Leon Black’s Apollo Drubbed by Tough Markets in Fourth Quarter

(Bloomberg) -- Apollo Global Management LLC reported the biggest quarterly loss in eight years as volatile markets sapped the value of its holdings, especially annuity seller Athene Holding Ltd.

  • The private equity giant led by Leon Black posted an economic net income loss of $1.01 a share, exceeding the loss of 82 cents expected by analysts.

Key Insights

Leon Black’s Apollo Drubbed by Tough Markets in Fourth Quarter
  • Athene, the largest asset on Apollo’s balance sheet, hit earnings. It slid 23 percent in the fourth-quarter even as it followed through on a promise to do more deals. But there’s still plenty of future upside for Apollo. The firm garners hefty management fees from Athene’s more than $100 billion in assets.
  • Apollo’s investment in ADT Inc. also curbed earnings. It took the security company public and has become its No. 1 equity shareholder. But the stock lost more half of its value last year.
  • Private equity firms are struggling to find enough deals given current valuations. That was reflected in the company’s dry powder, or undeployed capital, which was flat at $48.5 billion compared to the previous quarter.
  • With stock markets volatile and returns lackluster, investor interest in private equity remains strong. Apollo’s fee-related earnings surged, driven in part by increased advisory and transaction fees.
Leon Black’s Apollo Drubbed by Tough Markets in Fourth Quarter

What Our Analyst Says...

  • Larger than expected mark-downs in PE portfolios led to lower performance fees and ENI.  Base fundamentals remained strong in 4Q; while unrealized under-performance should turn around with rising asset prices. 
--Paul Gulberg, Bloomberg Intelligence financial industry analyst

Digging Deeper

  • Fee-related earnings rose to 62 cents a share.
  • Private equity fund performance depreciated 10.9 percent.
  • Net inflows came in at $21.6 billion.
  • Total assets under management rose to $280.3 billion from $270.2 billion in the prior three-month period.

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