Good morning, and welcome to Apollo Global Management's Second Quarter 2024 Earnings Conference Call. During today’s discussion, all callers will be placed in listen-only mode, and following management’s prepared remarks, the conference call will be open for questions. Please limit yourself to one question and then rejoin the queue. This conference call is being recorded. This call may include forward-looking statements and projections, which do not guarantee future events or performances. Please refer to Apollo's most recent SEC filings for risk factors related to these statements. Apollo will be discussing certain non-GAAP measures on this call, which management believes are relevant in assessing the financial performance of the business. These non-GAAP measures are reconciled to GAAP measures in Apollo's earnings presentation, which is available on the company's website. Also note that nothing on this call constitutes an offer to sell or a solicitation for an offer to purchase an interest in any Apollo fund. I will now like to turn the call over to Noah Gunn, Global Head of Investor Relations.

Thanks operator. And welcome again everyone to our call. We appreciate the opportunity to speak with you and discuss all the momentum we are seeing across the firm. Earlier this morning, we published our earnings release and financial supplement on the Investor Relations portion of our website. We reported solid second quarter financial results, which included record quarterly FRE of $516 million or $0.84 per share and SRE of $710 million or $1.15 per share. Combined with principal investing income, HoldCo financing costs and taxes, we reported adjusted net income of $1 billion or $1.64 per share. Joining me this morning to discuss our results in further detail are Marc Rowan, CEO; Jim Zelter, Scott Kleinman, Co-President; and Martin Kelly, CFO. Before handing it over, I'd like to formally announce that we are hosting an Investor Day in New York on Tuesday, October 1st. We will provide additional detail in the coming months and hope that you will join our broader team as we discuss the exciting long-term growth opportunities in front of us. With that, I'll hand the call over to Marc.

