Transcript for:
Apollo's Role in Evolving Capital Markets

What we're trying to build is probably something that first off, no one's really tried before. Why haven't others done it to the same degree? I think I got 10 calls. You'll never do a deal for an S&P 500 company again. Why is that such a massive innovation and how did it happen? There's many people who are not okay with that discussion. I love that discussion. [Music] John, I've been really excited to do this with you. Me, too. The main reason I'm excited is I don't cover this style of investing all that much. Credit Apollo is one of the emerging most important financial institutions. I don't think people appreciate how it works. And this is a very cool and rare opportunity to spend hours talking about it. So I think it'll benefit everybody. And to set it up properly, I would love you to talk about the stakes as you see them in capital markets today because just the whole world of capital markets which has been kind of one way very US-d dominated for a very long time is shifting around and it's not going to move fast but it's changing and it's really important and I think you have a very unique seat to see not only through Apollo but just the whole global capital markets picture and I would just love you to give like a like a state of the union on what you think matters and why. First off, thank you for the comments. I think, you know, I I go back to the beginning of my career when when loans were not even going to be something that traded and all of a sudden they were all on bank balance sheets and people thought it was just complete lunacy that you would trade a b a loan. And today, you know, you're issuing 500 billion of CLOS's today. Uh I worked my first job out of college. I sat on a trading desk and the guy next to me was launching a $5 million credit hedge fund. And I used to get in early. I didn't even know what a bond was. And I would read up and down. I was reverse commuting to Greenwich. And you know, I was learning the difference between bid, ask, yield, how to calculate bond yield all on my own. I went to Ammerst College and it wasn't really a finance-heavy education. It was much more about, you know, thinking outside the box and being much more liberal arts education. Um, so it was all learn on the job. And, uh, we ended up, he ended up hiring me as his second employee to start this hedge fund. And in 2002 2003 he ended up raising a billion four. Guy name was Jim Caspber who had run Morgan Stanley Dean Witter's um high yield business for for a long time and JH Whitney's high yield business for a long time but a billion four was massive in credit just massive. So you know we would you know the the whole ecosystem of alternatives and going into institutional products and it was such a new thing and um the design of the CDS market very new the design of index products very new and this isn't that long ago that was 22 23 years ago um and you look at today we're a 800 billion just under $800 billion asset manager um a vast majority of our capital uh is in credit. We're growing at 150 billion a year. We're writing anywhere between a billion to two billion of annuities per week. We originated 260 billion of investment grade product last year. Investment grade and and private asset product last year. The scale is kind of I think crazy and hard for people to believe, but it's been a a complete retooling of the way that capital markets even function. Um, you know, what we're trying to build is probably something that first off, no one's really tried before. Um, you know, for us, we we have this very large traditional asset manager. Traditional asset manager is okay, we we take your money, we invest it the best of our ability, we take some sort of fee and but it's not our money. We're investing your money. And three years ago, we really said we think the future of asset management is being aligned with our clients in a way that no one else is. So we merged with our insurance retirement service company called Athe. And with that brought on uh close to half our balance sheet, just over $300 billion today of our own balance sheet, which we're investing every day, 95% investment grade, 5% alternatives. We'll write an annuity at four or 5%. We'll invest that money at six and a half. So, we're guaranteeing you that income and we're keeping the balance, but we switch the whole model on its head where we're not only an asset manager as a third party business, asset light, capital light, but we are also a principal investor and we're creating an alignment that I think in all times people will know whether or not they believe we're we're doing a good job making good investments, they'll know we're aligned. we're aligned with effectively um a a a very large first loss position in in in our retirement service business through through through Athen. Uh and we're investing lots we're we're the biggest investor in a vast majority of our products. And so that's kind of one big technology shift in terms of how you think about asset management. what we're building we're building effectively a more merchant focused principal focused not agent focused asset manager and we think that that model is going to win and there's people who question the model I think that's the that's kind of the one of the big bets we're making the second thing is just how does all of this long we're about to go through this generational shift in power infra defense spend uh in Europe it's been completely underspent and is needed globally everybody needs more compute. Um I don't think there's a debate on that. The question is how should it be funded? Should it be funded through more traditional sources which is you know a bond listed bond equity or should that be with matched longer duration capital. So the beautiful thing about annuities is it's long duration liabilities. What beautiful thing about retirement long duration in terms of the life 10 20 30 50 years in some cases uh that matches really well with long duration infrastructure projects. So the natural shift is to go from a more bankf funded shorter duration product that is how things were historically funded whether it was a CQIP bond or a onbalance sheet bank loan in Europe to a more duration matched more retirement insurance related product and using that capital in a way and that's what's happening you see what's happened with us with Intel with IMBBEV very large very large transactions that no one in the world ever thought Apollo would be leading and So we're in the middle of this just generational shift in the way everything gets capitalized and the rel the traditional relationship between investor asset manager bank asset manager S&P 500 issuer and private alternative firm that is deemed to be more you know more of a private equity investor really stepping in and being a more private credit safe lender. So it's been it's been really fun. Um I want to come back to Athen and tell that story in detail because that's like a huge innovation and change in how a firm like yours is structured but I want to also ask first about your perspective on the US's the America's role in global capital markets maybe like in your whole career and how you see that might change perspectively with what seems like more of a schism in capital markets in geopolitics and in all these sort of big you know these big things. Yeah, look, right now it's obviously a big uh a big big focus. I think all the all of the discussion is around tariffs. Uh I worry much much less about around tariffs than the public narrative and I'm hyperfocused on just our position in effectively a monopolistic position in capital markets. We've been the beneficiary of of so many things by having the biggest equity market, the place everybody goes to go public, the best venture capital market. if you want to do a growth company, you're going to you're coming to to the valley. You're coming to the US to get a term sheet. I went and met with a company that that actually does preede rounds. Uh last week and they said, "We have all these Europeans that are founders, be great founders, really smart founders. They send out a a business plan in Europe. They get a they get a a term sheet back in two weeks and they send a term sheet out in San Francisco. They get five the next day." Okay? And that's the that's the amazing thing about our our our entire capital system. We are super entrepreneurial, very hungry and all of that's a function of several hundred billion dollars a year. Every dollar that left the country in any any form was coming back because this is the place to invest your capital. Every retirement market overindex the US. Everybody is overindexed generally in their strategic asset allocation to the US. It's an amazing thing. It inc it creates a growth vector that's higher than any other company any other any global company or European Asia-based. Our growth vector is just higher because we have a lower cost of capital. We get better talent. We get better companies to go public. We have a $50 trillion debt market. Just amazing tailwinds that flywheel. We we we want we don't want to take precious asset. Yeah. We don't want to take that for granted. And why does that happen? Rule of law, really easy to come do business here. understanding of the rules and a very clear talent density talent density but also just just very clear rules of the road on how on how things operate and you know this the the thing that worries me a little bit and there's no place really to put money now I there's no real capital market big enough but with all the uncertainty going on you do see a new new changes in Europe potentially changes in securization rules uh you know we have a $15 trillion securitized market here in the US. There's a 500 billion securitized market in Europe. The economies aren't that different in size. You know, we're 30 trillion here. We're 24 trillion in Europe. Multi-trillion dollar opportunity to take assets out of the banks into private credit and create tons of liquidity to fund all these growth projects with Germany and France and and the rest of the Euro zone need to do because they've underspent on lots of infrastructure and defense. They're they're we're creating an incentive and all the global pools want another option other than the US now. And so we just have to be sensitive to that. We trade at because of all the benefits of us growing faster and having better companies, bigger talent pool. That that resulted in most of our equities trading at somewhere between five and seven turn multiples higher. Multiple trillions of value. that is what what really benefits our entire system and I'm hopeful that we we make sure we we keep that intact because we've really benefited over the last 20 years. One of the beautiful components of the US system is also innovation in types of financing and I'd love your perspective on like the key hash marks on the historical timeline for these key innovations going back you know 50 years or something like this maybe junk bonds in