opportunity ahead for Athora given its scale and strong positioning in the U.K. market. Our Asset Management business continues to execute at a high level, and we are reaffirming our 20%-plus FRE growth outlook as you heard this morning. Underpinning this view are expected strong inflows and a robust origination pipeline, broadening across all parts of our business, both of which will benefit our ACS business. And as an example, we are increasingly providing multiple draw financing solutions, which create better line of sight to future ACS revenues beyond the current pipeline.

Moving to Retirement Services briefly, Athene's net investment assets grew 14% year-over-year to $300 million, and we generated $719 million of SRE for the quarter. The alternative investment portfolio return for the quarter was 6%, strong in the context of an exceptionally weak market backdrop. AAA, which is approximately 80% of the portfolio, delivered a positive annualized return in line with this level. The return on our alts portfolio would have been even stronger were it not for Atlas' recognition of an idiosyncratic impairment and Athora's capital raise associated with the PIK acquisition, which resulted in a flat mark quarter-over-quarter. The combination of these 2 items, which we do not expect to repeat, approximated 3.5 to 4 percentage points of annualized return in the quarter.

The blended net spread across Athene's portfolio was 97 basis points versus the 120 basis points in the prior quarter. When considering our 11% return expectation on the alternatives portfolio, the net spread in the first quarter would have been 25 basis points higher. Adjusting for this, the net spread is in line with the 120 to 125 basis point outlook that we provided for the year. We continue to originate new organic business consistent with our long-term ROE targets and in line with historical averages. As we progress through the year, we continue to expect net spread stabilization as headwinds from asset prepayments continue to dissipate and the roll-off of profitable post-COVID businesses also dissipates, all in line with our update last November.

As we execute on our 2026 plan, we do so with tangible momentum across our retirement services business, and we are reaffirming our previously communicated guide of 10% SRE growth, assuming an 11% alts return.

With that, I'll hand the call back to the operator. We appreciate your time, and we welcome your questions.

[Operator Instructions] Our first question today is coming from Alex Blostein of Goldman Sachs.

I was hoping we could start with some comments on the durability of the origination volumes and the transaction fees you guys are seeing. So obviously, a record quarter in what's been a volatile and tough backdrop for the market broadly. So maybe talk a little bit about how your sourcing is evolving between different origination platforms? How is the syndicate composition changing as well? And I know you mentioned that the second quarter is likely to be strong as well, so maybe you could expand on that a bit as well.

Yes. I think when you take a step back, I think the growth and the momentum you're going to see is going to be in a variety of originations directly happening from the Apollo ecosystem rather than the platforms per se. Even this week when you saw the numbers on the hyperscalers, I mentioned, $800 billion and you go through the numbers and the source and uses has been well documented, 1/3 is going to come from cash flow of the company, 1/3 from the IG market and there's a large gap of funding, that's the private credit IG market that we are primarily focused on. And so we were not a name of a financing source a decade ago. The last 5 years, hundreds of dialogues with these companies where this is not a recent phenomenon. So the brand is really focusing on that infrastructure across the board. And I think the comments that Marc made and I made, it really is going to be in this -- the picks and shovels of a variety of the CapEx of the AI infrastructure. It's not just going to be on the data center per se, but also in defense as well as broader infrastructure.

So the lessons and the history of what we did with Intel and AB InBev, the ability for those companies to actually redeem that when they got into a different situation. It's really happening on the Apollo side, but it's also happening in partnership with banks. The activities we do, even though Paramount per se is not the type of transaction that we are involved with day in and day out, that puts us in a unique spot of being able to be a holistic solution provider in scale that really is unmatched today.

Yes. I would just add, this is not just an AI story. This is a global industrial renaissance story. This is infrastructure. This energy. This is energy transmission. This is energy transition. This is advanced manufacturing. This is defense and its AI and data. And it's not just a U.S. story, this is a European story. The U.S. clearly is out front. The recent week a number of us spent in Silicon Valley was informative. Here, we have the most prominent growth ecosystem anywhere in the planet and they have never been capital intensive before. We are going to see the growth ecosystem dominate debt issuance over the next 5 years. Today, the 10 largest issuers of IG are mostly financial institutions. Going forward, probably be the 5 largest banks and the 5 largest growth companies.

Europe is going to be on a percentage basis, in our opinion, the strongest investment-grade private market in the world. Europe needs to do everything that the U.S. is doing. It's banking system, its capital markets are just not as developed. And while there's historically been hostility towards private capital and private solutions, we find ourselves in dialogue with quasi governmental entities who are addressing fundamentals. How do we restart the Hinkley nuclear plant? How do we provide for a massive upgrade for our grid? How do we provide inventory for our defense munitions and other things on a 1-year annual budget cycle when we know these core munitions are going to be needed over decades. These are the questions we are helping answer. But keep in perspective, we are, at the end of the day, a relatively small player in the credit markets. The totality of assets under management just crossed $1 trillion, of which $800 billion is credit and about $600 billion-ish is investment grade. This is not even relevant in the scale of this marketplace. And when you talk at some of our public markets, peers who are $14 trillion and more, we have a long way to go here and we are mindful that our job is not to be the biggest. Our job is to grow profitably and to make sure we maintain underwriting discipline and spread.

Our next question is coming from Steven Chubak of Wolfe Research.

So I wanted to ask on the private credit marketplace. Given one of the bigger concerns on private credit relates to opacity of the asset class. I was hoping you could speak to how the launch of Delhi pricing later this year might change the perceived riskiness of private credit, your approach to validating the pricing is really like this whole market maker in terms of the breadth of assets you're hoping to price and how you might frame the revenue opportunity from this business as it continues to scale.

Let me start, and I'm sure Marc will add a few comments, but I think there's a threat here. I think Marc's comments about the private credit conversation being in a narrow corner, we just see it as a lack of imagination and it ties back to the prior question. The big growth in private credit is going to be in the IG universe. And interestingly, those investors are used to a bit more liquidity and certainly a lot more transparency. This is going to be driven by the investor universe. And we are -- whether it's our short duration vehicles, all of our fixed income asset classes that we've created a product suite for them to be able to allow private credit to be a major part, this is going to be standard operating procedure. And we've said consistently, the thread is the benefit of the larger spread is on your origination, not the fact that it is private and where it will be private for a while. Private does not also mean -- means it's market power forever.

And so the infrastructure that we've created and the thread of the conversation being much more global, much more investment grade, that's the critical aspect. And again, I think you're seeing it tie through. There's a reason why origination ACS capital formation, Marc's original comment. ACS has allowed us to take our 3,000 LPs and turn it into thousands upon thousands of conversations. That's the open architecture at work. That's how we're reinventing the business model. And certainly, that's what gives us the enthusiasm and excitement in terms of how the business all works in concert.

So I'll give you a little more, and it's going to require a little bit of -- we fundamentally changed our financial system. And particularly the large banks, investment banks were encouraged to deemphasize market making. In our equity markets, we had 4 firms step forward, led by James Street and Citadel, who now provide liquidity. The New York Stock Exchange, the London Stock Exchange are buildings. They are not sources of liquidity. And we have real liquidity in our equity markets. In our fixed income markets, no one stepped forward to provide liquidity. Fixed income trading capital in the world is now 10% of what it was in 2008 and the market is 3x its size.

The entirety of the market, whether you are investment grade or below investment grade is just not that liquid. It just appears liquid on good days. We have already seen wholesale breakdowns in the liquidity of this marketplace during COVID and during U.K. LDI, and I expect that we will see this again. When you look at the quote of a piece of public fixed income, be it a bond or alone. Are you actually seeing liquidity? Or are you seeing dealer estimates? You're seeing a dealer estimate. The vast, vast majority of issues do not trade, have not traded and are quoted 1 by 1 or 5 by 5, they're not quoting on a liquid basis. But yet, we sleep at night. This has never happened before in the private markets because private was not tradable and was not indicated. And so a year ago or more than a year ago now in connection with the support of State Street's product that mixed for the first time public and private investment grade, we began market making. And we didn't just begin market making by holding on to the information. We created a data warehouse. We made that data available to all other dealers. We are not the only market maker. And what is going to happen is the same thing that happened in the levered lending market, the broadly syndicated market. We've gotten the market going, but ICE IDs, data repositories, standardized data and ultimately, jealousy are going to cause market-making competition. No one wants to see Apollo earning widespread. You have already seen in other markets, other dealers come in anywhere we can get other dealers to come in, we will. I don't know exactly where we'll end up this year in terms of market making. But every quarter on quarter, it just gets bigger. And we're starting to see third parties, other competitors make markets as well.

Some in our industry are resisting this transparency. I just don't think that makes sense. And I think the recent press around marks is just driving us to the solution, and I expect regulatory interest to follow, which will also drive toward this solution. We use the same methodology that many public companies, many public asset managers use with respect to setting prices on a daily basis. We observed trades. We observe comparables. We observe trades and other issuers of the same issues that are public. We look at general market trends, and we will produce a price. That is the same price in many instances that you see for public securities. And every day, it gets better. That does not mean perfect, but our job is to try and make it better every single day, and we win in our opinion, if we have more transparency and more liquidity.

The next question is coming from Bill Katz of TD Cowen.

Marc, you mentioned in your prepared comments that you have everything you need to sort of meet your 2029 goals, which is great to hear. I guess the question is you also mentioned that you're sort of thinking now through the next decade. As you think about your footprint today, obviously, you had a lot of buyback this quarter against some of the elevated issuance. How are you prioritizing capital return from here? Should we assume you have enough organic growth to get there? Or do you need to now be a bit more acquisitive? Or could you start to return more capital to investors as you continue to scale the business.

Okay. So we have a 5-year plan. And that 5-year plan is the one we laid out in Investor Day. And when I referenced the 2029, I'm talking about that 5-year plan, which in round numbers gets us to plus asset management and a $5 billion retirement services business. The question Jim and I are asking ourselves is what comes next? Is it more of the same? Or is it something that is additive to that? I do not believe that we need to do anything from an acquisition point of view to meet our 2029 goals. Anything we choose to do will be accretive to the strategy and to the growth long term because buying more of the same just doesn't do anything for us. It actually creates noise and makes integration harder at a point in time when we are going through this massive productivity change.

And this is the backdrop that we're thinking. We have everyone in our firm can actually envision how the addition of technology is going to make their current job easier, faster, better, stronger, less expensive. Most people can also envision how software and data going to free will allow them to evolve their current business into something that is more productive for serving their clients. Very few people can imagine that the cost of now building challenger businesses, particularly in areas where we have core strengths has gone to 0. The bar for buying something is just really high. because the embedded value of existing franchises, unless they are truly unique and have unbelievable staying power just doesn't add all that much to us.

So we are mindful of our cost of capital and where our stock trades. We, as you know, have a dividend policy where we go up half of the FRE growth of the business, which we've done over the past 5 years. And when the market is in a risk-off mode, given that our business has not really cycled, we have been aggressive buyers of our stock. And we continue to think about it in that trade-off. If something is truly a catalytic to a strategy and can be another $5 billion business for us, yes, we'll entertain that. But to do more to integrate to buy more asset management. I just don't think we have any jealousy, any regret. We watch what's being purchased around our industry, and we kind of shrugged our shoulders and just say, like, did we miss it. And we haven't -- I don't think we've missed anything yet. The bar is really high for spending capital other than on stock.

The next question is coming from Glenn Schorr of Evercore ISI.

I'm fascinated with the daily pricing thing. So I have a couple of very quick follow-ups. One, does -- how do you think that translates to anything in private equity and hybrid lands kind of get there to Two, how does it inform how you build your secondaries business? And then three, the biggie is what does that mean for the illiquidity premium, your ability to produce alpha and ultimately charge fees for how this industry was built.

Let me start again. I want to make sure we frame this -- what we're talking here. Whenever we talk about the journey of transparency and daily pricing, it starts with the investment-grade private credit universe, the $38 trillion. Somehow the headlines and the dialogue always then goes to the $1.7 trillion. We'll get to the $1.7 trillion, but I want to really focus on the $38 trillion first. And that's where if you go back to what Marc mentioned, go back to the bank loan mark in the early '90s. Many banks did not want the agent to provide that transparency. Evolution took over, education took over, more investors came in.

So I do think, Bill, I think that again, it ties back this origination. The premium that you are able to extract is upon the origination because you're providing a holistic solution to an issuer in addition to what they can do day in and day out with a public IG issuance. You're going to see cap tables of very large established companies having public IG debt in the cap table along with a private originated IG transaction or tranche. It may be an asset, it may be a geography, it may be a subsidiary. That's what Intel and AB InBev. Those companies had public and private origination and debt in their capital structure on the cap table.

So we're going to start there, as Marc mentioned, we will evolve into the noninvestment-grade direct lending, leverage lending universe. But that's the prioritization in our view. But again, I go back, the premium that you're going to create is from the holistic solution you come as the provider of the capital in one fell swoop because most have to realize most origination that occurs in the leveraged loan market between high yield and leverage lending and IG is not on an underwritten basis. That's on an Asian basis. When we can act as principal, that's where it allows us to create that spread opportunity.

So I'm going to hit it on its head, maybe a little more. When we originate something in the private market, today, investors demand 150 to 200 basis points. We end up with a management fee, and we end up sometimes where we don't manage the assets with an ACS fee. The more liquidity and the more transparency, why will the premium always be 150 to 200 basis points that investors demand. The originator should get to control more of the profit if, in fact, we are originating good risk. We do not view the "illiquidity premium" as the basis on which you get paid. It is what is currently demanded by investors for holding it. And yes, for the broader market that does not control origination, I expect that there will be a narrowing of spread. And therefore, we have been consistent for the past 5 years, measuring our industry on AUM is imprecise at best and foolhardy at worst. We measure our capacity to generate investments that are worth doing because that is ultimately what has value. The ability to get the entire firm focused on origination is how we run the business on a day-to-day basis. AUM is what follows as a result of having lots of good origination.

Unlike a public asset manager that can buy everything that exists and can take any amount of money at any point in time, and therefore, AUM is a productive measure, AUM here and the chasing of AUM can be very degrading to a franchise if it exceeds your capacity to originate. And just to complete the thought because I want to say, Jim is right, we are at 6:30, 100% of our investment-grade corporate franchise, 9:30, the entirety of our credit franchise. I doubt in 2026, we're going to make progress around hybrid or private equity other than with respect to the techniques of valuation in the secondaries market. I believe the days of buying something at 70 and writing it up to par during an end.

Ultimately, good investors should be able to make money in the secondaries market by superior underwriting and superior access to information. I'm not sure the day 1 pop is something that is ordained publically.

Our next question is coming from Patrick Davitt of Autonomous Research.

For PIC, how should we think about the incremental expense on that 20 basis points? And should we assume the 20 basis points trend upward as you reposition the portfolio into higher-yielding assets?

I'd say, Patrick, it's one very small because we have an established ecosystem in Europe in London today that manages Athora and it's very scalable. And so I would not expect much, if any cost against that revenue pull through. And then in terms of revenue potential, yes, the 20 bps is a starting point. And the balance sheet will require pretty extensive repositioning, but that will take a bit of time. And so we're very focused on that. But you should expect to see incremental management fee growth from here as we reposition that balance sheet. And that's all in accordance with PRA regulatory framework, which is quite distinct from the framework that's existed up until now for Athora being a EU balance sheet.

The next question is coming from Mike Brown of UBS.

Great. I want to ask on sure. You reiterated the 10% growth for the year. So I just wanted to think through the puts and takes to asset yields and also kind of the higher cost of funds as we move through 26. Maybe just expand on how we should think about the spread dynamics. Can you still be in that $120 million to $125 million range. And then you mentioned, Marc, that the trajectory is improving. Can you just unpack that a little more, maybe just touch on annuities where the growth seems to be a bit tougher near term? And maybe could we see PRT coming back more in a bigger way in 2026?

Mike, it's Martin. I'll hit the first point. So -- and I commented on this a bit in the prepared remarks. We're right in the middle of the range that we indicated last quarter for the year. And as far as the first quarter is concerned, we certainly expect that to be the case for the balance of the year. So $120 million, $125 million is the is the spread range assuming [indiscernible] 11%.

As far as the quarter, we were pretty prescriptive last November in laying out the drivers of the spread progression over time. And if we look at what has happened in the quarter, it's very much in line with that. And so there's nothing -- there's no change to that. We continue to see some prepay headwinds, as expected, prepays, we believe, peaked in Q4. They were less in Q1. We expect that to dissipate over time, partly because of the CLO dynamic and the running off of that book. And then we are defensively positioned. We have -- between cash and treasuries on hand at the end of the quarter, we had close to $40 billion. And so that's an opportunistic sort of cost, if you like, to being ready to be more offensively positioned, partly in view of the market, probably in view of the pipeline of origination that we see in front of us.

Our next question is coming from Ken Worthington of JPMorgan.

So we've mentioned the $40 billion of cash in tertiary at Athene a couple of times. So Athene is very liquid. Spreads widened out in March, they've narrowed a bit in April. Is the market environment we're seeing today attractive enough that you'd expect those cash levels to be falling you really earmarking the excess cash for more opportunistic opportunities and maybe we even see seen cash levels build as you await those opportunities?

So it's Marc. I'd say almost all of the spread widening we saw take place, took place in the media and did not take place in the market with the exception of below investment-grade software and IG software to some extent, where we did see spread lining where we just do not have nor do we want meaningful exposure given the diverse set of outcomes that can happen with respect to credit.

So I would say in the marketplace, we have not seen the kind of spread widening to be interesting for us to go all in. It is our job to create. And the pipeline that we see coming together is really, really strong. Starting with the ARI commercial mortgage pipeline, moving into the AMAPS pipeline, as Tim said or I said earlier, we're $11 billion at Athene invested in AMAPS right now. We'll be double that by the end of the year. And that will, in part, be making up for CLO runoff, but part will be growth of the book. But we are holding cash and we do not account on the market bailing us out. This is all about self-help and originating volumes of liabilities consistent with the origination volume that we are able to bring to Athene, again, IG, and I am very optimistic and -- confident in the second quarter and optimistic for the balance of the year. that we have the kind of pipeline that is necessary to allow us to deliver on the targets that we have set out, both in terms of volumes and in terms of spreads.

The next question is coming from Michael Cyprys with Morgan Stanley.

I wanted to come back, Marc, to your commentary on the technology cycle and your views around it being very far-reaching, whether it's throughout AI, blockchain tokenization and so forth. I was hoping you could talk about the positioning of Apollo how you're positioning Apollo to navigate, what challenges and risks do you see ahead? How do you think about insulating the business either through organic or inorganic steps as you look out? And what are some of the most exciting opportunities that you see for Apollo to capture in the midst of these developments?

That sounds like the whole call. Look, this is -- we are -- there are just so many angles to this, Michael. It starts with the impact on the portfolio. which is -- and I'll go back to what John Zito and others were saying 18 months ago. Software is the ground 0 for issues around AI. That does not mean every software company is at risk. In fact, some may be enhanced. But our view was in the credit market, we are not paid to figure that out. The best you can do in credit is to get back your money and your interest on time in the amounts you've been agreed. And therefore, since there was no benefit to owning binary outcome software loans, who were bad, we sold them.

If you just discovered 6 or 8 weeks ago that AI could impact enterprise software, what were you doing for the past 2 years? We don't know. And so it starts with asset selection. And obviously, it is not just enterprise software, it is other businesses that are vulnerable to services. It informs our underwrite of investment grade and where we choose to extend credit. Jim focused on this notion of picks and shovels. There are those who have made big bets on the future value of compute, 5 and 6 and 10 years from now. And I have no doubt that some of those bets are going to pay off really handsomely. And some of those bets are going to be disastrous. We have appropriate -- not done single-asset bets. We have spread across with the right structures and the right protections with the right risk award to kind of create convex upsides while getting some amount of downside protection and some notion of our money back. This informs our underwrite. So this is the asset side of our business.

Internally, I said on the last call, we are circa 4,000 people in asset management, circa 2,000 people in our retirement services business. I will be surprised if other than on a short-term basis, we end up has more than that. Now I think that jobs are going to change, people are going to change. But the ability of our industry, which, for the first time, is at scale to not be so dependent on legacy systems that we can take advantage of new systems and new ways of doing things, I think, is extraordinary. Some of our industry will do this really aggressively. We will be among them, and some will not because their business is just not demanding enough and it's a pain in the butt to do.

So I do expect this will give us opportunity to redeploy margin, redeploy people and whether we choose to take that as additional margin or whether we invest that in growth in the business is a choice we'll make quarter-by-quarter as we think about what is best for the organization over the long term. And then you've got to look politically. We are going to go through wholesale change. If you are an ideally graduate who's in the liberal arts and certain things, you're 10 years out of school, you're making $60,000. If you can level a concrete floor, you're making $250,000. That is a dynamic that we have to be really attentive to because we have no political history of blue-collar workers ascendant and white collar workers under pressure. And many of these white-collar jobs are going to be resident in blue cities. That's where the knowledge workers are. And so we expect some amount of political upheaval both here and in Europe as this transition takes place and as we see. And we are mindful of that in terms of our overall defensive posture. I don't know if you want to add.

I guess, that's good.

The next question is coming from Brennan Hawken of BMO Capital Markets.

You spoke earlier on the spread in Retirement Services. I'm curious about the flow dynamic. I was a bit surprised that the funding agreement flows were so resilient given the spread dynamics in the quarter. So curious about how you think about your expectations just from a volume perspective on the funding agreement side? And then also on the retail side, it's been a little lighter in the last few quarters. We hear about the competition. You spoke to the cost side before, but just curious from a volume perspective, what your expectations are. Is this the right volume level if you think about retail as we go forward.

So Brennan, a couple of questions there. One is on the funding agreement side. We did no public funding agreements in the first quarter, given where spreads were. And given where spreads are today, they've come back in meaningfully from the wides, but they're still not the level. They're probably 15 to 20 basis points wide of where they need to be, depending on the tenor for us to find that attractive. We were, on the other hand, able to access private funding agreements in a way that compensated for that attractive spreads. So that's the funding agreement dynamic.

The retail annuities is like -- as we've referenced a couple of times, the market has been competitive. That has eased somewhat and we had a stronger April. But I would expect sort of that to be a base level plus or minus relative to where we expect the immediate quarters to land. And so we think while PRT remains a channel which is not open, we're accessing the other channels, but we're balancing spread, and we're balancing return on equity and relative to the cost structure of the firm, which is a competitive advantage, clearly, and the origination capabilities that we have.

The next question is coming from [indiscernible] of Piper Sandler.

I appreciate the question. I know it's the narrow corner of the market, but can you discuss the opportunity in direct lending today as well as some of the risks out there just cutting through some of the noise and headlines are you seeing increased interest from institutions, given some dislocations there? And then just on the retail side, how are the conversations with advisers and maybe more importantly, advisers and their end clients on the asset class and then confidence in adding alters exposure beyond just direct lending.

Yes. I would say to the specific question, the area of pricing for new product in that direct lending market is a SOFR 450 product plus or minus. And I think many originators in light of the last activity the last couple of months with headlines were widening out indications to issuers. And the reality is the flow has been pretty light because of the strength of the broadly syndicated market and the high-yield market. And so that's an alternative financing vehicle and financing avenue.

So from a product volume side, it's been a little bit lighter. But I would say many, many folks, including ourselves, for good quality direct loans that we believe, have robust business models, there's plenty of access. And it actually may result in industries or names that are not software or AI disruptable to trade actually a little bit of a tighter level. As we mentioned in our broad comments, institutions are looking at it as an opportunity to deploy even in bulk secondary opportunities or new primary mandates.

