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APOLLO GLOBAL MANAGEMENT, INC. – 10-Q – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction withApollo Global Management, Inc.'s condensed consolidated financial statements and the related notes included within this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that are subject to known and unknown risks and uncertainties. Actual results and the timing of events may differ significantly from those expressed or implied in such forward-looking statements due to a number of factors, including those in the section entitled "Risk Factors" in the 2020 Annual Report and Quarterly Report on Form 10-Q filed with theSEC onMay 10, 2021 . The highlights listed below have had significant effects on many items within our condensed consolidated financial statements and affect the comparison of the current period's activity with those of prior periods. General Our Businesses Founded in 1990, Apollo is a high-growth, global alternative asset manager. We are a contrarian, value-oriented asset manager in credit, private equity and real assets with significant distressed expertise and a flexible mandate in the majority of our funds which enables our funds to invest opportunistically across a company's capital structure. We raise, invest and manage funds on behalf of some of the world's most prominent pension, endowment and sovereign wealth funds as well as other institutional and individual investors. Apollo is led byJoshua Harris andMarc Rowan ,who have worked together for more than 35 years and lead a team of 2,035 employees, including 631 investment professionals, as ofSeptember 30, 2021 . Apollo conducts its business primarily inthe United States through the following three reportable segments: (i)Credit-primarily invests in non-control corporate and structured debt instruments including performing, stressed and distressed instruments across the capital structure; (ii)Private equity-primarily invests in control equity and related debt instruments, convertible securities and distressed debt instruments; and (iii)Real assets-primarily invests in (i) real estate equity and infrastructure equity for the acquisition and recapitalization of real estate and infrastructure assets, portfolios, platforms and operating companies, (ii) real estate and infrastructure debt including first mortgage and mezzanine loans, preferred equity and commercial mortgage backed securities and (iii) European performing and non-performing loans, and unsecured consumer loans. These business segments are differentiated based on the varying investment strategies. The performance is measured by management on an unconsolidated basis because management makes operating decisions and assesses the performance of each of Apollo's business segments based on financial and operating metrics and data that exclude the effects of consolidation of any of the managed funds. Our financial results vary since performance fees, which generally constitute a large portion of the income we receive from the funds that we manage, as well as the transaction and advisory fees that we receive, can vary significantly from quarter to quarter and year to year. As a result, we emphasize long-term financial growth and profitability to manage our business. In addition, the growth in our Fee-Generating AUM during the last year has primarily been in our credit segment driven by continued growth in traditional funds and managed accounts as well as growth in asset management services to the insurance industry and in performing credit products. The average management fee rate for these new credit products is at market rates for such products and in certain cases is below our historical rates. Also, due to the complexity of these new product offerings, the Company has incurred and will continue to incur additional costs associated with managing these products. To date, these additional costs have been offset by realized economies of scale and ongoing cost management. As ofSeptember 30, 2021 , we had total AUM of$481.1 billion across all of our businesses. Approximately 89% of our total AUM was in funds with a contractual life at inception of five years or more, and 60% of such AUM was in permanent capital vehicles. -78-
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The following table presents the gross and net returns for Apollo's credit
segment by category type:
Gross Returns Net Returns
For the Three Months For the Nine Months For the Three Months
Ended September 30, Ended September 30, Ended September 30, For the Nine Months Ended
Category 2021 2021 2021 September 30, 2021
Corporate Credit 1.7% 6.4% 1.4% 5.4%
Structured Credit 2.9% 13.3% 2.5% 11.8%
Direct Origination 3.2% 12.7% 2.4% 9.9%
On December 31, 2017 , Fund IX held its final closing, raising a total of $23.5
billion in third-party capital and approximately $1.2 billion of additional
capital from Apollo and affiliated investors for total commitments of $24.7
billion . As of September 30, 2021 , Fund IX had $11.4 billion of uncalled
commitments remaining. On December 31, 2013 , Fund VIII held a final closing
raising a total of $17.5 billion in third-party capital and approximately $880
million of additional capital from Apollo and affiliated investors, and as of
September 30, 2021 , Fund VIII had $2.5 billion of uncalled commitments
remaining. Additionally, Fund VII held a final closing in December 2008 , raising
a total of $14.7 billion , and as of September 30, 2021 , Fund VII had $1.8
billion of uncalled commitments remaining. We have consistently produced
attractive long-term investment returns in our traditional private equity funds,
generating a 39% gross IRR and a 24% net IRR on a compound annual basis from
inception through September 30, 2021 . Apollo's private equity fund appreciation
was 4.8% and 40.0% for the three and nine months ended September 30, 2021 ,
respectively.
For our real assets segment, there was a total gross return of 6.0% and 14.2%
for the three and nine months ended September 30, 2021 , respectively, which
represents gross return for our real estate equity funds and their co-investment
capital, the European principal finance funds, and infrastructure equity funds.
For further detail related to fund performance metrics across all of our
businesses, see "-The Historical Investment Performance of Our Funds."
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Holding Company Structure
The diagram below depicts our current organizational structure:
[[Image Removed: apo-20210930_g1.jpg]]
Note: The organizational structure chart above depicts a simplified version of
the Apollo structure. It does not include all legal entities in the structure.
Ownership percentages are as of November 3, 2021 . As of November 3, 2021 , there
were 246,579,482 Class A shares, 1 Class B share and 1 Class C share issued and
outstanding, and 157,065,879 AOG Units held by Holdings that are exchangeable
for Class A shares on a one-for-one basis. In addition, as of November 3, 2021 ,
Athene held 29,154,519 AOG Units that are non-voting equity interests of the
Apollo Operating Group and are not exchangeable for Class A shares.
(1)As of November 3, 2021 , the Class A shares represented 9.2% of the total
voting power of the Class A shares, the Class B share and the Class C share,
voting together as a single class, with respect to General Stockholder Matters.
As of November 3, 2021 , the Class A shares represented 56.9% of the total voting
power of the Class A shares and the Class B share with respect to certain
matters upon which they are entitled to vote pursuant to the certificate of
incorporation of AGM Inc. ("COI").
(2)Our Co-Founders own BRH Holdings GP, Ltd. , which in turn holds our only
outstanding Class B share. As of November 3, 2021 , the Class B share represented
6.9% of the total voting power of the Class A shares, the Class B share and the
Class C share, voting together as a single class, with respect to General
Stockholder Matters, and a de minimus economic interest in AGM Inc. As of
November 3, 2021 , the Class B share represented 43% of the total voting power of
the Class A shares and the Class B share with respect to certain matters upon
which they are entitled to vote as a single class.
(3)Through BRH Holdings, L.P. , our Co-Founders indirectly beneficially own
through estate planning vehicles, limited partner interests in Holdings. Our
Co-Founders' economic interests are represented by their indirect beneficial
ownership, through Holdings, of 32.5% of the limited partner interests in the
Apollo Operating Group .
(4)Holdings owns 36.3% of the limited partner or limited liability company
interests in each Apollo Operating Group entity. The AOG Units held by Holdings
are exchangeable for Class A shares. Our Co-Founders, through their interests in
BRH Holdings, L.P. and Holdings, beneficially own 32.5% of the AOG Units. Our
Contributing Partners , through their interests in Holdings, beneficially own
3.8% of the AOG Units.
(5)BRH Holdings GP, Ltd. is the sole member of AGM Management, LLC , which in
turns holds our only outstanding Class C share. The Class C share bestows to its
holder certain management rights over AGM Inc. As of November 3, 2021 , the Class
C share represented 83.9% of the total voting power of the Class A shares, the
Class B share and the Class C share, voting together as a single class, with
respect to General Stockholder Matters, and a de minimus economic interest in
AGM Inc.
(6)Represents 57% of the limited partner or limited liability company interests
in each Apollo Operating Group entity, held through the intermediate holding
companies. AGM Inc. also indirectly owns 100% of the general partner or managing
member interests in each Apollo Operating Group entity.
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(7)Represents 6.7% of the limited partner or limited liability company interests
in each Apollo Operating Group entity held by Athene Holding Ltd. and/or its
affiliates. AOG Units held by Athene are non-voting equity interests of the
Apollo Operating Group and are not exchangeable for Class A shares.
Each of the Apollo Operating Group entities holds interests in different
businesses or entities organized in different jurisdictions.
Our structure is designed to accomplish a number of objectives, the most
important of which are as follows:
•Historically, we were a holding company that was qualified as a partnership for
U.S. federal income tax purposes. Our intermediate holding companies enabled us
to maintain our partnership status and to meet the qualifying income exception.
Effective September 5, 2019 , Apollo Global Management, LLC converted from a
Delaware limited liability company to a Delaware corporation named Apollo Global
Management, Inc.
•We have historically used multiple management companies to segregate operations
for business, financial and other reasons. Going forward, we may increase or
decrease the number of our management companies, partnerships or other entities
within the Apollo Operating Group based on our views regarding the appropriate
balance between (a) administrative convenience and (b) continued business,
financial, tax and other optimization.
On March 8, 2021 , we announced that we entered into a binding governance term
sheet with the Co-Founders. The term sheet sets forth a number of changes to our
governance structure and a timeline for their implementation, including changes
relating to:
• composition and size of our board of directors;
• Board committees, including to create a nominating and corporate governance
committee, a compensation committee, and a new executive committee. The new
executive committee will for the first year consist of at least three members,
but no more than four members, including Jay Clayton , as the committee's
Chairman, Marc Rowan and Joshua Harris ; and
• elimination of the Up-C structure - as promptly as practicable following the
receipt of all required regulatory approvals:
• the single Class B share that is held by BRH Holdings GP, Ltd. will be
converted into shares of Series I Preferred Stock of AGM Inc. equal in number to
the outstanding AOG Units (other than those AOG Units held by the Company and
Athene) and entitled to one vote per share on each matter properly presented to
the stockholders of AGM Inc. ;
• upon the issuance of the Series I Preferred Stock, the Co-Founders shall cause
AGM Management, LLC to surrender to the Company the sole Class C share;
• on or prior to June 30, 2022 , as designated by us, which date will coincide
with the consummation of the transactions contemplated by the Merger Agreement,
provided that if the transactions contemplated by the Merger Agreement have not
been consummated by June 30, 2022 , then the mandatory exchange date will be June
30, 2022 (such date, the "Mandatory Exchange Date"), a wholly-owned subsidiary
of a newly formed holding company ("NewCo") will merge with and into AGM Inc. ,
with AGM Inc. to be the surviving company in the merger. Upon consummation of
this merger, each holder of a share of Class A common stock will receive on a
tax-free basis shares of Class A common stock of NewCo and will no longer hold
any equity interests in the Company;
• on the Mandatory Exchange Date all AOG Units beneficially owned by each holder
of AOG Units (other than those held by the Company and Athene) will be
transferred to NewCo and one or more of its affiliates in a series of
transactions in exchange for (i) such number of shares of Class A common stock
of NewCo equal to the aggregate number of AOG Units beneficially owned by such
AOG Unit owners as of immediately prior to the mandatory exchange (such AOG
Units, the "Outstanding
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AOG Units") and (ii) an aggregate amount in cash equal to the product of (a)
number of Outstanding AOG Units multiplied by (b) $3.66 , payable over a period
of four years in equal quarterly installments (the "AOG Unit Payment");
provided, however, that in the event that we consummate the transactions
contemplated by the Merger Agreement simultaneously with the mandatory exchange,
the AOG Unit Payment will be payable over the period between the date on which
the transactions contemplated by the Merger Agreement are consummated and the
third anniversary of the Mandatory Exchange Date in equal quarterly installments
(such transactions collectively, the "mandatory exchange").
The term sheet also states that the tax receivable agreement will not be
applicable for the mandatory exchange, but will remain in effect for any
exchanges occurring prior to the Mandatory Exchange Date.
The parties to the term sheet agreed that, upon the surrender of the Class C
share, the Company will provide each Co-Founder with certain stockholder rights
set forth in a stockholder agreement, as provided in the term sheet.
Implementation of the provisions of the term sheet remains subject to regulatory
and stockholder approvals, and there can be no certainty on the consummation or
the timing of these changes.
Business Environment
As a global investment manager, we are affected by numerous factors, including
the condition of financial markets and the economy. Price fluctuations within
equity, credit, commodity, foreign exchange markets, as well as interest rates,
which may be volatile and mixed across geographies, can significantly impact the
valuation of our funds' portfolio companies and related income we may recognize.
In the U.S. , the S&P 500 Index increased by 0.2% during the third quarter of
2021, following an increase of 8.2% during the second quarter of 2021. Global
equity markets depreciated during the quarter, with the MSCI All Country World
ex USA Index decreasing 0.6% following an increase of 5.9% in the second quarter
of 2021.
Conditions in the credit markets also have a significant impact on our business.
Credit markets were positive in the third quarter of 2021, with the BofAML HY
Master II Index increasing by 0.9%, while the S&P/LSTA Leveraged Loan Index
increased by 1.0%. The U.S. 10-year Treasury yield increased during the quarter
to 1.52%. The Federal Reserve kept the benchmark interest rate steady during the
last twelve months at a target range of 0% to 0.25%.
Foreign exchange rates can materially impact the valuations of our investments
and those of our funds that are denominated in currencies other than the U.S.
dollar. Relative to the U.S. dollar, the Euro depreciated 2.4% during the
quarter, after appreciating 1.1% in the second quarter of 2021, while the
British pound depreciated 2.6% during the quarter, after appreciating 0.4% in
the second quarter of 2021. The price of crude oil appreciated by 2.1% during
the quarter, after appreciating by 24.2% during the second quarter of 2021.
In terms of economic conditions in the U.S. , the Bureau of Economic Analysis
reported real GDP increased at an annual rate of 2.0% in the third quarter of
2021, following an increase of 6.5% in the second quarter of 2021. As of October
2021 , the International Monetary Fund estimated that the U.S. economy will
expand by 6.0% in 2021 and 5.2% in 2022. The U.S. Bureau of Labor Statistics
reported that the U.S. unemployment rate decreased to 4.8% as of September 30,
2021 . In addition, the U.S. Bureau of Labor Statistics reported that the annual
U.S. inflation rate was 5.4% as of September 30, 2021 , continuing to be the
highest rate since 2008 but relatively flat in comparison to the second quarter
of 2021.