in the 80s is like the first notable one to talk about. Yeah, we can we can start there. I I think about more distribution function ETF market how do people package and and consume uh products innovation in products where's there been product innovation where there hasn't been product innovation you look at the ETF market started in 93 we got to a trillion dollar ETF market probably 09 and then we're north of 10 trillion today sector focused every access point tax advantaged you name it you you triple triple sure there's some there's some every delivery function through ETF has gotten pretty innovative you look at the fixed income market I don't think the daily liquid fixed income products have changed once in 25 years which is pretty stark and I think for us a pretty a pretty cool opportunity right I think we look at our business and we we always joke we you know the the fixed income group is the uh brown suits and baloney sandwiches which just literally has not changed at all and Um, that's my internal I I created like a a brown suitsuits and baloney sandwich picture on AI and that's like our joke for like we're not going to be this, you know, and and you look at what we've done in our credit business. We took you like when I joined Apollo, I I was joining Apollo to join Apollo for what you know there Apollo's brand is as the known as just the place when things are dislocated. we have some of the smartest investors and we're going to figure out a way to win and just tenacious in terms of of um underwriting, work ethic, all the great things that you know if you're competitive, you want to go work at a place that's going to be, you know, work really hard and and typically be on the right side of things. You know, that's when when when I joined Apollo, that was what I was stepping into. And really, I was pretty intimidated uh about that. And you know over over time what's been unique is we've taken a lot of people that are wired that way that are super competitive, super smart, know the entire capital structure from a loan to a bond to a pre to an equity which there's not many people in the market. Typically people are very narrow. They don't look at the whole capital structure. And we've taken those people who typically worked in opportunistic high octane high returning vehicles and we've taken a lot of the most creative people and put them on investment grid which you think about innovation is how do you take a a deal for like an Intel 11 billion deal for Intel and structure it in a way that's north of 30 years really equity type capital but where we feel like it's more debt side protected. You have to have some creativity to do that because it's not something you go to a bank or you go and you just get it off the shelf. It's highly structured, highly creative working with the with the company to actually execute on that and because we put all of our all of our people, we put our best people on that stuff. So, it's and it's and we have full open architecture. What does that mean? So, what is the directive to those people? Is is the directive do the best risk return? Most most firms are set up by fund. They're set up by, okay, go buy go find a company or a preferred or a debt instrument that's going to make 15% rates of return. And we're set up, let's assess the company. Let's assess the best capital, the best solution for that company. And we have pools of capital from 5% to 20%. It could be a buyout, it could be an investment grade solution, regular way bond deal, but just understand riskreward or cost of capital structure per unit of risk. to completely different framing because we have no walls. They're they're not incentivized by a single fund. They're they're incentivized, you know, for us to originate 250 billion a year, you have to have a culture of of, you know, wanting the issuer to do business with you again. And so we have lots of repeat issuers that say, "Oh, well, you know, we may give them an investment grade bond today, but in two years it may be in a different situation. and they may need a prep rescue or something or we're in COVID and it's a totally different environment but because we were in the capital structure or we did something appropriate before they're more likely to work with us later this point is I don't think as understood that that you know this narrowness by fund narrowness by business we have no walls so our private equity team pool of capital well it's there are funds that are that are different below but the investment teams we have discussions across I'll talk to our private equity team to our our credit team and we're talking we can all talk to each other around okay well wait maybe we should do this and maybe we should do that maybe the company maybe it would be better to structure it this way for this pool of capital because that's what makes sense for the issuer as opposed to the in there's no hammer looking for a nail syndrome yeah and that's really having that and the flexibility to have all parts of that capital changed our business dramatically changed our business dramatically that's five years maybe if you think about the the history since you joined in 2012 12. Maybe now it's time to talk about Athen. Why is that such a massive innovation and how did it happen? Like where did that come from? Whose idea was it? How did they get executed? Why why haven't others done it to the same degree? Yeah, I mean we were pretty early. Um Mark and uh really brought on Jim Bolard and really in the middle of the financial crisis. Um, and the idea at that point was that you had very wide spreads for investment grade credit because we were coming out of the financial crisis and you had access to very long duration cheaper liabilities because interest rates had gone down a lot. So you could the spread business was extremely profitable and the asset management side of those businesses in traditional asset management for insurance had not been as sophisticated of going into other things like structured products or just other products other than the traditional QIP liquid business. And so the core of the business is originate excess spread, similar rating and fund the business with super long duration liabilities and that there was no one really running it as a growth business. They were running it because a lot of the public stocks traded at a discount to book. So if you look at how much equity capital's been raised in the last since the GFC, we're over 50% of total equity capital raised in retirement insurance businesses. and we've been the the the the biggest beneficiary of that because we've been very active in growing both our asset side and our liability side. When we started to realize that the business was going to scale, we had to do two things. We knew that we were going to be short origination because how are we going to service our own balance sheet? So from 2014 to 2022, we spent just under $10 billion of our own capital buying our own origination uh PK Air, aviation finance. We built our own uh non-qualified mortgage business called NewFi. We bought the CS securit type business called a warehouse business called Atlas. Um we've built and hired in those businesses 4,000 employees that originate assets on behalf of our balance sheet with companies that you don't know or Apollo, but they're Apollo Capital. And with that, we never really were building that on behalf of our third-party credit business because most of that's investment grade tight spread collateral. No one would have built a bit rates were zero. Everybody from from the financial crisis until 22 the clear trade for anybody who was managing money was interest rates are negative or zero everywhere. Get out of fixed income, get out of credit and get into equity products. Finance at the cheapest level possible term finance. So what do you do? Go into infrastructure. go into real estate, finance it very aggressively, build other alternative products, but don't build a credit business. Why are you going to build a credit business? You're making no money. Yeah. So, and I joke because I feel like it it's not a great analogy, but rates went up 500 basis points and I felt like Lieutenant Dan on the on the ship, you know, like on the ship, let's go. And and it was it was allin of a sudden because we were now overindexed. We were overindexed to origination. We never had really built out third party institutional business on that side. We had done it all for our own balance sheet and we crossed the Rubicon where all of a sudden we're we're actually originating more than can actually service our own balance sheet. And that's been the last three years. So now all of a sudden we can build fixed income products that are innovative that actually invest side by side with with our own retirement business. I mean that that and and now you see everybody trying to get in the business. It's very hard to emanate your way into the business because there's a origination culture that's been built here for 15 20 years. I mean just in credit and to align yourself in a principal way and to actually be able to talk the origination isn't just having a bunch of sorcerers finding risk. Origination is also the understanding what fits our balance sheet and how we think about risk and reward. Very hard to scale if you haven't worked with those people and really have a clear understanding and clear narrative about what works and what doesn't work. Uh any a lot of people can originate lots of bad risk, right? Um if you wanted to go buy a bunch of stuff, you theoretically could. It's probably not a good long-term strategy. We we've really built it organically with very very little M&A in the last several years. Um so I don't know now we have tons of our own origination market leader in overall spread origination market leader in liability writing and net net uh we feel like that business is going to do well for a really long period of time. Can you just lay out what Apollo looks like today? So if you just think about the $800 billion where is that 800 billion allocated in terms of what types of investments and also through what kinds of vehicles I just think it's like an interesting yeah so the the surprising thing people won't like half of our you know 65% of our balance sheets investment grade now when you look at the business in credit take credit as a just under 700 billion you have slightly over 300 billion our own balance sheet the other balance is third party investors investing in our products. Almost all of the investors investing in our products are in subinvestment grade, high returning credit strategies, direct lending, assetbacked and high returning credit strategies. We're going into the more fixed income replacement investment grade solution, business and third party. We've never really raised any money there. The other half is just our own balance sheet which is 95% investment grade 5% alternative where we're making a spread. Our equity business is predominantly our private equity business but we have secondaries we have a