Good morning, and welcome to Apollo Global Management's Second Quarter 2025 Earnings Conference Call. This conference call is being recorded. This call may contain forward-looking statements and projections, which do not guarantee future events or performance. 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 figures 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 solicitation of an offer to purchase an interest in any Apollo Fund. I would now like to turn the call over to Noah Gunn, Global Head of Investor Relations.

Great. Thanks, operator, and welcome again to our call this morning. As usual, I am joined by Marc Rowan, CEO; Jim Zelter, President; and Martin Kelly, CFO. Earlier this morning, we published our earnings release and financial supplement on the Investor Relations portion of our website. For those who tuned in early and enjoyed our pregame hold music, we played a Blues track called Take Out Some Insurance by Jimmy Reed. However, no insurance was necessary to protect against our performance this quarter as the results are simply outstanding. Strong execution like this is only made possible because of the tremendous efforts of our global team. We're all excited to discuss in further detail. So I'll now pass it over to Marc.

Thanks, Noah. Good morning, everyone. I appreciate your interest in joining us today. As Noah mentioned, the second quarter was notably strong. To highlight some key figures, we achieved record FRE of $627 million, a 22% increase year-over-year, and saw management fee growth of 21% year-over-year, along with record ACS fees totaling $216 million and SRE of $821 million. Most of the metrics we focus on are performing well, and both Martin and I will elaborate on that. What drives these results? It's all about our team. When I analyze the business, the effectiveness of our origination efforts was clearly evident this quarter, with $81 billion originated from our platforms, excluding inorganic factors. Including inorganic, the figure would be in the 90s. The spread over treasuries was 350 basis points. Jim will discuss the quality of our originations in more detail. The goal is not just to buy or originate assets, but to secure those that yield excess returns relative to their risk. We experienced strong inflows of $61 billion across the firm, reaching a record AUM of $840 billion. Our capital-raising and deployment processes were robust this quarter. The business remains strong and is gaining momentum, and Martin will provide further expectations for the remainder of the year. Focusing on asset management, performance is vital. All segments of our credit business, which is our largest area, performed well, with returns between 9% and 12% over the last year, and 2% to 3% quarter-over-quarter. Notably, our ADS has shown over 9% annual returns since inception, delivering 2.3% in the latest quarter and now surpassing $20 billion in size. This demonstrates that we can scale while maintaining the principles we hold in our investment approach. In the private equity sector, Fund X has continued strong results, with a net IRR of 23% at the end of the quarter and a DPI of 0.2, compared to an average of 0 for the industry. Fund IX reported a net IRR of 16% and a DPI of 0.6, against 0.3 for the industry. Over three decades, we’ve seen 39% gross and 24% net returns. Success in our private equity business is not overly complex, but it requires disciplined execution. Each business segment is thriving, with our hybrid segment showing 17% returns over the last year, totaling $75 billion by the end of the quarter and $7 billion raised year-to-date. We anticipate this to be our fastest-growing segment. Our flagship vehicle in this area, the Apollo Aligned Alternatives, has achieved an 11.1% return over the last year, with 2.6% in the last quarter and significantly less volatility compared to public equity markets. This is what our team aims to deliver—steady long-term performance with reduced volatility. Fundraising remains strong, particularly within the institutional channel, which has outpaced the retail channel this quarter, indicative of institutions exploring equity replacement sooner than expected. The reward for our strong performance this quarter saw over $40 billion in inflows for our asset management business, with both institutional and wealth channels contributing significantly. Turning to retirement services, we are witnessing substantial demand for retirement products, with the annuity market expanding significantly compared to a few years ago. High rates contribute to this trend, but we believe demographic shifts will permanently increase the demand for such products. Our objective is not only to provide existing products but to innovate and address future needs. We reported $21 billion in inflows during the second quarter, marking our second strongest organic quarter. Our size and scale allow us to originate in diverse markets, with fixed annuities being a key contributor this quarter, while other products may lead in different periods. Our approach is to meet market demands while ensuring solid returns for our equity investors. In the current environment, we’ve seen spreads tighten significantly after briefly widening, making origination from trusted sources crucial. This quarter, we maintained the necessary spreads and returns through strategic origination, focusing on top-rated assets that are not widely accessible. The third quarter's pipeline appears promising, with ongoing projects aimed at exceeding projected inflows for Athene. It's also essential to highlight our exceptional cost structure; this quarter, Athene's cost of doing business was just 16 basis points, significantly lower than many competitors. This efficiency positions us favorably in the market, enabling us to manage risks and profitability effectively. Looking at the European market, we see similar demand patterns for retirement products due to demographic shifts. Our strategic involvement with Athora, particularly their planned acquisition of PIC in the UK, opens new opportunities for growth in the UK market, which mirrors many US trends but lacks equivalent capital. We are optimistic about this venture and what it means for our capacity to generate assets. As for the industry, with peers reporting their results, we see positive trends across the board. Over the years, our focus has expanded from serving primarily institutional demands to now including individual investors, insurance companies looking for long-term capital strategies, and a broader interest in private assets from various institutional categories. We are also preparing to serve the 401(k) and defined contribution markets more effectively. I expect forthcoming regulatory changes to facilitate this, which aligns with the need for improved retirement savings outcomes for many individuals. To summarize, while our business started by serving a niche within institutional clients, we now have multiple demand sources. Moving forward, our growth will hinge less on the demand for high-quality private assets and more on our origination capacity. Each market will require innovative solutions, whether that's partnerships in existing products or exploring new opportunities in markets like stablecoins or trading private assets. Innovation is key, and we see potential for significant growth by embracing this approach. As Noah indicated at the beginning, this has been an exceptionally strong quarter, and the team is dedicated to continuing this momentum. We've seen increased engagement in the office, signaling a busy and productive environment. I’ll now hand it over to Jim Zelter.