Thank you, Noah. Good morning to all. Thank you for joining us. Happy summer. Those in New York certainly know what I’m talking about. This quarter was a good reminder that great companies are built by honoring the fundamental promise they have made to their clients. In our industry, alternative assets. The fundamental promise that we make to our clients is excess return per unit of risk. Absent that, I’m not sure why we as an industry would exist. This promise, the delivery of this promise was on full display across the entirety of our franchise for the quarter, through private equity and hybrid and in our credit franchise. Just a quick tour of the quarter. In private equity we announced three transactions in the past 30 days. Travel Corp, Everi and IGT Gaming, truly an amazing statistic. The team is working round the clock. If you think about the last decade of our private equity franchise which is impacted by funds 9 and 10, $45 billion of capital, $13 billion already realized. In Fund 9 as of the end of the quarter, 29 gross and 20 net. In Fund 10, 47 gross and 20 net. Notwithstanding headwinds across the private equity industry by people who perhaps trade from a fundamental promise, the team is doing an unbelievable job. In hybrid or equity that is private, something we’ll talk more about on Investor Day. AAA, which is our flagship vehicle returned 10% over the last 12 months with on-track quarterly results. We now have positive returns in AAA for 16 quarters in a row. To give you a longer-term perspective of why investors like hybrid, we've had two down quarters over the past 38. In a market characterized by volatility, by indexation and correlation, by key bets on very high-flying companies, the notion that you can achieve double-digit rates of return in the equity market and still have downside protection and reduce volatility is incredibly attractive to investors across the entire spectrum, from retirees to those seeking to accumulate. We have 17 billion of NAV now in our AAA vehicle, and as I've suggested, I expect this will be our largest fund over a period of time. Credit, which is the largest of our franchise, also had an amazing quarter. We were early in credit, and we have built a leading and differentiated franchise. Recall that the differentiation of our franchise is a unique focus on investment grade, private investment grade to be specific. To give you just some performance stats for our major vehicles for the quarter, our total return fund is up nearly 2% for the quarter, 10% latest 12 months. Structured credit and ABS, 2% for the quarter, 15% for the latest 12 months. ADS, our direct lending vehicle, private market BDC, if you will, is up 3.4% for the quarter, 17% latest 12 months. Direct origination, 3.8% for the quarter, 19% for the latest 12 months. Across the entirety of the franchise, equity, hybrid, and credit, this was an awesome quarter. I start with performance because ultimately the reward for good performance is more work. In our case, more work is inflows. We had record inflows for the quarter for a non-PE franchise year of $39 billion. Institutional was $16 billion, global wealth, $4 billion, up 50% versus the first quarter, and Athene had organic inflows of $17 billion. It was truly a great quarter across asset management. Asset management is generally better fitting from tailwinds. What we're seeing in our business is not the result of a quarterly spike or peak. We're seeing a fundamental shift in the marketplace, and it is happening across the entirety of our franchise. If you step back and think about what the big drivers are, the big driver in credit, we are looking at three really interesting trends. Think of the places that capital is needed in our economy over the next decade. We are going to spend an awful lot of money on the next generation of infrastructure for data centers and AI. We are going to spend an equal amount of money for energy transition, and we are going to spend a lot of money on what I'll call normal infrastructure. All three of those things are long dated and many of them are structured, many of them are complex. These are the kinds of things that are not well suited for institutions who are funded short. These are exactly the kinds of transactions in the investment grade market that we expect to drive our business and are driving our business. The way we look at the driver of our business, especially in credit, is by originations. Recall that we have a $125 billion target for this year for originations. We originated $52 billion in the quarter, including $11 billion from Intel alone. We are quickly approaching the $150 billion target that we set for 2026, and the team is unhappy to hear this because they know I'm going to revise the number up. Just to give you a sense for how strong the trends are, year-to-date we've deployed $17 billion in next generation infrastructure alone. I expect this not to be a one or two quarter blip. I expect this to drive our business over the next decade against the backdrop of regulatory change, against the backdrop of government borrowing, and all the other trends that we know are happening in fixed income. Origination also drives for us capital solutions. Capital solutions, fees, and revenues are the byproduct of a successful origination franchise. Fee revenue totaled more than $200 million. We are on pace for a record year. Our pipeline is as strong as it has ever been, and we will continue to build out the business, both by industry and by geography, including major advances in Australia and in Asia because the need for originated high-quality investment grade assets with spread is global. Let me turn now to Athene and Retirement Services. Retirement Services is now in its 15th year. We've basically grown our earnings over 15 years at 15%, including 26% last year. Just like in asset management, good performance is ultimately rewarded with more capital. In Athene’s case, this is the ability to attract strategic investors to support Athene through its sidecar, which we call ADIP. ADIP is the capital engine that helps Athene scale its business and run a truly efficient franchise. ADIP II has now closed and raised $6 billion, almost twice as much as ADIP I. As far as we know, this is the largest third-party capital sidecar in the retirement services industry. For the quarter, Athene hit every operating metric. New business volumes, underwritten returns, credit quality, expenses, surrenders, capital. Profitability for the quarter was impacted by the roll-off of exceptionally profitable business, which was put on during the peak of COVID. That same roll-off of business will also occur in the next quarter. Also during the quarter, the disagreement over the direction of interest rates toward the beginning of the quarter provided us opportunities to do additional hedging, which we did for the quarter. The roll-off of this business and hedging essentially cost us growth for the quarter and will cost us growth for Q3. We expect by Q4 the business to grow and to be back on trend, the result being that we will achieve in our estimation mid-single-digit SRE growth for the year, accounting for the two lost quarters, and we will return to trend double-digit growth next year. Martin will detail further and will dissect the pieces of this business, which I know are of interest to many of you. Athene is on track for $70 billion of organic inflows for the year. When I step back, we are simply fortunate to have delivered on our core promise to customers and to be in a market and in an industry that is driven by long-term tailwinds. We have essentially four tailwinds in front of us. The first I've already detailed, which is this voracious need for capital, most of which we believe to be investment grade. That will drive our fixed-income franchise, fixed-income replacement. The second, retirement is a fact of life. We are all getting older. We have so far over the first 15 years at Athene, one, by producing incredibly good returns not just for investors but for customers, but essentially what we have done is we have modernized existing products. The opportunity now exists for the entire next generation of products to serve retirees, whether they are in the traditional insurance sector or they are in the vast pool of 401-K, which here to four has been off limits to most alternative assets providers. The third, our entire industry over a 40-year period has been built out of a small bucket of the institutional marketplace. We are watching an individual marketplace, led by family offices and high-net-worth individuals that I believe will grow to be the size of the institutional market over time. Finally, and a notion that we will spend lots of time on Investor Day, we are watching investors fundamentally rethink the difference between public and private. We grew up thinking that private was risky and that public was safe, and that probably was true 40 years ago. Private represented three products, private equity, venture capital, and hedge funds, and public diversified portfolios of stocks and bonds. What if our fundamental premise is wrong? What if private is both safe and risky and public is both safe and risky? The entire basis on which we have constructed portfolio allocation will need to be rethought. I don't have to guess at this. This is already happening in the fixed income bucket of our large institutional clients who are making daily trade-offs between public investment grade and private investment grade. It is happening in fixed income first because there are helpful gatekeepers or signposts called rating agencies who help investors discern quality between public and private markets. It is also helped by that there is not real liquidity in public fixed income markets, so the trade-off of liquidity is not that immense. The opportunity in front of us over the next few years is fixed income replacement, which will provide a turbo charge to an otherwise healthy business. But make no mistake, replacement is coming for the equity business as well. We will end up with a portion of public equity that decides that equity can be private as well. And we will have access to other parts of our institutional investor’s allocation. We look forward to seeing you at Investor Day. And it certainly has been an active summer. And with that, I will turn it over to Scott.

