Apollo Global Management shares on Tuesday turned in their biggest gain since 2020, after the firm said its pending acquisition of insurance annuities investor Athene Holdings would help it double its assets under management to $1 trillion by 2026.
If the gains hold through the session, it’ll be the largest jump in the stock since April 2, 2020, when it rose 12.5% as it recovered losses from the COVID-19-inspired selloff in the overall market in March, 2020. In other big moves, the stock rose 7.2% on Jan. 26, 6.9% on May 18, 2020 and 7.0% on April 17, 2020.
Apollo is also set to report earnings on Nov. 2, with Wall Street expecting the private-equity firm to report net income of $1.08 a share on revenue of $543.4 million.
Fitch Analyst Meghan Neenan said investor sentiment around Apollo’s ability to grow its insurance business with Athene
is providing additional lift to the company’s prospects.
“There’s already been bullishness around the growth of alternatives and the prospect of more fee-related earnings, but Apollo put some specific numbers around it,” Neenan said.
In its investor day presentation on Tuesday, Apollo CEO Marc Rowan said Apollo is positioning itself as a high growth private-equity firm. It expects to increase its fee-related earnings by 2.5 times to $2.8 billion by 2026 from $1.1 billion in 2021. Its assets under management will roughly double from just under $500 billion now to $1 trillion during the same period.
Overall, the alternatives universe is growing at about 10% a year to combined AUM of $17.2 trillion in 2026 from $11.8 trillion in 2021. Meanwhile, total U.S. retirement assets have increased to $33 trillion in 2020 from $12 trillion in 2000.
Since 2009 or so, interest rates have been at historically low rates, making alternative investments more appealing for institutional investors to compensate for flat returns in the bond market.
Other tailwinds helping Apollo and other private-equity firms include a receptive exit environment. Private-equity firms are able to sell portfolio companies or take them public due to positive conditions in the IPO market as well as the M&A arena.
To make its stock more appealing to index funds, Apollo in 2019 converted to a traditional corporate structure instead of a publicly traded limited partnership structure and also eliminated different share structures.
In March, Apollo revealed plans to acquire the portion of Athene it doesn’t already own for about $11 billion. The deal is expected to close in January.
Since Apollo sponsored Athene’s IPO in 2016, other large private-equity firms have also been developing their businesses in managing insurance assets including KKR KKR Blackstone BX and Brookfield Asset Management BAM.
Tomi Kilgore contributed to this report.