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I'm gonna kick off this conversation by
stating what Lisa has questioned to
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start 2025. Are stocks too rich or are bonds
too cheap.
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Well, I think I think we have a
backdrop.
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I think your point about the US and
China and Europe and the three parties,
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you know, it's our view that there's an
Thorsten has been very consistent.
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The US economy is, has been the beacon
of opportunity in the last several
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years.
Strong economic growth capital coming in
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from around the globe.
And so in terms of let's talk I don't
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want to talk about the stock market or
other type of the underlying economy.
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So underlying the economy looks like
it's a place to invest.
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I don't think it's any surprise that
when you peel the onion back private
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capital, which has really been embraced
in the US and gives diversity of
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funding, lets companies grow, start,
expand and all the things we're talking
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about, the global renaissance, it's been
the place to invest and that's been
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attracting capital.
Contrast that to what's going on in the
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UK and continental Europe, where they
are stuck in a financing system that's
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really 15, 20, 30 years behind the rest
of the of what's going on in North
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America.
It tells us that the US is the place to
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invest.
So you think some of these problems in
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Europe might be more structural in
nature?
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I think structural is really the key to
really analysis.
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It's very easy to focus on the last 3 to
6 months.
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We talk about the Liz Truss moment in
the UK.
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I think it is a great reminder for this
current administration is they've got
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great ambitions in terms of
US investment, CapEx, tariffs,
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immigration, a variety of other big
initiatives.
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It's good for this reminder of the Liz
Truss moment in the back of their minds
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and know what can happen if you lose
confidence.
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But there's no doubt, I think if you
look at what the Draghi document did,
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you know, later last fall, he pointed
out in 158 summary pages of all the
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challenges that they have not really
embraced.
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And while the banks are in better shape
than they have been in a couple of
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decades in Europe, the US is the
standout.
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We have the greatest financial services
sector in the world.
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We have the deepest, broadest capital
markets.
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We've undergone a tremendous amount of
regulations on our banks and they've
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continue to thrive in a more narrow
world.
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And that's the page that the Europeans
should be looking at embracing
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securitization, embracing private
capital.
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They've got a massive amount of
infrastructure needs and they should be
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embracing that for their long term
economic success.
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In the meantime, people are saying that
maybe the ghost of Liz Truss is kind of
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hovering over this administration and
hovering over the US Treasury market
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right now, especially given the rise
that we've seen in longer term yields.
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And I'm wondering how susceptible you
are to changing your view on how
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constructive the US economy is if you
get some more negative data prints.
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We had Greg Daco yesterday talking about
a frozen job market.
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We had Neil Richardson talking about how
smaller companies really are feeling
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rates where they are.
We are.
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Rates have been higher for the last 12
to 18 months.
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They've been higher.
Obviously, we're in a period right now
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where what the Fed did in its actions in
the fall and what the market has
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responded to is a very unique period.
So you're right, we are in a little bit
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of a unique zone here with regard to
macro and rates in the US.
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You know, I do think we are in a period
where rates do look attractive versus
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where equities are, and we're in a
period right now where we're still the
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place of economic growth.
But it is a warning sign for the
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administration about how much they can
push.
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Now, clearly, the other side of the
trade, I would not probably be lowering
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rates right now.
I think that
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you have full employment economies doing
quite well.
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I'm not sure I see a need other than
economic textbook to lower rates in
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terms of the target, but it does create
a lot of room for the new administration
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if they have weakness in any kind of the
economy because of their initiatives,
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the Fed pushes back.
They have a lot of room to move.
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Your colleague is sort of edifying, your
points as you see them, Torsten Slok
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moments ago, inflation accelerating.
To your point about not necessarily
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needing to lower rates further, you talk
about credit being the sweet spot and
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debt maybe even over equities, and that
has been the story over a long period of
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time the past couple of years.
If inflation could be accelerating,
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could you see that story changing at a
certain point?
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Yes, you could.
And I guess this and there's there's a
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lot of consensus out there about where
the S&P is going to go and where rates
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are going.
But the in our view, in the backdrop,
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the US economy, still the strength, the
strength of the globe, it's the beacon
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of economic opportunity.
We still have a lot of economic growth
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in terms of the industrial renaissance
we've been talking about.
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So in our view, the breadth of credit
investment grade as well as
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non-investment grade, we try to find
areas of dislocation or areas of
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mismatch of capital and opportunity, and
we're still seeing it in credit versus
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the equity markets.
Now, when you look at the S&P 500,
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I would say.
Say that.
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It's interesting.
You've got.
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We all know what the Magnificent Seven
are, but certainly the other 493, a lot
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of online unloved opportunities in that
in that basket.
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And there's probably an opportunity in a
non consensus view on terms of those
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companies in terms of just pure economic
growth.
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But we are still this in private credit.