Your third question is really about the adviser. I think, listen, there's been a tremendous amount of dialogue and insight and the degree of education on portfolio construction is really coming home to light, and we are spending a tremendous amount of our time on that. To say when the redemption cues and the redemption volumes, we really won't know for the next 4 weeks or so -- or next 2 weeks internationally and then 4 weeks domestically. I mentioned our preliminary numbers for April are strong. That, at the end of the day, will rule the day in terms of the asset class performance over time. So I think the headlines have dissipated a little bit. As we mentioned as well as a few of our peers, the redemption requests have not been wide across the investor universe. It's been a bit narrow based on a few distribution channels in a few geographies. But it's too early to tell exactly how that works in the next few weeks. But the reality is, this is a very robust asset class. For 10-plus years, it returned plus 300 or so versus public safe, high-yield and leveraged loans. So institutional investors have benefited. Global wealth investors have benefited from inception-to-date returns. And this is a period that we need to get through.

The next question is coming from Wilma Burdis of Raymond James.

Can you talk about the opportunity -- market opportunity in Japan. We know Apollo is very strong there, and there's fewer competitors. And we've definitely seen an uptick in activity with Aflac and Prudential doing some deals. So can you just talk about what we can expect there going forward and if there's a good amount of volume.

We've been very public, broadly speaking, on our constructive approach to what's going on in Japan. We actually took all of our 190 partners there in January for our biannual partners off-site for a strategic review of our business, but did a deep dive in Japan. I break it down into 3 areas: private equity area. We've been active with 4 to 5 carve-outs that really plays into our business model of corporate carve-outs in industrialized companies. That's number one.

Number two is the distribution of yield product into their insurance and other retirement products vehicles, which we've continued to add dramatically in that space. Third is working with a lot of banks and helping them augment their excess capital and that's excess reserves in dollar-based assets. And the fourth, as you said, mentioned about the insurance business, we typically to date have been a reinsurer, but a lot of activity going on to see how we can use our competitive asset management and origination capabilities to compete to a broader degree. I think it'd be inappropriate to talk about any one transaction. But we're excited about what we see broadly speaking. And I will add that we brought on a very senior individual to run our Asia business, our Asia Pac business based in Japan, Ueda-san, who after a long career at Goldman ran GPIF as a CIO for 5 years, so incredibly well positioned, and it's really a statement of our view on the opportunity set in that country in that region.

The next question is coming from Bart Dziarski of RBC Capital Markets.

I wanted to ask around Athene. So thanks for the enhanced disclosure. I do agree. I think it's the best disclosure out there for life insurance. And I wanted to ask sort of your view today on the regulatory temperature, if you will. So the NAIC is looking at CLO capital charges sound manageable for you guys. And then last week, the U.K. PRA. So they're looking into Bermuda-based funded reinsurance transaction. So just curious how you guys are thinking about the regulatory environment as it's evolving.

It's going to be -- we'll see how you take this, it's going to be kind of an interesting dialogue. So we have been very engaged regulatory over a long period of time. We benefit from a good, robust set of rules that make sense. And the reason is that we are the largest factor in this industry. And like some of the largest, most dominant banks, we are indirectly responsible for the poor behavior of others. Every once in a while, when someone does something silly, a bill is delivered to the industry, and we are the largest participant in the paying of that bill, and we are tired of writing $100 million and $150 million checks for the stupidity of others. And so we have been consistent with our regulatory focus, equal capital for equal risk. The CLO project is a project that we have supported and helped on for a long period of time. It is ultimately up to the regulators to do the work that they need to do, informed by data, to come to the notion of equal capital for equal risk as opposed to an inherent bias for or again structured or for or against corporate securities. So in that regard, we're happy to see it.

The other thing that's going on is there is an increased focus on offshore jurisdictions. Let's start with the U.S. The U.S. understands that to the extent massive amounts of money are being moved to the Cayman Islands and the Caymans are not as transparent that the U.S. system is on the hook. Every one of them understands is there is heightened exposure around Cayman. And this is not to say that Cayman itself is a bad place, but in the current regime, without the same protections that places like Bermuda or otherwise have done, they are not reciprocal jurisdictions and are under intense scrutiny. And it will not surprise me to see increased amounts of regulatory scrutiny and perhaps increased request for capital for those people who have made extensive use of Caymans, which, by the way, are not just new entrants. There are lots of established entrants who also have positions in the Caymans.

With respect to the PRA, there is also a focus on offshore funded reinsurance. I believe the rules or the proposed rules that have come from the PRA are beneficial to people who are actually running a proper business. I expect them to be helpful to what we're trying to do. I also expect the same to come from the Japanese marketplace. In Japan, we have seen, like in many other jurisdictions, companies make use of offshore funded reinsurance in some places with credit counterparties who are not quite where they should be. Just like for the PRA, this is a concern for the Japanese regulator, and I would not be surprised to see formal or informal pressure brought around that.

I come back to the competitive dynamic. Very few people have been able to amass the kind of capital base we have. The reason we've been able to do this is because we manage ROE, we write business that makes sense for us as principal and as a result, our investors allow us to retain the capital in the business and to compound that capital over time. Almost every other company in our industry pays out 90-plus percent of their earnings and does not grow their capital base. Over time, the ability to guarantee outcomes, we believe, is going to be more and more important. We are not shying away from the guarantee business. We like the guarantee business. We just want to be paid appropriately for what we're doing and continue to manage the business around robust ROEs, and we welcome the regulatory intensity. When we produce the kinds of decks you've seen for Athene, every regulator has them. We asked the question that you would logically ask, why isn't everyone required to do this?

And again, there should not be just a focus on new entrants. This is a problem for the established insurers as well. There are a number of really good companies out there. We do lots of business with them, and there are a number of people who are cutting corners, and I do not believe are ultimately good players and good participants in the industry in their current form.

Thank you. This brings us to the end of today's question-and-answer session. I would like to turn the floor back over to Mr. Gunn for closing comments.

Great. Well, we appreciate everyone's time and extended attention this morning. As always, if you have any follow-up, please feel free to reach out, and we look forward to speaking with you soon.

Ladies and gentlemen, this concludes today's event. You may disconnect your lines at this time or log off the webcast, and enjoy the rest of your day.

Good morning, ladies and gentlemen. First of all, thank you for joining us after we have broadly talked on Friday. However, we have accomplished results over the weekend that I think I really want to share with you. And so I'm very happy to report that we have signed an agreement to sell our Interiors business to Apollo. So we signed the deal on the expected terms that we have communicated in spite of a challenging environment through the Middle East crisis. So we can attain out of that transaction an enterprise value at EUR 1.82 billion and the anticipated net debt reduction of at least EUR 1 billion.

Olivier Durand, our CFO, is with me, and he's going to share some further financial details in just a second. The project is obviously subject to works council consultations that we have started this morning and then also the customary regulatory approvals. I'm convinced that this project is possible because it reflects on the strength and the leadership of FORVIA Interiors as well as the expertise and the commitment of our global interiors teams.

So it highlights the business group's very solid industrial base, its market positioning and the good value creation potential that the acquirer sees in FORVIA Interiors. So it goes without saying that this is a key milestone in the execution of our IGNITE strategic road map that we discussed during the Capital Market Day on February 24. It is, in fact, sharpening FORVIA's focus on high value-add technology-driven activities. And as well, we strengthened our financial structure by paying debt down, as I commented earlier on.

And at the same time, for the Interiors business going out, the business is gaining a very dedicated ownership and Apollo has a very strong sector expertise and an active ownership approach to their automotive activities. So that's going to support the future development and the transformation of the Interiors business in a consolidating market environment. So Olivier, why don't you share the numbers that are now associated with that transaction?

Happy to. Good morning, everyone. Thank you, Martin. So let me provide some color on the key financial terms of the transaction with Apollo. So as mentioned, the agreement implies an enterprise value of around exactly EUR 1.82 billion. This is corresponding to 3.1x the adjusted EBITDA under IFRS of the business. Another data point is to mention that if you take a kind of proxy of the U.S. GAAP, i.e., excluding R&D capitalization and lease, which is more the type of comparison to assess the multiple of a transaction, in fact, the multiple will stand at 4.8x.

We confirm the expected net debt reduction of at least EUR 1 billion. And I want to stress that the bridge that we are talking about between enterprise value and net debt reduction is comprehensive. It's taking all items into account, including transaction costs and including the consolidation of the cash of joint ventures in which we have a majority stake.

So it takes into account the deduction for minority interest in the joint ventures that we have inside this business. It takes into account the debt adjustment, including the pension liabilities, and it includes all carve-outs and tax cost of the transaction before and after closing. Given the cash position and the distribution of the cash inside this business, the gross debt reduction will be actually higher. It will exceed EUR 1.4 billion. And this is, in fact, the relevant metric to use in order to assess the reduction in financial cost that this transaction entails.

On a run rate basis, this reduction will be around EUR 50 million to EUR 70 million in lower financial expenses per year. We expect the closing to happen by year-end subject to the customary conditions precedent, including regulatory approvals.

I want to stress that this is a definitive transaction, excluding those basic regulatory approvals. We will continue to manage Interior as a FORVIA business group until that date, and we will benefit from the net cash flow generation that this business has until the actual closing of the transaction, which is most of this year.

All proceeds will be allocated to debt reimbursement and which means that, in fact, with the combined -- with the expected organic cash flow generation in '26, we expect to reach a financial leverage of 1.5x, and we expect a net debt to reach EUR 4.5 billion at year-end as we communicated during the Capital Market Day. This means a division by 2 of both the leverage and the level of net debt compared to the initiation of the acquisition of HELLA back in '22. This transaction, therefore, support the full restoration of FORVIA financial structure and is totally aligned with our IGNITE framework, which targets ultimately a leverage ratio of 1.2x by the end of '28.

And on this note, I return to Martin.

Yes. Thank you, Olivier. And before talking about the next step, I would like to thank, first of all, Michel de Rosen, our Chair and the entire Board for the support of the project. And then most importantly, also all Interiors employees for their commitment and contributions. And we have seen very good contributions really when it comes to the operational business, but also in terms of preparing this transaction.

So again, we expect a close of the project by the year-end, and when the financial effect should kick in as well. And you can imagine what kind of an important milestone this transaction is for the group and for our IGNITE strategy. So I look forward to finishing a successful year together with the colleagues in Interior because the numbers that you have heard about are also considering on the cash side, still the incomes from the Interior business this year.

So when looking forward, I mean, it's exciting around for FORVIA. We have our 2 clusters, the growth and the value clusters that are nicely complementary in nature and that we are going to develop. And we have our 3 strategic priorities with best-in-class performance, business transformation, the announcement today falling into that priority and invigorating our culture.

So the compass is clear. And then it go without saying on the next 2 pages, also in light of that Interiors transaction, I want to explicitly confirm all elements of our 2026 guidance.

And on the next page, we are reiterating also our 2028 ambition. And you can imagine now with that first important step in terms of portfolio transformation, we are obviously also confirming all ambitions and all numbers around 2028. So we are getting ready to unlock what's next. And at the same time, we drive what matters so much every single day.

And with that, I would like to open up for questions.

[Operator Instructions] The first question comes from Ross MacDonald of Citi.

Congrats on getting this deal done. I think a lot of investors had assumed this would be second half business, so very impressive. I have 3 quick questions. I think we touched on one previously, just around dis-synergies. So I'm thinking about your business going forward, specifically for things like Interior lighting and seating. How do you think about the loss of the Interior business and the potential dis-synergies over the midterm from a revenue perspective for those businesses? Is it something that customers typically expect for it to bring Interior seating as a combined package? Or do you think that there's limited headwinds from the loss of Interiors from a synergies perspective? That's question number one.

First of all, and thanks for rejoining second day, second workday in a row. On a product level, on a top line level, we are not expecting any dis-synergies. And I tell you what we observed over the last couple of years. FORVIA has strongly driven the concept of cockpit of the future, interior of the future. And you could see in some of the trade shows that we really animated and designed complete interiors of vehicles to give the customers ideas of what's possible.

At the same time, we have never come really to combined sourcing of our OE customers. In other words, they buy seats separate from the Interiors. So whereas this engineering exercise, the design exercise helped to position both interiors and seating products, it would never ended up in combined deals and therefore, synergies. What we intend to do on a way forward, we have a unit that's called the XLAB. And the XLAB is basically combining engineers from all of our business groups, and we will retain Interiors' expertise on that XLAB, so that we can continue to create new experience for Interior. But then after the transaction, we are going to fully focus on selling the seating products. And again, that traditionally has been independent from interior product sales.

And my second question is just around the employee transfer. And if you can maybe just confirm how many employees were within Interiors, I had 31,000 in my mind. Will all of those employees transfer over? And you mentioned the Works Council approval. Is that something that we should think of as a formality here? Or is there a potential roadblocks around Works Council as it relates to this deal?

Yes. No, we are selling ultimately the entire business. So all Interior employees one by one are going to go over into the new company. So that's clearly agreed with the buyer. And as far as the Works Council approvals or consultations are concerned, it's a consultation, and that's very well defined in French law. So we started that this morning. We informed the Works Council, and we expect the period of conversations and discussions. We expect that to find a good way towards the deal. So no deal breaker expected as of now.

And then you also will have the regulatory approvals, foreign direct investment and so on with different jurisdictions. Given the nature of Apollo's business and ours, also here, as of now, we do not expect roadblocks.

Maybe a final one and just a strategic one. Obviously, you've done this deal at a very challenging time in the automotive supply chain. Is there anything when you look at the business as it stands going forward, excluding Interiors, is there anything within the value clusters that you think actually -- given the valuation we're getting for Interiors, which looks attractive, is there anything within the group that you would think could be further monetized by FORVIA? I know you want to keep the value versus growth segments, but just curious if the opportunity presents itself, if you would look to monetize other parts of the group given the valuations that you're achieving today?

Yes. No, whereas we do not pursue concrete ideas or projects at this point in time. We discussed that during the CMD, right, saying both the organic deleveraging and now in particular, the Interiors deal, we do not have the same pressure as of before. So there is nothing concrete in the make. At the same time, it is an option for the value cluster if opportunities should present themselves.

The next question comes from Stephen Reitman of Bernstein.

So congratulations on the deal. Again, I mean, it was very much following on from the questions that Ross was asking really about the overlaps. I think, you made that very clear that there isn't -- you have been running these separate businesses. But again, on sourcing really, could you just give a little bit more about that, just to sort of reassure us already that the scale impact [indiscernible] going to suffer from the loss of scale.

Yes. No, good question, Stephen, and welcome back to the call this morning. There is obviously lots of plastic material sourcing happening around the Interiors business. And then the second big consumption we have on plastics parts is on the lighting side. So it is important to look at the concrete plastic resins that we purchased for both. And there is only limited overlap, right? You can imagine between the screens of a headlamp and what we put into a door panel, it's quite different materials. So the dis-synergies are going to be very limited in that regard. We estimated it, call it, single million euros of dis-synergies possible on the purchasing side.

[Operator Instructions] Mr. [indiscernible], there are no more questions registered at this time.

All right. We check into the online questions. Just give us a second.

Okay. So we have a few questions on the chat. Let me take the first one. What is the effective economic date of the transaction? And to what extent may the price be adjusted for cash flows between now and completion?

So first of all, it's a firm deal. Now, they have the process of regulatory approvals and the transfer. So we expect the transaction to get to closing by the end of the year, probably fairly Q4 of this year. The price of 1.82 [indiscernible] Interior is part of the company until the closing, i.e., the cash flows of the Interior business are part of the evolution of the company. So in terms of IFRS of '25, it will not appear in terms of the operating metrics. That's why our guidance are totally unchanged. But in terms of the net debt reduction, this is part of the net debt reduction we expect during the year. To keep things [indiscernible] if you take the average of the last 2 years, '24 and '25, you are getting at [ 150 million EUR].

The second question, EUR 1.82 billion is corresponding to a 3.1 multiple of the EUR 582 million of adjusted EBITDA IFRS of '25. Is that not a bottom line factor for a company of this size. And between buckets, the notice factor 3 is more for low and medium-sized companies. What about account receivables minus accounts payable inventory, which should be added to the 3.1 multiple of the adjusted EBITDA? Thanks for your feedback.

So on the data, you are totally correct, [indiscernible] 582 is what is reported. If the IFRS [indiscernible] of the company exactly the perimeter and the enterprise value is EUR 1.82 billion. Regarding working capital, we have taken into account variations that can happen and this is how it leads to it's incorporated in all the adjustments we are showing you in the bridge. Let me stress once again that the bridge is really reflecting all the adjustments. In fact, the impact of the fact that part of the business is joint ventures. So EUR 1.82 billion is at 100% ownership of everything. So we have to take into account that we don't own 100% some of the companies and a few in particular in China. This is taking into account the debt adjustment of different nature and all the transaction costs, carve-out, separation, fees of the different advisers as well as the tax cost of the transaction.

And maybe another element in M&A world in terms of evaluating companies, people are more used to use U.S. GAAP or proxy of U.S. GAAP, which in this case would be the EBITDA excluding R&D capitalization, amortization and lease. If you take this differential, which is more comparable on the worldwide basis, actually, the multiple is 4.8x, which I think is more reflecting, in fact, the value of the deal itself.

Do we have some questions on the call itself before we take more questions on the chat?

[Operator Instructions] I confirm Mr. [indiscernible], we had no more questions registered at this time from the audio call.

Well, then we continue with the online questions.

No problem. Next question, what will be the new company brand name managed by Apollo?

And that is an answer we cannot share yet. So there will be a new name, and it's going to be published then on time.

The next question is what's the exit window of time frame strategy for a PE like Apollo? And will there be another divestiture from Apollo to another [indiscernible] strategic entity as buyer?

The thing that we can say is Apollo is in the automotive business for quite a while and have created a fairly large position with the different acquisitions they have done in the last few years, Panasonic, TI, Tenneco. It's becoming a large, in fact, automotive supplier group of companies. So I think this is the strategy they have and to develop the business and to have, in fact, the means to develop this business. We have no other information.

The next question, I think FORVIA has around EUR 2.4 billion debt coming up in '26 and '27. And correct me if I'm wrong, but you are mentioning a EUR 1.4 billion gross debt reduction from this asset sale. So can you please explain how you managed to reduce interest costs when you will need to refinance some debt in '26 before they fall current?

So in terms of the different items of debt maturities coming '26, '27, we will have EUR 1.4 billion coming from this transaction. We will have another EUR 0.5 billion from the business itself. And we continue our work of cash [indiscernible] and simplification of our flows. You have seen that we have reduced the gross cash a little bit last year. We expect to reduce excluding, in fact, this transaction, the gross cash even more, which means that in terms of new -- in terms of refinancing, we expect limited activity. The exception to it is there is inside those numbers, a bond in HELLA, which is maturing in January 2027, and HELLA will probably refinance part of it in over the course of this year. So that will be the main refinancing transaction.

We will monitor, of course, the evolution of interest rates and remain opportunistic on this in the different markets from a credit world in which we operate since we are now having access not only to eurobond [indiscernible] U.S. bonds and smaller activities, Japan, China.

Next question. What amount of pensions factoring and reverse factoring, respectively, will travel with the entire business?

So in terms of pension is actually EUR 69 million. In terms of factoring, it will depend how we will finish, but it's -- you have seen that we reduced, in fact, the factoring balance by EUR 100 million overall before the transaction itself. And I would say that this is -- we will not reconstruct a position anyway and maybe going further down. And in reverse factoring is actually a small number that is going with this business, EUR 50 million, EUR 70 million in reverse factoring position.

Do we have other questions on the call?

[Operator Instructions] Mr. [indiscernible], there are no questions registered at this time.

So I continue and complete the chat. How much of your existing business was tied into your Interiors offering? Is there a risk of losing any seating electronics business now?

No, that is an answer we had with Stephen's question and Ross's question. Basically, there is no business that we are going to lose. We are excluding from the Interiors business, the MATERI'ACT perimeter. Remember, MATERI'ACT is the company where we develop and produce sustainable plastic materials. That's going to stay with FORVIA. And there, we have already today a supplier relationship in place with the Interiors business, and that's going to be written over to the new company. So we continue to supply of these sustainable materials to the new company.

Next one, congratulations on the deal. Could you give us more details on the use of the proceeds?

So it will be fully used for that reimbursement. And from a financial debt perspective, it will be on maturities, '27 and '28. And we will see which choice will be the most attractive.

Next question, can you please remind us the P&L impact from discontinued operation in '26?

Frankly speaking, it's not a reminder because we did not mention this one. But what we can say is that we -- during the Capital Market Day, we mentioned that as part of the operation, some of the costs, including the tax cost upon closing could not be booked in '26 -- '25, sorry. And we expect this to be around EUR 150 million. Vice versa, Interior is contributing to the net income. So you should expect a bit less than this EUR 150 million in terms of the net P&L impact in discontinued [indiscernible] something should be around the number, but there are some accounting aspects that can provide some volatility on this.

The next question is what is the best estimate of the minority P&L and minority dividend you can give for '26.

I assume that the question is not related to the transaction itself. But before answering this one, let me mention that as part of the transaction, we simplify, in fact, our structure and we have less joint ventures as a consequence, meaning that the leakage in terms of minority dividends and minority P&L is reduced. Minority P&L is something like EUR 30 million plus that is going away, in fact, with this transaction starting therefore in '27.

In terms of minority P&L for the company itself as a whole, we are in the EUR 100 million, EUR 120 million range, no change on this type of aspect.

Next question. Do you expect any rating action following that business reduction in scale, but that is also reducing basically the rating unchanged?

I think the rating agencies are fully informed of this transaction coming. We will have communication with them. I think it's a confirmation of executing our plan after in terms of rating evolution, it's, of course, a decision that they take. But clearly, the profile from a debt perspective, from a cash management perspective is improving significantly with this transaction. So I think it's a good element in terms of the financial structure and the credit view of the company for structure.

Next question. What will be the impact of the support service function currently being provided by GBS to the Interior activity? Will this support continue as is? Or are there any changes being planned?

Yes, very good question. I mean we are going to hand over an independent self-sustained company to Apollo, which means that we are also going to provide functions and the employees performing these functions in terms of corporate services. So that's going to happen now as part of the separation process that we clearly identify, resources personnel that goes over with the business.

So to the earlier question, we are going to transfer all employees that are associated with the Interiors business directly, plus those corporate services that the company will need to operate. Olivier, do we have another question on the chat?

We do. Could you quantify the bridge element in Slide 3, which is the slide of the bridge. Regarding the debt adjustment aside from the EUR 69 million in pension, what are the other parts of this?

So we are showing in the bridge, in fact, 3 big blocks. So the first block is minorities. Our minorities is coming from the fact that 1.82 is at 100%. We have some companies in which we own less than 100%. And therefore, there is a deduction for the value of those one as well as the fact that we have some cash position inside those companies and mechanically, since -- and we consolidate those cash position today at 100% when you have the sale, you are paid for the part of the company you actually own.

So this is on the first block, and that's -- so that's why it's significant. It means also once again that the complexity of the company will be reduced by this transaction. The second block is debt adjustment in which there is the pension. There is also some working capital and miscellaneous financial adjustment that are taken into account inside this block. And the last one is all the carve-out separation cost. This is also the tax cost of the transaction. We had some tax costs in terms of verticalizing the legal structure according to this perimeter, and we will have a little bit of tax cost mainly in China in terms of tax on capital gains in some jurisdiction, a few of them, as you can imagine, but in China, this is the case.

So this bridge once again is providing full view of the impact really of all items so that there is transparency to you, to all related parties, investors and regulators about what is net-net, the debt reduction that this transaction entails.

I have another question, I think, which is, can you please quantify some of the elements in the bridge, mainly minorities and debt adjustment?

So this is what I mentioned. The 3 blocks are not exactly of the same size, but with the biggest of the 3 on the tax and carve-out and separation cost. And I see no more questions, at least on the chat.

Okay. Then question to the operator, any live question left?

There are no more questions on the web -- on the audio call.

All right. Then let me summarize. First of all, thank you very much for your great interest today that led to a lively session. And you think -- I think you could convince yourself that IGNITE is now in full swing, 2 months after we announced it. And from here, the full attention at FORVIA goes into execution. And that happens on 2 levels. We are delivering the year. That's utmost important. And then we drive the Interiors business to transaction close by the end of the year as well.

