HIGHLIGHTS: Marc Rowan - CEO of Apollo
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Hi everybody tuning into this short version of the podcast, which we do every friday for the long version, tune in on hi everyone. I'm nuclear tanging, the C E. O of north west bank investment management, the norwegian someone else fund.

And today we are joined by a true visionary in the world of finance, mark roman, who founded or cofounded Apollo global management, which is one of the most influential alternative asset manager firms in the world. Now we are the lucky owner, or just under two percent of Apollo, which works out at just on the one and a half billion dollars. Mark, three air, great. thanks.

Thanks for coming and and hopefully your happy .

shirt ler mark, in one thousand nine hundred 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 eighty billion and the market cap is more than a eighty billion. So I think can say 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 for in our industry. Deva was roughly the same size.

And then thirteen 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 helps.

Well, look, the skill and talent is to make sure we're position with tail wind behind us by positioning the business the right way. But fundamental change is ultimately were powered our business.

What does IT take to start a family 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 way 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.

Mark, 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 um in a way, taking away from them more doing and sell them.

But I think it's a actually a bit of a mister or 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 that means lever landing or direct lending, 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, 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 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, fast majority of private credit is investment. great. So we look and now say, are we replacing the banks generally? Not.

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

You're losing another eighty percent of the investable market. 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. Mark, eighty percent of volume.

S, M, P, five hundred, sixty plus percent of the market passive ten stocks, thirty nine percent of the excipt 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 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. I think investors, including institutions like yours, you may not own private equity, but you will own equity that is private. You, you mayor and many, you 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 one 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 that's a ways out. Still the next five years is gonna about fix income replacement.

Is there such a thing as an Apollo investment physical?

Y there is i've said that it's purchase Price matters.

What ah so what does that mean?

This is so there are lots of strategies that one can employ. There's someone who's a great internationalist. There's someone who's a great maco tracor.

There's 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've 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 rated company from a single alerted company? Then they can others SE get in the public marketplace.

Has he ever been difficult to stay true to the philosophe?

It's been very difficult, uh, especially when the U. S. Is printing eight trillion dollars over a period of time and random companies are multibillion evaluations.

Night.

uh, what do you do then you you try to manage a lot of taig personalities and convince them that doing nothing is the best thing.

So this is the time where you are .

holding back of 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.

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 in 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 unemployment, 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. Note is 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 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 direct investment, and we're rapping defense production. All of those things are fiscally stimulus 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 were up, stocks went up.

Capital markets are fully liquid. This is a pretty good set up. Oh, by the way, we have a two trillion dollar of 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 do you cope with stress?

I don't find the job tremendously stressful. I literally believe we are the luckiest 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 are doing, time for them to have another job within the Apollo system 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.