"We expect another $30 billion-plus minus of (gross) inflows for Q4," said Marc Rowan, chief executive officer, during Apollo's third quarter earnings call on Nov. 1.
Rowan added that Apollo expects to bring in total gross inflows of $150 billion in 2023.
"Fundamentally, everything in the business is working, and I believe we're set up appropriately to benefit from the current market," he said.
Apollo invested $36 billion in the third quarter and $153 billion in the year ended Sept. 30.
Rowan noted that private credit is the "mainstay of our business."
Apollo's yield unit, which mainly includes its private credit unit, is its largest business with $460.5 billion in AUM as of Sept. 30, up 2% from $449.8 billion at the end of the second quarter and up 20% from $382.7 billion year over year.
"I believe we are in the first inning or infancy of private credit," Rowan said. But, he said, direct lending is but a "fraction of a fraction" of the potential private credit business.
The business of lending to buyout sponsors is about to get commoditized because there is a lot of capital coming to this area and there are low barriers to entry, he said.
"Everything on a bank balance sheet is actually private credit," Rowan said. "The vast, vast majority of what we're interested in in private credit is actually investment grade."
He suggested investors replace fixed income with private credit that would produce higher returns than fixed income but lower than private market investments.
If chief investment officers consider investment grade private credit to be a private capital investment, the CIOs are "not going to buy it because they need 15% and 20% rates of return out of their alternative bucket," Rowan said.
"But if it's fixed income because it is rated the same as fixed income and it offers 200 basis points to 300 basis points of excess return for the same risk, institutional investors, family offices, wealthy individuals should be able to tolerate some degree of illiquidity," Rowan said.
The highest gross returns in Apollo's yield business in the period was from its direct lending strategy, producing 4.9% in the third quarter and 13.6% for the year ended Sept. 30. Structured credit earned 3.4% for the quarter and 9.1% for the year ended Sept. 30, and corporate credit, which includes collateralized loan obligations, had a gross return of 2.6% for the third quarter and 8.8% for the year ended Sept. 30.
Separately, Rowan announced that Apollo is changing the compensation for four of its senior leaders will be compensated substantially with long-term stock options instead of a cut of profits. The four executives are John Zito, a partner and deputy CIO of credit; David Sambur, a partner and co-head of private equity; Matt Nord, a partner and co-head of private equity; and Grant Kvalheim, a partner and president of Athene since April 2022.
"That does not necessarily mean more, it just means different," he said. "I also will tell you, we are committed to immunizing the stock that we intend to grant."
Those compensation awards amount to about $500 million at the time they are granted, amounting to 1% of Apollo's share count and include exchanging the majority of existing and expected compensation from future fee-related earnings , spread related earnings, carried interest and other current forms of compensation for newly issued vested stock, said Martin Kelly, Apollo's chief financial officer, on the same call.