00:00So let's talk about the different roles here because Apollo's name isn't in the name of the
00:04ETF. It used to be, now it's not. It's a whole story. But talk to us about what State Street
00:09does and then what is Apollo's function when it comes to serving Prive. Prive is how I pronounce
00:15it. I would agree. Prive as well. There's a big controversy about that though. So Apollo as the
00:21world's largest alternative credit manager is originating the asset that State Street then
00:27has the option to buy. And if State Street in the ETF in Prive buys it, we guarantee the
00:32liquidity against that. But I would say taking a step back more broadly on liquidity, I think
00:39that is sufficient to make the ETF work. But from our perspective, we wanted to bring in
00:43a broader consortium of trading counterparties that would actually make this work more efficiently
00:48for underlying investors. And so we went out about 18 months ago to five sell side bulge
00:54bracket, well known name brand banks and said come trade private investment grade with us. And so in that
01:00context, State Street now has the ability to come to Apollo to seek liquidity or they can go to one
01:06of those
01:06five bank counterparties in that consortium. And so we are really trying to develop this private, the secondary
01:12market in private credit. And I think we're on that journey. And to create that liquidity so that it's easy
01:18to
01:18access at any given point. How big a selection of private credit instruments are you offering to State Street? Is
01:24Apollo
01:25basically handing over saying here's what's available. We're originating about 300 billion a year in private in total
01:32origination across our ecosystem. The vast majority of that origination can be shared with firms like State Street and
01:38through our strategic partnership. They have identified the investment grade segment of the market where they're really
01:44interested in buying either corporates or asset backed, explicitly rated investment grade instruments that Apollo has
01:50originated ourselves. And so they ultimately decide, State Street that is, decides to make the investment themselves. And then again,
01:58we
01:58we create the liquidity against that investment. Let's talk about differentiation because this is where I sometimes wonder how much
02:05this can
02:05resonate with ETF investors. I get why institutions like this, they can do that nuance, like with sharp ratio and
02:12all that. But
02:13advisors in retail, they tend to look for shiny things or cheap things. So your yield is 4.5%. It's
02:20returning in the ballpark of
02:21LQD. So it's like, what am I really what do I need this for when I have all these other
02:26types of bonding tips I can get
02:27similar numbers from? What would you say? So look, I think what's really novel about this is we have created
02:32a first of its
02:33kind public and private ETF. And really, our thesis is how do we think about disrupting the core plus category,
02:40where 20 to 40% of that
02:42categories, portfolios are invested in public high yield. So in pride, we replace the public high yield exposure that
02:49would otherwise have been found with private investment grade. So from our perspective, that's better risk, better return and lower
02:56volatility because we're more senior. And so therefore, we can outperform that those peers in that category and have done
03:04so by about 80
03:05basis points as you put up on the screen slightly earlier. And so I think the thesis has played itself
03:11out top performance,
03:12really interesting conversations with investors around the world. And I think it's starting to resonate as we go through the
03:18process.
03:18Well, I want to talk about where you stand right now, because your total assets in these ETF above 800
03:25million. You're just about a year into the game here. I do wonder, though, given that it is a first
03:30of its kind ETF, you know, what are your ambitions for this fund? And I mean, to put it bluntly,
03:36are you surprised it's not bigger?
03:38Look, I think we believe this is a category killer. We are certainly off to the races. The thesis is
03:45really sound.
03:45We have been validated by a large institutional asset owner who's one of the most sophisticated fixed income investors in
03:52the world. The conversations are resonating across channel, institutional wealth, insurance, and so on.
03:59And so I think the prospects for the success of the ETF are high. But we would say in our
04:03first year, we've had incredible performance, good capital formation, and I see a strong pipeline for us building the portfolio.
04:10Overcome. Let's just pull back that chart of the net asset growth, because I think it shows something that's really
04:15interesting here.
04:16There's some two spikes in that chart, as opposed to kind of something that builds over time. And I'm wondering
04:22how organic this growth is in assets.
04:26I think in our first year, we've had a variety of dialogues with investors around the world.
04:32This is a novel product. I think the evolution of the market has probably outpaced the investor education.
04:39And so in the context of this portfolio, really what we're talking about is private investment grade, not the $2
04:46trillion market that is getting all the headlines today in private credit.
04:49Really, this is the $38 trillion segment of the $40 trillion total pie in private credit that is focused on
04:56the investment grade side of the market.
04:57And so we are on a journey, and it's our mission to educate the market around private investment grade and
05:02the fact that this is actually a safe yield, interesting replacement for Core Plus, and really isn't a high yield
05:08exposure.
05:09And so we're on that journey, and I think that conversation is ongoing.
05:1230 seconds. A lot of people cynically would say, well, if Apollo is getting in, they just want to, like,
05:18have exit liquidity.
05:20This would be what somebody would say, like, why are they so interested in sharing this with the rest of
05:25it if it's so good?
05:26What would you say to that?
05:27I'd say our view is we've been on a journey for liquidity for the last 18 months to two years.
05:33We believe that liquidity, transparency, and ultimately sunshine in private credit is good and net beneficial for investors and the
05:40industry.
05:40And so we own, principally, everything that State Street selects in the ETF.
05:46So we can't necessarily guarantee a good outcome every time, but we can guarantee the same outcome.
05:50And we are not offloading our credit to this portfolio.
05:54Rather, we're actually sharing in the fruits of our labor and our origination.
Comments