Apollo Global CEO Marc Rowan on Paramount merger talks, investing in private markets

Joining me now is Mark Rowan. He’s the CEO of Apollo Global, one of the largest alternative asset managers, $671 billion in assets under management. That’s the new figure from the quarter with that was just reported. And it’s good to have you actually after that quarter as well given that was I think Thursday. Mark, it’s good to have you. We’re going to talk a lot about the private markets as we have during this annual interview that we do. But I want to start up for the old business, private equity, because you guys are in the news with Paramount. I don’t know how much you can share, but I would love if you could at least explain perhaps why Apollo is partnered with Sony on a potential bid to acquire Paramount. What’s attractive about the asset? Well, let’s start. As you know there’s there’s not a lot I can share, but private equity is all about value creation. It’s about taking something and making it better. And so you think about industries that have gone through transformation. Media, which you live every day, is in the midst of an amazing transformation. The notion that 2 Studios could potentially come together historically, we would have thought not possible. But you think of all the new competition from streamers, from meta, from Apple and from everyone else, this market is wide open, having scale, having the resources to produce content and to do it efficiently, having multiple genres, multiple everything. I think that’s it’s been an interesting spot for us. We’re active through Yahoo. We’re active through Legendary. We’ve been active in the space before and partnering with a strategic just bring something else to the table. Why do they need you usually for money? But also we’ve been in this industry a long time. I used to joke with people in the in the cable television business that people thought of John Malone as the strategic and us as the financial. And yet you look at every business that John Malone’s built. We built them and sold them to John. So we’ve been here a long time. This is for me, my 40th year doing this and for the team 35 years in the media business. We’ve made the mistakes we need to make to pay the tuition. You know when it comes to that potential deal and again, who knows at this point. It’s not without its regulatory aspects as well, whether a foreign buyer in the form of Sony obviously or the stations given how many you already own, are those potential gating issues to any transaction coming to fruition? Look, regulatory is an issue for every transaction, but these paths are well trodden. Sony already owns a studio. We already own TV stations. The limits and the laws are pretty straightforward. You think it would be if you could get it at the right price then something that would actually generate a good return even in the very challenged world that we live in. Here in media landmark look, as I say for us purchase price matters. This is all about providing our investors excess return per unit of risk. There is nothing that is worth doing that does not provide a return to our investors. All right. I want to get back to the conversation we’ve been having for some time and you have it elsewhere, which makes me jealous whenever you talk other places that’s, you know, you can’t have me every day. I know. Well, I’d like to have you more often, but I’m glad you’re here. You know, and I’ve noticed when you talk about sort of this move public to private, it feels as though every year that I look at it your your, your remarks get a little more pointed. This is from the conference call just last week. You said, I believe we are revisiting the most fundamental concepts that underlie our financial markets. And then you went on to talk about all the reasons why private going from AA to levered equity in public 8000 companies to four. But explain to our viewers why are we revisiting the most fundamental concepts that underlie our financial market. Well, take the most basic product we have in the US, the largest pool of money I believe anywhere in the world 401K12 to $13 trillion. These are the people who need returns the most. What are they invested in for 50 years? They’re invested in daily liquid stock index funds for the most part. Why? Well, we go back and we think about the origins of our financial system and stocks and bonds were the two tools that people use to build portfolios and stocks were fully diversified. 8000, as I said, public companies bonds again and now you look forward and you think about 80% of companies who are over 100 million of revenues in the US and Europe are private, not public. Why would you exclude yourself from that much of the marketplace? And the answer is people are not. We are revisiting the whole notion of what it means to be public, what it means to be private. Is private safe? Excuse me, is public safe and is private risky? Or are both safe and risky and just offer differing degrees of liquidity? Lots of places around the world, be it Australia, be it what’s happened in Mexico, have found a way to blend public and private markets on behalf of all investors. Well, when you talk about that, you go on to say as well that you believe investors increasingly will seek out equity exposure in private markets in other forms that exist today. And you go on to say it’s your job at Apollo to create the product. So what would that look like? Because we are talking about potentially A seismic change. And I wonder if I can access the private markets almost as easily as the public. What’s the difference? Well, I I spoke at a conference and I spoke to a group of people who are on record as being against private equity and I reminded them that private equity is a product. It’s not in and of itself, it’s not all equity that’s private. And I try to make a distinction in their minds between private equity, the product and equity that is private. And it started with the same logic. If 80% of the market or 80% of the companies above 100 million of revenue are private, why would you exclude yourself from that marketplace? Think about what private equity is. Private equity is a fund. Private equity uses leverage to enhance returns. They target high rates of returns and it’s locked up. What if many of the characteristics of public also lived in the private market, active management. But the difference between a public company and a private company maybe share ownership and not much more, not much else, right? Well, and not access to daily liquidity obviously as well. When you think about again the investor universe, start with the 401K. Do they need access to their money on a daily basis? Do they use access to their money? Are we paying too much for access to our money on a daily basis? Then you move to institutions, many of whom have 20 and 30 and 40 year time horizons. Why are big public institutions 80% liquid and 20% private? Because in another time we thought of having a private bucket. Because if private is risky, you want only a little bit of it. But if private is safe and risky and public is safe and risky, shouldn’t you be where the action is? So what are these products going to look like? Can you give us some sense as well how you think about it? Well, look, you think you break it into in the most simple way, the portfolio construction. You have equity, mostly public equity, you have debt, mostly public fixed income. And then you have alternatives. Alternatives are already almost exclusively in the private marketplace. Yeah, in credit. We are watching institutions and individuals around the world begin to use their fixed income bucket to participate in private credit market. I always like to challenge CIOs. Is a private single A rated security an alternative or is it fixed income that can take an hour in some places. But by the way, it’s just fixed income and if you can earn another 150 or 200 basis points of return for the same rating, you’re going to do that with at least a portion of your portfolio that you do not need liquidity for. And why is it happening faster in private? In credit, it’s happening because there are signposts. There are rating agencies who allow investors to say this is a single A, this is a single A, and I’m just dealing with liquidity. We don’t have those signposts and equity yet. But if 8000 public companies go to 4000 public companies and eventually go to 3000 public companies, institutions around the world are going to need to find ways to participate in this market. And they may choose to participate in a product, private equity, or they may choose to participate in equity that is private.