Thanks, Marc. Much has been written covering the second quarter in terms of macro events that led to periods of uncertainty followed by a resurgence of confidence and risk on mentality. For Apollo, the attributes of our model were on full display. As stated previously, our North Star is to be an all-weather equal opportunity investor, private and public, primary and secondary, combined with speed and scale across the entirety of the investment-grade and non-investment-grade ecosystem as well as the equity ecosystem. In the aftermath of Liberation Day, we deployed $25 billion in a condensed time frame and we're well regarded as the market leader in that period. As the quarter progressed, confidence returned, markets reopened and risk assets recovered. In this environment, we continue to lead with scale, conviction and certainty of execution. In particular, I would highlight the performance of our high-grade capital solutions business, where we originated more than $8 billion across 4 transactions, including transactions for AES, BP, Mumbai Airport and EDF, which I will touch on shortly. In aggregate, as Marc mentioned, we originated $81 billion of assets during the quarter, representing nearly a 50% growth year-over-year. This result was driven by activity across our diversified origination channels, platforms, core credit, high-grade capital solutions, equity and hybrid. Within platforms, volumes were led by ATLAS and MidCap, which posted combined volume growth of approximately 30% quarter-over-quarter, while maintaining solid historical spread. Within core credit, volumes were led by CRE debt, large-cap direct lending and fund finance, which in a combined basis doubled quarter-over-quarter. It is very important to draw the distinction that all origination is not equal, and we believe there is a fundamental difference and significant value capture between directly originated versus purchasing others originated assets. Of our total origination in the quarter, $75 billion was debt comprised of $60 billion of investment-grade credit with an average rating of A- and $15 billion of sub-investment-grade credit with an average rating of B. On our investment-grade origination, we generated excess spread of approximately 290 basis points over treasuries or approximately 190 basis points over comparable rated corporate debt. On our sub-investment-grade origination, we generated excess spread of over 470 basis points over treasuries or approximately 200 basis points over comparably rated high-yield corporates. Overall, we observed stable spreads quarter-over-quarter and saw modest widening in July. Achieving record origination volume while generating excess spread is particularly impressive, as Marc said, when considering we are in a market where many areas within credit, such as CLOs or BB crossovers have gravitated to decade-plus or even generational type spreads. Our origination activity continues to be broad-based with several diverse flows across channels. We had some excellent wins in the quarter. And as I highlighted, in particular, was our GBP 4.5 billion financing for Électricité de France, EDF, which marked the largest sterling-denominated private credit transaction to date. Proceeds from the financing will be used to finance EDF's electronuclear projects in the U.K., most notably the Hinkley Point C nuclear power station. This bespoke large-scale HGCS financing supports EDF's vital role in advancing the European energy and power infrastructure. We see a broad pipeline of these transactions, and it reinforces our reputation as a trusted adviser, making us a partner of choice for companies in need of secular CapEx investments. More broadly, Europe is an area we are investing significant time and resources to expand our dominant presence. Over the coming years, we see substantial origination opportunity as the region commits infrastructure investments, defense, reindustrialization and power generation. In Germany, which I visited 3 times during the quarter, we have made a significant commitment to support the country's growth initiatives and have committed to deploy over $100 billion over the next decade. We see a large direct lending opportunity as well, given over 90% of the firms with revenue greater than $100 million are still private. We also see a major opportunity in the asset-based finance strategy, particularly if meaningful securitization reform takes place, which we saw in the beginning of the quarter. For context, the U.S. is a $30 trillion economy with a $15 trillion securitization market compared to Europe's $24 trillion economy with just a $500 billion total securitization market. Within our sustainability and infrastructure business, it's worth noting that we have now deployed nearly $60 billion into energy transition and decarbonization opportunities since 2022, surpassing our previously 5-year goal of $50 billion, nearly 2 years ahead of schedule. Given the unprecedented CapEx needs, it is clear there is an outsized demand for long-term flexible capital where our Apollo franchise is at the forefront. I would specifically highlight the opportunity we see in financing AI infra projects. To facilitate the pace of growth, research estimates suggest nearly $3 trillion of investment will be required by the end of the decade with $1.5 trillion of external funding needed to support that activity. Within this $1.5 trillion financing gap, there's nearly an $800 billion opportunity for private credit led by asset-based finance. And we believe we are particularly well suited to serve this market given our expansive long-dated capital base in terms of creativity and flexibility. An emerging aspect of our origination effort continues to be our bank partnerships. We've worked collaboratively with many of the banks to drive capital formation and unlock differentiated sourcing. Currently, our global network of 12 bank partnerships spans to both U.S. and international. And based on active conversations, we anticipate adding a handful of new partnerships by year-end 2025. These partnerships are active in ABFs, private corporate credit, infrastructure, trade finance, SRTs and junior capital solutions, all enhanced by the strategic alignment and trust and communication we have built. In summary, our origination machine continues to produce quality spread at scale. As we continue to discuss larger trends in the broader private credit ecosystem, I will highlight 2 points on our platform. First, as we have brought together our toolbox to global sponsors in the private equity ecosystem, our direct lending share in the sponsor marketplace has dramatically increased. Combined volumes for the large cap, our large-cap team and our mid-cap team totaled $25 billion in the first half of the year, up dramatically year-over-year. Secondly, as the conversation surrounding private credit continues to expand, it's clear that the new favorite flavor in the marketplace is investment-grade solutions. By our account, we have an unmatched market presence with over 29 financings totaling $44 billion since 2020. Turning to capital formation. Our engine was firing on all cylinders as we generated $61 billion of inflows in the quarter, including record organic inflows of $49 billion. Inflows were driven by $40 billion from asset management, which included $12 billion of inorganic flows from the Redding Ridge Irradiant acquisition and $21 billion from Athene. Our capital formation capabilities were differentiated with 3 distinct pillars driving our results, our institutional business, our global wealth franchise and our retirement services platform. Within the $40 billion of inflows from asset management, approximately 80% went to credit-oriented strategies and 20% to equity-oriented strategies with contributions coming from a broad array of investors. One area of standout performance was our third-party insurance business that generated $7 billion of inflows, which included 6 new and 2 upsized mandates. Third-party insurance is on track for a record year with over $9 billion raised year-to-date across diverse products, types, strategies, geographies and liability profiles. Insurers are increasingly recognizing our differentiated origination capabilities and unique level of alignment with our clients. We own what they own, which is driving a strong pipeline of interest. In Global Wealth, momentum continues to generate as we generated more than $4 billion of inflows in the quarter, the second best on record despite the turbulent backdrop. Year-to-date inflows of $9 billion were up 40% versus the year-ago period with contributions from 18 separate strategies encompassing our semi-liquid suite as well as a drawdown in QP offerings. In particular, we've observed continued strength from ADS, which is set to take in another $600 million in July as well as building momentum in ABC and AIC. Our wealth franchise now has 7 strategies exceeding $1 billion in AUM with 2 above $20 billion, AAA and ADS, a signal of the increasing scale and receptivity we're seeing across strategies. Our expanding distribution footprint is supporting continued growth, and we currently have more than 5,000 advisers across nearly 700 firms allocating to our products. With an excellent first half of the year, we believe that we are well on our way to achieve our full year goal in 2025. Athene had another excellent quarter with $21 billion of organic inflows, the second highest result on record. By channel, inflows were driven by $7 billion from retail, $12 billion from funding agreements and $2 billion from flow insurance. Retail flows saw particularly strength in fixed index annuities, where FA issuance was strong at $12 billion and marked a second quarter of record volumes as we continue to lean in and take advantage of favorable issuance spreads. Taken together with the strength of the first quarter, Athene is on pace for a record year in FA issuance. As we've been saying for some time, the expanding needs of the global retiree population present a significant growth opportunity for Athene, and the franchise is exceptionally well positioned to capitalize on this broad secular trend. With that, I'll turn it over to Martin for the financial results.