Regardless of the market or economic environment at any given time, Apollo
relies on its contrarian, value-oriented approach to consistently invest capital
on behalf of its fund investors by focusing on opportunities that management
believes are often overlooked by other investors. As such, Apollo's global
integrated investment platform deployed $28.3 billion and $81.0 billion of
capital through the funds it manages during the three and nine months ended
September 30, 2021 , respectively. Drawdown capital deployed was $7.4 billion and
$16.7 billion during the three and nine months ended September 30, 2021 ,
respectively. We believe Apollo's expertise in credit and its focus on nine core
industry sectors, combined with more than 31 years of investment experience, has
allowed Apollo to respond quickly to changing environments. Apollo's core
industry sectors include chemicals, manufacturing and industrial, natural
resources, consumer and retail, consumer services, business services, financial
services, leisure, and media/telecom/technology. Apollo believes that these
attributes have contributed to the success of its private equity funds investing
in buyouts and credit opportunities during both expansionary and recessionary
economic periods.
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In general, institutional investors continue to allocate capital towards
alternative investment managers for more attractive risk-adjusted returns in a
low interest rate environment, and we believe the business environment remains
generally accommodative to raise larger successor funds, launch new products,
and pursue attractive strategic growth opportunities, such as continuing to grow
the assets of our permanent capital vehicles. As such, Apollo had $18.1 billion
and $43.9 billion of capital inflows during the three and nine months ended
September 30, 2021 , respectively. Apollo returned $8.8 billion and $21.6 billion
of capital and realized gains to the investors in the funds it manages during
the three and nine months ended September 30, 2021 , respectively.
On October 20, 2020 , at a regularly scheduled meeting of AGM Inc.'s board of
directors, Apollo's former Chairman and Chief Executive Officer, Leon Black ,
requested that the conflicts committee of the board of directors (comprised of
independent directors) retain outside counsel to conduct a thorough review of,
and independently confirm, the information that Mr. Black has conveyed about his
previous professional relationship with Mr. Jeffrey Epstein . The conflicts
committee had retained Dechert LLP as outside counsel to conduct a thorough,
independent review which included interviewing individuals and examining
relevant documents.
On January 25, 2021 , the Company announced that the conflicts committee of the
board of directors had completed its previously announced independent review of
Mr. Black's previous professional relationship with Jeffrey Epstein and publicly
released the review's findings. The findings of the report are consistent with
statements made by Mr. Black and Apollo regarding the prior relationship.
On January 25, 2021 , the Company announced that, at a meeting of the executive
committee of our board of directors on January 24, 2021 , Mr. Black informed the
executive committee members that he intends to retire from his position as Chief
Executive Officer of the Company on or before July 31, 2021 . Leon Black , Marc
Rowan and Joshua Harris , on behalf of our Class C Stockholder , voted to appoint
Mr. Rowan as our Chief Executive Officer to begin serving in such role effective
upon Mr. Black's retirement.
On March 21, 2021 , Mr. Black stepped down from his position as Chief Executive
Officer, Director and Chairman, and as a member of the executive committee of
our board of directors. Mr. Rowan formally assumed the role of Chief Executive
Officer of AGM Inc. The executive committee of our board of directors appointed
Lead Independent Director Jay Clayton to serve as Non-Executive Chairman of the
Board effective March 21, 2021 .
On May 20, 2021 , the Company announced that Co-Founder Joshua Harris will step
down from his day-to-day role at Apollo effective upon the closing date of
Apollo's merger with Athene, while continuing to serve on our board of directors
and the executive committee of our board of directors.
Managing Business Performance
We believe that the presentation of Segment DE supplements a reader's
understanding of the economic operating performance of each of our segments.
Segment Distributable Earnings and Distributable Earnings
Segment DE is the key performance measure used by management in evaluating the
performance of Apollo's credit, private equity and real assets segments. See
note 16 to the condensed consolidated financial statements for more details
regarding the components of Segment DE. DE represents Segment DE less estimated
current corporate, local and non-U.S. taxes as well as the current payable under
Apollo's tax receivable agreement. DE is net of preferred dividends, if any, to
the Series A and Series B preferred stockholders. DE excludes the impacts of the
remeasurement of deferred tax assets and liabilities which arises from changes
in estimated future tax rates. The economic assumptions and methodologies that
impact the implied income tax provision are similar to those methodologies and
certain assumptions used in calculating the income tax provision for Apollo's
condensed consolidated statements of operations under U.S. GAAP. Specifically,
certain deductions considered in the income tax provision under U.S. GAAP, such
as the deduction for transaction related charges and equity-based compensation,
are taken into account for purposes of the implied tax provision. Management
believes that excluding the remeasurement of the tax receivable agreement and
deferred taxes from Segment DE and DE, respectively, is meaningful as it
increases comparability between periods. Remeasurement of the tax receivable
agreement and deferred taxes are estimates that may change due to changes in the
interpretation of tax law.
We believe that Segment DE is helpful for an understanding of our business and
that investors should review the same supplemental financial measure that
management uses to analyze our segment performance. This measure supplements and
should be considered in addition to and not in lieu of the results of operations
discussed below in "-Overview of Results
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of Operations" that have been prepared in accordance with U.S. GAAP. See note 16
to the condensed consolidated financial statements for more details regarding
management's consideration of Segment DE.
Fee Related Earnings and Fee Related EBITDA
Fee Related Earnings, or "FRE", is derived from our segment reported results and
refers to a component of Segment DE that is used as a supplemental performance
measure. See note 16 to the condensed consolidated financial statements for more
details regarding the components of FRE.
Fee related EBITDA is a non-U.S. GAAP measure derived from our segment reported
results and is used to assess the performance of our operations as well as our
ability to service current and future borrowings. Fee related EBITDA represents
FRE plus amounts for depreciation and amortization. "Fee related EBITDA +100% of
net realized performance fees" represents Fee related EBITDA plus realized
performance fees less realized profit sharing expense.
We use Segment DE, DE, FRE and Fee related EBITDA as measures of operating
performance, not as measures of liquidity. These measures should not be
considered in isolation or as a substitute for net income or other income data
prepared in accordance with U.S. GAAP. The use of these measures without
consideration of their related U.S. GAAP measures is not adequate due to the
adjustments described above.
Operating Metrics
We monitor certain operating metrics that are common to the alternative
investment management industry. These operating metrics include Assets Under
Management, capital deployed and uncalled commitments.
Assets Under Management
The following presents Apollo's Total AUM and Fee-Generating AUM by segment (in
billions):
[[Image Removed: apo-20210930_g2.jpg]][[Image Removed: apo-20210930_g3.jpg]]
Note: Totals may not add due to rounding
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The following presents Apollo's AUM with Future Management Fee Potential by
segment (in billions):
[[Image Removed: apo-20210930_g4.jpg]]
Note: Totals may not add due to rounding
The following tables present the components of Performance Fee-Eligible AUM for
each of Apollo's three segments:
As of
Credit(1) Private Equity Real Assets Total
(in millions)
Performance Fee-Generating AUM (1) $ 48,386 $ 38,539 $ 5,605 $ 92,530
AUM Not Currently Generating Performance Fees 5,054 3,101 931 9,086
Uninvested Performance Fee-Eligible AUM 11,802 21,530 6,010 39,342
Total Performance Fee-Eligible AUM $ 65,242 $
63,170
As of
Credit Private Equity Real Assets Total
(in millions)
Performance Fee-Generating AUM (1) $ 21,076 $ 20,690 $ 5,562 $ 47,328
AUM Not Currently Generating Performance Fees 29,028 10,888 618 40,534
Uninvested Performance Fee-Eligible AUM 9,551 27,647 4,621 41,819
Total Performance Fee-Eligible AUM $ 59,655 $
59,225
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As of December 31, 2020
Credit Private Equity Real Assets Total
(in millions)
Performance Fee-Generating AUM (1) $ 34,685 $ 29,296 $ 4,886 $ 68,867
AUM Not Currently Generating Performance Fees 16,791 5,035 821 22,647
Uninvested Performance Fee-Eligible AUM 9,847 27,214 5,709 42,770
Total Performance Fee-Eligible AUM $ 61,323 $
61,545
(1)Performance Fee-Generating AUM of$4.2 billion ,$0.5 billion and$1.6 billion as ofSeptember 30, 2021 ,September 30, 2020 andDecember 31, 2020 , respectively, are above the hurdle rates or preferred returns and have been deferred to future periods when the fees are probable to not be significantly reversed. The following table presents AUM Not Currently Generating Performance Fees for funds that have invested capital for more than 24 months as ofSeptember 30, 2021 and the corresponding appreciation required to reach the preferred return or high watermark in order to generate performance fees: Invested AUM Not Currently Generating Investment Period Appreciation Required to Strategy / Fund Performance Fees Active > 24 Months Achieve Performance Fees(1) (in millions) Credit: Corporate Credit $ 1,462 $ 1,268 2% Structured Credit 3,483 3,483 6% Direct Origination 109 108 30% Total Credit 5,054 4,859 6% Private Equity: Hybrid Capital 544 524 >250bps Other PE 2,557 2,196 45% Total Private Equity 3,101 2,720 103% Real Assets: Total Real Assets 931 730 >250bps Total $ 9,086 $ 8,309
(1)All investors in a given fund are considered in aggregate when calculating
the appreciation required to achieve performance fees presented above.
Appreciation required to achieve performance fees may vary by individual
investor. Funds with an investment period less than 24 months are "N/A".
The components of Fee-Generating AUM by segment are presented below:
As of September 30, 2021
Private Real
Credit Equity Assets Total
(in millions)
Fee-Generating AUM based on capital commitments $ 1,101 $ 25,168 $ 7,243 $ 33,512
Fee-Generating AUM based on invested capital 3,170 12,798 2,354 18,322
Fee-Generating AUM based on gross/adjusted assets 239,969 577 30,807 271,353
Fee-Generating AUM based on NAV 35,250 642 2,214 38,106
Total Fee-Generating AUM $ 279,490 $ 39,185 (1) $ 42,618 $ 361,293
(1)The weighted average remaining life of the traditional private equity funds
as of
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As of September 30, 2020
Private Real
Credit Equity Assets Total
(in millions)
Fee-Generating AUM based on capital commitments $ 854 $ 27,113 $ 6,347 $ 34,314
Fee-Generating AUM based on invested capital 2,816 15,220 2,278 20,314
Fee-Generating AUM based on gross/adjusted assets 226,760 1,119 25,871 253,750
Fee-Generating AUM based on NAV 26,241 469 1,057 27,767
Total Fee-Generating AUM $ 256,671 $ 43,921 (1) $ 35,553 $ 336,145
(1) The weighted average remaining life of the traditional private equity funds
at
As of December 31, 2020
Private
Credit Equity Real Assets Total
(in millions)
Fee-Generating AUM based on capital commitments $ 922 $ 25,168 $ 6,580 $ 32,670
Fee-Generating AUM based on invested capital 3,000 15,393 2,434 20,827
Fee-Generating AUM based on gross/adjusted assets 238,202 771 26,820 265,793
Fee-Generating AUM based on NAV 27,534 494 1,356 29,384
Total Fee-Generating AUM $ 269,658 $ 41,826 (1) $ 37,190 $ 348,674
(1) The weighted average remaining life of the traditional private equity funds
as of December 31, 2020 was 73 months.
The following presents the total AUM and Fee-Generating AUM amounts for our
credit segment by category type (in billions):
[[Image Removed: apo-20210930_g5.jpg]] [[Image Removed: apo-20210930_g6.jpg]]
Note: Totals may not add due to rounding
Apollo, through its consolidated subsidiary, ISG, provides asset management
services to Athene with respect to assets in the Athene Accounts, including
asset allocation services, direct asset management services, asset and liability
matching management, mergers and acquisitions, asset diligence, hedging and
other asset management services and receives management fees for providing these
services. The Company, through ISG, also provides sub-allocation services with
respect to a portion of
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the assets in the Athene Accounts. See note 14 to the condensed consolidated
financial statements for more details regarding the fee rates of the investment
management and sub-allocation fee arrangements with respect to the assets in the
Athene Accounts.
The following table presents the aggregate Athene Sub-Allocated Total AUM by
asset class (in billions):
[[Image Removed: apo-20210930_g7.jpg]]
Note: Totals may not add due to rounding
Other Assets include cash, treasuries, equities and alternatives. Total AUM includes$52.1 billion ,$39.2 billion and$41.3 billion of gross assets related to Athene Co-Invest Reinsurance Affiliate 1A Ltd. and$2.0 billion ,$2.5 billion and$2.5 billion of unfunded commitments related to Apollo/Athene Dedicated Investment Program ("ADIP") as ofSeptember 30, 2021 ,September 30, 2020 andDecember 31, 2020 respectively. Apollo, through ISGI, provides investment advisory services with respect to certain assets in certain portfolio companies of Apollo funds and sub-advises the Athora Accounts and broadly refers to "Athora Sub-Advised" assets as those assets in the Athora Accounts which the Company explicitly sub-advises as well as those assets in the Athora Accounts which are invested directly in funds and investment vehicles Apollo manages. The Company refers to the portion of the Athora AUM that is not Athora Sub-Advised AUM as "Athora Non-Sub Advised" AUM. See note 14 to the condensed consolidated financial statements for more details regarding the fee arrangements with respect to the assets in theAthora Accounts. -88- -------------------------------------------------------------------------------- Table of Contents The following table presents Athora Sub-Advised and Athora Non-Sub-Advised AUM (in billions): [[Image Removed: apo-20210930_g8.jpg]]
Note: Totals may not add due to rounding
The following presents total AUM and Fee-Generating AUM amounts for our private
equity segment by category type (in billions):
[[Image Removed: apo-20210930_g9.jpg]] [[Image Removed: apo-20210930_g10.jpg]]
Note: Totals may not add due to rounding
-89- -------------------------------------------------------------------------------- Table of Contents The following presents total AUM and Fee-Generating AUM amounts for our real assets segment by category type (in billions): [[Image Removed: apo-20210930_g11.jpg]] [[Image Removed: apo-20210930_g12.jpg]] Note: Totals may not add due to rounding
The following tables summarize changes in total AUM for each of Apollo's three
segments:
For the Three Months Ended September 30,
2021 2020
Private Private
Credit Equity Real Assets Total Credit Equity Real Assets Total
(in millions)
Change in Total AUM(1):
Beginning of Period $ 331,028 $ 88,469 $ 52,278 $ 471,775 $ 300,454 $ 73,301 $ 39,851 $ 413,606
Inflows 13,904 2,406 1,753 18,063 7,110 1,701 4,147 12,958
Outflows(2) (1,882) (7) - (1,889) (4,959) (108) - (5,067)
Net Flows 12,022 2,399 1,753 16,174 2,151 1,593 4,147 7,891
Realizations (2,305) (6,177) (351) (8,833) (419) (1,082) (227) (1,728)
Market Activity(3) 124 1,367 457 1,948 9,919 2,989 468 13,376 End of Period$ 340,869 $ 86,058 $ 54,137 $ 481,064 $ 312,105 $ 76,801 $ 44,239 $ 433,145 (1)At the individual segment level, inflows include new subscriptions, commitments, capital raised, other increases in available capital, purchases, acquisitions, and portfolio company appreciation. Outflows represent redemptions, other decreases in available capital and portfolio company depreciation. Realizations represent fund distributions of realized proceeds. Market activity represents gains (losses), the impact of foreign exchange rate fluctuations and other income. (2)Outflows for Total AUM include redemptions of$0.6 billion and$0.7 billion during the three months endedSeptember 30, 2021 and 2020, respectively. (3)Includes foreign exchange impacts of$(1.8) billion ,$(91.5) million and$(142.1) million for credit, private equity and real assets, respectively, during the three months endedSeptember 30, 2021 and foreign exchange impacts of$3.2 billion ,$88.6 million and$172.3 million for credit, private equity and real assets, respectively, during the three months endedSeptember 30, 2020 . -90-
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For the Nine Months Ended September 30,
2021 2020
Private Private
Credit Equity Real Assets Total Credit Equity Real Assets Total
(in millions)
Change in Total AUM(1):
Beginning of Period $ 328,560 $ 80,716 $ 46,210 $ 455,486 $ 215,530 $ 76,788 $ 38,787 $ 331,105
Inflows 28,716 7,230 7,931 43,877 98,726 3,949 6,776 109,451
Outflows(2) (11,408) (721) - (12,129) (11,585) (169) (517) (12,271)
Net Flows 17,308 6,509 7,931 31,748 87,141 3,780 6,259 97,180
Realizations (4,686) (15,874) (1,017) (21,577) (1,584) (2,785) (817) (5,186)
Market Activity(3) (313) 14,707 1,013 15,407 11,018 (982) 10 10,046
End of Period $ 340,869 $ 86,058 $ 54,137 $ 481,064 $ 312,105 $ 76,801 $ 44,239 $ 433,145
(1)At the individual segment level, inflows include new subscriptions,
commitments, capital raised, other increases in available capital, purchases,
acquisitions and portfolio company appreciation. Outflows represent redemptions,
other decreases in available capital and portfolio company depreciation.