climate business we have a hybrid business which does everything outside of performing credit. Those businesses are I mean have done well for a long period of time. Our private equity business has had you know top returns for for over 35 years. Um, and our hybrid business is effectively the the space between, you know, uh, performing credit and private equity, everything in between. And that's been a really fast growing segment for us at at, uh, just over $80 billion. Can you talk about fees and the business model of asset management, which as you said in the beginning, historically, it's been you give me some money, I charge you some fees, I charge you a percent of the profits, maybe above a hurdle or something very kind of straightforward. Um fees are so interesting because in some cases these are extremely high margin businesses especially like the two and 20 driven ones. What do you think about that model? It's persisted for a long time. Where do we need innovation there? Where do you think it goes? Yeah, I think it depends on asset category. You know, I think it's really specific on asset category and the ability for you to show outsiz returns. If you show outsiz returns, you can charge. Yeah. people. You look at some of the multi-managers, I mean, they're charging pretty high fee. They can charge it because they've had great high net returns with low vault. Um, and if you can do that over long periods of time with large swaps of capital, they'll pay the fee. People will pay fee because they feel like it's differentiated. um as you get into products or other things that get more commoditized uh and you've seen that happen in parts of the really investment grade take investment grade liquid credit fees go down a lot and so you know we're really around the more privately originated IG that you can't get elsewhere and the reason that we've created this platform business is to control all that collateral where no one else can really get it other than from unless you own those origination machines. So, we feel like because we have those 4,000 people just originating assets that are completely diversifiers to the rest of the anyone's credit portfolio, we should get compensated in some form. Where the fee settles out, it'll be somewhat dependent on overall rates and everything else. When rates were zero, it felt like fees were going to collect. When rates go higher as a percentage of your aggra return, if you're making 10%, you can charge fee. when when credit was making 4% fees collapsed because the net the net the net excess relative to the total return ended up being a lot um in alternative products you know it's you got to deliver you you got to deliver the the art the artistry you if you don't if the if the client doesn't feel like they're getting something opportunistic or special and uh they don't feel like they're getting either there's been tremendous push on co-invest which effectively has been a a fee fee reducer not from headline fee but effectively a mechanism to fee reduce um you you need to you need to to partner with clients now in a completely different way than 10 15 years ago. They've fully built out their own, many of them have built out their own fully capable, you know, very productive, very smart teams that will are willing and want to co-underwrite risk with you. And so, it's much more of a partnership approach uh than it ever has been. I'd say I always I always uh I joke because, you know, there's always headline that the banks are getting upset with the alternative managers. You know, they're stealing deals from each other. You know, on one hand, we've built out our own origination, but we're still partners with them in so many ways that it's still working. The same thing's happening with the LPGP relationship. They've built out their investment cap capacity, and so we've had to pivot our business as well. So, the whole chain is pivoting their business to be more partner-like and figure out the appropriate ven diagram on how we work together. Um, my I I don't know why this is happening, but I I I laugh that you you go meet with venture guys and they all want to get into private equity. Talk to the private equity guys, they all want to get in hybrid. Talk to the hybrid guys, they all want to get in credit. Talk to the credit guys, they all want to get in investment grade. And I'm like, wait, what's going on? I can't actually figure out. I don't know what's happening. I think because markets have been up for so long that these businesses they're just they're trying to de everyone's trying who's who's very narrow in whatever they're doing. They're trying to go into bigger asset categories with less binary outcomes and just broader TAMs. And I'm like but I didn't put it all together till I was like you know you meet these and I'm like I don't know what the theme is of that other than like everyone's trying to go bigger market and and broader market. I'm really curious to understand how you think three different groups think about Apollo today and then how you would like them to think about Apollo say five years from now. So the groups are companies, issuers, um I'll call them uh I don't want to say retail but but people that might think about accessing equities through ETFs. It's not just retail institutions use it too, but people that want to put money in and earn a rate of return on the money and then shareholders of Apollo the business. So maybe starting with issuers, how do you We've made some progress. I mean, I think we we did a deal for IMBBEV in 2020 and I think I got 10 calls people telling John, great it's co you'll never do a deal for an S&P 500 company again. Like what is private? Why set the stage for that? Why was that? Like why is that a change? Why does that represent such a change from what the history was prior? Well, well, investment grade companies really never accessed private credit in that way. Yeah. If you were an investment grade company, you accessed your you accessed capital through the bank channel. It was a very narrow view of the world. You know, I got to build a I need to build a plant or I'm going to go to a bank. I'm going to raise bonds. That was kind of the or I'm going to raise equity. It was very simple. U kind of like asset allocation was like, okay, I'm going to do 6040 bond and equity. No privates was involved. And still to this day, you know, 401ks don't buy privates, which we can have a talk about, too. Yeah. But um you know that the the idea that we would be able to do a multi-billion dollar deal for an S&P 500 company through private credit and through that was investment grade rated was something very foreign to the market very new. Um and you look now we've done deals for BP, Air France, Venovia, Intel. The pipeline there is very large because people are realizing that they can get well first off if you have a hundred billion dollars of debt and you're an investment grade company doing a $5 billion deal with Apollo is just a diversifier. Yeah. It's not like doesn't mean it's not a negative conotone anymore. So that's gone away. Um and two there's more flexibility we can do with our funding, right? We can give more flexibility. We can go much longer duration. we can do it attached to a certain asset or some sort of structured transaction. Um, so it's just it's just a little different. It's not mean it does not by any means means that the traditional funding sources are going away or that it'll completely change and that it'll all go private, but it's another option and I think it's going to be it's here to stay. So if you take one of those examples, Intel or BP or whatever, they have options, right, for how they're doing their financing. They chose you and you know these are big deals. What are the features of the financing from Apollo that are attractive to them relative to the traditional way of doing things? Like what are the variables that matter to them typically? Typically off balance sheet typically. Why why do they care? It doesn't go against their existing debt quantum. So it's typically off balance sheet. Typically longer duration typically flexibility and some sort of um coupon and when it ramps if it's a project that's ramping we may give them a couple years at the onset that you probably couldn't get through a traditional debt market. So really working with the issuer and saying okay what are we trying to solve for customization it's all customization and so we'll work with an issuer 6 months nine months 12 months to work through exactly the customization and we have the teams that that are capable of doing that which is just very different than the traditional syndicated market. So so the perspective from companies today five years forward would be you've evolved as this like personalized lender. Yeah I I hope I hope that's the case. Look, we're still we're still it it's gotten a lot better. The more big branded companies we do and the, you know, the more they'll do it. And the more repeat issuers that we do, the more that it will happen. And we've made a ton of progress in the last 5 years, but I'll go to certain areas or certain parts of the globe and they're like, "Aren't you just a equity investor? Like what? Aren't you a distress there?" And it that that still happens every once in a while problem. It's just by and large. Listen, we we we have we have an incredible history of generating fantastic returns, sometimes in more difficult situations and um sometimes, you know, stepping into situations that no one else would step into. And so, um people have that, you know, still have that perception of us despite the business being in a completely different place um to where it was 15 years ago. Can you comment on just the state of expected rates of return across asset classes today? Like you you mentioned the zero rates for so long. The expected return was nothing and so people weren't interested in it. Equities have come off a period of extremely strong returns since 2009. We now have this like group of people that have had real long careers that didn't experience that draw down and have seen nothing but like awesome returns to the S&P 500. How what's your assessment of the landscape today? Just looking perspectively. There's all these people and I want to talk about like the innovation 401k, annuities, retirement, etc. in a minute, but there's all these people, all these pools of capital that want a rate of return. They're interested in credit again because there's there's a yield. What what's your sort of like state of the union on what what returns could or might be how you're thinking about it for the next 10 or 20 years? So, we created a whole alternative universe based on zero rates. Most of the product design was based on zero rates and it is still yet up for debate on how much of your return during that 15-year period was from just really low subsidized interest rates or actually from operational excellence. And we'll see that over, you know, over the next couple years as we start to try to monetize some of these