Thank you, Jim, and good morning, everyone. Our second quarter results, as you've heard, underscore the increasing momentum across our platform and demonstrate consistent execution of our long-term strategy. I'll briefly walk through the quarter's financial results and highlight the drivers that position us well for the remainder of the year. FRE. In Asset Management, AUM increased by 22% year-over-year to a record $840 billion, while fee-generating AUM grew 22% to $638 billion. Nearly 60% of our total AUM and 75% of our total fee-generating AUM is comprised of perpetual capital, which is highly scalable and largely insulated from cyclical drawdown fundraising. Perpetual capital is benefiting from strong flows in our Global Wealth business as well as Athene. We generated $627 million in fee-related earnings in Q2, a new quarterly high. FRE grew by 22% year-over-year, driven by the following 4 items: one, 22% overall management fee growth with 25% growth in credit, reflecting a strong origination volumes and spreads that Jim described across our asset-backed and other high-grade businesses. Notably, the acquisition of Irradiant by Redding Ridge further builds out the capabilities of Redding Ridge. While this contributed to AUM, it did not contribute to growth in fee- paying AUM or management fee growth in any meaningful way. With respect to equity, S3 has contributed catch-up fees for the last 3 quarters including approximately $15 million in Q2, as we closed out a very successful $5.5 billion fundraise. Two, we generated record capital solutions fees, as you've heard, of $216 million, which exceeded our prior peak in Q2 of '24. The quarter's fee activity comprised approximately 100 discrete transactions supported by the breadth of our origination and portfolio activity. Three, fee revenue growth also included 21% year-over-year growth in fee-related performance fees, reflecting the ongoing scaling of our semiliquid product suite led by ADS. And four, fee-related expenses grew by 13% year-over-year as we balance continued investment in our growth priorities with increasing efficiency throughout the business. The increase in compensation expense in the quarter reflects an accelerated pace of hiring activity in the first half that we expect to moderate in the back half. With 17% fee-related revenue growth and 13% cost growth, we generated approximately 200 basis points of FRE margin expansion year-over-year for the quarter and for the first half. We remain confident in our ability to drive higher margins over time as we execute our business plan and achieve greater scale. For the balance of 2025, with the momentum that is evident across all the metrics that are relevant, we are tracking to the higher end of our 15% to 20% FRE guide in a non-flagship PE fundraising year. SRE. Moving to retirement services. Q2 delivered another strong organic growth quarter with $21 billion of inflows, our second highest on record. Athene's net invested assets grew by 18% year-over-year to $275 billion. We generated $821 million of SRE for the quarter with an additional $36 million, adjusting to our long-term 11% return expectation on the Alternatives portfolio, all in line with our prior comments. The Alternatives return for the quarter came in slightly higher than our pre-release estimate due to positive late quarter pricing and FX adjustments. The blended net spread in Q2 was 122 basis points versus 126 basis points in the prior quarter, reflecting the continuing runoff of profitable business written post-COVID. We generated new business spreads of approximately 130 basis points in the first half, right in line with historical long-term spreads of the business and fully consistent with our overall SRE growth outlook for the year. We remain highly confident that we'll achieve the mid-single-digit growth in 2025 on the basis we previously communicated. Bridge. We're continuing to work towards the close of our pending acquisition of Bridge Investment Group, and we expect to close the transaction in early September. In terms of financial impact, given partial year timing, we anticipate relatively modest FRE contribution for the remainder of 2025. For 2026, we anticipate Bridge will contribute approximately $100 million to our FRE, in line with previously published forecasts in the Bridge shareholder proxy filing. We expect meaningful scaling of Bridge's FRE and total financial accretion in 2027 and beyond, and we'll hold an update call in the fall to provide additional information. With that, I'll turn the call back to the operator, and we welcome your questions.

