Apollo CEO: Private Markets, Investment Alpha and Risk Management
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Hi everyone, i'm neck tang in the C E O of norwest bank investment management, the norwegian someone will fund and today we are joined by a true visionary in the world finance mark the roman who founded or cofounded Apollo global management, which is one of the most influential alternative asset managment firms in the world.

Now we are the lucky owner, or just under a two percent of Apollo, which works out at just under one and a half billion dollars. Mark will do air. great. thanks.

Thanks for coming. And and hopefully you are a happy shareholder.

Mark, in nineteen and eighty four you said, god, i'm just too late. All the money has been made. You come out of business school ah now a few years later, uh, you have assets and the management at a polo of six hundred and eighty billion and the market cap is more than a eighty billion. So I think we can say that, that was a not a very accurate statement.

Well, I I think IT was accurate because IT reflected the business at the time because not only did I say at eighty four, I said IT in ninety and I said IT again in two thousand and one. And the point being, in some ways I was too late for the business that had been done. But the interesting thing part of the interesting part of the job is he keeps changing.

I mean, you ve two thousand and eight, we were forty billion of A U. M. In fact, almost every other large firm in our industry, va was roughly the same size.

And then thirty, fourteen years later, we're now up to over seven hundred billion of A U. M. Something changed.

It's clearly not as a result of our skill and talent, we had to be in the mainstream how well look the skill talent is to make sure we're positioned with tail wins behind us by positioning the business the right way. But fundamental change is ultimately were powered our business. But you think .

about to uh your first job draw um drive also went bus in nineteen ninety and then you decided to find Apollo 好。

what was .

the thinking?

Well it's a founding a new company. The a great motivator is to be unemployed. So think of one thousand ninety as two thousand eight.

A to be an unemployed investment banker in the middle of a recession, a financial markets collapse, new york banking crisis, texas banking crisis. A fundamental change in the financial system was not a great thing, fortunately, was early in my career. And IT was a great time to just do something.

Entrepreneur r what does IT take to start to IT?

IT takes a little bit luck. Look, I had spent the prior six years, from eighty four until ninety, mastering my craft. So clearly I knew something about the business.

But one has to be humble and actually accept that there is a fair degree of luck, because I was actually quite happy doing what I was doing at drexel berna. In some ways, the single best thing that ever happened to me was to be forced to make a change. 嗯。

do you think you would take the same type of skill to set up today?

Or is that a different skills set required? I think IT well, IT depends on the scale of your ambition today. Um if you look at what's required today, I think IT is much, much more difficult to set up a new financial services firm. In fact, I think the structure of the market today will result in firms that are very small and firms that are very large. I think that is gonna very tough place to be in the middle.

In a few sentences, what do you actually do at a poll?

Um if you look at the the best to describe what we do is to think about how we employ people. So if you look at the asset management business, we are three thousand people in asset management. Then you look at the retirement services business, where fifty hundred people in retirement services, and then there are four thousand other people at Apollo who do not Carry in Apollo business card, but instead originate credit.

What does that mean? Well, think about what the old G E. Capital was fifteen or twenty years ago.

Certainly, as I was coming up, G. E. Capital was thought of as the single best originator of senior security private credit.

They use their expertise in engines and medical devices and aircraft to become a really good lender. That's essentially what we've done. We have a fleet finance business, we have an aircraft finance business, we have a security zone finance business.

IT is all about the origination of credit because origination is the lifeblood of our business. So you say, what is Apollo today? Apollo is two businesses. On the one hand, the business that is not as well known is the retirement services business. A theme two thousand eight.

use that up with partners.

yes. But in two thousand eight, we had an idea to set up a new financial institution. And this financial institution was an insurance company. And the insurance company did not ensure people's life, people's health, people's property IT only ensured their retirement.

That business, which was initially capitalized with sixteen million dollars, is now with its european affiloir now four hundred million dollars, growing seventy billion a year organically and is by far of the largest retirement services company in the world. And IT turns out what we did in that business because if you think about what retirement is, it's essentially a fixed income business. People want guaranteed lifetime inga, or guaranteed income for a period of time or they're saving for retirement or their pension needs to be guaranteed to be in that business.

You have to be very highly rated because you're dealing with people's retirement and therefore, you have to have very safe assets. What we needed to be successful in that business was investment create fixed income, but with a spread, and we start with a baseline view that public markets, particularly public fixed income markets, markets offer no alpha. So if your entire business model is dependent on fixing, come alpha and there is none, what do you do? Well, you build the origination capability to service initially yourself, and that's what got us into credit origination.

And then you realize that you want to be diversified. You don't want a hundred percent of any rescue original at. You want twenty five percent of everything in one hundred percent of nothing.

So we built the client business side by side initially. Other other insurance companies in downwards pension funds, individuals and a traditional client base, the capacity to originate investment grade creditors at the heart of what pollo is. So what are we where retirement services insurance company and then we're an asset manager.

