170: The Irreversible Convergence of Public & Private Markets – With Scott Kleinman, Co-President of Apollo Asset Management
Apr 1, 2025
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Scott Kleinman, Co-President of Apollo Asset Management, shares insights from his extensive experience in a firm managing over $750 billion. He dives into the fascinating convergence of public and private markets, highlighting how traditional investment strategies are evolving. Kleinman discusses the impacts of passive investing on market dynamics and liquidity. He also addresses opportunities outside the US and emphasizes the importance of hard work and curiosity for the youth, reminding listeners to always ask 'why?'. A treasure trove of finance wisdom!
Apollo Asset Management has evolved from focusing on undervalued acquisitions to strategically identifying opportunities in underserved markets as industry dynamics shift.
The convergence of public and private markets is steering institutional investors towards private assets, necessitating a reconsideration of liquidity and return expectations.
Deep dives
Impact of Zero Interest Rates on Private Equity
A prolonged period of declining interest rates, followed by a zero rate environment, dramatically transformed the private equity landscape. This shift led to an influx of new participants into the market, resulting in a substantial increase in the industry's size. Investors found it increasingly difficult to differentiate between managers delivering genuine alpha and those merely benefiting from a favorable market without true investment skill. As a consequence, companies that were not necessarily viable candidates for buyouts ended up being acquired, complicating the assessment of investment performance and sustainability.
Evolution and Growth of Apollo Asset Management
Apollo Asset Management has significantly expanded since its founding, growing into a $750 billion alternative asset manager that spans various asset classes such as private equity, real estate, and credit. The firm initially focused on acquiring undervalued companies and enhancing their operations, employing contrarian strategies to achieve results. Over the years, Apollo has adopted a more strategic approach as it scaled, identifying key opportunities in the market and moving into areas previously deemed underserved or overlooked. This evolution has positioned Apollo as a key player in both private and institutional investment landscapes, particularly amid changing market dynamics.
Public-Private Asset Convergence
The traditional 60-40 split between equities and fixed income is evolving as institutional investors increasingly allocate capital to private assets. This public-private convergence is driven by the need for higher returns and a reevaluation of what constitutes liquidity in investment portfolios. With diminished liquidity in public markets following regulatory changes, private debt and equity markets present new opportunities for investors seeking to enhance returns while managing risk. As these lines blur, private capital is likely to play a more prominent role in institutional allocations, creating substantial market opportunities.
Opportunities in Global Capital Markets
The current global economic environment presents unique investment opportunities, particularly in Europe, where companies face significant capital needs fueled by deglobalization and infrastructure demands. Apollo Asset Management is poised to capitalize on these developments, as many businesses require funding to modernize and adapt to new market realities. The firm has recently scaled its lending business, targeting sectors like technology and digital infrastructure, which require substantial capital investments. This strategic positioning enables Apollo to leverage its expertise while addressing critical gaps within the market, ultimately driving growth and value creation.
In the world of mythology, Apollo is one the most revered and significant of all the ancient Greek and Roman Gods.
It was also the name given to an asset management business created in 1990 and today with assets of over $750 billion*, it’s a leading provider of alternative asset management and retirement solutions.
In this conversation we understand Apollo’s growth, reach and specialisations. More importantly we discuss the convergence of the public and private asset management industries, where the accelerating marriage of alternatives and traditional assets appears irreversible. From institutional portfolios, now expanding into individual allocations, the trend appears early in its evolution.
Scott Kleinman, Co-President of Apollo Asset Management, reviews the liquidity aspects implied by this phenomenon. He discusses the role of banks, where regulation has allowed the growth of non-bank enterprises like Apollo to blossom, and the trade-offs, risk, reward and liquidity, investors will make.
He also describes opportunities and challenges, outside of the US where capital is less abundant, and securitisation malfunctioning. Finally, Scott offers some great advice to youth that “you can’t escape hard work” and “you should never stop asking why?!”