Thanks. And as Marc touched on, each of our core business drivers, deployment, investment performance and capital formation, were strong in the second quarter and highlight that momentum across Apollo is building. As we've discussed, our current five-year plan is underpinned by three strategic growth pillars, including origination, global wealth and capital solutions, all of which are tracking ahead of our 2026 targets and fueling growth in our franchise and our earnings power. On the investing front, gross capital deployment surged to a record $70 billion in the second quarter. The driving force of this strong investing activity was debt origination, complemented by deployment in hybrid and equity strategies. Record debt origination in the second quarter was driven by broad-based strength across all three forms of origination, traditional, platforms and record levels of high-grade corporate solutions activity. Combined with the strong first quarter, debt origination volume in the first half of the year was close to the total amount originated for all of 2023, highlighting the increasing scale of our ecosystem. We expect momentum in overall deployment activity to persist given the line of sight we have to robust transaction pipelines in both our equity and debt-focused businesses. As a result of the higher interest rate backdrop and structural changes in traditional financing markets, we're seeing a lot of demand for customized, long-dated solutions that utilize debt capital, equity capital, or a combination of both. We believe we're uniquely positioned to meet this need by accessing our lower-cost, scaled long-duration capital within Athene and elsewhere, coupled with our flexible investment approach that aims to maximize risk-return across the capital structure. Within second quarter activity, the Intel transaction Marc explained earlier is a prime example of how we combine these powerful advantages to serve clients in a differentiated way. Importantly, we expect the markets for these types of transactions to grow from here, supported by the multi-trillion-dollar opportunity to finance the clean energy transition and AI infrastructure build-out. Another theme we're observing in the current rate backdrop is that the bid-ask spread between buyers and sellers is persisting, hampering investment activity for most. At the industry level, the second quarter saw the lowest number of private equity deals in a quarter since the onset of COVID. This is a moment where our PE capabilities have the opportunity to shine. We believe that, unlike others, we're well positioned to capitalize amid these conditions given our ability to find value, structure creatively, and embrace complexity. As Marc highlighted, we've announced five transactions in just the last couple of months, representing approximately $15 billion in total enterprise value at an average creation multiple of under seven times. And our deal pipeline looks strong from here. Ultimately, all of our sourcing and origination activity is a function of being able to find interesting investments and deliver good outcomes. And indeed, we're doing that across the business. Returns across our yield-focused strategies remain strong. For example, direct origination and structured credit portfolios have appreciated 19% and 15% respectively over the last 12 months. Hybrid Value had a standout quarter with a portfolio appreciating 5% in the second quarter and 17% over the last year. And another of our flagship hybrid businesses, Accord & Accord Plus, has also delivered robust returns over the past year, totaling 17%. And as Marc alluded to earlier, our PE portfolios are enjoying very strong performance and are marked at very defensible valuations. Strong investment results are helping to drive strong capital formation. Inflows totaled $39 billion in the second quarter across our asset management and retirement services businesses, bringing total inflows close to $80 billion in the first half of the year. Within that, third-party fundraising, excluding any leverage or segment transfers, has been particularly robust, totaling $20 billion and $33 billion in the second quarter and year-to-date, respectively. This momentum gives us confidence that we're on track to achieve our $50 billion fundraising target this year. Second quarter fundraising activity included a record amount of third-party capital raised in yields, as well as strong hybrid inflows. Fundraising was diverse across a range of products and also benefited from some sizable institutional commitments. Some of the more significant drivers by strategy included asset-backed finance, multi-credit, large cap direct lending, ADIP, opportunistic credit, and infrastructure equity. Additionally, we recently secured a sizable strategic investment from Mizuho Bank in Apollo Clean Transition Capital, our flagship climate and transition credit strategy. This capital enables us to continue building a strong portfolio following initial seed investments in 2023 as we position the strategy for a broader fundraise next year. Importantly, Mizuho's limited partner commitment is the largest they've ever made, which speaks to their support and advocacy of energy transition as well as the broader Apollo relationship. Turning to global wealth, our momentum remains strong as we continue to solidify our position as one of the top players in the market. We've raised north of $6 billion in the first half of the year, including record fundraising in the second quarter, positioning us to exceed the $8 billion of capital raised last year. The most significant contributor to our growth momentum is Apollo Debt Solutions, the non-traded credit BDC we manage. Performance remains stellar with the fund's class, share returning more than 13% net over the past year from a portfolio comprised almost entirely of first-lien loans. Monthly inflows averaged over $500 million in the second quarter, reflecting these strong returns, continued traction with global distribution partners, as well as new approvals across channels. Additionally, we're focused on further broadening access to the strategy on a geographic basis by extending into Europe, Asia, and LatAm via our Luxembourg-based product platform. As we think about the evolution of our private credit offering in the global wealth channel, we're very excited about introducing an asset-back strategy as a complement to what we've built with ADS. Initial interest in Apollo Asset-Back Credit Company, or ABC, has been quite strong, as we believe distributors recognize the scale, diversity, and maturity of our asset-backed finance franchise as a significant competitive advantage. We've just launched ABC in the global wealth market, and we expect flows to increase as we expand distribution to wirehouses over the coming quarters. More broadly, as we think about how best to access different client segments, we've also been engaged in a number of conversations around partnerships. Our role can and will take on multiple forms, ranging from joint ventures to parts provider. We're at the center of these conversations in what's an incredibly robust opportunity set.