Our first question today is coming from Alex Blostein of Goldman Sachs.

So really impressive results across the business. I was hoping to maybe double-click into credit spread dynamics and importantly, how that could impact the insurance business perhaps beyond 2025, just taking into account your ability to sort of flex and move between products, but also rising competition in some of the more traditional channels like retail. And then again, to your point, fairly tight credit spreads across the ecosystem?

Thanks, Alex. It's Marc. I'll start and then I'll let Martin finish up. I think the way to think about the quarter, in credit spreads, in products that we have historically bought CLO, that are now more readily accepted and readily available, have tightened to levels that we think are unsustainable and uneconomic for the risk. We have been able to pivot the origination to maintain spread. Coming back to what Martin said, we are originating new business in the context of this tight spread environment at 130 basis points at numbers consistent with historical rates of return in amounts that we have never done before that we feel very comfortable doing. Why isn't the business growing faster? The business is not growing faster because the profitability of what we had done in the COVID era was just extraordinary. And so what you're watching is the business itself is incredibly healthy, and we're just amortizing, if you will, the flow-through of the business that took place in the COVID era. And as soon as that business runs off, we would expect a meaningful tick up in SRE. There is no doubt and then as I look forward in liabilities that we will see compression in, first, asset spreads that things people can buy. So when we started in this business, insurance companies were not large investors in CLOs. Insurance companies are now large investors in CLOs. The business, while private and originated, is commoditized. It's pretty easy access to the CLO market. It is our job to pivot to products that are not easy access, and that's what we're doing, and that's what you saw in the quarter, and Jim cited it in some of the platforms and some of the high-grade alpha deals. The same thing is likely to happen on the liability side of the business. On the liability side of the business, things that people can do just by showing up, moving annuities or other sorts of MYGAs through the broker channel, which does not require all that much sophistication or a high credit rating, are going to become commoditized. It is our job to take a significant portion of our origination into new markets. You know from my previous comments that in our industry, we have not seen a tremendous amount of innovation take place. What we have done as the most innovative is we have simply optimized everything that existed when we started the company. The next phase of growth for this business is to create you will begin to see, in the beginning of '26, creation, new products, new ways of delivering the business, new uses for spread. And so I look at the business as incredibly healthy. It's been a little more difficult to forecast the flow-through and the burn-off, because business burned off faster given the spread compression than we wanted, which is, on the one hand, negative for the current quarters, but better for future quarters, because more of it burned off. Having said that, I see no reason to, in any way, deviate from our long-term projection of where we think the business is going. And I'll turn it over to Martin.