Realizations represent fund distributions of realized proceeds. Market activity
represents gains (losses), the impact of foreign exchange rate fluctuations and
other income.
(2)Outflows for Total AUM include redemptions of $1.9 billion and $1.9 billion
during the nine months ended September 30, 2021 and 2020, respectively.
(3)Includes foreign exchange impacts of $(4.2) billion , $(92.4) million and
$(234.3) million for credit, private equity and real assets, respectively,
during the nine months ended September 30, 2021 , and foreign exchange impacts of
$2.7 billion , $119.2 million and $133.1 million for credit, private equity and
real assets, respectively, during the nine months ended September 30, 2020 .
Three Months Ended September 30, 2021
Total AUM was $481.1 billion at September 30, 2021 , an increase of $9.3 billion ,
or 2.0%, compared to $471.8 billion at June 30, 2021 . The net increase was
primarily due to growth of our retirement services assets under management. More
specifically, the net increase was due to:
•Net flows of $16.2 billion primarily related to:
•a $12.0 billion increase related to funds we manage in the credit segment
primarily consisting of (i) a $9.5 billion increase in AUM in the advisory and
other category due to the growth of our retirement services clients and (ii)
$3.4 billion of subscriptions driven by the corporate credit and structured
credit funds we manage; offsetting these increases were $(1.1) billion of net
segment transfers, primarily into real assets, and $(0.6) billion of
redemptions;
•a $2.4 billion increase related to funds we manage in the private equity
segment primarily consisting of $1.4 billion of subscriptions across the hybrid
capital and traditional private equity funds we manage; and
•a $1.8 billion increase related to funds we manage in the real assets segment
primarily consisting of $0.8 billion of net segment transfers, $0.7 billion of
subscriptions and $0.3 billion of leverage across the real estate and
infrastructure funds we manage; partially offset by
•Realizations of $(8.8) billion primarily related to:
•$(6.2) billion related to funds we manage in the private equity segment
primarily consisting of distributions of $5.4 billion from the traditional
private equity funds we manage; and
•$(2.3) billion related to funds we manage in the credit segment primarily
consisting of distributions from the corporate credit funds we manage.
Nine Months Ended September 30, 2021
Total AUM was $481.1 billion at September 30, 2021 , an increase of $25.6
billion , or 5.6%, compared to $455.5 billion at December 31, 2020 . The net
increase was primarily due to growth of our retirement services assets under
management, appreciation in the private equity segment and fundraising across
the platform. More specifically, the net increase was due to:
•Net flows of $31.7 billion primarily related to:
•a $17.3 billion increase related to funds we manage in the credit segment
primarily consisting of (i) $9.8 billion of subscriptions driven by the
corporate credit and structured credit funds we manage and (ii) a $16.8 billion
net increase in AUM in the advisory and other category primarily due to the
growth of our retirement services clients; offsetting these increases were
$(5.3) billion of net segment transfers, primarily into real assets, and $1.8
billion of redemptions;
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•a $7.9 billion increase related to funds we manage in the real assets segment
primarily consisting of $4.9 billion of net segment transfers, $1.8 billion of
leverage and $1.2 billion of subscriptions across the real estate and
infrastructure funds we manage; and
•a $6.5 billion increase related to funds we manage in the private equity
segment primarily consisting of $4.5 billion of subscriptions and $1.3 billion
of leverage across the hybrid capital and traditional private equity funds we
manage.
•Market activity of $15.4 billion , primarily related to $14.7 billion of
appreciation in the private equity segment driven by $4.2 billion , $3.8 billion ,
$1.2 billion , and $0.9 billion from Fund VIII, Fund IX, Fund VII, and Tech Data
Co-Invest, respectively.
•Realizations of $(21.6) billion primarily related to:
•$(15.9) billion related to funds we manage in the private equity segment
primarily consisting of distributions of $13.3 billion and $1.4 billion from the
traditional private equity and hybrid capital funds we manage, respectively; and
•$(4.7) billion related to funds we manage in the credit segment primarily
consisting of distributions from the corporate credit and direct origination
funds we manage.
The following tables summarize changes in Fee-Generating AUM for each of
Apollo's three segments:
For the Three Months Ended
2021 2020
Private Private
Credit Equity Real Assets Total Credit Equity Real Assets Total
(in millions)
Change in Fee-Generating AUM(1):
Beginning of Period $ 272,139 $ 39,541 $ 41,880 $ 353,560 $ 254,332 $ 43,840 $ 31,606 $ 329,778
Inflows 11,394 955 1,142 13,491 5,552 277 4,059 9,888
Outflows(2) (3,457) (197) (272) (3,926) (7,069) (229) (185)
(7,483)
Net Flows 7,937 758 870 9,565 (1,517) 48 3,874 2,405 Realizations (756) (1,103) (115) (1,974) (211) (130) (167) (508) Market Activity(3) 170 (11) (17) 142 4,067 163 240 4,470 End of Period$ 279,490 $ 39,185 $ 42,618 $ 361,293 $ 256,671 $ 43,921 $ 35,553 $ 336,145 (1)At the individual segment level, inflows include new subscriptions, commitments, capital raised, other increases in available capital, purchases, acquisitions and portfolio company appreciation. Outflows represent redemptions, other decreases in available capital and portfolio company depreciation. Realizations represent fund distributions of realized proceeds. Market activity represents gains (losses), the impact of foreign exchange rate fluctuations and other income. (2)Outflows for Fee-Generating AUM include redemptions of$0.6 billion and$0.7 billion during the three months endedSeptember 30, 2021 and 2020, respectively. (3)Includes foreign exchange impacts of$(1.6) billion ,$(15.7) million and$(109.3) million for credit, private equity and real assets, respectively, during the three months endedSeptember 30, 2021 , and foreign exchange impacts of$3.0 billion ,$14.9 million and$129.8 million for credit, private equity and real assets, respectively, during the three months endedSeptember 30, 2020 . -92-
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For the Nine Months Ended
2021 2020
Private Private
Credit Equity Real Assets Total Credit Equity Real Assets Total
(in millions)
Change in Fee-Generating AUM(1):
Beginning of Period $ 269,658 $ 41,826 $ 37,190 $ 348,674 $ 172,893 $ 43,826 $ 29,727 $ 246,446
Inflows 24,930 2,158 6,116 33,204 93,807 1,723 6,785
102,315
Outflows(2) (12,343) (1,580) (419) (14,342) (14,074) (1,252) (861)
(16,187)
Net Flows 12,587 578 5,697 18,862 79,733 471 5,924
86,128
Realizations (2,238) (3,271) (329) (5,838) (681) (676) (368) (1,725) Market Activity(3) (517) 52 60 (405) 4,726 300 270 5,296 End of Period$ 279,490 $ 39,185 $ 42,618 $ 361,293 $ 256,671 $ 43,921 $ 35,553 $ 336,145 (1)At the individual segment level, inflows include new subscriptions, commitments, capital raised, other increases in available capital, purchases, acquisitions and portfolio company appreciation. Outflows represent redemptions, other decreases in available capital and portfolio company depreciation. Realizations represent fund distributions of realized proceeds. Market activity represents gains (losses), the impact of foreign exchange rate fluctuations and other income. (2)Outflows for Fee-Generating AUM include redemptions of$1.8 billion and$1.8 billion during the nine months endedSeptember 30, 2021 and 2020, respectively. (3)Includes foreign exchange impacts of$(3.6) billion ,$(13.2) million and$(209.5) million for credit, private equity and real assets, respectively, during the nine months endedSeptember 30, 2021 , and foreign exchange impacts of$2.6 billion ,$2.1 million and$100.2 million for credit, private equity and real assets, respectively, during the nine months endedSeptember 30, 2020 . Three Months EndedSeptember 30, 2021 Total Fee-Generating AUM was$361.3 billion atSeptember 30, 2021 , an increase of$7.7 billion , or 2.2%, compared to$353.6 billion atJune 30, 2021 . The net increase was primarily due to growth of our retirement services assets under management. More specifically, the net increase was due to: Net flows of$9.6 billion primarily related to: •a$7.9 billion increase related to funds we manage in the credit segment primarily consisting of (i)$8.6 billion increase in AUM in the advisory and other category due to the growth of our retirement services clients and (ii)$1.0 billion of subscriptions across the corporate credit funds we manage; offsetting these increases was$(1.8) billion of change in leverage. Net flows were offset by realizations of$(2.0) billion primarily related to the traditional private equity funds we manage. Nine Months EndedSeptember 30, 2021 Total Fee-Generating AUM was$361.3 billion atSeptember 30, 2021 , an increase of$12.6 billion , or 3.6%, compared to$348.7 billion atDecember 31, 2020 . The net increase was primarily due to growth of our retirement services assets under management. More specifically the net increase was due to: •Net flows of$18.9 billion primarily related to: •a$12.6 billion increase related to funds we manage in the credit segment primarily consisting of (i) a$15.4 billion increase in AUM in the advisory and other category due to the growth of our retirement services clients, (ii)$4.6 billion of fee-generating capital deployment and (iii)$3.4 billion of subscriptions primarily across the corporate credit funds we manage; offsetting these increases were (i)$(4.2) billion of net segment transfers, primarily into real assets, (ii)$(3.9) billion of change in leverage and (iii)$(2.1) billion of fee-generating capital reduction; and •a$5.7 billion increase related to funds we manage in the real assets segment primarily consisting of$3.6 billion of net segment transfers and$1.3 billion of fee-generating capital deployment. •Net flows were offset by realizations of$(5.8) billion primarily related to the traditional private equity funds we manage. -93- -------------------------------------------------------------------------------- Table of Contents Deployment, Drawdown Deployment and Uncalled Commitments During the third quarter of 2020, the Company modified the definition of deployment to include net purchases, certain originations and net syndications to provide a more accurate representation of market activity across all the funds and accounts the Company manages. Prior period deployment figures have been recast to conform to this change in definition. The prior definition of deployment was limited to purchases in our commitment based funds, excluding certain funds in which permanent capital vehicles are the primary investor, and SIAs that have a defined maturity date, and has been renamed "drawdown deployment". Uncalled commitments, by contrast, represent unfunded capital commitments that certain of Apollo's funds and SIAs have received from fund investors to fund future or current fund investments and expenses. Deployment, drawdown deployment and uncalled commitments are indicative of the pace and magnitude of fund capital that is deployed or will be deployed, and which therefore could result in future revenues that include management fees, transaction fees and performance fees to the extent they are fee-generating. Deployment, drawdown deployment and uncalled commitments can also give rise to future costs that are related to the hiring of additional resources to manage and account for the additional capital that is deployed or will be deployed. Management uses deployment, drawdown deployment and uncalled commitments as key operating metrics since we believe the results are measures of our funds' investment activities. Deployment and Drawdown Deployment The following presents deployment across all funds and drawdown deployment for funds and SIAs with a defined maturity date, by segment (in billions): [[Image Removed: apo-20210930_g13.jpg]] [[Image Removed: apo-20210930_g14.jpg]] Note: Totals may not add due to rounding -94- -------------------------------------------------------------------------------- Table of Contents Uncalled Commitments The following presents Apollo's uncalled commitments by segment (in billions): [[Image Removed: apo-20210930_g15.jpg]]
Note: Totals may not add due to rounding