He has private credit and private
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capital has been the engine of economic
growth in the US.
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And I will you know, again, I said
earlier, it's not a great irony, it's a
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great irony that that the US has been
the bastion of economic growth with the
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embracing of private capital.
But you know, one of the greatest
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investors in US capital history, Warren
Buffett and Berkshire, when you really
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pull the covers back on Berkshire
Hathaway, of the trillion dollars of
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assets at the end of 23, 30% are in the
public equities that we know about
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Apple, Coca-Cola, American Express,
Viva.
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But 70% are private companies.
It's the growth engine.
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He's the greatest capitalist.
He's been doing it for 50 years.
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That's where growth and opportunity is
in America, private capital in private
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companies.
And they have access in the debt
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markets.
They don't need to go public to raise
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capital anymore, 8000 public companies
to 4000.
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That's the trend in the future.
And we're sitting really in an
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intersection trying to bring those
opportunities to the broad group of
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investors, retirees and savers around
the globe.
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So you mentioned Europe and Europe.
Certainly the bank channel is
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overburdened and we've been talking
about this for years.
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The Europeans have strongly talked about
trying to do something with public
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markets in the same way we have here in
the United States.
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It's not happening.
I want to understand from your
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perspective how you will work with the
banks in America going forward from
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here, because this is not a new trend
where the banks will originate the loans
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and then you'll provide the money.
How is that going to work in years to
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come?
How take that opportunity be?
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Oh, I think we're I think 24 was a pivot
year.
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You know, for us as a leading firm in
this industry and in this sector, you
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know, there was a great headline and you
and I talked about the three of us have
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talked about on this show many times
where the great battle between private
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capital and banks.
The reality is, if you look at the
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commercial dialogue going on between the
top five top ten institutions and the
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handful of US elite, our industry, the
amount of integration dialogue working
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together on big deals has never been
deeper.
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Obviously, there was our Citibank
transaction, Citigroup transaction,
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there was a transaction we did with
Standard Chartered BNP.
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And so I think we're still at the early
days.
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These these partnerships need to have
substance.
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They can't be excuse the phrase shotgun
marriages.
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They have to be ones that really have
substance, dialogue, trust and some
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history of doing a lot of transactions
together.
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We've been fortunate in all the ones we
put together where there has been a lot
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of either history of personnel or of
activity.
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But I think it's I think still it's
early days, early innings now.
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There's a lot of headlines just to grab
headlines and there's not a lot of
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substance behind them.
But I think that trend of of of private
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capital and bank partnerships is going
to extend in 25 and 26.
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And I do think if you think about the
economic backdrop, I do sense that there
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is a great opportunity for strategic M&A
that clearly feels like it's going to
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happen.
I'm a little bit more skeptical about
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the massive IPO window.
If you look at the last ten years,
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equity issuance has been about 250
billion, 50 billion IPOs, 200 billion
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secondaries.
That's removing all the SPAC numbers.
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I think you still have a valuation issue
with a lot of private equity companies
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that want to want to come out and do
their IPO.
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And so I think we have a consensus view
or non consensus view at Apollo that
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that number is going to be not as large
as people think.
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And so the big mismatch, if you have a
big credit market, a big equity market,
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this area of hybrid in between which
we've been talking a lot about applying
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capital to those over levered companies,
that's the opportunity of 25 and 26.
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Just to build on the IPO issue just a
little bit more.
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It's not just a valuation issue or do
you think it's a role that you have to
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play here, that these companies don't
need to go public anymore?
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It's a combination of both.
It's a great question.
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I think it is a valuation issue for
probably 50 to 60% of them.
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I think it's very, very clear.
Now private companies have access to all
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sorts of capital debt and equity,
preferred convertible, whatever it may
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be.
And so the typical route you needed to
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go to have your employees be able to
monetize their investments, broad based
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capital equity revolver, as you saw with
opening I did several months ago,
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bringing in a bank facility.
There's there's tremendous pools of
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capital, private capital that can fund
and finance these companies.
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So going public is by no means the the
ticket to liquidity that you needed in
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the past.
A lot more options in 5 to 10 years.
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Will there be a difference between
public and private markets?
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We don't believe so.
I think there will be some
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differentiations.
And I think the question that gets
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raised right after that question that
you ask is, well, is there going to be a
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massive compression in yields?
And the the advantage is going to go to
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those folks that have the bigger you're
going to make money on the origination,
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the ability to make the three, five,
seven, 0 billion commitment to X, Y, Z
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company.
That's where you're going to garner the
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extra spread.
But all the things that we're doing in
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origination and capital formation and
trying to bring some liquidity, these
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markets in terms of secondary activity
with transparency and price discovery, I
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think the barriers and you know, what's
what's private is risky and what's
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public is safe.
