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Why Apollo Investment Is Reducing Its Investments

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Declining portfolio activity

Apollo Investment (AINV) made total investments of $122.7 million in fiscal 1Q17[1. ended June 30, 2016] compared to $508.6 million in fiscal 1Q16 and $178.5 in fiscal 4Q16. The company deployed a majority of its funds in the first lien, totaling $58.2 million, and $46.5 million in the second lien, reflecting increased deployment on a quarter-over-quarter basis in the second lien.

The yields on its first lien purchases stood at 11.2% as compared to 10.3% in the second lien. Both remained higher than in fiscal 1Q16. The trends reflect higher competition in purchases of quality debt offerings.

AINV’s total portfolio stood at $2.6 billion in fiscal 1Q17 compared to $3.2 billion in fiscal 1Q16.

Here are some of the company’s peers in investment management and their assets under management:

  • Ares Capital (ARCC): $8.9 billion
  • KKR (KKR): $98 billion
  • BlackRock Group (BLK): $4.7 trillion
  • Apollo Global Management (APO): $163 billion

Together, these companies form 5.4% of the PowerShares Global Listed Private Equity ETF (PSP).

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Exits rise

Apollo Investments (AINV) sold $146 million in investments and repaid $193 million in fiscal 1Q17. The company is repositioning its portfolio in order to have a lower risk profile and lower volatility, as well as to provide a more stable return for shareholders.

This action repositions a portion of the portfolio into traditional corporate loans, primarily a floating rate directly sourced from the Apollo platform, while adding additional product offerings via mid-caps. The company continues to grapple with loss-making investments and positions taken over the past few quarters. The company expects the situation to stabilize over the next couple of quarters before profits can rise substantially from their current levels.

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