So thank you very much for your continued interest, and I look forward -- we look forward to talking to you soon. Thank you.

Good morning, everyone. We're going to get started. Thank you all for joining BofA's 34th Annual Financial Services Conference. This is Craig Siegenthaler, North American Head of Diversified Financials at BofA. It's my pleasure to introduce Jim Zelter. Jim oversees Apollo's strategic initiatives across its asset management and retirement businesses, and he serves on its leadership team and Board of Directors. He joined Apollo in 2006 and led the broad expansion of Apollo's largest business, credit.

Jim, thank you for joining us today.

Always glad to be here. Thank you. I see a bunch of friends and shareholders. So always enjoy being in this forum.

So Apollo was founded in 1990 with a focus on private equity. The firm has since evolved into a diversified global alt manager with scale across all 3 channels, really the 3 eyes. Institutional and individual and the leading insurance platform. Apollo pioneered the alternative insurance model with the creation of Athene and many of its large-cap peers have since replicated this strategy. The firm now manages more than $900 billion in assets under management and is one of the 5 largest alt managers in the world. With that, let's get started.

So Jim, we have entered year 4 of the bull market. IPO and M&A is expected to accelerate. The Fed has been cutting. There might be a few more cuts this year. The economy continues to be resilient. On the other hand, spreads are pretty tight, and I know that matters for you guys, and geopolitical risks are heightened and private equity realizations remain muted. How do you see this macro backdrop unfolding in 2026?

Well, I think it's a marketplace where the 3 big drivers, especially domestically, but also globally are a bit interest rate insensitive. You've got the massive AI build, the massive global industrial renaissance and the benefits from One Big Beautiful Bill. And those are very powerful forces. I would say this is my 41st year in the business. You always -- if you use the analogy of golf for the golfers in the audience, if you can stay in the fairway, you're probably better off than being in the rough. And right now, the fairway looks pretty good. You've got an administration that is very pro-growth, very much trying to remove regulatory barriers and you have a massive CapEx cycle, you have an M&A cycle, you have a monetization cycle, a lot of great things in the fairway.

The problem is we're playing in the U.S. open. So the fairway is very narrow and the rough is very severe. And I don't know if I would say that typically, it's a 90-10 split, but it does feel to us, and Mark, myself, Zito, Scott, we've all been very consistent about 1 year, 1.5 years ago, while we love being in the fairway, the risks of being in the rough are pretty punitive right now. And so I'm a bit more skeptical on the equity monetization cycle. I think it's going to be slower than people think. I don't think it's going to be as large as people think. And I always love to run numbers. If you look at the robust IPO market in the U.S., depending on X or including SPACs, it's a $250 billion, $300 billion number. The PE asset class is $5 trillion to $6 trillion you've got to monetize $500 billion to $800 billion a year. And so the equity market is only a small portion. So you really need strategic M&A.

So back to your original question, yes, I mean, in the fairway, the market is pretty robust, but we've continued as the cycle has gotten more and more elongated, and we really have not had a credit cycle for close to 18 years when you really add up the numbers, 17 years, you have to be much more thoughtful about how you're investing a broad, diverse portfolio. But in the fairway, things look pretty good.

So let's flip it up to private credit. It got a lot of media attention last year, while credit quality across the industry really wasn't that bad. It was pretty good. And returns across private credit look pretty good, too. I know you just put out a white paper, private credit factor fiction. Probably many of us didn't check that out yet, so we can after this meeting. But maybe just summarize the house view and what's going on in private credit.

The house view is that the definition of private credit, there's 60 of us in the audience. If we ask everybody, we'd probably have 70 different responses what private credit really is. Private credit, in our view, is simply anything that historically possibly had been on the bank balance sheet or historically was not in a liquid marketplace. And with the dominance in the last 10 years, of the private direct origination in the non-investment-grade world, basically 0 to about $2 trillion, that has dominated the headlines rather than the broader conversation of private credit.

And let's just break that down for a moment. I grew up in the junk bond market in the mid-80s. If you were a private equity sponsor, you grew your business by financing with high-yield bonds and then leveraged loans. In 2014, '15, a few smart folks said, wait a second, we don't need a rating, and we can go give a private equity sponsor a direct loan, do it in size and certainty. And so it became the third leg of the noninvestment-grade financing world. Investors wanted yield. It grew from 0 to $2 trillion between high-yield loans and direct lending. It's a $5 trillion asset class.

And those 3 products make up the noninvestment-grade world, but they only make up a small portion of what we would call private credit. The bigger opportunity in private credit has been really the evolution of the banking model post the GFC. Many financial institutions, including the largest, most robust, most profitable in the world, BofA being one of them, JP being the other of the big 4, clearly have continued to refine their business model. And as a result, a lot of activities were not accretive in the regulatory or ROE model. And as investors around the globe diversified their curiosity, they ended up playing a larger role in commercial real estate debt, resi real estate debt, ABS. And so when we look around, we see private credit really is a $40 trillion asset class, much, much broader, much more relevant and much more embedded than the direct lending activities.

And so for us, it really is an education and dialogue. We had our 200 partners in Japan last week. Usually, I meet with all the mega banks, I did again, the trading companies. And so this is not a recent phenomenon. But clearly, the conversations, which I'm sure you'll ask me about, I think there's been some questions about software lately, I believe. Just a few. Those questions really are focused on the non-investment-grade direct lending area of private credit. Now it's going to have an impact because of the AI cycle on investment grade, which we can talk about.

But I think the real message here is, there is a -- if you are a participant in diversified asset managers and you really don't understand the story that I just spoke about in terms of the breadth of this opportunity, you're really missing a massive tectonic plate in how the business is run. It's the idea that private credit is going to stall and it's going to stop. That's just having a deaf ear to what's going on in the broader economy. And I would say that as we travel around the globe as one of the thought leaders in credit and private credit in addition, many government leaders, regulators want to talk to us because I don't think it's any coincidence that the U.S. marketplace and the U.S. economy has been a real bulwark of growth around the globe because of the relevance of private credit, which is a much longer conversation.

So Jim, Apollo has grown exponentially since the global financial crisis, like well north of 10x. As you sit here today, what are your strategic priorities as President of Apollo? And what do you need to get right to keep this growth momentum continue?

Yes. Well, I would say about 3 years ago, we, as a leadership team, really started to publicly dialogue about the growth and the importance of origination to these models. We're fortunate we have a great brand. We've had great success. The limiting factor of our long-term success was clearly the input on great investments, not our ability to raise capital. And so we've been working on this since we created Athene 2010, 2011. So internally, we've spent billions on these origination platforms, on the role that we play as a financial provider of capital solutions from investment grade to noninvestment grade. And that's been very successful for us.

I would say that in the last -- when we did our Investor Day last fall, we talked about a number of themes over the next 3 to 5 years. We talked about the global industrial renaissance really wanting to fund that, which is origination. We talked about feeding the individual investor through retail. We talked about the public-private convergence, and we talked about different types of replacement around the globe. And all of those are the 4 main factors. So personally, I spent a tremendous amount of time on origination. How we're taking that show more broadly around the globe. And so again, I think we've been very clear about looking through the windshield, not the rearview mirror.

And so when we like -- we love the alternatives business, but we just -- as we talked about in our call on Monday, we see those themes that I talked about, the industrial renaissance, the public-private convergence, the whole idea of wealth and individual investors. We see ourselves feeding those not through the traditional alts business, but through individuals with retail, through traditional managers like we announced with Schroders, what we're doing with insurance, what we're doing in 401 DC. So it really is taking our business model and taking that sourcing and that packaging and delivering it through a variety of other channels of distribution.

Jim, where are we in the secular growth of private investing, private companies, public-private convergence? And do you think that private credit will begin to trade and kind of look a little more liquid? And wouldn't that essentially lead to tighter credit spreads in the future?

Yes. So a lot of questions there. I guess the audience is probably thinking, wait a second, if something is private, it must have a wide discount. And therefore, when it becomes tradable, that discount gets compressed. And there's some degree of truth to that. But what we've -- there's -- what people have not connected is the growth of private credit solutions and our focus on origination. When you look at various industries and how they're going to get funded, private credit, depending on corporate asset based or different types of real estate are going to need different sources of capital. And from our perspective, it's the premium that one achieves by offering a private solution in scale to a company that is part of the company's financing. We believe that premium will retain even if there's a degree of liquidity and transparency.

Now there's a bunch of themes crashing here together. For those who are real students of history, there was a time in 1990 where loans did not trade. I was a trader at Goldman Sachs. We traded bonds. We hired this individual. We're going to trade loans. Well, banks didn't want you to trade loans. They were held on their balance sheet. There were regional banks. There were money center banks. There was banks in Boston and New York and various others. They did not want their loans to trade. There was a huge pushback. Sound familiar. As you brought more activity into that asset class that was deemed private and illiquid and the embedded holders of those loans did not want the mark-to-market, now you have a couple of trillion dollar leveraged loan market that is relatively liquid, BKLN and various other ETFs and such.

Our view is the investment-grade side of the marketplace, you will have companies like Alphabet that yesterday went out and raised $30 billion in IAG financing, but they will also, depending on their CapEx schedule, whether it's a data center facility, an energy facility, they will find private solutions as well as they need every pocket of capital to fund this growth. And so yes, there will be -- that's on the origination side.

At the same time, on the investor side, depending on institution or other channels, price discovery, information, education, that will be part of the dialogue. So we've been very active in many of these large high-grade capital solutions for Sony, for Intel, for many others. We make markets in those such that if investors are sophisticated and they want to log on to our site, and we've shared this information with firms like BofA and other intermediaries, we want investors to be able to have liquidity. So last year, we traded a shade under $10 billion of these assets.

So I think this is just evolution. If you are a historian of markets and you understand how capital flows work, and how education and dialogue brings in more investors, I think that the capital needs are so large that many, many more companies will think about their capital structure as I have public or private equity, I have some public bonds, I have some private financing, and it's a toolbox that companies will use to finance.

Jim, your CEO and Co-Founder, Mark Rowan, has consistently identified investing deployments as the bottleneck of the model. I know you've built out many asset origination kind of platforms. You have well north, I think, of 15 now. I'm wondering, do you need to keep building this out? And what are some emerging areas of opportunity?

I think the answer that I would say to this whole question is we've been on a very strong trajectory of growth. And it's really now about making sure we maintain the excellence and the quality at scale, growth with intention. And we've listed the spreads of our origination over the course of the year, the $306 billion, the different geographies, the different quadrants, but it really is making sure we grow and maintain that scale. So we have 16 of these origination platforms. There's a handful that are quite large and have been quite successful. Those would be names like Atlas, MidCap, Redding Ridge. In our view, we're going to continue to refine those business models. They may geographically expand, but they're going to be really focused on the product set, which they do.

And Atlas is a very good example. When we purchased Atlas from CS, it had about a $60 billion balance sheet. We purchased, we got out of some agency businesses and businesses that were really balance sheet heavy, but poor ROE. We slimmed it down to 25. We've worked it back up to 60 now. We've gotten our cost of financing down. So of the 16, we probably have 7 to 8 to 9 that are really at scale and the other 6, 7 are in a development mode. And some of those will either merge together. We've in the past sold them. We sold a mortgage originator a few years ago. And so I think this theme with those is to take them a bit more global. I don't think we need -- we don't have a voracious appetite to own 30 of them. I think it's really about growth with intention and scaling them so they have a reason to win.

But I think the question really on the origination the answer for our strategy is going a bit more global, expanding more into Europe, more into Asia. We had all of our 200 partners in Japan last week, amazing hybrid opportunity. And so our origination has been very focused on investment-grade debt and debt overall, i.e., credit. It will continue to be focused on that. But I think you'll see more growth globally, more growth in some of these emerging platforms as well as a degree of expansion. Our hybrid business is really a $20 billion origination business now. I think easily, it could be much larger, a transaction we announced yesterday for Clear Channel.

So we see a dramatic opportunity to take a very U.S.-focused strategy, a bit more global and go deeper with what we have already succeeded in.

Jim, let's talk about AI, artificial intelligence for a moment. There's been a number of very high-profile AI infrastructure financing transactions out there. You just announced one with xAI. So the question is, how is Apollo approaching the AI infrastructure opportunity? And what type of deals are you looking for? What type of deals are you trying to avoid?

When I take a step back and you think about the analysis that's been done on the amount of capital needed for AI infrastructure, the market is somewhere $5 trillion to $7 trillion over the next 5 years. When you break that down, about 1/3 of it will get funded by operating CapEx of these companies, operating cash flow, about 1/3 in existing investment-grade markets and such. And then the third is like a question mark. And I'm rounding for general numbers.

So in the last 12 to 18 months, as the market was very, very red hot last summer, the issuers were very smart and they had an infrastructure marketplace, a real estate marketplace and a corporate marketplace, all competing for product to fund these businesses. We've tried to take a step back and say, where can our capital be structurally advantaged and where are we actually a bespoke value-add versus a commodity. And again, I think so just like various other industries, what we did for Valor and xAI was really -- it was a very interesting sale leaseback of chips with a 4-year duration. We took negligible residual risk. And so we're not counting on some trend to continue for us to have a successful outcome. And so we're humble enough to know that there's various outcomes in 3, 5, 7, 10 years that we don't know. And we don't want to be in financings where we're betting on a trend or a pricing umbrella or something to continue. We'd rather get contractually paid back our capital.

So that's a long answer to say we're not chasing every financing in that sector. With $5 trillion to $7 trillion, you can be picky. We want to make sure that we have our fair share. Our advantage is the duration of our capital, the geographic expansion of our capital in Europe because of PIC, U.K. because of PIC. And where banks are very good 2, 3, 5 years, we want to augment that 10, 15, 20 years. So we're trying to find areas that we're not assuming future trends where we can actually differentiate our capital and where we're not really competing with a variety of asset classes for one specific outcome. But there's plenty to do, and there will be plenty to do.

And I would say from mid last year, mid-June, July, August, when the market was extremely white hot to what has gone on in the last 6 months, 3 months in particular, the pricing has widened out. Now it's interesting to see how early in the last 2 weeks, 3 weeks, even in light of all the noise in the marketplace, Alphabet with a mega deal on Monday, Oracle with a mega deal last week. These companies are still -- the top 6, the hyperscalers are still having great access to capital, but the public markets is deep and as broad as they are, they are not large enough. And if you really look at the IG index over the next 10 years, there's no doubt that technology that is like a 1% exposure will go to high single digits and have a large impact on the IG marketplace. So with those big trends, we feel pretty good about our differentiating strategy, and I think it's a large growth engine of the firm.

Jim, let's talk about the private wealth channel for a moment. This has been a real success story for Apollo. ADS and private credit has done really, really well, probably ramp faster than anyone expected. AAA has done really well, too. As you look at your offering today, where would you like to expand further on the product front and also on the distribution side?

I think we feel on the basic product set, of global wealth, we started this journey 5, 6 years ago. I've often said we were a bit arrogant. We thought it was all about performance. We quickly pivoted 5 years ago and built out a broad product set with education, i.e., Torsten, technology, feet on the street. And I feel we have the complete product offering right now when you look at our product set vis-a-vis our peers. And I believe the trend that you saw happen in nontraded BDCs with ADS and a handful of others capturing a big share. I believe that will be in the ABS market, asset-based securities, asset-based finance and our lead product, we have the flagship vehicle. It's still sub-$5 billion, but it's still quite large. It's the biggest and largest out there. That will be our next franchise to ride, if you will. But we have 8 that are over -- raised more than $500 million a piece last year.

So I think on the individual commingled products, we have the product set. I think what you're going to see happen quickly in Global Wealth is it's going to continue to evolve from some investors want an individual product to some want a broader product set where an asset manager or an adviser will co-mingle a variety of products under an umbrella product, if you will, more of a solution, a private credit solution with a handful of managers. Also, if you have to look at what's going on in the models industry with the growth of models in Global Wealth and the role we play there.

So I think it really is -- really ties back into the answer we said the other day on the call is it's really taking this alts business and taking it not only just to Global Wealth, but this whole idea of replacement with traditional managers, things we're doing with Schroders, things we're doing with State Street with PRIV. So it's not one solution, but I feel that we are of all the folks fairly on the cutting edge of trying to really listen to product solutions and be thoughtful about things that have great convexity. And I think those products, which I just mentioned, have great convexity.

So Jim, I think a lot of us are looking forward to the Fund XI raise. You have the best private equity performance among kind of all your large-cap peers. A lot of them have pivoted more towards the growth side. You've stuck to your guns, purchase price matters, something Mark always talks about more of a value fund, your DPIs are healthy, your track records are healthy. How do you think about the timing and sizing of this fund?

Yes. We started the official kickoff late last year at January. We've gotten a great reception, as you said, as many other -- when you think about mega PE managers, there's a handful that have been very consistent in their strategy over decades. We're one of those. There are not many that are also in our ZIP code. So as the questions regarding credit and software will leak into equity returns. I suspect that Fund XI will get a -- we've gotten a great reception. We'd like to replicate what we did for Fund X. So low to mid-20s, we think that's very much very reasonable. I think you'll have a first close before the midpart of the year. It will probably leak into 2027 to some degree. But really, it's a sweet spot between the end of the first quarter and the first quarter of '27. I feel very comfortable and confident of our ability to raise that $22 billion to $25 billion.

So let's move into the retirement services business, focus on North America. Athene has been an incredible success story. You guys were the first to kind of start this business well earlier than peers. What gives you confidence that Athene can sustain this impressive growth trajectory, especially as the competitive landscape gets a little more crowded?

Well, I think in the core business of what Athene does today, really in the fixed annuity business, we are a market leader between fortress balance sheet, high rating, low cost of executing our business plan, i.e., our OpEx and the distribution that we have, we feel very comfortable with our ability to maintain our share in that business. And our view is that rates will be a bit stickier than others think and people like to buy annuities in this marketplace.

So the core business, there are many folks -- and for those in the room who are students of Athene, we have a variety of channels to raise capital. We have 4. We have the M&A business, which has been a bit quiet, which many of the larger newer players are buying business at rates of return that we think are really not great. There's your retail business, which is your organic business. The first is your inorganic and your organic business. We obviously are a pioneer and leader in the FABN market and the FABR market, fixed annuity-backed repo, fixed annuity-backed notes. And then fourth is PRT. The amount of players that can do all 4 of those globally in Japan with a very highly rated balance sheet with a public currency with low OpEx, there's a grand total of less in your hand. So while there's hundreds of players, like the CLO market, there's a handful that dominate the marketplace.

So we feel very comfortable with our core competency in those 4 products in the variety of channels. We are spending a tremendous amount of time when you think about a retiree today, the last 50 years in the U.S. with what's going on between DB and DC, there is a retirement crisis. Unfortunately, we are in a business that gets better every day. People get older and their certainty of future income away from social security is not a robust answer to the solution -- to the problem, excuse me.

And so coming up with ways to offer a better return, if you have that lump sum of $250,000 as a retiree and you spend 4% or 6%, there's various outcomes in terms of your likelihood of outliving your savings, the ability to embed guaranteed lifetime income or other wealth builder products, that is just very logical. And again, I think that investors take a very short-term view of Athene. And if you really take a step back, we've built an amazing machine that's been able to weather market volatility, a massive change in rates, and we've done so in a very methodical way. And so I think people are discounting our ability to continue to reinvent ourselves.

So we're incredibly excited by the future of -- that Athene has in front of us. Obviously, the Athora purchase of PIC was a great example of an amazing business over in Europe. Obviously, Athene owns a bit of Athora and in turn, owns the exposure to Athene or to PIC. But again, I think solving this retirement conundrum around the globe in scale, the post accumulation, whether it's in Australia, whether it's in the U.S. or other markets, we couldn't be more excited about the future of those. And while you may not be able to pencil out in a model, we think those are all upside opportunities for us in the future.

So you covered a little bit of my next question. So I was almost debating skipping it. But I wanted to talk about the retirement business outside the United States. And I don't think you mentioned Japan, but like as you look outside the U.S., what markets are you -- do you see as most attractive for 5- to 10-year growth?

Well, I think that Athora's purchase of PIC in the U.K. The U.K. has a very well-defined market on the whole pension risk transfer, and we're excited about the opportunities once that has been closed and has all the approvals from the regulators. Certainly, in Asia, we have a variety of activities in Japan, more so on the reinsurance side with Athene. The backup in rates has changed investors' desire for a variety of products. We think we're going to be part of that conversation. Certainly, in places such as we have some activity in Taiwan with FWD. But I think there's a handful of geographies, Japan, Korea, Taiwan and Australia that we think in Hong Kong that are the areas of growth for us. And then Western Europe, there's a variety of solvency rules that make some geographies very attractive, some less so. I think you're going to see us do more in the U.K.

Great. Jim, with that, we're out of time. So on behalf of all of us at Bank of America, I just wanted to thank you for joining us. I hope to see you next year.

I appreciate it. Thank you.

All right. Hello. I'm Mike Brown, the U.S. Asset Management and broker analyst here at UBS. It's my pleasure to introduce you to Martin Kelly, the CFO of Apollo Global Management. Apollo today is one of the world's largest alternative asset managers with AUM totaling $938 billion. So Martin, thank you so much for joining us here in Florida.

Good morning, Mike, and thanks for having us. I appreciate it. I was actually telling Mike, I've been coming to this conference for so long that I've stayed in the same room more than once. .

Well, Martin, why don't we start on the macro front. It's certainly been an interesting start to the year, a lot of disruption in the market. But as you think about the path of interest rates, inflation, some of the geopolitical noise, what is kind of Apollo's view on the outlook here?

We're seeing all the same data that you all are -- we also have the benefit of what we see at our portfolio companies, which is pretty consistent actually with the broad macro themes that you've seen and you read about it is a bit mixed for sure. But the tailwinds certainly would point in the direction we think of higher rates not lower rates and higher inflation over time. So I think the K-shape economy is definitely real. That's -- we all see that. The fiscal stimulus that is more ahead of us than behind of us, particularly as it relates to the consumer. We'll probably put some upward pressure on inflation. And then there's a whole series of tailwinds, which create sort of upward pressure on both rates and inflation we think.

So deregulation, the tax bill, which the CapEx deductions broadly defined, so the AI spend, cheap dollar just the need for capital, the amount of government debt that's required and private financing all puts up with pressure on rates. So we're in the camp that rates are a question whether we see further rate cuts from here. There's 2 in the curve at the short end question if that will actually happen or if we'll actually see upward short-term rates and then long-term rates are probably based to the up net-net given all of those dynamics. And so that's the macro picture. We see the same in the portfolio companies. What does it mean for us as a firm activity levels are really high.

All of the demand for capital is just creating activity levels and pipelines that are really robust. And so we see it as a benefit for the phone.

Great. So Apollo reported earnings yesterday. And on the call, you affirmed 20%-plus FRE growth 10% growth. Can you maybe just summarize a couple of the key kind of takeaways from the earnings print yesterday? What were some of the main headlines there?

Sure. We finished off a really strong year. We came into the year on the asset manager side, suggesting mid-teens FRE growth. We printed 23% and I think the most gratifying part of the results was the breadth of origination across the business. And we effectively achieved our 5-year target in year 1 with an origination of $300 million. And that was about 40% driven by what we call our platforms, our lending businesses. about 40% was our credit businesses very broadly defined. And the other 20% was hybrid equity and our high-grade lending businesses. And so it was broad. It was geographic. And I think what was really particularly evident was the connection between that and the impact it has on earnings.

So it drove management fee growth higher. It drove a syndication flow through our Capital Solutions business. So we had a very high year. We had an $800 million year in ACS which exceeded our expectations. But it's linked. It's like to origination. And it also created attractive spread assets that guide Athene's growth rate up above what we had indicated about 6 months ago. So there's lots to like about activity levels of the fund. But I think there's a distinction to our strategy to focus on origination and the benefits that, that provides. And I think that, that was really clear in the numbers that we pointed and announced yesterday.