assets. But buying an unlevered asset at five or 6%. Which is you know infrastructed activity and funding at zero as I mentioned makes a ton of sense. It works. Funding at six or seven and buying an asset at 5, six or seven less good. Less good. So so you know I think it's going to be harder. I think it's going to be harder. You're taking more risk. It's a different risk profile. I think those assets should be matched more with IG longduration product, not levered product because the leverage is too expensive. There'll be other times where the leverage is cheap, but right now it doesn't make all that much sense. But we've raised all these pools of capital under a construct that all of these alternative products should make 15% plus rates of return in all different environments without the subsidy of effectively zero to negative rates. That seems hard. Seems really hard. Um, do I think private I mean private assets generally, private equity generally has made net returns 13 plus across the board. You've seen, you know, packaging and secondaries grow, access points are going to grow. I think that's a pretty good place to be. Um, in just generally private assets, I'd say broadly speaking, we have a high level view that all assets are going to get more liquid over time. And so the question is what's that going to do to returns and what's that going to do to volatility of those returns and the perceived riskiness of those return of those assets. And can you say a lot more about that? I think that is like such an interesting topic. It's also seems to be like the topic of the moment with some of the stuff going on with endowments. I mean there's all that there's incredible amount of money in private credit and private equity and lots of it has been illquid for a really really long time and off-ramp and liquidity are really interesting questions. So what do you think is going to happen? This is back to the market structure conversation which is you've historically had a market structure where institutions and actually probably 20 or 30 institutions controlled or dominated the private markets and define private markets as private equity and other you know in in all asset categories. Private equity and infro real estate and and true corporate. And now you have the evolution of the wealth business and you know 91% of private wealth clients don't have an alt and that's growing at very fast rate where people are trying to get access to private assets because most companies have gone private and don't go public and so to get access to the whole economy you probably need to own private assets. um the structure of those vehicles in evergreen form versus the traditional draw down form where you call capital you're going to have lower headline returns IRRa versus actually evergreen returns. Now remember, I've I I think I told you about this. I I told you about this, which is, you know, I did this comic where you have the two people at their 30 year 10 year reunion and one person says, "I've saved 100 grand." And the other other the girl, Susie, says, "I saved a h 100red grand, you know, let's make sure we invest it well." And then they show the 20-year reunion. They come back and he's got this nice suit on and he says, "I've absolutely killed it. I invested in all these private, you know, private and I made 32%." She's she has this next next frame she has this like really sad face and she's like I invested in all these you know evergreen strategies and made 13 and she's like just curious like how much do you have and he says I have 180 grand she goes how do I have she goes I have 330 I don't understand by the way I explained that story to my to my friends my in-laws people who aren't in the business they it's still not understandable it's not understandable to them that somebody could say they made 32% a year and someone made 12 and somehow one of them has more money than the other because of the compounding elements of it, right? And I know that you get it, but like as you go down distribution channel of more evergreen products, you're going to see a much more normal riskreward where equity is making somewhere between high single digits and low double digits and then credit depending on where we are in the rate cycle will make high single digit low double digit whether it's levered or unlevered. But the compounding element and the income orientation in a more high rate regime is more valuable. You know, international assets have traded historically at lower growth and lower multiple. And if some of this foreign direct investment changes, could you see with Germany really powering the printing press for the first time in a decade? Could you see a normalization of multiple and and a bit more higher growth regime in Europe? I I everyone has a hard time betting on that, but it feels like the stars are aligned that potentially you see a higher growth regime in Europe for the first time in a decade. So, how do you think we get pricing, liquidity, interesting new ways for people that have put all this money into these vehicles and want to get it out but can't contractually because the fund lives are whatever they are or you think that changes? I I mean, look, I I have a much different I mean, I think that there's going to be secondaries marketplaces. I think the secondary business is going to change dramatically. I think private asset exchanges will happen. Uh we've obviously started do it. Who will build those? I think there's going to be I think there's going to be new I think there's going to be first off I think there's going to be a need. Two I think that the the more that wealth wants equity product and private equity type products, the more that they're going to need a liquidity lever and a need for this private marketplace. And so how how that's designed is a question. I mean, you see us experimenting and and what one of the things I love about our place is we experiment with a lot of different things and we're experimenting with with market making on private IG. We've experimented with doing partnership with State Street and the and and Lord Abbott. Um we're experimenting with you know what we we listed our first fund on blockchain uh with five different protocols and we're tokenizing the fund where I think funds will actually trade and even though they're quarterly liquid they'll trade every day 365 247 you see Coinbase saying that they're going to list a token that's backed by their doc you can see what's happening which is this evolution of to to this 365 24/7 what does that mean for it's such a strange thing that to imagine I don't know an LP interest in a normal private equity fund trading when the amount of information available on the fund let alone the underlying companies and holdings and all that detail but it trades I mean it trades in secondary pretty liquidly I mean there's a pretty big bit you look at volumes going through the secondary business every year. It's I mean it's extremely liquid. Uh I mean if you want to get out of it in most market conditions, you can get out of it at some price not that far from part you know 90 92 96 depending on the fund depending on the the the design of the fund the sector the size of the manager and the brand of the manager but by and large you can transact in that. the more you pull assets, the more likely you'll get more liquidity to your point. So the more that you can call it diversified beta, the more likely you'll be able to, you know, more that more that it's deemed to be private markets beta as opposed to single name underwrite, the more likely you can actually move the risk. And that's happened in in fixed income market where portfolio trading is happening. You can trade a pool of investment grade bonds at three basis points but if you want to trade a single name bond it's you know half a point to a point wide which is just vastly different in terms of um cost of execution. What do you think happens in the wealth market like that seems to have be become a huge driver of new capital coming into innovation? It's hard to say it doesn't grow. I mean I people are just underindexed to privates. It's just it's not that dissimilar to the story I said about, you know, 2003. A billion dollars was a really big credit fund. And by the way, I'd was 24 years old going to Geneva. I'd go there, they'd send me, I'm like, I'm not I should not be marketing this product. I'm like not prepared to do this. I'd go over there, I'd, you know, read off my list. I'd prep myself for what the marketing pitch was for a long short credit fund. And we would raise 50 to 75 million on one meeting. Now I'm at Apollo with close to 25 years of experience. It takes us two or three years to raise a dollar sometimes, right? People want to know I'm right on repeat the gestation period to raise money. It's completely gotten out of it's so much longer than it ever was in wealth. It's the early days where they need product. They need to get more indexed. They want to go with big highquality managers. They want to go with someone they know, they trust, etc. But there's only a handful of brands that can do that and they're all short product. So the tailwinds there are going to be hard to, you know, hard to see them not not not continue to grow. I want to ask about the third category which is how shareholders of Apollo have historically thought about. You kind of talked about its legacy. For any shareholders listening, I hope they love us. I think we um listen we we are extremely generally at our core we are um pretty unsatisfied generally we we try lots of different things um we have probably one of the the smartest most strategic leaders in the marketplace uh and you know that that really powers the culture of the place I mean we have a you know we have we have a set of people who are really really it's pretty flat still so like you'll have principles and associates and analysts are not afraid to talk to me or anybody else and um we like it that way. You know, if you have a good idea, bring it up. We don't really have all the hierarchical stuff of a, you know, traditional what you think of as like an $800 billion manager. To me, it still feels, you know, pretty flat. And we want to we want to keep that that feeling. Um, you know, I I always there's the you I played football at Ammerst. Uh, and there was this game that we lost my senior year against Wesian. We lost 247. We were definitely not supposed to lose. Anyone on Wesian, you know, you weren't supposed to win. Um, but uh, you know, and we it was like Sunday the day after the game. We were all sitting there and the coach came out. He was like, "Thumb guys, finger guys, don't blame anyone else. Don't be a finger guy. We're all thumb guys. And the point was like hold it in like take the accountability yourself. Stop trying to blame everything else. And when things go wrong or we're trying to create something, people take it on themselves. And we have that just embedded culture of just owning that owning that like ownership of both successes and