Thanks, Scott, and good morning, everyone. So as we execute on our strategy, the building blocks powering our business—asset origination, capital formation, and investment performance, as you've heard—are setting us up to continue generating attractive long-term earnings growth. Let me close out with some comments on our Q2 financial performance and outlook in advance of a comprehensive review about the next five years at our Investor Day on October 1. Starting with FRE results, fee-related revenues increased 11% quarter-over-quarter and 18% year-over-year, driven by solid growth across all three revenue streams. Management fees grew 3% and 8% respectively, driven by strong capital formation activity. Capital solutions fees, as you heard, exceeded $200 million in a quarter for the first time, reflecting strong growth across the broader debt origination ecosystem that included a record quarter of high-grade corporate solutions activity. Fee-related performance fees, which are spread-based versus NAV-based in our business, continued their upward trajectory. Driven by our credit business, including growth in ADS, these fees have a high degree of stability and are now run-rating at more than $200 million on an annualized basis. Looking to the second half of the year, management fee growth should be aided by healthy organic and closer to Athene, fundraising activity in equity strategies, and the deployment of capital already raised. We're currently sitting on a record $55 billion of management fee-eligible AUM, of which approximately 80% is in yield and hybrid strategies, which generate fees when the capital is invested. Given the robust results in capital solutions in the first half of the year, we expect full-year fees to be stronger than originally expected, inclusive of expectations for normalized fee revenue in the third and fourth quarters, supported by the very healthy pipeline that Marc referenced. Turning to FRE expenses, the sequential increase in fee-related compensation resulted from continued investments in building out our capital formation and credit investing teams, as well as some pull-through of strong fee-related revenues to compensation. We also recognized a $15 million one-time item in non-comp expenses related to a fund merger that we previously commented on. Importantly, we're on track to grow total fee-related expenses by a low double-digit rate in 2024, inclusive of the one-time expense. SRE, so moving on to retirement services, the fundamentals underpinning a themed business remain fully intact and very strong relative to the industry. Organic inflows continue to be robust, totaling $17 billion in the second quarter and $37 billion year-to-date. We are benefiting from our four organic growth channels and leading market share in the U.S. annuity market as well as strong secular tailwinds driving demand for retirement income solutions. The combination of our first half results and competitive positioning gives us continued confidence in reaching our $70 billion organic inflow target for the full year. Profitability on new business has remained in line with targeted returns, both in terms of spread and ROE. Through our differentiated origination capabilities, we're able to invest new business volumes in attractive investments that generate excess spread through structure and liquidity. We've continued to deliver value so far this year, driven by deployment into directly originated investment-grade credit of more than $10 billion with an attractive excess spread of approximately 200 basis points above comparably rated public corporate benchmarks. In terms of our Q2 financial results, adjusting for long-term expectations of 11% for the alternative portfolio, the net spread would have been 27 basis points higher. And on a comparable basis, the Q2 net spread was six basis points lower than Q1. There are three dynamics that influence the spread performance. One, nearly $4 billion of highly profitable funding agreements issued during COVID market uncertainty at a low 2% cost of funds and invested at attractive spreads matured in Q2. Two, we strategically executed hedges, primarily in Q1 and in Q2, to immunize earnings exposure to potential changes in interest rates, the cost of which is expected to be an approximate 5% headwind to earnings growth this year. Three, we also allocated more than 40% of our first half purchases to corporate securities compared with 25% to 30% in 2023. And we experienced some back-weighted deployment activity, a dynamic we also experienced last quarter. Considering these factors and their impact on the second half of the year, along with in-line business performance, we expect our SRE growth rate for 2024 to be in the mid-single-digit percentage range, assuming 11% alternatives return. We anticipate our net spread to be approximately 150 basis points on the same basis. For the back half, we expect Q3 SRE to be in line with Q2 before growth resumes in Q4 at a more normalized rate. Turning to ADIP, integral to Athene’s long-term success, we view the $6 billion fundraise for ADIP II, the second vintage of our strategic third-party capital sidecar, as further validation of Athene’s attractive growth trajectory. This vehicle invests side-by-side Athene in new business, enabling Athene to scale in a capital-efficient manner while providing an attractive risk-adjusted return to fund investors. Organic growth at Athene continues to be very attractive in today's environment, equating to an approximate 20% return on equity to the HoldCo when accounting for spread earnings, management fees, and sidecar fees generated. We view the sidecar strategy as a true strategic differentiator as we look to penetrate the massive retirement services addressable market in front of us. Before concluding, let me spend a moment on Athene's alts investments. Athene's alternative portfolio is highly diversified and constructed to generate a hybrid-like risk and return profile. Most of the portfolio is represented by AAA, which had a 9% return for Q2 and 10% over the last 12 months, inclusive of significant cash being held for future investment. The remainder of the portfolio is in several retirement services companies, including Athora, Catalina, Venerable, and FWD, which are all strategic investments and important to our long-term growth, but which have underperformed the broader portfolio on a market valuation basis. With that, I'll turn the call back to the operator for Q&A.

