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How Monetary Policy Could Impact Apollo’s Credit Segment

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Jul. 26 2018, Updated 3:35 p.m. ET

Understanding the impact of interest rate hikes

Asset managers’ credit segments are very sensitive to interest rate fluctuations. The higher the rates, the more downtrend in asset managers’ credit holdings. Moving forward, the credit segments might witness negative impacts since the Federal Reserve is expected to announce two rate hikes in the second half of 2018.

In the first quarter, competitor (XLF) Blackstone Group’s (BX) credit segment generated net management fees of $167.6 million. The global credit segment of Carlyle Group (CG) garnered fund management fees of $59 million, and the public markets segment of KKR & Co. (KKR) generated management fees of $93.3 million.

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Previous performance

The credit segment of Apollo Global Management generated management fees of $183 million in the first quarter, which reflects a rise of 15.6% YoY (year-over-year). The division’s performance fees amounted to $42.7 million in the first quarter, which implies a YoY rise of 14.8%.

At the end of the first quarter, Apollo Global Management’s credit segment had managed assets of $165 billion. That reflects an increase of 17% YoY. Of its total assets under management, the drawdown category had $28 billion, and the liquid category had $45 billion. In the first quarter, the segment generated economic income of $47.7 million. In Q1 2017, it was $115.2 million.

In the next part of this series, we’ll see what could impact Apollo’s real estate business.

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