The asset management business though reflects pretty much what i've just said of the call. At seven hundred billion, five hundred and fifty billion is credit, most of which is investment grade, and one hundred and fifty billion is equity in two flavors. One, a traditional private equity business, which is about a hundred billion dollars, and the other, a hybrid equity business, hybrid not in the sense of bank hybrid, but hybrid being the mid d point of risk between that equity.

market. There's been a lot of focus on how you are replacing banks through direct deals with with companies. What kind of um business are you, uh, in a way, taking away from the more doing instead of them?

Well, I think it's a actually a bit of a moma. The press likes to report on this notion of banks and investors fighting over private credit. But I think we have to start with a definition. What is private credit? Well, for most people, IT means left landing or direct landing, which is a below investment, great activity.

And yes, IT is true that the vast majority of levered loans used to be originated in the banking system, and now they are split between being originated in the banking system and being originated in the investment marketplace. And yes, we are engaged in that business. But IT is a very small part of our business.

I think generally, financial ponente in other market participants are are not missing the bigger trend to me. Private credit encompasses almost every acid on a bank baLance sheet alone to a customer private, alone to a company private, along to a project private, and so on and so on. And the vast, vast majority of private credit is investment.

great. So we look and now say, are we replacing the banks generally? not.

If you think you working with the bank .

s is the point. And again, I will mix match. The a bank is actually really, really good at doing some things.

Think of that a bank is funded short and let long. A bank is not a great source of really long term capital. And think about what we're borrowing money for today. We're borrowing money for infrastructure, for energy transition, for next generation data and power, all really long term assets. These are not the idea of assets for a bank baLance suit.

Typically, they would go to the investment grade bond market, but they happened not to be great assets for the investment grade bond market, either because they are generally complex projects or structured in some way. What we are doing is we are matching really long term insurance liabilities with really long term investment grade counterparties in credit and becoming a providers of capital because in almost every financial system, there are only two sources of credit IT comes from the banking system or from the investment marketplace. There's no third choice around the world.

For whatever reason, regulators have decided that banks should do less and investors should do more. And of that piece that investors do more, the investment grade piece, particularly the piece that is not well suit to the I G. Public market, is what we have really come to do very.

very well. What do banks do? Well.

banks are Operationally intensive, shorter term, anything that is really Operational or clients centric.

So if you think about a Better picking credit.

you think I wouldn't think so. I our credit record stands up uh, to i'd say, any bank out there.

But you to that during hundred years of experience, they would ever learned something that is not that easy to learn in a twenty period.

Oh, my guess is the same people who were there a hundred years ago no longer here, nick. And these are all ultimately about people. And if I think, again, I think about the partnership that is evolving between asset managers and investors.

Look to me and banks thing I say to banks, we do not want what the bank wants. We don't want the bank's client, because if you think about the structure of an asset manager, we want the asset. We are incapable of providing the client, ama advice, equity advice, capital markets advice, hedging, derivatives, foreign exchange payments, custody, credit cards.

This whole bundle of services is not something that we can provide nor is something we want to provide. So the bank wants the client. If they lose the client to another bank, they lose all the services. If the bank loses an asset, they just lose the asset. And in the new capital regimes, in many instances, the banks no longer want the asset.

When do you think you'll be fully regulated?

Why would we be fully regulated? Why would blackrock not be fully regulated? Why would nor just not be fully regulated?

What is IT? What we're actually doing that gives rise to regulation. And i'll come back.

Do we take deposits? no. Do we do maturity transformation?

no. Do we have access to the treasury? no.

But don't you think at some stage you need to do, you know, focus s on big company and, uh, the regulators will be quite upset and they would overregulate like they do in many cases .

for clothes on a big company. I don't really know what that means. So again, think about what will you do. We're at the investment, great end of the marketplace.

If we're for closing in the investment rate into the marketplace, I assure you there is absolute chaos everywhere in the world. For closing is something that pinko does, that black rock does, that fidelity does, that everyone else does. IT is not unique to Apollos business model or what we do and investment grade, you would expect you to be different.

I meet with lots of regulators around the world, and I come back to this broader theme. Credit can come from investors or banks in the U. S.

bank. Landing is down to less than thirty percent of the overall market in europe, is still sixty five percent in europe. They are freezing the banks harder than in the U.

S. bozzle. For em game and so on. But at the same time, they have not liberalized on the invest side.

IT does not surprise me that europe suffers from a capital deficit. The us. Is, by far, there's the luckiest place in the world.

From a capital markets point of view, fifty percent of the worlds capital is raised here. The diversity of sources. So again, think about an investor. Every dollar that moves out of the banking system increases the resiliency of the system and reduces the leverage.

