This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along with Jonathan Ferroll and Lisa Abramowitz. Join us each day for insight from the best and economics, geopolitics, finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and anywhere you get your podcasts, and always on Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business App.
We are at Apollo HQs and am please to say that joining us now is Mark Rowan, the c e O Market.
Morning's here, Good morning all, great to thank you for coming.
Great to be here and great to have you with us.
So let's just go straight to the top of this conversation, private markets versus public markets and why you believe the big opportunity.
Right now is in the former and not the latter.
Look, we've had a sea change, not just over a year, We've had it over fifteen years. So much of our public markets are index and corel related eighty percent of volume s and P five hundred sixty percent of the market ETFs one hundred percent of our returns this year are from ten stocks, which constitute thirty five percent of the S and P that traded an average PE of fifty How many of us come in every day looking to buy fifty PE stocks?
Not many?
And I guess what I'm suggesting to you is that if you public markets, they are so correlated an index to interest rates and to money flows that if you actually want alpha outperformance, you need to step away from public markets. And I think that's happening because we're also revisiting the notion of public being safe and private being risky. This is the framework we used to be in. Private meant venture capital, hedge funds, private equity. Now it just means less.
Liquid Is that not inherently a risk? In your mind? Liquiditsy.
Liquidity is a risk to everyone, but in different degrees. So if you are a retirement plan or a retirement system, you know your liquidity requirements for the next ten years. So if you can get paid for illiquidity, why not get paid for ill liquidity.
If you're a wealthy.
Individual, how many of them need one hundred percent of their money on Tuesday? If they don't, they should get paid for illiquidity. And we're seeing that in the performance data. If you look at the active management, active management has failed to beat the index eighty five percent of the time for twenty years, and I think it's going to get harder, not easier, to beat the index. As more
and more of the market is indexed. Very little money is left to actually make up what needs to be done in active management?
What is the single operational distinction between Drexel, Burnham Lambert and your Apollo? What is the micro idea you can give us of them versus now.
Not just I'll give you Drexel, I'll give you Lehman Brothers, I'll give you bear Stearns, I'll give you SVB, I'll give you First Republic. The financial institutions tend to die of one of two causes, heart attack or cancer. Heart Attack is funding risk. They borrow short and they lend long. Cancer is the slow addition of poor quality assets, which.
Over time undermine the system.
So you look at all of those firms, All of those had an element of both heart attack and cancer funding risk as well as asset risk.
You look at what we're doing.
We are borrow borrowed long, and lent long. Everything is matched, everything is in a fund. There is no daily liquid, quarterly liquid money.
At Apollo.
We are ideally situated to take advantage of less liquid assets. We've structured ourselves that way. And then you look at the totality of what we do. Equity is a risk business. Equities go up and down every day. You can lose money in public equity. You can lose money in private equity. In the credit business. The vast, vast majority of what we do is private investment grade.
When I look at the risks out there and A translated into Nazim teleban all the work you did in quant with black Swan, what are the tail risks you see right now for private equity? I mean, are you hedged perfectly? Is there next to no delta where you feel so comfortable? Are there actual tail risks in apollo?
I don't think there are tail risks, and I don't think there are tail risks in private equity. I think private equity is a risk taking activity. But each of the companies, each of the situations is idiosyncratic onto itself, and over time, private equity has proven to be a very good asset class. Recognizing that in certain markets you will lose money, just like in certain public markets you will lose money.
You had a test here with the way interest rates went, you had a four or five six standard deviation shock. How did your risks perform given the shock of higher rates the glide path of that? How is it along the way?
Single best year in Apollo's.
History, earnings, asset performance, our platform. As you think about it, we are around six hundred and fifty billion of assets under management in our asset management business. Five hundred billion of that is credit. We generally benefit from rising rates. Yes, on the equity side, some equity will be worth less than it was, but as a general rule for Apollo, credit rates going off is very strong on the retirement services side of our business, which is the Athene business
just gone through the roof. Athene is up thirty percent year over year.
So I'm going to steal a page from this guy because he's been talking about a zepic a lot, and honestly, I think that it's important for us to talk about it.