mistakes. But really on the mistake side, people aren't always looking to blame other people. And we've surrounded ourselves with those people. It's just that's just like I don't know how to we do that with our people, but that just emanates the whole place. It's such a cool I mean amazing concept. If everyone did that, I think a lot of companies would be a lot better. I have sort of like a a two-part question. In addition to the the fingers versus thumbs thing, I'm curious how you think about the culture. First, as a participant in it and now increasingly as a steward of it. And the second part of the question is how you navigated what has been like a you know you're fairly young like a fairly like meteoric rise inside of Apollo from managing 130 million to the position that you're in now. Curious thinking back on that like why do you think that happened? What did you do well to do that? Well that's everyone I think I mean part of it you know you always have to bifurcate you know seat versus person. I mean, part of it I was like, Mark drove the credit, drove a theme. Credit became powered by an internal pool of capital. Our teams did an incredible job of navigating creating new asset classes, being innovative. But listen, when you have tailwinds like that and you're one of the leaders of those business and and and help architect that business, that obviously helps. Um, but we have an incredible team, incredible people, but also the leadership. I mean, across the board, they've ne they've always let if we have an idea, they've let us run with it. You know, in 2018-19, we did a billionaire a deal, direct lending deal when no one was doing multi-billion dollar deals and we did it with not a very big direct business. When we wanted to go to the Middle East and partner with Mubata to raise a 12 billion balance sheet, no one had raised a large cap direct line. This is 2019. No one had thought of really raising a balance sheet to commit to distribute and hold and have our own balance sheet that were effectively 50/50 with Mubatala. No one thought about those things creating, you know, assetback businesses, our platform business, all of these things into products. If if it was a good idea, pure meritocracy and pure just engagement with the entrepreneurial spirit despite us getting bigger, we haven't lost that. And that starts with Mark and goes down to Zelter and Climman and just an acceptance across the board. And the team has just been amazing, right? And so that that part, you know, has been fun. I I I'm definitely like oddly overindexed to change. So I like it a lot. Um so not and and you know, like I I have to work on that because I even when things aren't supposed to change, I like the change. Um but the industry has changed a lot. I um have tried to be really market oriented around what is the appropriate equilibrium of where the market should sit both in product design, fee and asset category and where and really question how to disrupt ourselves. You know, like I'm okay with that discussion. There's many people who are not okay with that discussion. Um I love that discussion because I'm like, okay, well then let's let's do it. you know, like I want to go figure out what if someone's going to disrupt them, I'd rather just do it ourselves um before letting any anything else happen. And and I think you you build trust by having that mentality. The other thing is like we I I oversee a really big, you know, private credit business. That's how it's viewed from the outside. And really now I oversee a big private markets business. Um, but I grew up in a public markets DNA in a job that was literally here's a draw of very small nominal dollars. Eat what you kill. If you lose money, you won't have a job. And that's like a different thing, you know, like it's a different thing. You have to be all over all of the risk all of the time. That's hard to untrain. Part of that training though was create with very little capital. I worked at a 500 billion $3 billion fund. What you what you had to do in that is you had to design the skill of having the idea, going and creating the idea, getting other people to believe it's another good idea, having the banks in some cases finance that idea. And so I was constantly training ourselves and our team with small pools of capital with no brand. You know, we were small brands, Bren Court, Argent, these places were small, not in Apollo, right? Where I kind of learned how to do things without that business card, that seat. I learned to do it with very little resources. And so now when you have the resources, all of a sudden you're just like incredibly empowered to do things and you can do the whole deal yourself. Um, and that's been pretty I think you know having that public spark DNA in the context of a big private manager that really differentiates ourselves from a lot of different people out there. I also love this idea you've talked to me about before that historically Apollo and firms like it are are attacking the alternatives sleeve of someone's portfolio. maybe the 20% allocation they have to alternatives and that the future might be much more about attacking all 100% of a portfolio. How do you think about that shift making that happen making that possible? It's a very different approach. Yeah, I mean look the first you have to agree that privates and publics become one overwhelming thesis that most assets get more liquid over time. So let's just assume that assets get more liquid over time. So what was seemingly perceived to be less liquid before will be more liquid and more accessible and more acceptable into those portfolios. There are certain states today which will take a rated private asset and comp it like a rated IG private asset and it eats against their private equity bucket because it's deemed private. So by definition we are all wired and we've talked about this a lot. We were wired to think that private is risky. But if it's an Intel bond with a 20-year guarantee from Intel, is it riskier or safer than the Intel CQIP bond and you're attached to the asset? So, you actually have a double double claim in some ways, right? So, that that part we think will over time go away, right? Particularly for start with private IG. Let's just start with credit to start which is you have a third party saying that this is rated X and S&P is saying this is rated tripleB. S&P saying this other asset's rated tripleB. So you have guideposts. If you have the guideposts when you look at your credit allocation in a 60/40 shouldn't you just be optimizing for return with your credit allocation? And will that then go into subinvestment grade and that will go into equity? Will that go into equity pools both private and public? Should there be diversifiers to the S&P 500? You know, the these are, I think, real questions. If you look at market structure, if you look at how capital pools are growing, they're kind of telling you that's what's happening. Um, so, you know, we we talk to a client in the future, I don't think we're going to be talking about the 20. We're going to be talking about, okay, what's the best riskreward suggested return? And by the way, we're organizing our business with no walls. To the earlier comment on riskreward, it's the same thing when you talk to an issuer. talk to talk to let's okay what's what do you what what are you solving for here are all the things you can do in credit public private we do all those things by the way we do them on our own balance sheet let's compare notes okay equity what what are you looking for public private okay we do all those things we understand exactly that okay here's the solutions we can provide you and by the way let's put it all together um there's a whole other you know ecosystem around private assets and data and exactly who owns you know what what what information you get from your data set versus public markets data sets and um which I think again early days but I think the the broader bigger scal scalable businesses that have more touch points across the economy particularly when the economy is going more private than public hopefully we can use that data to make better investment decisions if I'm an equity investor I'm a private equity investor or a long short hedge fund investor or a pot investor or something um what is the value to me to understand what's the most important parts of your world to do my job better. For someone who grows up on the capital structure side where you have to understand all parts of the capital structure, but as a credit investor, you need to understand the structural dynamics and flexibility of loans and converts and bonds and press. When you're purely equity investor, typically when you talk to them, they're focused predominantly on one thing, which is topline growth. Yeah. And if you get the three-year topline growth number right, you typically get the stock right. And when you go to California and you ask about debt, no one wants to talk about debt. But now you have venture companies actually building defense companies that are going to be super asset heavy. And now you have hyperscalers that have never had any debt that need a lot that are becoming now more capital intensive. So the powering of the stuff is more capital intensive. But investing in businesses and optimizing for ROE, you can if you're running a business and you understand all the different flexibility points at different parts of the capital structure on balance sheet and off balance sheet, you're going to optimize and have better shareholder returns over time because you're going to give yourself a lot more flexibility and in some cases have much cheaper growth capital than you think you probably do than just raising equity. Um so you have to value the if you understand credit and you're an equity investor typically you understand all the option value you are long when you issue debt and you just create lots of optionality for yourself that maybe if you didn't understand that you wouldn't price it in to your stock if you were teaching like a uh gra an HBS class or something on uh the class was called how to build a great origination platform you work with lot a lot of origination platforms. You buy you've bought a lot of them historically. It's like a really key feature of everything that you do. You have to originate these things. What would be the curriculum of or the syllabus of of that class? Number one, have very clear credit box, very clear rules of the road on what you buy and what you don't buy. Uh when you're not clear on that, it can create lots of issues. And so the more clear you can be upfront, if you're clear with someone about what you're willing to buy and what you're not willing to buy, what are the parameters and bookends of what you're willing to buy and not buy, that empowers your origination machine. If you're not clear, if you're not clear on on on your decision-m if there's not a clear point of accountability, it creates way too much noise in the channel because you're not delivering to the clients