We’ll begin with an ultralaconic recap of the primary installment of this collection. Please learn “How Brookfield and friends generate income…” if one thing within the following part just isn’t clear to you. Constructing on this recap, I hope to make the insurance coverage technique of different asset managers accessible for all readers at the price of some oversimplification.

A primer on alt asset managers

• Various (“Alt”) property are every little thing apart from public-trading shares, bonds, and money devices. The most well-liked various asset is non-public fairness adopted by actual property, non-public credit score, pure assets, infrastructure, renewables, and a few others. Since alt property don’t commerce publicly, they’re illiquid and should take years to promote.
• Alt managers supply funds principally from institutional purchasers with lengthy funding horizons similar to pension plans, school endowments, sovereign funds, and so forth. Purchasers’ contributions are organized in so-called non-public funds that differ by classic and technique. Alt managers deal with concurrently tens of personal funds with a typical lifetime of 7-10 years throughout which purchasers’ monies stay locked. When a fund winds up, purchasers obtain again their contributions with earnings. Since alt managers must consolidate non-public funds of their statements, their GAAP stories are obscure.
• Lately, alt managers have began attracting funds from high-net-worth and mass-affluent people as nicely (the so-called retail channel). Regardless of sure hiccups, it’s thought-about a promising channel for development.
• Some alt managers make investments their very own vital funds together with purchasers to realize alignment of pursuits and are referred to as asset-heavy. Others attempt to make investments as little as legally doable and are referred to as asset-light.
• The largest alt managers embody 6 firms (that I name the “Large Six”) however 7 shares: Blackstone (BX), Brookfield Company (BN), Brookfield Asset Administration (NYSE:BAM), Apollo (NYSE:APO), KKR (KKR), Carlyle (CG), Ares (ARES). Every of the Large Six has its distinctive technique and a number of other of them have overwhelmed the market over the long run. All of them are extra risky than the market and at present a number of of them are buying and selling at a excessive dividend yield.
• Alt managers cost purchasers charges. For asset-light managers, these charges dwarf all different sources of income. Asset-heavy managers can rely on returns on their capital as nicely, however charges are nonetheless probably the most dependable and beneficial a part of their enterprise. Payment-related earnings (FRE) is crucial line merchandise of an alt supervisor’s revenue.
• The purchasers comply with pay charges since usually (however not at all times) the returns they obtain AFTER FEES are larger than they will obtain in any other case. Alt supervisor’s efficiency monitor document is a beneficial intangible asset that’s extremely cherished.
• Charges may be divided into administration charges charged as a proportion of purchasers’ funds (much like mutual funds however larger) and efficiency charges. Smaller recommendation and transaction charges charged on a per-event foundation are often grouped with administration charges. Administration charges are steady and predictable as they’re being charged quarterly whereas a non-public fund exists. Some efficiency charges are assessed periodically as nicely however may be zero if funding targets should not reached. The very best-known efficiency payment is the so-called carried curiosity (“carry”) that represents a slice of funding acquire/revenue obtained by an alt supervisor solely when a fund is wound up offered its funding efficiency is above a sure hurdle charge.
• Since charges are depending on property underneath administration (“AUM”), AUM is the only most necessary metric for all asset managers. Once we speak about business development, we imply development in AUM. The full of alt AUM in the present day is estimated at $13T with 40% of them in non-public fairness. The Large Six forecast development in AUM at ~16-20% over the subsequent 5 years or so.

Berkshire’s enterprise mannequin

Warren Buffett popularized an in depth connection between insurance coverage and investments. Most of my readers will need to have learn Buffett’s annual letters explaining it however I’ll repeat his mantra in brief.

Insurers obtain premiums earlier than paying claims which permits them to generate “float” – money that’s reserved for paying future claims however that may be invested in the meantime. So long as a property and casualty (“P&C”) insurer is rising and generates underwriting earnings (i.e. its premiums are higher than the sum of its claims and bills), its float grows as nicely. For our ever-profitable and ever-growing insurer, in the present day’s float is a legal responsibility that can NEVER be paid (as a result of it can solely develop) and thus it may be used for long-term investments similar to shopping for shares or buying companies.

So far as I do know, no person earlier than Buffett formulated this precept so brazenly. Many of the real-world insurers are much less assured of their underwriting profitability and/or their development and make investments their float principally or solely in dependable bonds.