Are you telling me something that's absolutely not And I.
Just think I'm not saying that anyone is onozepic. We're talking about this as a game. Estentially, no one here is on o zepic, and we're not making any not that there's anything wrong with it.
Whatever, let's move on.
Here's this question about how much that transforms life expectancy, how much that transforms some of the investment thesis from your perspective and for retirement look.
Over time, you would expect improvements in healthcare, improvements in health technology to improve life expectancy, but not by all that much. We tend to find other things that are bad for the human body. As one thing does not kill us, another thing does so. But I would expect the trend to continue. We are just to be clear, we are not in the insurance business.
We are in We are.
An insurance company that is in the retirement services business. We make money by guaranteeing people's retirement, and we earn money by earning more on our assets than we payd on our liabilities, very little exposure to longevity or any other what you would consider biometric or typical insurance risk.
There's a real question here and real focus on income. And you've been talking about that. How there is risk and equity but not necessarily the same type of thing that you see in credit. And we just saw credit outperform private credit outperform private equity pretty meaningfully. Are you going to shift away from private equity more and more and just focus purely on the more credit business.
No, this is the answer, but we have to step back and go back to what our business is. Our business at Apollo and for most people in the alternative asset management industry, we're not in the asset management business. We're in the excess return period at risk business. And then I ask myself where can we get access return? Well, inequity, we've gotten to one hundred and fifty billion.
Is it going to grow?
I think it will grow, really grow multiples. I don't think so. I think the nature of the business, if we're true to ourselves of just focusing on excess return, is slower growth. I look at the credit business. The credit business is nearly five hundred billion today. We're not relevant in the scheme and the scale of these markets.
Five hundred billion is not a relevant sentiment. I assure you, when you speak to all the big bank CEOs today, they don't wake up every day wondering what the mighty Apollo is doing.
There's a phrase I've used twice already this morning, in the last forty minutes one hour de Bankking, and every time I've used it I've had pushback around this table.
Why don't we like that price the bankking.
I personally like that phrase, Jim Zelter. It will cost me twenty dollars for just saying the word de banking, but I'm happy to pay it. I think the world is debanking, and I say it this way. Every economy, every regulatory scheme, credit is tied to GDP, and regulators have only two choices as to where credit comes from. It can come from the banking system, or it can come from the investment marketplace. There's no third choice, and
everyone around the globe has made a different decision. But if you look at the trend, with the exception of China, everywhere in the world regulators are favoring investors over banks. That does not mean we're going to see us on shift. That does not mean the banking business is going out
of business. On the margin, though, the growth is going to take place in the investor marketplace rather than in the banking system for good and valid reasons and for regulatory choice, not because the banking system is unsafe.
So, given that you said, you don't see a lot of upside in terms of growth, tremendous amount of growth and the equity side, you said, you're irrelevant with five hundred billion dollars. How big, how relevant could you become?
Well?
I sat next to a senior executive from Blackrock last night at dinner and they had food in front of them, and I had no food, and I.
Said, how big do you have to be to get food in front of you? And he said trillion.
So that's what you're aiming forten dollars is what you're saying.
Look for us.
For us, this is about excess return per unit of risk. Our business plan calls for a doubling of our business and at the end of the doubling, liking who we are as a culture. Our limitter is not capital raising. Our limitter is not size of aum. Our limitter is making sure we get excess return per unit of risk, so finding assets and making sure we like our culture at the end of the day.
And we all bring to this our childhoods. My childhood was a white Anglo Saxon Protestant grandmother John after her third Scotch, who would talk about how Jews couldn't go to a certain school in Massachusetts. Most of them ended up at Lisa's University of Chicago. That was a different battle. Now there is a new battle, and we address this with Mark Rowan. I am stunned at what I see at these schools, and particularly at your University of Pennsylvania.
You've been vocal. What is the dialogue you have right now with the leadership of the University of Pennsylvania is they deal with this new anti Semitism?