Great. And one of the positive surprises from the results yesterday that I wasn't quite expecting was the strength on the realization and the performance income side of the P&L. So there's certainly a lot of optimism in the market about the capital markets recovery here. How do you think 2026 could really progress for the industry and then for Apollo specifically as we also kind of take into account some of the recent volatility and could that have a bit of a cooling effect on capital markets activity?

So it's interesting, most of the upside and the realizations was actually driven by our credit business. And so PE was a component of that, and I'll talk about that in a minute. But we had a really strong year in credit and our -- and most of the funds in credit to pay carry have an annual payout and so it happens in the fourth quarter, and so that's what we saw. So our credit businesses were up between 8% and 12% across the board, really strong. And so the earnings that we reported in our Principal Investing segment were principally driven by that. We also had Fund X, our currently active investing PE flagship rise over its ESCO threshold, which means it was allowed to distribute carry, which was related to prior exits.

And so it was less a function of in-quarter realization activity than it was sort of a catch-up of -- an appreciation in value in the fund that allowed us to distribute. All that said, we had a decent year in realizations in PE, and that's what we see ahead of us. We're cautiously optimistic. It's hard to handicap. But it would feel like activity levels in the market and certainly speaking to all the M&A bankers that we do, everyone is really busy. But whether that comes through a public exit through an IPO process or through it's sale to a sponsor or a strategic remains to be seen. But I think if you go back a year, this time last year, enthusiasm was high then we hit liberation day. And so that sort of set the time for the rest of the year.

I think as we come into this year, I think the knowns and the unknowns about policy are more known and more accepted, and I think people are more inclined to get on with it. And so I would expect to an uptick. But it's -- as I said on the call yesterday, it's the hardest part of the business to predict. But I think we're coming off the lows, and we should see modestly at least higher activity from here.

Okay. Great. If we change gears to inflows. So in the fourth quarter, you saw $42 billion of inflows, $220 million for the year. As we look ahead to 2026, it seems to be a bit of a story of continuing broadening out of your breadth of your inflows. Maybe just talk a little bit about how you think about the channels in '26 versus '25 and where the flows will come from?

Yes, it can expect to origination actually. So everything has a connection point back. But the short answer is we expect it to be higher. We expect wealth to continue to increase. And so we have 12 products, 7 $1 billion, and we continue to focus on the wealth channels as a really important way to access individuals and that's with different access points, it's in all geographies. It's building on our team, it's building out the structure that we bring product to market in that's appropriate regulatorily for local markets, wherever that is. And so wealth was $18 billion of capital raise in '25, we expect it to be higher than '26.

Institutional capital raise, we expect to be meaningfully higher than we raised in '25 driven by Firstly, we're in market with our new PE flagship Fund XI. So that will have some closings this year. It won't activate until next year. But by dollar value, it's actually, I think, more driven by credit in all forms, asset-backed, direct lending, investment-grade forms of credit. AES is a part of that. And then infrastructure and sort of equity adjacent businesses. So we're pretty optimistic about the environment, and it's really being driven by -- we've started to articulate these 6 markets that we are attaching origination to third-party insurance, sort of the notion of replacement, fixed income replacement and equity replacement. And and partnerships with traditional asset managers is all relevant to the capital raise. And so it's -- can we originate the right products? Can we get it in the right format, including what we call building blocks to access the 6 forms of capital that we raised.

Great. Great. Maybe just one quick follow-up there on the third-party insurance opportunity. It seems like it was a big step forward in 2025. You guys have been really telling a very compelling story about the alignment with Athene there, and that seems to be really resonating in the market. What's kind of next there? Maybe can you talk about some of the key drivers in 2025 that really allowed you to take that step forward?

We approach third-party insurance, both through managed accounts and through syndicating flow activity to mostly investment-grade debt business to third-party insurance clients. And if it's attractive to Athene, it will most likely be attractive to third-party insurance clients. So we're very happy to syndicate to what may be considered to be competitors of Athene. And we do that frequently. And then we have strategic relationships with clients that are giving us money to manage. And then we manage that money in an account like any other LP. So it's -- it aligns with our principal mindset.

If we are prepared to win the risk ourselves, through ethane, then that sets a strong foundation for the underwriting of that risk and it sort of sets benchmark, I think, against which third-party insurance look at and say it's good quality risk. So we think -- again, coming back to origination, if we can originate the right product with the right risk return attributes and certainly in the context of an insurance company that has the right capital charges associated with it and earn return on equity, then it's attractive business, and we will continue to grow that business. And so we have a team focused on that. They've had some great success last year, and I expect that to be greater in '26.

Great. And then if we switch over to the wealth side of the story there. So the redemptions in the nontraded BDCs was certainly a big theme that we saw play out in the fourth quarter. The ADS fund has a lower level of direct lending exposure. So is that something that you believe that the broader wealth channel fully kind of understands and appreciates and is that starting to really resonate in this moment in time? And maybe can you just touch on what you're seeing and hearing from your partners in the wealth channel currently?

Sure. So flows, as you'd expect, flows were a bit later across the whole industry and in Q4, and we saw that. And we've seen this in certain times before when slows can temporarily slow down. Redemptions picked up, generally speaking, across the industry, below the gates, but sort of into the 3% to 4% annualized area. And so I do think we've been very clear about the risk profile of our BDC, ADS relative to the PS. And so I do think that this is really an opportunity which we're leaning into, as you'd expect for that to differentiate itself. So it has a very attractive return on a comparable basis. but has lower everything that you care about, lower leverage, lower PIC, lower software, lower ARR software, lower pick software.

And so I think this is a moment when the risk -- the return to the risk profile of that vehicle really should differentiate itself. And so we should start to see a pickup in market share. So I'm optimistic. But the -- what you're seeing in the industry tends to be washing over the whole industry at the moment.

Okay. Great. And then the growth of the wealth platform was certainly a standout in 2025. And so certainly, the industry could face some pressures near term. But as you continue to monitor the health and strength of the Apollo Wealth business. What are some of the key KPIs that you track there? And what are some of the impediments to the growth of the wealth business near term? What are some of the key constraints there?

The most important KPI is the return that investors on over a period of time. So [indiscernible] back to the prior question and the comments around ADS. So ultimately, you have to have a trusted product. You have to have reputation and credibility that you can deliver a product which is valuable to individual clients that's accepted by whatever the distribution point is. And so if you can't deliver on that, then you're not going to do well over time. So it all comes back to origination and underwriting and making sure that the risk return is, we think, appropriate for the customer.

Assuming that is the case, then it's a really interesting but also a really complicated ecosystem. And so we continue to build out the teams. It's one of the less than a handful of areas where we continue to make really significant investments that will again be the case and it's not just having the product. We have 12 products, but it's a question of getting the product in the right format for the jurisdiction that's being sold into retail investors in different jurisdictions have different requirements, set the LTIF in the -- in Europe as an example, but it's different in Asia, and it's different in other jurisdictions. So it's product, it's relationships with the wirehouses, the private banks, our RIAs to get access points. It's the structure of the products, it's the technology to support all of that. and it's people, it's teams on the ground who are doing the work and building out the network.

That's in the U.S. It's been building out in Europe and parts of Asia and it's increasingly now in Canada and Latin America. So we have the markets covered that we want to cover. We're continuing to build out the teams but this is a long term. At the end of the day, individual investors need alpha in their portfolios. And so private assets are the way to deliver that. And so the thesis remains intact. It's just -- it's a complicated ecosystem to build out, but one that we think has enormous runway ahead of us. And that's why we continue to invest and prioritize that.

Can you maybe just touch on what the next chapter of growth here will be you talked about the fact that there's an opportunity to continue to invest in people. Continue to add more maybe wrappers for kind of the international markets. But as you think about really what's the next growth path here? Is it -- it doesn't sound like it's necessarily launching new product, but is it continuing to expand geographically? Is it continuing to deepen with the wires? Is it new channels, like the 401(k) market? Do you think perhaps that's kind of the next frontier here?

I do. I think we have the right product line up more or less. We have 12 products. There may be 1 or 2 more, but we have different forms of credit covered. We have infrastructure, secondaries, we have AAA as a really interesting equity replacement product. There's 1 or 2 other things that are sort of in the lab, if you call it that, which may be relevant. But for the most part, I think we're covered. And so it's doing everything that we're doing. I think asset-backed as a fund is the most likely next products to get real traction and it's been increasing quarter-by-quarter.

It's really attractive and high-quality products, meaning investment grade with a good excess spread. And so it has a home in people's portfolios. But as we've seen from some of our competitors, you need -- you can have 1 or 2 products that just take off. And so we'll see. So we continue to do everything I just described. The DC 401(k) is also really interesting. It's -- we had the guidance. We have a process that's sort of working its way through right now. It's iterative I think we're optimistic that, that will provide more clarity. And so that will give more sort of comfort to [indiscernible] that private assets have a home.

But again, it comes back to -- you have to get it in a format which is easy for plan sponsors to take. And so it's not obviously asset by asset, but you have to have a building block of that goes into a fund that is understandable. So it could be short duration IG as an example or it could be an asset-backed fund. But it needs to be something that's sort of comprehensible. And then it needs to be in a format like a CIT, which is acceptable to a plan sponsor. And then it needs -- ideally, it needs to be a -- become a default allocation through a model versus it being a choice that individual investors in 401(k)s make because that won't get the traction that's needed. So all of that is playing out. All of it has, we think, massive potential, but it will continue to take a bit more time.

Great. Why don't we come back to the discussion on private credit. That obviously continues to be a very topical focus for investors these days, and it really kind of picked up in terms of the focus back in the fall and it continues to kind of pop up in conversations now. We talked a little bit about the wealth angle, but I wanted to hear maybe the perspective from the institutional side. Have you seen any slowdown from your institutional investors or LPs there in terms of their continued allocations to private credit? What are some of the conversations been from that cohort?

So this gets back to the definition of private credit, which is -- which requires going to be careful about how you define it. So private credit sort of typically find is below investment grade. That's been the focus of the nontraded BDC space. And that has been a sort of a wealth-oriented product. Our definition, as you know, is investment grade in a much, much larger marketplace, and that's been the focus of all our origination efforts. And that is where we've continued to grow the sort of the top line originations up to now $300 billion in the last year. The demand for investment-grade private credit continues to increase.

And we saw that again in the most recent quarter. We certainly saw that last year. And it all comes down to where can you originate product and how does that compare with what you could buy alternatively. And if you look at -- we gave some stats on the call yesterday, we originated in the most recent quarter, and it was similar for the last year. investment-grade credit at 290 basis points over treasuries. And so if you look at where the BBB index is, that's a 200 basis point pickup relative to where you can buy an equivalent bond and so that's obviously a huge differential. And in the noninvestment-grade space, it's more pronounced.

It's for [indiscernible] of a comparable high-yield bundle mix. And so it's more than 200 basis point pickup. So if you're able to create products that has that return outperformance and it's appropriately structured and it's diversified and it's rated and is, therefore, appropriate for not just insurance company buyers but all forms of investment-grade buyers, then it's a very attractive asset to [indiscernible] and so that's, I think, our edge. Our edge is our ability to create volume like originating in real size, most of it is investment grade. And most of it is what we call private credit, but it's investment a private credit and it's inherently attractive given its return profile so we see demand increasing.

That's what we saw last year, and we see that looking ahead. And if you come back to the question you asked on capital formation and where do we expect to raise money this year? That's a key driver of money that we expect to accumulate this year driven by that origination capability.

So let's go to origination. That was kind of where you led with in the beginning of our discussion here. And Apollo has really built a very differentiated ecosystem. You have 16 origination platforms I think nearly 4,000 employees across that space. What's really the next phase of expansion there? What origination engines do you expect to maybe be bigger drivers of asset growth in '26 and '27. Maybe just touch on Atlas specifically?

Yes. Atlas has been a terrific platform and still has, we think, a lot of potential to grow. So I'll talk about the platforms and I'll talk more broadly because I think it's both relevant. So platforms are about 40% of our origination. Atlas is by volume, the largest originator. To date, the majority of that has been U.S.-based business. And so for most of our platforms, the potential exists, certainly within the case of Atlas, to grow its footprint outside the U.S. And so Atlas originates in Australia, for example, has some origination in Europe. But the potential to grow that business more geographically is real.

And so could Atlas sort of grow from a $40 billion, $50 billion a year business to a $100 million business quite conceivably hopefully quite easily. So that's one piece of it. There are other platforms that are as important, mid-cap, Redding Ridge and then you go down through the asset classes that we have. And so they're all -- and so they're all relevant and I think many of them can grow outside their current sort of mostly domestic footprint. So then you move into, okay, when we set up a new business, and I think this is where the market will go, this is certainly how we're thinking about the market.

The business of raising a fund in a particular area and having the size of the opportunity being attached to the size of the fund, maybe with some spillover for large coinvest, we think is sort of behind us, and if you take infrastructure or sports as 2 examples, they are both businesses that, in one case, we're in infrastructure, in one case, we're raising a sports fund. But the scale of the opportunity around origination for both those businesses is much greater than the size of the fund. And so -- and we're seeing that in infrastructure. Infrastructure, which is sort of the data center power supply, ecosystem and all of the financing that's required around that is much more than just the infrastructure business that we have today, represented by Evan.

So we originate a lot of infrastructure assets. They go in different places. They go to the sixth channels that require supply. And you'll see the same in sports. Sports is a really interesting ecosystem that's sort of underpenetrated in terms of financing. And you'll see us, over time, create an origination capability in sports that's much greater than just the size of the fund. And so I think as we as we continue to grow parts of our business, hybrid is actually another example of it. We have a hybrid value fund. It's $4 billion or $5 billion. We originate much more than that in hybrid origination. It's in that $300 million number, and that product goes into managed accounts and others that want that type of product.

So that's the evolution in the market that we see, we're origination-led and yes, part of the origination is supported by the fund that you raised with the purpose to invest in that. But a lot of it is either syndicated or put into other accounts that want the same risk return profile. So that's the future of the business that we see. And that's why we keep coming back to origination is the most important thing that we do.

I wanted to ask you maybe a follow-up on the origination theme. And what thing I was trying to unpack here as we continue to move into 2026 and spreads stay quite compressed across industry, certainly some recent movement there. But do you think the origination platforms kind of gain more of an incremental advantage, a big trend that we've seen across the ADF space is a lot of these flow partnerships with the banks. But what we're hearing more is that banks are retaining more loans and competing more effectively. So I'm assuming spreads will start to really come down on that side of the kind of flow side of ABF. So just curious your views on that.

We're not seeing it. The relationships with banks and the partnerships we have on flow are important to -- it's an important source of supply for us. And so banks want a certain type of asset on their balance sheet and they don't want other types of assets on their balance sheet. So anything that has duration is much more appropriate outside the banking system. And so there's all sorts of ways you can allocate flow to achieve that purpose. Often in partnership. Often, it's pro rata or it could be you sort of truncate the cash flows and the duration and the banks take the short end, we take the long end. There's ways that you can do it that achieve objectives for both.

And it sort of -- it comes back to the demand for financing is enormous and growing all over the world. And now we're seeing -- we're really seeing it in Europe with defense spending and data and power supply. And so the capital that's required is more than the banking system can provide. And so we're happy partners with the banks. We have some very valuable relationships. And I don't see -- if anything, it becomes more of a buyer's market as the supply of financing to the market steps up. And so there should be spread relief versus spread tightening, I think, as we look ahead.

Okay. Great. So let's talk about the private equity business a little bit here. You talked about that when we were talking about flows, that [indiscernible] will be back in the market this year. And just wanted to hear a little bit about the sentiment across fundraising and private equity land these days. We haven't seen a whole lot of realizations coming through for the industry. Performance in some places has been a little bit spotty. So maybe just touch on how is LP appetite for private equity funds and for Fund XI specifically?

So we -- well, I'll talk about the industry first. It's the most bifurcated market, I think, that exists out there. And so if your returns are strong and your [indiscernible] and your scale and your brand is strong, then you're having a much easier time raising the next one. If you don't check those boxes, then you're not. And we're seeing some recent large fund sizes done relatively quickly by plan sponsors that have those characteristics. So we believe we fit in the same category. We have -- we are out now with Fund XI.

We have a target size of $25 billion. We are marketing off very strong track records for the 2 predecessor funds, both in IRR and DPI. And so I think all of that is really important to LPs. And so we have -- we've been at this now for 35 years. Our returns speak for themselves across that whole period of time. And I think if you look at what we've paid for investments that we've made in our funds, it really hasn't changed. We pay about 6x cash flow in Fund I at 6x cash flow in Fund IX, 6x cash flow. And so if you have a sort of a value orientation, then it's just easier to monetize assets when the markets get more difficult, and that's being reflected in our DPI, which is it's 0.3 for Fund X, it's 0.6 for Fund IX, both well above where the industry is.

And so if LPs see strong performance and they're getting cash back then -- and you've been a good long-term partner, then they're going to trust you to sort of take money for the next one. So we're pretty optimistic.

So you've got a differentiated result on performance, returning cash to investors. How do we think about the size of Fund XI versus Fund X?

We're aiming for the [indiscernible] so we'll see. We've just started marketing. Early dialogue is favorable, but these things. It will take a year plus to get this done. .

Okay. So on the FRE margin side of the story here, it's certainly topical as we move into 2026. You talked a little bit about it yesterday on the earnings call. Maybe just back a little bit more. What are some of the puts and takes here as we think about the potential for margin expansion? You've got bridge that came in at a lower margin and kind of mixed the firm level margin down, but you're continuing to get a lot of benefits of scale on the operating leverage side. So maybe talk about where the margin can go? And maybe if you could also tell us about what the margin would be excluding bridge or what that margin expansion could be?

Sure. So we focus much more on FRE dollar growth than we do the margin. So it's not a primary metric by which we try to manage the business. And the reality is there is so much that can be invested to grow each of the 6 distribution points and the complexity around them. And so we're, I think, very disciplined. We have a very thoughtful process around how we set up the span not for -- just for the current year, but for the next couple of years. And so -- and we look at the investment -- the OpEx investment that's required to get a return on that. And you're always investing now for revenues to come a couple of years from now. .

So -- and that's the judgment that you have to apply to the process. So all that said, I think having operating margin expansion is a good discipline. And so that's what we target. So I mentioned yesterday that ex Bridge, we're up by 50 basis points on the margin. were flat, including bridge and for 2026, we'll be up about 100 basis points inclusive of bridge. So -- but that reflects a really thoughtful allocation of investment spend to grow Global wealth to grow our distribution points around replacement, partnerships, product design. And then ultimately, as we evolve the ecosystem, will require a form of daily pricing. If we were to provide private products to institutional investors, then they will require a form of daily pricing and a form of daily trading.

And so that's a really important part of being able to deliver on that. That's also really complicated. So our businesses, I think, are deceptively complicated once you get under the hood. And so yes, we're trying to be more efficient. We're trying to embrace AI, we're going to do everything we can to create efficiencies in the process. But the opportunity set that we see ahead of us to create real growth in revenues not just this year, next year, but over the next 5 years, place, is real. And so that's the balance that we look at each year as we go through this process.

So if we shift gears to Retirement Services. You guys gave a very comprehensive presentation back in November. Yesterday, as I mentioned at the beginning, you reiterated the 10% SRE growth for 2026. I would still say there seems to be some investor skepticism about that kind of 10% level. But it seems to be related to competition in the market, the tight spreads declining base rates, which maybe everyone has some different views on. But just a number of headwinds that kind of impact that 10% level. So maybe just talk a little bit about that and what gives you that confidence.

Yes, we're very confident. And so we did a lot of work ahead of the November session, and we were with a lot of positive feedback about the sort of the depth that we went into to articulate the business. So 10% is the combination of 2 things in really simple terms. One is the sort of the headwind of the roll off of the existing portfolio, and it's where you're writing new business and at what spreads you're writing it. And so when you combine that, you get to the 10% dollar growth rate or you get to a spread rate of between 120 and 125 basis points. And so -- we have modeled -- we articulated the headwinds on the business as being rates down spreads in, meaning refis on our CLO portfolio, mostly and then the roll-off of the sort of very profitable business that we wrote post-COVID, that's very modelable and you can sensitize that for different assumptions that you make, and we've done all of that work.

And then you look at where do you think you can write new business at what spreads, supported by the origination back to the very first point and what you earn on the capital that you have supporting the business, and that lends to that rate. So we're obviously confident we've been very clear about it. We laid it all out. And so that's what we're focused on achieving.

Great. Great. Okay. Let me pause there. And if anybody wants to submit a question, you can do so through the app or through the web. We could also take any live questions in the room, if there are any. No one's willing. We'll see if they come through. But while that -- while we wait there let's talk about AI. I think one thing that I'm kind of interested to hear about is how Apollo is using it in your investment process and you as a CFO, how do you think about where the opportunities are to perhaps kind of maybe then the cost curve, where can some of the leverage come through? Could it help slow some of the head count growth in certain areas of your business?

Yes. So we're spending a lot of time on this. We are focused on a couple of different things. One is actually before you even get to that, how could AI disrupt our business. And so including where could it impact the current portfolio of assets that we own. So part of our risk management stress testing is an AI stress and looking at businesses that are either impacted by negatively or actually levered to, meaning upside to AI. And so that's something that we run across the business across all our portfolios. .

In terms of the opportunity, we have a group of senior people who are spending a significant amount of time focused on how we embrace AI to impact the decision-making process or just the gathering of information to AI to make the judgment around an investment decision through to how we operate the business more efficiently. And it's interesting, it's much less about the AI app and the opportunity and what it does to you then making sure that you have a process from front to back organized and someone actually owning it and the data in the right place that allows you to be efficient. So our viewpoint is that the judgment that's required is unlikely to be disintermediated but the way you get the information to make the judgment will be.

And we're definitely seeing that there's all forms of apps that we have around the company that people are using to make their lives more efficient. And then to get real synergies, which is what I focus on, like how do you bend the cost curve, when do you extract efficiencies. It's having a single person owning front-to-back process and really applying apps at all parts of the process. And unless you have your -- and that doesn't mean just someone in finance or someone in ops, it means someone who runs the business from the very front end sourcing through the very back end client reporting owning everything about the business. And if you don't have yourself organized that way, then you have handoffs, but you have breaks in the chain where you don't get that benefit all those synergies. So it's interesting.

Everyone has their own viewpoint on how quickly this will play out. but it does really seem real. And we have -- we have 95% of our company who are using apps every day. And so the adoption rate is high, but we're really focused on organizing end-to-end processes to get the efficiencies on.

Okay. Great. That's probably as good as any -- as a spot to stop. So please join me in thanking Martin. Martin, thank you.

Good morning, and welcome to Apollo Global Management's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]

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 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 in any Apollo fund.

I would now like to turn the call over to Noah Gunn, Head of Investor Relations.

Thanks, operator, and welcome again, everyone, to our call. Joining me to discuss our results and the momentum we're seeing across the business are Marc Rowan, CEO; Jim Zelter, President; and Martin Kelly, CFO.

Earlier this morning, we published our earnings release and financial supplement on the Investor Relations portion of our website. And our apologies for the later earnings date this quarter, this was principally due to our Partner Summit, which was a fantastic event that we held in Tokyo last week.

As you can see, our results reflect the broad-based strength across the business and our team's exceptional execution throughout the year. For the full year, we generated record combined fee-related earnings and spread-related earnings of $5.9 billion, which drove adjusted net income of $5.2 billion, up 14% year-over-year or $8.38 per share. And so given the strength of these results, I've asked the guys to keep our remarks on the tighter side this quarter. But of course, we make no promises.

And with that, I'll hand it over to Marc.

Thanks, Noah. I will do my best. I have doubts about Jim and Martin.

Again, an exceptional quarter capping off an exceptional year. FRE for the year, $2.5 billion, up 23% year-over-year. SRE, $3.4 billion plus -- normalized plus 9% year-over-year.