As ofSeptember 30, 2021 andDecember 31, 2020 , Apollo had$46.9 billion and$46.8 billion of dry powder, respectively, which represents the amount of capital available for investment or reinvestment subject to the provisions of the applicable limited partnership agreements or other governing agreements of the funds, partnerships and accounts we manage. These amounts exclude uncalled commitments which can only be called for fund fees and expenses and commitments from permanent capital vehicles. The Historical Investment Performance of Our Funds Below we present information relating to the historical performance of our funds, including certain legacy Apollo funds that do not have a meaningful amount of unrealized investments, and in respect of which the general partner interest has not been contributed to us. When considering the data presented below, you should note that the historical results of our funds are not indicative of the future results that you should expect from such funds, from any future funds we may raise or from your investment in our Class A shares. An investment in our Class A shares is not an investment in any of the Apollo funds, and the assets and revenues of our funds are not directly available to us. The historical and potential future returns of the funds we manage are not directly linked to returns on our Class A shares. Therefore, you should not conclude that continued positive performance of the funds we manage will necessarily result in positive returns on an investment in our Class A shares. However, poor performance of the funds that we manage would cause a decline in our revenue from such funds, and would therefore have a negative effect on our performance and in all likelihood the value of our Class A shares. Moreover, the historical returns of our funds should not be considered indicative of the future results you should expect from such funds or from any future funds we may raise. There can be no assurance that any Apollo fund will continue to achieve the same results in the future. Finally, our private equity IRRs have historically varied greatly from fund to fund. For example, Fund VI generated a 12% gross IRR and a 9% net IRR since its inception throughSeptember 30, 2021 , while Fund V generated a 61% gross IRR and a 44% net IRR since its inception throughSeptember 30, 2021 . Accordingly, the IRR going forward for any current or future fund may vary considerably from the historical IRR generated by any particular fund, or for our private equity funds as a whole. Future returns will also be affected by the applicable risks, including risks of the industries and businesses in which a -95- -------------------------------------------------------------------------------- Table of Contents particular fund invests. See "Item 1A. Risk Factors-Risks Related to Our Businesses-The historical returns attributable to our funds should not be considered as indicative of the future results of our funds or of our future results or of any returns expected on an investment in our Class A shares and our Preferred shares" and "Item 1A. Risk Factors-The COVID-19 pandemic has caused severe disruptions in theU.S. and global economy and is expected to continue to impact our business, financial condition and results of operations" in the 2020 Annual Report. -96- -------------------------------------------------------------------------------- Table of Contents Investment Record The following table summarizes the investment record by segment of Apollo's significant commitment-based funds that have a defined maturity date in which investors make a commitment to provide capital at the formation of such funds and deliver capital when called as investment opportunities become available. The funds included in the investment record table below have greater than$500 million of AUM and/or form part of a flagship series of funds. All amounts are as ofSeptember 30, 2021 , unless otherwise noted: Total Vintage Committed Invested Remaining Gross Net ($ in millions) Year Total AUM Capital Capital Realized Value Cost Unrealized Value Total Value IRR IRR Private Equity: Fund IX 2018$ 28,666 $ 24,729 $ 12,862 $ 3,782$ 10,926 $ 14,993$ 18,775 47 % 28 % Fund VIII 2013 16,436 18,377 16,063 18,149 6,739 12,196 30,345 18 14 Fund VII 2008 2,250 14,677 16,461 33,970 184 282 34,252 33 25 Fund VI 2006 643 10,136 12,457 21,134 405 2 21,136 12 9 Fund V 2001 260 3,742 5,192 12,721 120 2 12,723 61 44 Fund I, II, III, IV & MIA(2) Various 10 7,320 8,753 17,400 - - 17,400 39 26 Traditional Private Equity Funds(3)$ 48,265 $ 78,981 $ 71,788 $ 107,156 $ 18,374 $ 27,475$ 134,631 39 24 ANRP III 2020 1,485 1,400 393 75 393 479 554 NM1 NM1 ANRP II 2016 2,292 3,454 2,779 2,679 1,334 1,449 4,128 20 12 ANRP I 2012 342 1,323 1,149 1,091 554 123 1,214 2 (2) AION 2013 453 826 700 407 365 353 760 3 (2) Hybrid Value Fund II(8) N/A 3,073 3,379 431 - 431 430 430 NM1 NM1Hybrid Value Fund 2019 4,013 3,238 3,237 1,368 2,343 3,000 4,368 32 26 Total Private Equity$ 59,923 $ 92,601 $ 80,477 $ 112,776 $ 23,794 $ 33,309$ 146,085 Credit: Apollo Origination Partners(8) N/A$ 1,820 $ 1,818 $ 267 $ 1$ 267 $ 273$ 274 NM1 NM1 FCI IV 2021$ 1,123 $ 1,123 $ 123 $ -$ 123 $ 129$ 129 NM1 NM1 FCI III 2017 2,713 1,906 2,859 1,899 1,866 1,865 3,764 19 % 14 % FCI II 2013 2,192 1,555 3,207 2,416 1,720 1,507 3,923 7 5 FCI I 2012 - 559 1,516 1,975 - - 1,975 12 8 SCRF IV (6) 2017 2,510 2,502 5,183 4,325 1,266 1,434 5,759 9 8 SCRF III 2015 - 1,238 2,110 2,428 - - 2,428 18 14 SCRF II 2012 - 104 467 528 - - 528 15 12 SCRF I 2008 - 118 240 357 - - 357 33 26 Accord IV 2020 2,410 2,337 784 494 356 367 861 NM1 NM1 Accord IIIB(7) 2020 - 1,758 691 762 - - 762 23 18 Accord III(7) 2019 - 886 2,358 2,499 - - 2,499 22 18 Accord II(7) 2018 - 781 801 843 - - 843 16 12 Accord I(7) 2017 - 308 111 121 - - 121 10 5 Total Credit$ 12,768 $ 16,993 $ 20,717 $ 18,648 $ 5,598 $ 5,575$ 24,223 Real Assets: European Principal Finance Funds EPF III(4) 2017$ 5,224 $ 4,558 $ 3,924 $ 2,113$ 2,263 $ 3,247$ 5,360 21 % 11 % EPF II(4) 2012 985 3,472 3,556 4,620 555 336 4,956 13 8 EPF I(4) 2007 241 1,499 1,970 3,315 - - 3,315 23 17U.S. RE Fund III(5) 2021 945 935 303 4 300 332 336 NM1 NM1U.S. RE Fund II(5) 2016 1,195 1,264 1,000 574 729 869 1,443 14 11U.S. RE Fund I(5) 2012 185 655 639 830 131 101 931 12 9 Asia RE Fund II(5)(8) N/A 951 947 405 57 354 363 420 NM1 NM1 Asia RE Fund I(5) 2017 729 719 456 228 287 448 676 17 13 Apollo Infrastructure Opportunity Fund II(8) N/A 1,583 1,517 394 - 394 471 471 NM1 NM1 Apollo Infrastructure Opportunity Fund I 2018 758 897 802 861 298 363 1,224 26 20 Total Real Assets$ 12,796 $ 16,463 $ 13,449 $ 12,602 $ 5,311 $ 6,530$ 19,132 (1)Data has not been presented as the fund's effective date is less than 24 months prior to the period indicated and such information was deemed not meaningful. (2)The general partners and managers of Funds I, II and MIA, as well as the general partner of Fund III, were excluded assets in connection with the 2007 Reorganization. As a result, Apollo did not receive the economics associated with these entities. The investment performance of these funds, combined with Fund IV, is presented to illustrate fund performance associated with Apollo's Co-Founders and other investment professionals. (3)Total IRR is calculated based on total cash flows for all funds presented. -97- -------------------------------------------------------------------------------- Table of Contents (4)Funds are denominated in Euros and historical figures are translated intoU.S. dollars at an exchange rate of €1.00 to$1.16 as ofSeptember 30, 2021 . (5)U.S. RE Fund I,U.S. RE Fund II,U.S. RE Fund III,Asia RE Fund I and Asia RE Fund II had$158 million ,$792 million ,$260 million ,$376 million and$515 million of co-investment commitments as ofSeptember 30, 2021 , respectively, which are included in the figures in the table. A co-invest entity withinU.S. RE Fund I is denominated in pound sterling and translated intoU.S. dollars at an exchange rate of £1.00 to$1.35 as ofSeptember 30, 2021 . (6)Remaining cost for certain of our credit funds may include physical cash called, invested or reserved for certain levered investments. (7)Gross and Net IRR have been presented for these funds as they have a defined maturity date of less than 24 months and have been liquidated. (8)Vintage Year is not yet applicable as these funds have not had their final closings. Private Equity The following table summarizes the investment record for distressed investments made in our traditional private equity fund portfolios, since the Company's inception. All amounts are as ofSeptember 30, 2021 : Total Invested Capital Total Value Gross IRR (in millions) Distressed for Control $ 7,795$ 18,873 29 % Non-Control Distressed 5,963 10,202 71 Total 13,758 29,075 49 Corporate Carve-outs, Opportunistic Buyouts and Other Credit(1) 58,030 105,556 21 Total $ 71,788$ 134,631 39 % (1)Other Credit is defined as investments in debt securities of issuers other than portfolio companies that are not considered to be distressed. The following tables provide additional detail on the composition of the Fund IX, Fund VIII and Fund VII private equity portfolios based on investment strategy. Amounts for Fund I, II, III, IV, V and VI are included in the table above but not presented below as their remaining value is less than$100 million or the fund has been liquidated and such information was deemed not meaningful. All amounts are as ofSeptember 30, 2021 : Fund IX(1)Total Invested Capital Total Value (in millions) Corporate Carve-outs $ 2,768$ 3,274 Opportunistic Buyouts 9,689 13,763 Distressed(2) 405 1,738 Total $ 12,862$ 18,775 Fund VIII(1)Total Invested Capital Total Value (in millions) Corporate Carve-outs $ 2,704$ 6,905 Opportunistic Buyouts 12,792 22,686 Distressed(2) 567 754 Total $ 16,063$ 30,345 -98-
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Fund VII(1)
Total Invested Capital Total Value
(in millions)
Corporate Carve-outs $ 2,539 $ 4,799
Opportunistic Buyouts 4,338 10,817
Distressed/Other Credit(2) 9,584 18,636
Total $ 16,461 $ 34,252
(1)Committed capital less unfunded capital commitments for Fund IX, Fund VIII
and Fund VII were $13.5 billion , $16.1 billion and $14.4 billion , respectively,
which represents capital commitments from limited partners to invest in such
funds less capital that is available for investment or reinvestment subject to
the provisions of the applicable limited partnership agreement or other
governing agreements.
(2)The distressed investment strategy includes distressed for control,
non-control distressed and other credit. Other Credit is defined as investments
in debt securities of issuers other than portfolio companies that are not
considered to be distressed.
During the recovery and expansionary periods of 1994 through 2000 and late 2003
through the first half of 2007, our private equity funds invested or committed
to invest approximately $13.7 billion primarily in traditional and corporate
partner buyouts. During the recessionary periods of 1990 through 1993, 2001
through late 2003 and the recessionary and post recessionary periods (beginning
the second half of 2007 through September 30, 2021 ), our private equity funds
have invested $68.6 billion , of which $21.4 billion was in distressed buyouts
and debt investments when the debt securities of quality companies traded at
deep discounts to par value. Our average entry multiple for Fund VIII, VII and
VI was 5.7x, 6.1x and 7.7x, respectively, as of September 30, 2021 . Our average
entry multiple for a private equity fund is the average of the total enterprise
value over an applicable adjusted earnings before interest, taxes, depreciation
and amortization, which may incorporate certain adjustments based on the
investment team's estimates and we believe captures the true economics of our
funds' investments in portfolio companies. The average entry multiple of
actively investing funds may include committed investments not yet closed.
Permanent Capital
The following table summarizes the investment record for our permanent capital
vehicles by segment, excluding Athene-related and Athora -related assets managed
or advised by ISG and ISGI:
Total Returns(1)
For the Three For the Nine For the Three For the Nine
Months Ended Months Ended Months Ended Months Ended
IPO Year(2) Total AUM September 30, 2021 September 30, 2021 September 30, 2020 September 30, 2020
Credit: (in millions)
MidCap(3) N/A $ 9,879 3 % 16 % 4 % 3 %
AIF 2013 366 3 15 4 (11)
AFT 2011 392 2 15 5 (11)
AINV/Other(4) 2004 4,665 (2) 32 (10) (45)
Real Assets:
ARI 2009 8,068 (5) % 42 % (5) % (44) %
Total $ 23,370
(1)Total returns are based on the change in closing trading prices during the
respective periods presented taking into account dividends and distributions, if
any, as if they were reinvested without regard to commission.
(2)An initial public offering ("IPO") year represents the year in which the
vehicle commenced trading on a national securities exchange.
(3)MidCap is not a publicly traded vehicle and therefore IPO year is not
applicable. The returns presented are a gross return based on NAV. The net
returns based on NAV were 2% and 2% for the three months ended September 30,
2021 and September 30, 2020 , respectively, and 12% and 0% for the nine months
ended September 30, 2021 and September 30, 2020 , respectively.
(4)All amounts are as of June 30, 2021 except for total returns. Refer to
www.apolloic.com for the most recent financial information on AINV. Included
within total AUM of AINV/Other is $1.7 billion of AUM related to a non-traded
business development company from which Apollo earns investment-related service
fees, but for which Apollo does not provide management or advisory services.
Total returns exclude performance related to this AUM.
SIAs
As of September 30, 2021 , Apollo managed approximately $38.0 billion of total
AUM in SIAs, which include capital deployed from certain SIAs across Apollo's
credit, private equity and real assets funds.
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Overview of Results of Operations
Revenues
Advisory and Transaction Fees, Net. As a result of providing advisory services
with respect to actual and potential credit, private equity, and real assets
investments, we are entitled to receive fees for transactions related to the
acquisition and, in certain instances, disposition of portfolio companies as
well as fees for ongoing monitoring of portfolio company operations and
directors' fees. We also receive advisory fees for advisory services provided to
certain credit funds. In addition, monitoring fees are generated on certain
structured portfolio company investments. Under the terms of the limited
partnership agreements for certain funds, the management fee payable by the
funds may be subject to a reduction based on a certain percentage of such
advisory and transaction fees, net of applicable broken deal costs ("Management
Fee Offset"). Such amounts are presented as a reduction to advisory and
transaction fees, net, in the condensed consolidated statements of operations
(see note 2 to our condensed consolidated financial statements for more detail
on advisory and transaction fees, net).
The Management Fee Offsets are calculated for each fund as follows:
•65%-100% for certain credit funds, gross advisory, transaction and other
special fees;
•65%-100% for private equity funds, gross advisory, transaction and other
special fees; and
•65%-100% for certain real assets funds, gross advisory, transaction and other
special fees.
Management Fees. The significant growth of the assets we manage has had a
positive effect on our revenues. Management fees are typically calculated based
upon any of "net asset value," "gross assets," "adjusted par asset value,"
"adjusted costs of all unrealized portfolio investments," "capital commitments,"
"invested capital," "adjusted assets," "capital contributions," or
"stockholders' equity," each as defined in the applicable limited partnership
agreement and/or management agreement of the unconsolidated funds.
