What to Expect from Apollo’s Private Equity Segment


Jun. 12 2018, Updated 2:00 p.m. ET

Expected performance

Apollo Global Management’s (APO) Private Equity segment ended the first quarter with total AUM (assets under management) of $69 billion. In the quarter, the company witnessed some negative effects resulting from the segment’s underperformance.

In Q1 2018, the company’s private equity fund witnessed a fall of 2.7%. The fall was mainly the result of Fund VIII’s holdings, which are listed and are being traded.

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The declining momentum in ADT (ADT) was the main reason for the negative momentum in Apollo’s Private Equity segment. In the second quarter, the segment is expected to be hit again primarily due to ADT’s performance. The stock has underperformed the SPDR S&P 500 ETF (SPY) by a huge margin. Over the past three months, ADT has fallen -24.2%, while SPY has risen 0.28%.

Counting on distressed investments

Even though Fund VIII’s performance in the first quarter was less than impressive, Apollo Global’s management believes that it has delivered significant returns since its inception. Moreover, Apollo’s management expects that in the long term, ADT will prove a profitable investment.

Apollo Global’s Private Equity segment ended the first quarter with total dry powder amounting to $34 billion. The segment has been focusing on distressed investments. In the second quarter, the segment is expected to witness a sequential rise in its management fees primarily due to Fund IX.

The realizations of alternative asset managers such as Apollo Global, the Blackstone Group (BX), the Carlyle Group (CG), and KKR & Co. (KKR) are expected to rise primarily due to increased valuations. The primary reason for these higher valuations is an improved US economy, as we can see reflected in the recently released jobs report.


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