because they think they can do X and that actually is brand degrading. So the number one rule is make sure you spend all the time in the world to define the credit box and be very quick if you don't want to do stuff, be quick to redefine that credit box and and be clear with your communication to anyone who's originating on your behalf. That's the the rule number one. It sounds pretty simple, but you'd be surprised how hard it is to execute at scale. Do you have a favorite example of an origin of of a great what you view to be a great origination platform? Just like tell a little story about what one of these things might look like. So CS was going through some changes and then ultimately uh bought by UBS. Um Atlas was the the structured products business at Credit Swiss. It was the number one profit center for a decade generating uh a big percentage of CS's earnings for a long time with effectively no losses. They had a $45 billion balance sheet. And what they do is they provide warehouses to originators all over the world. And they would let those w those those originators write a bunch of small loans and when they get to a certain quantum they would securitize those loans and distribute those loans via through a distribution mechanism. Because CS stock was trading at such a discount to book they needed to if they could sell it at book value was actually accretive. But what was this had every this was the classic Apollo deal. It had mortgages. It had solar. It had commercial real estate. It had consumer. To underwrite all of those things was almost impossible for anyone in the market other than us because you had to have the full suite of the team and you had to bring on the full opex of the business. So, so you're talking about 300 people. In 22 when rates moved they spent they sent two million wires for margining. Okay. So you have to have the scale to actually do it. You have to know all these asset classes and you have to have the experience of being able to take on a team culturally integrate the team all those things and then execute on a plan. So it got down to the wire. I was uh I remember sitting here. We was we were sitting here. It was like midnight or 1:00 a.m. and I was eating Chinese food with one of the analysts and uh the deal partner and I was like this is fun. Like I love this is we're back, you know, like let's do this again. And um and that's what it's like. I mean, we were all kind of on the floor having fun. Um and we ended up winning that deal. It we ended up taking on 28 billion of assets. We brought in three partners, including Mass Mutual, to partner with us on the equity. Um two sovereigns as well. And now we're, you know, we're on pace to grow that to, I think, 50 billion and and our long-term goal is to grow that to a hundred billion dollar warehouse business. We've hired 180 people into that business completely. We'd have to restaff it with its own CFO, CRO, entire operations as a real company. We rebranded it Atlas. And now we control 280 separate warehouses. We're one of the go-to places to provide across all these different asset categories. and we control the front end. I mean, it's that's just like right down the middle of the fair where everything about Apollo where it's working. What deal that you have been an intimate part of has been the most fun for you at Apollo. Most fun. And of course, I'm going to ask you to tell the story. So, yeah. I mean, most fun I probably went I'd say the most time and attention the last five years I had to deal with was probably Carvana. Uh, and I know you know Ernie, uh, that that situation went from, you know, us being down half a billion dollars to up a billion dollars probably in a matter of six months. Um, it went from us, you know, being a lead order in a JP Morgan syndicated deal in 22 to all of the bonds a year later trading at 30, having bought another 750 to a billion of bonds on the way down and um, you know, being questioned about the whole investment and I think every single investor, every meeting I went into, I was like, I will never do this again. Every single meeting I went into, I was getting questions like what's current and by the way it was it sounds like I mean it was a big position for us but in the context of all of our funds even with it at 30 we had we were up 8% or 9%. So we took you know 100 or 150 basis point loss by vehicle but just because it was in the news it was so much headline for meme the whole thing. Um and you know I kind of sensed that there was going to be an issue. I mean, I think probably in November of 22, about six months after we did the original deal, every time I started going out to California to go to the Athena offices, I would email Ernie and say, "Hey, you know, I um I'm going to be in Phoenix. We need to catch up." And he'd be like, "Okay." And he I'm sure you could tell he was like, "Who's this guy first off? Who's this guy from Apollo?" And who who like what does he want? Like there's not a problem yet. And then bonds keep going down. I'm texting him. I I was looking at my text last night and I was like, "Wait, how am I going to tell this story?" And you look at the text from the beginning and he like wouldn't respond. He wouldn't engage, right? Like he just wouldn't. And it was like, "Sure." And you could tell you're just like, "Who who is this person?" Um, and then in November of 20, I think in November, they we caught wind that they were going to try to and and and by the way, I probably did 20 calls and two or three dinners with him. and just no real engage. I mean, I mean, I think he he heard what I was saying, but he didn't he was just worried that I was playing I was trying to do something that was not in his best interest, which I understood. I mean, you can get that. Um, so they they hire Mullis and I catch wind of it prior to it that they're going to launch a super coercive exchange. And this is before the idea of co-ops. Co-ops are where you actually partner with other creditors and agree that no matter what, we're going to take the same deal. so that they can't take other lenders and give them a better deal versus us. They say, "Listen guys, we're it's us ver it's we're the lenders, there's a company, we're going to figure out a good deal together, but it's not going to be because they pin us against each other." So, at that point, a five billion it was a five and a half billion of outstanding debt, coalescing 5 a half billion of debt requires you to have known these people for a long period of time. And the credit markets, whether or not you accept it or not, it's a cottage industry. Yeah, handful of people. I'm friends with most people in the market. I like I'd like to say I've not done anything wrong to anyone in the market. Um, and generally have real personal relationships that have gone for a long period of time. They're not they're they're deep real real relationships that because in credit it's not it's not zero sum. Yeah. You know, the equity markets are more zero sum. You win the deal, I lose the deal. credit. It's like you're going to be on the you typically are in the same bond with them or same loan or maybe we'll be on the other side, but I know I'll be in the same side again. And so it's a very different dynamic. So we were able to get 90% of the bonds on board. They launch this exchange. The exchange gets blocked. What does the exchange just describe? The exchange is effect is effectively like, hey, if you roll into this bond at a steep discount, we'll give you security, but you have to take a big haircut to par. to all of us said no. They launched it, they extended it and no deal. And people don't know this story part of the story, but I'm sitting in vacation, like my first vacation probably a year in uh the south of France and I'm sitting there with my wife and guess who's sitting next to me? Ken Mullis and his wife. Okay. And I'm like, Ken, I'm on vacation and it's one of these places where you got to stay like a minimum couple nights or whatever. And so Ken's there sitting at every meal he's there. And I'm like, Ken, can can we somehow get to an agreement on this other thing and he's like his his famous quote of the whole thing is co-ops are made to say no. Meaning that like once you guys all get together, you're never going to get to a deal. I'm like, we can get to a deal, reasonable deal. Just get everyone together, send us over something. And I'm like just encouraging them then to do it. And you know, eventually we ended up flying out to Phoenix as a group and we back and forth. And finally, you know, you realize that first off to get these deal done incredibly hard, very rare to get done. Two, it's probably the only co-op where everything worked. We cut a deal, the stock and we had bought stock at four, you know, the stock went from four to over to 280 in the next 12 months. The bonds went from 30, you exchanged at 90. Those bonds were trading at 120 a year later. Everybody won in this. There's very rarely do you have in that time short of time period do you have a deal that's not that's effectively you know a fair deal not not where we're taking the equity or anything and a year later everybody's won now we sold the stock at like 15 it went to 290 so we're the idiots but but like you know we but it was it was it was fun to see and I think like here I'll pull it up now because I was laughing Ernie and I are both into uh where he wouldn't reply to anything before Now we're like personal friends and I'm like reading through the text and I sent him this song. I sent him Evening Gown by MC Jagger. I don't know why I sent I sent him this song like a year ago and I sent him like we were saying we're both into music and he goes, "If the FBI had to profile you based on your music, they would say you were a 60-year-old from West Texas with an optimistic form of depression." So you go through the channel and you're like, "Okay, how did this deal get done?" You know how it got done? It got done because I was just kept going back. I kept being super brutally honest. And despite his like lack of he didn't want to trust. I think part of it was like institutionally or what we were doing in the he just didn't want to. Smart people just see through it. You know, smart people just see through and they actually were. He heard me for the content. And once he got there, like if you talk to him now, he'll tell you like there was no deal without without us having spent all that time before and the whole process of me going to Phoenix all those times and actually engaging with him and just keep giving him just feedback, feedback, feedback. That's what ultimately got our deal done. And in most cases, that situation would have ended up in in in some sort of bankruptcy or some sort of aggressive thing where no one probably would have won, honestly. Um, so I'm that one was fun because I feel like, you know, Ernie and I are great friends now and I think we both learned a lot and you kind of realize that you have to have flexible capital, you have to be willing to actually