Performance Fees. The general partners of our funds are entitled to an incentive
return of normally up to 20% of the total returns of a fund's capital, depending
upon performance of the underlying funds and subject to preferred returns and
high water marks, as applicable. Performance fees, categorized as performance
allocations, are accounted for as an equity method investment, and effectively,
the performance fees for any period are based upon an assumed liquidation of the
funds' assets at the reporting date, and distribution of the net proceeds in
accordance with the funds' allocation provisions. Performance fees categorized
as incentive fees, which are not accounted as an equity method investment, are
deferred until fees are probable to not be significantly reversed. Prior to the
adoption of the new revenue recognition guidance, incentive fees were recognized
on an assumed liquidation basis. The majority of performance fees are comprised
of performance allocations.
As of September 30, 2021 , approximately 57% of the value of our funds'
investments on a gross basis was determined using market-based valuation methods
(i.e., reliance on broker or listed exchange quotes) and the remaining 43% was
determined primarily by comparable company and industry multiples or discounted
cash flow models. For our credit, private equity and real assets segments, the
percentage determined using market-based valuation methods as of September 30,
2021 was 73%, 21% and 31%, respectively. See "Item 1A. Risk Factors-Risks
Related to Our Businesses-Our funds' performance, and our performance, may be
adversely affected by the financial performance of our funds' portfolio
companies and the industries in which our funds invest" and "-The COVID-19
pandemic has caused severe disruptions in the U.S. and global economy and is
expected to continue to impact our business, financial condition and results of
operations" in the 2020 Annual Report for discussion regarding certain
industry-specific risks that could affect the fair value of our private equity
funds' portfolio company investments.
In our private equity funds, the Company does not earn performance fees until
the investors in the fund have achieved cumulative investment returns on
invested capital (including management fees and expenses) in excess of an 8%
hurdle rate. Additionally, certain of our credit and real assets funds have
various performance fee rates and hurdle rates. Certain of our credit and real
assets funds allocate performance fees to the general partner in a similar
manner as the private equity funds. In our private equity, certain credit and
real assets funds, so long as the investors achieve their priority returns,
there is a catch-up formula whereby the Company earns a priority return for a
portion of the return until the Company's performance fees equate to its
incentive fee rate for that fund; thereafter, the Company participates in
returns from the fund at the performance fee rate. Performance fees, categorized
as performance allocations, are subject to reversal to the extent that the
performance fees distributed exceed the amount due to the general partner based
on a fund's cumulative investment returns. The Company recognizes potential
repayment of previously received performance fees as a general partner
obligation representing all amounts previously distributed to the general
partner that would need to be repaid to the Apollo funds if these funds were to
be liquidated based on the current fair value of the underlying funds'
investments as of the reporting date. The actual general
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partner obligation, however, would not become payable or realized until the end
of a fund's life or as otherwise set forth in the respective limited partnership
agreement of the fund.
The table below presents an analysis of Apollo's (i) performance fees receivable
on an unconsolidated basis and (ii) realized and unrealized performance fees for
Apollo's combined segments:
As of
September 30, 2021 For the Three Months Ended September 30, 2021 For the Nine Months Ended September 30, 2021
Performance Fees
Receivable on an Unrealized Realized Total Unrealized Realized Total
Unconsolidated Basis Performance Fees Performance Fees Performance Fees Performance Fees Performance Fees Performance Fees
(in thousands)
Credit:
Corporate Credit $ 175,133 $ 19,063 $ 23,227 $ 42,290 $ 99,282 $ 48,763 $ 148,045
Structured Credit 229,336 28,164 10,594 38,758 48,822 117,271 166,093
Direct Origination 104,902 6,336 9,298 15,634 45,277 12,092 57,369
Advisory and Other 43,326 (606) - (606) 17,983 - 17,983
Total Credit 552,697 52,957 43,119 96,076 211,364 178,126 389,490
Total Credit, net of profit sharing
payable/expense 102,516 25,296 30,067 55,363 99,415 85,148 184,563
Private Equity:
Fund IX 591,815 (93,777) 265,209 171,432 438,017 265,209 703,226
Fund VIII(5) 877,451 (162,847) 175,517 12,670 76,985 700,860 777,845
Fund VII(1)(2) 77,459 (1,446) 49,393 47,947 182,511 49,408 231,919
Fund VI 17,012 (270) 11 (259) (826) 32 (794)
Fund IV and V(1) - (78) - (78) (399) - (399)
ANRP I, II and III(1)(2) 91,514 (39,588) 51,738 12,150 100,882 51,743 152,625
HVF I 100,855 40,623 8,659 49,282 48,358 56,434 104,792
Other(1)(3) 131,533 11,058 15,210 26,268 129,993 23,379 153,372
Total Private Equity 1,887,639 (246,325) 565,737 319,412 975,521 1,147,065 2,122,586
Total Private Equity, net of profit
sharing payable/expense 995,075 (159,203) 291,839 132,636 554,223 588,065 1,142,288
Real Assets Funds:
Principal Finance(1) 121,387 29,525 3,477 33,002 43,591 25,890 69,481
Real Estate Equity Funds(1) 27,932 9,682 1 9,683 11,973 1 11,974
AIOF I and II 14,268 (8,351) 15,105 6,754 1,469 15,548 17,017
Other(1)(3) 23,213 3,487 545 4,032 17,733 2,325 20,058
Total Real Assets 186,800 34,343 19,128 53,471 74,766 43,764 118,530
Total Real Assets, net of profit
sharing payable/expense 92,910 16,761 10,192 26,953 38,040 21,225 59,265
Total $ 2,627,136 $ (159,025) $ 627,984 $ 468,959 $ 1,261,651 $ 1,368,955 $ 2,630,606
Total, net of profit sharing
payable(4)/expense $ 1,190,501 $ (117,146) $ 332,098 $ 214,952 $ 691,678 $ 694,438 $ 1,386,116
(1)As of September 30, 2021 , certain private equity funds and certain real asset
funds had $64.8 million and $29.7 million , respectively, in general partner
obligations to return previously distributed performance fees. The fair value
gain on investments and income at the fund level needed to reverse the general
partner obligations for certain private equity funds and certain real assets
funds was $1.2 billion and $234.1 million , respectively, as of September 30,
2021 .
(2)As of September 30, 2021 , the remaining investments and escrow cash of Fund
VII and ANRP II were valued at 108% and 108% of the fund's unreturned capital,
respectively, which were below the required escrow ratio of 115%. As a result,
the funds are required to place in escrow current and future performance fee
distributions to the general partner until the specified return ratio of 115% is
met (at the time of a future distribution) or upon liquidation. As of
September 30, 2021 , Fund VII and ANRP II had $128.5 million and $58.8 million of
gross performance fees, or $73.2 million and $36.4 million net of profit
sharing, respectively, in escrow. With respect to Fund VII and ANRP II, realized
performance fees currently distributed to the general partner are limited to
potential tax distributions and interest on escrow balances per the funds'
partnership agreements. Performance fees receivable as of September 30, 2021 and
realized performance fees for the three months ended September 30, 2021 include
interest earned on escrow balances that is not subject to contingent repayment.
(3)Other includes certain SIAs.
(4)There was a corresponding profit sharing payable of $1.4 billion as of
September 30, 2021 , including profit sharing payable related to amounts in
escrow and contingent consideration obligations of $119.6 million .
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(5)For the nine months ended September 30, 2021 , total performance fees includes
$148.6 million of realized performance fees received in the form of shares.
The general partners of certain of our credit funds accrue performance fees,
categorized as performance allocations, when the fair value of investments
exceeds the cost basis of the individual investors' investments in the fund,
including any allocable share of expenses incurred in connection with such
investments, which we refer to as "high water marks." These high water marks are
applied on an individual investor basis. Certain of our credit funds have
investors with various high water marks, the achievement of which is subject to
market conditions and investment performance.
Performance fees from our private equity funds and certain credit and real
assets funds are subject to contingent repayment by the general partner in the
event of future losses to the extent that the cumulative performance fees
distributed from inception to date exceeds the amount computed as due to the
general partner at the final distribution. These general partner obligations, if
applicable, are included in due to related parties on the condensed consolidated
statements of financial condition.
The following table summarizes our performance fees since inception for our
combined segments through September 30, 2021 :
Performance Fees Since Inception(1)
Maximum
Performance
Total Undistributed and Fees Subject to
Undistributed by Distributed by Fund Distributed by Fund and General Partner Potential
Fund and Recognized and Recognized(2) Recognized(3) Obligation(3) Reversal(4)
(in millions)
Credit:
Corporate Credit $ 175.1 $ 1,382.2 $ 1,557.3 $ - $ 207.8
Structured Credit 229.3 265.1 494.4 - 202.9
Direct Origination 104.9 55.7 160.6 - 95.8
Advisory and Other 43.3 - 43.3 - 43.3
Total Credit 552.6 1,703.0 2,255.6 - 549.8
Private Equity:
Fund IX 591.8 265.2 857.0 - 739.6
Fund VIII 877.5 1,519.4 2,396.9 - 1,878.1
Fund VII 77.5 3,181.6 3,259.1 - 55.0
Fund VI 17.0 1,663.9 1,680.9 - 0.4
Fund IV and V - 2,053.1 2,053.1 31.5 0.4
ANRP I, II and III 91.5 146.0 237.5 12.0 111.6
HVF I 100.9 76.2 177.1 - 134.6
Other(5) 131.5 749.7 881.2 21.3 171.6
Total Private Equity 1,887.7 9,655.1 11,542.8 64.8 3,091.3
Real Assets:
Principal Finance 121.4 442.3 563.7 27.1 286.5
Real Estate Equity Funds 27.9 34.9 62.8 2.6 34.1
AIOF I and II 14.3 31.0 45.3 - 28.7
Other(5) 23.2 36.4 59.6 - 30.8
Total Real Assets 186.8 544.6 731.4 29.7 380.1
Total $ 2,627.1 $ 11,902.7 $ 14,529.8 $ 94.5 $ 4,021.2
(1)Certain funds are denominated in Euros and historical figures are translated
into U.S. dollars at an exchange rate of €1.00 to $1.16 as of September 30,
2021 . Certain funds are denominated in pound sterling and translated into U.S.
dollars at an exchange rate of £1.00 to $1.35 as of September 30, 2021 .
(2)Amounts in "Distributed by Fund and Recognized" for the Citi Property
Investors ("CPI"), Gulf Stream Asset Management, LLC ("Gulf Stream"), Stone
Tower Capital LLC and its related companies ("Stone Tower") funds and SIAs are
presented for activity subsequent to the respective acquisition dates. Amounts
exclude certain performance fees from business development companies and Redding
Ridge Holdings LP ("Redding Ridge Holdings "), an affiliate of Redding Ridge.
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(3)Amounts were computed based on the fair value of fund investments on
September 30, 2021 . Performance fees have been allocated to and recognized by
the general partner. Based on the amount allocated, a portion is subject to
potential reversal or, to the extent applicable, has been reduced by the general
partner obligation to return previously distributed performance fees at
September 30, 2021 . The actual determination and any required payment of any
such general partner obligation would not take place until the final disposition
of the fund's investments based on contractual termination of the fund.
(4)Represents the amount of performance fees that would be reversed if remaining
fund investments became worthless on September 30, 2021 . Amounts subject to
potential reversal of performance fees include amounts undistributed by a fund
(i.e., the performance fees receivable), as well as a portion of the amounts
that have been distributed by a fund, net of taxes and not subject to a general
partner obligation to return previously distributed performance fees, except for
those funds that are gross of taxes as defined in the respective funds'
governing documents.
(5)Other includes certain SIAs.
Expenses
Compensation and Benefits. Our most significant expense is compensation and
benefits expense. This consists of fixed salary, discretionary and
non-discretionary bonuses, profit sharing expense associated with the
performance fees earned from credit, private equity, and real assets funds and
compensation expense associated with the vesting of non-cash equity-based
awards.
Our compensation arrangements with certain partners and employees contain a
significant performance-based incentive component. Therefore, as our net
revenues increase, our compensation costs rise. Our compensation costs also
reflect the increased investment in people as we expand geographically and
create new funds.
In addition, certain professionals and selected other individuals have a profit
sharing interest in the performance fees earned in relation to our private
equity, certain credit and real assets funds in order to better align their
interests with our own and with those of the investors in these funds. Profit
sharing expense is part of our compensation and benefits expense and is
generally based upon a fixed percentage of credit, private equity and real
assets performance fees. Profit sharing expense can reverse during periods when
there is a decline in performance fees that were previously recognized. Profit
sharing amounts are normally distributed to employees after the corresponding
investment gains have been realized and generally before preferred returns are
achieved for the investors. Therefore, changes in our unrealized performance
fees have the same effect on our profit sharing expense. Profit sharing expense
increases when unrealized performance fees increases. Realizations only impact
profit sharing expense to the extent that the effects on investments have not
been recognized previously. If losses on other investments within a fund are
subsequently realized, the profit sharing amounts previously distributed are
normally subject to a general partner obligation to return performance fees
previously distributed back to the funds. This general partner obligation due to
the funds would be realized only when the fund is liquidated, which generally
occurs at the end of the fund's term. However, indemnification obligations also
exist for realized gains with respect to Fund IV, Fund V and Fund VI, which,
although our Co-Founders and Contributing Partners would remain personally
liable, may indemnify our Co-Founders and Contributing Partners for 17.5% to
100% of the previously distributed profits regardless of the fund's future
performance. See note 14 to our condensed consolidated financial statements for
further information regarding the Company's indemnification liability.
Each of Joshua Harris and Marc Rowan receives $100,000 per year in base salary
for services rendered to us. Additionally, Messrs. Harris and Rowan can receive
other forms of compensation. In addition, AHL Awards and other equity-based
compensation awards have been granted to the Company and certain employees,
which amortize over the respective vesting periods. The Company grants equity
awards to certain employees, including RSUs, restricted Class A shares and
options, that generally vest and become exercisable in quarterly installments or
annual installments depending on the contract terms over a period of three to
six years. In some instances, vesting of an RSU is also subject to the Company's
receipt of performance fees, within prescribed periods, sufficient to cover the
associated equity-based compensation expense. See note 12 to our condensed
consolidated financial statements for further discussion of equity-based
compensation.
Other Expenses. The balance of our other expenses includes interest, placement
fees, and general, administrative and other operating expenses. Interest expense
consists primarily of interest related to the 2024 Senior Notes, the 2026 Senior
Notes, the 2029 Senior Notes, the 2030 Senior Notes, the 2039 Senior Secured
Guaranteed Notes, the 2048 Senior Notes and the 2050 Subordinated Notes as
discussed in note 10 to our condensed consolidated financial statements.