I think those barriers will be coming
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down.
And again, I go back to this book here.
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It's no one really talks about it, but
it is quite an irony that the greatest
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public investor of all time, 70% of
those companies, when you look at the
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when you look at the the Web page, these
are some great American companies.
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And over 50 years he's assembled them
and they're massive compounders and
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that's 70% of the underlying value.
Geico being at the top Clayton homes
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BNSF many many other great companies and
I think that's a lesson for us all.
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There's there's companies that are
private and there's private equity.
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You should differentiate between the
two.
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But we clearly want to be part of that
big trend and offer those to investors
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and retirees around the globe.
It's a big change in market structure.
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Jim, I've got to ask you this and we can
move on quickly if you want.
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Say, how close were we to losing Mark
Drummond to the swamp down in
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Washington, D.C.?
How close did we come?
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Well, I think that the administration
saw an amazingly bold thinker and would
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have had a huge impact on the future
trajectory of our economy and our the
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far ranging responsibilities of the
Treasury secretary.
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And I think he was, you know, very
engaged in the process.
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But America's loss is Apollo's gain.
And we certainly feel we have a great
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deep management team that could carry
carry the water in his absence.
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But it was he he was very engaged in the
process.
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Let's build on your gain.
And that's diplomatically put in that.
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In November, when we got this election
outcome, your stock was like a rocket.
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What were investors seeing?
What do you see as this an opportunity
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if the incoming administration, what
kind of changes are you expecting that
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might benefit your business?
Well, I think they've seen in our in our
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particular example, we've been a company
that has grown over the last decade by
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being at this intersection between
retirees and investors around the globe
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and companies needing to raise capital.
And as the markets have evolved, we've
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continued in a low rate environment.
In a high rate environment, we've been
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able to continually, you know, 15 to 20%
growth of our business every year.
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And they see that in an environment
where we're going from an administration
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that was clearly not pro-business and
not as pro-growth to one that clearly is
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pro-growth, a less like a regulatory
environment that clearly has changed.
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So I think the view has been if these
folks have succeeded so well in an
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environment where there's been an
administration that was not cheering
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them on to one that's clearly cheering
them on, that's a better backdrop of a
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broader success.
And I think that's what we're seeing
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right now.
You know, it's certainly the the the
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refreshed view of a regulatory backdrop,
the refreshed view of M&A, the refreshed
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view of bringing capital in the United
States and having capital really provide
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a lot of this growth, whether it's in
technology, whether it's in the on re on
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the on shoring of companies.
We're feeling the backdrop to back after
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that, which I think is very, very
positive.
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I want to pick up on that.
The idea of financing some of the
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technological advancements.
We've heard a lot about that, whether
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it's some of the warehouses, whether
it's some of the energy grid, what areas
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is Apollo going to double down on as a
result of maybe more free permitting,
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more acceptance And frankly, some of the
sentiment that you were talking about?
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I think you've identified certainly when
you look at the big the big terms of of
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infrastructure, of data centers, of the
utility grid, that broad infrastructure,
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all of those by many, many investment
grade companies, even the highest rated
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investment grade companies witnessed
what we did last year with Intel.
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There's a whole slew of those that are
looking at massive CapEx needs.
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And we've talked about it here in the
past.
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As much as the investment grade market
is a very robust open market.
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A lot of the growth of these companies
are confronted with are well, well in
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excess of what can be financed purely
with the investment grade market, with
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their existing ratings.
So you've identified four or five, and
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they're really in those big pools of
economic growth of of infrastructure,
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technology, digital data, all of those
areas which many.
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Many US companies, as well as the on
shoring of foreign companies coming to
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the US, wondering how they're going to
finance these activities.
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So as I said before, since the Intel
transaction, we have been incredibly
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busy.
I would argue I've used the term phone
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ringing off the hook about the dialogues
we've been in with a variety of these
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investment grade companies looking to
finance their business in a variety of
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manners.
And certainly there's a belief that the
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incoming administration, Lisa, is going
to have a more pragmatic, pragmatic
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approach to the energy needs that are
going to be required to support some of
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these shifts.
That's for sure.
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With respect to drill, baby, drill,
there has to be a host of different
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energy provisions.
And that's one thing that we keep
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hearing.
Key question for a lot of people is how
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consistent can some of the regulatory
parameters be?
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And that's why some of these connections
are for many years in terms of the
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investments and some of the big tech
companies that are making some of the
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financing.
Well, also, these are these are long
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duration investments.
And again, this is another thing that
00:16:05
really came to the surface last year in
terms of what the market has really
00:16:09
embraced is the duration of the capital
that we have with our annuity.
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And retirees that are many of our peers
have as well.
00:16:18
But the scale and the integrated manner
that we've brought that to the
00:16:22
forefront, I think that's what the
market has embraced.
