How has the trend of bank closures contributed to the development of the alternative investment market, what does the market include besides venture capital and private equity funds, and what does Apollo Asset Management offer to clients in Israel?
Véronique Fournier, a senior manager at Apollo and responsible for the EMEA Capital Management team, Global Capital Management Solutions, discussed these questions with Globes correspondent Assaf Youni at the Globes Alternative Investments Conference held in partnership with Phoenix. Group and Apollo Global Management, one of the world’s leading investment firms.
According to Fournier, Apollo has become one of the industry’s largest players in the alternative or proprietary market. “We have two main areas of business. One is retirement services. We created this area about ten years ago, and it operates mainly in the United States, but also in Europe, where we provide retirement services to individuals.
“Our second area is asset management, and many people know us from our private equity funds and private credit funds. We currently have assets under management worth more than $700 billion.” According to Fournier, half of the assets under management are owned by Apollo or its insurance company, noting that “we are usually the largest investors in our funds.”
Fournier brings three key principles to Apollo, which, she says, define what the company does.
“First, we believe that the purchase price matters, so in private equity cases, we will typically be value investors. And when we think about credit, we will focus first on secured debt, and we will focus on low-risk investments. And that brings me to the next point: the second principle, which is Apollo is a full partner with its investors, and I have already mentioned that half of the assets we manage are our own, so the concept of excess returns per unit of risk is crucial to us, so that we can ensure both return and risk reduction.
“Our third central principle comes from our belief that there should be excess returns per unit of risk. So, if you’re going to look towards alternative investments, you should expect excess returns per unit of risk. That’s our ethos and that’s where we aim for our investors.”
Can you explain why asset management companies love Apollo? You have posted impressive profits in recent years – what has changed in the market? What is your secret? Or perhaps, what do banks do better?
“I think part of the growth in the alternative sector comes from the fact that we are not the only ones in this sector. Many of the big players, like us, have benefited from the market mentality. Part of this came after the global financial crisis (GFC) and the whole trend of bank closures that continues Continuing, it has given a big boost that private equity managers, like Apollo, can now get into the game, in terms of financing.
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“We can also see important trends in the market such as artificial intelligence or the transition to green energy,” Fournier adds. “Companies like Apollo play an important role in this area.”
Most people may learn about the private or alternative market through private equity investments or venture capital funds. Today, the private market offers diverse investment opportunities, from investment-grade debt to investing in distressed companies. So, the growth and whole approach to capital management offered by companies like Apollo has definitely contributed to the growth of this industry and contributed to the growth of Apollo. I think in terms of our growth, what has contributed to that is adherence to the principles I mentioned earlier. Loyalty to these principles was important to us, not only in terms of growth, but also in terms of profitability.”
Can you share an example of a recent investment in Europe?
“I can talk about the convergence of public and private credit, and the role that private equity firms are playing now, as well as in financing solutions for larger companies. You may have noticed that, at the beginning of the year, we announced an $11 billion financing solution for Intel, to finance one of its factories in Ireland ( Intel sold 49% of the factory it is building to Apollo for $11 billion. In terms of size and scope, in deals like this, which were historically done by banks, today are done by teams like Apollo, today they can also get in on the game.” .
Regarding your focus on the alternative market. Do geopolitical or regulatory issues affect your success in this field? What are the advantages in this area of investments and what are the risks when referring to geopolitical and regulatory issues?
“As part of my role, I talk to private investors and venture capitalists every day. For example, in 2022, they saw that there is no place to hide, no matter your sector or your situation. This has affected a lot of them, to some degree.” . To some extent, leaving public capital management and choosing the private sector, I think the advantages of the private market are known, for example the issue of diversity, or understanding the huge potential in the number of companies in the private market. An interesting statistic is that private companies account for 80% of employment in the United States. In the United States, I think over 90% of the companies in Europe with a turnover of over $100 million are private companies, so the exposure to opportunities like this, which until now has been available. “What is available to investors is very interesting to us, and we see similar interest from many of our partners.”
“I think a lot of market evolution, or market innovation, is what has created an opportunity for private investors to invest in the private market in borderless, no-closing-date, partial-liquidity investments that have brought the choice and diversity that these investors previously had in ways,” Fournier adds. Public Investment: The whole concept that investing in public capital is safe and investing through private equity firms is risky is now changing, and there is already a recognition that both public and private investments can be safe or risky Now, liquidity of returns is more important. Will you need all your money on Tuesday? Is there a form of illiquidity that you can consider when investing in private companies, which is not yet available for private investment?
“I think regulation is also having an impact on this. We talked earlier about non-bank investing, and it has certainly given a boost to capital managers like us. And I think regulators are starting to understand that there is no reason why private investors cannot invest in the private market, especially when they realize How important it is to the overall economy, we certainly agree with this vision, and are very pleased with the developments in this area.
In conclusion, what is Apollo’s approach to attracting Israeli investors?
“We are very happy to be in Israel, and that we can offer Israeli investors access to everything Apollo does, whether in private equity, private credit or real assets. In limited-term investment paths, as we have done in the past, or in new paths that We discussed, which are relatively less limited and liquid, and can serve as an alternative to income on private capital gains, or 60/40 fixed income portfolios. These are the ways we thought about bringing products to market.
“In Israel, we are very happy to work with Phoenix, who are our partners, who offer and distribute everything that Apollo knows how to do, and also do it in the way that we see is relevant to the market, in partnership., such as currency hedging in shekels, etc., and we We try to be as friendly as possible with investors, by making investing convenient and simple for them.”
Full disclosure: The conference was held in partnership with Phoenix and Apollo Global.
Published by Globes, Israel Business News – en.globes.co.il – on October 10, 2024.
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