A bank is levered twelve to fourteen times an investor is generally not levered at all, reduction in leverage and diversity, a bank borrow short and lend slog, investors general borrow short, borrow lung and landlord, 嗯， there is no maturity transformation, there is no guarantee from treasury, there is no deposit. But the thing that always gets regulators, what percentage of banks baLances sheet in the U. S.

And europe for that matter, is investment great. Sixty plus minus. For us, our baLances Better than ninety percent plus investment grade.

What about the business you take from the public fixing market? I think i've heard do you say that in a little while, we there will basically be no difference between public and privates and investment? Great credit.

I I think that is true. I think that what we're we're heading um IT does not but after remember where we're starting from. So let's start with a general calibration.

We used to a thousand public companies in the U. S. We now have four thousand public companies.

We have more companies going private than going public. I don't think this is a short term phenomenon. This is a long term phenomenon.

Eighty percent of companies over one hundred million of revenue are private. What percent of capital should be private? A vast, vast majority of IT.

So we are actually supporting the whole private company ecosystem. 嗯， do I think we're going to display the public investment grade market? No, I don't think we're going to.

I think it's important to put all of these things in size perspective. You have black rock at eleven or twelve trillion. You have the idea Apollo at seven hundred billion.

If we are really, really successful, we will be twice our size five years from now. My guess is you will have a series of asset managers in the U. S. That are twenty trillion at that point in size.

We serve an important but relatively small role in the economy, and it's kind of what I like, the notion that our industry is not an asset management industry, an asset manager. You can give any amount of money and they will invest IT. We can only invest IT if we can produce excess return alpha. We're in the off of generation .

business after noon now. We are only in the public markets, right? It's not in a Mandate to be in the private market. What are we are losing out on?

You're losing another eighty percent of the investible mark. And if you think about IT, public markets do not work the way we think they work. In fact, nothing works the way we think IT works.

So I look at public markets today and I ask really fundamental questions, like in the U. S, which is the most developed of the capital markets, do we have Price discovery in the short term? I don't think so.

Think about what's happened in U. S. markets. Eighty percent of volume S M P, five hundred sixty plus percent of the market passive ten stocks, thirty nine percent of the S A P.

Four stocks have determined basically profitability for the last four years. One stock is larger than every public market other than japan that's the university are going into. If you had Price discovered.

you saying that the public market is very risky.

I think it's risky. I'm saying it's indexing correlated and IT is about capital flows. Now IT is not about Price discovery of an individual security.

In the short term, think about people who are supposed to be able to outperform the index. Active managers. However, active manager is done well, basically ninety plus percent of the time.

For the past twenty years, they have failed to beat the index. Did they get stupid? No, the structure of our market has changed.

IT doesn't mean bad IT just means indexed and correlated. And so an investor, particularly an international investor who wants to express an opinion in the U. S, no longer comes in and buys a basket of security. They buy the index.

Now you are also in the private equity industry business and done really, really well now. Um what are the trends you are seeing here?

The trends. So this is about reinvention, and this is the business I was referring to, wear and eighty four. I was done in ninety and so on and so on.

The business continues to reinvent itself, but I think we have to level set the decade that has just passed. I think she's going to turn out to be very unusual, and I don't think we'll be great for our investors. I have forecasts and i've said publicly, I think returns in traditional private market on existing vintages of funds over done over the past decade will be low.

Why people invested generally in the midst of the us. Printing a trillion dollars following the financial crisis and then following code and you had interest rates near zero. And so we have a very proximal approach to private markets invest. Sixty percent of, quote, private equity was actually growth. And many of the companies that were purchased, even if they were good companies, were purchased that relatively high Prices with capital structures, Prices at very low Prices that are now going to a be refinanced at much higher rates given that holding periods will be extended. All of that tells me that returns will go down.

So why should we then go into pride .

could do this is well, let let's go back. The same is true for public markets. Public markets have had exactly the same, but private equity is not the same for everyone.

You will find a core group performs that over the past ten years did not success to the the benefits of low cost leveraged and reflect that in Price. And I think we're gonna have a bit of a shake out in our industry. People who are giving you in my term private markets beta, I think you're gona be smaller going forward, they will be less successful.

And people who really stuck to what they do well, giving you private markets alpha. I think we continue need to be very, very successful. I believe that we will see a shake out. And again, my forecasts for the industry is that you will end up with the large and the small. I think the middle is going to be a very, very tough place to be for a variety of reasons.

What do you think will happen to transparency, esg and fees in the private cate industry?

So fees have been remarkably stable over a very, very long period of time, and I expect fees to be remarkably stable over a very, very long period of time. I have said about the industry in its traditional form that I do not think IT is a growth industry because our job, after all, is to produce alpha in private market.

IT is very we are take Apollo with, for instance, where a hundred billion doll plus franchise with a thirty five year history in this marketplace with exceptional returns, we can we can double the size of our business. Nor do we even think about IT. This business is run for rate of return.

