APOLLO GLOBAL MANAGEMENT A The following discussion should be read in conjunction withApollo Global Management, Inc.'s consolidated financial statements and the related notes as ofDecember 31, 2019 and 2018 and for the years endedDecember 31, 2019 , 2018 and 2017. This discussion contains forward-looking statements that are subject to known and unknown risks and uncertainties. Actual results and the timing of events may differ significantly from those expressed or implied in such forward-looking statements due to a number of factors, including those included in the section of this report entitled "Item 1A Risk Factors." The highlights listed below have had significant effects on many items within our consolidated financial statements and affect the comparison of the current period's activity with those of prior periods. General Our Businesses Founded in 1990, Apollo is a leading global alternative investment manager. We are a contrarian, value-oriented investment manager in credit, private equity and real assets with significant distressed expertise and a flexible mandate in the majority of our funds which enables our funds to invest opportunistically across a company's capital structure. We raise, invest and manage funds on behalf of some of the world's most prominent pension, endowment and sovereign wealth funds as well as other institutional and individual investors. Apollo is led by ourManaging Partners ,Leon Black ,Joshua Harris andMarc Rowan , who have worked together for more than 33 years and lead a team of 1,421 employees, including 472 investment professionals, as ofDecember 31, 2019 . Apollo conducts its business primarily inthe United States through the following three reportable segments: (i) Credit-primarily invests in non-control corporate and structured debt instruments including performing, stressed and distressed instruments across the capital structure; (ii) Private equity-primarily invests in control equity and related debt instruments, convertible securities and distressed debt instruments; and (iii) Real assets-primarily invests in (i) real estate equity and infrastructure equity for the acquisition and recapitalization of real estate and infrastructure assets, portfolios, platforms and operating companies, (ii) real estate and infrastructure debt including first mortgage and mezzanine loans, preferred equity and commercial mortgage backed securities and (iii) European performing and non-performing loans, and unsecured consumer loans. These business segments are differentiated based on the varying investment strategies. The performance is measured by management on an unconsolidated basis because management makes operating decisions and assesses the performance of each of Apollo's business segments based on financial and operating metrics and data that exclude the effects of consolidation of any of the managed funds. Our financial results vary since performance fees, which generally constitute a large portion of the income we receive from the funds that we manage, as well as the transaction and advisory fees that we receive, can vary significantly from quarter to quarter and year to year. As a result, we emphasize long-term financial growth and profitability to manage our business. In addition, the growth in our Fee-Generating AUM during the last year has primarily been in our credit segment. The average management fee rate for these new credit products is at market rates for such products and in certain cases is below our historical rates. Also, due to the complexity of these new product offerings, the Company has incurred and will continue to incur additional costs associated with managing these products. To date, these additional costs have been offset by realized economies of scale and ongoing cost management. As ofDecember 31, 2019 , we had total AUM of$331.1 billion across all of our businesses. More than 80% of our total AUM was in funds with a contractual life at inception of seven years or more, and 50% of such AUM was in permanent capital vehicles. - 94-
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As ofDecember 31, 2017 , Fund IX held its final closing, raising a total of$23.5 billion in third-party capital and approximately$1.2 billion of additional capital from Apollo and affiliated investors for total commitments of$24.7 billion . OnDecember 31, 2013 , Fund VIII held a final closing raising a total of$17.5 billion in third-party capital and approximately$880 million of additional capital from Apollo and affiliated investors, and as ofDecember 31, 2019 , Fund VIII had$3.0 billion of uncalled commitments remaining. Additionally, Fund VII held a final closing inDecember 2008 , raising a total of$14.7 billion , and as ofDecember 31, 2019 , Fund VII had$1.8 billion of uncalled commitments remaining. We have consistently produced attractive long-term investment returns in our traditional private equity funds, generating a 39% gross IRR and a 25% net IRR on a compound annual basis from inception throughDecember 31, 2019 . Apollo's private equity fund appreciation was 15.6% for the year endedDecember 31, 2019 . For our real assets segment, there was a total gross return of 16.2% for the year endedDecember 31, 2019 . Included in the gross return areU.S. Real Estate Fund I andU.S. Real Estate Fund II including co-investment capital,Asia Real Estate Fund including co-investment capital, the European Principal Finance funds, and infrastructure equity funds. For further detail related to fund performance metrics across all of our businesses, see "-The Historical Investment Performance of Our Funds." Holding Company Structure The diagram below depicts our current organizational structure: [[Image Removed: structurechart021820.jpg]] Note: The organizational structure chart above depicts a simplified version of the Apollo structure. It does not include all legal entities in the structure. Ownership percentages are as ofFebruary 18, 2020 . (1) As ofFebruary 18, 2020 , the Class A shares represented 56.9% of the total
voting power of the Class A shares and the Class B share with respect to the
limited matters upon which they are entitled to vote pursuant to the
certificate of incorporation of
(2) Our
outstanding Class B share. As of
represented 43.1% of the total voting power of the Class A shares and the
Class B share with respect to the limited matters upon which they are
entitled to vote and a de minimis economic interest in
(3)
through estate planning vehicles, limited partner interests in Holdings. Our
Managing Partners' economic interests are represented by their indirect
beneficial ownership, through Holdings, of 39.0% of the limited partner
interests in the Apollo Operating Group .
(4) Holdings owns 43.1% of the limited partner or limited liability company
interests in each
Holdings are exchangeable for Class A shares. Our
their interests in BRH and Holdings, beneficially own 39.0% of the AOG Units.
Our
own 4.1% of the AOG Units.
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(5)
Manager. In connection with the Conversion,
one issued and outstanding Class C share, which bestows to its holder certain
management rights over
Law of the
the COI, for so long as certain conditions are satisfied (as set forth in the
COI), the exclusive voting power for all purposes relating to holders of
capital stock is vested in the holder of the Class C share.
(6) Represents 56.9% of the limited partner or limited liability company
interests in each
intermediate holding companies.
general partner interests in each
Each of the
Historically, we were a holding company that was qualified as
a partnership for U.S. federal income tax purposes. Our
intermediate holding companies enabled us to maintain our
partnership status and to meet the qualifying income
exception. Effective September 5, 2019 , Apollo Global
Management, LLC converted from a Delaware limited liability
company to a Delaware corporation named Apollo Global
Management, Inc.
• We have historically used multiple managementcompanies to
segregate operations for business, financial and other
reasons. Going forward, we may increase or decrease the
number of our management companies, partnerships or other
entities within the Apollo Operating Group based on our views
regarding the appropriate balance between (a)administrative
convenience and (b) continued business, financial, tax and
other optimization.
Conversion to a C Corporation
Effective September 5, 2019 , Apollo Global Management, LLC converted from a
Delaware limited liability company to a Delaware corporation named Apollo Global
Management, Inc. Prior to the Conversion, a portion of the investment income,
performance allocations and principal investment income we earned was not
subject to corporate-level tax in the United States . Subsequent to the
Conversion, generally all of the income is subject to U.S. corporate income
taxes, which could result in an overall higher income tax expense (or benefit)
in periods subsequent to the Conversion.
Business Environment
As a global investment manager, we are affected by numerous factors, including
the condition of financial markets and the economy. Price fluctuations within
equity, credit, commodity, foreign exchange markets, as well as interest rates,
which may be volatile and mixed across geographies, can significantly impact the
valuation of our funds' portfolio companies and related income we may recognize.
In the U.S. , the S&P 500 Index increased by 28.9% during 2019, following a
decrease of 6.2% in 2018. Outside the U.S. , global equity markets rose during
2019, with the MSCI All Country World ex USA Index increasing 23.2% following a
decrease of 14.4% in 2018.
Conditions in the credit markets also have a significant impact on our business.
Credit markets were positive in 2019, with the BofAML HY Master II Index
increasing 14.4%, while the S&P/LSTA Leveraged Loan Index increased 8.6%.
Benchmark interest rates finished the year lower from where they were at the end
of 2018, as the Federal Reserve lowered the target rate three times during the
year. The U.S. 10-year Treasury yield at the end of 2019 was 1.9%.
Foreign exchange rates can materially impact the valuations of our investments
and those of our funds that are denominated in currencies other than the U.S.
dollar. Relative to the U.S. dollar, the Euro depreciated 2.2% during the year,
after depreciating by 4.5% in 2018, while the British pound appreciated 3.9% in
2019, after depreciating 5.6% in 2018. The price of crude oil appreciated by
34.5% during the year ended December 31, 2019 .
In terms of economic conditions in the U.S. , the Bureau of Economic Analysis
reported real GDP increased at an annual rate of 2.1% in 2019, following an
increase of 2.6% in 2018. As of January 2020 , the International Monetary Fund
estimated that the U.S. economy will expand by 2.0% in 2020 and 1.7% in 2021.
Additionally, the U.S. unemployment rate stood at 3.5% as of December 31, 2019 .
Regardless of the market or economic environment at any given time, Apollo
relies on its contrarian, value-oriented approach to consistently invest capital
on behalf of its fund investors by focusing on opportunities that management
believes are
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often overlooked by other investors. As such, Apollo's global integrated investment platform deployed$15.5 billion of capital through the funds it manages during the year endedDecember 31, 2019 . We believe Apollo's expertise in credit and its focus on nine core industry sectors, combined with more than 29 years of investment experience, has allowed Apollo to respond quickly to changing environments. Apollo's core industry sectors include chemicals, manufacturing and industrial, natural resources, consumer and retail, consumer services, business services, financial services, leisure, and media/telecom/technology. Apollo believes that these attributes have contributed to the success of its private equity funds investing in buyouts and credit opportunities during both expansionary and recessionary economic periods. In general, institutional investors continue to allocate capital towards alternative investment managers for more attractive risk-adjusted returns in a low interest rate environment, and we believe the business environment remains generally accommodative to raise larger successor funds, launch new products, and pursue attractive strategic growth opportunities, such as continuing to grow the assets of our permanent capital vehicles. As such, Apollo had$63.6 billion of capital inflows during the year endedDecember 31, 2019 . While Apollo continues to attract capital inflows, it also continues to generate realizations for fund investors. Apollo returned$11.4 billion of capital and realized gains to the investors in the funds it manages during the year endedDecember 31, 2019 . Managing Business Performance We believe that the presentation of Segment DE supplements a reader's understanding of the economic operating performance of each of our segments. Segment Distributable Earnings and Distributable Earnings Segment DE is the key performance measure used by management in evaluating the performance of Apollo's credit, private equity and real assets segments. See note 17 to the consolidated financial statements for more details regarding the components of Segment DE. DE represents Segment DE less estimated current corporate, local and non-U.S. taxes as well as the current payable under Apollo's tax receivable agreement. DE is net of preferred dividends, if any, to the Series A and Series B preferred stockholders. DE excludes the impacts of the remeasurement of deferred tax assets and liabilities which arises from changes in estimated future tax rates. The economic assumptions and methodologies that impact the implied income tax provision are similar to those methodologies and certain assumptions used in calculating the income tax provision for Apollo's consolidated statements of operations underU.S. GAAP. Management believes that excluding the remeasurement of the tax receivable agreement and deferred taxes from Segment DE and DE, respectively, is meaningful as it increases comparability between periods. Remeasurement of the tax receivable agreement and deferred taxes are estimates that may change due to changes in the interpretation of tax law. We believe that Segment DE is helpful for an understanding of our business and that investors should review the same supplemental financial measure that management uses to analyze our segment performance. This measure supplements and should be considered in addition to and not in lieu of the results of operations discussed below in "-Overview of Results of Operations" that have been prepared in accordance withU.S. GAAP. See note 17 to the consolidated financial statements for more details regarding management's consideration of Segment DE. Fee Related Earnings and Fee Related EBITDA Fee Related Earnings, or "FRE", is derived from our segment reported results and refers to a component of Segment DE that is used as a supplemental performance measure. See note 17 to the consolidated financial statements for more details regarding the components of FRE. Fee related EBITDA is a non-U.S. GAAP measure derived from our segment reported results and is used to assess the performance of our operations as well as our ability to service current and future borrowings. Fee related EBITDA represents FRE plus amounts for depreciation and amortization. "Fee related EBITDA +100% of net realized performance fees" represents Fee related EBITDA plus realized performance fees less realized profit sharing expense. We use Segment DE, DE, FRE and Fee related EBITDA as measures of operating performance, not as measures of liquidity. These measures should not be considered in isolation or as a substitute for net income or other income data prepared in accordance withU.S. GAAP. The use of these measures without consideration of their relatedU.S. GAAP measures is not adequate due to the adjustments described above. Segment Strategies Subsequent toDecember 31, 2018 , Apollo determined to change the business segment in which it reports certain funds and accounts to align its segment reporting with the manner in which such funds and accounts were managed. Effective January - 97-
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1, 2019, theEuropean Principal Finance Fund series, which has been historically reported in the credit segment, moved to the real assets segment. Several funds and accounts that generally invest in illiquid opportunistic investments and the latest fund in theCredit Opportunity Fund series, which have been historically reported in the credit segment, moved to the private equity segment. Certain commercial real estate mortgage loan assets, previously reported in the credit segment, moved to the real assets segment. These changes affected the composition, but not the determination, of Apollo's reporting segments. In order to better reflect the grouping of synergistic credit strategies across the funds, accounts and permanent capital vehicles managed within our credit segment, Apollo re-aligned its credit segment around four main strategies: corporate credit, structured credit, direct origination and advisory and other. The underlying assets managed within, and strategies employed by, Apollo's credit segment did not change as a result of this re-alignment. Apollo re-aligned its private equity segment around three strategies: traditional private equity, hybrid capital and natural resources. Hybrid capital includes the hybrid value strategy, other funds and accounts that generally invest in illiquid opportunistic investments and the latest fund in theCredit Opportunity Fund series. Apollo re-aligned its real assets segment around three strategies: real estate, principal finance and infrastructure. Real estate includes the commercial real estate mortgage loan assets discussed above, among other types of real estate assets. Principal finance includes ourEuropean Principal Finance Fund series. In connection with these changes, all prior periods have been recast to conform to the new presentation. Consequently, this information will be different from the historical segment financial results previously reported by Apollo in its reports filed with theSEC . Operating Metrics We monitor certain operating metrics that are common to the alternative investment management industry. These operating metrics include Assets Under Management, capital deployed and uncalled commitments. Assets Under Management The tables below present Fee-Generating and Non-Fee-Generating AUM by segment: As of December 31, 2019 As of December 31, 2018 Private Private Credit Equity Real Assets Total Credit Equity Real Assets Total (in millions) (in millions)
Fee-Generating AUM
9,060 84,659 30,307 28,453 7,132 65,892
Total AUM $ 215,530 $ 76,788 $ 38,787 $ 331,105 $ 174,378 $ 75,086 $ 30,795 $ 280,259 The table below presents AUM with Future Management Fee Potential, which is a component of Non-Fee-Generating AUM, for each of Apollo's three segments.
As of As of
December 31, 2019 December 31, 2018
(in millions)
Credit $ 10,898 $ 8,725
Private Equity 9,441 10,555
Real Assets 2,208 2,097
Total AUM with Future Management Fee Potential $ 22,547 $ 21,377
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The following tables present the components of Performance Fee-Eligible AUM for each of Apollo's three segments:
As of December 31, 2019 As of December 31, 2018
Private Private
Credit Equity Real Assets Total Credit Equity Real Assets Total
(in millions) (in millions)
Performance
Fee-Generating AUM(1) $ 38,560 $ 22,907 $ 5,179 $ 66,646 $ 23,574 $ 22,974 $ 2,019 $ 48,567
AUM Not Currently
Generating Performance
Fees 12,514 8,112 589 21,215 17,857 3,850 2,662 24,369
Uninvested Performance
Fee-Eligible AUM 9,919 30,084 4,676 44,679 8,483 35,749 4,659 48,891
Total Performance
Fee-Eligible AUM $ 60,993 $ 61,103 $ 10,444 $ 132,540 $ 49,914 $ 62,573 $ 9,340 $ 121,827 (1) Performance Fee-Generating AUM of
applicable hurdle rates or preferred returns, but in accordance with the
adoption of the revenue recognition standard effective
recognition of performance fees associated with such Performance
Fee-Generating AUM have been deferred to future periods when the fees are
probable to not be significantly reversed.
The following table presents AUM Not Currently Generating Performance Fees for funds that have invested capital for more than 24 months as ofDecember 31, 2019 and the corresponding appreciation required to reach the preferred return or high watermark in order to generate performance fees: Appreciation Required to Invested AUM Not Achieve Currently Generating Investment Period Active Performance Strategy / Fund Performance Fees > 24 Months Fees(1) (in millions) Credit: Corporate Credit $ 5,406 $ 5,377 3% Structured Credit 636 636 18% Direct Origination 278 - N/A Advisory and Other 6,194 - N/A Total Credit 12,514 6,013 4% Private Equity: ANRP I 282 282 129% Hybrid Capital 2,344 1,612 102% Other PE 5,486 147 105% Total Private Equity 8,112 2,041 106% Real Assets: Total Real Assets 589 372 > 250bps Total $ 21,215 $ 8,426
(1) All investors in a given fund are considered in aggregate when calculating
the appreciation required to achieve performance fees presented above.
Appreciation required to achieve performance fees may vary by individual
investor. Funds with an investment period less than 24 months are "N/A".
