Skip to Content
Stock Strategist

High Hopes for Apollo's Athene Acquisition

Positioned to benefit from the shift to nontraditional lenders, narrow-moat Apollo now needs to ensure the success of the Athene merger.

Mentioned: ,

Over the past two decades,  Apollo Global Management (APO) has grown into one of the asset management industry's most powerful private equity players and its strongest credit-focused firm. Its specialization in illiquid credit instruments offers substantial potential in the coming years. Banks of all sizes, under tough regulatory scrutiny following the Great Recession, are shedding risky and complex credit assets to shore up their capital ratios. We see this as a secular trend, particularly as Basel III rules force banks to shed risk, and Apollo's relationships and deep expertise in the market position the firm to earn lucrative returns.

The acquisition of fixed-annuity provider Athene in late 2013 differentiates Apollo from its peers, in our view. Apollo's permanent capital base with Athene is just over $60 billion in assets under management, almost 40% of Apollo's overall AUM. Unlike private equity funds, which have a life cycle of seven to 10 years, Athene's AUM does not need to be returned to investors, meaning that Apollo can earn steadily greater fees from Athene as it invests more of Athene's AUM in Apollo funds. Furthermore, there is substantial opportunity to reposition Athene AUM toward the type of illiquid credit investments that Apollo has been buying up in its own funds, boosting Athene's returns and, more important, generating capital to be used for further acquisitions of insurance float (and thus Apollo AUM). Finally, as Athene is a fixed-annuity provider, its costs are generally fixed, whereas Apollo's investments for Athene are generally in variable-interest securities, meaning it should benefit from higher interest rates through a wider spread.

Stephen Ellis does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.