IT is not run for growth. I think the vast majority of our competitors see the business similarly. That doesn't mean exactly the same.

And I think the business will be roughly at size in a traditional private equity format. But I also think we're gonna have increased demand for private assets. I think that demand is gonna from family offices.

It's coming from individuals and IT may, in fact come from retirement systems and IT may, in fact come from four one k IT will depend on how the regulatory situation he evolves. My own view is a relatively positive view of private markets without regard to the product for a period of time. And I think about the industry y's history, we basically grew the private assets industry, the private markets industry side by side with institutions.

But those institutions funded IT out of the small lest part of their portfolio, a little office down the hall called alternatives. All of a sudden, you have another source of demand you have who have almost no exposure to private assets, who are roughly the same size of institutions who I believe will also participate in that marketplace. You then have retirement systems and retirement plans looking to provide retirement income, who already have been big buyers of private assets, primarily fix income assets who are expanding what they do as the population ages.

And finally, I think you have public markets. And private markets convergence is happening first in the debt market, but I think I will eventually happen to some extent in the equity market. So institutions who historically have limited their participation in private assets to their alternative bucket that was done out of a mistaken belief that private was risky, in public was safe.

What if that basic conception is just wrong? What if private is safe and risky, and public is safe and risky? Why does the acid allocation of private only and alternatives make any sense?

What doesn't I think we will rethink the whole notion of asset allocation, and I can see that happening in real time in fix income. Fix income, historically for institutional clients, has been one hundred percent of investment grade and one hundred percent public. I see institutions now dividing that.

But the same fixed income allocation between beta public market I G and alpha private market I G and it's happening in family office, is happening in pension funds, is happening in downtown, is happening in offering well funds. And the reason is happening in fixing come first is you have external al gatekeepers, rating agencies. They can actually tell a portfolio manager your portfolio S N, A, this is an a, they are of the same risk. Now you're just making a determination as to liquidity and how much rate of return you want for a little less liquidity. Oh, and by the way, there is no liquidity in public fixing the markets.

And given that a lot of capitalist moving over to the private market, what what are the implications for the liquidity and how will that out? Also, investment banks are using less uh, capital for market making. Uh, you have different types of rules for banks and sea sea.

So the answers is the change has already happened in two thousand eight.

but we have not seen the vacation.

We haven't seen the really stress test we have within a twice. We've seen, we thought in covered where etf and fix income almost broke. And we saw in the U K, N, L, D, I, yes, we should expect. So think here's the set up, two thousand eight. Part of the regulatory reform was to penalize those who made markets and held market making capital within the banking system, particularly for fixed income, there is roughly ten percent of the amount of capital for fixing come market making today as there was in two thousand eight, and the market is three times its size.

And so when will we see that? So less than we have some type of crash. Yeah but mean in in the biggest scale.

the next time we get a significant risk of event, my own view is we should expect little to know. Liquidity in publicly traded fix income today in the best of times in the most liquid market takes five days to sell an investment grade corporate bond. What can we expect when I goes in the other direction? And so private markets today in investment grade, don't trade, okay? You're going to see liquidity come into private markets.

That will mean for private markets, everyday liquidity, everyday pricing, everyday Prices discovery. If you think about investment, great, at least you will have the same issues, the same ratings, the same size, and you will have similar liquidity over time. My god tells me over the next eighteen months, investors will really call us around this idea of fixed income and dividing IT between alphand.

对了， eventually I don't think change is gonna stop at fixed income。 I think it's coming for equity as well. As I said when I was in oslo, I think investors, including institutions like yours, you may not own private equity, but you will own equity that is private.

You mayor and many do already. They own spotify, they own OpenAI, they own any number of tech companies that have remained private. Well, why should I stop there? I think they'll be fifty or hundred companies that are private for which equity can be raised. Maybe that is the new form of active management, active ownership of companies or P E, without the leveraging, without the fund, that's a ways out. Still, the next five years is gonna about fix income replacement.

Now you're a uh, listed company and but your uh your target is is to generate returns for your investors. So how do you how do you um look at that kind of uh well trade off for not trade off between generating assets, which is what the public market this thing wants you to do or generating returns.

So I think if you follow the generation of assets and that is your only goal, you'll destroy the business. I come back to the basis on which we run this business. We run IT, at least Apollo, on three fundamental principles.

The first is everything is one strategy at apple. It's all purchase Price matters in equity. We think of that is value in fixed income.

We think of that as protection of principle and getting return not necessarily through credit selection or reaching down the capital structure, but through structure and origination. Um the second is we are not an asset manager. We are a source of alpha access return per unit of risk.

We can only up. So I wouldn't all as managers say that. I won't think so.