commit to having a personal trusting relationship with whoever the decision maker is. And if you don't have that trusting personal relationship with the decision maker, not only the decision maker, but also your peers because in credit, you have to be able to agree that sometimes 1 plus one is three. It's not zero sum in that in that amazing story. And I love having heard it from every I mean, it's obviously one of the most fascinating capital market stories of the last like 20 years. Another story that I've loved hearing you talk about is Herz. mostly just because I don't know it seems to see seems to tell the story of what Apollo does and why it's interesting and differentiated. Can you tell that story as well? Yes. So that story was like 2016 annual meeting I said that Herz would file for bankruptcy. I was dead wrong for three four years. It was like because I was of the view that Uber people would rent fewer cars, you know, pricing would collapse, used car prices would go down. That was kind of the thesis in 2016. COVID hits, they I talked to the management team a month later. They're like, "Oh, we don't have any plans for anything. You know, Iba does fine." And I'm like, "Okay, so this literally like locked up in my house in Bedford." I'm like, "What are you guys talking about?" and um we bought several hundred million of June insurance and company filed in May literally a month later after they told me everything was fine. So that was like the start of the Hertz journey. From there we bought the term loan at 60. We thought that we'd probably own the company at a sub billion dollars. Was very different with their company when we hated it was you know10 billion dollar company. We were buying the company effectively at a billion and you go over the life of the journey from mid20 to when we were buying the term loan at 60 as a distress for control which is again not really what we do historically but it was covid times and we're like if we own it here we don't think it's going to be distress for control but if we own it at this valuation it's worth this we refinanced to think about the story of Apollo and how it can actually provide solutions right from that point forward we became the largest secured lender. We provided the dip. We refinanced $4 billion of in that summer $4 billion of their entire used car vehicle financing because they had to they because the used cars were collap they needed a refi. We refied $4 billion. We then the term loan went up. Then we provided the when the company ultimately ended up exiting bankruptcy, they took out the term loan in November of that year. They had a lease business, a platform business that actually did, you know, fleet finance inside of Herz that they wanted to sell before they exited. We bought it. We bought it in our platform business and have merged it with wheels, which is a specialty lending fleet finance uh platform business. Then when they actually it ended up being a solvent company where there was value to the equity, Nighthead ends up winning the bid. We provide the $2 half billion dollar exit financing which six months later we get taken out at at 130. We put in $10 billion into the ecosystem across dip secured securitized product buying a business out of the platform there. Nobody could have navigated that whole over a 12 or 18month period. You have to have tons of flexibility, creativity, and agility. You can't you have to think up and down the capital structure. And that was like that was really one of the that was the first time I saw the whole platform at work working together from our platform team to our senior team to our hybrid team all working in the whole ecosystem. You know that's a pretty that was a pretty special thing and um hope to do a lot more like that. Yeah I they don't you you need you need a combination of market ball uh and single name ball for that to happen. Um but when it happens and you can execute on it well and and and showcase everything again being close to the decision maker the more we did the more we would get the first call right by providing the four billion of securitized product not it's not that that's a plus 300 business meaning it's not high returning but because we did that guess what we got the first call on the platform then we did that we were the call and we were we you know we got a call last minute on that prep um from from Nighthead And in 30 minutes, because we knew the company so well, I said, "Okay, we'll do two and a half billion of prep." Because we could react that quickly at scale, big and fast. Very few firms can move big and fast like that. And when we move big and fast like that, because we know the businesses so well, we follow them well. We have a big balance sheet to be able to commit fast. And we do it in a way that it's because we have we've invested in five, we're invested in all these companies for so long. you know, high yield companies don't they never go away. I mean, they either get acquired, they either refinance their debt, so they're back in market every two or three years, or they file. It's never like you do the loan and hope you're going to get paid enough in cash. So, there these are companies that, you know, and and you follow for a long period of time. I'd love to talk about some of the future categories that you think you'll be most focused on. The obvious one is like US infrastructure buildout around AI like and AI is of course like you have to ask about it. It's the thing everyone's talking about. I know you've spent some time meeting with some of the young companies which is so so cool. We've met with some of the same companies and it is pretty wild to imagine like where the world's going. But when you think about Apollo's role in all of that, one of the things happening is just a massive outlay of of capital to update in you know compute infrastructure. How do you think about something like that? How do you approach it? When do you know like the right time is? Do you wait and let it settle out a little bit? How do you approach something like that? My wife's banned me from talking about AI at dinner because I think it ruins a dinner party. So, we don't we don't talk about it. You're a doomer about it. No, I'm I'm more I'm less nihilist. I'm more excited about it, but I want to talk about it a lot. I think there's three segments of our business that we have to think about. One is the aggregate data. Taking tons of unstructured data and structuring it. How do we use that in a way that's attractive? um how do we use that in a way that potentially is predictive two is all the operations of a financial services company which I think will just get better right the way that just everything from custody to transfer cash transfer trade settlement whenever you do a transaction there's lots there's a whole host of workflow that I think will get more optimized and more efficient and three is the investment process and really for us it's how do you co-pilot you know how do you create co-pilots to make our risk decision makers better. Uh I think that's going to happen. But you have to you have to have people who are very proficient at that to actually train the computer and the system and create the system the way you want. You can create a system that gives you bad advice too. So you want to make sure that it's creating it under the framework that you acknowledge to be the framework that will suit the product's needs or the funds needs or the investment process needs. So, um, that stuff's that stuff's pretty exciting for us because we're we're very large, which means we have lots of information and lots of optim lots of optimized stuff that we can do that we haven't done yet. So, I'm pretty excited about our future in that in that regard. I'm really excited about doing it. It's it's you know, obviously um you know, you talk to people in the ecosystem, they get a little nervous about what that means for everybody. Um, I think that we're just going to be doing our jobs better and more proficient and be able to do more, which is I think exciting. What do you think it means from from the uh do you think it it affects where you put your dollars? Meaning like so much money is being spent on all this stuff and making it possible like everything you just described, you're going to spend money on that's flowing through a whole new set of infrastructure. Do you think you'll be involved in that part of the equation? Yeah. So compute is the the center of uh all of this and the demands for compute will go up. The the sizing of these mega data centers is astronomical. There's not frankly there's only a few investors that can finance them with matched liabilities at the scale and we're fortunate to be one of them. I think we'll be a leader in that. Intel was just the start of that. There'll be a handful of us which will lead that charge. Um, which again the key the most important thing for that is that that we work well first off the counterparty risk typically is high quality because the hyperscalers and others that want that compute are typically very well capitalized and growing their earnings really quickly. The more that we can partner with them to create the most flexible type of capital structure duration wise that matches with exactly what they need, I think the more likely we're going to be the service provider of that. And I I think we're we are positioned given just the org design of uh and the the liability structure of our business. We're designed to be the provider one of the largest providers of all that capital. Um that's definitely going to be it feels like that and probably defense are probably our largest sectors that are growing really quickly. If you think about young entrepreneurs interested in capital markets amidst this entire shifting changing landscape that we spent a lot of time describing, where do you think are the most interesting opportunities to start new finance firms, new capital markets firms, new asset managers today? I mean, look, I always think there's going to be some level of the the core, let's say core credit, core equity businesses are going to get consolidated. So, if you're kind of me big, you're going to become mega and you're going to distribute and produce products. And I think there'll be consolidation there and you're kind of seeing that. U but there'll always be the family office, the endowment that wants the the small artist. Yeah. Yeah. You there's I started here with $130 million fund, you know, like I no one paid attention to me for five at least five years. Like what the hell is this guy doing over there with this long short credit fund? Um and I did that for 10 years before coming here. So those businesses are wake up every day super riskmanaged or in the liquid business super riskmanaged and you know every line item you know every risk every night and you're living and breathing the artistry of that business whether it's middle market buying middle small businesses investing in small businesses venture these are just artist