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The components of Fee-Generating AUM by segment are presented below:
As of December 31, 2019
Private Real
Credit Equity Assets Total
(in millions)
Fee-Generating AUM based on capital
commitments $ 3,921 $ 26,849 $ 4,932 $ 35,702
Fee-Generating AUM based on invested
capital 1,372 15,743 2,273 19,388
Fee-Generating AUM based on
gross/adjusted assets 144,028 814 21,403 166,245
Fee-Generating AUM based on NAV 23,572 420 1,119 25,111
Total Fee-Generating AUM $ 172,893 $ 43,826 (1) $ 29,727 $ 246,446 (1) The weighted average remaining life of the traditional private equity funds
as of
As of December 31, 2018
Private
Credit Equity Real Assets Total
(in millions)
Fee-Generating AUM based on capital
commitments $ 3,403 $ 26,849 $ 5,419 $ 35,671
Fee-Generating AUM based on invested
capital 1,020 18,601 6,659 26,280
Fee-Generating AUM based on
gross/adjusted assets 119,525 776 11,435 131,736
Fee-Generating AUM based on NAV 20,123 407 150 20,680
Total Fee-Generating AUM $ 144,071 $ 46,633 (1) $ 23,663 $ 214,367 (1) The weighted average remaining life of the traditional private equity funds
as of
The following table presents total AUM and Fee-Generating AUM amounts for our credit segment by category type:
Total AUM Fee-Generating AUM
As of As of As of As of
December 31, December 31, December 31, December 31,
2019 2018 2019 2018
(in millions)
Corporate Credit $ 110,659 $ 98,188 $ 92,601 $ 82,812
Structured Credit 52,735 42,693 45,453 37,932
Direct Origination 24,234 16,715 22,031 14,395
Advisory and Other 27,902 16,782 12,808 8,932
Total $ 215,530 $ 174,378 $ 172,893 $ 144,071
Investment Management Agreement - ISG
Apollo, through its consolidated subsidiary, ISG, provides asset management
services to Athene with respect to assets in the Athene Accounts, including
asset allocation services, direct asset management services, asset and liability
matching management, mergers and acquisitions, asset diligence, hedging and
other asset management services and receives management fees for providing these
services. The Company, through ISG, also provides sub-allocation services with
respect to a portion of the assets in the Athene Accounts. See note 15 to the
consolidated financial statements for more details regarding the fee rates of
the investment management and sub-allocation fee arrangements with respect to
the assets in the Athene Accounts.
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The following table presents the aggregate Athene Sub-Allocated Total AUM by
asset class:
As of December 31, 2019 (1)
(in millions)
Core Assets $ 32,346
Core Plus Assets 30,132
Yield Assets 48,552
High Alpha 5,051
Cash, Treasuries, Equity and Alternatives 14,220
Total $ 130,301
(1) Includes
billion of unfunded commitments related to
Program ("ADIP").
Investment Advisory and Sub-Advisory Agreements - ISGI
Apollo, through ISGI, provides investment advisory services with respect to
certain assets in certain portfolio companies of Apollo funds and sub-advises
the Athora Accounts and broadly refers to "Athora Sub-Advised" assets as those
assets in the Athora Accounts which the Company explicitly sub-advises as well
as those assets in the Athora Accounts which are invested directly in funds and
investment vehicles Apollo manages. The Company refers to the portion of the
Athora AUM that is not Athora Sub-Advised AUM as "Athora Non-Sub Advised" AUM.
See note 15 to the consolidated financial statements for more details regarding
the fee arrangements with respect to the assets in the Athora Accounts.
The following table presents Athora Sub-Advised and Athora Non-Sub-Advised AUM:
As of As of
December 31, December 31,
2019 2018
(in millions)
Sub-Advised AUM $ 3,877 $ 3,032
Non-Sub-Advised AUM 10,019 4,952
Total AUM $ 13,896 $ 7,984
The following table presents total AUM and Fee-Generating AUM amounts for our
private equity segment:
Total AUM Fee-Generating AUM
As of As of As of As of
December 31, December 31, December 31, December 31,
2019 2018 2019 2018
(in millions)
Private Equity Funds $ 62,139 $ 60,680 $ 36,947 $ 39,519
Hybrid Capital 9,113 8,886 2,961 3,025
Natural Resources 5,536 5,520 3,918 4,089
Total $ 76,788 $ 75,086 $ 43,826 $ 46,633
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The following table presents total AUM and Fee-Generating AUM amounts for our
real assets segment:
Total AUM Fee-Generating AUM
As of As of As of As of
December 31, December 31, December 31, December 31,
2019 2018 2019 2018
(in millions)
Real Estate $ 29,401 $ 21,971 $ 22,890 $ 16,873
Principal Finance 7,181 7,050 5,102 5,468
Infrastructure 2,205 1,774 1,735 1,322
Total $ 38,787 $ 30,795 $ 29,727 $ 23,663
The following tables summarize changes in total AUM for each of Apollo's three
segments:
For the Years Ended December 31,
2019 2018
Credit Private Equity Real Assets Total Credit Private Equity Real Assets Total
(in millions)
Change in Total AUM(1):
Beginning of Period $ 174,378 $ 75,086 $ 30,795 $ 280,259 $ 144,807 $ 80,694 $ 23,427 $ 248,928
Inflows 51,104 3,779 8,682 63,565 46,799 6,252 9,437 62,488
Outflows(2) (10,942 ) (169 ) (399 ) (11,510 ) (14,233 ) (260 ) - (14,493 )
Net Flows 40,162 3,610 8,283 52,055 32,566 5,992 9,437 47,995
Realizations (2,111 ) (7,275 ) (2,056 ) (11,442 ) (2,533 ) (6,242 ) (2,279 ) (11,054 )
Market Activity(3) 3,101 5,367 1,765 10,233 (462 ) (5,358 ) 210 (5,610 )
End of Period $ 215,530 $ 76,788 $ 38,787 $
331,105
(1) At the individual segment level, inflows include new subscriptions,
commitments, capital raised, other increases in available capital, purchases,
acquisitions and portfolio company appreciation. Outflows represent
redemptions, other decreases in available capital and portfolio company
depreciation. Realizations represent fund distributions of realized proceeds.
Market activity represents gains (losses), the impact of foreign exchange
rate fluctuations and other income.
(2) Outflows for Total AUM include redemptions of
during the years ended
(3) Includes foreign exchange impacts of
during the year ended
equity and real assets, respectively, during the year ended
2018.
Total AUM was$331.1 billion atDecember 31, 2019 , an increase of$50.8 billion , or 18.1%, compared to$280.3 billion atDecember 31, 2018 . The net increase was primarily due to: Net flows of$52.1 billion primarily related to: • a$40.2 billion increase related to funds we manage in the credit segment
primarily consisting of (i) an increase in AUM relating to Athene of
billion as a result of portfolio company activity, (ii) an increase in AUM
in the advisory and other category as a result of the acquisition of
Insurance
which added approximately
respectively, and (iii) subscriptions across the corporate credit funds we
manage and capital raised for Apollo/Athene Dedicated Investment Program
("ADIP") of
were offset by net segment transfers of
• an
segment primarily consisting of net segment transfers of
an increase in leverage of
we manage; and
• a
segment consisting of subscriptions of
certain traditional private equity fund co-investments and certain hybrid
capital funds of
Market activity of$10.2 billion primarily related to$5.4 billion of appreciation in the funds we manage in the private equity segment, primarily related to Fund VIII, as well as$3.1 billion and$1.8 billion of appreciation in the funds we manage in the credit and real assets segments, respectively. - 102-
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Offsetting these increases were:
Realizations of
primarily consisting of distributions of
respectively;
•
consisting of distributions from the structured credit and corporate
credit funds; and
• $2.1 billion related to funds we manage in the real assets segment
primarily consisting of distributions from the real estate and principal
finance funds.
For the Years Ended December 31,
2019 2018
Credit Private Equity Real Assets Total Credit Private Equity Real Assets Total
(in millions)
Change in Fee-Generating AUM(1):
Beginning of Period $ 144,071 $ 46,633 $ 23,663 $ 214,367 $ 116,352 $ 34,063 $ 18,550 $ 168,965
Inflows 39,968 1,677 7,098 48,743 43,755 25,676 7,668 77,099
Outflows(2) (12,703 ) (2,955 ) (761 ) (16,419 ) (14,351 ) (12,098 ) (792 ) (27,241 )
Net Flows 27,265 (1,278 ) 6,337 32,324 29,404 13,578 6,876 49,858
Realizations (854 ) (1,739 ) (628 ) (3,221 ) (1,475 ) (1,005 ) (1,853 ) (4,333 )
Market Activity(3) 2,411 210 355 2,976 (210 ) (3 ) 90 (123 )
End of Period
(1) At the individual segment level, inflows include new subscriptions,
commitments, capital raised, other increases in available capital, purchases,
acquisitions and portfolio company appreciation. Outflows represent
redemptions, other decreases in available capital and portfolio company
depreciation. Realizations represent fund distributions of realized proceeds.
Market activity represents gains (losses), the impact of foreign exchange
rate fluctuations and other income.
(2) Outflows for Fee-Generating AUM include redemptions of
billion during the years ended
(3) Includes foreign exchange impacts of
during the year ended
equity and real assets, respectively, during the year ended
2018.
Total Fee-Generating AUM was$246.4 billion atDecember 31, 2019 , an increase of$32.1 billion or 15.0%, compared to$214.4 billion atDecember 31, 2018 . The net increase was primarily due to: Net flows of$32.3 billion primarily related to: • a$27.3 billion increase related to funds we manage in the credit segment
primarily consisting of (i) an increase in AUM relating to Athene of
billion as a result of portfolio company activity, (ii) an increase in AUM
in advisory and other as a result of Athora's acquisition of Generali
increase relating to fee-generating capital deployment of
these increases were partially offset by net segment transfers of
billion and fee-generating capital reduction of
• a
segment primarily consisting of net segment transfers of
$0.6 billion of fee-generating capital deployment, primarily related to certain infrastructure funds; and
• a
segment primarily consisting of a fee-generating capital reduction of
billion, partially offset by fee-generating capital deployment of $1.0
billion .
Market activity of
as a result of appreciation across the corporate credit funds we manage.
Capital Deployed and Uncalled Commitments
Capital deployed is the aggregate amount of capital that has been invested
during a given period by our commitment-based funds, SIAs that have a defined
maturity date and funds and SIAs in our real estate debt strategy. Uncalled
commitments, by contrast, represents unfunded capital commitments that certain
of Apollo's funds and SIAs have received from fund investors to fund future or
current fund investments and expenses.
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Capital deployed and uncalled commitments are indicative of the pace and
magnitude of fund capital that is deployed or will be deployed, and which
therefore could result in future revenues that include management fees,
transaction fees and performance fees to the extent they are fee-generating.
Capital deployed and uncalled commitments can also give rise to future costs
that are related to the hiring of additional resources to manage and account for
the additional capital that is deployed or will be deployed. Management uses
capital deployed and uncalled commitments as key operating metrics since we
believe the results measure our fund's investment activities.
Capital Deployed
The following table summarizes the capital deployed for funds and SIAs with a
defined maturity date by segment:
For the Years Ended December 31,
2019 2018 2017
(in millions)
Credit $ 5,224 $ 2,864 3,906
Private Equity 8,081 6,039 6,904
Real Assets 2,189 2,399 850
Total capital deployed $ 15,494 $ 11,302 $ 11,660
Uncalled Commitments
The following table summarizes the uncalled commitments by segment:
As of As of
December 31, 2019 December 31, 2018
(in millions)
Credit $ 11,591 $ 8,066
Private Equity 36,346 41,585
Real Assets 5,736 5,980
Total uncalled commitments(1) $ 53,673 $ 55,631
(1) As of
billion, respectively, represented the amount of capital available for
investment or reinvestment subject to the provisions of the applicable
limited partnership agreements or other governing agreements of the funds,
partnerships and accounts we manage. These amounts exclude uncalled
commitments which can only be called for fund fees and expenses.
The Historical Investment Performance of Our Funds Below we present information relating to the historical performance of our funds, including certain legacy Apollo funds that do not have a meaningful amount of unrealized investments, and in respect of which the general partner interest has not been contributed to us. When considering the data presented below, you should note that the historical results of our funds are not indicative of the future results that you should expect from such funds, from any future funds we may raise or from your investment in our Class A shares. An investment in our Class A shares is not an investment in any of the Apollo funds, and the assets and revenues of our funds are not directly available to us. The historical and potential future returns of the funds we manage are not directly linked to returns on our Class A shares. Therefore, you should not conclude that continued positive performance of the funds we manage will necessarily result in positive returns on an investment in our Class A shares. However, poor performance of the funds that we manage would cause a decline in our revenue from such funds, and would therefore have a negative effect on our performance and in all likelihood the value of our Class A shares. Moreover, the historical returns of our funds should not be considered indicative of the future results you should expect from such funds or from any future funds we may raise. There can be no assurance that any Apollo fund will continue to achieve the same results in the future. Finally, our private equity IRRs have historically varied greatly from fund to fund. For example, Fund VI generated a 12% gross IRR and a 9% net IRR since its inception throughDecember 31, 2019 , while Fund V generated a 61% gross IRR and - 104-
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a 44% net IRR since its inception throughDecember 31, 2019 . Accordingly, the IRR going forward for any current or future fund may vary considerably from the historical IRR generated by any particular fund, or for our private equity funds as a whole. Future returns will also be affected by the applicable risks, including risks of the industries and businesses in which a particular fund invests. See "Item 1A. Risk Factors-Risks Related to Our Businesses-The historical returns attributable to our funds should not be considered as indicative of the future results of our funds or of our future results or of any returns expected on an investment in our Class A shares and our Preferred shares." Investment Record The following table summarizes the investment record by segment of Apollo's significant commitment-based funds that have a defined maturity date in which investors make a commitment to provide capital at the formation of such funds and deliver capital when called as investment opportunities become available. The funds included in the investment record table below have greater than$500 million of AUM and/or form part of a flagship series of funds. All amounts are as ofDecember 31, 2019 , unless otherwise noted: Total Vintage Committed Invested Realized Gross Net ($ in millions) Year Total AUM Capital Capital
Value Remaining Cost Unrealized Value Total Value IRR IRR
Private Equity:
Fund IX 2018 $ 24,789 $ 24,729 $ 3,732 $ 46 $ 3,732 $ 3,865 $ 3,911 NM (1) NM (1)
Fund VIII 2013 19,953 18,377 15,821 8,730 11,828 16,518 25,248 19 % 13 %
Fund VII 2008 3,805 14,677 16,461 31,260 2,739 1,824 33,084 33 25
Fund VI 2006 648 10,136 12,457 21,126 405 9 21,135 12 9
Fund V 2001 261 3,742 5,192 12,721 120 2 12,723 61 44
Fund I, II, III, IV
& MIA(2) Various 13 7,320 8,753 17,400 - - 17,400 39 26
Traditional Private
Equity Funds(3) $ 49,469 $ 78,981 $ 62,416 $ 91,283 $ 18,824 $ 22,218 $ 113,501 39 % 25 %
ANRP II 2016 2,804 3,454 2,253 1,381 1,590 1,559 2,940 19 10
ANRP I 2012 511 1,323 1,144 996 627 291 1,287 4 -
AION 2013 743 826 669 324 459 640 964 17 9
Hybrid Value Fund 2019 3,247 3,238 792 19 785 806 825 NM (1) NM (1)
Total Private
Equity $ 56,774 $ 87,822 $ 67,274 $ 94,003 $ 22,285 $ 25,514 $ 119,517
Credit:
Structured Credit
Funds
FCI III 2017 $ 2,669 $ 1,906 $ 2,394 $ 985 $ 1,898 $ 2,024 $ 3,009 26 % 20 %
FCI II 2013 2,270 1,555 2,770 1,765 1,709 1,603 3,368 8 5
FCI I 2012 - 559 1,516 1,975 - - 1,975 11 8
SCRF IV (6) 2017 3,170 2,502 3,848 1,907 2,317 2,413 4,320 17 13
SCRF III 2015 - 1,238 2,110 2,428 - - 2,428 18 14
SCRF II 2012 - 104 467 528 - - 528 15 12
SCRF I 2008 - 118 240 357 - - 357 33 26
Total Credit $ 8,109 $ 7,982 $ 13,345 $ 9,945 $ 5,924 $ 6,040 $ 15,985
Real Assets:
European Principal
Finance Funds
EPF III(4) 2017 $ 5,056 $ 4,509 $ 2,360 $ 441 $ 1,972 $ 2,612 $ 3,053 32 % 17 %
EPF II(4) 2012 1,498 3,439 3,475 4,288 727 770 5,058 15 9
EPF I(4) 2007 236 1,451 1,906 3,202 - 7 3,209 23 17
U.S. RE Fund II(5) 2016 1,295 1,243 848 420 628 804 1,224 19 15
U.S. RE Fund I(5) 2012 321 653 636 723 211 228 951 14 10
Asia RE Fund(5) 2017 669 719 428 205 275 351 556 21 15
Infrastructure
Equity Fund 2018 1,078 897 800 122 719 875 997 NM (1) NM (1)
Total Real Assets $ 10,153 $ 12,911 $ 10,453 $ 9,401 $ 4,532 $ 5,647 $ 15,048 (1) Data has not been presented as the fund commenced investing capital less than
24 months prior to the period indicated and such information was deemed not
meaningful.
(2) The general partners and managers of Funds I, II and MIA, as well as the
general partner of Fund III, were excluded assets in connection with the 2007
Reorganization. As a result, Apollo did not receive the economics associated
with these entities. The investment performance of these funds, combined with
Fund IV, is presented to illustrate fund performance associated with Apollo's
Managing Partners and other investment professionals.
(3) Total IRR is calculated based on total cash flows for all funds presented.
(4) Funds are denominated in Euros and historical figures are translated into
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(5)
million and
2019, respectively, which are included in the figures in the table. A
co-invest entity within
translated into
(6) Remaining cost for certain of our credit funds may include physical cash
called, invested or reserved for certain levered investments.
Private Equity The following table summarizes the investment record for distressed investments made in our traditional private equity fund portfolios, since the Company's inception. All amounts are as ofDecember 31, 2019 : Total Invested Capital Total Value Gross IRR (in millions) Distressed for Control $ 7,915$ 18,993 29 % Non-Control Distressed 5,416 8,483 71 Total 13,331 27,476 49 Corporate Carve-outs, Opportunistic Buyouts and Other Credit(1) 49,085 86,025 21 Total $ 62,416$ 113,501 39 %
(1) Other Credit is defined as investments in debt securities of issuers other
than portfolio companies that are not considered to be distressed.
The following tables provide additional detail on the composition of the Fund VIII and Fund VII private equity portfolios based on investment strategy. Amounts for Fund I, II, III, IV, V, VI and IX are included in the table above but not presented below as their remaining value is less than$100 million , the fund has been liquidated or the fund commenced investing capital less than 24 months prior toDecember 31, 2019 and such information was deemed not meaningful. All amounts are as ofDecember 31, 2019 : Fund VIII(1)Total Invested Capital Total Value (in millions) Corporate Carve-outs $ 2,673$ 6,228 Opportunistic Buyouts 12,603 18,170 Distressed(2) 545 850 Total $ 15,821$ 25,248 Fund VII(1)Total Invested Capital Total Value (in millions) Corporate Carve-outs $ 2,539$ 3,645 Opportunistic Buyouts 4,338 10,855 Distressed/Other Credit(2) 9,584 18,584 Total $ 16,461$ 33,084
(1) Committed capital less unfunded capital commitments for Fund VIII and Fund
VII were
capital commitments from limited partners to invest in such funds less
capital that is available for investment or reinvestment subject to the
provisions of the applicable limited partnership agreement or other governing
agreements.