Someone who is a passive asset manager who has scaled massively in the etf business, their job is to give you beta, really efficient, really well run, really low cost, well reported beta. That is the vast mass majority of public markets today. Our job is to give you ala. We are therefore limited in our growth by our capacity to generate alpha. If we take in too much in the way of assets, we will delete our returns and ultimately create negative impact for our business.

Let's let's spend some time on .

the alpha side.

So is there such a thing as an Apollo investment ilog? Hy.

there is. It's in i've said that its purchase Price matters.

What is? What is?

What does that mean? This is so there are a lots of strategies that one can employ. There's someone who's a great internationalist, there's someone who a great microtron or they're someone who's greater chasing growth.

We are greater finding value. Sometimes that value comes from trading hard work for purchase Price, as in our private equity portfolio and asset management. But if you translate IT over to fixed income, it's finding excess return per unit of risk. So how do we get paid more for a single ted company from a single labor to company, then they can otherwise get in the .

public marketplace? Has the investment flow have .

changed since you started the firm?

IT has not changed in a very change. I do. Has IT ever been difficult to stay true to the philosopher?

Now it's been very difficult, especially when the U. S. Is printing eight million dollars over a period of time, and random companies are have multibillion dollar valuations. Night, uh, what do you do then? You you try to manage a lot of type personalities and convince them that doing nothing is the best thing.

And how do you do that? So you have think you have some ambition.

You've been to the circus where they have the lion timor.

So you see you hire this person like straight out of, you know, working where we actually both went to school. Uh, they are very keen on the kind of concrete the world. And there you are, a mark well, holding the back. yes. And how easy is that?

It's actually quite easy because it's not it's not just mark growing. It's the whole firm. We've all growing up in this culture.

We've growing up this way. It's not me against the firm IT. Actually, everyone has been around long enough to understand what our job is.

And we accept that there are a periods of time when we will not grow as fast. And there are a periods of time that we will grow very, very fast. But fundamentally, this is about making your own luck. I'll come back to A, A, A different way of thinking about our business, which I will be chAllenging for a second.

How important state talent versus cultural system.

it's all part of something there. There's lots of talent to people. But retaining let's go to do a more fundamental because you're getting out of a more fundamental.

What do we offer people? What do we offer a client? We offer them judgment.

There's no secret sauce. There's no you know, algorithm in the back room. It's judgment.

How do you get judgment? I think you get IT over a long period of time seeing what we do and don't do in a variety of chAllenging and not so chAllenging circumstances. That implies that I need you to spend your career at Apollo.

How do I do that? Well, I need to make this place the single best place to be a partner in financial services. And that is my north star.

Because if I do that, I will retain you for your whole career. There are two hundred partners on Apollo, and I wish all two hundred wanted the same thing. unfortunate. They want two hundred things, some mix of merit, compensation, culture, environment, purpose and twenty other intangibles.

So you, your clients and your people judgment. Right now.

people offer the judgment. Our clients are the beneficiaries.

U V O clients judgment. Now how is that judgment different from the blackstone judged E Q T judged judgment?

Everyone has A A slight difference or more than a slight difference in the way they do they do business. The firms, although they're all in the quote, alternative asset manage industry, are actually quite different in terms of the deals they pursue, how they're structured. Over time, we become more different rather than more similar.

Our business today is one of one. No one actually looks like we do today. I'll describe this set up.

Yeah what is an Apollo deal is let's t what's start with a more basic if we're seven hundred billion of A U M, which is approximate where you and three hundred and fifty billion of that was our own baLance sheet. Three hundred and fifty billion of that was client money. We are generally the largest buyer of everything.

The person that is most impacted by growing too fast is us. IT is a wonderful way to be alive with your clients from from a growth point of view and from an investment point of view. And that is the third perceptive.

The first is purchase Price matters. And the second is access to return for you to risk. The third is alignment. No one looks the way we look today. That implies other things.

We also manage a disproportion amount of fixed income, five hundred and fifty billion of fixed income verses one hundred and fifty billion of equity. Our businesses set up differently. What's been interesting about this is people.

This industry started with private equity. Almost for every firm you have mentioned, private equity is a very expensive cost of capital. Think of IT as a twenty percent plus rate of return that is required.

How many companies in the world with leverage can are appropriate for that high cost of capital? The answer is a few. But maybe the pile is about this high over time.

What we've done is we've taken our skill set, our ability to originate, our ability to analyze, our ability to source, our ability to discern. And we've extended IT from investment grade to leverage equity. We've actually lowered our cost of capital substances over time.

If you look at the average investment, Apollo mix today probably has a six or seven percent cost of capital, very heavily tilted to investment grade. That's a reflection now you're going to talk about of where the world is. So I start with questions back.

Is the world cheap today? no. Is risk being rewarded today? no. Spreads are tight in a world with geopolitical risk where valuations are high and spreads are tired.

Why would I want to take lots of rise today? They'll be a time to take risk after financial markets, correct? At some point, they always do. That ll be a time when we want to take risk. But if you're looking forward, the Apollo DNA and Apollo philosophy access return per unit of risk.