Business is firing on all cylinders. Origination, record volume across the $300 billion mark. More importantly, robust, consistent spread, 350 basis points over treasuries, with an average rating of BBB. Capital formation, record inflows, $228 billion, both Athene and Asset Management; ACS, third straight record year.

Most important to us, this is all done with strong investment performance without reaching. To give you a sense of just how strong, all buckets of credit up 8% to 12%, hybrid value up 16% for the year. Fund X, our most recent vintage Fund 23, 22% net IRR, strong DPI versus industry DPI that rounds closer to 0.

Looking forward, all of the drivers that powered us in '25 are going to power us in '26. In fact, I would say that they're more mature. And if you think about what's happening in our business, we are going from serving one market, institutional alts portfolios, to serving 6 markets. We now serve individuals, we serve insurance. We serve the debt and equity buckets of our institutional clients. We serve traditional asset managers. And we hope to serve more robustly the 401(k) market. Each of these markets has the ability to be roughly the same size as our original market, which power the entire industry.

Understanding that, these markets require different products, different product structures, different access points, different investments in technology to serve. And you will see these markets mature more and more over time. And so as we look forward, we think the trends that are showing up in '25 will show up even more in '26 and again in '27.

To give you a brief sense of progress, in the individual market, more than $18 billion of inflows, now 9 strategies in excess of $500 million of annual fundraising. Insurance more than $15 billion of third-party insurance with a very active pipeline. Increasing growth in our fixed income replacement business. And what we see is a number of the leading investors in the world moving to this notion of total portfolio approach.

Total portfolio approach essentially opens up the debt and equity buckets of these institutions to private assets in competition for what has historically been a 100% market share for public assets. Traditional alt managers, you saw the announcement with Schroders this morning, which I expect to grow into a multibillion-dollar partnership, and PRIV, our ETF with State Street, now approaches $700 million in size. And more importantly, it's among the top performers of investment-grade ETFs everywhere. Again, proving that private can be both liquid and illiquid. In this case, private investment grade being fully liquid.

We're also seeing progress in our DC and 401(k), products in motion with State Street with Empower, with One Digital and with 1 very large RIA. Everything we're talking about ultimately comes down to the promise of private markets, which is excess return per unit of risk. And our ability to generate assets or originate assets with excess spread at scale is becoming more and more important. And our historical investment in origination has given us a bit of a competitive moat that others are trying to catch up to.

Outlook in '26 for Asset Management, which will not be a flagship fund year, continues to be 20%-plus FRE growth. In Retirement Services, the demand for retirement income has never been higher. The global retirement crisis is coming much more into view. We as a world and we as societies are starting to deal with the consequences of this. You saw more than $80 billion of inflows in '25; you should expect approximately $85 billion of inflows in '26. And more than $5 billion of this will be from markets that we were not in 18 months ago and that I believe will turn out to be a very large share of our business.

Our November [ teach-in ] set a very clear path. The SRE growth remains durable. We expect 10% SRE growth in '26. And we reaffirm the 10% growth on average through '29 assuming we do what we're supposed to do in the alternatives.

We step back and we think about macro, all of this comes down to a focus on risk and reward. Each of us has our own way of expressing what it is we're doing. The way I like to express it is to talk about markets that essentially exists on a playing field. For most of my career, 95% of the outcomes have been on that field and very little has been outside that. In fact, it was such a small percentage that we never really thought about it that much and didn't really hedge. And sometimes, we like what was in front of us in terms of valuation, in terms of liquidity, in terms of economic outlook, and sometimes not, but we knew how to navigate those cycles.

What we're watching now is just an increased percentage or increased probability of outcomes outside of established lanes or an established playing field. And one needs to take those factors into account as you invest, as you think about risk and award.

And what's becoming clear in our industry is the notion of having a principal's mindset versus an agent's mindset. A principal's mindset approaches every asset and every asset class as if they're going to own it for the long term because they do. An agent's mindset responds to the [ hot dot ] in the marketplace and ask more fundamentally, is can the asset be sold, is the asset popular. I believe a principal mindset will serve us very well.

Jim will give you some notion of software, and I will steal only a little bit of his thunder. But in our PE business, our software exposure rounds to 0. In our Athene balance sheet, our software exposure rounds closer to 0 than to 1. In ADS, half the exposure of our large peers.

Software is an amazing business. The market's overreaction to software is extreme. But clearly, factors have changed, and we have good software companies and bad software companies and good valuations and bad valuations. If you were aggressive at a point in time when valuations were very high and not a lot of diligence was being done and people were expecting growth forever, you're playing defense now. I assure you, we are on offense, and software will be a very attractive sector, albeit not at the valuation levels and with the kind of underwriting that has been done previously.

To give you a sense of how this principal mindset plays out, take our largest private markets direct lending vehicle, ADS, now more than $25 billion. For the quarter and for the year, approximately 8% return, lowest leverage, private capital structure, large company, no pick [indiscernible] I assure you ADS is on offense.

In hybrid, our largest vehicle there is AAA, which now exceeds some $25 billion. AAA, 12% inception-to-date return, very low volatility, 43 of 44 positive quarters, including 23 consecutive positive quarters. This is the perfect strategy for institutions who are thinking about total portfolio approach in that, on a risk-reward basis, it has outperformed almost everything else in their book.

In our equity business, with 39$ gross and 24% net return for our PE flagship funds over the last 3.5 decades; just can't be matched.

At Athene, while others have reached for spread, we have been positioned defensively. We've built $24 billion position of cash treasuries and agencies. While this is a short-term drag, we are always willing to sacrifice short-term profitability for doing the right thing, and gives us significant firepower to redeploy. Athene maintains plenty of flexibility, and some of the levers that we've seen even industry leaders undertake, whether it's the move to Cayman or asset risk taking, we have simply not had to do, nor will we do. When you come to work each day with a principal's mindset, you just approach business very differently. Athene is a very tough competitor with numerous advantages.

Let me just wrap up by saying, last week we had a chance to spend time in Tokyo with our 200 partners, an unbelievable cultural moment. The theme of playing to win, tremendous excitement, not just about what's happening, but what is in the kitchen that we're working on, which we expect to roll out over the next 6 months. Real focus on what makes Apollo, Apollo, and responding to the cultural moment and not simply growing our business for the sake of growing our business, but growing our business at scale, with quality and with intentionality.

Jim, over to you.

Thanks, Marc. Over the past several years, we've talked about Apollo's individual capabilities: our credit platform, our equity franchise and balance sheet, each strong on its own. But I want to take focus for a moment today on how those pieces work together in an integrated system, the connection between origination and capital formation and why that matters more than ever to date.

At scale, investing does not get simpler. It gets more complex. What differentiates Apollo is that we built a system designed to absorb that complexity and convert it into consistent, high-quality outcomes for our clients. That is our long-term moat. Origination today is no longer a standalone function. It's bespoke investing. The flywheel that powers our business is now origination, product and investing in teams working in sync across the firm. And capital formation is not something that happens at the end of the process; in many ways, it shapes what we originate upstream.

Understanding this connection between origination and capital formation allows us to deliver the right cost of capital to the right opportunity quickly and at scale, while maintaining discipline and alignment. At the end of the day, our job is to make money for our clients. And that's precisely what we did in 2025 with our scaled, connected platform generating over $60 billion of value to our investors.

We've been running our business with the same patient, purchase price matters discipline that has driven our investing success through various cycles over the last 35-plus years. That discipline is particularly evident in areas like software where we estimate it represented approximately 40% of all sponsor-backed private credit and 30% of all PE deployment for more than a decade. As Marc mentioned, our positioning is amongst the lowest in the industry and it's really a situation of selectivity versus exposure. Today it represents less than 2% of our total AUM. In private equity, 0 exposure to grow software. On Athene's balance sheet, we have de minimis exposure of 0.5%, which is virtually all IG-rated, with hyperscalers such as Microsoft and Oracle. And I'd further add that software investments within our credit business, excluding Athene, represent less than 4% of AUM. And within ADS's relative proportion is amongst the lowest, as Marc mentioned, amongst our peers.

We have managed ADS, our flagship credit vehicle, in a prudent manner with lower than market leverage, low pick and all first lien exposure.

In summary, we see parallels between software and prior cycles, where an influx of capital fuels over-allocation, dispersion follows and patience is rewarded. We believe we're well positioned for this moment.

Turning to origination. In 2025, the strength and breadth of our capabilities were on full display. As Marc noted, we originated over $305 billion of assets, up nearly 40% for the prior year. And incredibly, that was really the first year of our 5-year plan that we presented in Investor Day just 18 months ago.

Across that activity, $282 billion was debt comprised of approximately 80% IG, with an average rating of A and 20% sub-investment-grade rating with the rating of B. Within core credit, volumes were led by large cap direct lending, commercial mortgage lending, residential mortgage lending and fund finance, a large growth area.

Across our platforms where volumes increased over 30%, the activity was led by our 3: Atlas, MidCap and Redding Ridge. The scaling that we've seen has been facilitated by a broadening of our offering, expanding our capabilities and redefining our opportunity set.

Our success within the sponsor ecosystem is a clear example. We identified sponsors as an opportunity several years ago and, in 2022, it generated $20 billion in volume across mid-cap and large-cap direct lending. Through the broadening and deepening of our sponsored toolbox, which now allows us to offer comprehensive full-service solutions, origination volumes in this area totaled nearly $80 billion in 2025, quadrupling in 4 years.

Numerous noted transactions could be put forth, but I'll mention 3 quickly. In December, we led a $3.5 billion capital solution to support Valor's $5.4 billion acquisition and lease of data center infrastructure to a subsidiary of xAI. This franchise transaction for the firm in the AI space underscores our role as a leading provider of flexible, asset-based capital for the next generation assets.

In January, we led a $3 billion convertible preferred financing for QXO, a building products distributor led by Brad Jacobs, a proven allocator with a phenomenal track record. And we were tapped to bring together a blue-chip investor group to provide flexible capital to support the company's long-term strategy of growth.

And lastly, our hybrid and credit franchise delivered $1.2 billion in strategic financing for Russell Investments, providing long-term capital and enhanced balance sheet flexibility to support their continued expansion.

Double-clicking and providing context on the origination spreads for the year, our investment-grade origination, we generated excess spread of 290 basis points over treasuries or approximately 220 basis over rated corporates in the index. On our sub-IG origination, we generated excess spread of 490 basis points over treasuries or approximately 200 basis points over comparably rated high-yield rated corporates.

Again, and importantly, we observed stable spreads quarter-over-quarter over the course of the year, noteworthy in a market environment where public spreads remain near multi-decade highs. Generating excess spread at broad scale while maintaining quality is a clear testament to the breadth and depth of our solutions offered by our origination systems.

Simply put, 2025 was an outstanding year where we focused on scale, but also maintaining quality.

Turning to capital formation. Our fourth quarter results punctuated a record year across the firm. We generated $42 billion of inflows in the quarter and $228 billion for the full year. Asset Management delivered $100 billion of organic inflows and $45 billion of inorganic inflows, while Athene added $83 billion. Across the firm, we generated record organic inflows during the year totaling $182 billion, approximately 2/3 of which were attributable to third parties, a focused growth over the last several years.

Similar to origination, the definition of success within Capital Formation has expanded with the addition of new capabilities and new sources of demand. The scaling that we have seen in capital formation has been driven by moving from a sole source of demand, as Marc mentioned, the alts buckets with institutions, to 6 pockets of demand, with new sources including fixed income replacement, wealth, third-party insurance, traditional asset managers and 401(k).

Of the $100 billion of organic inflows into Asset Management during the year, approximately 75% went to credit-oriented strategies and 25% to equity-oriented strategies, supported by strong demand across multiple client types and geographies. Our institutional business had a phenomenal year posting the strongest year of fundraising on record outside of a flagship year.

Within institutional, third-party insurance was a particular highlight with $15 billion of new mandates. And when combined with $16 billion of growth in our third-party side cars during the year, this brings our third-party insurance platform to more than $135 billion across 30 strategic and SMA mandates.

We continue to see growing engagement from insurance who value our origination capabilities and the complete alignment that [ come ] with our balance sheet. This is translating into robust and expanding pipeline around the globe, but with particular focus in Europe and Asia.

Our Global Wealth business had an excellent year with fundraising totaling $18 billion, up nearly 50% year-over-year. As Marc mentioned, to illustrate the increased diversification of the activities, 9 strategies raised more than $500 million and 3 raised more than $1 billion.

ABC filed last year's quarter -- record quarter with another $400 million in raise, and we believe sustained investor interest reflects the conference in our origination advantage in the asset-based finance as investors look to diversify away from corporate credit. Our global wealth offering is resonating and partners are increasingly engaging Apollo as a full-service solution provider rather than just for individual strategies.

At Athene, full year inflows were a record $83 billion, driven by robust retail inflows of $34 billion, record funding agreement issuance of $35 billion and strong reinsurance of $12 billion and a modest contribution from the pension group annuities as well as a variety of new channels. The global retiree wave continues to build and Athene remains uniquely positioned to meet the growing demand for long-term security. We did not get here by accident. Years of hard work have established us as the industry leader with multiple competitive advantages, allowing us to serve retirees and increasing scale.

Overall, the road ahead for capital formation is full of opportunity, is global, and the momentum we're seeing gives us confidence we'll see meaningful, more organic inflows across asset management and Athene in every channel in 2026. With that, I'll turn it over to Martin.

Thanks, Jim, and good morning, everyone. So our fourth quarter results capped a very strong year of performance and demonstrate sustained execution against our long-term strategy. Particularly evident this year is the earnings flywheel benefit of origination, driving inflows to create management and performance fees, syndication volume to create capital solutions fees and spread assets to create spread-related earnings.

In Asset Management, we generated increases in AUM and fee gen AUM of 25% year-over-year to $938 billion and $709 billion, respectively. This helps drive record fee-related earnings of $2.5 billion in 2025, up 23% year-over-year. I would note that this level of FRE growth was among the best in sector for 2025.

In the year, we delivered 22% growth in management fees with underlying strength driven by increasing contribution from third-party asset management inflows into both credit and equity strategies as well as strong capital deployment and robust growth at Athene.

Capital Solutions fees of $226 million reached a new high in the fourth quarter and drove the full year results to exceed $800 million. The underlying activity driving capital solutions fees is increasingly diversified with more than 125 transactions in the fourth quarter and approximately 430 transactions during the full year, with full year transaction activity approximately 60% credit-driven. This is a strong validation of how our proprietary origination capabilities are continuing to broaden and deepen, resulting in greater fee generation opportunities for ACS.

Fee-related performance fees grew by 28% year-over-year, reflecting continued scaling of diversified wealth products and perpetual capital vehicles, led by ADS and with additional contributions from Redding Ridge, MidCap and other platforms.

In the fourth quarter, growth in fee-related expenses was driven by several factors, including the full quarter impact of Bridge, continued investment in our team, with key senior hires, including our new Head of Strategy in Asia, as well as infrastructure investment particularly on next-generation technology platforms, data and AI initiatives, and further, normal course fourth quarter seasonality and some nonrecurring noncomp costs.

For the full year, our FRE margin was approximately 57%, stable year-over-year and consistent with our previously communicated target.

In the first 4 months post acquisition, Bridge contributed approximately $105 million of fee-related revenue and $60 million of fee-related expenses to our 2025 results. And quarterizing that contribution is a reasonable way to estimate the run rate contribution over the near term. Excluding the impact of Bridge, our full year FRE margin grew by about 50 basis points inclusive of the cost of significant investments in our platform.

Moving to Retirement Services, Athene's net invested assets grew by 18% year-over-year to $292 million. We generated $865 million of SRE for the quarter with an additional $28 million at our long-term 11% return expectation on the alternatives portfolio. The alts return for the quarter came in slightly higher than our pre-estimate due to favorable late quarter pricing adjustments. The blended net spread ex-notables was 120 basis points in the fourth quarter, versus 121 basis points in the prior quarter, primarily reflecting asset prepayments and mostly offset by new business growth and higher return on the alt portfolio. When considering our 11% return expectation on the alternatives portfolio, the net spread in the fourth quarter would have been 4 basis points higher. Both the fourth quarter and the full year SRE landed slightly above our previously communicated expectations.

We continue to originate new business that meets our long-term ROE targets, and that is in line with historical averages supported by our origination capabilities and highly efficient cost structure. The recently announced transaction with Apollo Commercial Real Estate Finance, ARI, is one such example where Athene will acquire, subject to ARI stockholder approval, $9 billion of commercial mortgage assets with attractive yields and conservative LTVs. These assets offer approximately 50 to 75 basis points of additional spread versus new issue CMLs today. And importantly, Athene already knows the portfolio well given nearly 50% ownership overlap with the underlying loans.

Turning to principal investing, realized performance fees of $588 million in the fourth quarter were driven by carry from several strategies. Fund X appreciated above its escrow ratio for the first time, allowing us to receive a catch-up of carry previously accrued. Accord+ completed a full portfolio monetization following the 1 year anniversary after its investment period and our credit hedge fund credit strategies recognized its annual crystallization upon generating very strong performance.

Our operating tax rate in the fourth quarter benefited from large deductions related to employee stock compensation due to a higher stock price on delivery. We continue to expect our multiyear tax rate to be approximately 20% subject to quarterly variability.

On capital allocation, we've returned approximately $1.5 billion to shareholders via dividends and repurchases during the year, while also allocating capital to strategically invest in future growth. With respect to dividends, we intend to increase the annual per share [ amount ] by 10% from $2.04 to $2.25 commencing with the first quarter of 2026. This continues our commitment to returning capital through dividends, which we intend to grow approximately 10% annually or roughly half the growth rate of FRE, as well as share repurchases to [ immunize ] equity-based compensation.

As we enter 2026, we do so with significant embedded momentum across the platform and a clear line of sight to continued earnings growth. As we previously communicated, we expect FRE to grow by 20% plus with 75% of the revenue contribution coming from well-established core businesses such as asset-backed finance, direct lending, multi-credit and hybrid as well as the annualization of growth already in the ground. The remaining 25% of top line growth we expect to come from euro initiatives such as Apollo Sports Capital and Athora's pending acquisition of PIC.

Specific to FRE expenses, we expect low double-digit growth in non-comp costs, inclusive of a full year of Bridge. Compensation cost growth will reflect investments in the build-out to support the 6 markets and further senior hires in specific areas as well as a full year of comp costs associated with Bridge. In sum, growing at a high teens growth rate.

For SRE, we anticipate 10% growth and assuming an 11% alts return or approximately $3.85 billion in 2026. This outlook is consistent with our detailed Retirement Services business update from last November.

Since the merger with Athene, which closed at the beginning of 2022, we have generated compound annual growth in adjusted net income of 17%, more than double that of S&P 500 companies over the same period. As we enter 2026, we are extremely well positioned to continue delivering durable performance and compounding value for our shareholders.

And with that, I'll hand the call back to the operator. We appreciate your time, and we welcome your questions.

[Operator Instructions] Our first question is coming from Mike Brown of UBS.

So I wanted to start on, Martin, you commented on the ARI transaction. I actually wanted to start there. Can you just unpack a little bit of the implications to SRE here? Just looking at the loans, they have a nice high yield of about 7.7%. So just thinking through that, how can that help with the spread? Can that drive spread higher? Or is it something that kind of just helps drive growth for Athene? And then what are some of the offsets that we need to consider when we think about how that could play through for SRE?

So it's Marc to start, and then we'll get to the specifics of your question. If you think about what's going on, institutions are looking really hard for durable spread, safe yield, if you will. Individuals, for at least retail investors and stocks, trade these vehicles at a discount. The notion of us continuing to invest into vehicles that don't create value to shareholders didn't make a lot of sense to us. And so for us, the best outcome was to transfer the portfolio at fair market value from the public company, which is trading at a discount to NAV, to primarily Athene, but will ultimately be other third-party buyers for loans that they already know that offer them spreads in excess of what's available in the current market. This is just, for us, just common sense.

Again, just to focus, and we see this across our business, the structure of some of these vehicles, particularly the closed-end vehicles, just historically have traded at discounts, at a point in time when the assets themselves are very scarce. As we transfer those assets to Athene, it will not be a full net benefit of, for instance, $9 billion with excess spread because we maintain a diversified portfolio, it will displace other forms of SRE lending. And Martin's comments on our confidence in the 10% SRE for the year embeds the notion of this portfolio as opposed to it being additive. I don't know if either Jim or Martin, you...

Yes, I think Marc has captured the philosophy of getting the right cost of capital and the right investor capital on certain assets. And again, this is just a basic philosophy about how we approach all of these vehicles. And so the idea of having a pool of assets that are institutionally in high demand in a vehicle trading at a historic discount does not make philosophical sense for it. So it goes into a principal mindset and alignment at the core of what we do. And I'll let Martin talk about the philosophy and the specifics, excuse me.

Sure. So it's -- I think it's clear, Mike, that our objective here is to deliver 10% SRE growth. And so this transaction, while not contemplated in the prior guidance we gave, sort of helps derisk the year. And so that's -- I would view it as a part of [ steps ] delivering 10% history growth, but don't assume it's more than that. We're focused on 10% annual growth over time.

The next question is coming from Alex Blostein of Goldman Sachs.

I was hoping we could spend a minute on dynamics in the nontraded BDC space and ADS and your comments there specifically. So obviously, it's been a little bit more turbulent with redemptions picking up and gross sales have generally slowed down, and that's really even before all the software headlines from the last week or so. To your point, ADS, I think, is in mid-teens exposure to software, and you talked obviously about other features that make the product perhaps less risky than what's out there. Is that resonating with advisers in the channels? How do you think the competitive position of ADS will look over the next sort of 6 to 12 months from a net flow perspective when it comes to this part of the market?

Yes, Alex, it's Jim. Yes, there's no doubt that what's happening today, we have been consistent for the last 24 months, if not longer, about the philosophy in terms of portfolio construction with regards to ADS. 100% senior secured, first lien, no PIC, no ARR. And all of those themes have resonated historically, but certainly resonating currently as well.

We had a net -- even though with a small below-the-line redemption in the fourth quarter, net new assets were up every quarter last year, over $5 billion of net inflows. And yes, it's resounding to many of the distribution channels that it's the alignment and philosophy, but it's return without reaching.

So yes, we expect -- the numbers, as you mentioned were a little bit over double digit in terms of aggregate software exposure. But when you really take -- again, it's really more about selectivity than it is real exposure. And when you look at our software PIK exposure, negligible; when you look at our software ARR exposure, negligible; when you look at our pre-'21, '22 software exposure, negligible. And so those folks who really are students of the product are able to really differentiate. And we expect to be picking up share in that product.

But also, we've been clear in the last 24 months that investors should diversify away from their corporate exposure in terms of a broader portfolio approach, and that's why we're so excited about ABC, really the flagship vehicle in the marketplace in terms of asset-backed portfolio construction. So we couldn't be happier about our current position and feel like we'll accelerate, capture greater market share. And investors are really seeing that rather than chasing the hot dot.

Our next question is coming from Glenn Schorr of Evercore ISI.

Just continuing on your ongoing theme of the total portfolio approach, excess return per unit of risk. I would imagine at times like this, we're going to see some really differentiated performance. That goes across all your asset classes. So I guess I'm curious, maybe more on the institutional side, what was the interaction with LPs over the last week or 2? And where I'm coming from is, are there any bigger implications from what happened, meaning are LPs rethinking size of allocation to privates in general or just maybe a switch in terms of structure and having more liquid vehicles as part of their mindset? I'm just curious if you'd opine on that.

So it's Marc, Glenn, and then I'll turn it over to Jim after. A lot of what's playing out is playing out in the public markets. Recall, and I know the concern on BDCs and private credit and direct origination as it relates to software. But I always remind people that that is first lien. Most of the investments that are made into these private BDCs are derisking for the individual making the investment. They are not selling their treasury exposure. What they're doing is they're selling their equity exposure and they're making an intelligent decision that they can earn roughly long-term equity returns in first lien debt versus an equity.