(2) The distressed investment strategy includes distressed for control,
non-control distressed and other credit.
During the recovery and expansionary periods of 1994 through 2000 and late 2003 through the first half of 2007, our private equity funds invested or committed to invest approximately$13.7 billion primarily in traditional and corporate partner buyouts. During the recessionary periods of 1990 through 1993, 2001 through late 2003 and the recessionary and post recessionary periods (beginning the second half of 2007 throughDecember 31, 2019 ), our private equity funds have invested$55.5 billion , of which$20.0 billion was in distressed buyouts and debt investments when the debt securities of quality companies traded at deep discounts to par value. Our average entry multiple for Fund VIII, VII and VI was 5.7x, 6.1x and 7.7x, respectively, as ofDecember 31, 2019 . Our average entry multiple for a private equity fund is the average of the total enterprise value over an applicable adjusted - 106-
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earnings before interest, taxes, depreciation and amortization, which may
incorporate certain adjustments based on the investment team's estimates and we
believe captures the true economics of our funds' investments in portfolio
companies. The average entry multiple of actively investing funds may include
committed investments not yet closed.
Credit
The following table presents the gross and net returns for Apollo's credit
segment by category type:
Gross Returns Net Returns
For the Year Ended For the Year Ended
Category December 31, 2019 December 31, 2019
Corporate Credit 10.6 % 9.5 %
Structured Credit 13.0 10.6
Direct Origination 12.2 8.2
Permanent Capital
The following table summarizes the investment record for our permanent capital
vehicles by segment, excluding Athene-related and Athora-related assets managed
or advised by ISG and ISGI:
Total Returns(1)
For the Year Ended For the Year Ended
IPO Year(2) Total AUM December 31, 2019 December 31, 2018
Credit: (in millions)
MidCap(3) N/A $ 8,962 17 % 19 %
AIF 2013 377 19 (5 )%
AFT 2011 405 14 (4 )%
AINV/Other(4) 2004 5,064 57 (18 )%
Real Assets:
ARI(5) 2009 6,715 21 % - %
Total $ 21,523 (1) Total returns are based on the change in closing trading prices during the
respective periods presented taking into account dividends and distributions,
if any, as if they were reinvested without regard to commission.
(2) An initial public offering ("IPO") year represents the year in which the
vehicle commenced trading on a national securities exchange.
(3) MidCap is not a publicly traded vehicle and therefore IPO year is not
applicable. The returns presented are a gross return based on NAV. The net
returns based on NAV were 11% and 14% for the years ended
and
(4) All amounts are as of
www.apolloic.com for the most recent financial information on AINV. Included
within Total AUM of AINV/Other is
business development company from which Apollo earns investment-related
service fees, but for which Apollo does not provide management or advisory
services. Total returns exclude performance related to this AUM.
(5) All amounts are as of
www.apolloreit.com for the most recent financial information on ARI.
SIAs
As ofDecember 31, 2019 , Apollo managed approximately$28 billion of total AUM in SIAs, which include capital deployed from certain SIAs across Apollo's credit, private equity and real assets funds. Overview of Results of Operations Revenues Advisory and Transaction Fees, Net. As a result of providing advisory services with respect to actual and potential credit, private equity, and real assets investments, we are entitled to receive fees for transactions related to the acquisition and, in certain instances, disposition of portfolio companies as well as fees for ongoing monitoring of portfolio company operations and directors' fees. We also receive advisory fees for advisory services provided to certain credit funds. In addition, monitoring fees are generated on certain structured portfolio company investments. Under the terms of the limited partnership agreements for certain funds, the management fee payable by the funds may be subject to a reduction based on a certain percentage of such advisory and transaction fees, net of applicable broken deal costs ("Management Fee Offset"). Such amounts are presented as a reduction - 107-
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to advisory and transaction fees, net, in the consolidated statements of
operations (see note 2 to our consolidated financial statements for more detail
on advisory and transaction fees, net).
The Management Fee Offsets are calculated for each fund as follows:
• 65%-100% for certain credit funds, gross advisory,
transaction and other special fees;
• 65%-100% for private equity funds, gross advisory,
transaction and other special fees; and
• 65%-100% for certain real assets funds, gross advisory,
transaction and other special fees.
Management Fees. The significant growth of the assets we manage has had a
positive effect on our revenues. Management fees are typically calculated based
upon any of "net asset value," "gross assets," "adjusted par asset value,"
"adjusted costs of all unrealized portfolio investments," "capital commitments,"
"invested capital," "adjusted assets," "capital contributions," or
"stockholders' equity," each as defined in the applicable limited partnership
agreement and/or management agreement of the unconsolidated funds.
Performance Fees. The general partners of our funds are entitled to an incentive
return of normally up to 20% of the total returns of a fund's capital, depending
upon performance of the underlying funds and subject to preferred returns and
high water marks, as applicable. Performance fees, categorized as performance
allocations, are accounted for as an equity method investment, and effectively,
the performance fees for any period are based upon an assumed liquidation of the
funds' assets at the reporting date, and distribution of the net proceeds in
accordance with the funds' allocation provisions. Performance fees categorized
as incentive fees, which are not accounted as an equity method investment, are
deferred until fees are probable to not be significantly reversed. Prior to the
adoption of the new revenue recognition guidance, incentive fees were recognized
on an assumed liquidation basis. The majority of performance fees are comprised
of performance allocations.
As of December 31, 2019 , approximately 51% of the value of our funds'
investments on a gross basis was determined using market-based valuation methods
(i.e., reliance on broker or listed exchange quotes) and the remaining 49% was
determined primarily by comparable company and industry multiples or discounted
cash flow models. For our credit, private equity and real assets segments, the
percentage determined using market-based valuation methods as of December 31,
2019 was 72%, 23% and 12%, respectively. See "Item 1A. Risk Factors-Risks
Related to Our Businesses-Our funds' performance, and our performance, may be
adversely affected by the financial performance of our funds' portfolio
companies and the industries in which our funds invest" for a discussion
regarding certain industry-specific risks that could affect the fair value of
our private equity funds' portfolio company investments.
In our private equity funds, the Company does not earn performance fees until
the investors in the fund have achieved cumulative investment returns on
invested capital (including management fees and expenses) in excess of an 8%
hurdle rate. Additionally, certain of our credit and real assets funds have
various performance fee rates and hurdle rates. Certain of our credit and real
assets funds allocate performance fees to the general partner in a similar
manner as the private equity funds. In our private equity, certain credit and
real assets funds, so long as the investors achieve their priority returns,
there is a catch-up formula whereby the Company earns a priority return for a
portion of the return until the Company's performance fees equate to its
incentive fee rate for that fund; thereafter, the Company participates in
returns from the fund at the performance fee rate. Performance fees, categorized
as performance allocations, are subject to reversal to the extent that the
performance fees distributed exceed the amount due to the general partner based
on a fund's cumulative investment returns. The Company recognizes potential
repayment of previously received performance fees as a general partner
obligation representing all amounts previously distributed to the general
partner that would need to be repaid to the Apollo funds if these funds were to
be liquidated based on the current fair value of the underlying funds'
investments as of the reporting date. The actual general partner obligation,
however, would not become payable or realized until the end of a fund's life or
as otherwise set forth in the respective limited partnership agreement of the
fund.
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The table below presents an analysis of Apollo's (i) performance fees receivable
on an unconsolidated basis and (ii) realized and unrealized performance fees for
Apollo's combined segments:
As of December 31,
2019 2018 For the Year Ended December 31, 2019 For the Year Ended December 31, 2018 For the Year Ended December 31, 2017
Total Total Total
Performance Fees Receivable Unrealized Realized Performance Unrealized Realized Performance Unrealized Realized Performance
on an Unconsolidated Basis Performance Fees Performance Fees Fees Performance Fees Performance Fees Fees Performance Fees Performance Fees Fees
(in thousands)
Credit:
Corporate
Credit(1)
55,640 35,527 91,167 19,839 15,686 35,525 12,195 56,959 69,154
Direct Origination 104,535 89,581 (17,080 ) 57,520 40,440 42,079 24,645 66,724 21,316 17,666 38,982 Total Credit$ 395,583 $ 248,688 $ 48,658 $ 190,721 $ 239,379 $ 66,755 $ 73,529$ 140,284 $ 30,605 $ 109,648$ 140,253 Total Credit, net of profit sharing expense 103,835 70,657 8,443 97,046 105,489 42,015 37,450 79,465 17,213 75,239
92,452
Private Equity: Fund VIII(2)$ 715,531 $ 441,736 $ 274,337 $ 387,994 $ 662,331 $ (575,264 ) $ 213,549$ (361,715 ) $ 693,772 $ 206,393$ 900,165 Fund VII(1)(2) 172 214 (59,065 ) 2,703 (56,362 ) (108,938 ) 7,350 (101,588 ) (4,156 ) 19,817
15,661
Fund VI(2) 17,130 312 28,331 3,496 31,827 (51,851 ) 3,338 (48,513 ) 80,996 - 80,996 Fund IV and V(1) - - (1,252 ) - (1,252 ) (4,459 ) - (4,459 ) (13,775 ) - (13,775 ) ANRP I and II(1)(2) 5,119 34,017 (32,497 ) 13,918 (18,579 ) (3,325 ) 11,612 8,287 (52,167 ) 59,519 7,352 Other(1)(3) 94,026 52,870 35,685 21,041 56,726 (45,232 ) 43,229 (2,003 ) (63,583 ) 160,194 96,611 Total Private Equity$ 831,978 $ 529,149 $ 245,539 $ 429,152 $ 674,691 $ (789,069 ) $ 279,078$ (509,991 ) $ 641,087 $ 445,923$ 1,087,010 Total Private Equity, net of profit sharing expense 506,433 323,470 150,932 234,012 384,944 (507,864 ) 122,899 (384,965 ) 427,711 252,434 680,145 Real Assets: Principal Finance$ 199,208 $ 122,158 $ 77,028 $ 1,760 $ 78,788 $ (50,893 ) $ 45,367$ (5,526 ) $ 19,096 $ 73,585$ 92,681 U.S. RE Fund I & II 22,685 16,158 6,527 1,645 8,172 (1,137 ) 1,448 311 (2,968 ) 11,925 8,957 InfrastructureEquity Fund 18,188 - 18,188 - 18,188 - - - - - - Other(3) 26,442 11,078 15,098 (62 ) 15,036 (8,544 ) 9,156 612 745 7,944
8,689
Total Real Assets$ 266,523 $ 149,394 $ 116,841 $ 3,343 $ 120,184 $ (60,574 ) $ 55,971$ (4,603 ) $ 16,873 $ 93,454$ 110,327 Total Real Assets, net of profit sharing expense 151,796 80,963 67,615 1,906 69,521 (42,227 ) 22,600 (19,627 ) 17,322 42,514
59,836
Total$ 1,494,084 $ 927,231 $ 411,038 $ 623,216 $ 1,034,254 $ (782,888 ) $ 408,578$ (374,310 ) $ 688,565 $ 649,025$ 1,337,590 Total, net of profit sharing expense(4)$ 762,064 $ 475,090 $ 226,990 $ 332,964 $ 559,954 $ (508,076 ) $ 182,949$ (325,127 ) $ 462,246 $ 370,187$ 832,433
1. As of
general partner obligations to return previously distributed performance fees.
The fair value gain on investments and income at the fund level needed to
reverse the general partner obligations for certain private equity funds was
2. As ofDecember 31, 2019 , the remaining investments and escrow cash of Fund VIII were valued at 131% of the fund's unreturned capital, which was above the required escrow ratio of 115%. As ofDecember 31, 2019 , the remaining investments and escrow cash of Fund VII, Fund VI, ANRP I and ANRP II were valued at 63%, 35%, 47% and 90% of the fund's unreturned capital, respectively, which were below the required escrow ratio of 115%. As a result, these funds are required to place in escrow current and future performance fee distributions to the general partner until the specified return ratio of 115% is met (at the time of a future distribution) or upon liquidation. As ofDecember 31, 2019 , Fund VII had$128.5 million of gross performance fees, or$73.3 million net of profit sharing, in escrow. As ofDecember 31, 2019 , Fund VI had$167.6 million of gross performance fees, or$112.4 million net of profit sharing, in escrow. As ofDecember 31, 2019 , ANRP I had$40.2 million of gross performance fees, or$26.0 million net of profit sharing, in escrow. As ofDecember 31, 2019 , ANRP II had$31.2 million of gross performance fees, or$19.5 million net of profit sharing, in escrow. With respect to Fund VII, Fund VI, ANRP II and ANRP I, realized performance fees currently distributed to the general partner are limited to potential tax distributions and interest on escrow balances per the funds' partnership agreements. Performance fees receivable as ofDecember 31, 2019 and realized performance fees for the year endedDecember 31, 2019 include interest earned on escrow balances that is not subject to contingent repayment. 3. Other includes certain SIAs. 4. There was a corresponding profit sharing payable of$758.7 million as ofDecember 31, 2019 , including profit sharing payable related to amounts in escrow and contingent consideration obligations of$112.5 million . The general partners of certain of our credit funds accrue performance fees, categorized as performance allocations, when the fair value of investments exceeds the cost basis of the individual investors' investments in the fund, including any allocable share of expenses incurred in connection with such investments, which we refer to as "high water marks." These high water marks are applied on an individual investor basis. Certain of our credit funds have investors with various high water marks, the achievement of which is subject to market conditions and investment performance. Performance fees from our private equity funds and certain credit and real assets funds are subject to contingent repayment by the general partner in the event of future losses to the extent that the cumulative performance fees distributed from - 109-
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inception to date exceeds the amount computed as due to the general partner at the final distribution. These general partner obligations, if applicable, are included in due to related parties on the consolidated statements of financial condition. The following table summarizes our performance fees since inception for our combined segments throughDecember 31, 2019 :
Performance Fees Since Inception(1)
Maximum
Performance Fees
Total Undistributed and Subject to
Undistributed by Distributed by Fund
Distributed by Fund and
Fund and Recognized and Recognized(2) Recognized(3) Obligation(3) Reversal(4)
(in millions)
Credit:
Corporate Credit $ 89.6 $ 1,100.4 $ 1,190.0 $ - $ 95.2
Structured Credit 201.4 155.2 356.6 - 188.9
Direct Origination 104.6 1.9 106.5 - 58.3
Total Credit 395.6 1,257.5 1,653.1 - 342.4
Private Equity:
Fund VIII 715.6 818.6 1,534.2 - 1,272.0
Fund VII 0.2 3,131.5 3,131.7 97.7 355.8
Fund VI 17.1 1,663.9 1,681.0 - 1.8
Fund IV and V - 2,053.1 2,053.1 30.5 0.3
ANRP I and II 5.1 104.5 109.6 15.6 21.7
Other 94.0 737.1 831.1 45.5 145.5
Total Private Equity 832.0 8,508.7 9,340.7 189.3 1,797.1
Real Assets:
Principal Finance 199.2 371.4 570.6 - 327.5
U.S. RE Fund I and II 22.7 27.8 50.5 - 38.4
Infrastructure Equity Fund 18.2 - 18.2 - 18.2
Other(5) 26.4 36.2 62.6 - 35.4
Total Real Assets 266.5 435.4 701.9 - 419.5
Total $ 1,494.1 $ 10,201.6 $ 11,695.7 $ 189.3 $ 2,559.0 (1) Certain funds are denominated in Euros and historical figures are translated
into
2019. Certain funds are denominated in pound sterling and translated into
(2) Amounts in "Distributed by Fund and Recognized" for the Citi Property
Investors ("CPI"),
are presented for activity subsequent to the respective acquisition dates.
Amounts exclude certain performance fees from business development companies
and
Redding Ridge.
(3) Amounts were computed based on the fair value of fund investments on
the general partner. Based on the amount allocated, a portion is subject to
potential reversal or, to the extent applicable, has been reduced by the
general partner obligation to return previously distributed performance fees
at
any such general partner obligation would not take place until the final
disposition of the fund's investments based on contractual termination of the
fund.
(4) Represents the amount of performance fees that would be reversed if remaining
fund investments became worthless on
potential reversal of performance fees include amounts undistributed by a
fund (i.e., the performance fees receivable), as well as a portion of the
amounts that have been distributed by a fund, net of taxes and not subject to
a general partner obligation to return previously distributed performance
fees, except for those funds that are gross of taxes as defined in the
respective funds' governing documents.
(5) Other includes certain SIAs.
Expenses
Compensation and Benefits. Our most significant expense is compensation and benefits expense. This consists of fixed salary, discretionary and non-discretionary bonuses, profit sharing expense associated with the performance fees earned from credit, private equity, and real assets funds and compensation expense associated with the vesting of non-cash equity-based awards.