Thank you. Our first question comes from Glenn Schorr with Evercore ISI. Please go ahead with your question.

Hi, thanks very much. I just want to get a clarifier on your outlook. So you talked about what would impact the second half versus the first half on the alternative net investment income, so I appreciate that. Is the back-to-double-digit trend next year? I just want to be clear. Does that mean 2025, you hope to grow low double digits over what is the new thought process around 2024? And you mentioned that includes an 11% return on volts, which was kind of half of that recently. Maybe you could help us with what produced the underperformance of Athora and then or what seems like a good environment. Why are they not performing their normalized return? Thanks a lot.

So, Glenn, the short answer is yes to what you've said. But we do anticipate growing double digits over the results for 2024. In the Alts book, as Martin was saying, we have two types of alts. One is the invested alts. Most of the invested alts are inside of AAA, which is LTM 10-ish, just over 10. And that includes a substantial amount of cash, which is yet to be invested, which is being invested, which gives us great comfort that we'll beat 11. In terms of the back and forth over the strategic investments, Catalina and FWD have not performed well and are basically flat. Athora and Venerable in particular have been an awesome investment, but grew, I want to say, 16% to 20% last year. You just don't get a straight line. And Athora basically has been the same. It's been mid-teens rates of return, and this year it's up in the low single digits. So you do get some lumpiness quarter-to-quarter over the strategic alts. The other thing we're looking at is, and Martin mentioned this, you have a forward curve which talks about seven rate cuts. That is what we budget. And so we basically are going to an environment where we think we're going to earn low double digits against a backdrop of seven rate cuts. While we have dramatically reduced our exposure to rates, we have not fully immunized our exposure to rates. So that is a little bit of a headwind, and we're taking that into account when we're giving you guidance. Hopefully that's helpful.

Thank you. Our next question comes from the line of Alex Blostein with Goldman Sachs. Please proceed with your question.

Hi, Greg. Good morning, everybody. So, Marc, private fixed income has been obviously a huge growth driver for Apollo over the last several years, and we've spoken extensively about that. More recently, I think you started to highlight opportunities you see to further expand Apollo's private equity capabilities, and I was hoping you could spend a couple of minutes on what that could look like sort of two, three years out. I'm assuming you're going to spend quite a bit of time at the investor day, but maybe a bit of a preview would be helpful. And I guess looking at the more near-term opportunities, Fund 10 seems to be quite active, as you highlighted. How does that inform your thinking about Fund 11? Thanks.