So this is a time where you are holding back a IT.

We're definitely holding back in adJusting how we invest right now. We want return. So if I give you the credit market return, reaching down the capital structure and taking more supportive at risk feels like a about bad idea today using your people and your resources to get paid for origination and structure. But being senior in the capital structure feels like a tremendously good use of time, right?

And that's what we've been doing. So you you playing IT safe a bit like warm buffet who is .

raising cash last I looked, live a long time in a very happy way.

Um what are the main risks in these markets? And what what could trigger something more, more serious.

So I look at the river today. Look, the rist in front of us and in somewhere are obvious. We have geopolitics, says one of the most overriding risk, but not even geopolitics, politics.

I mean, we right now in the U. S, I will tell you, things feel great. Not only do we have growth and we have very low employment, we have a backlog of fiscal stimulus that hasn't even hit yet.

Three years ago, we passed nearly two trillion, and infrastructure bill is still being built. Nothin built yet. Two years ago, fifty two billion r for semi conductor plants.

Not a single plant is open yet. A year ago, inflation reduction act to encourage manufacturing of E V S and other things here. Not a single plant open.

Last three years in a row, we've been the largest recipe in the foreign act investment, and we're rapping defense production. All of those things are fiscally stimulative against a backdrop of no legal immigration. That is a pretty good set up.

We've raised rates, five hundred bases points. What happened? Home Prices went up.

Stocks and up. Capital markets are fully liquid. This is a pretty good set up.

Oh, by the way, we have a two trillion dollar deficit in peace time with a four percent unemployment. That's a worry. So one can look at geopolitics. One can look at politics or governance as another and how .

how bigger war is the deficit to me?

Um IT doesn't it's not a short term worry, but IT is ultima long term worry.

How could you turn into a short time worry?

Um usually these things turn into a short to marry by bond market reaction. Eventually, the bond market tends to be the discipline disciplines for the world.

How do we know that is not going to kick in suit .

we we don't these that's why it's it's a worry. But let me come to another worry like these are things. How do you protect yourself in these environments? Well, you protect yourself by being top of the capital structure, senior, secure and credit markets.

And you protect yourself and equity markets by trying not to buy into trends, not to pay massive Prices for things that may, in fact, be supported by a liquidity bubble. But what else worries me? Indexation and correlation.

Think about what's happened in the world. Everyone is now index to the same trade. We saw this in U.

K. L, D, I. L, D, I was not some crazy thing U. K. Institutions were doing, is just that everyone owned the same risk at the same time, in the same way, and thought they would be able to sell their triple A N W A holdings to meet margin calls.

Guess what they couldn't? Isn't that the setup of the whole world today? The vast, vast majority of public markets, daily liquid. Daily liquid seems to me to be the biggest imbaLances that we have anywhere in the world.

You are not daily liquid because you have a long term point of view and what you do, we're not daily liquid because we manage for generally long term institutions, but the vast majority of money that out there is daily liquid. Think about what we've done with the largest pool of capital anywhere in the world. In the us.

We have twelve to thirteen trillion in four one cake. These are people who need retirement money, retirement savings more than anyone else in the world, returns. What do we have them invested in? Daily liquid, generally index funds for fifty years.

why? Well, I believe that privateer's risky in public is safe. A notion that you need daily liquidity in a fifty year asset class.

Things we do just don't make sense, and they don't make sense in the context of the financial market, the way that exists today, verse, the way might have existed years ago. As you know, as a student of history, public financial markets are relatively new phenomenon in the history of mankind. Most markets were private over a very, very long period of time.

I'm not saying one is Better or worse. Clearly, private public markets have done awesome, good things for the world. But indexation correlation, I do not think of our friend in periods of volatility.

Mark, uh changing time a bit here. Uh let's talk about leadership now we find all your colleagues and uh and employees and about leaders say hopefully .

they would say nice things. But I also I I get uh a an update on my literary style every six months and and how .

do you how do you get that?

I I get formal feedback. And the nice thing about the group of apol is they are not shy. They are very generous ah with their feedback what they say, they acknowledge my strength and also my weaknesses.

What are your weaknesses?

It's a long less nickle I am metro.

What are you what are you working on? What are you trying to improve with your leader?

Start so let's let's start with what OK i'll go there and said what we have to do. I believe as leaders, i'm a servant leader. You are a servant leader.

You gave up what you were doing to be a servant leader. I gave up what I was doing to be a servant leader. I used to think doing anything.

I was actually quite good at doing things. Now I do nothing, and that doesn't literally mean nothing. But I know if I do something I have to do IT again, whether if I create a culture of letting my team succeed, they get to do IT.

They paint my fence for me. My job is to make their job easier, and I ve accepted that. So I look at what i'm trying to do here half my day is managing the careers of two hundred people because I can't run this firm by myself. IT is way too big a firm.