Placement fees are incurred in connection with our capital raising activities.
In cases where the limited partners of the funds are determined to be the
customer in an arrangement, placement fees may be capitalized as a cost to
acquire a customer contract, and amortized over the life of the customer
contract. General, administrative and other expenses includes occupancy expense,
depreciation and amortization, professional fees and costs related to travel,
information technology and administration. Occupancy expense represents charges
related to office leases and associated expenses, such as utilities and
maintenance fees. Depreciation and amortization of fixed assets is normally
calculated using the straight-line method over their estimated useful lives,
ranging from two to sixteen years, taking into consideration any residual value.
Leasehold improvements are amortized over the shorter of the
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useful life of the asset or the expected term of the lease. Intangible assets
are amortized based on the future cash flows over the expected useful lives of
the assets.
Other Income (Loss)
Net Gains (Losses) from Investment Activities. Net gains (losses) from
investment activities include both realized gains and losses and the change in
unrealized gains and losses in our investment portfolio between the opening
reporting date and the closing reporting date. Net unrealized gains (losses) are
a result of changes in the fair value of unrealized investments and reversal of
unrealized gains (losses) due to dispositions of investments during the
reporting period. Significant judgment and estimation goes into the assumptions
that drive these models and the actual values realized with respect to
investments could be materially different from values obtained based on the use
of those models. The valuation methodologies applied impact the reported value
of investment company holdings and their underlying portfolios in our condensed
consolidated financial statements.
Net Gains (Losses) from Investment Activities of Consolidated Variable Interest
Entities. Changes in the fair value of the consolidated VIEs' assets and
liabilities and related interest, dividend and other income and expenses
subsequent to consolidation are presented within net gains (losses) from
investment activities of consolidated variable interest entities and are
attributable to Non-Controlling Interests in the condensed consolidated
statements of operations.
Other Income (Losses), Net. Other income (losses), net includes gains (losses)
arising from the remeasurement of foreign currency denominated assets and
liabilities, remeasurement of the tax receivable agreement liability and other
miscellaneous non-operating income and expenses.
Income Taxes. Significant judgment is required in determining the provision for
income taxes and in evaluating income tax positions, including evaluating
uncertainties. We recognize the income tax benefits of uncertain tax positions
only where the position is "more likely than not" to be sustained upon
examination, including resolution of any related appeals or litigation, based on
the technical merits of the positions. The tax benefit is measured as the
largest amount of benefit that has a greater than 50% likelihood of being
realized upon ultimate settlement. If a tax position is not considered more
likely than not to be sustained, then no benefits of the position are
recognized. The Company's income tax positions are reviewed and evaluated
quarterly to determine whether or not we have uncertain tax positions that
require financial statement recognition or de-recognition.
Deferred tax assets and liabilities are recognized for the expected future tax
consequences, using currently enacted tax rates, of differences between the
carrying amount of assets and liabilities and their respective tax basis. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period when the change is enacted. Deferred tax
assets are reduced by a valuation allowance when it is more likely than not that
some portion or all of the deferred tax assets will not be realized.
Non-Controlling Interests
For entities that are consolidated, but not 100% owned, a portion of the income
or loss and corresponding equity is allocated to owners other than Apollo. The
aggregate of the income or loss and corresponding equity that is not owned by
the Company is included in Non-Controlling Interests in the condensed
consolidated financial statements. The Non-Controlling Interests relating to
Apollo Global Management, Inc. primarily include the 36.6% and 40.4% ownership
interest in the Apollo Operating Group held by the Co-Founders and Contributing
Partners through their limited partner interests in Holdings as of September 30,
2021 and 2020, respectively. Additionally, as of September 30, 2021 , and Athene
holds a 6.7% Non-Controlling Interest in the Apollo Operating Group as a result
of the Transaction Agreement. Non-Controlling Interests also include limited
partner interests in certain consolidated funds and VIEs.
The authoritative guidance for Non-Controlling Interests in the condensed
consolidated financial statements requires reporting entities to present
Non-Controlling Interest as equity and provides guidance on the accounting for
transactions between an entity and Non-Controlling Interests. According to the
guidance, (1) Non-Controlling Interests are presented as a separate component of
stockholders' equity on the Company's condensed consolidated statements of
financial condition, (2) net income (loss) includes the net income (loss)
attributable to the Non-Controlling Interest holders on the Company's condensed
consolidated statements of operations, (3) the primary components of
Non-Controlling Interest are separately presented in the Company's condensed
consolidated statements of changes in stockholders' equity to clearly
distinguish the interests in the Apollo Operating Group and other ownership
interests in the consolidated entities and (4) profits and losses are allocated
to Non-Controlling Interests in proportion to their ownership interests
regardless of their basis.
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Results of Operations
Below is a discussion of our condensed consolidated results of operations for
the three and nine months ended September 30, 2021 and 2020. For additional
analysis of the factors that affected our results at the segment level, see
"-Segment Analysis" below:
For the Three Months Ended For the Nine Months Ended September
September 30 , Amount Percentage 30, Amount Percentage
2021 2020 Change Change 2021 2020 Change Change
Revenues: (in thousands) (in thousands)
Management fees $ 474,537 $ 433,570 $ 40,967 9.4% $ 1,401,814 $ 1,240,127 $ 161,687 13.0%
Advisory and transaction fees, net 62,831 73,449 (10,618) (14.5) 205,530 172,369 33,161 19.2
Investment income (loss):
Performance allocations 458,211 459,241 (1,030) (0.2) 2,588,697 (350,483) 2,939,180 NM
Principal investment income (loss) 78,283 50,722 27,561 54.3 536,674 (25,506) 562,180 NM
Total investment income (loss) 536,494 509,963 26,531 5.2 3,125,371 (375,989) 3,501,360 NM
Incentive fees 5,436 1,292 4,144 320.7 23,608 21,016 2,592 12.3
Total Revenues 1,079,298 1,018,274 61,024 6.0 4,756,323 1,057,523 3,698,800 349.8
Expenses:
Compensation and benefits:
Salary, bonus and benefits 182,576 163,197 19,379 11.9 538,505 453,485 85,020 18.7
Equity-based compensation 56,218 49,726 6,492 13.1 165,664 161,268 4,396 2.7
Profit sharing expense 262,874 191,809 71,065 37.0 1,279,601 (68,230) 1,347,831 NM
Total compensation and benefits 501,668 404,732 96,936 24.0 1,983,770 546,523 1,437,247 263.0
Interest expense 34,820 34,889 (69) (0.2) 104,433 98,422 6,011 6.1
General, administrative and other 111,597 90,822 20,775 22.9 327,285 259,073 68,212 26.3
Placement fees 822 612 210 34.3 1,950 1,380 570 41.3
Total Expenses 648,907 531,055 117,852 22.2 2,417,438 905,398 1,512,040 167.0
Other Income (Loss):
Net gains (losses) from investment
activities 172,798 144,472 28,326 19.6 1,439,343 (851,412) 2,290,755 NM
Net gains from investment activities of
consolidated variable interest entities 142,455 122,119 20,336 16.7 400,452 14,061 386,391 NM
Interest income 2,114 1,485 629 42.4 3,557 13,413 (9,856) (73.5)
Other income (loss), net (14,907) 10,161 (25,068) NM (28,126) (3,019) (25,107) NM
Total Other Income (Loss) 302,460 278,237 24,223 8.7 1,815,226 (826,957) 2,642,183 NM
Income (Loss) before income tax provision 732,851 765,456 (32,605) (4.3) 4,154,111 (674,832) 4,828,943 NM
Income tax (provision) benefit (101,434) (89,357) (12,077) 13.5 (498,731) 66,173 (564,904) NM
Net Income (Loss) 631,417 676,099 (44,682) (6.6) 3,655,380 (608,659) 4,264,039 NM
Net income (loss) attributable to
Non-Controlling Interests (373,095) (403,700) 30,605 (7.6) (2,060,441) 331,169 (2,391,610) NM
Net Income (Loss) Attributable to Apollo
Global Management, Inc. 258,322 272,399 (14,077) (5.2) 1,594,939 (277,490) 1,872,429 NM
Series A Preferred Stock Dividends (4,382) (4,382) - - (13,148) (13,148) - -
Series B Preferred Stock Dividends (4,782) (4,781) (1) - (14,344) (14,344) - -
Net Income (Loss) Attributable to Apollo
Global Management, Inc. Class A
Shareholders $ 249,158 $ 263,236 $ (14,078) (5.3)% $ 1,567,447 $ (304,982) $ 1,872,429 NM
Note: "NM" denotes not meaningful. Changes from negative to positive amounts and
positive to negative amounts are not considered meaningful. Increases or
decreases from zero and changes greater than 500% are also not considered
meaningful.
In March 2020 , the World Health Organization declared the outbreak of a novel
coronavirus (COVID-19) pandemic, which has resulted in uncertainty and
disruption in the global economy and financial markets. While we are unable to
accurately predict the full impact that COVID-19 will have on our results from
operations, financial condition, liquidity and cash flows due to numerous
uncertainties, including the duration and severity of the pandemic and
containment measures, our compliance with these measures has impacted our
day-to-day operations and could disrupt our business and operations, as well as
that of the Apollo Funds and their portfolio companies, for an indefinite period
of time. See "Item 1A. Risk Factors - Risks Related to Our Businesses - The
COVID-19 pandemic has caused severe disruptions in the U.S. and global economy
and is expected to continue to impact our business, financial condition and
results of operations" in the 2020 Annual Report.
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Three Months Ended September 30, 2021 Compared to Three Months Ended
September 30, 2020
In this section, references to 2021 refer to the three months ended
September 30, 2021 and references to 2020 refer to the three months ended
September 30, 2020 .
Revenues
Management fees increased by $41.0 million to $474.5 million in 2021 from $433.6
million in 2020. This change was primarily attributable to an increase in
management fees earned from Athene and ANRP III of $34.6 million and $4.3
million , respectively. For additional details regarding changes in management
fees in each segment, see "-Segment Analysis" below.
Advisory and transaction fees, net, decreased by $10.6 million to $62.8 million
in 2021 from $73.4 million in 2020. Advisory and transaction fees earned during
2021 were primarily related to advisory and transaction fees earned from
companies in the media, telecom and technology, chemicals and consumer and
retail sectors. Advisory and transaction fees earned during 2020 were primarily
attributable to advisory and transaction fees related to a long-term strategic
investment for an underlying real estate portfolio.
Principal investment income increased by $27.6 million to $78.3 million in 2021
from $50.7 million in 2020. The increase was primarily driven by increases in
the value of investments held by certain Apollo funds and other entities in
which the Company has a direct interest, mainly with respect to Fund IX and
Redding Ridge of $24.0 million and $7.4 million , respectively.
Incentive fees increased by $4.1 million to $5.4 million in 2021 from $1.3
million in 2020. This change was primarily attributable to incentive fees earned
from Apollo Investment Corporation ("AINV") of $4.1 million in 2021.
Expenses
Compensation and benefits increased by $96.9 million to $501.7 million in 2021
from $404.7 million in 2020. This change was primarily attributable to an
increase in salary, bonus and benefits of $19.4 million due to an increase in
headcount. Additionally, there was an increase in profit sharing expense of
$71.1 million in 2021 related to the Incentive Pool . See "-Profit Sharing
Expense" in the Critical Accounting Policies section for an overview of the
Incentive Pool . In any period, the blended profit sharing percentage is impacted
by the respective profit sharing ratios of the funds generating performance
allocations in the period. Included in profit sharing expense is $37.0 million
and $8.3 million for 2021 and 2020, respectively, related to the Incentive
Pool .
General, administrative and other expenses increased by $20.8 million to $111.6
million in 2021 from $90.8 million in 2020. This change was primarily driven by
an increase in legal and other professional fees as well as higher travel and
occupancy expenses in 2021.
Other Income (Loss)
Net gains from investment activities increased by $28.3 million to $172.8
million in 2021 from $144.5 million in 2020. This change was primarily driven by
gains attributable to new investments in APSG, AP Liberty, L.P. and APSG II of
$11.8 million , $9.8 million and $4.5 million , respectively, during 2021.
Net gains from investment activities of consolidated VIEs increased by $20.3
million to $142.5 million in 2021 from $122.1 million in 2020. This change was
primarily driven by gains from newly consolidated funds during 2021 as discussed
in note 5 to the condensed consolidated financial statements.
Other Income (loss), net decreased by $25.1 million to $(14.9) million in 2021
from $10.2 million in 2020 primarily driven by foreign exchange losses in 2021.
Income Tax Provision
Income tax (provision) benefit totaled $(101.4) million and $(89.4) million for
2021 and 2020, respectively. The increase was primarily due to changes in pretax
income subject to income taxes and an increase in the estimated effective income
tax rate. The provision for income taxes includes federal, state, local and
foreign income taxes resulting in an effective income tax rate of 13.8% and
11.7% for 2021 and 2020, respectively. The most significant reconciling items
between the U.S. federal statutory income tax rate and the effective income tax
rate were due to the following: (i) income passed through to Non-
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Controlling Interests and (ii) foreign, state and local income taxes, including
NYC UBT (see note 9 to the condensed consolidated financial statements for
further details regarding the Company's income tax provision).
Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30,
2020
In this section, references to 2021 refer to the nine months ended September 30,
2021 and references to 2020 refer to the nine months ended September 30, 2020 .
Revenues
Management fees increased by $161.7 million to $1.4 billion in 2021 from $1.2
billion in 2020. This change was primarily attributable to an increase in
management fees earned from Athene and Athora of $127.8 million and $21.2
million , respectively. For additional details regarding changes in management
fees in each segment, see "-Segment Analysis" below.
Advisory and transaction fees, net, increased by $33.2 million to $205.5 million
in 2021 from $172.4 million in 2020. Advisory and transaction fees earned during
2021 were primarily related to transaction fees earned from companies in the
consumer services, financial services and media and technology industries and
structuring fees earned from a company in the consumer and retail industry.
Advisory and transaction fees earned during 2020 were primarily related to fees
earned in relation to a long-term strategic investment for an underlying real
estate portfolio as well as net advisory and transaction fees earned with
respect to certain portfolio companies in the media, telecom and technology
industries and an increase in structuring fees earned from a company in the
consumer and retail industry.