Okay. So I'll do some of it, and then Scott will pick up as he corrects or fills in for what I screw up. Let's start with this. Private equity is the traditional business on which the alternative asset management has been built. It is a 40-year-old business. Over the last decade in particular, call it 15 years, a lot of what has been produced was not the result of great investing, but it was the result of $8 trillion of money printing. Well, guess what? We stopped printing that magnitude of money, rates went up, and lots of people in the industry mistook good performance for actually a beta bet. We did not succumb to that. We are not facing the headwinds that the general private equity industry is facing, and what I wanted to do is really call it out. The benefit of purchase price matters is you get to be on offense. In markets like this, you get to produce good returns. I personally think this sets us up well for Fund 11. We have to deliver it, though. Scott, I'll leave it to Scott to speculate on timing and other things, but I'm feeling incredibly good about what the team is doing at private equity. Fixed income replacement, which you also mentioned, is happening, and I want to distinguish that from what people normally call private credit. Most of the usage of the term private credit refers to below-investment-grade direct lending, which I actually think is a terrific business, but it is funded primarily out of the alternatives bucket as an alternative to equity allocations. What I'm talking about in fixed income replacement is primarily the replacement of public investment grade with private investment grade. I mean think about Intel as an example. Intel has bank debt. Intel has public bonds and now Intel has $11 billion of investment grade private credit. The fact that there is a rating agency helps investors arbitrate as to whether they prefer to be in the bank debt, the public investment grade or the private IG. And the trends, if you think about where money is needed in the world are the ones I cited there are three really long-dated structured trends that are generally not appropriate for bank balance sheets, some of it will go to the public markets but an awful lot of it will go to the private marketplace and most of it is IG. As an industry, we have basically built an entire industry out of the smallest bucket of our institutional clients. And what I was pointing out is that we as an industry and us in particular now have access to the next largest bucket fixed income. We've never had access to it before. We're starting to get access to it. We will not be the only ones, but clearly I believe that we are in the leading position to do this because we were forced to do it and have been doing it for 15 years for Athene and for the insurance industry. So we've gotten a huge head start through the building of 16 platforms and everything else, you know. I am also pointing out that I believe we will at some point get access to the equity bucket of our institutional clients. 8,000 public companies is now 4,000 public companies. Most of our investors invest in public equities through indexation. 10 companies are 35% of the S&P. Four companies determine a hundred percent of their returns. I'm not sure that that's how they really thought their public equity portfolio is. 80% of companies over $100 million of revenue are private, 80% of employment is private. I believe that we will see investors own equity that is private, which to me in addition to owning private equity the distinction being leveraged. What is private equity at the end of the day? It is equity. With active management, in this case, active management defined as control of companies with leverage added to fit into a required high return of the alternatives bucket without the leverage maybe the new form of active management is the active running of companies rather than the active buying and selling of stocks. We've built a business that we call hybrid. That is a $50 billion plus business for us today and I believe on a percentage basis will be our fastest-growing business because the equity bucket is as yet untapped, and it is the largest bucket of our institutional clients. The thing that's here and now fixed income replacement, thing that I think we look forward to replacement.

I think Marc said that well. Going back to your question around our private equity business, you're right, deployments going very well there as I alluded to it in my comments the market we're in right now is really the sweet spot for Apollo private equity deployment, and we see that continuing regardless of what that may do in a quarter or two. So as we look at just deployment pacing, I would expect by the end of next year Fund 10 will be largely deployed, and we'll be kicking off a fundraise for Fund 11. So that should give you a sense of the timeline there.

Thank you. Our next question comes from the line of Patrick Davitt with Autonomous Research. Please proceed with your question.

Hi, good morning everyone. Marc at a conference a couple months ago. I think you hinted that a partnership like the KK Capital Group 1 is on the come with two hybrid liquid products planned for launch this year. Do you have any update on the progress there and when you expect to actually have products like that in the market? Thank you.

I remain confident that we are on track, and you can expect to see the first product in the market in Q3, with hopes for the second product in Q4. It's important to discuss that as an industry, we need to determine if we are limited by our origination capacity. Historically, I viewed our industry as small, not seeing origination capacity as a barrier to growth, but rather focusing on our ability to raise money. I believe that as firms have matured, our growth limitation is now primarily our ability to originate high-quality assets. We're experiencing this in fixed income; every quality asset we originate finds a home. We performed well this quarter, achieving $50 billion, and we should view these partnerships as enhancements to our business rather than replacements. If my assessment is correct, that origination is the key growth limitation, we need to scale origination responsibly while staying aligned with our company culture. We must avoid the temptation to distribute to third parties and forfeit full fees for assets we would prefer to retain completely. This is our strategy regarding partnerships. You will notice more than just the partnerships I have mentioned; there will be many partnerships this year. Major firms have the opportunity to participate because they each have unique origination capabilities, leading to several intriguing alignments. In terms of asset management, active management has faced challenges recently, often not outperforming broader indices. Each active manager is evaluating their strategies, with some acquiring alternative managers and others seeking partnerships. This aspect of our business is particularly exciting because our industry, including Apollo, is reaching family offices directly, which makes sense since they are institutions. We will also engage high-net-worth individuals through global wealth systems and RIAs, but we will not develop the necessary infrastructure to access the majority of investors who are already served by traditional asset managers. Our role, as Scott pointed out, is to provide parts for products we can originate and prefer to have in excess, and to be a joint venture partner. I cannot predict exactly how these alignments will take shape, but this is a compelling area of our business at the moment, and everything is progressing as I have described.

Thank you. Our next question comes from the line of Brennan Hawken with UBS. Please proceed with your question.

Good morning. Thank you for taking my question. Marc, you mentioned the fluctuations quarter-over-quarter in some of the strategic investments within your alternative business, which makes sense. However, since these are strategic investments, it would be beneficial to understand the sources of weakness among these firms. My understanding is that the decline in earnings from certain insurance properties has not been just a short-term issue. Additionally, Catalina has been operating at a loss. Could you elaborate on the reasons for this weakness, what might lead to its reversal, and whether Apollo and Athene are actively working to support those earnings moving forward? Thank you.