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Our compensation arrangements with certain partners and employees contain a significant performance-based incentive component. Therefore, as our net revenues increase, our compensation costs rise. Our compensation costs also reflect the increased investment in people as we expand geographically and create new funds. In addition, certain professionals and selected other individuals have a profit sharing interest in the performance fees earned in relation to our private equity, certain credit and real assets funds in order to better align their interests with our own and with those of the investors in these funds. Profit sharing expense is part of our compensation and benefits expense and is generally based upon a fixed percentage of credit, private equity and real assets performance fees. Profit sharing expense can reverse during periods when there is a decline in performance fees that were previously recognized. Profit sharing amounts are normally distributed to employees after the corresponding investment gains have been realized and generally before preferred returns are achieved for the investors. Therefore, changes in our unrealized performance fees have the same effect on our profit sharing expense. Profit sharing expense increases when unrealized performance fees increases. Realizations only impact profit sharing expense to the extent that the effects on investments have not been recognized previously. If losses on other investments within a fund are subsequently realized, the profit sharing amounts previously distributed are normally subject to a general partner obligation to return performance fees previously distributed back to the funds. This general partner obligation due to the funds would be realized only when the fund is liquidated, which generally occurs at the end of the fund's term. However, indemnification obligations also exist for realized gains with respect to Fund IV, Fund V and Fund VI, which, although ourManaging Partners andContributing Partners would remain personally liable, may indemnify ourManaging Partners andContributing Partners for 17.5% to 100% of the previously distributed profits regardless of the fund's future performance. See note 15 to our consolidated financial statements for further information regarding the Company's indemnification liability. Each Managing Partner receives$100,000 per year in base salary for services rendered to us. Additionally, ourManaging Partners can receive other forms of compensation. In addition, AHL Awards (as defined in note 13 to our consolidated financial statements) and other equity-based compensation awards have been granted to the Company and certain employees, which amortize over the respective vesting periods. The Company grants equity awards to certain employees, including RSUs, restricted Class A shares and options, that generally vest and become exercisable in quarterly installments or annual installments depending on the contract terms over a period of three to six years. In some instances, vesting of an RSU is also subject to the Company's receipt of performance fees, within prescribed periods, sufficient to cover the associated equity-based compensation expense. See note 13 to our consolidated financial statements for further discussion of equity-based compensation. Other Expenses. The balance of our other expenses includes interest, placement fees, and general, administrative and other operating expenses. Interest expense consists primarily of interest related to the the 2024 Senior Notes, the 2026 Senior Notes, the 2029 Senior Notes, the 2039 Senior Secured Guaranteed Notes, the 2048 Senior Notes and the 2050 Subordinated Notes as discussed in note 11 to our consolidated financial statements. Placement fees are incurred in connection with our capital raising activities. General, administrative and other expenses includes occupancy expense, depreciation and amortization, professional fees and costs related to travel, information technology and administration. Occupancy expense represents charges related to office leases and associated expenses, such as utilities and maintenance fees. Depreciation and amortization of fixed assets is normally calculated using the straight-line method over their estimated useful lives, ranging from two to sixteen years, taking into consideration any residual value. Leasehold improvements are amortized over the shorter of the useful life of the asset or the expected term of the lease. Intangible assets are amortized based on the future cash flows over the expected useful lives of the assets. Other Income (Loss)Net Gains (Losses) from Investment Activities. Net gains (losses) from investment activities include both realized gains and losses and the change in unrealized gains and losses in our investment portfolio between the opening reporting date and the closing reporting date. Net unrealized gains (losses) are a result of changes in the fair value of unrealized investments and reversal of unrealized gains (losses) due to dispositions of investments during the reporting period. Significant judgment and estimation goes into the assumptions that drive these models and the actual values realized with respect to investments could be materially different from values obtained based on the use of those models. The valuation methodologies applied impact the reported value of investment company holdings and their underlying portfolios in our consolidated financial statements.Net Gains (Losses) from Investment Activities of Consolidated Variable Interest Entities. Changes in the fair value of the consolidated VIEs' assets and liabilities and related interest, dividend and other income and expenses subsequent to consolidation are presented within net gains (losses) from investment activities of consolidated variable interest entities and are attributable to Non-Controlling Interests in the consolidated statements of operations. Other Income (Losses), Net. Other income (losses), net includes gains (losses) arising from the remeasurement of foreign currency denominated assets and liabilities, remeasurement of the tax receivable agreement liability and other miscellaneous non-operating income and expenses. - 111-
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Income Taxes. Prior to the Conversion, certain entities in theApollo Operating Group operated as partnerships forU.S. federal income tax purposes. As a result, these members of theApollo Operating Group were not subject toU.S. federal income taxes. However, certain of these entities were subject toNew York City unincorporated business taxes ("NYC UBT") and certain non-U.S. entities were subject to non-U.S. corporate income taxes. EffectiveSeptember 5, 2019 ,Apollo Global Management, LLC converted from aDelaware limited liability company to aDelaware corporation namedApollo Global Management, Inc. Subsequent to the Conversion, generally all of the income is subject toU.S. corporate income taxes, which could result in an overall higher income tax expense (or benefit) in periods subsequent to the Conversion. Significant judgment is required in determining the provision for income taxes and in evaluating income tax positions, including evaluating uncertainties. We recognize the income tax benefits of uncertain tax positions only where the position is "more likely than not" to be sustained upon examination, including resolutions of any related appeals or litigation, based on the technical merits of the positions. The tax benefit is measured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. If a tax position is not considered more likely than not to be sustained, then no benefits of the position are recognized. The Company's income tax positions are reviewed and evaluated quarterly to determine whether or not we have uncertain tax positions that require financial statement recognition or de-recognition. Deferred tax assets and liabilities are recognized for the expected future tax consequences, using currently enacted tax rates, of differences between the carrying amount of assets and liabilities and their respective tax basis. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period when the change is enacted. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Non-Controlling Interests For entities that are consolidated, but not 100% owned, a portion of the income or loss and corresponding equity is allocated to owners other than Apollo. The aggregate of the income or loss and corresponding equity that is not owned by the Company is included in Non-Controlling Interests in the consolidated financial statements. The Non-Controlling Interests relating toApollo Global Management, Inc. primarily include the 44.7% and 50.1% ownership interest in theApollo Operating Group held by theManaging Partners andContributing Partners through their limited partner interests in Holdings as ofDecember 31, 2019 and 2018, respectively. Non-Controlling Interests also include limited partner interests in certain consolidated funds and VIEs. The authoritative guidance for Non-Controlling Interests in the consolidated financial statements requires reporting entities to present Non-Controlling Interest as equity and provides guidance on the accounting for transactions between an entity and Non-Controlling Interests. According to the guidance, (1) Non-Controlling Interests are presented as a separate component of stockholders' equity on the Company's consolidated statements of financial condition, (2) net income (loss) includes the net income (loss) attributable to the Non-Controlling Interest holders on the Company's consolidated statements of operations, (3) the primary components of Non-Controlling Interest are separately presented in the Company's consolidated statements of changes in stockholders' equity to clearly distinguish the interests in theApollo Operating Group and other ownership interests in the consolidated entities and (4) profits and losses are allocated to Non-Controlling Interests in proportion to their ownership interests regardless of their basis. - 112-
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Results of Operations Below is a discussion of our consolidated results of operations for the years endedDecember 31, 2019 , 2018 and 2017. For additional analysis of the factors that affected our results at the segment level, see "-Segment Analysis" below: For the Years Ended December 31, Amount Percentage For the Years Ended December 31, Amount Percentage 2019 2018 Change Change 2018 2017 Change Change Revenues: (in thousands) (in thousands) Management fees$ 1,575,814 $ 1,345,252 $ 230,562 17.1 %$ 1,345,252 $ 1,154,925 $ 190,327 16.5 % Advisory and transaction fees, net 123,644 112,278 11,366 10.1 112,278 117,624 (5,346 ) (4.5 ) Investment income (loss): Performance allocations 1,057,139 (400,305 ) 1,457,444 NM (400,305 ) 1,306,193 (1,706,498 ) NM Principal investment income 166,527 5,122 161,405 NM 5,122 161,630 (156,508 ) (96.8 ) Total investment income (loss) 1,223,666 (395,183 ) 1,618,849 NM (395,183 ) 1,467,823 (1,863,006 ) NM Incentive fees 8,725 30,718 (21,993 ) (71.6 ) 30,718 31,431 (713 ) (2.3 ) Total Revenues 2,931,849 1,093,065 1,838,784 168.2 1,093,065 2,771,803 (1,678,738 ) (60.6 ) Expenses: Compensation and benefits: Salary, bonus and benefits 514,513 459,604 54,909 11.9 459,604 428,882 30,722 7.2 Equity-based compensation 189,648 173,228 16,420 9.5 173,228 91,450 81,778 89.4 Profit sharing expense 556,926 (57,833 ) 614,759 NM (57,833 ) 515,073 (572,906 ) NM Total compensation and benefits 1,261,087 574,999 686,088 119.3 574,999 1,035,405 (460,406 ) (44.5 ) Interest expense 98,369 59,374 38,995 65.7 59,374 52,873 6,501 12.3 General, administrative and other 330,342 266,444 63,898 24.0 266,444 257,858 8,586 3.3 Placement fees 1,482 2,122 (640 ) (30.2 ) 2,122 13,913 (11,791 ) (84.7 ) Total Expenses 1,691,280 902,939 788,341 87.3 902,939 1,360,049 (457,110 ) (33.6 ) Other Income (Loss): Net gains (losses) from investment activities 138,154 (186,449 ) 324,603 NM (186,449 ) 95,104 (281,553 ) NM Net gains from investment activities of consolidated variable interest entities 39,911 45,112 (5,201 ) (11.5 ) 45,112 10,665 34,447 323.0 Interest income 35,522 20,654 14,868 72.0 20,654 6,421 14,233 221.7 Other income (loss), net (46,307 ) 35,829 (82,136 ) NM 35,829 245,640 (209,811 ) (85.4 ) Total Other Income (Loss) 167,280 (84,854 ) 252,134 NM (84,854 ) 357,830 (442,684 ) NM Income before income tax (provision) benefit 1,407,849 105,272 1,302,577 NM 105,272 1,769,584 (1,664,312 ) (94.1 ) Income tax (provision) benefit 128,994 (86,021 ) 215,015 NM (86,021 ) (325,945 ) 239,924 (73.6 ) Net Income 1,536,843 19,251 1,517,592 NM 19,251 1,443,639 (1,424,388 ) (98.7 ) Net income attributable to Non-Controlling Interests (693,650 ) (29,627 ) (664,023 ) NM (29,627 ) (814,535 ) 784,908 (96.4 ) Net Income (Loss) Attributable to Apollo Global Management, Inc. 843,193 (10,376 ) 853,569 NM (10,376 ) 629,104 (639,480 ) NM Series A Preferred Stock Dividends (17,531 ) (17,531 ) - - (17,531 ) (13,538 ) (3,993 ) 29.5 Series B Preferred Stock Dividends (19,125 ) (14,131 ) (4,994 ) 35.3 (14,131 ) - (14,131 ) NM Net Income (Loss) Attributable to Apollo Global Management, Inc. Class A Common Stockholders$ 806,537 $ (42,038 ) $ 848,575 NM$ (42,038 ) $ 615,566 $ (657,604 ) NM
Note: "NM" denotes not meaningful. Changes from negative to positive amounts and
positive to negative amounts are not considered meaningful. Increases or
decreases from zero and changes greater than 500% are also not considered
meaningful.
A discussion of our consolidated results of operations for the year endedDecember 31, 2018 as compared to the year endedDecember 31, 2017 is included in the Company's Annual Report on Form 10-K filed with theUnited States Securities and Exchange Commission onMarch 1, 2019 (the "2018 Annual Report"). - 113-
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Revenues
Our revenues and other income include fixed components that result from measures of capital and asset valuations and variable components that result from realized and unrealized investment performance, as well as the value of successfully completed transactions. Year EndedDecember 31, 2019 Compared to Year EndedDecember 31, 2018 Management fees increased by$230.6 million for the year endedDecember 31, 2019 as compared to the year endedDecember 31, 2018 . This change was primarily attributable to an increase in management fees earned from Athene and Fund IX of$120.3 million and$79.4 million , respectively, during the year endedDecember 31, 2019 , compared to the same period during 2018. For additional details regarding changes in management fees in each segment, see "-Segment Analysis" below. Advisory and transaction fees, net, increased by$11.4 million for the year endedDecember 31, 2019 as compared to the year endedDecember 31, 2018 . This change was primarily driven by net advisory and transaction fees earned from Fund IX of$33.0 million and increased net advisory and transaction fees earned related to the structuring of a loan for a portfolio company, partially offset by a decrease in net advisory and transaction fees earned with respect to Fund VIII of$41.6 million during the year endedDecember 31, 2019 , as compared to the same period during 2018. Performance allocations increased by$1.5 billion for the year endedDecember 31, 2019 as compared to the year endedDecember 31, 2018 . The increase in performance allocations was primarily attributable to increased performance allocations earned from Fund VIII, EPF III and Fund VI of$1,024.0 million ,$98.6 million and$80.3 million , respectively, during the year endedDecember 31, 2019 , as compared to the same period during 2018. The increase in performance allocations from Fund VIII was primarily driven by appreciation in the value of the fund's investments in public portfolio companies primarily in the consumer services, manufacturing and industrial, business services and financial services sectors, and appreciation in the value of the fund's investments in private portfolio companies in the consumer services and leisure sectors, during the year endedDecember 31, 2019 as compared to the same period during 2018. The increase in performance fees from EPF III was primarily driven by appreciation in the value of the fund's investments in logistics assets, hospitality assets and non-performing loan portfolios, and appreciation in the value of the fund's investments in public portfolio companies primarily in the real estate sector during the year endedDecember 31, 2019 as compared to the same period during 2018. The increase in performance fees from Fund VI was primarily driven by appreciation in the value of the fund's investments in public portfolio companies primarily in the leisure sector and private portfolio companies in the chemicals sector, during the year endedDecember 31, 2019 as compared to the same period during 2018. Principal investment income increased by$161.4 million for the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 . This change was primarily driven by an increase in the value of investments held by certain Apollo funds and other entities in which the Company has a direct interest, mainly with respect to Fund VIII of$124.7 million , during the year endedDecember 31, 2019 as compared to the same period in 2018. Incentive fees decreased by$22.0 million for the year endedDecember 31, 2019 as compared to the year endedDecember 31, 2018 . This change was primarily attributable to a decrease in incentive fees earned from AINV and a strategic investment account of$17.7 million and$8.8 million , respectively, during the year endedDecember 31, 2019 as compared to the same period in 2018. The decrease in incentive fees earned from AINV was a result of the amended and restated investment management agreement with AINV, which revised the incentive fee to include a total return requirement, as described in note 15 to our consolidated financial statements. Expenses Year EndedDecember 31, 2019 Compared to Year EndedDecember 31, 2018 Compensation and benefits increased by$686.1 million for the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 . This change was primarily attributable to an increase in profit sharing expense of$614.8 million due to a corresponding increase in performance allocations during the year endedDecember 31, 2019 , as compared to the same period in 2018. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance allocations in the period. In addition, salary, bonus and benefits increased by$54.9 million primarily due to changes in bonus accrual estimates and an increase in headcount. Included in profit sharing expense is$72.2 million and$62.0 million for the years endedDecember 31, 2019 and 2018, respectively, related to theIncentive Pool . See "-Profit Sharing Expense" in the Critical Accounting Policies section for an overview of theIncentive Pool . - 114-
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Interest expense increased by$39.0 million for the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 , primarily due to additional interest expense incurred during the year endedDecember 31, 2019 as a result of the issuances of the 2029 Senior Notes and 2039 Senior Secured Guaranteed Notes, as described in note 11 to our consolidated financial statements. General, administrative and other expenses increased by$63.9 million for the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 . This change was primarily driven by an increase in professional fees as a result of the Conversion, occupancy expenses and fund organizational expenses during the year endedDecember 31, 2019 as compared to the same period in 2018. Other Income (Loss) Year EndedDecember 31, 2019 Compared to Year EndedDecember 31, 2018 Net gains from investment activities increased by$324.6 million for the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 . This change was primarily attributable to increased appreciation on the Company's investment in Athene Holding during the year endedDecember 31, 2019 , as compared to the same period in 2018. See note 7 to the consolidated financial statements for further information regarding the Company's investment in Athene Holding. Net gains from investment activities of consolidated VIEs decreased by$5.2 million for the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 , primarily driven by a decrease in net gains fromChamp, L.P. during the year endedDecember 31, 2019 , as compared to the same period in 2018. See note 6 to the consolidated financial statements for details regarding net gains from investment activities of consolidated VIEs. Interest income increased by$14.9 million for the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 , primarily due to increased interest income earned fromU.S. Treasury securities held during the year endedDecember 31, 2019 , as compared to the same period in 2018. Other loss, net was$46.3 million during the year endedDecember 31, 2019 , as compared to other income, net of$35.8 million during the year endedDecember 31, 2018 . This change was primarily attributable to losses from the change in tax receivable agreement liability during the year endedDecember 31, 2019 . Net Income Attributable to Non-Controlling Interests and Series A and Series B Preferred Stockholders For information related to net income attributable to Non-Controlling Interests and net income attributable to Series A and Series B Preferred Stockholders, see note 14 to the consolidated financial statements. Income Tax Provision EffectiveSeptember 5, 2019 ,Apollo Global Management, LLC , aDelaware limited liability company, converted to aDelaware corporation namedApollo Global Management, Inc. Prior to the Conversion, a portion of the investment income, performance allocations and principal investment income we earned was not subject to corporate-level tax inthe United States . Subsequent to the Conversion, generally all of the income is subject toU.S. corporate income taxes, which could result in an overall higher income tax expense (or benefit) in periods subsequent to the Conversion. The provision for income taxes includes federal, state and local income taxes inthe United States and foreign income taxes. Year EndedDecember 31, 2019 Compared to Year EndedDecember 31, 2018 The income tax provision decreased by$215.0 million for the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 . The decrease in the income tax provision was primarily related to the benefit recorded as a result of the following Conversion related items: (i) the step-up in the tax basis of assets from prior exchanges of AOG Units for Class A shares and (ii) the deferred tax benefit resulting from the inclusion of certain partnerships previously not subject to federal income taxes. The additional benefit is offset by the mix of earnings when comparing the amount of earnings that are subject to corporate-level tax to those earnings that are not subject to corporate-level tax as such earnings are passed through to Non-Controlling Interests. The provision for income taxes includes federal, state, local and foreign income taxes resulting in an effective income tax rate of (9.2)% and 81.7% for the years endedDecember 31, 2019 and 2018, respectively. The Company's high effective income tax rate for the year endedDecember 31, 2018 resulted primarily from a significant portion of the losses from performance allocations and investment activities that are not subject toU.S. income taxes. As a result, these losses have reduced the Company's net income, but do not generate a tax benefit. The most significant reconciling items between ourU.S. federal statutory income tax rate and our effective income tax rate were due to the following: (i) income passed through to Non-Controlling Interests and - 115-
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(ii) the impacts upon Conversion noted above (see note 10 to the consolidated financial statements for further details regarding the Company's income tax provision). Segment Analysis Discussed below are our results of operations for each of our reportable segments. They represent the segment information available and utilized by our executive management, which consists of ourManaging Partners , who operate collectively as our chief operating decision maker, to assess performance and to allocate resources. See note 17 to our consolidated financial statements for more information regarding our segment reporting. Our financial results vary, since performance fees, which generally constitute a large portion of the income from the funds that we manage, as well as the transaction and advisory fees that we receive, can vary significantly from quarter to quarter and year to year. As a result, we emphasize long-term financial growth and profitability to manage our business. Credit The following table sets forth our segment statement of operations information and our supplemental performance measure, Segment Distributable Earnings, within our credit segment. For the Years Ended December 31, For the Years Ended December 31, 2019 2018 Total Change Percentage Change 2018 2017 Total Change Percentage Change (in thousands) (in thousands) Credit: Management fees$ 779,266 $ 642,331 $ 136,935 21.3 %$ 642,331 $ 555,586 $ 86,745 15.6 % Advisory and transaction fees, net 44,116 8,872 35,244 397.2 8,872 30,325 (21,453 ) (70.7 ) Performance fees(1) 21,110 28,390 (7,280 ) (25.6 ) 28,390 17,666 10,724 60.7 Fee Related Revenues 844,492 679,593 164,899 24.3 679,593 603,577 76,016 12.6 Salary, bonus and benefits (196,143 ) (180,448 ) (15,695 ) 8.7 (180,448 ) (172,152 ) (8,296 ) 4.8 General, administrative and other (131,664 ) (119,450 ) (12,214 ) 10.2 (119,450 ) (107,617 ) (11,833 ) 11.0 Placement fees (272 ) (1,130 ) 858 (75.9 ) (1,130 ) (1,073 ) (57 ) 5.3 Fee Related Expenses (328,079 ) (301,028 ) (27,051 ) 9.0 (301,028 ) (280,842 ) (20,186 ) 7.2 Other income, net of Non-Controlling Interest 54 1,104 (1,050 ) (95.1 ) 1,104 11,285 (10,181 ) (90.2 ) Fee Related Earnings 516,467 379,669 136,798 36.0 379,669 334,020 45,649 13.7 Realized performance fees(2) 169,611 45,139 124,472 275.8 45,139 91,982 (46,843 ) (50.9 ) Realized profit sharing expense(2) (93,675 ) (36,079 ) (57,596 ) 159.6 (36,079 ) (34,409 ) (1,670 ) 4.9 Net Realized Performance Fees 75,936 9,060 66,876 NM 9,060 57,573 (48,513 ) (84.3 ) Realized principal investment income, net(3) 8,764 19,199 (10,435 ) (54.4 ) 19,199 19,249 (50 ) (0.3 ) Net interest loss and other (21,997 ) (13,619 ) (8,378 ) 61.5 (13,619 ) (16,638 ) 3,019 (18.1 ) Segment Distributable Earnings$ 579,170 $ 394,309 $ 184,861 46.9 %$ 394,309 $ 394,204 $ 105 - %
(1) Represents certain performance fees from business development companies and
(2) Excludes realized performance fees and realized profit sharing expense
settled in the form of shares of Athene Holding during the year ended
(3) Realized principal investment income, net includes dividends from our
permanent capital vehicles, net of such amounts used to compensate employees.
