How did the bank closures trend contribute to the development of the alternative investment market, what does the market include besides venture capital funds and private equity, and what does Apollo Asset Management offer customers in Israel?
Veronique Fournier, a senior manager at Apollo, who is responsible for the capital management team in Europe, the Middle East and Africa, in the global capital management solutions department, discussed these questions with "Globes" reporter Assaf Uni at the Globes Alternative Investments Conference, held in partnership with Phoenix Group and Apollo Global Management, one of the world’s largest and leading investment firms.
According to Fournier, Apollo has become one of the industry’s biggest players in the alternative, or private market. "We have two main business areas. One is retirement services. We established this area about ten years ago, and it operates mainly in the US, but also in Europe, within which we provide retirement services to private individuals.
"Our second field is asset management, and many know us through our private equity funds and private credit funds. We currently have over $700 billion assets under management." According to Fournier, half of the managed assets belong to Apollo or its insurance company, noting, "We are usually the biggest investors in our funds".
Fournier introduces three key principles at Apollo, which, she says, define what the firm does.
"One, we believe that purchase price is important, so in cases of private equity we will usually be value investors. When we think about credit, we focus firstly on secured debt, and will focus on reduced risk investments. This brings me to the second principle, which is that Apollo is aligned with its investors. I’ve already mentioned that half of the assets we manage are our assets, therefore the whole concept of excess returns per unit of risk is critical for us, so that we can seek both return and risk reduction.
"Our third central principle comes from our belief that there should be excess returns per unit of risk. So, if you're going to go for alternative investments, you should expect an excess return per unit of risk. That's our ethos and that's where we aim for our investors."
Can you explain why asset management companies love Apollo? You recorded impressive profits in recent years - what were the changes in the market? What is your secret? Or maybe, what do you do better than the banks?
"I think that part of the growth in the alternative sector comes from the fact that we’re not the only ones in the sector. Several large players, like us, benefited from the market's mindset. Part of this came after the global financial crisis (GFC) and the whole trend of banks reducing their balance sheets that has given a significant push so that private capital managers, like Apollo, can enter the game now, in terms of funding."
Fournier adds, "We can also see significant trends in the market such as artificial intelligence or the transition to green energy. Companies like Apollo play an important role in this area.
Most people may identify the private or alternative market with private equity investments or venture capital funds. Today, the private market offers diverse investment opportunities across the risk/return spectrum, from investment grade rated debt through to private equity. So, the growth, and the whole approach to capital management that companies like Apollo offer definitely contributed to the growth of this industry and contributed to Apollo’s growth. I think that, regarding our growth, what contributed was sticking to the principles I outlined earlier. Loyalty to these principles was important for us, not only in terms of growth, but also profitability."
Can you share an example of a recent investment in Europe?
"I can talk about the convergence of public and private credit, and the role that private capital firms play now, also in financing solutions for larger companies. You may have seen that, at the beginning of the year, we announced an $11 billion financing solution for Intel, to finance one of their manufacturing plants in Ireland, (Intel sold 49% of the plant it is building to Apollo for $11 billion). This was a big deal in the market. It shows the performance of companies like Apollo, in terms of size and scope, in deals like these, which historically were done by the public bond market, and today are done by teams like Apollo. Today, they too can take part in the game."
Regarding your focus on the alternative market. Do geopolitical matters or regulatory matters affect your success in this area? What are the advantages in this area of investments and what are the risks, when referring to geopolitical and regulatory issues?
"As part of my role, I talk to private investors and wealth advisors every day. And for example, in 2022 they saw there was no place to hide in public markets, no matter what your sector or status. This influenced many of them, to a certain extent, to leave public capital management and opt for private. I think the advantages of the private market are well-known, for example the matter of diversification, given the number of companies in the private market. There is an interesting statistic that says private companies account for 80% of employment in the US. I think that in Europe over 90% of the companies with revenue of over $100 million are private. So, exposure to opportunities like this, which until now weren’t available to individual wealth investors is something that is very interesting to us, and we see similar interest from many of our partners."
Fournier adds, "I think that a lot of the development and product innovation in the market - things like semi-liquid funds and fixed income replacement strategies - have increased access and demand among wealth investors. Also, the whole concept that investing in public markets is safe and investing through private markets is risky, is changing now, and there is already recognition that both public and private investments can be safe or can have risks. Right now, liquidity is of greater importance. Will you need all your money on Tuesday? Is there some form of illiquidity you can consider for investing in private companies, one that hasn’t been available for private investment until now?
"I think regulation also has an impact on this. We talked earlier about non-bank investment, and it certainly gave capital managers like us a boost. And I think the regulators are beginning to understand there is no reason why private investors cannot invest in the private market, especially when they understand how important they are to the general economy. We definitely agree with this insight, and are very happy about the developments in this area."
To conclude with, what is Apollo's approach when appealing to Israeli investors?
"We are very happy that we have a presence in Israel, and that we can offer Israeli investors access to everything that Apollo does, whether in private equity, private credit or real assets - whether through our institutional vehicles, growing our Wealth business and semi-liquid product offerings for individuals, or in partnering with local companies and institutions.
"In Israel, we’re very happy to work together with Phoenix, who are our partners, and also do it in a way that we see as relevant to the market, in partnership, such as hedging currency in shekels, and so forth. We try to be as friendly as possible to investors, by making the investment relevant and simple for them."
Full disclosure: The conference was held in partnership with Phoenix and Apollo Global.
Published by Globes, Israel business news - en.globes.co.il - on October 10, 2024.
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