There's no dialogue with leadership at the moment. Leadership is on their way or in DC for a series of congressional hearings. But the underlying culture that permitted this to happen is just so strong and until there is a moment of self reflection where we're not dealing with just anti Semitism, we're dealing with the culture that allowed this to happen, there really is going to be no progress, and to date there's been no progress.
So what is progress right? Because there's a real question around free speech versus something else? What is this something else that you're looking for some of these universities to target.
There's really not a question of free speech. This is a question of favored speech and disfavored speech, and an institutional psychology and an institutional culture. So there are places where this is modeled and they're getting it right. For instance, University of Chicago. University of Chicago is getting it right. They are kicking pens butt to be candid, and it's
not that hard. The institution has decided that it is institutionally neutral and that the students and professors and other actors on campus are allowed to have opinions and to speak their opinions within respectful ways. Say what you will, say what you want, allow the other side to speak.
That is a culture of free speech. A culture where you shout people down, where you have ninety five percent of the professor or academia speaking in one way, where you permit violent protests, where students are unable to go to class because there's boycotts or there's pressure or other things, is not a culture of free speech.
How do you understand the increase in anti semitism on the left, which is really polarized frankly the Democratic Party and created a lot of sort of soul searching.
Look, this is a long time coming, but I'll start with history. The definition of antisemitism, the modern definition, the IRA definition includes anti Zionism as a form of anti semitism. This got through the Senate with many of the current senators still there are nine to zero, including most of the most progressive Democratic centers. So what we've seen is we've seen a shift in the mood of the populace, particularly on university campuses. We live in a culture on
these university campuses of simplicity. You are oppressed or you are an oppressor. If you are oppressed, it does not matter what you do.
You can do no wrong.
If you are an oppressor, facts be damned, it does not matter what you do, you can do no right. In that kind of mindset, it does not surprise me that anti Semitism, anti Zionism has taken hold. And if you give historical context, go to the Holocaust, you have dehumanization, you have delegitimization, and then you ultimately have genocide. Now you apply that to anti Zionism, you have dehumanizing of
Israelis and Jews. You have delegitimizing of Israelian Jews, and now with Hamas's attack, you have the beginnings of killings. It's not that hard to see where we are.
The only thing that's hard is for the left recognize it.
I have been surprised that people have been so surprised by where some of these campuses are at. And I think about the amount of tremendous philanthropy that have come from people like you, Saith over the years on these campuses, I do wonder why we allowed it to come to this mark, why it got this far when we've seen this been building for years and years and years through.
A whole generation.
The answer, I believe is a slow build. And it ultimately comes back to governance and leadership. If I speak just about University of Pennsylvania, the governance has actually divided between the faculty and the trustees. Except for the last twenty five years, only one of those two groups has been doing their job. And I put myself in the camp that did not do their job. I was a
trustee for a long period of time. The trustees have a very important role to play in setting in the strategic direction of the university permissible and impermissible where we want to go, except it's not a governing body. Forty seven trustees really can't agree on anything. It's not set up to govern, and there's no histy of govern and so in the absence of any leadership, faculty or administration has taken these universities in direction that the.
Alumni do not recognize.
When you have a John Huntsman, Ronald lauder A Cliff Asnaes, and seven thousand other alumni who for their own reasons, their own political persuasions, their own belief system, all don't recognize the university that they loved.
You have a problem.
So first move is to stop donating. I guess we could disengage, walk away. You seem to be more constructive about the prospect of change. Shit you think there is a better path ahead.
I think the worst thing that can happen to these universities is apathy. Right now, there's not apathy. Donors are engaged, they want change, they love the place. This goes on much longer, I think we will get to apathy. And once we get to apathy, I don't think the universities can recover from this. And unfortunately, all university presidents that I'm aware of, particularly at the University of Pennsylvania, they seek to wait this out. Maybe this will go away,
I won't have to deal with this. That is actually a loss. They haven't internalized that that's a loss, but that is a loss.
There's an understanding there's a woke adjustment going on right now. We see it in Hollywood, to collapse of many Disney movies and others that have certain messages that aren't selling to the public. The Ft has an article on your colleagues at Blackrock on ESG and how there's a woke adjustment in the ESG. How's this going to adjust the wokeness of these universities? How will it adjust?