In his insurance coverage operations, Buffett can also be extra conservative than in his verbal statements. Under is a desk from considered one of my previous articles about Berkshire Hathaway (BRK.A)(BRK.B) that exhibits that the sum of money and bonds on its stability sheet often exceeds its float. Nevertheless, in 2008, when shares have been significantly enticing as a result of Monetary Disaster, Buffett used the float to fund aggressive fairness investments. On a smaller scale, he did it additionally in 2009, 2011, 2013, and 2015.

For Berkshire, insurance coverage at all times means P&C operation (not counting some life reinsurance). This isn’t by probability. P&C insurance coverage has short-duration contracts (sometimes one 12 months and even much less for some instances) and on the finish of the contract time period, a conservative provider is aware of its underwriting outcomes pretty nicely. Thus each underwriting earnings and float can be found in money and may be invested, no less than partially, in shares or acquisitions.

Quite the opposite, contracts for all times insurers have lengthy length and earnings are accounting-driven and accounting itself is arcane. Precise money is unambiguously generated solely on the finish of the long-term contract. This makes life insurance coverage unattractive for a capital allocator like Buffett.

Berkshire’s mannequin, nonetheless, has a serious weak spot – it wants Buffett to make it work no less than through the development interval. Markel (MKL), Alleghany (Y), and Fairfax (FFH:CA) have tried to duplicate it with restricted success. Each Markel and Fairfax made vital funding errors at a sure level. Alleghany has prevented it however was too cautious to generate robust returns and just lately was acquired by Berkshire.

Hedge funds and insurance coverage

Some hedgies tried to take advantage of insurance coverage otherwise. For causes that can grow to be clear shortly, we are going to spend a few paragraphs on it.

The 2 well-known examples contain well-known hedgies Daniel Loeb and David Einhorn. Each arrange affiliated/managed public reinsurance firms within the Caribbean that paid funding administration charges to their hedge funds. So long as one trusts publicly introduced plans, these reinsurers have been supposed to learn from the hedgies’ funding acumen and offshore taxation.

In actuality, hedge funds have been the one beneficiaries. Hedgies considered reinsurers’ float as a everlasting capital to handle and an countless supply of charges. Beneath this lens, reinsurance underwriting was secondary and total efficiency was mediocre, to place it mildly. Traders in these public reinsurers haven’t fared nicely whereas hedge funds pocketed a whole lot of thousands and thousands in charges.

Athene and Apollo

Apollo co-founded insurer Athene proper after the Monetary Disaster and have become its main and controlling shareholder. James Belardi, a long-time insurance coverage govt who continues to be Athene’s CEO, was one other co-founder. Athene’s design was primarily based on fundamentals that Belardi had realized for 20 years of his earlier insurance coverage profession.

The timing of Apollo’s entry into the insurance coverage business was not unintentional. After the Monetary Disaster, banks grew to become tightly regulated and needed to restrict their lending actions. The necessity to borrow cash, in the meantime, saved rising in keeping with the financial system. This mismatch had created a worthwhile area of interest to take advantage of and Apollo decided to grow to be a non-bank lender. Again then, only a few, apart from Apollo, found out the long-term penalties of the Dodd-Frank Act and related rules.

At the moment, Apollo was an asset-light alt supervisor with out the wherewithal to fund any loans. The reply was to lend different individuals’s cash and Athene’s float was presupposed to grow to be one (however not the one one) supply of funding. The start was relatively modest – Athene had nonetheless to generate float and Apollo had nonetheless to optimize its lending expertise.

Whereas the idea itself was relatively inventive, its implementation required much more creativity. Nevertheless, James Belardi had finished it earlier than for his earlier employer.

Banks fund their loans with prospects’ deposits. Insurance coverage firms, in precept, can fund loans with underwriting liabilities aka float. However not all floats are created equal. Buffett wants P&C short-duration float to fund fairness investments for the explanations I already defined. Quite the opposite, Apollo wanted long-duration liabilities to learn from the illiquid long-term nature of personal credit score. Of all insurance coverage firms, life insurers have the longest-duration float and so Athene was destined to grow to be a life insurer.

This answer had one other necessary profit: a typical assets-to-equity ratio for all times insurers is one thing like 10:1. Since Apollo’s charges are primarily based on AUM, it offered a easy technique to generate lots of charges on a relatively small fairness funding.

All this was roughly apparent. However the vital step in Athene’s design was a strict limitation on merchandise it could underwrite. Oversimplifying a bit, Athene would specialize solely in annuities.

