Leon Black’s Epstein Ties Set to Dominate Apollo Earnings Call
Leon Black’s Epstein Ties Set to Dominate Apollo Earnings Call
(Bloomberg) -- Apollo Global Management Inc. investors will want to hear about more than just earnings when the firm reports its latest results on Thursday morning.
They’ll also expect answers about how Apollo plans to handle the growing fallout from co-founder Leon Black’s ties to convicted sex offender Jeffrey Epstein, and whether it’s hurting fundraising efforts. Apollo is seeking money for real estate, distressed credit and infrastructure funds, and recently launched an impact-investing platform.
Fresh scrutiny on the Black-Epstein relationship comes at a time when the firm should be in a strong position to invest, with businesses struggling and credit markets in turmoil. But last week, major consultants expressed reservations about giving new money to Apollo and two public pensions said they were halting investments.
The comments represent one of the biggest threats to Black’s fundraising bona fides in decades, and suggest just how damaging the issue could be for the asset manager. Apollo hired law firm Dechert LLP to conduct a review that’s expected to take 60 to 90 days, according to people familiar with the matter.
“If there is not a quick resolution to the issue, there could be increased problems with fundraising, especially with public-sector pensions that are sensitive to issues like this,” said Kelly DePonte, a managing director at Probitas Partners, which helps raise money for private equity funds.
The recent reticence among investors marks a stark departure from earlier this year, when Apollo executives set a fundraising goal of $20 billion. They described being deluged with calls from groups looking to put money to work with the firm, long known for its distressed-investing prowess. Apollo’s flagship private equity fund, which opened to investors almost two decades ago, has delivered annual gains of 44%, Bloomberg reported in January.
In the second quarter, Apollo announced and closed on $17.4 billion in commitments to its funds. It took the firm eight weeks to raise $1.75 billion for a dislocation fund earlier this year, executives said in July. The company invested the money rapidly and planned to raise as much as $3 billion more for a similar fund, according to people familiar with the matter. Also that month, Mubadala Investment Co. announced a $12 billion partnership with Apollo to make loans of as much as $1 billion to companies in the U.S. and Europe.
Deep Regrets
Black, 69, is expected to address investors on Thursday’s conference call. Among those listening will be public shareholders and institutional funds reconsidering their ties to Apollo amid renewed scrutiny over Epstein, whom Black has said he turned to for matters such as taxes, estate planning and philanthropy.
Investors including a Pennsylvania pension fund and the state of Connecticut paused new investments with the firm. And major consultants with sway over hundreds of billions of dollars have urged clients to hold off or put Apollo on notice that they might not recommend the company.
In a letter to Apollo’s limited partners this month, Black said he deeply regretted having had any involvement with Epstein and that nothing in a recent New York Times article was inconsistent with an earlier description of their ties.
The newspaper, which didn’t accuse Black of breaking the law, reported on Oct. 12 that he wired at least $50 million to Epstein after his 2008 conviction for soliciting prostitution from a teenage girl. Shares of Apollo have tumbled about 16% since.
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