Yes. The only thing I'd add is, obviously, it's a very dynamic and fluid environment. Q1 market spreads were historically tight, and we spoke about that on the call. I spoke about our investing spreads for the year, for the half at 130 basis points. It was wider than that in Q2. It was inside that in Q1. And then in the month of July, we've seen it wider than that. So the setup for us as far as we can tell right now looks promising. And so we're managing that in view of the existing portfolio that Marc mentioned. So we're clearly focused on 10% through cycle growth. That remains our objective here, and we're managing that through an environment, which is dynamic. So we'll provide a more specific update on 2026 as we get closer to the end of this year. But I think we are running the business very well. We're originating liabilities in the right channels well, and we are able to access origination that's very favorable to us, and that's coming through in the new asset spreads that we're speaking to.

The next question is coming from Patrick Davitt of Autonomous Research.

My question is actually on Athora-PIC. I understand there's still a lot of regulatory hoops to jump through, so it might be tough to give specifics. But is there any color you can give on potential FRE impacts or even the Athora valuation impact on Athene's balance sheet when that closes next year?

I think your preface kind of sums it up. It is early, and there are still a number of regulatory hurdles. What I will say is we expect this transaction, should it close, to be accretive to Athora's valuation, and over time, to be accretive to FRE. The scale of PIC relative to the U.K. market is the scale of Athene relative to the U.S. market. And I'm going to speak about it in strategy terms rather than numbers, which I know you will find unsatisfying, but it's where we are. We have a massive need for assets in the U.S. as a result of Athene. That has incented us to create massive amounts of origination. And since we are a diversified investor, that origination that we create, a portion of it goes to Athene, but a portion of it builds our third-party business, which is aligned with us. We have not heretofore had an incentive to massively create pound-denominated assets. PIC is as an anchor through Athora, and depending on what the management team at PIC wants, PIC is the opportunity to create a massive pound-based origination ecosystem, which will both benefit Athora PIC and will benefit all of our clients and open up a significant amount of client base in the U.K. market. And similarly, as you know, we have a euro-based funding, which is not as large as we had hoped it to be, but still quite large in the scheme of the continent. And it is our job consistent with some of Jim's remarks about the attractiveness of Europe. And I think what you'll see from us over the coming quarters is to significantly build our requirements for euro-denominated liabilities. This is a virtuous circle. We create a funding box. The funding box needs assets. We build origination around that funding box. The origination serves the funding box itself. It also creates capital markets fees and then it creates FRE, because we also have excess product, which we then are aligned with our investors on. I think momentum is building in the business. I'm personally very excited about the PIC transaction. And the most interesting thing for me, it's coming at a moment of regulatory introspection and political introspection in the U.K., which has made, from my point of view, the U.K. one of the most dynamic and exciting markets potentially for capital formation in private markets. The U.K. government has been incredibly welcoming and has recognized the need for private capital to exist alongside public capital to finance all of the things that the U.K. government wants to do in the context of its other budgetary end requirements. So we feel quite welcome there, and we intend to make a significant contribution and build to our resources in the U.K.

The next question is coming from Glenn Schorr of Evercore.

Simple question. I'm curious, you mentioned ADS is like $20 billion now and scaling well. So my question is, can ABC scale in right trail behind and tailwind of ADS? Meaning, can you talk about the platform approval pipeline, the scalability, uniqueness of the product? Like where do you think this can go maybe using ADS as an example?

Thank you, Glenn. You bring up a good point. We observed that while ADS did not reach its target with the Apollo brand, it has positioned us as one of the top players in the market. We believe we have a first-mover advantage in the Asset-Based Financing (ABF) sector with ABC. This area relies heavily on origination. The acquisition of ATLAS, with its extensive network of relationships, has been beneficial. We are seeing strong early approvals, and there is robust institutional and Global Wealth client interest. We anticipate a clear trajectory for this product to build on the success of ADS. Investors are aware of potential credit cycle concerns, but the underlying risk in ABC involves higher quality investment-grade counterparties. As the cycle progresses, there is significant demand for better yield opportunities, which ABC certainly offers. Our initial signs suggest that we are on track to become the market leader, and it is now about executing our strategy and realizing our vision.

The next question is coming from Bill Katz of TD Cowen.

It certainly feels like there was a step function of earnings power and just throughput of the platform. And when I look at some of these numbers on the origination or deployment, they are significant. And I'm sort of curious, what has changed in the last couple of quarters here? Is it just the breadth of clients that you're working for? Is it the capacity at the origination platform? Because it seems like not only to be sustainable, but they're sort of accelerating. I'm just trying to understand what the incremental driver has been.

