Apollo plans to sell its assets to retail and ETFs

(Bloomberg) — Apollo Global Management Inc. plans to expand its asset origination business to sell private credit to retail channels, including exchange-traded funds, CEO Marc Rowan said Thursday.

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The company already sells credit instruments to insurers, including its own Athene unit, and to institutional investors. Apollo has set a five-year goal of increasing annual origination to between $200 billion and $250 billion.

“We built a third-party insurance business, and then a third-party institutional business, a fixed income replacement business, and you’ll see us do that in retail,” Rowan said at the conference on Bernstein’s strategic decisions. “You will see us doing this at regular intervals. You’ll see us do this in ETFs.

Private asset managers are increasingly seeking sources of capital beyond traditional institutional investors such as pension funds and endowments amid a challenging fundraising environment. Blackstone Inc. and KKR & Co. are also creating wealth management units, while Carlyle Group Inc. is preparing its first European private credit fund aimed at wealthy individuals.

Private wealth is “one of those megatrends,” Carlyle CEO Harvey Schwartz said at the same event Thursday.

Only 1% of the $80 trillion in wealth held by individuals with at least $1 million in their accounts is allocated to alternative assets, compared to a third for institutional clients, the chairman of Blackstone said a day earlier , Jon Gray.

“I’m not saying it’s going to go to the same place,” he said, “but I think it could be a lot bigger.”

Wealth Channels

Apollo’s products aimed at individual investors are distributed through intermediaries such as banking networks and registered investment advisers, and the company doesn’t expect that to change, Rowan said.

But the company sees opportunities to create investments that allow individual investors to access private markets that are a mix of 70% beta and 30% alpha, he said. Apollo plans to launch two such products this year, Rowan said.

“Eventually you’ll see this in credit, but ultimately you’ll see it across the landscape,” he said.

KKR and Capital Group announced last week that they had formed a partnership to create hybrid public-private investment products for investors.

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(Updated with comments from Carlyle and Blackstone CEOs starting in fifth paragraph.)

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