Okay. I won't use this call to go into detail as it would take too long, but I will encourage Jim Belardi and the team to provide more information during their fixed income call. We need to assess performance over time. Venerable has been a very profitable investment, and while I don't have the exact figures, my recollection is that it has delivered about a 20% return over a long period. The business has its ups and downs, leading to very high returns in certain quarters. There is nothing fundamentally wrong with Venerable; everything is functioning well. Challenger is a public company that experienced a significant rise followed by a period of stability, but overall, it has performed well over time. Athora also had a considerable increase and is now stable. Catalina, as you mentioned, has been underperforming; it operates in the P&C closeout sector. Given recent developments, we determined that we do not favor the long-term prospects of that business, so we are transitioning Catalina from its traditional focus on old block P&C to simply acting as a sidecar for Athene. Catalina offers attractive capital benefits through its involvement in annuities and diversification. It is a relatively minor investment, and we expect to phase out Catalina over the next two years. Looking at the bigger picture, what is happening stems from a legacy situation where Apollo and Athene were not fully aligned. During the time when Athene was independent and Apollo owned a one-third stake, it made sense to hold all strategic investments within the insurance company to ensure regulatory compliance. Since the merger, with Apollo now owning 100%, many of these stakes should probably be managed similarly to how we handle MOTIV or Sophie Nova as balance sheet investments of Apollo. This quarter highlights a bit of frustration on our part because, while the majority of the alternatives portfolio is performing as expected, we are seeing some inconsistency with certain strategic investments. The only strategic stake underperforming is Catalina, which is a relatively small interest and is currently undergoing a business transition. That is the situation with Catalina.

Thank you. Our next question comes from the line of Craig Siegenthaler with Bank of America. Please proceed with your question.

Thanks, good morning everyone. I was actually just curious on the prepared comments that the liability outflows and retirement, I think we're going to stay elevated in the third quarter driven by funding agreements, because in the fixed income presentation that you guys update every quarter, it looked like they'd be elevated in the second quarter which they were, but they were going to step down in 3Q. So I'm just wondering kind of why the difference.

I don't think there is a difference. I think you misheard. I think that we were saying that there are extraordinary levels of profitability associated with business that is terminating in the quarter rather than there will be deviations from the schedule. The schedule, as you know, we're pretty much on schedule, and we expect to be on schedule.

Yes. It's Craig, it's the run rate impact, principally. The reason we've been so transparent in publishing our expected future maturities across the portfolio is to provide that guide. And if you look at actual experience relative to expectations, it's right on top this quarter going back in time, and obviously, we expect that to be the case going forward.

Thank you. Our next question comes from the line of Michael Cyprys with Morgan Stanley. Please proceed with your question.

Hey good morning. Thanks for taking the question. Just wanted to ask about Asia. I know that's come up on prior calls and conversations, just as a meaningful opportunity set for you. I was hoping maybe you can update us on your initiatives overseas and Asia, remind us of your footprint there? How you see the opportunity set unfolding? Which particular countries you're most excited about? And in particular, I'd just be curious for any updated color on what you see evolving in Japan and the opportunity there? Thank you.

Sure. Sure. It's Scott. Yes, no, as we've alluded to in prior quarters, our Asia business continues to grow pretty substantially, albeit from a small base starting a couple of years ago. Today, we have close to a couple of hundred employees on the ground in Asia across a number of different countries and a number of different asset classes. Just walking through, I would say, from a PE perspective, we have really made a lot of progress in Japan. We've now announced and executed about 4 or 5 transactions over the last couple of years in Japan and have really established our presence there, most recently, just the deal announced a couple of months ago. So really like what we see from that market from a PE perspective. Other markets for PE, India and Australia would be where we're focused for private equity. Other things we're doing across Asia. We're building out our insurance capabilities. So whether it's through flow agreements and reinsurance agreements in Japan. As you know, some stakes in companies in Australia and Hong Kong. We continue to penetrate there, both on the liability side as well as asset management side for numerous Asian insurance companies that are looking for improved returns for their portfolios. And then on the credit side, we're continuing to scale really pan-Asia as a real opportunity as Marc alluded to in his comments, just the need for thoughtful long-dated credit capital there is huge. And so that business continues to scale. So overall, we're being very methodical, very true to the Apollo value orientation strategy, a safe, secured strategy, but there's real opportunity and we continue to scale it. So it's right now, it's, call it, in the 5% to 10% of Apollo dollars. As Apollo continues to grow at the rate it's growing, that percentage will probably remain constant, but continue to grow dollar-wise.

Thank you. Our next question comes from the line of Kenneth Worthington with JPMorgan. Please proceed with your question.