Year EndedDecember 31, 2019 Compared to Year EndedDecember 31, 2018 Management fees increased by$136.9 million for the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 . This change was primarily attributable to an increase in management fees earned from Athene, Athora,SCRF IV and Apollo Total Return Fund L.P. of$98.5 million ,$8.0 million ,$6.6 million and$6.0 million , respectively, during the year endedDecember 31, 2019 , as compared to the same period during 2018. Advisory and transaction fees, net increased by$35.2 million during the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 . This increase was primarily driven by net advisory and transaction fees earned related to the structuring of a loan for a portfolio company during the year endedDecember 31, 2019 , as compared to the same period during 2018. Performance fees decreased by$7.3 million for the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 . This change was primarily attributable to a decrease in performance fees earned from AINV of$17.7 million - 116-
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during the year endedDecember 31, 2019 , as compared to the same period during 2018 as a result of the amended and restated investment management agreement with AINV, as described in note 15 to our consolidated financial statements. The fee arrangement with AINV revised the performance fee to include a total return requirement, and the total return hurdle rate was not achieved as ofDecember 31, 2019 . This decrease in performance fees was partially offset by increased performance fees fromRedding Ridge Holdings and a business development company of$5.3 million and$5.1 million , respectively, during the year endedDecember 31, 2019 , as compared to the same period during 2018. The performance fees fromRedding Ridge Holdings and a non-traded business development company were primarily driven by the vehicles exceeding their annualized hurdle rate during the year endedDecember 31, 2019 , which did not occur during the same period during 2018. Salary, bonus and benefits expense increased by$15.7 million for the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 primarily due to an increase in headcount. General, administrative and other increased by$12.2 million during the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 . The change was primarily driven by an increase in technology expenses, occupancy expenses and other miscellaneous expenses during the year endedDecember 31, 2019 , as compared to the same period in 2018. Realized performance fees increased by$124.5 million during the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 . This change was primarily attributable to an increase in realized performance fees generated from MidCap,Apollo Credit Strategies Master Fund Ltd. , FCI I, andApollo Credit Master Fund Ltd. ("Credit Fund ") of$45.4 million ,$29.5 million ,$24.2 million and$12.3 million , respectively, during the year endedDecember 31, 2019 as compared to the year endedDecember 31, 2018 . The increase in realized performance fees generated from MidCap was primarily a result of achieving a vesting provision during the year endedDecember 31, 2019 , while the fund had no realized performance fees during the year endedDecember 31, 2018 . The increase in realized performance fees generated fromApollo Credit Strategies Master Fund Ltd was a result of additional fees that crystallized onDecember 31, 2019 , as market values were higher for investments held across the fund during the year endedDecember 31, 2019 . The increase in realized performance fees generated from FCI I was primarily driven by realizations of the fund's investments in various life settlement policies during the year endedDecember 31, 2019 , while the fund had no realized performance fees during the year endedDecember 31, 2018 . The increase in realized performance fees generated fromCredit Fund was primarily driven by the appreciation and realization from its bank loan investments during the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 . Realized profit sharing expense increased by$57.6 million during the year endedDecember 31, 2019 , as compared to the same period in 2018, as a result of a corresponding increase in realized performance fees as described above. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is$17.7 million and$3.6 million related to theIncentive Pool for the year endedDecember 31, 2019 and 2018, respectively.The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period. Realized principal investment income, net decreased by$10.4 million for the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 . This change was primarily attributable to an increase in dividend amounts used to compensate employees during the year endedDecember 31, 2019 , as compared to the same period in 2018. Net interest loss and other increased by$8.4 million for the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 , primarily due to additional interest expense incurred during the year endedDecember 31, 2019 as a result of the issuances of the 2029 Senior Notes and 2039 Senior Secured Guaranteed Notes, as described in note 11 to our consolidated financial statements. Year EndedDecember 31, 2018 Compared to Year EndedDecember 31, 2017 Management fees increased by$86.7 million for the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 . This change was primarily attributable to an increase in management fees earned fromAthene and Apollo Total Return Fund L.P. of$60.2 million and$9.8 million , respectively, during the year endedDecember 31, 2018 , as compared to the same period during 2017. The increase in management fees earned from Athene was primarily attributable to its completion of the reinsurance transaction relating to the fixed annuity business ofVA Capital in 2018. Advisory and transaction fees, net decreased by$21.5 million during the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 . This decrease was primarily driven by a decrease in net advisory and transaction fees earned with respect to FCI III of$20.3 million during the year endedDecember 31, 2018 , as compared to the same period during 2017. - 117-
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Performance fees increased by$10.7 million for the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 . This change was primarily attributable to increases in performance fees earned from a business development company andRedding Ridge Holdings of$5.0 million and$3.7 million , respectively, during the year endedDecember 31, 2018 , as compared to the same period during 2017. Salary, bonus and benefits expense increased by$8.3 million for the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 primarily due to an increase in headcount. General, administrative and other increased by$11.8 million during the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 . The change was primarily driven by an increase in professional fees during the year endedDecember 31, 2018 , as compared to the same period in 2017. Other income, net of Non-Controlling Interest decreased by$10.2 million during the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 . This change was primarily attributable to proceeds received in connection with the Company's early termination of a lease and the Company's recognition of$6.2 million of other income from the assignment of a CLO collateral management agreement during the year endedDecember 31, 2017 . Realized performance fees decreased by$46.8 million during the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 . This change was primarily attributable to a decrease in realized performance fees generated from SCRF III and a strategic investment account of$33.9 million and$4.8 million , respectively, as well as modest decreases across other credit funds and investment vehicles during the during the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 . This decrease was partially offset by an increase in realized performance fees generated from a strategic account of$11.0 million during the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 . The decrease in realized performance fees generated from SCRF III was primarily driven by lower realizations prior to the liquidation of the fund during the year endedDecember 31, 2018 as compared to the year endedDecember 31, 2017 . The decrease in realized performance fees generated from the strategic investment account was driven by less profit generated in investments in collateralized loan obligations and an investment in an Apollo fund during the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 . The increase in realized performance fees generated from the strategic investment account was primarily driven by increased income and sales proceeds from the private lending and opportunistic strategies during the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 . Net interest loss and other decreased by$3.0 million for the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 , primarily due to additional interest income earned from money market funds andU.S. Treasury securities held afterDecember 31, 2017 . Interest income was partially offset by additional interest expense incurred during the year endedDecember 31, 2018 as a result of the issuance of the 2048 Senior Notes inMarch 2018 , as described in note 11 to our consolidated financial statements. - 118-
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Private Equity
The following table sets forth our segment statement of operations information
and our supplemental performance measure, Segment Distributable Earnings, within
our private equity segment.
For the Years Ended December 31, For the Years Ended December 31,
2019 2018 Total Change Percentage Change 2018 2017 Total Change Percentage Change
(in thousands) (in thousands)
Private Equity:
Management fees $ 523,194 $ 477,185 $ 46,009 9.6 % $ 477,185 $ 356,208 $ 120,977 34.0 %
Advisory and transaction
fees, net 71,324 89,602 (18,278 ) (20.4 ) 89,602 84,216 5,386 6.4
Fee Related Revenues 594,518 566,787 27,731 4.9 566,787 440,424 126,363 28.7
Salary, bonus and benefits (184,403 ) (160,512 ) (23,891 ) 14.9 (160,512 ) (144,391 ) (16,121 ) 11.2
General, administrative and
other (99,098 ) (79,450 ) (19,648 ) 24.7 (79,450 ) (81,058 ) 1,608 (2.0 )
Placement fees (812 ) (585 ) (227 ) 38.8 (585 ) (4,238 ) 3,653 (86.2 )Fee Related Expenses (284,313 ) (240,547 ) (43,766 ) 18.2 (240,547 ) (229,687 ) (10,860 ) 4.7 Other income (loss), net 4,306 1,923 2,383 123.9 1,923 27,843 (25,920 ) (93.1 ) Fee Related Earnings 314,511 328,163 (13,652 ) (4.2 ) 328,163 238,580 89,583 37.5 Realized performance fees 429,152 279,078 150,074 53.8 279,078 445,923 (166,845 ) (37.4 ) Realized profit sharing expense (195,140 ) (156,179 ) (38,961 ) 24.9 (156,179 ) (193,489 ) 37,310 (19.3 ) Net Realized Performance Fees 234,012 122,899 111,113 90.4 122,899 252,434 (129,535 ) (51.3 ) Realized principal investment income 53,782 43,150 10,632 24.6 43,150 44,087 (937 ) (2.1 ) Net interest loss and other (31,804 ) (20,081 ) (11,723 ) 58.4 (20,081 ) (23,131 ) 3,050 (13.2 ) Segment Distributable Earnings$ 570,501 $ 474,131 $ 96,370 20.3 %$ 474,131 $ 511,970 $ (37,839 ) (7.4 )% Year EndedDecember 31, 2019 Compared to Year EndedDecember 31, 2018 Management fees increased by$46.0 million for the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 . This change was primarily attributable to the commencement of Fund IX's investment period inApril 2018 , resulting in an increase of$79.4 million in management fees during the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 . The increase in management fees was partially offset by decreased management fees earned from Fund VIII and COF III of$21.5 million and$7.4 million , respectively, during the year endedDecember 31, 2019 as compared to the year endedDecember 31, 2018 . Advisory and transaction fees, net decreased by$18.3 million for the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 . This change was primarily attributable to a decrease in net advisory and transaction fees earned with respect to Fund VIII and a strategic investment account of$41.6 million and$15.0 million , respectively, during the year endedDecember 31, 2019 , as compared to the same period during 2018. The decrease in net advisory and transaction fees was partially offset by increased net advisory and transaction fees earned related to Fund IX portfolio companies of$33.0 million during the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 . Salary, bonus and benefits expense increased by$23.9 million for the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 primarily due to changes in bonus accrual estimates and an increase in headcount. General, administrative and other increased by$19.6 million during the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 . The change was primarily driven by increased professional fees, fund organizational expenses and occupancy expenses during the year endedDecember 31, 2019 , as compared to the same period in 2018. Realized performance fees increased by$150.1 million for the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 . This change was primarily attributable to an increase in realized performance fees generated from Fund VIII of$174.4 million during the year endedDecember 31, 2019 as compared to the year endedDecember 31, 2018 . The realized performance fees from Fund VIII during the year endedDecember 31, 2019 were the result of sales and income generated from investments primarily in the manufacturing and industrial, business services, financial services and consumer services sectors. The realized performance fees during year endedDecember 31, 2018 were the result of sales and income generated from investments primarily in the chemicals, leisure, consumer services and natural resources sectors. - 119-
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Realized profit sharing expense increased by$39.0 million during the year endedDecember 31, 2019 , as compared to the same period in 2018, as a result of a corresponding increase in realized performance fees as described above. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is$54.4 million and$49.3 million related to theIncentive Pool for the years endedDecember 31, 2019 and 2018, respectively.The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period. Realized principal investment income increased by$10.6 million for the year endedDecember 31, 2019 , as compared to the same period in 2018. This change was primarily attributable to an increase in realizations from Apollo's equity ownership in Fund VIII of$21.2 million , partially offset by Apollo's equity ownership interest in COF III, AION and Fund VII of$2.4 million ,$2.1 million and$2.1 million , respectively, during the year endedDecember 31, 2019 , as compared to the same period in 2018. Net interest loss and other increased by$11.7 million for the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 , primarily due to additional interest expense incurred during the year endedDecember 31, 2019 as a result of the issuances of the 2029 Senior Notes and 2039 Senior Secured Guaranteed Notes, as described in note 11 to our consolidated financial statements. Year EndedDecember 31, 2018 Compared to Year EndedDecember 31, 2017 Management fees increased by$121.0 million for the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 . This change was primarily attributable to the commencement of Fund IX's investment period inApril 2018 , resulting in$240.3 million in management fees during the year endedDecember 31, 2018 . The increase in management fees was partially offset by decreased management fees earned from Fund VIII and Fund VI of$79.5 million and$23.0 million , respectively, during the year endedDecember 31, 2018 as compared to the year endedDecember 31, 2017 . The decrease in management fees earned from Fund VIII was the result of a change in the basis upon which management fees are earned from capital commitments to invested capital. The decrease in management fees earned from Fund VI resulted from the termination of the fund's management fee. Advisory and transaction fees, net increased by$5.4 million for the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 . This change was primarily attributable to an increase in net advisory and transaction fees earned as a result of theCatalina Holdings transaction of$16.7 million , partially offset by a decrease in net advisory and transaction fees earned with respect to Fund VIII's portfolio companies of$13.7 million during the year endedDecember 31, 2018 , as compared to the same period during 2017. Salary, bonus and benefits expense increased by$16.1 million for the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 primarily due to an increase in headcount. Other income, net decreased by$25.9 million for the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 . This change was primarily attributable to proceeds received in connection with the Company's early termination of a lease during the year endedDecember 31, 2017 , in addition to insurance proceeds of$17.5 million received during the year endedDecember 31, 2017 in connection with fees and expenses relating to a legal proceeding. Realized performance fees decreased by$166.8 million for the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 . This change was primarily attributable to a decrease in realized performance fees generated fromAAA and related funds of$136.1 million as a result of sales of the investment in Athene Holding during the year endedDecember 31, 2018 as compared to the year endedDecember 31, 2017 . Realized profit sharing expense decreased by$37.3 million during the year endedDecember 31, 2018 , as compared to the same period in 2017, as a result of a corresponding decrease in realized performance fees as described above. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is$49.3 million and$43.0 million related to theIncentive Pool for the years endedDecember 31, 2018 and 2017, respectively.The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period. Net interest loss and other decreased by$3.1 million for the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 , primarily due to additional interest income earned from money market funds andU.S. Treasury securities held afterDecember 31, 2017 . Interest income was partially offset by additional interest expense incurred during the year endedDecember 31, 2018 as a result of the issuance of the 2048 Senior Notes inMarch 2018 , as described in note 11 to our consolidated financial statements. - 120-
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Real Assets
The following table sets forth our segment statement of operations information
and our supplemental performance measure, Segment Distributable Earnings, within
our real assets segment.
For the Years Ended December 31, For the Years Ended December 31,
2019 2018 Total Change Percentage Change 2018 2017 Total Change Percentage Change
(in thousands) (in thousands)
Real Assets:
Management fees $ 188,610 $ 163,172 $ 25,438 15.6 % $ 163,172 $ 170,521 $ (7,349 ) (4.3 )%
Advisory and transaction
fees, net 7,450 13,093 (5,643 ) (43.1 ) 13,093 3,083 10,010 324.7
Fee Related Revenues 196,060 176,265 19,795 11.2 176,265 173,604 2,661 1.5
Salary, bonus and benefits (82,770 ) (74,002 ) (8,768 ) 11.8 (74,002 ) (77,612 ) 3,610 (4.7 )
General, administrative and
other (42,242 ) (40,391 ) (1,851 ) 4.6 (40,391 ) (39,904 ) (487 ) 1.2
Placement fees (1 ) (407 ) 406 (99.8 ) (407 ) (8,602 ) 8,195 (95.3 )
Fee Related Expenses (125,013 ) (114,800 ) (10,213 ) 8.9 (114,800 ) (126,118 ) 11,318 (9.0 )
Other income (loss), net of
Non-Controlling Interest 177 1,942 (1,765 ) (90.9 ) 1,942 4,327 (2,385 ) (55.1 )
Fee Related Earnings 71,224 63,407 7,817 12.3 63,407 51,813 11,594 22.4
Realized performance fees 3,343 55,971 (52,628 ) (94.0 ) 55,971 93,454 (37,483 ) (40.1 )
Realized profit sharing
expense (1,437 ) (33,371 ) 31,934 (95.7 ) (33,371 ) (50,940 ) 17,569 (34.5 )
Net Realized Performance
Fees 1,906 22,600 (20,694 ) (91.6 ) 22,600 42,514 (19,914 ) (46.8 )
Realized principal
investment income 3,151 7,362 (4,211 ) (57.2 ) 7,362 4,906 2,456 50.1
Net interest loss and other (11,525 ) (8,330 ) (3,195 ) 38.4 (8,330 ) (8,584 ) 254 (3.0 )
Segment Distributable
Earnings $ 64,756 $ 85,039 $ (20,283 ) (23.9 )% $ 85,039 $ 90,649 $ (5,610 ) (6.2 )%
Year Ended December 31, 2019 Compared to Year Ended December 31, 2018
Management fees increased by $25.4 million for the year ended December 31, 2019 ,
as compared to the year ended December 31, 2018 . This change was primarily
attributable to an increase in management fees earned from Athene and ARI of
$18.0 million and $4.2 million , respectively, during the year ended December 31,
2019 , as compared to the same period during 2018.