Look, this is a question ultimately a balance. This is not a question of a pendulum swing all the way back. But right now these universities are out of balance. And I believe that the trustees, the alumni, and by the way, many of the faculty. If we read Bill Ackman's letter yesterday, and the experience I'm having at the University of Pennsylvania is word for word the experience that Bill Ackman is having at Harvard. Professors don't want to be muzzled anymore.
They feel that they can't speak out unless they are conforming to the narrative of the university, and the resentment is building. All we've done, all I've done, all Bill has done, is given people an opportunity to speak their minds and guess what they have a lot to say.
Big election next year, let's finish on that. Is this going to change how you approach us politics? Who you would enduce for twenty twenty four?
No, it's not going to change.
Do you have a favorite candidate?
No, it's hard to believe with three hundred and fifty million people in this country that we're down to two.
You disappointed with these two personally?
I'm disappointed.
What is it about these two that you find so disappointing?
Thing, Look, we are we have the single best hand of cards anywhere in the world.
We have it all. We just play this hand poorly.
What does that mean?
Think about it? People want to come here.
We have an incredible knowledge base, We have abundant energy, we're leaders in technology. We have a massive domestic market with the strongest military power. And yet we have challenges that we have not been able to as a result of lack of leadership, as a result of political consensus to address. We have a retirement crisis, we have a healthcare crisis, we have a budgetary crisis. We are inconsistent
to our allies around the world. We have important decisions to make without weighing in as to what's going on in Ukraine and what's going on in the Middle East, all of which seems to be caught in a little bit of a morass.
Is United Nations experience important for a presidential.
Candidate United Nations know, Okay, it's.
Trying to give them good That was delicate. This is delicate.
That that was a sensitive sight.
I thought, I responded, delicate.
Thank you, thanks for having us. It's going to catch up.
Total pleasure.
Thank you very much. Mak Robin at the CEO of Apollo.
Jim's out that joins us now the co president of Apollo Global Management, Jim Gimmonisia.
Good morning and welcome to Apollo.
Thank you for having us. Thank you for having us.
I said, the coffee is good and the price is even better.
Right, the coffee is good and the price is free and we like that.
Yeah, to see it right to David Tip jerk believe money.
Oh, this is called this is the you're making the show today from our Contrarian cafes.
So we welcome you nice and you have a great line up this morning.
So we're excited to have you here and tell you more about our story.
That great lineup begins with you. I mentioned a little bit earlier. There is a call on the cycle that we can talk about. There's also a call on the industry. Let's start with the industry. That phrase I mentioned moments ago, D banking perfect place to start. What is D banking and what does it mean for you in the same well, you know, I.
Don't use that term. I really use the evolution of finance. The reality is that we the last forty years, we had amazing tail wins with globalization and technology and lower rates. Banks became they were advisors for decades. In the nineties and the two thousands, they became large global institutions. Oh eight or nine happens, and there's a tremendous amount of
Legg dot frank to change their business model. But at the same time rates were lower, and in the last fifteen years, CEOs, the CEOs you're going to have on today from Wells and from other places, they're focused on
ROE and their shareholder return. And as they're focused on ROE and shareholder return, there's a massive gap where companies need to find capital, and firms like Apollo we've been at the front of the front of the parade in terms of providing capital across our business and when you put that together with our funding model of LP capital from around the globe plus our retirement services, we're just a very unique player in that's going on.
We've got to get into how big the addressable market is and what are private markets. Typically we think of leverage, finance, macro and your colleague and we'll catch up with a little bit later this morning talks about basically everything that's on a bank balance sheet.
How big is this going to be?
You know, when most people talk about and you did a great job, right, they're talking about private capital and private markets. Most people when they talk about private credit today, they talk about direct origination, which is about a trillion five it's about a third of the high yield and loan markets.
We think the definition.