Hi, this is Alex Bernstein on for Ken. Thanks so much for taking the questions. We wanted to double click on the transaction. You've obviously done other similar large-scale deals. Some of the examples such as AT&T and Air France come to mind. But this one is obviously quite a bit bigger. So I think we wanted to double click and get a better understanding of how the transaction came together? How it may differ from some of the other ones? Or what made some of the lessons learned from the prior ones be? And then from a P&L perspective, to what extent it flows through the 2Q results that you reported, notably on the capital markets business side? If you can provide maybe a concept of just how big of an impact it was there obviously, record returns. And then perhaps what else we can look to expect from Q3 from this transaction? Thanks so much.

Yes. Regarding the transaction, you're correct that Intel represents a larger deal compared to some of our previous announcements. However, the way it was structured and executed is very much in line with our approach to high-grade capital solutions. To effectively serve large blue-chip companies, we need to leverage all the resources at our disposal, including relationships within the firm, whether in private equity, credit, or other areas, as well as our structuring, underwriting, and syndication capabilities. For the Intel transaction, I would estimate that around 50 different team members across the firm contributed to its development over several months. This is not akin to smaller desk trades typical of mid-market private credit; these are significant projects that only firms like Apollo, with extensive capabilities and connections, can undertake. In terms of scale, while this transaction was large, it reflects a broader trend driven by factors such as digital infrastructure development, deglobalization, and the need for substantial investment in energy transition. We're engaging in more of these sizable discussions, and I expect to see similarly large or even larger transactions in the future. Only a handful of firms are positioned to handle this level of capital.

Thank you. Our next question comes from the line of Bradley Hays with TD Cowen. Please proceed with your question.

Hi, it’s Bradley on behalf of Kanz. You mentioned that originations are driving capital solutions fees. Could you provide more details on the increase in originations this quarter, particularly how the non-U.S. origination opportunity played a role in that? Additionally, how should we approach the future pipeline?

So I'll start and then pass it over to Scott. When we reflect on our efforts, we've made significant progress with companies like Sony, AB InBev, Air France, Vonovia, Intel, and AT&T, all conveying that we are open for business. We're witnessing the emergence of a new market, not only among investors looking for fixed income alternatives but also among issuers. Issuers now have an additional option besides bank debt and 10-year corporate bonds. While we may not engage in every transaction, the overall opportunity relative to our business is substantial, and we are seeing consistent growth. Although the growth may appear uneven, with notable transactions occurring each quarter, the trend indicates that private solutions are becoming a viable option for capital needs, and I am pleased with how our strategy is developing. Governments worldwide will borrow significantly over the next decade, which will lead to competition for capital. Banks are generally focused on shorter-term funding and may not be suitable for long-term capital needs. This situation leaves us with two primary sources of credit: the banking system and the investment marketplace. In the investment marketplace, capital can be sourced from the public market or the private match-funded market. While not everything will transition to the private market, a significant amount will, especially considering the major drivers of capital.

Yes. To address your specific question, it should not be surprising. Over the past two years, we have emphasized that our primary focus has been on expanding our origination capabilities in terms of breadth, geography, and category. This is exactly what we have been pursuing. Additionally, a complementary aspect of origination is ACS, where some of the excess not utilized within our controlled balance sheets is processed through the ACS system. We have also been enhancing our capabilities in that area. If you examine our ACS profit and loss statement, it reflects many transactions. As Marc mentioned, there are typically one or two significant transactions each quarter, but the bulk of the activity consists of smaller trades that accumulate to contribute to our quarterly earnings. This is what you are observing. We continue to invest in both the origination and ACS aspects of our business and will keep investing in these areas, as they are essential to the overall operations of the Apollo platform.

Thank you. Our final question will come from the line of Ben Budish with Barclays. Please proceed with your question.

Good morning. Thank you for allowing me to ask a question. I wanted to inquire about the capital markets fees. You mentioned a strong second half of the year. Is it too early to ask for any insights on what 2025 may look like? I'm curious if the pipeline extends that far. Specifically, I’m trying to understand whether the strong performance in the second half of this year will be driven by pent-up demand or if it will return to a more typical level, and what implications that might have for fiscal 2025. Thank you.

Ben, it's Martin. The visible pipeline of business is about two quarters ahead, which is expected. The business continues to grow as we enhance our capabilities, expand into new geographies, increase product awareness, and align supply with demand. From our spotlight event nearly a year ago, there are various avenues for everything we originate. Portions go to Athene for its investment-grade portfolio, some to third-party limited partners through funds or managed accounts where we earn management fees, and others to capital solutions for which we receive transaction fees. This balance allows us to grow demand as we expand supply. We anticipate the business to keep ramping up from here. It’s an ecosystem where we have an advantage, and we are very optimistic about future growth.

Thank you. That concludes the Q&A portion of today's call. I will now return the floor to Noah Gunn for any additional or closing comments.

Great. Thanks again for joining our call this morning. As usual, if you have any questions about anything we discussed on the call, feel free to follow up with us. And we look forward to hosting you and are excited for you to join us for our Investor Day on October 1st. Thank you.

Thank you. That does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.