The equity exposure and the pricing of what's happened in software-related and other related has been extreme. We're talking, in some instances, quality companies down 50% to 70%. This is why people are in first lien to begin with.

When you translate it over to the institutional side, you have a little bit of the same phenomenon. And so I do think that there is going to be increased dispersion amongst managers. It's been easy for a really long period of time, and as Jim suggested, in private markets, particularly private equity, it had been almost 30% of the -- software has been over 30% of the market for a decade. Software is still an amazing business, but you may not like the purchase price at which you entered because you get to now look at the same companies down 50% to 70%. And that's the public companies. And I have to believe the private markets with leverage will go down equally as much. And so I expect that we will be, along with a handful of other managers, prettier, than we have been historically.

The other thing to think about is so much of the conversation has taken place around the alternative bucket. And what we see, the vast majority of growth going forward is going to take place outside of the alternative bucket. Some of the wins in fixed income replacement, some of the wins into PRIV, some of the wins into AAA are institutional. And we see -- and I think you will see an acceleration of the institutional business going forward.

I'm going to belabor this a little bit because this will be a theme across our business. Going back to the 6 markets, the first, of course, is the institutional alternatives portfolio business. The second has garnered most of the attention, which is the wealth business. But if you think about the other buckets, insurance, that's an institutional business. If you think about the debt and equity portfolios of institutions, that's an institutional business. The serving of traditional asset managers is an institutional business. 401(k), while we think retail is making a choice, it's actually not. It's an institutional business, because it's being made primarily by trustees and by consultants and by other forms of gatekeepers.

I think you're going to see a change in the dialogue amongst the managers of private assets as they fully embrace this, which is not that wealth is not important, not that it's not going to grow. It's just the most visible. These other markets have every bit as much opportunity. And I continue to come back to the theme I've been on for quite a while, our business at the end of the day will vary from quarter-to-quarter, but it is not ultimately constrained by capital. There's plenty of demand for private assets. What it is constrained by is the ability to originate things that are worth buying. We are so focused on getting this origination side, right, not just in terms of volume but with a principal mindset where we're originating risk we are prepared to own, turns out clients like when you are side-by-side with them as opposed to selling to them.

I'd also add, I think there's -- I'm taking a step back here, but so much of the conversation in the last several weeks has been about a quick reset of prices in the public equity market and then the impact to non-investment-grade software lending, which has been particularly focused well by the nontraded BDCs. We put out a deck in December and all the conversation recently has been about the narrow sector, the $2 trillion to $3 trillion of private credit, and it's really not touching the $35 trillion to $40 trillion opportunity in investment-grade private credit.

In the last 18 months, short duration IG vehicle, a strategy we really started 18 months ago, is up to over $7 billion in assets. And again, that's private investment grade across the board a variety of industries. And so it just seems like the headlines are focusing on the small pond. And there's no doubt there's going to be dispersion among various debt and equity managers who have pursued growth in technology in the last several years. Our Fund XI, Fund X/XI are going to be big beneficiaries of the value versus growth mentality. But again, I really think taking a step back and really understanding how the big boulders are moving. This is a discussion when we talk about nontraded BDCs. That's about pebbles, what Marc is talking about, about boulders. It's much more thematic and it's truly what's driving our business over the next 5 to 10 years.

The next question is coming from Patrick Davitt of Autonomous Research.

I have another question on the total portfolio changes. And I agree that that could be a big opportunity for alternatives and specifically Apollo. Big step last year with CalPERS announcing their shift. So curious to what extent you're hearing other large pensions planning to follow suit. And how quickly do you think we'll start to see meaningful reallocations of that capital around the new approach?

I would just say it's really important, when Marc laid out the 5 additional channels, the speed at which they all individually and collectively adopt is going to be start-stop. The public institutional marketplace is not known to be a business where those who are in charge take historic institutional risk. And so it's going to be measured. It's going to be -- that's why we're focusing on all 6, not just one.

But I'll give you one example, like the conversations that have been going on in the industry, and in particular with us, with our Apollo Sports Capital, those are areas where institutions are trying to figure out where the opportunities are, not in the narrow definitions of asset classes. What we've done in the insurance, Athene, Sidecar ADIP, those are all areas where institutions have said, how can I make sure that the normal definitions of equity and fixed income traditionally are not going to limit my ability to perform? And I think whether it's family offices, whether it's institutional buyers, whether it's those, the traditional asset managers, they're all trying to find areas outside the norms of the boundaries, and that's what's going to drive this over time. It's really about how to create better risk-adjusted returns and not being a prisoner to the barriers of adoption in terms of your mandate.

If anything is going to speed it up, Patrick, it will be volatility. Public market volatility is ultimately a significant imperative, we're seeing an accelerant to people's changing up mindset. Trustees and heads of plans who have watched assets grow, pretty consistently over a long period of time, get a little bit of shock when they see the kinds of volatility in their portfolio and in public markets, and they look for the same return or more return but with less risk.

The next question is coming from Bill Katz of TD Cowen.

I wanted to maybe tie some big picture, some of the boulders together, to use Jim's analogy. I like that one. Could you talk a little bit about where you might be on the origination opportunity clearly running, what, 4 years ahead of schedule already, how that may influence the opportunity set in ACS? And then maybe how we should think about the margin profile as we look into '27 and '28 FRE margin profile.

Great. So I think, Bill, the way -- you just went and answered that, is if you look at the $305 billion last year, $245 billion was really North America: $40 billion Europe, $15 billion, $20 billion in Asia, we're taking this strategy global. The answer to your question, big picture, is we're going to take a very successful strategy of integrating origination to every aspect of our business. We're taking it global. And we're going to make sure that in Europe and Asia Pac, that the same tools, the same partnership, the same platforms are executing in that part of the globe. But we're really focused on quality as well as scale. We certainly have shown an ability to originate scale, but it's really growth with intention. And so I want to make sure that we're not overemphasizing the growth in this point. We have a ton of robust yield, robust spread, and that's what we're trying to do.

So in my mind, it really is the globalization of the strategy. And it's also into these ecosystem activities like you see in Apollo Sports Capital, I would suspect to see a handful more of those ecosystem strategies where we can be completely relevant in terms of the cost of capital and the toolbox to the companies embedded in that ecosystem.

And why it works so well for sports is very simple. It's one where the quality of cash flows are not in a regular manner. They are regular cash flows. There's been a tremendous amount of growth in valuation. There's a limitation to the actual funding and lending in the area as many so many have focused on the equity returns. And so we're just finding with a holistic toolbox, like we did for sponsors, there's a great deal of reception. So the answer is global. The answer is focusing on quality and as well as scale in these focused ecosystem strategies.

I'm going to just take the liberty of maybe going off-piece a little bit. We've seen over the past month or so a number of acquisitions in our industry. And I want to say that from our point of view, if you think about where our business is going, it's all about origination and having the product and then building the capabilities to serve 5 markets, that we've never served before as an industry. So all of the firms were built to serve the institutional alternative bucket, draw down funds, product-specific sales forces, relatively slow moving, fine with quarterly marks.

These 5 markets are totally different. You're seeing some of the firms build out significant wealth strategies. But you have yet to see the rest of the industry build out to serve the other markets that are now available to us.

And so when you think about what we're trying to do, we're trying to make sure that we don't grow too fast, that we can only grow as fast as we originate. Therefore, if we want to grow, we have to originate that scale in quality. At the same time, we understand that every time you buy something, it comes with people. And integration on a cultural basis is very difficult. And so unless something is exceptional, we just prefer to build it ourselves.

Sports Capital is a really good example, not to say that there are not -- there's not value in acquisition, if you need to. But the ability to put a team on the ground in an industry that is very valuable, growing very fast, that produces uneven cash flows, therefore, is not industry to bank or for public markets, in addition to deploying the $6 or so billion in the Sports Capital fund, I believe this ecosystem will generate $30 billion to $50 billion of origination opportunities. I think you are more likely to see us grow, as Jim said, globalizing what we have and then building organically the platforms that we need to, to penetrate industries that require specialized knowledge and deserve a specialized pool of capital.

And so we often say the strategy here, let's look through the windshield, not through the rearview mirror. We have so much white space in front of us. It's up to us to now prepare the business, not just to hit the 5-year plan, but for what comes next.

And Bill, let me address here you're talking questions on margins because it's important, obviously. So you should expect a FRE margin expansion over time. And we're always balancing, as you know, investing in new capabilities to build the platform with extracting efficiencies from the current business. So I would think something like 100 basis points annually as we go forward, that's sort of the guidepost that we set for ourselves, with the puts and takes netting into that.

The next question is coming from Michael Cyprys of Morgan Stanley.

I wanted to ask about fundraising. You've had a very strong year in '25, about -- over $180 billion organic inflows. I think you mentioned you're targeting $150 billion on an annual basis. So just curious how you think about the outperformance this past year relative to that $150 billion guide. To what extent does that make sense? What might be areas where flows could be slower, I guess, if that does make sense? But then at the same time, it sounds like you're pretty confident in '26, maybe even being better, particularly in the Athene. So maybe you could speak to the confidence there. What you see contributing? And maybe you could elaborate on what's in the kitchen in terms of things that might be rolling out.

Yes. So Mike, I would say we feel like we have a tremendous wind in to our back across the -- let's separate Athene and Apollo Asset Management for a moment. On the Apollo Asset Management side, global wealth prime for continued growth. And on the institutional business, we do have Fund XI in the marketplace. But also when you think about the product set of the asset-backed ecosystem, the hybrid ecosystem, Sports Capital and such, we believe that this year will be the strongest year on record for us in that area. So we're unambiguous about our ability to outshine on the Apollo Asset Management side.

Again, on the Athene side, strong numbers across their 4 channels. We expect that to replicate it. So when you do -- when you add those 2 together, we're solidly north of $150 billion again for the Apollo and Athene side in collective shape.

I would say we feel like we're actually grabbing our fair share in a variety of asset classes that we had not done before. When we think about our whole fixed income replacement product suite, things like the short-duration IG vehicle, core IG, the asset-backed area, amongst many, we're just seeing a variety of ability for us to pick up. And again, that's the conversation we want to be having with this group. As you talk about private capital and private credit, the natural tendency is to focus on the small noninvestment-grade $2 trillion pond. I urge all of you on this phone call, focus on the $40 trillion. That's the opportunity set. That's what's driving volume. That's what's driving profitability. That's what's driving scale.

And so I know it's great headlines about the software bump in the road. But there will be dispersion, but there's a bigger, bigger picture and don't miss that.

The next question is coming from Ken Worthington of JPMorgan.

As we think about performance fees for 2026, you highlighted in the deck that 2025 was light in part to sizable PE and hybrid activity that was prudently delayed. With market conditions better, can you help us think about your pipeline of deal activity should market conditions remain accommodative, and how you see this flowing through into carry and performance fees?

The most unpredictable part of the earning stream, that's the multiple, Ken. I think we see the optimism in the marketplace, particularly with the bank community. Activity levels are high. There's different ways to exit assets. Going through a public process is one, and private processes are more complicated. So I would say we are more cautiously optimistic as we sit here now about the year ahead. But it's difficult to predict. And so it's -- that's why we have anchored ourselves to a long-term guidepost around [ PAI ] of [ $500 million]. That remains our target. But it's not going to be a straight line clearly to get there.

I'd say this in the portfolio. Fund X, which is the most recent fund is already 0.3-plus DPI versus an industry that rounds to 0. At the end of the day, when you buy things at reasonable multiples, you can sell them at reasonable [ multiples]. That's what we've seen and that's what we've experienced, that's what I continue to experience. We are not stuck with a portfolio of things that were purchased at very high prices that now have been reset in the market where they're going to go into perma hold. We're in the business of creating value and moving it out. If the market is accommodative, we're going to make it happen. The market is not accommodative, we will, I believe, do better than everyone else.

I would just add this, our performance in '26 is not going to be market-dependent on the equity market or the equity capital markets.

The next question is coming from Ben Budish of Barclays. .

I wanted to ask maybe a 2-parter on just some of the dynamics going on in Athene. I guess, first, in the pension risk transfer segment, it looks like there's been some positive momentum with a number of the cases out there. Any thoughts on your expected contribution from that channel in particular in '26? Or does that require a little bit more time? And then just curious your latest thoughts on competition in the retail side, it feels like 3 or 4 quarters ago, that was a bigger issue. It doesn't seem to have -- been bearing its head as much more recently, but similar, high-level thoughts on the current state of competition in that channel.

So the volume targets for '26 are not dependent on PRT picking back up. You're right, the legal situation around PRT is improving. However, this is all about spread. We do not underwrite the volume; we underwrite to profitability. If you underwrite to profitability, you get to keep doing business. So I think we have more than enough at bats, lots of new initiatives, broad distribution. I believe the target we've set out, which is roughly $85 billion, will be the target that we deliver. Demand for retirement products is off the charts, but it has to be done at a margin that makes sense.

In terms of competition, we continue to see interesting competition in some of what I would call the lower-quality broker channels, which are not as credit dependent. As I've warned on prior calls, the business is only about earnings spread. Spread is created by having an asset origination machine, by having a liability origination machine at a low cost and by having a low OpEx. Most of the companies competing in this industry, including the established players, with very few exceptions, do not have origination of appropriate assets. They do not have a low-cost liability -- [ factory], and they do not produce at an efficient level. The only way return can be achieved is by giving away asset management fees and by moving the business offshore to Cayman, to places like that, that do not require capital.

This is not a recipe for success. Ultimately, I believe that will end badly, hopefully not badly for the industry. And I do not believe that many of these firms will hit escape velocity, because they will ultimately need to come back on more capital.

Athene is a really tough competitor. And as Jim said, this is something we've worked on for the better part of 15 years with Athene to put it in a position it's in. I like our chances. Martin gave the guidance for '26, and we're working hard to achieve what we've said we're going to do.

The next question is coming from Wilma Burdis of Raymond James.

Just following up a little bit on the last question. We did see a -- it looks like an improvement in PRT volume for the first time in 2 years. Maybe you could go into a little bit more detail there. And then as sort of a second part of this question, if you could talk a bit about the [ FAB ] environment and the lower flows there. And any drivers, whether it's credit spreads or anything else you're seeing in the market?

So again, this is a story of assets and of liabilities. On the asset side, it's all about the capacity to originate. As Jim suggested, this year was a very strong asset origination year, which led to the outperformance of the target. I expect based on what we've seen thus far, '26 to be an equally strong asset origination year, augmented or, I should say, protected by the ARI transaction, which will give us some initial excess flow early in the year.

On the liability side, having multiple channels is a godsend. There are places sometimes you don't want to do business. I personally don't think we've missed much in PRT over the past year. Not only have there been fewer transactions, but the spreads on those transactions, when one ultimately shines a light on them, are poor. Winning business is not about volume. Winning business is about capturing profitability. At every point, we're offered the opportunity to do something that's expedient versus something that will build the book of business over the long term. Having a principal's mindset is a very, very healthy way to run the business.

The next question is coming from John Barnidge of Piper Sandler.

My question is focused on being on the offense. If we can go back to software, digging on that a little bit more could be interesting. Maybe is it private equity, credit, both? And kind of what areas of software do you find appealing?

Yes. I'm just going to answer that generically. We've historically -- if you go back in our 35 years, whenever there's an over-allocation of capital, we tend to be defensive. And whenever there is a withdrawal of capital, we tend to be on our front foot. If you look at the brief pricing that's happened very, very quickly in the equity market, the valuations are certainly lower, but they're not cheap. They're still very, very high from an earnings multiple and such. But many companies had plans to either grow because of organic cash generation or equity origination, and those companies may not be able to do so.

So there's no doubt that our screen of opportunities from the world of equity, particularly from the world of hybrid and, in some degrees, in the world of credit, we are as busy as we've ever been because there will be a dispersion of returns. Some business models will continue to thrive. Some will be more challenged. But what Marc talked about earlier, I'm just going to remind folks on this call, you had companies in this sector that were priced or purchased or valued at 15x revenue several years ago, maybe even 20x revenue, and now they're trading at 12 to 16x earnings. And so there's a very large difference in that valuation gap. It doesn't say they're not good companies, but the growth trajectory and the capital availability of them to acquire capital to grow was changed.

So yes, there's no doubt that we're going to be much more on the offense, but there's nothing that's going to happen tomorrow that we're going to announce. This is just more of a dispersion over time and plays into how we want to be a real partner, whether it's a sponsor community or the corporate community as they need capital.

The next question is coming from Brennan Hawken of BMO Capital Markets.

I just had a couple on spread within SRE. I want to follow-up from Mike's question. You spoke to the 50 to 75 basis points greater spread versus new issue. But how should we think about that on the net spread as you reported? We appreciate that it fits into the 10% total expectation for the year. And also maybe a bit more broadly, how should we think about the cost of fund side? It sounds like there's a great deal of optimism on the origination and the asset side. Cost of funds though has steadily gone up. We hear about competition in some of those markets. And so is the expectation that the cost of funds increases will stop? Or is it more around the ability to outpace it on the asset side?

So it's Marc. I'll give you a business side and then Martin will dig in a little bit. Cost of funds is ultimately a function of bond yields. Historically, it's that, it's moved around the BBB corporate spread. Having said that, in individual channels and individual times and individual quarters, tightens are loosened.

We run a business that is competitive in the marketplace with the highest-quality companies and liability side spread in mainstream markets are market-determined. Most of the new entrants who are paying significant premiums for their cost -- in their cost of funds, and you can see this in any industry publication, are in the broker channel. And so it will not surprise you that as a percentage of our business, we do less in the broker channel.

At the end of the day, the ability to have a low OpEx and higher-than-average asset spread allow us to win a fair share of business that we want to win, and we want to win it in a mix. We want some long-dated business, some short-dated business, some policyholder dependent business, behavior dependent business, some nonpolicy-holder dependent business. And ultimately, as I suggested, this iteration of the business of the retirement is a fascinating business.

Retirement products are in amazing demand. Having said that, the next leg of this business is not the product set that exists today. It is creating the product set that serves the needs of retirees that is simpler, easier to deliver and that relies more heavily on the things [ we do well ], OpEx and the origination of spread. Building out unique or less traffic liability channels is something that we're focused on that will be important not just over the next 5 years, but for the 5 years after that.

On the spread question, Brennan, we operate the business on a net spread basis. So the cost of where we write liabilities and the associated cost of funds is connected to where we can invest against that. And we create a net spread, which after costs and [indiscernible] return on an equity basis gets to a mid-teens return.

So in terms of guidance, we were quite specific at the November Day on where we expect the spread to come out, assuming alts are at 11%, and that was 120 to 125 basis points. That's what we printed for Q4, at 124 basis points. And given the comments that we've made about ARI earlier on the call, I would assume that the same holds through for the year. So in the 120 to 125 ZIP code on a reported net spread basis and where we write the business and we invest against it.

The next question is coming from Brian Bedell of Deutsche Bank.

Great. Maybe just shifting to the 401(k) market, Marc, if you could just talk about what kind of progress you're seeing in the DOL and for plan sponsors in terms of their appetite to adopt alternative products. And then if you can add in your strategy with collaboration with different managers. You had the Schroders announcement this morning, obviously, Lord, Abbett and State Street as well. Should we expect more of the types of announcements? Or do you view yourself as sort of an open architecture collaborator, if you will? Or do you feel like you've got the partners you need for the future game plan here?

So let me work backwards in this. We are open architecture, and we are a product supplier to numerous traditional asset managers, particularly through our ACS business. That is one level of collaboration with traditional asset managers. The next level of collaboration is the creation of a partnership and the serving of joint -- creation of joint product. I think you're starting to see that, and in a couple of partners, you've [ mentioned it]. I think we're going to continue to see that blossom.

Having said that, we're all learning right now. And what has to happen in the business is we, as an industry, we need to adapt our business to the way traditional asset managers work. Moving your business to daily NAV is a big deal for our industry. We are in the process of moving, as I suggested on our last call, particularly our high-grade credit business, to daily NAV. That is an unlock, providing liquidity in markets, which many in our industry have spoken against, is an unlock for traditional asset managers.

And so I expect, and I've said this previously, I think traditional asset managers done well could be the single largest opportunity, and I expect them to be among the largest buyers. Some of that will be in the existing mutual fund complexes and ETF complexes. Some of that will be through new products. And some of that will be through 401(k).

On the 401(k) specifically, the big volumes in 401(k), in my opinion, are not going to come until there is a rule making or at least guidance that will give more clarity to the executive order that has come down. Having said that, Jim and I are the recipients of numerous call reports. If I had to give you my e-mail inbox, the amount of activity taking place in D.C. in all its quadrants is just off the charts. Every conference, every industry get-together is literally just overwhelmed with the discussion of private assets, and for very good reasons. The addition of private assets to a portfolio, given the length of time these employees will be in these plans, are 50% to 100% better outcomes.

And the other interesting piece of this is, and not so much focused on in the executive order, is the opening of 401(k) to guaranteed income, particularly guaranteed lifetime income. We moved as a world for something that was really good for employees. We've moved from defined benefit. Employees loved it, guaranteed lifetime income. Companies hated it. We then moved to a world of defined contribution, where all of the risk was essentially on the employee and not on the company. It's been great for companies, but not so good for employees. Most employees have not made a proactive investment decision within their 401(k) ever. They are guided by the alternatives provided by the trustees of that plan.

I believe the world we're heading to is a more of a hybrid world, to use a term that we use a lot around here, where we will end up with something that looks more closely to defined benefit, but will not be provided by the employers. It will be provided by the marketplace. Right now, we're in the baby step space where every day we're making progress. It will be north of $1 billion this year. It might have even been, I don't have the number in front of me, north of $1 billion last year. But I can see it taking shape.

And just like the comments around traditional asset managers, these people need to be not just daily NAV, they need to be daily liquid. The ability to do this, the ability to create the structures, the ability for our indices, not just for us, to adapt our product set to serve these markets, in addition to the rule making or guidance, is going to be what unlocks this opportunity. But you can hear from what we're doing and from the comments around margin, we've gone from a business with 1 market to 6 markets. The problem is where the opportunity is, 5 of those markets require different product set, different delivery mechanisms and different surroundings in terms of daily NAV and liquidity. And how fast our industry and our firm pivots to that is going to be how fast we're able to grow, along with Jim's comments around origination at scale, but with quality.

At the end of the day, the thing that is not changing here, we come at this business with a principal's mindset. Whether you are an institutional client, a retail client, a 401(k) client, an insurance company client, you are side-by-side with us. We're eating our own cooking. It keeps us really focused on the quality of what we do. There is no amount of fee that we can make from an asset that will overcome a bad principal decision. We reinforce that every day. It's why we're going to be on offense in software. It's why we have the opportunity set we have today. I couldn't be more enthusiastic.

Thank you. That brings us to the end of the question-and-answer session. I would like to turn the floor back over to Mr. Gunn for closing comments.

Great. Thank you, everyone, for joining us this morning and for all your time, your spending with us. If you have any follow-up questions, as usual, please feel free to reach out on anything we discussed. Thank you very much.

Ladies and gentlemen, this concludes today's event. You may disconnect your lines and log off the webcast at this time, and enjoy the rest of your day.

Okay. Well, great. Good morning, everybody, and welcome to the second day of Goldman Sachs Financial Services Conference. I'm Alex Blostein, and I lead the capital markets research here at the firm. We really appreciate everyone's time, attention. And hopefully, today is going to be just as productive and as informative as yesterday.

To kick things off, it's my pleasure to introduce Marc Rowan, CEO of Apollo, one of the leading global financial services companies with robust capabilities across private markets and insurance. 2025 is shaping up to be another record year for the firm, and based on recent origination and fundraising activity, Apollo's momentum into 2026 also appears quite robust. So thank you, Marc, as always, for being here. It's a pleasure to have you here.

