Apollo's Sambur Sees Opportunity in Public Markets

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00:00Talk to me a little bit about that. Not so much just about AI specifically, but how you sort of

00:05make your portfolio companies more resilient, particularly in a world, I mean, at least

00:09certainly this year, that is just changing so fast. You know, the pace of change is increasing

00:15and change is a constant. When we think about our portfolio companies, you know, there's a lot of

00:20ways to create value. We're looking to avoid mistakes. When you talk about AI, one of the

00:25biggest things to focus on is making sure that you don't buy a company that is at risk of being

00:29disrupted. So much of our value prop is making these companies grow faster, be more profitable

00:34and deploying technology even before ChatGPT got released. And it was just three years ago.

00:39There was AI before that. We've been bringing together experts to help our portfolio companies

00:44deploy best in class technologies to grow faster and be more profitable. And it's literally all we

00:49talk about right now. I am curious just about the general structure of how you sort of manage your

00:54business. I mean, we've talked a lot on this program about the state of the PE industry.

00:59We joke whether the PE industry is dead or just, you know, kind of, you know, taking a little bit

01:03of a breather. But when you look under the hood, there's still been a ton of activity, a ton of at

01:09least internal returns for the companies that are managing that money. What is the state of PE right

01:13now? You know, I'd say for the industry in general, it's reaching a critical pivot point.

01:19And that pivot point, I think, started in 2022 when rates spiked. If you look at the period from the

01:24GFC to 2022, 99 percent of private industry rates of return were driven by multiple expansion and

01:32revenue growth. That's not private equity. That's levered beta, levered beta on steroids. And when

01:37rates rose, people have to get back to doing what PE was before rates got so historically cheap, which is

01:43buy a good company at a reasonable price, make it grow faster and be better through using technology

01:48and otherwise, and then exited thoughtfully. And that's the most important point. LPs are dying

01:54for distributions. Post the interest rate spike, the industry's been returning capital at about half

01:58the rate it did historically. And that's the whole purpose of our model. It's to return capital to

02:03investors. I think a lot of people just got lazy when the job was easy and people got to get back to

02:09doing the hard work that you get paid to do to make these companies better. Where are you finding

02:14opportunities right now, new opportunities? So for us, first of all, we've been very active.

02:21You talk about where the industry is. This is actually the most active year we've had in the

02:24history of our business. If you think about this year, it's been a crazy year where people went into

02:28the beginning of the year expecting there to be a tremendous amount of M&A that didn't materialize

02:33because of Liberation Day. And then the second half of the year has been a pickup in activity for

02:37the industry. We put out almost $10 billion of capital this year, and it's been one of the busiest years in

02:42terms of returning capital for us as well. Where are we finding it? Finding it in all

02:46different places. We're finding it in public markets. We're a big buyer of public companies

02:50because simply put, I think the public markets aren't functioning for non-technology companies,

02:55so we're a better owner of those companies. And we're finding it in corporate carve-outs,

02:59whether it's buying Yahoo from Verizon, which we did in 2021, or whether it's buying Panasonic

03:04Automotive from Panasonic, which we did at the end of last year. We're seeing corporations want to

03:09simplify their businesses and partner with someone like us that could apply capital

03:13and know-how to make these underperforming businesses perform better.

03:17With that type of deal activity, are you seeing a lot of sort of public-on-public type of deals,

03:22or is it kind of a public company buying a private company? What are you seeing?

03:27I think if you're not an AI company, it's unclear that there's a home for you in the public markets.

03:31You're talking about seven companies that have driven almost half of the returns

03:35over the last five years, and approximately 40 companies are 75% of the returns.

03:40Earlier in my career, you could take industrial companies public, packaging companies public.

03:45It's not clear to me the public markets want or care about normal companies.

03:50You have a world now where 90% of companies in America over $100 million are private.

03:55Every year, more companies are removed from the public markets than are redeposited back into the public markets.

04:01And I don't think that trend is changing. I think that's a long-term secular trend,

04:05despite the fact that the value of the public markets is as high as it's ever been.

04:09It's a narrow, concentrated, ever-shrinking public market in terms of the number of companies and the breadth of industries.

04:15And that's an opportunity for us as a buyer.

04:18Where's the opportunity for investors, meaning the investors who are looking at public markets

04:22and realizing there aren't a whole lot of options, or at least not the breadth of options that maybe they want,

04:26and then they look at the private markets and they see all this activity,

04:30how does that expand in terms of giving people more access to that?

04:34I think that's why people are really asking themselves, how could you expand access to private equity?

04:39And it's certainly something we think a lot about as a firm.

04:41We want to make sure that it's not just the same products that are offered to institutional investors

04:46that are offered to individual investors.

04:48They have to be different products with different risk profiles, perhaps lower risk, lower volatility,

04:52with different liquidity profiles.

04:54But because the returns have been so good for so long versus public markets,

04:58because public markets now, it's not even clear what purpose they serve,

05:02I can understand why people are so focused on the private markets.

05:05Before I let you go, I do have to ask you about your boss, Mark Rowan.

05:09He wrote a very impassioned column today for Bloomberg.

05:11I'm sure you saw, and I'm sure everything you wrote in there,

05:14you've probably heard from him a million times behind closed doors.

05:17It was a pretty full-throated defense, specifically on private credit.

05:20But the idea, and it kind of addresses some of the issues you talk about,

05:24the idea of what the quality is in there at a time where everybody's sort of trying to look under the hood

05:28and saying that what's going on in private credit is somehow just some sort of ticking time bomb.

05:33Yeah.

05:34I think Mark said it well in his op-ed.

05:36There are good loans and bad loans.

05:38There are good underwriters and bad underwriters.

05:40There are good equity investors and bad equity investors.

05:42We try to be the good type.

05:44If you think about it, there's been private lending going on in America for 250 years.

05:49It's only been a brief moment in time that there's been so much public lending in America.

05:55And I think Mark said it well, that there's a lot of misunderstanding going on in the marketplace.

06:00And in fact, these loans are often the most heavily diligent, the most well-underwritten loans.

06:06And private credit means more than just levered lending.

06:08And a couple of the blow-ups that people have talked about, the two that he referenced in his article,

06:12those were bank-underwritten loans that were levered lending.

06:16And when we say private credit, we really mean the investment-grade private credit,

06:20the much bigger, lower risk ends of the market.

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