Apollo plots private credit push with expansion to ETFs

Apollo Global Management Inc. plans to expand its asset origination business to sell private credit to retail channels, including exchange traded funds, Chief Executive Officer Marc Rowan said Thursday.

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

“We built a third-party insurance business and then we built a third-party institutional business, a fixed-income replacement business, and you will watch us do this in retail,” Rowan said at the Bernstein Strategic Decisions Conference. “You will watch us do this in interval funds. You will watch us do this in ETFs.”

Private asset managers are increasingly looking beyond traditional institutional investors such as pension funds and endowments for sources of capital amid a difficult fundraising environment. Blackstone Inc. and KKR & Co. are also building wealth units, while Carlyle Group Inc. is readying its first European private credit fund for wealthy individuals.

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

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

“I’m not arguing it’s going to the same place,” he said, “but I think it could be much larger.”

Wealth Channels

Apollo’s products for individual investors are distributed through intermediaries such as bank wealth channels and registered investment advisers, and the firm doesn’t expect that to change, Rowan said.

But the firm sees opportunities to create investments for 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 eventually you will see this in the whole landscape,” he said.

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