I think there's plenty to cover. So we'll just jump right in. Perhaps not surprisingly, my first question is probably going to be around private credit. And while I think you and many of your peers have addressed this at length really over the last couple of months, the market still continues to be a little jittery on this topic. So first, and I guess acknowledging that Apollo's activity is actually an investment-grade space for the most part, I'd still love your perspective on current state of private credit markets broadly. How are these headlines impacting LP appetite? And as part of that, maybe we can talk a little bit about the BOE and what the regulators are trying to do in sort of stress testing and how helpful might that be to the marketplace?

So look, we live in, I'll call it, mediatization of financial markets. And one of the things that's been frustrating to us is we have this term private credit and no one actually knows what it means. Everyone uses it differently. It covers a broad range of asset classes. And as I suggested to you before we came on, you're going to get a Christmas gift from us. It's going to be a giftwrap book. It's the definitive book of private credit. It will be on our website. So all of you will have access to it. And the first page says, why are we getting this wrong? Well, first is no one knows what private credit is, so we have to define it. And the second is people misunderstand private credit in the sense they don't understand the difference between a bank and an investor. So let me start from the investor point of view.

Private credit direct lending, levered lending was a better business 4 years ago. It was a better business 3 years ago. It was a better business 2 years ago. It was a better business last year. But I also wanted to buy Navidea 4 years ago and 3 years ago and 2 years ago, and this is all about relative value. If you have an opportunity to move your money out of a high-priced equity market that is concentrated around 7 stocks and earn roughly long-term equity returns for first lien risk, that is a derisking trade for investors. That is what we're seeing. And when people say, well, there's risk in private credit. Of course, there's risk in private credit direct lending. We're lending to BB companies. Some number of these companies will default. But it's a fraction of the risk of equity, and it's a fraction of the risk of public high yield.

So this is always about alternatives. People are not moving their money out of their treasury portfolio and into direct lending. They're moving it out of equity. And so what -- I think the market broadly does not understand is this is a derisking trade for the market. And I think the derisking trade is going to continue, particularly around equity volatility so long as private credit returns are good. Will there be defaults? Yes, there will be defaults. There have always been defaults. Will there be defaults in high yield? Yes, there have always been defaults in high yield. Not much has changed other than this media lens because what they're seeing is an overlap of "private credit and financial institutions." And that's now the divide. Most of what is inside of financial institutions, be it a bank or an insurance company, is investment grade.

So let's talk a little bit about that. So when you think about the growth opportunities for Apollo, and you made that point a bunch of times, we talked about it on the way in as well, origination. That's really the source of growth for the firm. So when you think about your recent trends, you've delivered really strong origination volumes for 2 quarters in a row with pretty stable spreads, I think, over 300 basis points over treasuries. You've effectively achieved your 5-year targets in the first year on that front. Maybe you're talking about...

You know what that means, of course, they just sandbag the target.

I've heard that. I think I've written that probably as well. Maybe I haven't used that term exactly. But let's talk about what's driving the strength so far? And I guess, looking ahead, when you look at areas that you're most excited about, what does that sort of look like? And what are some of the more emerging capabilities on the origination side that you think will be contributors over time?

So I'll say this. We've been highly focused on origination because we were -- we needed this 17 years ago for our balance sheet. And so we got a big head start on this whole notion of origination. And I think you're going to hear a lot today and if -- and hopefully, people understand, origination is actually the entirety of the business. There's almost nothing else. Yes, there's distribution, there are short-term trends. This is an origination business. The difference between a traditional asset manager and a private asset manager is a traditional asset manager, you give them any amount of money, they will invest it at the market. A private asset manager can only invest as fast as they create, originate.

And so we have been hyper-focused on origination. And we have yet to achieve in the public consciousness this pivot from judging us and judging our industry, not so much on the capacity to grow AUM, but on the capacity to find assets that are worth buying. And so we originate 3 different ways right now. One is we have built a series of platforms, some $12 billion invested now of 5,000 people. That originate granular risk the way AGE Capital used to originate granular risk pre-financial crisis. The benefit of originating granular risk is you end up with higher rates of return and better control of collateral and better control of structure. And so platform origination is almost always our highest quality form of origination.

The second is direct origination in the corporate market around the world. The demand for capital for -- from this global industrial renaissance that we're going through is just off the charts. If Microsoft wants to borrow, the cheapest place for Microsoft to borrow is on their balance sheet, drive by deals, low spreads, any amount, any day. That's not what's happening now. When you're doing data center deals or you're doing power deals or you're building a new defense plant or new manufacturing or infrastructure, these are project finances. Project finance does not generally go to the bond market. When you're talking about project finance in the broadest sense, if it's short dated, you're going to the banking system. The banking system is by far the most efficient place to go execute. If you want something long dated, you're generally coming to the private market. And what's happened is the scale of what we're doing is just off the charts. And everything that we're doing in the U.S., Europe wants to do and is less capable.

And so relative to the size of the private market, we're seeing this massive need for capital that is mostly investment grade, that is mostly secured, that is mostly project focused, that, at the end of the day, ends up as a credit derivative of investment-grade balance sheets, just not on balance sheet debt.

The third way we originate is with the banking system. The banking system has figured out that levered lending aside where the two, private and banks, are competitors, small market. But everywhere else, the banking system has figured out that we don't want their client because we can't monetize that client in any way. We don't offer advice. We don't offer M&A. We don't offer hedging derivatives, foreign exchange, custody, credit cards or any other service, all we want is the loan. And the bank balance sheet is ideally suited to do things that are short dated and highly rated. Our balance sheet is terrible for short-dated, but really good for long. And so we have now more than 20 areas of collaboration with different banks of different sizes to originate. But origination of risk is the limiter of growth in our business, not in the short term because in the short term, you can raise all the money you want, but eventually, if you don't invest it well, your franchise is diminished.

Can we double click into one of these areas, really financing the AI boom. And as you -- the way you and your -- many of your peers had described like this global infrastructure renaissance and that the demand for capital effectively has never been greater. At the same time, there are building concerns around valuation levels and the fact that maybe perhaps too much capital is starting to chase some of these opportunities. How are you navigating these dynamics? And I guess when you think about some of the bigger risks in the AI ecosystem, how would you frame that?

So it's going to be across not just AI, it's going to be across everything right now. There is a difference between a principal's mindset and an agent's mindset. If you are an agent and you are originating anything to do in AI and data today, you have 100% confidence that you can distribute the risk. And we're seeing some of that. If you have a principal's mindset and you're going to own the asset for a long period of time, you look at everything through a different lens. So if you now drill into the notion of AI and data centers, what are we really talking about?

Anywhere we go in the world, heavy users of compute, you ask them, what do they need to move faster? And the answer is always the same, more compute. When are they going to get more compute? No time soon because there are natural limits and there are energy limits, and there are regulatory limits and zoning and everything else. What does that tell you as a credit investor? Wearing my credit hat for the moment. It tells me that the risk I'm prepared to take is lease-up risk. The risk I'm not prepared to take is renewal risk. There's a chart on the wall of my office, which is the projection of energy usage in 2030, not -- and Bain, McKinsey, every great firm, the spread is like a child throwing darts.

If the experts in this have no idea on energy use, much less chip use, compute, the impact of quantum, do I really want to with, my credit hat on, take renewal risk? No. And so this is now, I think, the bifurcation of how you think about AI and how you think about data. With your credit hat on, if you -- there's plenty to do without taking renewal risk. With your equity hat on, initially, you were able to get equity returns inside of a nonrenewal period. That's no longer the case. You are now making fundamental bets on renewal. And I don't think that's either good or bad, but they're bets and there will be high volatility in outcome. And so let's make sure we're looking at this through the right lens.

Credit is credit and the best you do is get paid back. Therefore, it is not a great place to speculate on renewal. Equity has the volatility of upside and the chance of losing everything. And yes, you can lose it all and prices are high. And I think there will be both great fortunes made and lost in the equity of data centers.

Let's talk about fundraising for a little bit. You guys obviously have been doing incredibly well on the origination side. That's driving really strong momentum on the fundraising as well. Embedded in your 5-year targets, I think really continuation of that particularly when it comes to credit management fees. Maybe talk a little bit about sort of sources of demand that are driving this growth, particularly from third-party institutional investors? And how perhaps you've seen the mix of clients and products that they're looking for evolving over the last few years?

So the client base broadly, particularly institutions who now have been in this market the longest period of time see pretty much what I see. We had one buyer of private assets for almost 40 years. And that buyer was the alternative bucket of our institutional clients. And when something is an alternative, you want really high rates of return, you want to watch it closely. You don't want it to be that concentrated. And that sustained the entirety of our industry for almost 40 years. Then we got the second thing called retail, wealth, and that is now going to double the size of the market. Then we got a third thing called insurance companies. People watch what we did and understood that the ability to own certain types of private assets inside an insurance company made sense. Three markets. Then we got a fourth market, which are institutions looking at their debt and equity bucket, understanding that private no longer meant alternative, that private was just private and could be investment grade or not. Then we got a fifth market, accelerated by BlackRock's purchase of HPS and Preqin, which are traditional asset managers who are looking for the next thing because active management has not been a great market, very difficult to sustain performance in active management, and they are hoping that the blend of public and private will help produce returns that beat indices.

And then I think we're going to get a sixth market already indicated by the executive order in 401(k). So I see a building source of demand for our assets. And I come back to, over the short term, fundraising is really important. Over the medium term, I don't think it's going to be. I think we're going to figure out as an industry that we are not ultimately limited by capital. We are going to be limited by our capacity to originate risk that is worth originating.

Any asset we originate today has multiple buyers, multiple times over. And that's the reality of where we are. And so fundraising is a derivative of our capacity to originate. The fact that we're at our 5-year target tells me we're -- so long as we sustain it and grow it, we should be able to fundraise as opposed to the other way around, which is how most of the world still thinks about asset managers, which is you raise the money and then you go find the asset. And I think when you see the evolution of our business in '26, as we peel back more and more layers of what we're doing, this notion of asset driven rather than fundraising driven business, I think it's just going to become clearer and clearer to people.

Yes. That makes a lot of sense. Why don't we spend a couple of minutes on the channels, the wealth market being obviously one of the more important growth drivers for you guys and the industry broadly. Apollo is making great progress here running at about $20 billion on annual -- in terms of annual flows. EDF, your direct lending fund has probably been one of the bigger drivers of that. A couple of questions there. How have the media kind of barrage of headlines around direct lending, impacting financial adviser appetite for your product and direct [ lending ] products broadly? And how do you think that the sort of $20 billion pace of wealth flows will evolve over the next couple of years?

So let's start. I think wealth is going to grow. I think we're at the beginning of a really long trend. Headlines obviously have impacts. But I think we're going to see, and I think we will benefit from a more of a flight to quality. We have positioned ourselves in the wealth market, particularly as it relates to credit as less levered, no PIK, 100% first lien large companies. That does not result in the highest dividend. We proudly say that. That's not the business we're building. If I wanted the highest dividend, I would be more growth, more PIK, more subordination, higher leverage. These are just choices. And to date, investors have not had -- and advisers have not had to figure out which firm is which. They're just all private markets firms.

I think moments like this will help us define in the eyes of the advisers and the eyes of investors who we are as a firm. But I think -- and I want to -- I'll say this with the most respectful tone, I think we're looking at it on a really short-term basis. We are -- we and the other large firms are beneficiaries of a trend today, which is wealth. And the reason we're beneficiaries is people are buying wealth products like stocks and bonds of old. And only the large firms have the capacity to create the systems, the infrastructure, the support necessary to do this. I don't think that's the last stop though.

At the end of the day, I think no one buys stocks and bonds in the public market anymore. They buy exposures. I think they're going to buy private market exposures. And the moment we switch from buying it like stocks and bonds to buying exposures, I think the growth in our industry is going to accelerate because each individual sale is an individual sale. The moment it becomes a 10% or 20% or 40% allocation, it's going to go through the roof.

Now on the one hand, that is not going to -- that's going to reduce the power of the large firms that have invested in infrastructure. On the other hand, it's going to put power in the hands of firms who can originate. Everything in my opinion, will come back to your capacity to originate risk.

The channels, and I said this to you walking in, I would bet that we will do more volume next year in 4 trades with traditional asset managers than we will in thousands of trades in the wealth channel. We're so fixated on wealth because it's just the thing that's in front of us as opposed to stepping back and saying, there are 6 markets. Each of those markets is in different stages of maturity. They're all going to go through their own change. There's fundamentally good demand. This is ultimately about product and origination. And I think brand is going to be important for a period of time, but I think brand as an investor is actually going to become more important.

You spoke a little bit about that on the last earnings call as well. So maybe we can drill down into the opportunity you're seeing with traditional managers. On the one end of the spectrum, I totally get it, right? Like this could enhance returns for a lot of the traditional products. There are limitations, most [ 40th punk ] can only own up to 15% of liquids, most will probably not go quite that high. How do you, I guess, envision the commercial model for something like this working? And how do you, I guess, expect that part of the market to develop?

So we -- if you look at every -- I'll say it slightly differently, and then I'll come at the market. Put yourself in our shoes. If you think of this -- if you think of our industry as limited by assets, we should want to put our assets -- first, we should be diversified. The second is we should want to put our assets where we realize the highest net fee. And the third is we should want to be where money is sticky. So we don't have to keep doing it, and we have good stability of flows. If I think of it in that basis, it kind of gives you the revenue model for traditionals. The serving of individual clients, whether they are institutional clients or wealth clients is actually quite expensive. To the extent we are relieved of that, should I be willing to share some amount of the top line fee with the traditional, of course, I should. I'm interested in running a net profit business off of assets that are stable. It will be interesting to see whether, in fact, those assets become stable. 15% in a mutual fund bucket, if most mutual funds got to 10%, do the math what that would imply for this industry.

We, as an industry, cannot originate enough to serve all 6 channels. I believe we are heading for a world where there is more demand for quality private assets than there is supply of quality private assets. I think over time, that will generally give us some amount of pricing power so long as we originate good risk. And we will be very careful not to abuse that pricing power because we will want to do it with people who are partners over cycles and who are easy to serve. In the institutional market, I believe we will have fewer clients in 5 years than we have today. And those clients will be larger, they will be more partner like. In the retail market, I believe that we will be -- end up in a position where the big wealth firms probably don't sell individual products. They sell blended products of multiple exposures. I'm all for that world, although I'm a beneficiary of the world that exists today.

In insurance companies, there is nothing, but demand because assets that historically insurance companies might have seen spread in CLO, spreads have completely and totally compressed, and there is no mean reversion. You look at our book, and we were very -- we benefited greatly from this. We had a $40 billion CLO book. That book has run down to $30 billion, and my guess is it will run down to $20 billion. Spread is just not attractive in this market. Insurance companies worldwide are desperate for assets that offer excess return per unit of risk. You cannot run an insurance company successfully and profitably if your only access is what exists in the public market or what is readily available like CLO in the private market. Traditional asset managers just getting started. And if 401(k) happens, which I believe it is going to in some form or fashion, I think we're going to find out very quickly that our bottleneck is origination.

Yes. Let's play this out a little further. So as the end market evolves the way you sort of envision it, and obviously, we've seen that already with individual investors, insurance companies, maybe traditional asset managers, what are your expectations in terms of private markets becoming more of a tradable asset? And what role do you see Apollo and perhaps some of your peers playing in that ecosystem?

Well, we have -- like in every market, we have people who resist change, and I believe change will be visited upon them, and then we have people who are embracing change. I have never seen a market that has become more liquid and more transparent that shrinks. I think growing the market is good for our business because it creates more demand for private assets and that gives more power to the originator. That's it. It's no more complicated than that. And if you're running a business where lack of transparency, lack of liquidity, stability of pricing in a fictional way benefits your business, you're running a short-term business. This is ultimately not going to survive light of day. And so you look at the decisions we've made -- well, I'll go back in history. We don't -- like we have this market, which is the closest analogy to what's happening in private markets called broadly syndicated loans. Broadly -- why broadly syndicated loans trade? They're not securities. The notion that a broadly syndicated loan could trade is a relatively new phenomenon. These were private loans to companies. No company was the same, no standardization, no anything. One bank decided 20 years ago that they wanted to build a market, they made a market. And then lo and behold, we now have derivatives, open-end mutual funds, and we think of these things as securities, even though they're not securities.

The same thing is happening right now in private markets. It's starting with private investment grade. We -- little Apollo, I don't know, we're probably close to $7 billion of trades so far this year, and we're not even a trading firm. Like this is going to be 3x its size next year. And your firm is not going to like that we're earning widespread in this market. They're going to jump in and step in front of us because they're a better trader. And JPMorgan is not going to like that you are doing it, they're going to step in. We're going to see multiple market makers in private investment grade to start. Because what's interesting about private investment grade is most of the issuers are public companies. And you can put the Intel bonds -- public and Intel bonds private side by side. And you would not know the difference in trading volumes, in quotes, in spreads or anything else.

And so I think markets are going to trade. I think loans -- like the difference between direct lending and broadly syndicated is what? It's only whether the holder has chosen to trade it. There's no reason that it can't trade. In fact, I think you've seen in the past 2 weeks some firms lighten up their positions. And lo and behold, they wanted liquidity, they got liquidity. Will trading come to private equity? Probably not so long as it is in fund format. But will equity trade? I think you're going to see evolutions of products. And so I think the thing that we have to keep our eyes on, structures that were developed 40 years ago, like drawdown funds, are not ideal for trading. But the structures themselves are not going to survive the test of time. They were structures put in place during an intense lack of trust because these markets were not markets, they were a black art. And when you don't trust someone, you hold the money until the last second and then you give it to them and then you take it back the next day. The inefficiency of this is unbelievable, but it's custom and changing customs is sometimes very hard.

But I think you're going to see changes in how fund formation works, and that will make these products more tradable. Will they be as liquid as public markets? No, on the equity side. But on the credit side, I could see them rivaling public credit from a tradability point of view, which means poor liquidity because public credit has poor liquidity.

Right. Right. It's fascinating. All right. Let's pivot a little bit. Let's talk about the rest of your business, so private equity and hybrid. You guys have a really strong track record in private equity. You're going to be in the market raising your next vintage next year. Maybe talk to us a little bit about the LP appetite you hear in the market. Obviously, private equity as and asset class has been more challenged over the last couple of years. It's starting to get a little better. So curious your thoughts there. And then secondly, on hybrid, I believe back at the Investor Day, you talked about that being one of your fastest-growing businesses. How do you expect that business to evolve over the next few years?

So I'll start in reverse. Hybrid will be our fastest-growing business. And it just represents the best risk reward. There's just the ability to earn low double-digit rates of return with low vol, just doesn't exist anywhere else. And so it actually has gotten even more attractive relative to credit because credit often prices off of short rates, whereas things like hybrid price off the tenure, which have gone the other way. And so you have 2 phenomenas. One, the capital to companies is more attractive. It is lower cost. It is noncontrol. And that means it's in high demand. And the second is the capital formation is relatively difficult because it doesn't have a bucket. Both of those things together have resulted in hybrid being the best risk reward for the past decade. It is where most of our firm's principal capital is. It's where most of my family office principal capital is because that's just the best risk reward. And I think we're going to grow that market 3x its size. We were circa $100 billion, we'll be $300 billion in hybrid. Matt Nord, who runs this for us will be very busy.

In terms of private equity, private equity, I've said, not everyone loves this, it's not a growth business. We don't see it as a growth business. It's a 40-year-old asset class. It's an amazing business, and we run that business for rate of return. If you took your eye off the ball for the last 20 years, and you plowed in because rates were low and paying high prices, of course, you were going to have a hangover, both GPs and LPs. If you did what we and a number of other firms did, which was treat this like a 20-year asset class where you have to earn really high rates of return, you have reasonable DPIs, you have reasonable rates of return. I don't think there's any mystery to this. Private equity is an amazing asset class. It's just not a growth business. I think you will see us raise $20 billion plus, and we will go back and do exactly what it is we do.

And I think the growth you will see in our equity business will come in 2 places. One will be hybrid. And the second will be a reimagination of what private equity is as an industry. I won't explicate there. We're having a lot of fun with really stepping back and understanding what -- believing what private equity should be as an industry rather than what it is.

Great. Looking forward to seeing that.

That will be fun.

Okay. Let's let's spend a couple of minutes on Athene. You guys recently held a bit of a teach-in and really kind of outlining the growth prospects for the business for the next couple of years. So I wanted to double click on a couple of things you talked about. When it comes to originations with $85 million plus in volume targets in '26, embedded within that, and you talked about some of the new products, new structures, and really opportunities to evolve that marketplace, talk to us a little bit about what that looks like?

So we have this really interesting thing where people have lots of questions about Athene, and why you're in it, it's insurance, it's so complicated, it's capital intensive. And then we have like 100 firms who wish they were in it. And this is where I'd start. Given what we've said about origination and demand for assets, if you are building an insurance business to grow your asset management business, it's asked backwards. You should be able to sell your assets 5x over. And if you can't sell your assets 5x over, putting them in a regulated entity is not a good idea. There's a bit of risk reward. But if you think like we think that we are limited in our growth by their capacity to originate assets, the logical conclusion from that is that we want to earn more money on every asset that we originate. So getting a full fee is the beginning of the revenue stream. We want where it makes sense to earn some portion of the principal profit of every asset that we originate, that's a theme. It is a means for us to earn more money, and sometimes we own 100% of that risk. That's a theme proper. And sometimes we own 33% or 34% of that risk, that's ADIP or the sidecars that we run.

We like all the business. No, we're never going to be 100% principal because of diversification in capital. But as much profit as we can retain given that we are asset limited, we do. Now the prerequisite to that is that you earn adequate rates of return, and adequate rates of return to us are mid-double-digit rates of return. So we've earned north of 15% rates of return for the last 17 years. It comes from having good asset origination, good liability origination, low-cost structure and low vol. I don't see many people able to do that today. I see people with a poor strategic plan, which is basically we need to grow our asset management franchise because FRE is more valuable, and therefore, we're going to give away our asset management fee to subsidize the cost of getting into the insurance business. It just doesn't make any sense.

And so what people are doing is they're taking business offshore to Cayman, where there are fewer rules and fewer capital requirements. Because the business model is challenged, we've now seen 3 bankruptcies in Cayman. We will see more. I do not believe that Cayman will be a viable U.S. jurisdiction over 24 months. And so I come back to, owning more of your profit stream so long as you can own it at double-digit rates of return seems like an intelligent idea. There's plenty of demand for retirement product. And so we're kind of serving 2 markets at 1 time, which is; one, we originate assets to finance the global industrial renaissance, generally investment-grade and long term. Holding those assets unlevered by themselves would not be attractive to us. But we use that to support guaranteed income to retirees and holding the equity of Athene given that we have a perfect package of asset and liability matching gives us double-digit rates of return with low vol. It can be harder, it can be easy, Alex.

Yes. Fair enough. Well, lots more to talk about. But unfortunately, we're out of time. So Marc, thank you so much for being here. Really appreciate it.

Good afternoon, everyone, and welcome. I appreciate everyone who is able to join us in the room. And of course, we'd like to welcome many more who are tuning into the live stream today. I am Noah Gunn, and I have the pleasure of leading the firm's Investor Relations efforts.

Today, we're excited to bring you Retirement Services Business Update 2025. And while some of our content does pick up on tactical business discussions that we've had this year, at its core, we are continuing a longer-term story here, one of tremendous success, profitable growth and value creation, delivered consistently over time. Hosting this session today speaks to our ongoing commitment to educate, provide transparency and offer leading disclosure across many areas that we know the market is focused on. Of course, as we get into it, we encourage you to review our forward-looking statements and reconciliations.

And in terms of agenda, we've structured this afternoon's discussion to have three core segments. Marc will deliver a message on our thoughtful approach to the business. Then Grant will provide an update hitting on Athene's growth capabilities and competitive advantages. And then we'll have a financial update segment with Martin and Athene CFO, LJ, who I would add has a longer and wonderfully sounding name in French, and if I had a semblance of an accent, I would pronounce it for you. We will then close out with some Q&A.