Performance allocations increased by $2.9 billion to $2.6 billion in 2021 from
$(350.5) million in 2020. The increase in performance allocations was primarily
attributable to increased performance allocations earned from Fund VIII, Fund
IX, Fund VII, ANRP II and EPF III of $908.5 million , $872.5 million , $343.0
million , $169.0 million and $98.5 million , respectively, during 2021. In 2020,
the pandemic resulting from COVID-19 and the actions taken in response caused
severe disruption to the global economy and financial markets. In line with
public equity and credit indices, the Company experienced significant unrealized
mark-to-market losses in underlying funds in 2020.
The increase in performance allocations from Fund VIII was primarily driven by
higher appreciation in the value of the fund's investments in public portfolio
companies primarily in the consumer services, media, telecom and technology and
financial services sectors, as well as appreciation in private portfolio
companies primarily in the natural resources and media, telecom and technology
sectors during 2021.
The increase in performance allocations from Fund IX was primarily driven by
appreciation in the value of the fund's investments in private portfolio
companies in the consumer services, media, telecom and technology, consumer and
retail, leisure and financial services sectors during 2021. Moreover, the fund
achieved its annualized hurdle rate in 2021 whereas it was below the annualized
hurdle rate in 2020.
The increase in performance allocations from Fund VII was primarily driven by
appreciation in the value of the fund's investments in private portfolio
companies in the consumer services sector and in public portfolio companies in
the consumer and retail and natural resources sectors during 2021.
The increase in performance allocations from ANRP II was primarily driven by
appreciation in the value of the fund's public and private investments in the
natural resources sector during 2021. Moreover, the fund achieved its annualized
hurdle rate in 2021 whereas it was below the annualized hurdle rate in 2020.
The increase in performance allocations from EPF III was primarily driven by
appreciation in the value of the fund's investments in private portfolio
companies primarily in the financial services, logistics, hospitality and
commercial real estate sectors, as well as appreciation in the value of the
fund's investments in public portfolio companies primarily in the real estate
and real estate investment trusts sectors.
Principal investment income increased by $562.2 million to $536.7 million in
2021 from $(25.5) million in 2020. This change was primarily driven by increases
in the value of investments held by certain Apollo funds and other entities in
which the Company has a direct interest, mainly with respect to VA Capital, LLC ,
Fund VIII, Fund IX, Redding Ridge Holdings and Fund VII of $220.0 million ,
$116.1 million , $72.9 million , $30.9 million and $20.6 million , respectively.
The impact of the COVID-19 pandemic led to unrealized principal investment
losses during 2020.
Incentive fees increased by $2.6 million to $23.6 million in 2021 from $21.0
million in 2020. Incentive fees earned during 2021 were primarily earned from an
SIA and AINV of $13.8 million and $4.0 million , respectively. Incentive fees
earned during 2020 were primarily earned from Athene of $13.9 million in 2020.
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Expenses
Compensation and benefits increased by $1.4 billion to $2.0 billion in 2021 from
$546.5 million in 2020. This change was primarily attributable to an increase in
profit sharing expense of $1.3 billion , due to a corresponding increase in
performance allocations during 2021. In any period, the blended profit sharing
percentage is impacted by the respective profit sharing ratios of the funds
generating performance allocations in the period. Additionally, there was an
increase in salary, bonus and benefits of $85.0 million , primarily attributable
to an increase in bonus accruals and headcount.
Included in profit sharing expense is $72.7 million and $51.2 million for 2021
and 2020, respectively, related to the Incentive Pool . See "-Profit Sharing
Expense" in the Critical Accounting Policies section for an overview of the
Incentive Pool .
Interest expense increased by $6.0 million to $104.4 million in 2021 from $98.4
million in 2020, primarily due to additional interest expense incurred as a
result of the timing of issuances of debt arrangements, as described in note 10
to our condensed consolidated financial statements.
General, administrative and other expenses increased by $68.2 million to $327.3
million in 2021 from $259.1 million in 2020. This change was primarily driven by
an increase in legal, consulting, and other professional fees as well as higher
recruitment expenses corresponding to the increase in headcount during 2021.
Other Income (Loss)
Net gains (losses) from investment activities increased by $2.3 billion to $1.4
billion in 2021 from $(0.9) billion in 2020. This change was primarily
attributable to a gain from the Company's investment in Athene Holding during
2021 as compared to the same period in 2020 due to the combined impact of
COVID-19 related market dislocation and a higher discount for lack of
marketability ("DLOM") during 2020. See note 6 and 14 to the condensed
consolidated financial statements for further information regarding the
Company's investment in Athene Holding.
Net gains from investment activities of consolidated VIEs increased by $386.4
million to $400.5 million in 2021 from $14.1 million in 2020. This change was
primarily driven by gains from existing consolidated VIEs during 2021. See note
5 to the condensed consolidated financial statements for details regarding net
gains from investment activities of consolidated VIEs.
Interest income decreased by $9.9 million to $3.6 million in 2021 from $13.4
million in 2020, primarily due to lower interest income earned from money market
funds and U.S. Treasury securities in 2021.
Other Income (loss), net decreased by $25.1 million to $28.1 million in 2021
from $3.0 million in 2020 primarily due to losses from changes in foreign
exchange rates in 2021.
Income Tax Provision
The income tax (provision) benefit totaled $(498.7) million and $66.2 million in
2021 and 2020, respectively. The change was primarily related to the increase in
pre-tax income. Significant realized and unrealized mark-to-market book gains
were recognized in 2021 as compared to the unrealized mark-to-market book losses
recognized in 2020 due to the market dislocation impact of COVID-19. The
provision for income taxes includes federal, state, local and foreign income
taxes resulting in an effective income tax rate of 12.0% and 9.8% for 2021 and
2020, respectively. The most significant reconciling items between the U.S.
federal statutory income tax rate and the effective income tax rate were due to
the following: (i) income passed through to Non-Controlling Interests; and (ii)
foreign, state and local income taxes including NYC UBT (see note 9 to the
condensed consolidated financial statements for further details regarding the
Company's income tax provision).
Segment Analysis
Discussed below are our results of operations for each of our reportable
segments. They represent the segment information available and utilized by our
chief operating decision maker to assess performance and to allocate resources.
See note 16 to our condensed consolidated financial statements for more
information regarding our segment reporting.
Our financial results vary, since performance fees, which generally constitute a
large portion of the income from the funds that we manage, as well as the
transaction and advisory fees that we receive, can vary significantly from
quarter to quarter and year to year. As a result, we emphasize long-term
financial growth and profitability to manage our business.
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Credit
The following table sets forth our segment statement of operations information
and our supplemental performance measure, Segment Distributable Earnings, within
our credit segment.
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2021 2020 Total Change Percentage Change 2021 2020 Total Change Percentage Change
(in thousands) (in thousands)
Credit:
Management fees $ 278,928 $ 246,159 $ 32,769 13.3% $ 820,266 $ 679,109 $ 141,157 20.8%
Advisory and transaction fees, net 7,648 51,376 (43,728) (85.1) 95,535 80,399 15,136 18.8
Performance fees(1) 19,856 2,204 17,652 NM 36,702 8,048 28,654 356.0
Fee Related Revenues 306,432 299,739 6,693 2.2 952,503 767,556 184,947 24.1
Salary, bonus and benefits (72,503) (61,975) (10,528) 17.0 (217,181) (171,789) (45,392) 26.4
General, administrative and other (38,084) (40,367) 2,283 (5.7) (118,303) (112,991) (5,312) 4.7
Placement fees (594) (425) (169) 39.8 (1,660) (1,089) (571) 52.4
Fee Related Expenses (111,181) (102,767) (8,414) 8.2 (337,144) (285,869) (51,275) 17.9
Other income (loss), net of
Non-Controlling Interest (1,427) (780) (647) 82.9 (2,976) (2,167) (809) 37.3
Fee Related Earnings 193,824 196,192 (2,368) (1.2) 612,383 479,520 132,863 27.7
Realized performance fees 23,264 7,614 15,650 205.5 141,424 37,834 103,590 273.8
Realized profit sharing expense (13,054) (7,614) (5,440) 71.4 (92,978) (37,530) (55,448) 147.7
Net Realized Performance Fees 10,210 - 10,210 NM 48,446 304 48,142 NM
Realized principal investment
income, net(2) 248,864 928 247,936 NM 253,299 4,112 249,187 NM
Net interest loss and other (14,688) (14,010) (678) 4.8 (40,342) (42,981) 2,639 (6.1)
Segment Distributable Earnings
$ 255,100 139.3%$ 873,786 $ 440,955 $ 432,831 98.2% (1)Represents certain performance fees from business development companies,Redding Ridge Holdings , and MidCap. (2)Realized principal investment income, net includes dividends from our permanent capital vehicles, net of such amounts used to compensate employees. Three Months EndedSeptember 30, 2021 Compared to Three Months EndedSeptember 30, 2020 In this section, references to 2021 refer to the three months endedSeptember 30, 2021 and references to 2020 refer to the three months endedSeptember 30, 2020 . Management fees increased by$32.8 million to$278.9 million in 2021 from$246.2 million in 2020. This change was primarily attributable to an increase in management fees earned from Athene of$27.5 million during 2021. Advisory and transaction fees, net decreased by$43.7 million to$7.6 million in 2021 from$51.4 million in 2020. Advisory and transaction fees in 2021 were primarily attributable to advisory and transaction fees earned from companies in the manufacturing and industrial, media, telecom and technology and consumer services sectors. Advisory and transaction fees in 2020 were attributable to fees earned in relation to a long-term strategic investment for an underlying real estate portfolio. Performance fees increased by$17.7 million to$19.9 million in 2021 from$2.2 million in 2020, primarily attributable to an increase in performance fees earned fromRedding Ridge Holdings and AINV of$10.6 million and$5.0 million , respectively. BothRedding Ridge Holdings and AINV achieved its respective annualized hurdle rates during 2021 but did not do so in 2020. Salary, bonus and benefits expense increased by$10.5 million to$72.5 million in 2021 from$62.0 million in 2020 primarily due to an increase in headcount as the Company continues to invest in its businesses. General, administrative and other expenses decreased by$2.3 million to$38.1 million in 2021 from$40.4 million in 2020. This decrease was primarily driven by a decrease in technology and other miscellaneous expenses in 2021. Realized performance fees increased by$15.7 million to$23.3 million in 2021 from$7.6 million in 2020. This change was primarily attributable to an increase in realized performance fees from Accord III and Accord III B of$9.6 million and$5.5 million , respectively. The realized performance fees generated from Accord III and Accord III B in 2021 were due to incentive fees realized as part of the respective funds' final distributions. -109- -------------------------------------------------------------------------------- Table of Contents Realized profit sharing expense increased by$5.4 million to$13.1 million in 2021 from$7.6 million in 2020, as a result of a corresponding increase in realized performance fees as described above. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is$1.0 million and$2.7 million related to theIncentive Pool for 2021 and 2020, respectively.The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period. Realized principal investment income increased by$247.9 million to$248.9 million in 2021 from$0.9 million in 2020. This change was primarily attributable to an increase in realizations driven by the sale of a platform investment to certain funds we manage andAthora in 2021. Nine Months EndedSeptember 30, 2021 Compared to Nine Months EndedSeptember 30, 2020 In this section, references to 2021 refer to the nine months endedSeptember 30, 2021 and references to 2020 refer to the nine months endedSeptember 30, 2020 . Management fees increased by$141.2 million to$820.3 million in 2021 from$679.1 million in 2020. This change was primarily attributable to an increase in management fees earned from Athene andAthora of$111.4 million and$17.7 million , respectively. Advisory and transaction fees, net increased by$15.1 million to$95.5 million in 2021 from$80.4 million in 2020. This increase was primarily driven by advisory and transaction fees earned related to portfolio companies in the consumer and retail industries during 2021. Performance fees increased by$28.7 million to$36.7 million in 2021 from$8.0 million in 2020, primarily attributable to an increase in performance fees earned fromRedding Ridge Holdings and AINV of$24.6 million and$4.9 million , respectively during 2021. BothRedding Ridge Holdings and AINV achieved its respective annualized hurdle rates during 2021 but did not do so in 2020. Salary, bonus and benefits expense increased by$45.4 million to$217.2 million in 2021 from$171.8 million in 2020 primarily due to an increase in headcount and bonus accruals. General, administrative and other expenses increased by$5.3 million to$118.3 million in 2021 from$113.0 million in 2020. This increase was primarily driven by an increase in depreciation and professional fees, partially offset by a decrease in technology expenses in 2021. Realized performance fees increased by$103.6 million to$141.4 million in 2021 from$37.8 million in 2020. This change was primarily attributable to an increase in realized performance fees generated from the sale of a mortgage business and Accord III of$75.0 million and$14.3 million , respectively. The realized performance fees generated from Accord III in 2021 were primarily due to incentive fees realized as part of the fund's final distribution. Realized profit sharing expense increased by$55.4 million to$93.0 million in 2021 from$37.5 million in 2020, as a result of a corresponding increase in realized performance fees as described above partially offset by decrease in profit sharing expense related to theIncentive Pool . In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is$6.4 million and$19.4 million related to theIncentive Pool for 2021 and 2020, respectively.The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period. Realized principal investment income increased by$249.2 million to$253.3 million in 2021 from$4.1 million in 2020. This change was primarily attributable to an increase in realizations driven by the sale of a platform investment to certain funds we manage andAthora in 2021. Net interest loss and other decreased by$2.6 million to$40.3 million in 2021 from$43.0 million in 2020. The decrease was primarily due to higher expenses incurred in 2020 driven by one-time costs to wind down a managed account arrangement partially offset by lower interest income earned fromU.S. Treasury securities and additional interest expense incurred as a result of the timing of issuances of debt arrangements, as described in note 10 to our condensed consolidated financial statements, in 2021. -110- -------------------------------------------------------------------------------- Table of Contents Private Equity The following table sets forth our segment statement of operations information and our supplemental performance measure, Segment Distributable Earnings, within our private equity segment. For the Three Months Ended For the Nine Months Ended September 30, September 30, 2021 2020 Total Change Percentage Change 2021 2020 Total Change Percentage Change (in thousands) (in thousands) Private Equity: Management fees$ 119,716 $ 128,446 $ (8,730) (6.8)%$ 365,090 $ 381,306 $ (16,216) (4.3)% Advisory and transaction fees, net 55,797 20,108 35,689 177.5 104,175 85,253 18,922 22.2 Fee Related Revenues 175,513 148,554 26,959 18.1 469,265 466,559 2,706 0.6 Salary, bonus and benefits (62,869) (53,451) (9,418) 17.6 (180,474) (149,133) (31,341) 21.0 General, administrative and other (31,548) (25,099) (6,449) 25.7 (80,223) (68,863) (11,360) 16.5 Placement fees (188) (188) - - (188) (295) 107 (36.3) Fee Related Expenses (94,605) (78,738) (15,867) 20.2 (260,885) (218,291) (42,594) 19.5 Other income, net 109 23 86 373.9 1,528 48 1,480 NM Fee Related Earnings 81,017 69,839 11,178 16.0 209,908 248,316 (38,408) (15.5) Realized performance fees 565,738 2,025 563,713 NM 998,452 6,717 991,735 NM Realized profit sharing expense (273,897) (2,025) (271,872) NM (484,678) (7,021) (477,657) NM Net Realized Performance Fees 291,841 - 291,841 NM 513,774 (304) 514,078 NM Realized principal investment income 41,420 1,598 39,822 NM 130,225 5,544 124,681 NM Net interest loss and other (11,865) (14,580) 2,715 (18.6) (39,101) (41,940) 2,839 (6.8)