Advisory and transaction fees, net decreased by $5.6 million for the year ended
December 31, 2019 , as compared to the year ended December 31, 2018 . This change
was primarily attributable to a decrease in net advisory and transaction fees
earned with respect to Infrastructure Equity Fund of $5.8 million during the
year ended December 31, 2019 , as compared to the same period during 2018.
Salary, bonus and benefits expense increased by $8.8 million for the year ended
December 31, 2019 , as compared to the year ended December 31, 2018 primarily due
to an increase in headcount.
Realized performance fees decreased by $52.6 million for the year ended December
31, 2019 , as compared to the year ended December 31, 2018 . The decrease in
realized performance fees was primarily attributable to a decrease in realized
performance fees generated from EPF II and strategic investment accounts of
$41.6 million and $8.5 million , respectively, during the year ended December 31,
2019 , as compared to the year ended December 31, 2018 .
Realized performance fees from EPF II decreased primarily due to the
realizations of certain UK commercial real estate investments held by the fund
during the year ended December 31, 2018 , while the fund had no realizations
during the year ended December 31, 2019 . The decrease in realized performance
fees from strategic investment accounts was primarily driven by lower realized
profits allocated from underlying fund investments for the year ended December
31, 2019 as compared to the year ended December 31, 2018 .
Realized profit sharing expense decreased by $31.9 million during the year ended
December 31, 2019 , as compared to the same period in 2018, as a result of a
corresponding decrease in realized performance fees as described above, and a
decrease in profit sharing expense related to the Incentive Pool . In any period
the blended profit sharing percentage is impacted by the respective profit
sharing ratios of the funds generating performance fees in the period.
Included in realized profit sharing expense is $0.1 million and $9.1 million
related to the Incentive Pool for the years ended December 31, 2019 and 2018,
respectively. The Incentive Pool is separate from the fund related profit
sharing expense and may result in greater variability in compensation and have a
variable impact on the blended profit sharing percentage during a particular
period.
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Realized principal investment income decreased by$4.2 million for the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 . This change was primarily attributable to a decrease in realizations from Apollo's equity ownership interest in EPF II of$4.3 million during the year endedDecember 31, 2019 , as compared to the same period in 2018. Net interest loss and other increased by$3.2 million for the year endedDecember 31, 2019 , as compared to the year endedDecember 31, 2018 , primarily due to additional interest expense incurred during the year endedDecember 31, 2019 as a result of the issuances of the 2029 Senior Notes and 2039 Senior Secured Guaranteed Notes, as described in note 11 to our consolidated financial statements. Year EndedDecember 31, 2018 Compared to Year EndedDecember 31, 2017 Management fees decreased by$7.3 million for the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 . This change was primarily attributable to a decrease in management fees earned fromEPF II and Trophy Property Development Fund, L.P. of$ 12.2 million and$3.3 million respectively, during year endedDecember 31, 2018 , as compared to the same period during 2017. The decrease in management fees was partially offset by increases in management fees earned from ARI and real estate debt managed accounts of$5.0 million and$3.0 million , respectively, during the year endedDecember 31, 2018 , as compared to the same period during 2017. Advisory and transaction fees, net, increased by$10.0 million for the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 . This change was primarily attributable to an increase in net advisory and transaction fees earned with respect toApollo Infrastructure Equity Fund and the acquisition of management contracts forIndia -based funds of$6.0 million and$3.5 million , respectively, during the year endedDecember 31, 2018 . Salary, bonus and benefits decreased by$3.6 million during the year endedDecember 31, 2018 , as compared to the same period during 2017 primarily due to changes in bonus accrual estimates. Placement fees decreased by$8.2 million during the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 . This change was primarily driven by placement fees incurred in connection with capital raising activity relating to EPF III of$8.5 million during the year endedDecember 31, 2017 . Other income, net of Non-Controlling Interest decreased by$2.4 million for the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 , primarily attributable to proceeds received in connection with the Company's early termination of a lease during the year endedDecember 31, 2017 . Realized performance fees decreased by$37.5 million during the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 . The decrease in realized performance fees was primarily attributable to decreases in realized performance fees generated from EPF II,EPF I and Apollo U.S. Real Estate Fund II, L.P. ("U.S. RE Fund II") of$17.6 million ,$7.2 million and$7.1 million , respectively, during the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 . The decrease in realized performance fees generated from EPF II fund was primarily driven by a decrease in realizations fromUK commercial real estate investments during the year endedDecember 31, 2018 , as compared to the year endedDecember 31, 2017 . Realized performance fees from EPF I decreased as the fund did not have realizations during the year endedDecember 31, 2018 . The decrease in realized performance fees generated fromU.S. RE Fund II was driven by the fund generating significant realized performance fees during the year endedDecember 31, 2017 , relating to the sales of assets in the hotel and industrial sector, while sales slowed during the year endedDecember 31, 2018 . Realized profit sharing expense decreased by$17.6 million during the year endedDecember 31, 2018 , as compared to the same period in 2017, as a result of a corresponding decrease in realized performance fees as described above. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in profit sharing expense is$9.1 million and$12.0 million related to theIncentive Pool for the years endedDecember 31, 2018 and 2017, respectively.The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period. - 122-
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Summary of Distributable Earnings
The following table is a reconciliation of Distributable Earnings per share of
common and equivalent to net dividend per share of common and equivalent.
For the Years Ended December 31,
2019 2018 2017
(in thousands)
Segment Distributable Earnings $ 1,214,427 $ 953,479 $ 996,823
Taxes and related payables (62,300 ) (44,215 ) (26,337 )
Preferred dividends (36,656 ) (31,662 ) (13,538 )
Distributable Earnings 1,115,471 877,602 $ 956,948
Add back: Tax and related payables attributable
to common and equivalents 49,814 36,645 18,213
Distributable Earnings before certain
payables(1) 1,165,285 914,247 $ 975,161
Percent to common and equivalents 56 % 51 % 49 %
Distributable Earnings before other payables
attributable to common and equivalents 652,560 466,266 477,829
Less: Taxes and related payables attributable
to common and equivalents (49,814 ) (36,645 ) (18,213 )
Distributable Earnings attributable to common
and equivalents(2) $ 602,746 $ 429,621 459,616
Distributable Earnings per share(3) $ 2.71 $ 2.12 $ 2.34
Retained capital per share(3) (0.36 ) (0.29 ) (0.28 )
Net dividend per share(3) $ 2.35 $ 1.83 $ 2.06 (1) Distributable Earnings before certain payables represents Distributable
Earnings before the deduction for the estimated current corporate taxes and
the amounts payable under Apollo's tax receivable agreement.
(2) "Common and equivalents" consists of total shares of Class A Common Stock
outstanding and RSUs that participate in dividends.
(3) Per share calculations are based on end of period Distributable Earnings
Shares Outstanding, which consists of total shares of Class A Common Stock
outstanding, AOG Units and RSUs that participate in dividends.
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Summary of Non-U.S. GAAP Measures The table below sets forth a reconciliation of net income attributableApollo Global Management, Inc. Class A Common Stockholders to our non-U.S. GAAP performance measures: For the Years Ended December 31, 2019 2018 2017 (in thousands) Net Income Attributable to Apollo Global Management, Inc. Class A Common Stockholders$ 806,537 $ (42,038 ) $ 615,566 Preferred dividends 36,656 31,662 13,538 Net income attributable to Non-Controlling Interests in consolidated entities 30,504 31,648 8,891 Net income (loss) attributable to Non-Controlling Interests in the Apollo Operating Group 663,146 (2,021 ) 805,644 Net Income$ 1,536,843 $ 19,251 $ 1,443,639 Income tax provision (benefit) (128,994 ) 86,021 325,945 Income Before Income Tax Provision (Benefit)$ 1,407,849 $ 105,272 $ 1,769,584 Transaction-related charges(1) 49,213 (5,631 ) 17,496 Charges associated with corporate conversion(2) 21,987 - - (Gains) losses from change in tax receivable agreement liability 50,307 (35,405 ) (200,240 ) Net income attributable to Non-Controlling Interests in consolidated entities (30,504 ) (31,648 ) (8,891 ) Unrealized performance fees(3) (434,582 ) 782,888 (688,565 ) Unrealized profit sharing expense(3) 207,592
(274,812 ) 226,319 Equity-based profit sharing expense and other(4) 96,208 91,051
6,980
Equity-based compensation 70,962 68,229 64,954
Unrealized principal investment (income) loss (88,576 ) 62,097 (94,709 )
Unrealized net (gains) losses from investment
activities and other (136,029 ) 191,438 (96,105 )
Segment Distributable Earnings(5) $ 1,214,427 $ 953,479 $ 996,823
Taxes and related payables (62,300 ) (44,215 ) (26,337 )
Preferred dividends (36,656 ) (31,662 ) (13,538 )
Distributable Earnings $ 1,115,471 $ 877,602 $ 956,948
Preferred dividends 36,656 31,662 13,538
Taxes and related payables 62,300 44,215 26,337
Realized performance fees (602,106 ) (380,188 ) (631,359 )
Realized profit sharing expense 290,252 225,629 278,838
Realized principal investment income, net (65,697 ) (69,711 ) (68,242 )
Net interest loss and other 65,326 42,030 48,353
Fee Related Earnings $ 902,202 $ 771,239 624,413
Depreciation, amortization and other, net 11,212 9,140 13,179
Fee Related EBITDA $ 913,414 $ 780,379 $ 637,592
Realized performance fees(6) 602,106 380,188 631,359
Realized profit sharing expense(6) (290,252 ) (225,629 ) (278,838 )
Fee Related EBITDA + 100% of Net Realized
Performance Fees $ 1,225,268 $
934,938
(1) Transaction-related charges include contingent consideration, equity-based
compensation charges and the amortization of intangible assets and certain
other charges associated with acquisitions.
(2) Represents expenses incurred in relation to the Conversion, as described in
note 1 to the consolidated financial statements.
(3) Includes realized performance fees and realized profit sharing expense
settled in the form of shares of Athene Holding during the year ended
(4) Equity-based profit sharing expense and other includes certain profit sharing
arrangements in which a portion of performance fees distributed to the
general partner are allocated by issuance of equity-based awards, rather than
cash, to employees of Apollo. Equity-based profit sharing expense and other
also includes non-cash expenses related to equity awards in unconsolidated
related parties granted to employees of Apollo.
(5) See note 17 to the consolidated financial statements for more details
regarding Segment Distributable Earnings for the combined segments.
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(6) Excludes realized performance fees and realized profit sharing expense
settled in the form of shares of Athene Holding during the year ended
Liquidity and Capital Resources Overview Apollo's business model primarily derives revenues and cash flows from the assets it manages. Apollo targets operating expense levels such that fee income exceeds total operating expenses each period. The company intends to distribute to its stockholders on a quarterly basis substantially all of its distributable earnings after taxes and related payables in excess of amounts determined to be necessary or appropriate to provide for the conduct of the business. As a result, the Company requires limited capital resources to support the working capital or operating needs of the business. While primarily met by cash flows generated through fee income received, liquidity needs are also met (to a limited extent) through proceeds from borrowings and equity issuances as described in notes 11 and 14 to the consolidated financial statements, respectively. The Company had cash and cash equivalents of$1,556.2 million atDecember 31, 2019 . Primary Sources and Uses of CashThe Company has multiple sources of short-term liquidity to meet its capital needs, including cash on hand, annual cash flows from its activities, and available funds from the Company's$750 million revolving credit facility as ofDecember 31, 2019 . The Company believes these sources will be sufficient to fund our capital needs for at least the next twelve months. If the Company determines that market conditions are favorable after taking into account our liquidity requirements, we may seek to issue additional senior notes, preferred equity, or other financing instruments. The section below discusses in more detail the Company's primary sources and uses of cash and the primary drivers of cash flows within the Company's consolidated statements of cash flows: For the Years Ended December 31, 2019 2018 2017 (in thousands) Operating Activities$ 1,082,694 $ 814,259 $ 859,852 Investing Activities (263,972 ) (247,260 ) (417,819 ) Financing Activities 139,713 (752,184 ) (453,635 ) Net Increase (Decrease) in Cash and Cash Equivalents, Restricted Cash and Cash Held at Consolidated Variable Interest Entities$ 958,435 $ (185,185 ) $ (11,602 ) Operating Activities The Company's operating activities support its investment management activities. The primary sources of cash within the operating activities section include: (a) management fees, (b) advisory and transaction fees, (c) realized performance revenues, and (d) realized principal investment income. The primary uses of cash within the operating activities section include: (a) compensation and non-compensation related expenses, (b) placement fees, and (c) interest and taxes. • During the years ended December 31, 2019, 2018 and 2017, cash provided by operating activities primarily includes cash inflows from the receipt of management fees, advisory and transaction fees, realized performance revenues, and realized principal investment income, offset by cash outflows for compensation, general, administrative, and other expenses. Net cash provided by operating activities also reflects the operating activity of our
consolidated
funds and VIEs, which primarily include cash inflows from the sale
of investments offset by cash outflows for purchases ofinvestments.
Investing Activities The Company's investing activities support growth of its business. The primary sources of cash within the investing activities section include distributions from investments. The primary uses of cash within the investing activities section include: (a) capital expenditures, (b) investment purchases, including purchases ofU.S. Treasury securities, and (c) equity method investments in the funds we manage. • During the years endedDecember 31, 2019 , 2018 and 2017,
cash used
by investing activities primarily reflects purchases of U.S.
Treasury securities and other investments and net contributions to
equity method investments, offset by proceeds from maturities of
U.S. Treasury securities.
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Financing Activities The Company's financing activities reflect its capital market transactions and transactions with owners. The primary sources of cash within the financing activities section includes proceeds from debt and preferred equity issuances. The primary uses of cash within the financing activities section include: (a) distributions, (b) payments under the tax receivable agreement, (c) share repurchases, (d) cash paid to settle tax withholding obligations in connection with net share settlements of equity-based awards, and (e) repayments of debt. • During the year endedDecember 31, 2019 , cash provided by financing activities primarily reflects proceeds from the issuance of the 2029 Senior Notes, the 2039 Senior Secured Guaranteed Notes and the 2050 Subordinated Notes, partially offset by dividends to Class A Common Stockholders and distributions to Non-Controlling interest holders. Net cash provided by financing activities also reflects the financing activity of our consolidated funds and VIEs, which primarily include cash inflows from the issuance of debt offset by cash outflows for the principal repayment of debt. • During the year endedDecember 31, 2018 , cash used by financing activities primarily reflected repayments on the AMH term loan facility, dividends to Class A Common Stockholders and
distributions
to Non-Controlling interest holders, partially offset by proceeds
from the issuance of the Series B Preferred shares and the 2048
Senior Notes.
• During the year ended December 31, 2017 , cash used by financing
activities primarily reflects dividends to Class A Common
Stockholders and distributions to Non-Controlling interest holders,
partially offset by proceeds from the issuance of the Series A
Preferred shares. Net cash provided by financing activities also
reflects the financing activity of our consolidated funds and VIEs,
which primarily include cash inflows from the issuance of debt
offset by cash outflows for the principal repayment of debt.
Future Debt Obligations
The Company had long-term debt of $2.7 billion at December 31, 2019 , which
includes $2.6 billion of notes with maturities in 2024, 2026, 2029, 2039, 2048
and 2050. See note 11 to the consolidated financial statements for further
information regarding the Company's debt arrangements.
Contractual Obligations, Commitments and Contingencies
The Company had unfunded general partner commitments of $1.1 billion at
December 31, 2019 , of which $394 million related to Fund IX. For a summary and a
description of the nature of the Company's commitments, contingencies and
contractual obligations, see note 16 to the consolidated financial statements
and "-Contractual Obligations, Commitments and Contingencies". The Company's
commitments are primarily fulfilled through cash flows from operations and (to a
limited extent) through borrowings and equity issuances as described in notes 11
and 14 to the consolidated financial statements, respectively.
Consolidated Funds and VIEs
The Company manages its liquidity needs by evaluating unconsolidated cash flows;
however, the Company's financial statements reflect the financial position of
Apollo as well as Apollo's consolidated funds and VIEs. The primary sources and
uses of cash at Apollo's consolidated funds and VIEs include: (a) raising
capital from their investors, which have been reflected historically as
Non-Controlling Interests of the consolidated subsidiaries in our financial
statements, (b) using capital to make investments, (c) generating cash flows
from operations through distributions, interest and the realization of
investments, (d) distributing cash flow to investors, and (e) issuing debt to
finance investments (CLOs).
Other Liquidity and Capital Resource Considerations
Future Cash Flows
Our ability to execute our business strategy, particularly our ability to
increase our AUM, depends on our ability to establish new funds and to raise
additional investor capital within such funds. Our liquidity will depend on a
number of factors, such as our ability to project our financial performance,
which is highly dependent on our funds and our ability to manage our projected
costs, fund performance, access to credit facilities, compliance with existing
credit agreements, as well as industry and market trends. Also during economic
downturns the funds we manage might experience cash flow issues or liquidate
entirely. In these situations we might be asked to reduce or eliminate the
management fee and performance fees we charge, which could adversely impact our
cash flow in the future.
An increase in the fair value of our funds' investments, by contrast, could
favorably impact our liquidity through higher management fees where the
management fees are calculated based on the net asset value, gross assets or
adjusted assets.