And one final note. If you open the deck that we posted just before we went live, it's about 100 pages. And if you immediately feel tired, I would caution you that about half of it is an appendix that we prepared as a takeaway. We had some fun doing some myth busting, and I think you'll find a lot of the resources that are in there, very insightful.

And so with that, please join me in welcoming Marc.

Thanks, Noah, and thank you to everyone who's come out today as well as the hundreds who seem to be interested. Forgive me, I've been losing my voice having been in Asia all week. But I thought this would be a good day for us to level set. I was reading before I got up here a quote on the madness of crowds that we tend to go mad in herds, but only regain our sanity one by one. Let's have this be the start of that process, including for many people who have covered us, followed us, been engaged with us for a long time. A lot of just basic anchoring that I think needs to be done in an environment that is somewhat speculative.

Okay. How do we do this? Why did we get into this business? What do we think of this business? At the end of the day, you don't get to be large in any market unless you are serving a societal good. We are large, and we are serving a societal good. Everywhere in the world, not just in the U.S., but everywhere you look, we are short guaranteed retirement income. Our market is not going to peak until 2050, and we're going to see a 40% increase in the number of people over 65 between now and then. This should not be a surprise because we're already seeing it. Basically, the trend is playing out. We're up 5-plus times in 12 -- in 13 years. I would expect with some adjustments for interest rates, obviously, things are more attractive when rates are higher, I would expect this to be upward and to the right. And this, again, is not a surprise.

We have been doing this a long time. We were very, very fortunate to have gotten to scale and to have built the origination machinery before anyone even thought about retirement services and linking to asset management. And so I'll go back through what I think is required to succeed in this business.

Number one, you have to be able to originate assets, and they have to be investment-grade assets. There's a separate set of discussions, originating below investment-grade assets is actually not capital productive for an insurance company. The capital charge versus the excess spread you get just doesn't make any sense.

Second, it's just not smart. The ability to originate investment-grade assets is what you need. Second is you need a source of stable liabilities. Almost every liability in this industry is newly issued with a surrender charge or a market value adjustment or locked-in funding. When you originate the liability yourself, you get the benefit of that. When you are forced to buy these liabilities in the secondary market, you are buying degraded surrender charge, degraded market value adjustments. And worst of all, you're forced to deploy assets at one point in time. That means if you don't have massive warehousing, you are going to underperform asset targets that are available.

Three, is you need capital; four, for OpEx in a 120, 130 basis point spread business, the difference between a good and a bad operator in OpEx can be 30 or 40 basis points, a massive amount. And finally, good management. This is a business that requires management. You are forced to make decisions, you are forced to make market calls, you're forced to articulate your risk tolerance. It is not just put the capital in, match the assets and liabilities. It requires constant adjustment and constant refinement.

What's going on in the marketplace? Basically, spread, public fixed income has been declining. And it's not just public IG. In this case, I looked at BBB spreads. The CLO market, in this case, the ACLO market, we've seen declining spreads as a trend other than for a little bit of volatility around COVID for a long time. We're also seeing declining spreads in RMBS. Recall that CLO and RMBS were for us, the major asset classes that we pulled excess spread as we were growing. We should not think as a group, and we do not believe that we are going to get mean reversion. Anyone who's out there talking about how this is a low period, low spread, and we're going to do better next year, I think it's missing a much, much bigger trend that's going on in the business and in the asset management business.

What's happened is we have shown the market that you need these assets, you need to consider things that are private. And I consider CLO paper private, I consider RMBS private. But you need to be able to originate investment-grade assets. And so when people talk about origination, we almost need to refine what they mean by origination. There's easy business. Originating a CLO is showing up and offering a price. Public corporates showing up and offering a price. RMBS, a little bit more work, but showing up and offer a price. Most people -- most of the people in our industry when they are talking about origination, they are talking about those three buckets on the left. Spread is declining and tightening in every one of those markets.

On the right side, you have what I call as proprietary origination, private investment grade, so-called financing the global industrial renaissance. Basically, 50 to 150 basis points better risk. Asset-backed finance off our proprietary origination platforms, more -- again, fund finance. We have spent more than $12 billion, nearly 15 years and have 5,000 people doing this. No one else has done this. No one else is close to it. No one else can originate in size. We get to fish in the largest pool. We get to do the easy business, and we do some amount of easy business, but we can get spread from the hard business, which only belongs to us.

Now we don't just keep 100% of the hard business for ourselves because we are a diversified owner of credit even at Athene. And so in our third-party credit business, we syndicate this. You would not be surprised or maybe you are surprised, there are another 20 insurance companies, all of whom you would consider competitors of ours, who are buyers of pieces of this harder business. We don't think this changes the competitive dynamic because although we're buying at the same time, at the same price and in the same way, we're generally taking 30% of everything, and they're taking 3% to 5% of everything. I like that. I like the risk syndicated throughout the insurance industry. I like that regulators are seeing it not just from us, but from our peers. I like the validation of third-party pricing. I like the tenacity of our teams to have to serve third parties and to build origination and rating systems to serve third parties.

I've said this -- again, but why don't we think spreads are going to return? Well, fundamentally, we started in this industry of private credit, private capital 40 years ago. And 40 years ago, there was one buyer for private assets, the institutional alternative bucket. That was the only buyer. Then we got a second buyer called individuals. Then we got a third buyer called the insurance industry. Then we got a fourth buyer, traditional asset managers. A fifth buyer, the debt and equity buckets of our institutional clients are now open to private assets, particularly as they move to total portfolio approach. And now I believe we will get a sixth buyer in 401(k).

We are seeing immense opening of demand for private assets. So the notion that being private is somehow going -- the pressure is going to let up, I don't think it's the case. I think we have to appreciate that origination of private assets is what has value, particularly origination of private assets that have excess spread and for the insurance industry, origination of investment-grade private assets that have excess spread.

Moreover, if you're Apollo, not just with your Athene hat on, if origination is what's in short supply, if origination is going to be in demand, if our growth is ultimately limited by our capacity to originate assets, I believe the intelligent thing to do is to own more of the economics from every asset that we originate. Not only do we earn a full fee everywhere. But with a large percentage of the assets, we also own 100% of the ups. That's Athene. For another percentage of the assets, we own 33% of the ups or 30% of the ups, that's ADIP.

And then for even a larger chunk of the assets, we sell it just fee released. I believe this enables us to double our profitability without the same work that a fee-only manager would have to do and without taking undue risk, because although we have to put up capital, investors actually pay us for the right to put up 2/3 of the capital side-by-side with us. Think about that. It's so bad to put up capital that people pay us for that right, and we've earned 15% return on capital for nearly 17 years. This is the environment we're in.

Private credit, particularly as it relates to insurance companies, pension funds, banks, this is a $40 trillion market. All of the money, almost all of the industry is private. Everything on a bank balance sheet is private. Most of what we do is private investment grade. 100% of the press is focused on that little sliver at the bottom called levered lending. The problem is one of nomenclature. The media refers to the entirety of the stack as private credit and makes no distinction between the $38 trillion that is no different than public investment grade or what's on a bank balance sheet and the $2 trillion of levered lending, which is a below investment-grade activity.

And what we've seen, does anyone actually know what they're talking about? Go through these headlines. Private credit, banks, insurers will fall under the microscope. U.S. insurers are binging on private credit, the hazard lurking in your retirement fund. The IMF is raising their alarm. I don't know. My eyesight is not as good as it once was, but it seems that's 0.35%. The rest of the balance sheet is invested in investment-grade debt or as you know, we have 5% in alternatives. There's almost nothing about private credit that is on the balance sheet of Athene, is on the balance sheet, quite frankly, of almost all insurers and what the press is talking about in private credit.

This is about myths and reality, and I think it's worth to go through these. So people talk about private credit not being rated, investment-grade private credit is almost always rated. It's opaque. It's not opaque. It's actually totally transparent. You actually get borrower level financials and real due diligence. It's not priced. Nah, it's priced every single day. For the State Street ETF, there's a price every single day on every credit. Elsewhere at Apollo, there's $6 billion of trading that takes place in private IG. If we sent you a trading run for private IG and public IG, you would not be able to tell the difference in market depth, market pricing, market anything.

Not tradable versus strong trading volumes. Not regulated? It's the same regulation as there is for public IG. There's no difference other than an added level of scrutiny on a regulatory balance sheet where you also have the insurance regulatory oversight. And far from being a systemic risk rather than concentrating credit on the balance sheet of government-guaranteed short-dated funded levered institutions, you are now democratizing credit and the need for credit throughout the financial system.

As I said, I think people have really just lost their minds and the headlines get more and more hysterical and have almost nothing to do with the substance.

This is the comparison, and I'm not negative on public investment grade, but public investment grade limited covenants, limited access to management, limited direct diligence and you are essentially buying a portfolio on rating. All of the things that people say they hate you correct for in private. You're doing direct work. You have total access to management. You're covenanting what you need to covenant. And yes, you still have reliance on ratings because almost everything is rated.

Another fact that gets in people's way, almost all the losses in the insurance industry come from corporates and real estate. This is not just us. This is the U.S. insurance industry. These are 3 years, 5 years and 10 years. And you ask why? Well, what's happened over time is we have seen, particularly since 2000, increased pace of change. The problem with individual credits, they are subjected to individual rates of change. Think of what happens when regulations change, when consumer tastes change, when energy prices change, when demand for travel changes, we have seen an increased incidence of single issuer corporate bankruptcies at the investment-grade level. Whereas secured, negotiated asset-by-asset or structured products, just provide different levels of protection and different levels of diversification and have mostly protected the industry versus public corporates and real estate. It almost turns it on its head. What we think is risky is actually less risky and what we think is safe actually has produced almost all the losses in the industry.

What we have focused on is what we believe. We believe our entire industry, not just the insurance industry, but the whole private asset industry, ultimately is limited by our capacity to produce assets that make sense, excess return per unit of risk. We have originated $273 billion of assets in the latest 12 months. $190 billion of those assets are A- rated investment grade at T 280. We have 16 platforms. We originate, like everyone else does through our core credit business, where we get RMBS and CLO paper.

We also individually originate high-grade capital solutions for investment-grade borrowers such as the ones on the page. We originate through bank partnerships. We have been talking about origination for as long as I can remember. The industry is finally coming around to understand that we are, at the end of the day, originators of risk. It is our job to produce excess return per unit of risk. But if we fail to originate, we can't grow or we shouldn't grow is probably the best way to say it.

We are unique in the insurance industry in that Athene and Apollo together have a relationship where Athene can see on a daily, weekly and monthly basis, what the pipeline is. They know if they're coming into a strong origination pipeline or if there's a weak origination pipeline. If there's a strong origination pipeline, they can almost instantaneously step on the gas to produce liabilities. If there's a weak origination pipeline, which happens sometimes seasonally, they can back off. We do not run the business on autopilot. We run the business completely connected of producing spread by matching investment-grade assets, with liabilities that have surrender charge protection or market value of protection or contractual maturities.

We're writing profitable new business and we're growing volumes. You can see the step-up over time and the underwritten IRRs on new business at pricing. It is not all that different today than it's been at any time in our past. Some quarters are better, some quarters are worse. And no, it is not back to the period of time around COVID, where the business was just amazing.

What we're seeing, and what we're seeing in our business is the headwinds that have hit us over '24 and '25 really are beginning to dissipate and the strong pipeline of new business, which has been growing and is profitable, is starting to outweigh the headwinds. This is why we have a pivot point, and you're going to hear a lot more about this from LJ and from Martin. We are -- we faced over '24 and '25, three really significant headwinds. One was interest rates. The second was asset prepayment. Just to give you a sense of scale, we budgeted over the last 18 months, $23 billion of repayments at 6.1%. We got $30 billion of repayments at 6.5%.

When spreads tighten, everything that is prepayable prepays. The good news about that is there's very little left to prepay that is not out of it in its locked period of time. But this is something that we have to watch across the industry that we do budget for, but the spread tightening, we're talking about a generational tight in CLO paper.

The third is this roll-off of exceptionally profitable business when rates were less than 2%. You can see just how much business rolled off in each of the years. And some years, we're even more profitable than others, particularly the roll-off of the COVID business.

What do we expect? We expect what we said on our call, we expect to produce circa $880 million of spread-related earnings in Q4. We expect to grow our spread-related earnings roughly 10% in '26. And we expect to grow roughly 10% on average through '29.

This is a slide about management. And this is a slide about risk and something that I think it's hard to see from the outside. When spreads start tightening, when risk gets dialed up, we had a choice in '24 and '25. We had a choice to take more risk and protect SRE. We had a choice to deliver the underwritten SRE or to act like a principal. We decided and we always will act like a principal. We did a series of things, which Martin and LJ will dimension in terms of cost, that if you own the business for the long term as opposed to any quarter, you just do. We've taken our cash and treasuries, $8 billion to $22 billion. LTV -- low LTV mortgages, $4 billion to $17 billion. We've moved our CLOs up in credit quality. Every single one of these actions was SRE negative.

But in a spread tightening risk-on environment, we take risk-off. We play for the fat pitch. We want to make sure we have ample firepower, ample liquidity if we get a correction or if we see a big sell-off just as a change in the risk mood, but the time to take risk and the time to protect earnings is not when things are frothy when we need to do it. This is how we run the business, and this is why we have so much comfort in our ability to deliver.

As Noah mentioned, you have 50 pages in the back, which we had a lot of fun doing, of market myths, talking about opaque offshore capital, outsized credit risk, private ratings arbitrage and the run on the insurer, all of this should be great fun to read for anyone who's really interested in answers to these topics.

With that, Grant, it's all you.

Thanks, Marc. Good morning, everyone, or good afternoon. So in my new role as CEO, one of the very first things that Marc said to me was, Grant, growth is not an option. I think I already understood that, but it was nice to get clear direction. And so I'm here today to share why we're confident in the future of Athene.

Marc already highlighted the demographics on top of the fact that we have an expanding amount of aging people, quite a lot of them are woefully underprepared for retirement. I get a lot of comments from people in the room and others about the competitive environment that we're operating in. There have always been strong competitors in every aspect of the business that Athene operates in. And yet we've put together the track record we have of profitable growth. And I think we'll be able to continue to do so. We'll talk some more about that.

And in all the things that we're doing in the markets that we're currently in and the new markets that we are entering now, we just have tremendous opportunity. We're spoiled for choice in the opportunities that we have to grow.

You've seen this chart before. We add to it every time we get together. Nobody in our industry can put together a similar graphic. And it's driven by what you see on the right, which is market-leading origination channels, various ways for us to originate liabilities, our retail annuities, flow reinsurance, pension group annuities, funding agreements. We choose which business to write depending on the relative economics in those various platforms. But we've always found a way to continue to originate more while meeting our returns.

We have a self-funded -- a stable funded model. Our assets manage our liabilities. These are persistent, predictable, stable liabilities, average life of about 7 years, 89%, either with set maturities or protected by surrender charges and market value adjustments. We're not in any of the businesses that have caused heartburn for our peers, right? We're not in variable annuities. We're not in universal life with secondary guarantees. We're not in long-term care. The companies we acquired, we acquired after the great financial crisis, everything was mark-to-market. Since then, we've been originating in a relatively low interest rate environment, you won't find a cleaner liability structure in our industry than Athene.

We talk about our right to win. The advantages that we have are really hard to replicate. Marc talked about the asset origination machine. Differentiated assets at better returns per unit of risk, which is validated Athene by our consistently lower impairments over our entire operating life. We think we have about -- and that's, we think, 30 to 40 basis points, better assets, roughly 35 basis points of lower operating costs.

I met with a group of investors last week, and I made a statement that one of them found shocking. We have fewer employees today at Athene than Aviva USA had when we acquired them in late 2000 -- 2012. And at the time we acquired them, the combined enterprise was originating less than $3 billion. Last 12 months, Athene has originated $85 billion. Nobody comes close to the efficiency that we operate with. And when you take one and two together, it's pricing power. So we have the ability to make our products terribly compelling to the consumer. We don't put it all in there. We take part of it and bring it to the bottom line and earn superior returns.

On top of that, we've got great liability creativity and a liability distribution platform that we don't think anybody can match. All of this in the context of #4, what we call a fortress balance sheet, A1, A+, A+, A+ ratings, $35 billion of statutory capital, lower leverage than our peers, access to a large equity sidecar, operating in a heavily regulated environment to the highest standards with the most transparency of anyone in the industry.

And then lastly, we put that all together with a strong performance culture. We play to win. We plan to win, and we execute accordingly. I think it's a powerful combination that makes us an incredibly tough competitor.

Marc talked about the origination machine that Apollo has that Athene benefits from. Athene has created a liability machine to utilize all those great assets. This compares Athene in the dark blue bars to some of the people that we compete against, #2 in our industry and the average of 3 to 5. We dwarf all of our competitors. We're actually originating more on an annual basis than the accumulated balance sheet of quite a few of the competitors that we compete against.

Everything we do has to meet our pricing criteria. We underwrite the mid-teens unlevered returns. And I think across time, we've shown amazing discipline to pull back from business when it's not there. The top example, as you can see that really for almost 2 years, we didn't issue at all in the funding agreement-backed note market because we couldn't earn our returns. There have been periods of time when we've seen in the MYGA market, the multiyear guaranteed annuity market, pricing just gets too tight to make sense for us. And so we've stopped writing business there. And today, we see incredibly aggressive pricing in the pension group annuity business, deals priced to mid- to low -- mid- to high single digits. And we bid on 34 transactions in the last couple of years. And maintained our pricing discipline.

You can also see on this chart that there's periods where there spikes up. So when we see great market opportunities, we also lean in and try to capture them. So despite not reaching for business, we consistently find ways to grow and meet our return criteria.

We write great business. that gives us access to third-party capital. We did ADIP I in 2019, raised $3.3 billion. It's had a great track record. We've returned 70% of the capital, had a very different asset mix, as you can see in the commentary section versus what we've put into ACRA 2. But that meant when we came around to raise ACRA 2 in 2024, we were able to raise $6 billion. And what this allows us to do is figure out how much we want to keep on balance sheet, to Marc's point, how much to share with ACRA and what types of liabilities. So we can move quota shares up and down, we can talk about different kinds of liabilities that make sense at different points in time. I think our track record here will put us in great position to raise ACRA 3, but we still have $3 billion of undrawn capital inside of ADIP II.

I should say the last thing there, we are totally aligned in that Athene is about 1/3 of the capital in ACRA -- ADIP, ACRA, sorry, I'm mixing the two. But they're -- I think most of you know what that means. We're aligned because we are the biggest shareholder within it and that plays well. They are investing alongside of Apollo and Athene.

There's great tailwinds in our business. We've talked about some of them, I'll go quickly on this slide. I think one of the things I'd point out here is, I think we have an ability to expand the size of our market. When you think about the money market and CD markets, there's $10 trillion there, total size of the annuity market, is only -- is a fraction of that. And yet, if you compare CDs to MYGAs, to the multiyear guaranteed annuities, the MYGA offers higher rate, better liquidity and tax deferral. Athene and the industry as a whole, we need to convert that. We need to do a better job of telling our story.

What are the tailwinds for Athene specifically? We've built institutional distribution at Athene over the last decade for our retail annuity business. And we're now on 20 of the top 30 platforms. 10 years ago, that number was 0. We have about 18% of what goes through annuity sales in those institutional channels. But we can think we can capture a lot more. They are relatively new relationships, and over time, we can get more shelf space, and we can activate more people inside of those distributors to sell our products.

For the 10 platforms that we're not on, they sell more than $30 billion of annuities a year. So there's still an existing new distribution opportunity for us, and we're looking to go after that as well.

In the middle part, we are 10% of the fixed annuity market. We are the largest player. I would start by saying, again, that number was 0 when we entered the retail annuity market in 2011. We've grown to be the largest. We haven't capped out what we can do there. But then you look at RILA, which goes through those newer institutional, primarily broker-dealer relationships, we think there's significant upside for us in that marketplace, which is a fast-growing marketplace.

The litigation headwinds for us in PGA are subsiding. And sooner or later, we think that the pricing ought to become more rational. So that would be upside for us. We are expecting nothing in the near term.

We've talked before this year about entering new markets like stable value and structured settlements. We are ahead of plan there. We're really pleased with how that's going. We bought an entity called ARS. We've renamed it Vitera. It's our access point for guaranteed income into 401(k). There's a relatively small amount in our plan from new markets. So we think there's some significant upside to outperforming our expectations.

Just wanted to delve in a little bit more in retail. It's a core channel for us. Ten years ago, it was 100% IMOs. I think the transformation is incredibly compelling. We've gone from that to where we are today where institutional distribution is close to 80% of our total. The IMOs are still really important. If you look at 2015, IMO distribution was $3 billion. It's now down to just 22%, but that 22% year-to-date represents $6 billion of sales, and it just shows the scale of our business. We now have over 200 unique distributors, over 150,000 agents registered to sell our product. We think we have the market-leading technology platform that aids customer service and breeds agent loyalty.

I think probably the most stunning figure on this page is that in 2021, the top 5 institutional distributors that we had, sold $1 billion of our product. Last year, those same top 5 sold $17 billion, tremendous growth.

So just a case study on one of those top 5. We only got on to that platform in 2022. And not uncommonly, they started with three products. In that partial year, we ranked as the third largest carrier on that platform. Every year since we've been able to be the #1 carrier on the platform. We've been adding more products in our volumes from '22 to '25, have gone from $1.5 billion to an expected $5 billion this year. These largest distributors are incredibly powerful and are really driving the change that is going on in the annuity industry.

But I could come up with a lot more examples like this. The pattern is the same. When Athene gets on to a new large platform, we are incredibly successful and the speed of uptake is also quite fast.

We're big in the funding agreement space. We have four channels in the funding agreement-backed note space, maybe one that you're most familiar with, we've sold $13.5 billion so far this year. And yet we've sold 20% less in the core dollar market. We've done a lot more offshore than we have in the past, and we've done that intentionally to try to keep pressure off our spreads in the dollar market.

FHLB, I think you're familiar with that channel as well, totally aligned with the FHLB's mission of supporting residential real estate in the U.S. Athene actually created the FABR market shown here as the dark blue. In reaction to spreads blowing out in the time of COVID, we lost access to the FABN market. These deals are basically structured one-on-one with large banks use collateral, generally structured credit and has been incredibly successful for us as a funding source, now a consistent funding source with more and more banks involved and deal sizes having grown quite a bit.

And the most recent channel we add is what we call direct FAs, where Athene participates by being a funding agreement provider inside of a municipal energy prepay transaction. It's given us access to a new investor base and they tend to have longer maturities, 8, 9, 10 years.

I should say -- I'm going to go back. Two things I would point out, some of the questions we get are, do we have any liquidity issues. We make no assumptions that we will refinance a funding agreement-backed note at its maturity. They will be paid off out of asset cash flows. I think if you go back to the prior slide, we've clearly demonstrated that by staying out of the market for almost 2 years.

And the last thing I would say, we make no use of the funding agreement commercial paper market. So we're issuing term funding agreements and we're assuming they self-liquidate out of asset cash flows.

So our core business, shown here in the blue on the left, will continue to be a major part of our growth over the next several years. New and adjacent markets are going to play an increasing role. It's forecast to be $5 billion of our volumes in 2026, significant uptick on this year, will be led by stable value and structured settlements. We think we'll continue to see additional expansion in Asia Pacific. We've already done $15 billion of transactions there to date.

I mentioned we've entered the DC space with ARS, now renamed Vitera. That is the largest new market opportunity, the most difficult to negotiate the ecosystem but a $12 trillion target market and one that we're focused on. Proud of the track record that Athene has established to date, but the entire management team thinks that the best is yet to come for Athene.

And with that, I'll turn it over to Martin and LJ.