The only kind of annuity is a hard and fast annuity when a buyer provides an insurance coverage firm a sure sum of money with a precise information of how a lot and for the way lengthy she’s going to obtain again from it at a future date. Any such annuity is sort of much like a long-term financial institution CD (or a set of CDs to account for a number of contributions and/or payouts). There are different varieties of annuities with fixed-indexed annuities being particularly common. Some annuities additionally embody components of mortality dangers. Nevertheless, through the use of derivatives, reinsurance, and hedging, a life insurance coverage firm can scale back a extra sophisticated annuity to a easy mounted annuity. If it isn’t doable, Athene just isn’t to underwrite the product. Nor it’s all in favour of different insurance coverage merchandise similar to P&C, medical insurance coverage, long-term care, variable annuities, and so forth.

On this regard, Athene is an insurance coverage firm that carefully resembles a financial institution with funding from annuity liabilities instead of CDs. So long as Athene’s return on investments is bigger than annuity funding prices plus working bills, it generates spread-related earnings (“SRE”).

Since annuities are primarily for (future) retirees, Athene has grow to be a specialist retirement firm and that’s the way it positions itself. As a consequence of inhabitants growing older, retirement funding will stay a rising business for years to return.

Athene acquires annuities by way of a number of channels. First, from people by means of completely different intermediaries. Secondly, by reinsuring annuity liabilities generated by different insurers. Thirdly, by buying closed blocks of already current annuities from different insurers. Fourthly, by agreeing to offer defined-benefit pensions to staff of third events (it’s also referred to as a gaggle annuity or a pension threat switch). And eventually, by agreeing to take deposits from establishments (one thing like company CDs with both mounted or floating charges) – the so-called funding agreements that aren’t associated to annuities however are related in construction.

Under is a slide from current Athene’s presentation as an instance the way it works in follow. The slide exhibits solely spectacular natural development with out occasional massive acquisitions of closed blocks.

Regardless of all of the efforts in design and profitable implementation, Athene as a public firm had by no means traded nicely. Many buyers (together with actually yours) thought-about Athene a method to create AUM for Apollo’s charges and nothing else. It isn’t significantly shocking as soon as one is conversant in hedgies’ insurance coverage experiments.

In mid-2021, Apollo and Athene agreed to merge and it grew to become a complete shock for me. Solely after this announcement, I began Athene severely. Beneath the merger lens, it grew to become clear that Athene was far more than a provider of AUM to Apollo.

For the reason that merger (it closed on Jan 1, 2022), beforehand asset-light Apollo has grow to be asset-heavy. What was Apollo’s motivation for merging with Athene?

Considered one of well-known Apollo’s tenets is “buy worth issues”. This was the case with Athene as a result of it was buying and selling poorly. The acquisition was finished by issuing extra shares of Apollo at round P/E~6.

However the low worth was a requirement, not the motivation. The true purpose was attaining the total alignment of pursuits between either side. It’s clearly advantageous for the insurance coverage aspect as a result of the funding aspect, dealt with by Apollo, can be paying nearer consideration to Athene’s SRE along with FRE. Nevertheless, it’s much less apparent that Apollo will even profit from Athene’s capital era. Earlier than the merger, asset-light Apollo was paying out virtually all earnings within the type of dividends. Athene generates capital past its development wants and this capital may be and has already been used for long-term funding alternatives past instant SRE era.

The world in accordance with yield

Up to now, we have now described the legal responsibility aspect of Athene. However what’s on its asset aspect managed by considered one of Apollo’s funding teams? Earlier than we proceed, please check out Athene’s steady unfold generated:

And the next slide explains how this unfold is achieved:

So, apart from totally structuring its liabilities, Athene additionally incurs decrease working bills (which isn’t shocking for a narrow-focused and scaled-up specialist) and achieves higher funding outcomes AFTER APOLLO’S FEES! This overperformance could appear small at solely 0.3% however Athene’s property are ~11 occasions larger than its fairness and it permits to generate ROE a number of factors larger than its opponents!

To grasp the rationale for this overperformance, allow us to check out Athene’s stability sheet first:

There are two parts of “secret sauce” right here. First, a part of Athene’s fairness (however not float!) is invested in varied equity-like alts throughout Apollo’s methods. They generate annual returns of about 11% on common which contributes to funding outperformance.