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Additionally, higher performance fees not yet realized would generally result when investments appreciate over their cost basis which would not have an impact on the Company's cash flow until realized. Income Taxes EffectiveSeptember 5, 2019 ,Apollo Global Management, LLC , aDelaware limited liability company, converted to aDelaware corporation namedApollo Global Management, Inc. Subsequent to the Conversion, generally all of the income is subject toU.S. corporate income taxes, which could result in an overall higher income tax expense (or benefit) in periods subsequent to the Conversion. Consideration of Financing Arrangements As noted above, in limited circumstances, the Company may issue debt or equity to supplement its liquidity. The decision to enter into a particular financing arrangement is made after careful consideration of various factors including the Company's cash flows from operations, future cash needs, current sources of liquidity, demand for the Company's debt or equity, and prevailing interest rates. Revolver Facility Under the Company's 2018 AMH Credit Facility, the Company may borrow in an aggregate amount not to exceed$750 million and may incur incremental facilities in an aggregate amount not to exceed$250 million plus additional amounts so long as the Borrower is in compliance with a net leverage ratio not to exceed 4.00 to 1.00. Borrowings under the 2018 AMH Credit Facility may be used for working capital and general corporate purposes, including without limitation, permitted acquisitions. The 2018 AMH Credit Facility has a final maturity date ofJuly 11, 2023 . Dividends and Distributions For information regarding the quarterly dividends and distributions which were made at the sole discretion of the Company's Former Manager prior to the Conversion to Class A Common Stockholders, Non-Controlling Interest holders in theApollo Operating Group and participating securities, see note 14 to the consolidated financial statements. Although the Company expects to pay dividends according to our dividend policy, we may not pay dividends according to our policy, or at all, if, among other things, we do not have the cash necessary to pay the intended dividends. To the extent we do not have cash on hand sufficient to pay dividends, we may have to borrow funds to pay dividends, or we may determine not to pay dividends. The declaration, payment and determination of the amount of our quarterly dividends are at the sole discretion of the executive committee of our board of directors. Our current intention is to distribute to our Class A Common Stockholders on a quarterly basis substantially all of our Distributable Earnings attributable to Class A Common Stockholders, in excess of amounts determined by the executive committee of our board of directors to be necessary or appropriate to provide for the conduct of our business and, at a minimum, a quarterly dividend of$0.40 per share. OnJanuary 30, 2020 , the Company declared a cash dividend of$0.89 per Class A share, which will be paid onFebruary 28, 2020 to holders of record at the close of business onFebruary 11, 2020 . Also, the Company declared a cash dividend of$0.398438 per share of Series A Preferred share and Series B Preferred share which will be paid onMarch 16, 2020 to holders of record at the close of business onFebruary 28, 2020 . Tax Receivable Agreement The tax receivable agreement provides for the payment to theManaging Partners andContributing Partners of 85% of the amount of cash savings, if any, inU.S. federal, state, local and foreign income taxes thatAGM Inc. and its subsidiaries realizes subject to the agreement. For more information regarding the tax receivable agreement, see note 15 to the consolidated financial statements. Share Repurchases For information regarding the Company's share repurchase program, see note 14 to the consolidated financial statements. - 127-
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Athora
OnApril 14, 2017 , Apollo made an unfunded commitment of €125 million to purchase new Class B-1 equity interests in Athora, a strategic platform that acquires and reinsures traditional closed life insurance policies and provides capital and reinsurance solutions to insurers inEurope . InJanuary 2018 , Apollo purchased Class C-1 equity interests in Athora that represent a profits interest in Athora which, upon meeting certain vesting triggers, will be convertible by Apollo into additional Class B-1 equity interests in Athora. Apollo and Athene are minority investors in Athora with a long term strategic relationship and aggregate voting power of 35% and 10%, respectively. As part of an ongoing capital raise in connection with Athora's acquisition ofVIVAT N.V. , which is subject to regulatory approval, Apollo exercised its preemptive rights and made an additional incremental commitment of approximately €58 million to purchase new Class B-1 equity interests in Athora. In addition, Apollo will purchase Class C-2 equity interests in Athora that represent a profits interest in Athora which, upon meeting certain vesting triggers, will be convertible by Apollo into additional Class B-1 equity interests in Athora. For more information regarding unfunded general partner commitments, see "-Contractual Obligations, Commitments and Contingencies". Fund VIII, Fund VII, Fund VI, ANRP I and ANRP II Escrow As ofDecember 31, 2019 , the remaining investments and escrow cash of Fund VIII were valued at 131% of the fund's unreturned capital, which was above the required escrow ratio of 115%. As ofDecember 31, 2019 , the remaining investments and escrow cash of Fund VII, Fund VI, ANRP I and ANRP II were valued at 63%, 35%, 47% and 90% of the fund's unreturned capital, respectively, which were below the required escrow ratio of 115%. As a result, these funds are required to place in escrow current and future performance fee distributions to the general partner until the specified return ratio of 115% is met (at the time of a future distribution) or upon liquidation. With respect to Fund VII, Fund VI, ANRP I and ANRP II, realized performance fees currently distributed to the general partner are limited to potential tax distributions and interest on escrow balances per the funds' partnership agreements. Clawback Performance fees from our private equity funds and certain credit and real assets funds are subject to contingent repayment by the general partner in the event of future losses to the extent that the cumulative performance fees distributed from inception to date exceeds the amount computed as due to the general partner at the final distribution. See "-Overview of Results of Operations-Performance Fees" for the maximum performance fees subject to potential reversal by each fund. Indemnification Liability The Company recorded an indemnification liability in the event that ourManaging Partners ,Contributing Partners and certain investment professionals are required to pay amounts in connection with a general partner obligation to return previously distributed performance fees. See note 15 to the consolidated financial statements for further information regarding the Company's indemnification liability. Investment Management Agreements -Athene Asset Management The Company provides asset management and advisory services to Athene as described in note 15 to the consolidated financial statements. OnSeptember 20, 2018 , Athene and Apollo agreed to revise the existing fee arrangements (the "amended fee agreement") between Athene and Apollo. The amended fee agreement was subject to approval by Athene's shareholders of a bye-law amendment providing that Athene will not elect to terminate the investment management arrangement between Athene and Apollo, except for cause, for a period of four years from the date of the bye-law amendment and thereafter only on each successive two-year anniversary of the expiration of the initial four-year period. OnJune 10, 2019 , the Athene shareholders approved the bye-law amendment and the amended fee agreement took effect retroactive to the month beginningJanuary 1, 2019 . The Company began recording fees pursuant to the amended fee agreement onJanuary 1, 2019 . The amended fee agreement provides for sub-allocation fees which vary based on portfolio allocation differentiation, as described below. The base management fee covers a range of investment services that Athene receives from the Company, including investment management, asset allocation, mergers and acquisition asset diligence and certain operational support services such as investment compliance, tax, legal and risk management support, among others. Additionally, the amended fee agreement provides for a possible payment by the Company to Athene, or a possible payment by Athene to the Company, equal to 0.025% of the Incremental Value as of the end of each year, beginning onDecember 31, 2019 , depending upon the percentage of Athene's investments that consist of core assets and core plus assets. In furtherance of yield support for Athene, if more than 60% of Athene's - 128-
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invested assets which are subject to the sub-allocation fees are invested in core and core plus assets, Athene will receive a 0.025% fee reduction on the Incremental Value. As an incentive for differentiated asset management, if less than 50% of Athene's invested assets which are subject to the sub-allocation fee are invested in core and core plus assets, thereby reflecting a higher allocation toward assets with the highest alpha-generating abilities, Athene will pay an additional fee of 0.025% on Incremental Value. The amended fee agreement is intended to provide for further alignment of interests between Athene and the Company. On the Backbook Value, assuming constant portfolio allocations, the near-term impact of the amended fee agreement is anticipated to be immaterial. On the Incremental Value, assuming the same allocations as the Backbook Value, total fees paid by Athene to the Company are expected to be marginally lower than fees paid by Athene to the Company would have been under the prior fee arrangement. If invested asset allocations are more heavily weighted to assets with lower alpha-generating abilities than Athene's current investment portfolio, the fees that Athene pays to the Company under the amended fee agreement would be expected to decline relative to the prior fee arrangement. Conversely, if a greater proportion of Athene's investment portfolio is allocated to differentiated assets with higher alpha-generating abilities, Athene's net investment earned rates would be expected to increase, and so would the fees Athene pays to the Company relative to the prior fee arrangement. Strategic Transaction with Athene Holding OnOctober 27, 2019 Athene Holding,AGM Inc. and the entities that form theApollo Operating Group entered into the Transaction Agreement, pursuant to which, among other things, (i) Athene Holding will issue 27,959,184 AHL Class A Common Shares to certain subsidiaries of theApollo Operating Group in exchange for an issuance by theApollo Operating Group of 29,154,519 non-voting equity interests of theApollo Operating Group to Athene Holding and (ii)AGM Inc. , through theApollo Operating Group , will purchase an additional$350 million of AHL Class A Common Shares. The consummation of the Share Issuance and the other transactions contemplated by the Transaction Agreement are subject to certain closing conditions and regulatory approvals. See note 18 to the consolidated financial statements for further information regarding the Transaction Agreement with Athene Holding. Equity-Based Profit Sharing Expense Profit sharing amounts are generally not paid until the related performance fees are distributed to the general partner upon realization of the fund's investments. Under certain profit sharing arrangements, a portion of the performance fees distributed to the general partner is allocated by issuance of equity-based awards, rather than cash, to employees. See note 2 to the consolidated financial statements for further information regarding the accounting for the Company's profit sharing arrangements. Strategic Relationship Agreement with CalPERS OnApril 20, 2010 , the Company announced that it entered into a strategic relationship agreement with CalPERS. The strategic relationship agreement provides that Apollo will reduce fees charged to CalPERS on funds it manages, or in the future will manage, solely for CalPERS by$125 million over a five-year period or as close a period as required to provide CalPERS with that benefit. The agreement further provides that Apollo will not use a placement agent in connection with securing any future capital commitments from CalPERS. As ofDecember 31, 2019 , the Company had reduced fees charged to CalPERS on the funds it manages by approximately$108.7 million . Critical Accounting Policies This Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon the consolidated financial statements, which have been prepared in accordance withU.S. GAAP. The preparation of financial statements in accordance withU.S. GAAP requires the use of estimates and assumptions that could affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results could differ from these estimates. A summary of our significant accounting policies is presented in note 2 to our consolidated financial statements. The following is a summary of our accounting policies that are affected most by judgments, estimates and assumptions. Consolidation The Company assesses all entities with which it is involved for consolidation on a case by case basis depending on the specific facts and circumstances surrounding each entity. Pursuant to the consolidation guidance, the Company first evaluates whether it holds a variable interest in an entity. Apollo factors in all economic interests including proportionate interests through related parties, to determine if such interests are to be considered a variable interest. As Apollo's interest in many of these entities is solely through market rate fees and/or insignificant indirect interests through related parties, Apollo is generally not considered to have a variable interest in many of these entities under the guidance and no further consolidation analysis is performed. For - 129-
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entities where the Company has determined that it does hold a variable interest,
the Company performs an assessment to determine whether each of those entities
qualify as a VIE.
The determination as to whether an entity qualifies as a VIE depends on the
facts and circumstances surrounding each entity and therefore certain of
Apollo's funds may qualify as VIEs under the variable interest model whereas
others may qualify as voting interest entities ("VOEs") under the voting
interest model. The granting of substantive kick-out rights is a key
consideration in determining whether a limited partnership or similar entity is
a VIE and whether or not that entity should be consolidated.
Under the voting interest model, Apollo consolidates those entities it controls
through a majority voting interest. Apollo does not consolidate those VOEs in
which substantive kick-out rights have been granted to the unaffiliated
investors to either dissolve the fund or remove the general partner.
Under the variable interest model, Apollo consolidates those entities where it
is determined that the Company is the primary beneficiary of the entity.
The assessment of whether an entity is a VIE and the determination of whether
Apollo should consolidate such VIE requires judgment by our management. Those
judgments include, but are not limited to: (i) determining whether the total
equity investment at risk is sufficient to permit the entity to finance its
activities without additional subordinated financial support, (ii) evaluating
whether the holders of equity investment at risk, as a group, can make decisions
that have a significant effect on the success of the entity, (iii) determining
whether the equity investors have proportionate voting rights to their
obligations to absorb losses or rights to receive the expected residual returns
from an entity and (iv) evaluating the nature of the relationship and activities
of those related parties with shared power or under common control for purposes
of determining which party within the related-party group is most closely
associated with the VIE. Judgments are also made in determining whether a member
in the equity group has a controlling financial interest including power to
direct activities that most significantly impact the VIE's economic performance
and rights to receive benefits or obligations to absorb losses that could be
potentially significant to the VIE. This analysis considers all relevant
economic interests including proportionate interests held through related
parties.
Revenue Recognition
Performance Fees. We earn performance fees from our funds as a result of such
funds achieving specified performance criteria. Such performance fees generally
are earned based upon a fixed percentage of realized and unrealized gains of
various funds after meeting any applicable hurdle rate or threshold minimum.
Performance allocations are performance fees that are generally structured from
a legal standpoint as an allocation of capital to the Company. Performance
allocations from certain of the funds that we manage are subject to contingent
repayment and are generally paid to us as particular investments made by the
funds are realized. If, however, upon liquidation of a fund, the aggregate
amount paid to us as performance fees exceeds the amount actually due to us
based upon the aggregate performance of the fund, the excess (in certain cases
net of taxes) is required to be returned by us to that fund. We account for
performance allocations as an equity method investment, and accordingly, we
accrue performance allocations quarterly based on fair value of the underlying
investments and separately assess if contingent repayment is necessary. The
determination of performance allocations and contingent repayment considers both
the terms of the respective partnership agreements and the current fair value of
the underlying investments within the funds. Estimates and assumptions are made
when determining the fair value of the underlying investments within the funds
and could vary depending on the valuation methodology that is used. See
"Investments, at Fair Value" below for further discussion related to significant
estimates and assumptions used for determining fair value of the underlying
investments in our credit, private equity and real assets funds.
Incentive fees are performance fees structured as a contractual fee arrangement
rather than a capital allocation. Incentive fees are generally received from the
management of CLOs, managed accounts and AINV. For a majority of our incentive
fees, once the quarterly or annual incentive fees have been determined, there is
no look-back to prior periods for a potential contingent repayment, however,
certain other incentive fees can be subject to contingent repayment at the end
of the life of the entity. In accordance with the new revenue recognition
standard, certain incentive fees are considered a form of variable consideration
and therefore are deferred until fees are probable to not be significantly
reversed. There is significant judgment involved in determining if the incentive
fees are probable to not be significantly reversed, but generally the Company
will defer the revenue until the fees are crystallized or are no longer subject
to clawback or reversal. Prior to the adoption of the new revenue recognition
guidance, incentive fees were recognized on an assumed liquidation basis.
Management Fees. Management fees related to our credit funds, can be based on
net asset value, gross assets, adjusted cost of all unrealized portfolio
investments, capital commitments, adjusted assets, capital contributions, or
stockholders' equity all as defined in the respective partnership agreements.
The credit management fee calculations that consider net asset value, gross
assets, adjusted cost of all unrealized portfolio investments and adjusted
assets are normally based on the terms of the respective partnership agreements
and the current fair value of the underlying investments within the funds.