Of private capital and private credit is around a forty trillion number, and that would consist of you know, solar finance, inventory finance, trade finance, franchise finance, along with a lot of this corporate lending and investment grade privates that a lot of banks used to hold large chunks on their balance sheet. But again, in their search for roe and appropriate returns, they're not the right place to hold that.
They may be the right place to originate it, but they're certainly not the right place to hold it long term.
In our three hours with you, I think I want to get out of the way right away. The stereotype, it's high flute and fancy derivatives, fancy structures, mezzaning.
Everybody walks around says.
Mezzaning that we have mezzoning coffee, we have mezzoning Danish. But the reality is a shocking and conservative. On your website you lead with retirement service, How conservative, how measured, how prudent?
Is Apollo well and the end of the day, we do not like to lose money, and that even means a penny. The reality is, if you look at our firm today, six hundred and thirty billion, about one hundred billion in private equity, about one hundred billion in real estate and infrastructure, four hundred plus billion in credit, a vast mass majority of that is investment grade. And in this year alone, whether it's Air France, Venovia, AT and T, we're loaning money to great companies that are a lot
of them are investment grade. And it's interesting, you know, you talk around the globe right now, in the last six seven weeks, you know, buying investment grade debt of companies like Merk and Meta and many, many others. You've been making a double digit return between the compression of spreads and otherwise. Now that's in the public markets. But
back to the private credit. To your point, we lend to large companies, mostly investment grade, and for our perspective, back to Jonathan's question, it's not a one and a half trillion opportunity.
It's really a forty trillion opportunity.
So let's talk about where we are. You don't like to lose a petty and yet you've been focused on investment grade, which is underperformed. High yield risk has done a lot better than lower risk securities. Where are we in terms of where you can make the most money. Is it's still an investment grade despite where we are right now, Well, it's.
In higher quality credit. The reality is there's still this debate.
You'll have it with Torston later on soft landing hard landing, your friend mister Slock.
But the reality is the economy.
Is we're sort of a little bit in this interesting goldilocks period right now. Concern about a slowdown has been on everybody's mind the last six seven months. Fed's actually done a really nice job of maintaining higher rates. So I would argue that the FED put is back in the.
Market right now.
And the reality is you can make is people are worrying about soft and hard landing in credit. You've been making double digit returns in the last six and nine months.
So the FED put is back. We can't let that go. What exactly does that mean? Does that mean that we're not going to have the same kind of credit cycle that now you are a believer no on' soft landing.
I think what you're going to see is you're going to see an economy that there's going to be winners and losers, certainly like an inflation. You're seeing it right now in the goods section, goods area where goods prices are lower but services are a bit higher. And I'm just saying is that the economy is navigating what's going on right now. The FED is maintained at fairly high rates.
The market's gotten ahead of it, if you will, and if there were any kind of challenging economic backdrop, the FED does have a loaded gun that they can use as needed and as appropriate. I'm not assuming it's going to happen. I think you're going to see what we're all expecting. You know, we're students of history. We expect to happen in a way to happen. Again, I don't think you're going to see that happen right now. I think the actually reality is the banking system in the US,
the envy of the world, is actually quite robust. There are signs of the economy that are a bit more challenging. There are a lot of bios that have been done that will have a challenging time, but you're just going to have to navigate it with a really broad toolbox.
I mean, in the history on an almost cultural basis, one of my themes is we had seventy three seventy four Pittsburgh role you and I lived it in western New York. And the bottom line is then we had seventy seven a second leg of a great bullmarket starting into the eighty two expansion. Is that the analog right now that after the gloom of the pandemic and the churney, that there's something new here, constructive.
Well, there's no doubt in the you know, if you talk about those four tailwinds that I talked about globalization, lower rates, deregulation. The fourth is technology, and there are those who know a lot more about it than I do, but they would argue that we are on the precipice with what's going on with AI, cost structure, education and the breadth of that that that could have a huge impact. But the reality is the cost of capital is going to be higher for the next five or seven years.
We are in a higher cost of capital environment.
And it's how you navigating back to your original question, Like, the reality is the bank the banking system around the globe is evolving. The US is in the front of that. And as you'll hear about this morning, we think we're we are the player as that industry contain used to evolve.