Sure. I think what you're seeing, and it's a correct insight, it's just the power of the ecosystem. What Marc talked about in the CLO business, which was a black hour 20 years ago and now has become commoditized to some degree. And we're still a very large player in it, but it fits a different role. We're seeing that right now, even though we've increased our leverage, our capabilities in direct lending. Any one product can become commoditized, but if you deliver the entirety of the toolbox to either corporates, to finance companies, to financial sponsors, we're finding the power of that integrated toolbox is compelling. 24 months ago, we brought all of our origination globally under the leadership of Chris Edson. Certainly, there's many, many folks that contribute to that. But when we see delivering the consolidated toolbox and where you may get a product from a U.S. or a European financial sponsor, it may be a direct lending product, but it also may be an inventory finance, it may be fund finance, it may be a CLO issuance. So the crossover impact is dramatic. And from our perspective, that is the ability for us to really accelerate the platform and that flywheel that Marc talked about. Also, we're finding is more and more financial sponsors are focused on the cost of capital. And if the PE overhang is dramatic and it doesn't appear to be waning anytime soon, your ability to provide a variety of financing tools for them in a variety of areas, several of which are investment-grade rated, that's the second compelling area. And the third is, and I'll use ATLAS as a double-click for a moment. When the platforms engaged to purchase ATLAS, half the business at that point in time was an agency business, agency mortgages on the resi and commercial side. Those businesses we either sold or shut down, because they did not provide any excess spread for unit risk. And now if you look at the actual origination platform at ATLAS, from 200 facilities, over 300 under the leadership of Carey Lathrop, they're really hitting their stride. So when you connect these businesses together as a combined toolbox and it's more investment-grade solutions, those are what's the accelerating factor.

The next question is coming from Wilma Burdis of Raymond James.

Could you talk a little bit more about the other inflows in retirement services and what the outlook is there? I think the footnote mentions defined contribution plans, and we'd just like to get a little bit more color there.

Yes. It's some of the emerging areas that Marc has been speaking about. So specific to that line item, it's stable value products. And that's an area that we are spending a lot of time around developing capabilities and distribution points. And we think that, that's one of several new markets that will be the seeds of growth for Athene's business in the years ahead.

I think, Wilma, first up, thank you, and apologies for the last quarter, for what happened. We ended up not being able to take one of your questions last quarter. But just to expand on that a little bit for you. The industry has not really created that many new products. We have lots of variations on the theme. And when you think about what's happened, and I've said this publicly before, the first insurance policy ever issued was 1 page, Scottish Widows. When you die, you get this. Now to buy a retirement product and annuity is 100 pages. Very few people can understand what they're buying. When people are uncomfortable with what they're buying, you tend not to buy as much of it. Having said that, the compelling need is still causing the market to be very sizable. Part of the change we see happening in this industry is getting back to something that is really simple. Really simple will initially take place in the existing products. Can we get to an immediate issuance of an annuity? Can we make the process less burdensome? Can we use new technology to streamline what it is we're doing. We don't have to do things the way we've done them historically. Can we make it more accessible and more understandable. This is the first step in the journey. The second step in the journey is a kind of more ambitious goal. The world of retirement went over a long period of time from defined benefit, which employees loved and employers hated. We then threw people to the walls and defined contribution. Very few people have advice, very few people make choices. We've had good market performance, so we've had okay outcomes, but it is not as a result of positive selections made by the retirees. Most people actually make no decision with respect to their retirement options. They are simply defaulted into a variety of things. Part of the vision that we have for the world going forward is a return to defined benefit in the form of guaranteed income, not provided by the employers themselves, but providing people options within their 401(k), within their existing retirement structure to go for guaranteed lifetime income. Guaranteed lifetime income, as you know, since you follow this industry, one could say that's Aspida. But Aspida is not in a form that any real retiree can understand. But I do think that this is the big challenge ahead for our industry. I think it's the big opportunity ahead for our industry, which is not simply to think about our business of retirement in the context of the products that exist, but to think about it in the terms of simple guaranteed lifetime income. That is the holy grail for us. Along the way, we will have things like stable value. We will have other applications for spread-based product. Grant and Jim and LJ and the team are pushing really hard to have new products make up a significant portion of the originations on an ongoing basis. I want more choices, and we should want more choices than the 4 choices we have, because some of the markets will get commoditized. Our job is to simply keep moving and keep adapting much the way you've seen us do that on the origination side of our business, where we've seen commoditization of CLO spreads. Hopefully helpful.

The next question is coming from Ken Worthington of JPMorgan Chase.

Can you talk about GeoWealth and what you aspire to do with this partnership?