Allow us to flip now flip our consideration to 94% of Athene’s property in fixed-income. Roughly half of it’s in company and authorities bonds not completely different from different life insurers. However the different half consists of investment-grade securities originated principally by Apollo itself.

To originate debt, Apollo has 13 inside unbiased underwriting teams (and is within the technique of buying the 14th one from Credit score Suisse) which can be specialised in lending to a vertical the group is aware of intimately. For instance, one group could focus on senior secured lending to mid-market firms, one other in business mortgages, and so forth. Apollo is at all times on the prowl to start out, rent, or purchase new teams in numerous geographies to cowl increasingly more lending niches. These teams are efficiently competing towards banks and surprisingly typically cooperate with them. Per Apollo’s estimate, solely about 20% of US lending in the present day is originated by banks. To make our dialogue extra down-to-earth, I’ll carry a easy enterprise case that I’ve been barely concerned in.

My good friend is promoting his medical workplace in New York which he doesn’t want anymore. The property has sure points however ultimately, he discovered a purchaser who agreed on the worth. The client desires to start out a cosmetics enterprise within the workplace however she is a relative newcomer to the US and doesn’t have a credit score document that might permit her to acquire a financial institution mortgage. Nevertheless, she supplied to pay my good friend 2/3 of the acquisition worth in money plus a 5-year 7% seller-financed interest-only mortgage with a balloon fee on the finish. My good friend doesn’t want money now and is agreeable to this construction.

If the deal closes my good friend will originate a mortgage that banks don’t need. Do you contemplate this mortgage dangerous? It appears relatively secure to me due to the declare seniority, collateral high quality, and low loan-to-value ratio. In my good friend’s portfolio, this mortgage can grow to be a bond alternative, paying a better yield with out larger dangers. If every little thing goes nicely, my good friend will pocket extra cash with none trouble. If one thing goes mistaken, he should foreclose on the property but it surely ought to be a really worthwhile trouble.

There are 3 variations between my good friend and Apollo’s underwriting teams: the dimensions, the movement, and the securitization. Apollo’s teams can arrange a movement of sizable offers in numerous verticals after which securitize them making the top product actually funding grade however with a better yield (I’m hopeful my readers are conversant in securitization – it can take me too lengthy to elucidate it right here). Just like my good friend’s case, the underlying loans are pretty illiquid however that’s acceptable for entities with high-duration liabilities like Athene.

A number of circumstances are necessary for such a exercise: the claims ought to be senior; the loans are sometimes tailored relatively than customary; documentation management is crucial for draw back safety and favorable covenants; and the loans ought to be funded relatively shortly to make it handy for the borrower.

Earlier than the Apollo-Athene enterprise, non-public credit score implied primarily both distressed debt or junior speculative debt. Working with Athene, Apollo has grow to be a specialist in high-grade debt, distinctive amongst alt managers. The power to generate investment-grade debt (although illiquid in lots of instances) has led to 2 necessary penalties. First, Apollo’s high-grade merchandise are match not just for Athene however for different insurance coverage firms and pension funds as nicely. Secondly, Apollo has grow to be able to providing holistic and sophisticated capital options to massive firms throughout the credit score spectrum – from fairness to investment-grade debt with every little thing in between. A few of these offers have already been spectacularly profitable like financing and makeover of Hertz, for instance.

Apollo defines its goal in non-public credit score as delivering higher returns per unit of threat. Threat on this case is measurable as both back-looking historic credit score losses (Athene’s credit score losses are very low, decrease than these of its friends in life insurance coverage) or forward-looking debt metrics. So long as Apollo-originated merchandise are enticing on this regard, they find yourself on both Athene’s stability sheet (producing each FRE and SRE), in Apollo’s non-public funds (producing FRE), or on third-parties stability sheets (producing transactional and generally, administration charges as nicely).

Fast Apollo’s analysis

I hung out on Apollo/Athene as a result of it helps to grasp the mixture of alt managers and insurance coverage basically. However as soon as one understands how Athene works, it’s pure to crudely verify whether or not its worth is correctly mirrored in Apollo’s inventory worth.