We've got to set it up for the rest of this morning. There will be people at home asking this following question, So how to answer it. Are we not just transferring the risk from banks and the risk they post the economy to places like this, Well.
We're actually taking the risk that was consolidated on a bunch of financial institutions and bringing it to a much much broader system where we're diversifying that risk because our investors at the end of the day are either sovereign or other pension funds that don't own these assets on leverage, or there are other retirement services. So we're going higher quality assets and we're diversifying the risk of the system. It's actually making the system less risky.
Jim, this was awesome, Thanks for having us.
Thank you here, well, welcome today and we look forward to a great morning.
It's going to be fantastic. Jim's down to the of Apollo Global Management.
Joining usself. Someone you are very familiar with, Torsten Slock, of course holding court at Deutsche Bank for years, dragged over to Apollo to provide economic wisdom, and we're thrilled that he would host us here today. Nice coffee, We're coming next week. You have one single sentence in your report this time around. It's not the Friday jobs report, it's the Thursday Friday jobs report. Because the optimists are hanging on claims. How important are claims?
Well, that's really a critical question when it comes to this employment report on Friday for November. Jobless claims has been surprisingly resilient for a very long period. No, it's beginning to look more not like a soa if Daniel Hard landing bore more like a long term landing. We're waiting more and more and more for any evidence of either shop ors lowdown or acceleration, and what we do have on the label market on the slowdown side is
as we'll get today. The jold Stata has been showing the quits rate has been coming down, meaning the number of people who voluntarily quits their jobs has been declining. The number of job openings has been coming down, the work week has been coming down. Wages for job switches relatives to job stay us has been converging. In other words, you no longer have as much bargaining power if you change jobs, combined with a number of people who are
changing jobs for permanent reasons has also been changing. So the concrusion is we still have more and more evidence pointing the direction of the labor markets, oftening one indicator job this claims yes, still good, but basically everything else is pointing a direction of what you would expect, namely a week of lab.
Okay, I want a single point nine farm payils estimate, but they won't serve me the bacon John was talking about, So let me go to this is the whisper number finally turning towards it. So looked down a set. There was a John one hundred and eight eight thousand word.
That's consensus, maybe an estimate. Yeah we wait w which is a fact a whisper.
Number coming down instead of going up this time.
Well, if you readly back up and think about what's going on. The FED high rates in March of twenty twenty two, and your textbook would tell you when you raise interest rates, you should expect to see consumption begin to slow down, cap ex spending begins to slow down, credit growth on the banking sector begins to slow down, and all those things are happening, and all those things should also be expected to hit in particular lower rated credits,
smaller companies, middle market companies. And that's exactly where you're beginning to these signs of weaker labor demand. So you should expect to see non farm payrolls over the next several months do what the FED is expecting it to do. Let me gradually be soft and softer.
Is this labor market right now?
And this is a no doubts a question if for a ram Mack, is this labor market right now less of a reason to be hawkish at the Federal reserve, even if we are printing two hundred k on payrolls.
Well, as Jim was saying earlier, if it put is back, because think about it, we have now a situation where the market is spending so much time on the Fed's ministerial small changes in their communication, and if the Fed is now beginning to say, well, we still don't think that we are there yet, the market says, well, okay, we are there yet, and you come to that conclusion. But we've had that pivot so many times, and it remains to be seen whether that pivot this time is right.
But the way I think we should be looking at it is in the deal mandate. Should we be focusing on inflation or employment. Inflation is moving in the right direction. Employment is moving gradually in the right direction. But if the labor market does start to have more than a soft landing, then we will certainly have a sentiment change in markets.
So I never thought that i'd get to the place for Torston Slock and Ben Ladler would agree. I think of you as a perennial pessimist. I always open your uh your emails that I.
Kind of enjoy.
No, I actually risk exactly.
So you're worrying about risks and you're pointing to all.
These risks you're responsible. And then you.
Say, you know there's a FED put So does that mean that Goldilocks is back on the table.