businesses and I think there's always room for for for the artist in the aggregate asset allocation um So my my thing is find like find something that you love doing. Find something you're super interested in, create a product around that and get yourself excited about what you're doing every day because there's not a if you do that, you're going to probably design a pretty good product and a pretty good investment process. And the clients the again the clients see through this stuff. You know, it's they they they either feel the authenticity of whether or not you care or not, or whether or not you're interested in that or not in in the product that you designed, they know. They kind of know. And whether or not they know day one, they'll know. Do you think there's a future for Apollo in sports, financing teams, doing anything like that? in a world where uh let's go AI abundance and let's go uh you know seven night a week the the you know Ari we just backed Ari and his um the Miami Open and Madrid open and you know hopefully the some other events but you know their thesis is like the events business went from two nights a week to work from home turned it into three or four nights a week you go AI abundance it's a seven night a week business right people will be enjoying a GDP that's 5 to 10x and we're all just getting serviced by robots, you know, let's go there. AI abundance. Uh, and if we do that, you know, the events business is pretty cool. Um, what happens in in asset categories that go up in value really quickly, take sports teams for example, when they go up so fast, but it's not so much cash flow, it's more enterprise, there's not a ton of lending. So, there's this huge gap in specialty finance. And so I think you could see us lending against teams more actively. Not so much buying teams, but I could see us doing more things like we did with Ari where we provide financing and own a little bit of of and we back them through some sort of hybrid instrument. Yeah. It'd be really cool to imagine uh you applying this to literally every single sector as it matures over time. Yeah. As you do that, what are the things in the Apollo culture that you hope either stay the same or grow or become more true? kind of just a willingness to try new things. I mean, an openness. I think the world I mean, look, this isn't some I think everyone realizes the world's changing pretty quick. Um, and if not, I think they're going to realize I just it's just changing fast. It feels like it's changing faster than any of us can even accept. And the people who are closer to it even say we can't even predict this stuff. So, just a willingness to try new things, an openness, a flexibility um around that. like I prefer Gumby. Like we want we want people who are willing to to to like test some of those norms and just be outside the box thinkers. Um and not just because something worked in the past necessarily is it going to work in the future and and just have fun doing it. I mean I think we you know we have our Olympics. I I try to keep things pretty fun. Uh we do like an Olympics. We had, you know, um, last year at the end of the Olympics, we had this like kind of standard corporate Olympics, which which going to which is kind of going to suck. I mean, it was going to be fine. It was fun. We go out to Randles Island, but to mix it up, I always do something a little different. So, we went to the fish I had the the team meet us at the fish market at 5:00 a.m. We got three 50 lb grease cods because when I was growing up in Maine, we'd we'd have this annual greased cod race where you had to get in a fireman's outfit and a 50 lb grease cod back and forth. And so, no, I didn't tell anyone what the fi finale was for the finalist, the winners, the finalist. You guys get to race for the winning thing. And then I pulled out the the two uh the two three 50 lb grease cods and and it was the relay race for who would win. But that like we're still we still are trying to have fun here. Um and I I think I think most of us are I I'd like to think that most of us, you know, you got to have fun coming to work and and um and enjoy doing it. Where do you find the meaning in all this stuff? And the reason I asked this question is my wife and I are watching this new John Ham show on Apple TV. I'm a couple episodes in and I find it to be both uh really fun to watch and also uh maximally depressing. Like I can't watch it like makes makes me like hurt and it's all these guys who are incredibly rich whose lives could not seem like emptier or worse. And and I think this is a true thing that happens in finance where like the product literally is money and therefore like the world is money. The incentives are money and the market system is incredibly powerful and this is capital markets are the centerpiece of it. We talked about that at the beginning how powerful an asset this is for the US. But it seems like there's a chance that you get really distorted by the incentives and the structure of the system as a human. And so I'm curious where you find meaning in it and like why you've chosen to do it. I wanted to be a football coach and I was screaming to not come down to New York and I I it it it all hit the peak when I was coming in through the I drove down from Ammeris down to New York to move into my onebedroom with three guys on 38th and first and I'm coming in I'm coming in the Midtown tunnel and my tire pops going into the Midtown tunnel moving all my stuff because I had so much in my so much stuff in my bag and in in the back of the car and I was like, I cannot believe I'm doing this. And then getting on 4:30, 5:00 a.m. trains up, you know, every morning to beat my, you know, boss to work because my stepdad would say, you know, you got to be first in first in work. Actually got me a job. But, um, funny story on that is like when I'd get up there, I try to get there first every morning and my first boss, Jim Caspber, he'd get there super early and I couldn't beat him there. And he had just had a fourth kid. He was going to have his fourth kid. The fourth kid was ended up being triplets. So they had six kids. Oh my god. And now that I have three kids, I realized like, okay, he wanted to get there first before anyone woke up. So he So I was competing Yeah. I was competing with the with the six kid household. Yeah. So that was like too hard. But I went up there and I my step like just try it. And I met with the founder uh the founder of the firm and he's like look are you competitive? Yes. Are you good at math? Yes. Do you like new things? Yes. He's like your blood's going to turn green. Just come come up here and do it. But it wasn't the it wasn't the for me it was always about like having a really good product, making good returns versus other people. But it wasn't the out I wasn't so outcome focused. Um I was just about I've always been about trying to make sure like authentically feeling like I have an idea or a product or something that's just very original and very what what we believe in. you can use a fund as a effectively a a mechanism to actually take that view. And the thing I loved about it too is that if you have good per I've always had the view that if you have good performance over time for long periods of time that you kind of just like you you will have clients forever if you if they trust you and you do what you say you're going to do. It's like a pretty good framework for how to operate. And if you can do that consistently for long periods of time, you'll always have it. Um, and I've I mean I didn't realize how much I was going to love the business from the beginning, which is like where else can we be in the middle of compute, oil and gas, software, healthc care, being in the middle of all these conversations globally. I mean, it is the eternal learning center. And um I I don't think I could do anything else. And then people ask me, you know, you ever gonna I don't think I'm gonna I don't know how I stop. How about some blueberries? All right. So my my my wife, she's incredibly healthy. She also has a great way of finding just like very special things. And as you know, like anything that is special, I love to be a part of the the the building of something special, something unique. And I like sharing things that are unique. First is the every time you order an avocado in New York, you know, like from Instacart or order in, like half of them are not great or bad. So, like there's this guy called the Avocado Guy and he like avocado. Yeah. And he like duh avocado guy. You guys can go get it right now. It's like probably I don't know what it's probably 50 or 100% higher than a regular avocado. Every avocado is perfect. Yeah. So, no matter what, back to your idea on young ideas. Any anything that is unique, special, solves a problem, you can have a business. The avocado guy. Blueberries. My wife My wife found uh this farm down in Florida that makes blueberries once a year. Harvests you can order five pounds once a year. You got to order it the day of. You just missed it everybody. I I actually don't know the name of the farm, but it harvests it one once a year. Blueberry Guys. Duh. Blueberry Guys. And um we get them and I had them the first year and literally you can't eat other blueberries because they're so good for the And I'm like, "Okay, you can't." And then now I started sending them to everyone on the to people on the floor. So like you know I sent them to Zelter. The people on the floor are all getting they're like why are you sending me blueberries? And it's like it's just kind of a message around just the like it's really unique really special and it just you that's how you build relationships on stuff. Anything good is around that. And um I uh I give all the credit to my wife obviously on anything health related but also just these jobs are impossible. I mean if you don't have someone at home that's um supportive and you know just full trust all the time and just always making the right decision for you and in your and always looking out for you. I'm I'm pretty lucky to have that. It's been so cool learning from you over many conversations because Apollo is this sort of monolith that you might think was a private equity firm. Maybe if you thought it was in credit, it was doing just, you know, mid-market sponsor back deals and it's obviously turned into something much different. And so, it's been cool for me to learn about. I'm glad that everyone else listening gets to learn about it as well. When I do these, I ask everyone the same traditional closing question. What's the kindest thing that anyone's ever done for you? my stepdad who went to West Point, we were talking about him earlier, he he he I I was with my mom and stepdad for most of my life, but he set a ton of structure and um really always treated me like I always like my own, like his own. And like now that I have three kids, you know, it's, you know, it's hard to hard to thank someone enough for that, you know. Amazing. Great place to close. Thanks for your time, John.