On the Q3 earnings name, APO forecasted ~$2.35 and ~$4.00 per share for FRE and SRE respectively for the total 2022. The remainder of Apollo consists of carry and returns on its capital exterior of Athene’s stability sheet (Principal Funding Revenue or PII in Apollo’s lingo). PII is far smaller than FRE or SRE and fluctuates wildly. However I observed that it’s at all times greater than mixed mother or father prices and curiosity bills. For simplicity, we are able to conservatively discard all three of them collectively. The corporate additionally forecasted an 18% tax charge, which interprets into $1.93 after-tax FRE and $3.28 after-tax SRE. Utilizing 25 and 15 multiples respectively, we give you a ~$97 estimate of APO’s worth vs its present worth of ~$67. Alternatively, APO is at present buying and selling at a P/E ratio of 67/(1.93+3.28)~13 with anticipated development of one thing like 15% or larger.

I’ll keep away from particular discussions about multiples right here, please contemplate it as nothing greater than a ballpark estimate. Mixed Apollo will report its first full-year numbers shortly. It is going to be attention-grabbing to see its This autumn buybacks and the dividend enhance from Q1.

Dangers and sights of Apollo’s mannequin

The principle attraction of Apollo-Athene’s mannequin is an enlargement of alt managers’ addressable market. Now alt managers can cope with every kind of debt and the demand for higher-yielding investment-grade debt ought to land new purchasers and extra charges.

It doesn’t essentially require having an insurer on the alt supervisor’s stability sheet. Till 2022, Apollo had exercised this technique holding a major stake in Athene however with out merging with it. Upon the merger, Apollo received entry to SRE and Athene’s capital. However Athene, like most life insurers, has a excessive ratio of property to fairness and small funding or underwriting errors can result in massive unfavorable penalties. This threat is at all times with life insurers and can by no means go away. It might be additional exacerbated since Apollo-generated investment-grade property are comparatively new in contrast with well-known conventional bonds.

Up to now, nothing foretells that these property are riskier than bonds, fairly quite the opposite. Athene’s credit score losses have been decrease than these of its friends. Definitely, Apollo has full confidence on this technique as nicely, in any other case, the merger would have by no means occurred. Athene recurrently stress-tests its portfolio attempting to simulate the setting of the Monetary Disaster and even worse and publishes the outcomes on its web site. Nothing portends any bother. However nonetheless, the one technique to keep away from the insurance coverage threat is to maintain the insurer separate from the alt supervisor.

The Large Six observe one another relatively carefully and clone the most effective concepts. All of them have acknowledged the chance of working with affiliated insurers however some most popular to remain asset-light. Some investments in insurers have been nonetheless essential even for Blackstone – probably the most staunch asset-light supervisor. Alternatively, asset-heavy managers determined to duplicate Apollo-Athene’s technique in full. For example it, we are going to give attention to Brookfield’s strategy.

Brookfield and Oaktree

In 2018, I learn a transcript of Bruce Flatt’s interview by which he predicted that fairly shortly Brookfield would have a whole lot of billions of AUM in credit score funds. It sounded unbelievable as at the moment, Brookfield barely participated in non-public credit score. Nonetheless, Bruce Flatt was right. In 2019, Brookfield acquired a majority stake in well-known credit score specialist Oaktree which was step one in coming into insurance coverage.

In 2020, Brookfield shaped Brookfield Reinsurance (BNRE) as its new entity to conduct insurance coverage operations which began quarterly reporting in 2021. Initially, these operations have been at a small scale till in Could 2022, Brookfield acquired American Nationwide Group, a public insurer, for about ~$5B. This acquisition was one other essential step as Brookfield now has a succesful underwriting group with varied insurance coverage licenses in all 50 states and a capability to develop its insurance coverage enterprise organically. However the important thing prize was ~$30B in insurance coverage float that Brookfield was about to take a position extra profitably.

Brookfield has additionally made a number of smaller acquisitions within the insurance coverage business together with a ~20% stake in American Fairness Life (AEL). Altogether, Brookfield at present has about ~$40B in insurance coverage property and that is just the start. Absolutely, the corporate is on the hunt for brand new acquisitions within the business.

By way of technique, Brookfield seems to duplicate Apollo with a robust emphasis on retirement and annuities. The expectations are relatively excessive and Brookfield is at present estimating the worth of its insurance coverage operations at precisely two occasions its e book worth. Whereas there may be some floor for optimism relating to Brookfield’s insurance coverage operations, for my part, this estimate just isn’t sustainable.