Yes. As Marc mentioned, our main objective is to continue innovating on a journey with an uncertain destination, but we are clear about our goals. The technology utilized by these TAMP managers equips us to provide products that feature transparency and accurate information. In the past, documentation and technology posed challenges, but we view this as essential for our success, enabling us to enhance client relationships through increased transparency and educational resources. While we have a vision for our journey's direction, we are not fixated on a specific endpoint. We are committed to open architecture, the use of technology, and education, all of which will support us throughout this journey.

The next question is coming from Ben Budish of Barclays.

I wanted to follow up on the answer to Alex's question at the beginning of the Q&A session. Can you help us understand what to expect as the business related to COVID phases out? What is the expected timing for this? What was the average duration of the liabilities being written? Once we move past this phase, should we anticipate the aggregate spreads returning to around 130? How should we expect this to impact the profit and loss quarterly?

Yes. I think the best evidence of that is part of the question you asked, which is when do the net spreads stabilize. And so we will expect to see that business continue to run off through next year. And so you should expect to see the reported net spreads decline slightly through that period of time. It will decline for the balance of the year and then stabilize. And then we are past the period of very low-cost liabilities and very rich assets against those liabilities running off through the system. So that's what we see. That's what we model. That's what we're seeing in the actual numbers. It's clearly quite predictable. And so at the same time, we're managing top line growth of the business in view of the macro environment to achieve the growth ambitions.

The next question is coming from Michael Cyprys of Morgan Stanley.

I just wanted to ask about 401(k). I think you mentioned that you're on the cusp of serving the 401(k) marketplace. Just curious if you could elaborate a bit on how you see that opening up? What sort of changes, regulatory or otherwise, you're anticipating the time frame there? And then if you could talk about some of the steps that you're taking to ensure that you're going to be a winner as that marketplace opens up. I know you already have some partnerships on the intermediary wealth side. Just curious if you might need additional partnerships, how you're approaching that, and what strategy you think might make the most sense in the 401(k) channel?

I'll do my best in this context. Jim and I were just smiling at each other. First, the order isn't out yet, and it's always risky to speculate on something that doesn't exist yet. I believe the question will require a lot of answers. My perspective is that the need is evident. In regions where private assets have been integrated into public portfolios, outcomes have improved significantly. The Australian system is a prime example, along with systems in Israel, Mexico, and Chile, among others. As I mentioned, it's not just a slight improvement; we're talking about outcomes that are 50% to 100% better. This isn't something we need to market vigorously. Plan sponsors and ecosystem members recognize this need and generally want a more diverse array of assets that provide higher returns for retirees. The challenges so far have included factors like embedded businesses, record-keeping, technology, and reporting, but the main issue has been litigation. This sector has been highly litigious, forcing plan sponsors to opt for the lowest-cost solution rather than the one yielding the best net returns for beneficiaries. Currently, there’s no restriction on private assets, but what we need is greater clarity and clear regulations. Despite this lack of clarity, significant experimentation is ongoing. I can't pinpoint the exact amount, but we anticipate several billion dollars in origination this year within the 401(k) space, including managed platforms and Target Date Funds. The environment around Target Date Funds indicates a maturation of the private marketplace, comparable to the evolution observed in public markets. In the past, we thought of investing in public markets as merely buying stocks and bonds. However, people now invest in indices and solutions that provide desirable outcomes. The private market still resembles the straightforward purchasing of stocks and bonds, with people selecting specific funds rather than crafting tailored portfolios with both public and private market exposure. Some may seek more aggressive growth, while others prioritize stability, especially as they approach retirement. I believe the adoption of private assets will happen largely through indirect channels, such as Target Date Funds or established asset managers who already dominate this marketplace, recognizing that long-term retiree portfolios are ideal for quality private investments. Ultimately, I believe our industry is witnessing emerging demand that exceeds our current capacity to produce excess returns for the risk involved in private assets. In a transparent environment with substantial demand, origination becomes valuable. When you identify a quality asset that offers superior returns relative to risk, that will be compensated, whether through fees or via ownership stakes, as you sell to funds, co-investors, or individuals in managed accounts and 401(k)s. Our guiding principle is that we need to address all these markets with adaptable structures suited to each one. We require increased transparency, daily pricing, and enhanced liquidity, though it won’t be fully liquid. Ultimately, we must focus on origination. I’m enthusiastic about our initiatives, and as Jim noted, this journey is just beginning; we're not at the end of a mature cycle—there's a lot still ahead of us.

The next question is coming from Brian Bedell of Deutsche Bank.

I appreciate all the color today. This is a fantastic information. Two-parter question, if I can do that. First on Capital Solutions. Another solid quarter here. Maybe just some perspective on sort of the road map of new initiatives within this since Investor Day and maybe focusing on the trading of private credit. I think, Marc, you mentioned earlier, the potential for Capital Solutions to pace at a level above the $1 billion target in '29 or to meet that target sooner, I guess. And then just quickly on SRE, just the rate cut assumptions that you have in your guidance for this year and then sensitivity to more rate cuts if that happens?