Estimates and assumptions are
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made when determining the fair value of the underlying investments within the funds and could vary depending on the valuation methodology that is used. The management fees related to our private equity funds, by contrast, are generally based on a fixed percentage of the committed capital or invested capital. The corresponding fee calculations that consider committed capital or invested capital are both objective in nature and therefore do not require the use of significant estimates or assumptions. The management fees related to our real assets funds are generally based on a specific percentage of the funds' stockholders' equity or committed or net invested capital or the capital accounts of the limited partners. See "Investments, at Fair Value" below for further discussion related to significant estimates and assumptions used for determining fair value of the underlying investments in our credit, private equity and real assets funds. Investments, at Fair Value On a quarterly basis, Apollo utilizes valuation committees consisting of members from senior management, to review and approve the valuation results related to the investments of the funds it manages. For certain publicly traded vehicles managed by Apollo, a review is performed by an independent board of directors. The Company also retains independent valuation firms to provide third-party valuation consulting services to Apollo, which consist of certain limited procedures that management identifies and requests them to perform. The limited procedures provided by the independent valuation firms assist management with validating their valuation results or determining fair value. The Company performs various back-testing procedures to validate their valuation approaches, including comparisons between expected and observed outcomes, forecast evaluations and variance analyses. However, because of the inherent uncertainty of valuation, the estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. The fair values of the investments in our funds can be impacted by changes to the assumptions used in the underlying valuation models. For further discussion on the impact of changes to valuation assumptions see "Item 7A. Quantitative and Qualitative Disclosures About Market Risk-Sensitivity" in this Annual Report on Form 10-K. There have been no material changes to the valuation approaches utilized during the periods that our financial results are presented in this report. Fair Value of Financial Instruments Except for the Company's debt obligations (each as defined in note 11 to our consolidated financial statements), Apollo's financial instruments are recorded at fair value or at amounts whose carrying values approximate fair value. See "-Investments, at Fair Value" above. While Apollo's valuations of portfolio investments are based on assumptions that Apollo believes are reasonable under the circumstances, the actual realized gains or losses will depend on, among other factors, future operating results, the value of the assets and market conditions at the time of disposition, any related transaction costs and the timing and manner of sale, all of which may ultimately differ significantly from the assumptions on which the valuations were based. Financial instruments' carrying values generally approximate fair value because of the short-term nature of those instruments or variable interest rates related to the borrowings. Profit Sharing Expense. Profit sharing expense is primarily a result of agreements with ourContributing Partners and employees to compensate them based on the ownership interest they have in the general partners of the Apollo funds. Therefore, changes in the fair value of the underlying investments in the funds we manage and advise affect profit sharing expense.The Contributing Partners and employees are allocated approximately 30% to 50%, of the total performance fees which is driven primarily by changes in fair value of the underlying fund's investments and is treated as compensation expense. Additionally, profit sharing expenses paid may be subject to clawback from employees, former employees andContributing Partners to the extent not indemnified. When applicable, the accrual for potential clawback of previously distributed profit sharing amounts, which is a component of due from related parties on the consolidated statements of financial condition, represents all amounts previously distributed to employees, former employees andContributing Partners that would need to be returned to the general partner if the Apollo funds were to be liquidated based on the current fair value of the underlying funds' investments as of the reporting date. The actual general partner receivable, however, would not become realized until the end of a fund's life. Several of the Company's employee remuneration programs are dependent upon performance fee realizations, including theIncentive Pool , and dedicated performance fee rights and certain RSU awards for which vesting is contingent, in part, on the realization of performance fees in a specified period. The Company established these programs to attract and retain, and provide incentive to, partners and employees of the Company and to more closely align the overall compensation of partners and employees with the overall realized performance of the Company. Dedicated performance fee rights entitle their holders to payments arising from performance fee realizations.The Incentive Pool enables certain partners and employees to earn discretionary compensation based on realized performance fees in a given year, which amounts are reflected in profit sharing expense in the Company's consolidated financial statements. Amounts earned by participants as a result of their performance fee rights (whether dedicated orIncentive Pool ) will vary year-to-year depending on the overall realized performance of the Company (and, in the case of theIncentive Pool , on their individual performance). 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committee of the Company's manager determines that allocations of realized performance fees are not sufficient to compensate individuals, which may result in an increase in salary, bonus and benefits, the modification of existing programs or the use of new remuneration programs. Reductions in performance fee revenues could also make it harder to retain employees and cause employees to seek other employment opportunities. Fair Value Option. Apollo has elected the fair value option for the Company's investment in Athene Holding, the assets and liabilities of certain of its consolidated VIEs (including CLOs), the Company'sU.S. Treasury securities with original maturities greater than three months when purchased and certain of the Company's other investments. Such election is irrevocable and is applied to financial instruments on an individual basis at initial recognition. See notes 4, 6, and 7 to the consolidated financial statements for further disclosure. Equity-Based Compensation. Equity-based compensation is accounted for in accordance withU.S. GAAP, which requires that the cost of employee services received in exchange for an award is generally measured based on the grant date fair value of the award. Equity-based awards that do not require future service (i.e., vested awards) are expensed immediately. Equity-based employee awards that require future service are recognized over the relevant service period. In addition, certain RSUs granted by the Company vest subject to continued employment and the Company's receipt of performance fees, within prescribed periods, sufficient to cover the associated equity-based compensation expense. In accordance withU.S. GAAP, equity-based compensation expense for such awards, if and when granted, will be recognized on an accelerated recognition method over the requisite service period to the extent the performance fee metrics are met or deemed probable. The addition of these performance measures helps to promote the interests of our Class A Common Stockholders and fund investors by making RSU vesting contingent on the realization and distribution of profits on our funds. Forfeitures of equity-based awards are accounted for when they occur. Apollo's equity-based awards consist of, or provide rights with respect to, AOG Units, RSUs, share options, restricted shares, AHL Awards and other equity-based compensation awards. For more information regarding Apollo's equity-based compensation awards, see note 13 to our consolidated financial statements. The Company's assumptions made to determine the fair value on grant date are embodied in the calculations of compensation expense. A significant part of our compensation expense is derived from amortization of RSUs. The fair value of all RSU grants afterMarch 29, 2011 is based on the grant date fair value, which considers the public share price of the Company. The Company has three types of RSU grants, which we refer to as Plan Grants, Bonus Grants, and Performance Grants. Plan Grants may or may not provide the right to receive dividend equivalents until the RSUs vest and, for grants made after 2011, the underlying shares are generally issued byMarch 15th after the year in which they vest. For Plan Grants, the grant date fair value is based on the public share price of the Company, and is discounted for transfer restrictions and lack of dividends until vested if applicable. Bonus Grants provide the right to receive dividend equivalents on both vested and unvested RSUs and Performance Grants provide the right to receive dividend equivalents on vested RSUs and may also provide the right to receive dividend equivalents on unvested RSUs. Both Bonus Grants and Performance Grants are generally issued byMarch 15th of the year following the year in which they vest. For Bonus Grants and Performance Grants, the grant date fair value for the periods presented is based on the public share price of the Company, and is discounted for transfer restrictions. We utilized the present value of a growing annuity formula to calculate a discount for the lack of pre-vesting dividends on certain Plan Grant and Performance Grant RSUs. The weighted average for the inputs utilized for the shares granted are presented in the table below for Plan Grants and Performance Grants: For the Years Ended December 31, 2019 2018 2017 Plan Grants: Dividend Yield(1) 6.7% 5.7% 6.1%
Cost of Equity Capital Rate(3) 10.2% 10.8% 11.0% Performance Grants: Dividend Yield(2)
6.6% 6.8% N/A
Cost of Equity Capital Rate(3) 10.2% 10.8% N/A
(1) Calculated based on the historical dividends paid during the year ended
measurement date of the grant on a weighted average basis.
(2) Calculated based on the historical dividends paid during the three months
ended
the measurement date of the grant on a weighted average basis.
(3) Assumes a discount rate that was equivalent to the opportunity cost of
foregoing distributions on unvested Plan Grant and Performance Grant RSUs as
of the valuation date, based on the Capital Asset Pricing Model ("CAPM").
CAPM is a commonly used mathematical model for developing expected returns.
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The following table summarizes the weighted average discounts for certain Plan Grants and Performance Grants:
For the Years Ended December 31,
2019 2018 2017
Plan Grants:
Discount for the lack of distributions
until vested(1) 18.7% 12.0% 11.8%
Performance Grants : Discount for the lack of distributions until vested(1) 14.0% 12.8%
N/A
(1) Based on the present value of a growing annuity calculation.
We utilize the Finnerty Model to calculate a marketability discount on the Plan
Grant, Bonus Grant and Performance Grant RSUs to account for the lag between
vesting and issuance. The Finnerty Model provides for a valuation discount
reflecting the holding period restriction embedded in a restricted security
preventing its sale over a certain period of time.
The Finnerty Model proposes to estimate a discount for lack of marketability
such as transfer restrictions by using an option pricing theory. This model has
gained recognition through its ability to address the magnitude of the discount
by considering the volatility of a company's stock price and the length of
restriction. The concept underpinning the Finnerty Model is that a restricted
security cannot be sold over a certain period of time. Further simplified, a
restricted share of equity in a company can be viewed as having forfeited a put
on the average price of the marketable equity over the restriction period (also
known as an "Asian Put Option"). If we price an Asian Put Option and compare
this value to that of the assumed fully marketable underlying security, we can
effectively estimate the marketability discount. The inputs utilized in the
Finnerty Model are (i) length of holding period, (ii) volatility and
(iii) dividend yield.
The weighted average for the inputs utilized for the shares granted are
presented in the table below for Plan Grants, Bonus Grants and Performance
Grants:
For the Years Ended
December 31,
2019 2018 2017Plan Grants: Holding Period Restriction (in years) 0.4 0.8 0.6 Volatility(1)
37.9% 24.9% 22.1%
Dividend Yield(2) 6.7% 5.7% 6.1%
Bonus Grants: Holding Period Restriction (in years) 0.2 0.2 0.2 Volatility(1)
40.7% 22.5% 22.6%
Dividend Yield(2) 7.2% 5.3% 5.4%
Performance Grants: Holding Period Restriction (in years) 0.9 1.2 N/A Volatility(1)
30.6% 23.9% N/A
Dividend Yield(2) 6.6% 5.7% N/A
(1) The Company determined the expected volatility based on the volatility of the
Company's Class A share price as of the grant date with consideration to
comparable companies.
(2) Calculated based on the historical dividends paid during the twelve months
ended
the measurement date of the grant on a weighted average basis.
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The following table summarizes the weighted average marketability discounts for Plan Grants, Bonus Grants and Performance Grants:
For the Years Ended
December 31,
2019 2018 2017
Plan Grants:
Marketability discount for transfer restrictions(1) 4.9% 4.7% 3.6%
Bonus Grants:
Marketability discount for transfer restrictions(1) 4.1% 2.3% 2.3%
Performance Grants:
Marketability discount for transfer restrictions(1) 5.9% 5.6% N/A
(1) Based on the Finnerty Model calculation.
Bonus Grants constitute a component of the discretionary annual compensation awarded to certain of our professionals. During 2016, the Company increased the default portion of annual compensation to be awarded as a discretionary Bonus Grant relative to the portion awarded in previous years. The increase in the proportion of discretionary annual compensation awarded as a Bonus Grant has generally been offset by a decrease in discretionary annual cash bonuses. These changes are intended to further align the interests of Apollo's employees and stakeholders and strengthen the long-term commitment of our partners and employees. Income Taxes Prior to the Conversion, certain entities in theApollo Operating Group operated as partnerships forU.S. federal income tax purposes. As a result, these members of theApollo Operating Group were not subject toU.S. federal income taxes. However, certain of these entities were subject to NYC UBT and certain non-U.S. entities were subject to non-U.S. corporate income taxes. EffectiveSeptember 5, 2019 ,Apollo Global Management, LLC converted from aDelaware limited liability company to aDelaware corporation namedApollo Global Management, Inc. Subsequent to the Conversion, generally all of the income is subject toU.S. corporate income taxes, which could result in an overall higher income tax expense (or benefit) in periods subsequent to the Conversion. Significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties. The Company recognizes the tax benefits of uncertain tax positions only where the position is "more likely than not" to be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit is measured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. If a tax position is not considered more likely than not to be sustained, then no benefits of the position are recognized. The Company's tax positions are reviewed and evaluated quarterly to determine whether or not the Company has uncertain tax positions that require financial statement recognition. Deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amount of assets and liabilities and their respective tax basis using currently enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period during which the change is enacted. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Fair Value Measurements See note 7 to our consolidated financial statements for a discussion of the Company's fair value measurements. Recent Accounting Pronouncements A list of recent accounting pronouncements that are relevant to Apollo and its industry is included in note 2 to our consolidated financial statements. Off-Balance Sheet Arrangements In the normal course of business, we engage in off-balance sheet arrangements, including transactions in derivatives, guarantees, commitments, indemnifications and potential contingent repayment obligations. See note 16 to our consolidated financial statements for a discussion of guarantees and contingent obligations. - 134-
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Contractual Obligations, Commitments and Contingencies The Company's material contractual obligations consisted of lease obligations, contractual commitments as part of the ongoing operations of the funds and debt obligations. Fixed and determinable payments due in connection with these obligations are as follows as ofDecember 31, 2019 : 2020 2021 2022 2023 2024 Thereafter Total (in thousands) Operating lease obligations(1)$ 28,094 $ 40,516 $ 51,184 $ 49,383 $ 47,237 $ 467,698 $ 684,112 Other long-term obligations(2) 16,959 1,871 906 673 673 673 21,755 2018 AMH Credit Facility(3) 675 675 675 358 - - 2,383 2024 Senior Notes(3) 20,000 20,000 20,000 20,000 508,333 - 588,333 2026 Senior Notes(3) 22,000 22,000 22,000 22,000 22,000 530,983 640,983 2029 Senior Notes(3) 32,886 32,886 32,886 32,886 32,886 810,818 975,248 2039 Senior Secured Guaranteed Notes(3) 15,503 15,503 15,503 15,503 15,503 549,786 627,301 2048 Senior Notes(3) 15,000 15,000 15,000 15,000 15,000 648,750 723,750 2050 Subordinated Notes(3) 14,850 14,850 14,850 14,850 14,850 671,844 746,094 Secured Borrowing 330 330 330 330 330 19,913 21,563 2014 AMI Term Facility II 302 302 17,345 - - - 17,949 2016 AMI Term Facility I 246 246 246 246 246 18,924 20,154 2016 AMI Term Facility II 256 256 256 18,428 - - 19,196 Obligations$ 167,101 $ 164,435 $ 191,181 $
189,657
(1) Operating lease obligations excludes
expenses associated with operating leases.
(2) Includes (i) payments on management service agreements related to certain
assets and (ii) payments with respect to certain consulting agreements
entered into by the Company. Note that a significant portion of these costs
are reimbursable by funds.
(3) See note 11 of the consolidated financial statements for further discussion
of these debt obligations.
Note: Due to the fact that the timing of certain amounts to be paid cannot be
determined or for other reasons discussed below, the following contractual
commitments have not been presented in the table above.
(i) As noted previously, we have entered into a tax receivable agreement with our
Managing Partners and
Managing Partners and
by
ensure that we have sufficient cash available to pay this liability and we
might be required to incur additional debt to satisfy this liability.
(ii) Debt amounts related to the consolidated VIEs are not presented in the table
above as the Company is not a guarantor of these non-recourse liabilities.
(iii) In connection with theStone Tower acquisition, the Company agreed to pay the former owners ofStone Tower a specified percentage of any future performance fees earned from certain of theStone Tower funds, CLOs and
strategic investment accounts. This contingent consideration liability is
remeasured to fair value at each reporting period until the obligations are
satisfied. See note 16 to the consolidated financial statements for further
information regarding the contingent consideration liability.
(iv) Commitments from certain of our subsidiaries to contribute to the funds we
manage and certain related parties.
Commitments
Certain of our management companies and general partners are committed to contribute to the funds we manage and certain related parties. While a small percentage of these amounts are funded by us, the majority of these amounts have historically been funded by our related parties, including certain of our employees and certain Apollo funds. The table below presents the commitment and remaining commitment amounts of Apollo and its related parties, the percentage of total fund commitments of Apollo and its related parties, the commitment and remaining commitment amounts of Apollo only (excluding related parties), and the percentage of total fund commitments of Apollo only (excluding related parties) for each credit, private equity and real assets fund as ofDecember 31, 2019 as follows ($ in millions): - 135-
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Apollo Only
(Excluding Apollo Only
Related (Excluding
Apollo and Apollo Only Party) % of Apollo and Related Related Party)
Related Party % of Total Fund (Excluding Related
Commitments Commitments Party) Commitments Commitments Commitments Commitments
Credit:
Apollo Credit Opportunity
Fund II, L.P. ("COF II") $ 30.5 1.93 % $ 23.4 1.48 % $ 0.8 $ 0.6
Apollo Credit Opportunity
Fund I, L.P. ("COF I") 449.2 30.26 29.7 2.00 237.1 4.2
Financial Credit
Investment IV, L.P. ("FCI
IV") 174.3 26.90 11.3 1.75 174.3 11.3
FCI III 224.3 11.76 0.1 0.01 102.3 -
Financial Credit
Investment II, L.P. ("FCI
II") 245.3 15.77 - - 115.5 -
FCI I 151.3 27.07 - - - -
SCRF IV 416.1 16.63 33.1 1.32 109.0 8.8
MidCap 1,672.9 80.23 110.9 5.32 31.0 31.0
Apollo Moultrie Credit
Fund, L.P. 400.0 100.00 - - 160.0 -
Apollo Accord Master Fund
II, L.P. 116.6 22.57 11.6 2.25 20.4 7.6
Apollo Accord Master Fund
III, L.P. 225.1 25.40 0.1 0.01 168.8 0.1
PK Air 1, L.P. ("PK
AirFinance") 2,539.0 100.00 2,539.0 - 325.3 -
Apollo Revolver Fund, L.P. 322.1 61.31 42.1 8.01 322.1 42.1
Athora(1) 663.7 27.37 140.0 5.77 459.9 97.1
Other Credit 3,591.1 Various 216.7 Various 1,436.3 120.5
Private Equity:
Fund IX 1,917.5 7.75 470.2 1.90 1,583.7 393.5
Fund VIII 1,543.5 8.40 396.8 2.16 257.1 67.1
Fund VII 467.2 3.18 178.1 1.21 60.9 23.2
Fund VI 246.3 2.43 6.1 0.06 9.7 0.2
Fund V 100.0 2.67 0.5 0.01 6.2 -
Fund IV 100.0 2.78 0.2 0.01 0.5 -
AION 151.5 18.34 50.0 6.05 19.2 6.1
ANRP I 426.1 32.21 10.1 0.76 57.9 1.1
ANRP II 561.2 16.25 25.9 0.75 193.1 8.8
ANRP III 650.1 46.44 30.1 2.15 650.1 30.1
A.A. Mortgage
Opportunities, L.P. 625.0 80.31 - - 261.6 -
Apollo Rose, L.P. 299.1 100.00 - - - -
Apollo Rose II, L.P. 887.1 51.01 33.0 1.9 394.6 14.9
Champ, L.P. 188.7 78.25 26.0 10.8 15.7 2.4
Apollo Royalties
Management, LLC 108.6 100.00 - - - -
Apollo Hybrid Value Fund ,
L.P. 841.7 25.99 64.2 1.98 634.6 48.4
COF III 358.1 10.45 36.4 1.06 74.3 8.1
Apollo Asia Private Credit
Fund, L.P. 126.5 55.12 0.1 0.04 31.9 -
AEOF 125.5 12.01 25.5 2.44 92.5 18.8
Other Private Equity 713.8 Various 105.0 Various 161.0 48.7
Real Assets:
U.S. RE Fund III 317.1 71.68 7.1 1.60 317.1 7.1
U.S. RE Fund II(2) 717.6 57.71 4.7 0.38 336.1 1.8
U.S. RE Fund I(2) 434.7 66.60 16.6 2.54 80.9 2.7
Asia RE Fund(2) 386.8 53.77 8.4 1.16 189.2 3.7
Infrastructure Equity
Fund(3) 246.1 27.43 13.1 1.46 49.1 2.7
EPF III(1) 609.4 13.52 74.7 1.66 356.5 43.9
EPF II(1) 410.8 11.95 60.2 1.75 92.9 18.1
Apollo European Principal
Finance Fund, L.P. ("EPF
I")(1) 300.9 20.74 19.8 1.37 48.8 4.5
Other Real Assets 364.1 Various 24.1 Various 18.3 1.1
Other:
Apollo SPN Investments I, L.P. 15.6 0.34 15.6 0.34 10.2 10.2 Total$ 25,462.1 $ 4,860.5 $ 9,666.5$ 1,090.5
(1) Apollo's commitment in these funds is denominated in Euros and translated
into
2019.
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(2) Figures for
commitments. A co-investment vehicle within
pound sterling and translated into
to
Fund include co-investment commitments.
(3) Figures for
OnApril 30, 2015 , Apollo entered into theAAA Investments Credit Agreement (see note 15 of our consolidated financial statements for further disclosure regarding this facility). The 2018 AMH Credit Facility, 2024 Senior Notes, 2026 Senior Notes, 2029 Senior Notes, 2039 Senior Secured Guaranteed Notes, the 2048 Senior Notes and the 2050 Subordinated Notes will have future impacts on our cash uses. See note 11 of our consolidated financial statements for information regarding the Company's debt arrangements. Contingent Obligation-Performance fees with respect to certain credit and private equity funds and real assets funds is subject to reversal in the event of future losses to the extent of the cumulative performance fees recognized in income to date. See note 16 of our consolidated financial statements for a description of our contingent obligation. One of the Company's subsidiaries, AGS, provides underwriting commitments in connection with securities offerings to the portfolio companies of the funds Apollo manages. As ofDecember 31, 2019 , there were no underwriting commitments.
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