If a mature insurer produces an ROE of 10%, it’s buying and selling near its e book worth. To commerce at 2 occasions its e book worth, an insurer wants to realize a 20% ROE. Can Brookfield Reinsurance attain this quantity? It appears unlikely in the long term as even Athene has not finished it (Athene has produced a superior ROE of 15-17% over a few years). Nevertheless, it might be doable for Brookfield to succeed in shut to twenty% ROE in 2023 alone resulting from a good enhance in rates of interest.

General, I might not overestimate preliminary Brookfield’s success in insurance coverage as the corporate nonetheless has many wrinkles to iron out. We’ll begin with Oaktree as the principle credit score instrument in Brookfield’s arsenal.

Traditionally, Oaktree has been a distressed debt specialist. Its most profitable offers concerned shopping for deeply discounted junk debt of firms that have been both in chapter or near it. Later this debt could be both efficiently transformed into fairness of the restructured firm or bought at a better worth. This isn’t what’s required for insurance coverage operations. I don’t have the slightest doubt in Oaktree’s credit score capabilities however as we have now seen in Apollo’s instance, investment-grade expertise must be honed and constructed one step at a time.

The second downside is that although Brookfield owns a majority of Oaktree’s shares (64%), it doesn’t management the corporate. Oaktree has an archaic construction and is managed by its companions with Howard Marks and Bruce Karsh being the principle actors. It has a vital implication: Oaktree’s FRE margins are approach smaller than Brookfield’s (roughly 30%+ vs 50%+) and Brookfield can’t change it irrespective of what number of shares it controls. In different phrases, FRE generated by insurance coverage property are anticipated to be smaller than within the case of Apollo (Apollo’s FRE margins are comparable with Brookfield’s).

I imagine that is the principle purpose why the administration of BNRE float is suggested by Brookfield and sub-advised by Oaktree. It implies some settlement between Brookfield and Oaktree relating to the splitting of administration charges however we have no idea something about it.

Inside its actual property, infrastructure, and renewables companies, Brookfield has alternatives to originate debt much like how Apollo is doing it. As of in the present day, nonetheless, we have no idea a lot about these originating teams, their construction, and their scale. In my view, it ought to take a number of years to realize palpable progress on this path.

Lastly, some issues should not clear on the legal responsibility aspect of Brookfield’s insurance coverage operations. American Nationwide is a diversified insurer. Whereas annuities are an necessary a part of its enterprise it additionally underwrites P&C and medical dangers. This can be a direct contradiction to Athene’s playbook. Brookfield emphasised many occasions that it’s primarily all in favour of retirement float however didn’t specify its plans relating to different varieties of float on its stability sheet.

On the constructive aspect, Brookfield gives a chance in insurance coverage that Apollo can’t match. Since December, buyers should buy Brookfield both as asset-heavy BN or asset-light BAM. BAM is completely different from all different asset-light managers as a result of it enjoys all the advantages of alignment of pursuits with out the prices of it incurred by BN. By shopping for BAM, buyers can profit from the expansion of insurance coverage float on BN’s stability sheet with none publicity to insurance coverage dangers as BAM just isn’t invested in insurance coverage in any respect.

Conclusion

It’s time to reply the query within the title: what’s in it for you?

Apollo and Athene got here up with a brand new enterprise mannequin for combining investments and insurance coverage. This mannequin could or could not grow to be as worthwhile as Berkshire’s. It has taken a few years for Berkshire to make its mannequin extensively accepted.

On the planet of alt managers, every little thing is occurring extra shortly. The remaining 5 of the Large Six are creating their recipes to mix insurance coverage and investments partially following Apollo’s blueprints. Solely time will inform who will succeed probably the most.

However just for Apollo, insurance coverage is the centerpiece of its technique. On the finish of 2011, a few years after beginning its experiment with Athene, APO was buying and selling at ~$15. It implies that over 11 years, APO has delivered ~15% of CAGR solely from inventory appreciation. If we add vital dividends, the overall CAGR is nearer to twenty% yearly. Is it an indication that the mannequin works or a consequence of declining rates of interest?

In my view, Apollo’s mannequin is sort of enticing and nonetheless underappreciated by the market. By way of insurance coverage and investment-grade debt, Apollo is much forward of the remainder of the pack and in case you are comfy with insurance coverage dangers, shopping for APO could also be step. Alternatively, you’ll be able to contemplate asset-light managers similar to BAM to learn from the mannequin however insulate your self from these dangers.

Editor’s Word: This text discusses a number of securities that don’t commerce on a serious U.S. alternate. Please pay attention to the dangers related to these shares.