I need the two hundred partners of Apollo run this firm if I have them focused on the right direction and I have their bion, everything works because the people who are coming up in our firm and see two hundred partners who are here for their careers, they realized its worthwhile. The Young generation who are working really hard now have two amazing generations of mentor's in front of them IT all works. If the two hundred partners are not happy and we end up with turn over, it's very hard to run a knowledge base business where knowledge keeps leaving.

I think that's what we're seeing a lots of financial institutions today. So what am I working on? I never really understood how important the cultural side of this, the judgment side of this, the partner ship side of IT was.

But boy is an important that's a big part of my day. The second I had spent most, most of my career trying to avoid speaking to the press. I just never saw the utility of IT, the notion of how you lead. Now we have gotten to a size on our industry where we need to communicate .

what we need to do pook asts.

We even need to do podcast. But by the way, podcast is the single best form of difference.

which is why is becoming increasingly popular, right? Because you get time to plain.

you get time to explain. And you also generally are talking to someone who is not press for time, who has had the benefit of looking at what you do and has the history and is asking questions and engaged in the dialogue.

not just a flatter you, but is is interesting how IT became very important in the u know election in.

but communicating with regulators, communicating with our peers, communicating with competitors, most importantly, communicating a clear strategy to our employees so that everyone knows what is expected of them. We've just come through an invest day, really important process for us, everyone who will join Apollo from this point forward, we will see the three or four hours that we've put together. And so the amount of time that we take to actually articulate our strategy, look, I wish I could keep our strategy to ourselves and keep in a big secret, but that doesn't work anymore.

No, no, i'm not sure we really touch you, your weakness this but but hey ah what are your friends? S from .

a strange point of view, I think I have done a good job position the company in front of tail wins and really stepping back and trying to chAllenge coming into the office each day and just doing the same thing. Something tells me and I tell the team, what got us here over the past ten years is not going to be what gets us where we need to go going forward.

We are going to have to accept the markets have changed that are role in these markets have changed, that the products that we currently think of as immutable able are not possible. Think about your career micro. I started, no, how your bonds, no left d loans, no etf and minimal security zone.

We take for granted that those products are mainstream. Trust me, we're going to have in ten years from now new products that we never thought of. The a history of our financial services business is .

are you to are you going to invent them?

I hope we have a hand in them. And boy, are we try and hard to really anticipate where we think markets are going. Terms that we've used origination, fixed income replacement, these are now terms in our industry that did not exist before equity replacement, market making for private assets. We try to be at the forefront of everything that's going on, and I hope we are .

talking about working hard. What does the day look like? When do you wake up?

And i'm up at five almost every day, right? What do you do? Well, if I don't exercise at five thirty IT doesn't happen, right? So generally I try to exercise five thirty to six thirty and to be in the office sometime just after coffee.

before after the workout.

Yes, both. And if i'm at home, I do. And if i'm in the new york office, I like to sit on A A bar top just outside of our coffee bar and I get I like doctors hours, it's demise fied speaking to the C E.

O.

And your coffer bar has a cool name IT does the .

contrarian cafe the contrary .

cafe when you go to bed might be a little boring there that I am usually in bed .

by ten um like me. Energy what you get your energy from .

know the answers. I don't know. I don't know really do you think energy?

Do you think it's genetic?

I don't know it's genetic or otherwise because there there is no basis on which to know um but I will say that I wake up, I think, on one of the luckiest people in the world every single day and there is no shortest of things that interest me not just at Apollo but elsewhere. There's so much going on in the world and each of us has a role to play. Now my daytime b is at Apollo, but as you know, i've been very active in what's happening on american campuses in our universities.

And I probably just flag here that we have been sitting at the warden board together, which is where I go to know you. Um but you also do restaurants. You have a lots of you know restaurant well.

restaurants are easy because it's actually I don't know anything about running a restaurant, but I have an amazing partner. But if you look at we now talk about hobby's, which is not only are we interested in philanthropy interested, but we also need time for ourselves. One of my hobbies is building things.

I collect nothing, no, no cars, no wine, no, nothing. But I like to build things. One of the things I did was I renovated a historic building out in the hampton on the main street and sag harbor.

And I had, as a tenant, a restaurant. Well, that restaurant went out a business, and my space was dark for six months. I then had a second tenant.

Another restaurant who also went out of business took me a year to realize I was in the restaurant business. I just didn't know IT. So I formed a management company.

I hired a terrific partner who actually knows something about running a restaurant. And I get to do the fun park. I get to do design, construction, menu selection and concept, but once that opens on a customer, a very happy customer, but a customer .

when you make decisions, are they um analytically based or they .

get feed based? They're both um i'm an analyst son, but not everything can be analyzed. Uh a lot of time we are making judgements on on people and judgments on the source of information that we're getting. As you know, we live in a world of uncertainty. And so a little bit of beach.

how do you cope? stress.