Yes, this is Jim. I'll address the first question. There is indeed a connection within the ACS ecosystem and the trading ecosystem. If you look back five years, ACS has significantly broadened our traditional narrow unit of LPs. Our touch points have greatly increased on a day-to-day and month-to-month basis. As Martin noted, with 100 transactions in the quarter, our capacity to distribute both investment-grade and non-investment-grade equity and hybrid products has enhanced our intelligence in this area. This ecosystem acts as a flywheel for origination. I believe we will witness progress in this area; prior to discussing trading, it's worth mentioning that there's a maturation of the ACS product range across our universe, and we were very active during the quarter. Additionally, our discussions with more investors, including traditional insurance companies, have led to greater transparency, more information, and increased confidence in their purchases, which will ultimately grow the market. Today marks our 40th collective year in the business, and 80 years between Marc and myself. Whenever we can promote transparency, investor information, education, and confidence, it leads to market expansion. While others may have differing opinions, we believe that historical evolution will favor our approach. I can’t predict exactly how this will unfold, but the conversations around stablecoins, along with the meaningful tokenization occurring in our funds—albeit in a narrow scope—indicate to us that trading, liquidity, and the provision of liquidity to clients will broaden this ecosystem. This could manifest in various ways, such as bid-ask spreads, volumes during market dislocations, or improved indexing and product creation. This all contributes to that flywheel and adds another chapter to it. It’s still early days for us, and while we’re experiencing considerable success, the larger impact is anticipated in the next 12 to 24 months.

I think on the SRE, we'll follow up offline, because we have 2 more questions, and the call has been among our longest calls. So next up.

The next question is coming from John Barnidge of Piper Sandler.

My question is around realizations. They've remained muted and below historic levels. With markets activity beginning to pick up broadly, are you expecting an inflection point later this year? Or do you think it will be more next?

In our portfolio, as Marc mentioned, Fund IX has a 0.7 DPI compared to the industry's 0.2, and although we're still in the early stages with Fund X at 0.2 versus none for the industry, we are ahead of the curve, even if it falls short of our expectations. I believe we will see increased monetizations as the marketplace's risk appetite grows. While we maintain these levels, addressing the private equity overhang in monetizations will require more than just developments in the IPO market. I anticipate the creation of additional tools and products as part of a broader market structure issue and opportunity, not merely an IPO-focused narrative.

Let me just tell on that. Our peer group have gone before in prior calls and have been relatively optimistic on the realization cycle. I hope they're right. I don't think the realization cycle is unique to any one firm. I think in this case, it applies across the board. I think what we have going for us is a differentiated strategy, which does not always mean the right strategy. It just means a different strategy. We are a purchase price matters firm. You can like that, you could not like it, but our investors ultimately allocate to us because we provide a differentiated sort of risk across their portfolio. When you buy something at a reasonable price, you have more options on exit than when you have to get top tick because you paid a high multiple and you need to grow into it. We have been successful in cash flowing our investments. We have been successful in taking them public, even if below the valuations we want, because we simply had a purchase price matters mentality. It's why the net gross in Fund IX and Fund X and the DPI is ahead of it. But I heard the optimism. I hope they're right. If it happens, we're going to be the beneficiary of that. If it doesn't happen, we're going to continue to do what we do.

Our next question is coming from Kyle Voigt of KBW.

So in your prepared remarks, you noted you expected continued strong growth for AAA, but also highlighted institutional fundraising there and that institutions are now reevaluating the idea of equity replacement and doing so sooner than you previously thought. I was wondering if you could just expand upon some of those conversations you're having with LPs on that front. How has that changed more recently and whether you think you're potentially at an inflection point there?

We closed the quarter with revenue exceeding $23 billion and expect to finish the year with over $25 billion. We developed this product in collaboration with our Global Wealth teams, envisioning it as a retail offering. It provides high-net-worth investors access to a diversified portfolio at low fees while allowing them to participate in private markets. The product has delivered returns around 12%, with lower volatility compared to the S&P. We have successfully entered the retail market, but what surprised us was the strong institutional interest. Institutions seeking fully diversified portfolios – by vintage, type, structure, and industry – can partner with us on this. Institutions are adapting their strategies; some have noted our returns are just below private equity, to which we explain that our product is not leveraged. In response to demand, we've created a levered share class to help institutions achieve private equity-level returns with lower risk. This has attracted substantial investments. We've also seen strong interest from insurance companies due to stable returns and aligned investments. I firmly believe that leveraging a more diversified risk profile is a sound strategy, even if it differs from more aggressive private equity approaches. While this may not appeal to everyone, we are optimistic about the institutional growth of our product, which we did not initially anticipate but are pleased to see developing.

Thank you. At this time, I would like to turn the floor back over to Mr. Gunn for closing comments.

Great. Thanks, operator, and thank you again to everyone for all the time and attention this morning. If you have any follow-up questions regarding anything we discussed on today's call, please, of course, feel free to reach out to us, and we look forward to speaking with you again next quarter. Thank you.

Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day.