Well, but the issue here is that the market has been interpreting the FED in so many different ways for the last year, and the FED pivot has come I mean seven out of the last nine times, as you will, so a variant of the old joga of how many times can you come with the same story that now is the time, Now is the time for the Feds or turn dubbish. But they haven't turned dubbish, and I think that's why we will have rates higher for longa
This is good for fixed income. This means that the front end of the curve should be still cutting coupons. In terms of thinking about what is the overall outlook. It goes to take time before we get inflation under control, and I think that process, meaning into next year, still means that the downside risks, so the outlook continues to.
Get a course. First.
Ronal Jim from Rochester, thanks so much for watching to the tourist, and I'm going to cut to the chase. There's non linearities out there along the curve. The chairman Powell looks at where's the biggest potential non linearity. Is it wicked short like Apollo short term paper? Is it ten to twenty year French paper, thirty or forties? At the Austrian piece, where's the stress?
I would look at this from a macro perspective that the FED has high rates. We're seeing the language rates going up on credit cards, on auto loads if.
There's no there's a slock brim all love, seeing.
Revolt rates going up on higher the loans. It's been going up quite quickly in the last six months. You're also seeing the bank credit growth to slow down quite substantially. Taking those things together, all that so far looks like a soft landing. But again, as I said it, Moll been along landing here. But the bottom line still is to your question, the risk is if people wake up suddenly in the next few quarters and say, wow, maybe there's more downside rich to consumption. Because the hit is
not only from interest rates going up. If people also start losing their jobs and the lego markets often, which is what the FIT has been talking about, we get the doubleemy of both high interust rates hanging in there at the same time while the label market finally softens, which is what the has been waiting for.
For so long.
Okay, pause because in the last week we've just had records spending Black Friday online Cimber month that was online busiest day on recording US airports, and then buy now Pay Later underpinning is bad news.
That's why I want to ask.
Okay, roughly half of the population has used by now pay Later, and that number had just continued to go up in the last several months. So you begin to think about, well, is that a sign that they can't get credited elsewhere, even on their credit cards, so rangers tickets would find now pay Later. I know, well that's
You're probably part of that that has used it. But I'm just saying the confusion is that we're getting to the to the bottom line here that people are getting stressed more on the household side, savings are mainly with the middle and high income households. Low income houses are getting more and more pressure, in particular when it comes to the linkage rates. So that's of course implying that we will see more downside pressure on consumers over the next one.
Maybe this might be just the beginning of the can seema leffing gun. Why isn't it that.
Well, because the backdrop here is that the FED is not going to cut race anytime soon. So if the cost of financing states or in FED language, you will appreciate this. We will be above us star, which is two and a half for a very extended very soon.
Do our start?
Come on? Well, we got twelve.
Seconds, We've got about a minute left.
Williams said, Love, I would say they have ado to get that. We'll I'll go with the FED line here and say two and a half percent, and if you add five and a half, we will have restricted monetary posts.
For at least a few more years. So to Jonathan's question, that means that consumers will be under pressure potentially for a few more years.
A guy yesterday said he is some German bank. He said, ECB is gonna go first. What's a bundes Bank gonna tell the guard when she decides to cut.
That's a real wrestle inside the ECB at the moment.
But the ECB will go first.
But it's very clear that different ECB government Concile members are showing up at the meeting and have probably having different wish lists.
Yeah, the Federal reserves on the same page, maybe right now. Council for the ECB tossed slock there of Apollo Toaston Fankan.
Olivia Wassner joins us now head of Sustainable Investing for Apollo again from COP twenty eight, Olivia, thank you so much for joining us. A big splash in the ft is they really go after ESG and say is this all going to work out? And part of it and this goes to the investment of Apollo in sustainable investing. It's you can make money at ESG. You can make money and profit with sustainable investing. Is that what Apollos
witnessed with your investments? Have you seen money being made by being sustainable, by doing the things Cop twenty eight's talking about.
Absolutely? Well, first of all, thank you for having me. Thank you for having me in from Duvine from COP twenty eighth. I'm thrilled to be here and also be able to beam into Apollo this morning. Absolutely, that is what we are seeing with our investments. So if we look at the capital we have put to work over the last five years into sustainable investing seams, the firm on a whole has put about thirty one billion dollars to work, and that was really across the entire platform.