I don't find the job tremendously stressful. I know people find that weird, but I I just don't I don't feel the stress from this job. I literally believe we are the lucky st. People in the world to be able to do this.

The slogan we have here as we get to do this, anytime someone tells me in the firm they don't like what they're doing, it's time for them to have another job within the Apollo stem or to find something else to do. If you come in pretty often and you don't think I get to do this, this is not the right job for you. I get .

to do this. So when you interview people for this firm, what do you ask them? What is key for you? When you hire people.

you you want some insight into who they are and how they think and what drives them. So whatever questions help you get at that, along with the basics of are they skill to do their job if they get to me, generally, my team has already realized that they're qualified to do the job. The questions are they going to fit? We are a harder place to integrate into, but I believe a Better place to be as a career to.

I see the fine. We run .

a fully integrated platform. That means you are the beneficiary of lots of other information, lots of other resources that are not generally associated with your specific department. If we were the kind of firm where we were a series of silos, you could join our firm and get to know your silos really well and be very successful here because we are an integrated platform.

You don't just have to get to know your cyl o, you have to get to know who does what across the firm. That makes IT harder to integrate. But once you master that, the leverage you get in your job is unbelievable.

And so is that for everyone? No, it's not for everyone. There are some people who just want to be left alone to do what they do, and they do IT really well. They could be really successful, but probably not really successful here. On the other hand, people who are curious, who understand the mutual dependency, of looking across the platform, understanding how everything relates to everything else, I think our ideally suit for you.

how do you meant to your leaders look.

this is it's an interesting thing. So i'm i'll tell what we're working on. It'll give you some notion intermediary ship.

You take a firm, my gars or anyone in our industry, we've been more successful than any of us ever thought we would be. Most companies who are successful eventually revert to the mean people inside the firm. Leaders start playing not to lose rather than playing to win.

If you want to innovate, you have to get the team to play to win. How do you do that? Well, in part, you have to make IT safe for them to make a decision and to fail you.

So how do we do that? I am try to emulate for them, which is, I let them know that i'm, if i'm right, two thirds of the time, that a lot and I fell a lot, at least a third of the time, but I fell quickly. I acknowledge IT, I fix IT and I move on to the next.

That's that's different. I'm not saying we do that with money or with investments, but in terms of how we run the business at how we hire, how we position the business, we are not going to be right every time we make a decision, creating a place where people are not afraid to make a decision and are not afraid to fail. And I can openly say, I screw that up, let's fix IT and move on quickly is a big part of what IT takes, I believe, to be able to play to win and not just play not to lose.

When did you lose last?

We lose all the time. Specially we have lots of people who have come and gone from Apollo where we made bad decisions or we made bad decisions on grow with or something else.

If you want to try to abstract the type of mistakes you you have made is do they have anything in common there?

There are people mistakes. They're difficulty of scaling mistakes or in a lot of times, their timetable mistakes.

And success is what do they have in common for you?

Success is usually we've positioned ourselves the right way and the market came at the right time or we got there first. We believe something that no one else believed and we just went to went about an executed by. For us, the biggest thing that we've done has been retirement services. Yeah, we literally started with sixteen million dollars to a business that is now four hundred billion of assets under management, where we have a hundred firms who would like to emulate what we've done.

And you managed to acquire a big portfolios when other people sold might.

It's only the answer is yes. But we haven't acquired a portfolio for years at this point. We now do seventy billion of organic business, which is by far of the largest amount. Business first is establish names in .

the marketplace. What do you read?

I read mostly history. Um I like to read a lot about the middle st. I find IT just a fascinating place, not only because of what's going on today, but just because of how much change is taking place. I'm just back from the middle east last week, and I come back incredibly hopeful. You have most of the countries in the region who we thought of two decades ago as mired in extremism, focus on bearing the future for their people, on commerce, on moving their, their societies forward, very little in the way of extremism. I come away from a trip to the release, incredibly hope.

Now we have tens of of thousands of Young people listen to this. What advice would you give them? One wise would you have given to, you know, mark rome in one nine hundred and eighty four?

So I spend a lot of time talking to Young people. It's it's part of the fun, the fun part of this job. And I tell them all the same thing, master your craft, like ultimately, you get to do more when you become a master of your craft.

Once you do that, then you can pick your head up and you can look around and start to connect the dots. The second is boneless with yourself. All of these jobs are really hard we should make.

We should not be shy about this. These are all alive. If you don't fundamental love IT, you will not be successful long term in this business.

Well you have for sure message your craft a position this um uh to really benefit from from you all the all the uh winds and uh congratulate lation. It's been amazing. Thank you.

It's been a tremendous metaphor and i'm fortunate to have two hundred people who make me look good.

very good.

Thank you. All right. thank.