Segment Distributable Earnings
$ 345,556 NM$ 814,806 $ 211,616 $ 603,190 285.0% Three Months EndedSeptember 30, 2021 Compared to Three Months EndedSeptember 30, 2020 In this section, references to 2021 refer to the three months endedSeptember 30, 2021 and references to 2020 refer to the three months endedSeptember 30, 2020 . Management fees decreased by$8.7 million to$119.7 million in 2021 from$128.4 million in 2020. This change was primarily attributable to a decrease in management fees earned from ANRP II and Fund VIII of$7.7 million and$4.4 million , respectively, partially offset by an increase in management fees earned from ANRP III of$4.3 million . Advisory and transaction fees, net increased by$35.7 million to$55.8 million in 2021 from$20.1 million in 2020. This increase was primarily attributable to transaction and placement fees earned in relation to a portfolio company in the media, telecom and technology sector and structuring fees earned in relation to a company in the chemicals sector. Salary, bonus and benefits expense increased by$9.4 million to$62.9 million in 2021 from$53.5 million in 2020 primarily due to an increase in headcount. General, administrative and other expenses increased by$6.4 million to$31.5 million in 2021 from$25.1 million in 2020. This change was primarily driven by an increase in professional fees, travel, technology and occupancy expenses in 2021. Realized performance fees increased by$563.7 million to$565.7 million in 2021 from$2.0 million in 2020. This change was primarily attributable to increases in realized performance fees generated from Fund IX, Fund VIII and Fund VII of$269.5 million ,$182.0 million and$49.4 million , respectively. The increase in realized performance fees earned from Fund IX was the result of sales and income generated from investments primarily in the consumer and retail and media, telecom and technology sectors during 2021. The increase in realized performance fees earned from Fund VIII was the result of sales and income generated from investments primarily in the financial services, consumer services, natural resources and leisure sectors during 2021. The increase in realized performance fees earned from Fund VII in 2021 was the result of a sale of an investment in the consumer services sector during 2021. -111- -------------------------------------------------------------------------------- Table of Contents Realized profit sharing expense increased by$271.9 million to$273.9 million in 2021 from$2.0 million in 2020, as a result of the corresponding increase in realized performance fees as described above as well as an increase in the profit sharing expense related to theIncentive Pool . In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is$35.0 million and$1.2 million of expenses related to theIncentive Pool for 2021 and 2020, respectively.The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period. Realized principal investment income increased by$39.8 million to$41.4 million in 2021 from$1.6 million in 2020. This change was primarily attributable to an increase in realizations from Apollo's equity ownership in Fund VIII and Fund IX of$22.3 million and$15.5 million , respectively. Net interest loss and other decreased by$2.7 million to$11.9 million in 2021 from$14.6 million in 2020 primarily due to an increase in interest income earned fromU.S. Treasury securities in 2021. Nine Months EndedSeptember 30, 2021 Compared to Nine Months EndedSeptember 30, 2020 In this section, references to 2021 refer to the nine months endedSeptember 30, 2021 and references to 2020 refer to the nine months endedSeptember 30, 2020 . Management fees decreased by$16.2 million to$365.1 million in 2021 from$381.3 million in 2020. This change was primarily attributable to a decrease in management fees earned from ANRP II and Fund VIII of$21.0 million and$10.0 million , respectively, partially offset by an increase in management fees earned from ANRP III of$12.9 million . Advisory and transaction fees, net increased by$18.9 million to$104.2 million in 2021 from$85.3 million in 2020. Advisory and transaction fees in 2021 were primarily attributable to transaction and placement fees earned in relation to a portfolio company in the media, telecom and technology industry and structuring fees earned in relation to a company in the chemicals industry. Advisory and transaction fees in 2020 were primarily attributable to a transaction fee earned with respect to a portfolio company in the media, telecom and technology industry. Salary, bonus and benefits expense increased by$31.3 million to$180.5 million in 2021 from$149.1 million in 2020 primarily due to an increase in headcount and bonus accruals. General, administrative and other expenses increased by$11.4 million to$80.2 million in 2021 from$68.9 million in 2020. This change was primarily driven by higher recruitment fees related to the increase in headcount as well as an increase in technology expenses and legal fees. Realized performance fees increased by$991.7 million to$998.5 million in 2021 from$6.7 million in 2020. This change was primarily attributable to an increase in realized performance fees generated from Fund VIII and Fund IX of$577.1 and$273.2 million in 2021. The increase in realized performance fees earned from Fund VIII in 2021 was the result of sales and income generated from investments primarily in the financial services, consumer services, natural resources, manufacturing and industrial, and leisure sectors, which reduced the previous netting hole to zero and resulted in recognition of the realized performance fees. Fund VIII had no realized performance fees during 2020. The increase in realized performance fees earned from Fund IX in 2021 was the result of sales and income generated from investments primarily in the consumer and retail and media, telecom and technology sectors during 2021. Realized profit sharing expense increased by$477.7 million to$484.7 million in 2021 from$7.0 million in 2020, as a result of the corresponding increase in realized performance fees as described above as well as an increase in the profit sharing expense related to theIncentive Pool . In any period, the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is$63.3 million and$3.0 million of expenses related to theIncentive Pool for 2021 and 2020, respectively.The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period. Realized principal investment income increased by$124.7 million to$130.2 million in 2021 from$5.5 million in 2020. This change was primarily attributable to an increase in realizations from Apollo's equity ownership in Fund VIII and Fund IX of$91.2 million and$21.2 million , respectively, in 2021. -112- -------------------------------------------------------------------------------- Table of Contents Net interest loss and other decreased by$2.8 million to$39.1 million in 2021 from$41.9 million in 2020. The higher expense in 2020 was attributable to one-time costs to wind down a managed account arrangement. Real Assets The following table sets forth our segment statement of operations information and our supplemental performance measure, Segment Distributable Earnings, within our real assets segment. For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 Total Change Percentage Change 2021 2020 Total Change Percentage Change (in thousands) (in thousands) Real Assets: Management fees$ 67,374 $ 51,847 $ 15,527 29.9%$ 191,567 $ 150,227 $ 41,340 27.5% Advisory and transaction fees, net 1,632 878 754 85.9 4,097 5,191 (1,094) (21.1) Fee Related Revenues 69,006 52,725 16,281 30.9 195,664 155,418 40,246 25.9 Salary, bonus and benefits (29,637) (29,513) (124) 0.4 (88,883) (83,037) (5,846) 7.0 General, administrative and other (14,879) (11,869) (3,010) 25.4 (41,224) (35,637) (5,587) 15.7 Fee Related Expenses (44,516) (41,382) (3,134) 7.6 (130,107) (118,674) (11,433) 9.6 Other income (loss), net of Non-Controlling Interest 733 59 674 NM 482 154 328 213.0 Fee Related Earnings 25,223 11,402 13,821 121.2 66,039 36,898 29,141 79.0 Realized performance fees 19,128 7,806 11,322 145.0 43,764 49,477 (5,713) (11.5) Realized profit sharing expense (8,935) (7,806) (1,129) 14.5 (22,539) (49,477) 26,938 (54.4) Net Realized Performance Fees 10,193 - 10,193 NM 21,225 - 21,225 NM Realized principal investment income 885 356 529 148.6 4,420 4,028 392 9.7 Net interest loss and other (7,522) (6,216) (1,306) 21.0 (25,198) (16,069) (9,129) 56.8
Segment Distributable Earnings
23,237 419.3%$ 66,486 $ 24,857 $ 41,629 167.5% Three Months EndedSeptember 30, 2021 Compared to Three Months EndedSeptember 30, 2020 In this section, references to 2021 refer to the three months endedSeptember 30, 2021 and references to 2020 refer to the three months endedSeptember 30, 2020 . Management fees increased by$15.5 million to$67.4 million in 2021 from$51.8 million in 2020. This change was primarily attributable to an increase in management fees earned from Athene, Apollo Infrastructure Opportunities Fund II ("AIOF II") andAthora of$6.7 million ,$5.3 million and$1.5 million , respectively. General, administrative and other expenses increased by$3.0 million to$14.9 million in 2021 from$11.9 million in 2020. The change was primarily driven by an increase in professional fees, travel, occupancy and technology expenses in 2021. Realized performance fees increased by$11.3 million to$19.1 million in 2021 from$7.8 million in 2020. This change was primarily attributable to an increase in realized performance fees generated fromApollo Infrastructure Opportunities Fund ("AIOF I") of$10.8 million in 2021. The increase in performance allocations from AIOF I was primarily a result of realizations from an investment in the natural resources sector in 2021. Realized profit sharing expense increased by$1.1 million to$8.9 million in 2021 from$7.8 million in 2020 as a result of the corresponding increase in realized performance fees as described above, partially offset by a decrease in the profit sharing expense related to theIncentive Pool . In any period, the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is$1.0 million and$4.4 million related to theIncentive Pool for 2021 and 2020, respectively.The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period. Net interest loss and other increased by$1.3 million to$7.5 million in 2021 from$6.2 million in 2020 primarily due to a payment related to general partner obligations. Nine Months EndedSeptember 30, 2021 Compared to Nine Months EndedSeptember 30, 2020 In this section, references to 2021 refer to the nine months endedSeptember 30, 2021 and references to 2020 refer to the nine months endedSeptember 30, 2020 . -113- -------------------------------------------------------------------------------- Table of Contents Management fees increased by$41.3 million to$191.6 million in 2021 from$150.2 million in 2020. This change was primarily attributable to an increase in management fees earned from Athene, AIOF II,Apollo U.S. Real Estate Fund III, L.P. andAthora of$15.3 million ,$14.2 million ,$4.5 million and$3.5 million , respectively. Advisory and transaction fees, net decreased by$1.1 million to$4.1 million in 2021 from$5.2 million in 2020. Advisory and transaction fees in 2021 were primarily attributable to a transaction fee earned in relation to a company in the financial services industry. Advisory and transaction fees in 2020 were primarily attributable to structuring fees earned from a company in the consumer and retail industry. Salary, bonus and benefits expense increased by$5.8 million to$88.9 million in 2021 from$83.0 million in 2020 primarily due to an increase in headcount and bonus accruals. General, administrative and other expenses increased by$5.6 million to$41.2 million in 2021 from$35.6 million in 2020. The change was primarily driven by higher recruitment fees related to the increase in headcount as well as an increase in professional fees and technology expenses. Realized performance fees decreased by$5.7 million to$43.8 million in 2021 from$49.5 million in 2020. The lower realized performance fees generated in 2021 were primarily attributable to a decrease in realized performance fees generated fromApollo U.S. Real Estate Fund II, L.P. ("U.S. RE Fund II") and EPF III of$7.7 million and$4.6 million partially offset by an increase in realized performance fees from AIOF I of$9.2 million in 2021. The realized performance fees fromU.S. RE Fund II were primarily the result of industrial asset realizations in 2020 while the fund had no realizations in 2021. The realized performance fees from EPF III in 2021 were primarily a result of realizations from residential mortgage-backed securities, commercial real estate, and investments in a real estate investment trust. The realized performance fees from EPF III in 2020 were primarily attributable to the sale of investments in logistics assets. The increase in performance allocations from AIOF I was primarily a result of realizations from an investment in the natural resources sector in 2021. Realized profit sharing expense decreased by$26.9 million to$22.5 million in 2021 from$49.5 million in 2020 as a result of the corresponding decrease in realized performance fees as described above, and a decrease in profit sharing expense related to theIncentive Pool . In any period, the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is$3.0 million and$28.8 million related to theIncentive Pool for 2021 and 2020, respectively.The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period. Net interest loss and other increased by$9.1 million to$25.2 million in 2021 from$16.1 million in 2020 primarily due to a payment related to general partner obligations as well as a decrease in interest income earned fromU.S. treasury securities in 2021. -114- -------------------------------------------------------------------------------- Table of Contents Summary of Distributable Earnings The following table is a reconciliation of Distributable Earnings per share of common and equivalent to net dividend per share of common and equivalent. For the Three Months Ended For the Nine Months Ended September September 30, 30, 2021 2020 2021 2020 (in thousands, except per share data) Segment Distributable Earnings$ 869,402 $ 245,509 $ 1,755,078 $ 677,428 Taxes and related payables (108,157) (31,257) (180,118) (74,490) Preferred dividends (9,164) (9,163) (27,492) (27,492) Distributable Earnings 752,081 205,089 1,547,468 575,446 Add back: Tax and related payables attributable to common and equivalents 96,935 14,678 157,509 51,698 Distributable Earnings before certain payables(1) 849,016 219,767 1,704,977 627,144 Percent to common and equivalents 57 % 54 % 57 % 54 % Distributable Earnings before other payables attributable to common and equivalents 483,939 118,674 971,837 338,658 Less: Taxes and related payables attributable to common and equivalents (96,935) (14,678) (157,509) (51,698) Distributable Earnings attributable to common and equivalents(2)$ 387,004 $ 103,996 $ 814,328 $ 286,960 Distributable Earnings per share(3)$ 1.71 $ 0.47 $ 3.51 $ 1.30 (Retained) contributed capital per share(3) (1.21) 0.04 (2.01) 0.12 Net dividend per share(3)$ 0.50 $ 0.51 $ 1.50 $ 1.42 (1)Distributable Earnings before certain payables represents Distributable Earnings before the deduction for the estimated current corporate taxes and the amounts payable under Apollo's tax receivable agreement. (2)"Common and equivalents" consists of total Class A shares outstanding and RSUs that participate in dividends. (3)Per share calculations are based on end of period Distributable Earnings Shares Outstanding, which consists of total Class A shares outstanding, AOG Units that participate in dividends and RSUs that participate in dividends. -115-
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