Apollo Global Management built on the streak of strong earnings growth from listed alternative asset managers after it reported a 95 per cent rise in economic net income to $697m for the final quarter of 2012.
It earned $1.634bn in the full year, up from a $301m loss in 2011, with its performance boosted by asset sales as well as a rise in the value of its investments portfolio.
Blackstone last week reported a 43 per cent rise to $670m in fourth-quarter economic net income, while KKR this week said its income for the same period rose 22 per cent to $348m.
Apollo’s assets under management swelled 51 per cent to $113bn, with over half that flowing into its credit funds, a reminder of founder Leon Black’s deep roots in the debt markets.
Steven Fu of JMP Securities said Apollo’s quarter was significantly better than consensus forecasts. “The upside relative to expectations was primarily driven by stronger performance in private equity,” he said.
However, Marc Spilker, Apollo’s president, echoed rival industry executives when he sounded a cautious note about conditions in the credit market. He said “technical conditions are driving the market and are ahead of fundamentals.”
Apollo’s results come as it begins fundraising for its latest flagship fund. Investors say it is targeting $13bn. If it succeeds, it would be one of the largest funds in the current cycle and comes as investors have been wary of backing very large private equity funds.
Like its peers, Apollo focuses on economic net income rather than GAAP earnings because the measure excludes costs associated with the group’s initial listing on semi-private exchange in 2007, including compensation costs. It also takes into account operating performance including the current market valuation of its portfolio.
GAAP profits for the quarter rose to $171.5m, up from $10.9m in the final quarter of 2011.
Given its expertise in the debt market, Apollo has also been among the biggest beneficiaries of the Federal Reserve’s easy monetary policies.
Two of its big sources of gains in 2012, for example, were sales of its stakes in Lyondell Bassell and Charter Communications, companies that Apollo bought after initially investing in their distressed debt.
Apollo has also raised about $3bn for investing in non-performing loans and distressed debt both in the US and in Europe. Last year, for example, it bought some of Bank of America and Citigroup’s European credit card portfolios.
The group raised its payout to $1.05 per share for the fourth quarter. Apollo shares rose nearly 3 per cent to $22.80 in late morning trading in New York.
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