That was in real estate, that was in infrastructure, that was in credit, that was in private equity, and all of these deals were done in regular funds. These were done in funds that had return targets, and we saw great opportunities to make money for our investors to meet the return targets of the funds while also investing in businesses and in products and projects that are actually very
much contributing to the clean transition, the energy transition. How we think about sustainable resource use.
Going forward.
Olivia. If you look at COP twenty eight, the twenty nine and thirty are the financial discussions of Apollo and other good and worthies, the great and the good if you will, are they being overwhelmed by major polluters the United States and also China for example on coal.
Well, So, first of all, one of my biggest surprises of COP twenty eight so far has been that it is not all doom and gloom. There is a lot of really good news coming out of COP. You had one hundred and twenty company countries commit to tripling the amount of renewable generation by the end of the decade. That's massive if you think about it. We've had just so many positive announcements around capital going into the transition
from all different areas of the world. So one of the things that has really struck me is just the amount of capital that's really being mobilized, the ambitious commitments that folks are really setting here, and how excited everyone is. You know, if you look at historical cops as we think about, you know, twenty eight, twenty nine, thirty, and
the makeup of who is here has really changed. So when I was walking around yesterday, you know, instead of seeing just nonprofits and government officials, you see people from law firms, from investment banks, from asset allocators, asset managers, consulting firms. It really is amazing to me just how many people are here and how many people are really thinking about how does climate finance affect what they do, how does it affect their businesses, What are the opportunities
that are coming out of this. You know, both for the financial institutions like Apollo as well as our corporate partners.
Olivia, I've got to be honest, I was surprised also about just a degree of optimism, considering how much pessimism there is around the ability to reduce the increase in the climate by two degrees celsius. Given that, how much are you looking to invest things like carbon capture and other measures that go against just simply reducing emissions.
Yeah, absolutely so. So listen, we have a big challenge ahead of us, and if you look at the amount of capital that needs to be spent over the next thirty years, it's massive, right, you know, we're looking at somewhere between five and six trillion dollars a year of capital that needs to be spent. Apollo is very much looking at what we want to do on our end and how we really want to lean into financing this transition.
So we've set a couple targets for ourselves. We set a target of fifty billion by the end of twenty twenty seven, and we set a target of one hundred billion by the end of twenty thirty. So for us, we're really looking at big numbers into this space. And when you look at we've done historically again thirty one billion over the last five years. It has been a
tremendous amount of capital. And I talked to my peers here, I talked to financial institutions, I talk to other folks who are here, and what you're really seeing is there's just so much capital being really being mobilized here at the corporate level as well. I think the world has realized we do need to decarbonize, and now we're looking at what is the best way to do it, and how do we get the right fools of capital into it.
Do you feel that people are losing enthusiasm a little bit, seems to the backlash And Tom was just talking about how there is this rething. Have you seen any of that backlash in terms of just a halting in institutional enthusiasm.
Yeah, you know, I haven't really certainly. You know, you read the papers, and there is certainly some backlash. But on a whole I just think, you know, if you look at the quantum of people are here, at the number of businesses, at the number of corporates, I mean, there's just so much really good energy around this event, and folks are really looking at, you know, what can they do, how can they do it, how can they
best finance it? Where are the gaps? You know, we've had a lot of discussions over the last couple of days about the missing middle, right, how do we to this scaling up part. You know, there's been a ton of capital that has gone into the venture capital and growth equity part of the value chain, and we've the
capital that's gone really into the infrastructure. So when you have fully de risked investments, But how do we found that part in the middle where you've got you know, you've got technologies and companies that are proven, that are working, but that just need a little bit of help to kind of get to the next level. We see that both in individual companies as well as you know, it might be corporate carbouts of much larger companies, it may
be green financings for a larger company. There are so many opportunities here to really help fill that gap, and I'm excited about what Apollo's doing here. I'm also excited about what I'm seeing so many of my peers you hear.
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