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Apollo Global Management plans to grant roughly $550mn in stock to four senior executives, reworking their pay structure as future top leaders at the $631bn asset manager.
The stock grants to the four executives will align their pay structure with arrangements held by Apollo chief executive Marc Rowan and co-presidents Scott Kleinman and Jim Zelter. The four executives will give up their existing packages, receiving pay based on the performance of Apollo’s listed stock instead of returns from its private funds.
The four executives are Matt Nord and David Sambur, two senior partners who lead Apollo’s private equity business, as well as John Zito, deputy chief investment officer of credit, and Grant Kvalheim, president of Athene, Apollo’s life insurance and annuities subsidiary.
Rowan said the firm “decided to fundamentally change the compensation for four of our next generation of leaders”.
“All four of them have taken on increasing amounts of responsibility over the years,” Rowan also said. “They oversee massive pieces of our firm that are integrated. And as such, we have decided to compensate them substantially in stock.”
The shift came as Apollo reported third-quarter earnings that showed strong inflows across its business, with assets under management rising $14bn to $631bn. Shares rallied 10 per cent in early trading on Wednesday to $85.31, giving the business a market capitalisation of roughly $50bn.
Zito and Kvalheim have become increasingly prominent figures within Apollo as the firm has grown beyond its private equity roots. Kvalheim’s business sells annuities to millions of Americans, bringing in tens of billions of dollars a year. Zito’s team then invests it.
As Apollo’s credit and insurance operations have grown rapidly, the model they refined has been copied by other large asset managers, in part because Apollo shares have nearly tripled in value over the past five years.
The credit business Zito leads includes roughly $461bn of the firm’s investments across structured credit, corporate bonds and loans and private credit.
The private equity operation overseen by Nord and Sambur just closed a $20bn buyout fund that was smaller than an initial target of about $25bn after a sudden rise in interest rates soured investors’ outlook on private equity investments.
Apollo’s private equity investments have recently gained in value. In the third quarter, Apollo marked up the value of its buyout holdings by 2.7 per cent, putting year-to-date gains at more than 10 per cent.
Rowan said on an earnings call that Apollo’s private equity unit was investing heavily into more volatile financial markets after interest rates reached highs not seen in two decades.
“We have been on offence,” Rowan said. “If you like something now in the [private equity] business, given all the geopolitical implications, given the concerns over recession, given the high-rate environment . . . you really like it.”
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