Hi everyone, I'm Nicola Tangen, the CEO of Norges Bank Investment Management, the Norwegian sovereign wealth fund. And today we are joined by a true visionary in the world of finance, Marc Rowan, who co-founded Apollo Global Management, which is one of the most influential alternative asset management firms in the world. Now, we are the lucky owner of just under 2% of Apollo, which works out at just under one and a half billion dollars. Marc, thrill to be here. Great, thanks, thanks for coming, and hopefully you're a happy shareholder.

Mark, in um 1984, you said, "God, I'm just too late, all the money has been made." You came out of business school. Now, a few years later, uh, you have assets under management at Apollo of 680 billion and the market cap is more than 80 billion. So I think we can say that was a not a very accurate statement.

Well, I, I think it was accurate because it reflected the business at the time. 'Cause not only did I say it in '84, I said it in '90, and I said it again in 2001. And the point being, in some ways, I was too late for the business that had been done. But the interesting thing, part of the interesting part of the job, is it keeps changing. I mean, you've 2008, we were 40 billion of AUM. In fact, almost every other large firm in our industry today was roughly the same size. And then 13, 14 years later, we're now up to over 700 billion of AUM. Something changed. It's clearly not as a result of our skill and talent. We had to be in the mainstream. Well, skill and talent helps, right? Well, look, the skill and talent is to make sure we're positioned with Tailwinds behind us by positioning the business the right way, but fundamental change is ultimately what powered our business.

What does it take to start the firm? It, it takes a little bit of luck. Look, I had spent the prior six years from '84 until '90 mastering my craft, so clearly I knew something about business. But one has to be humble and actually accept that there's a fair degree of luck, because I was actually quite happy doing what I was doing at Drexel Burnham. In some ways, the single best thing that ever happened to me was to be forced to make a change.

Mark, there's been a lot of focus on how you are replacing banks through direct deals with uh, with companies. Now, what kind of um, business are you uh, in a way taking away from them or uh, doing instead of them?

Well, I think it's actually a bit of a misnomer. The press likes to report on this notion of banks and investors fighting over private credit. But I think we have to start with a definition: what is private credit? Well, for most people, it means levered lending or direct lending, which is a below investment grade activity. And yes, it is true that the vast majority of levered loans used to be originated in the banking system, and now they are split between being originated in the banking system and being originated in the investment marketplace. And yes, we are engaged in that business, but it is a very small part of our business. I think generally financial pundits and other market participants are missing the bigger trend. To me, private credit encompasses almost every asset on a bank balance sheet: a loan to a customer, private; a loan to a company, private; a loan to a project, private, and so on and so on. And the vast, vast majority of private credit is investment grade. So we look and now say, are we replacing the banks? Generally not. Absolutely. Now, we are only in the public market, right? It's not in our mandate to be in the private market. What are we losing out on? You're losing out on 80% of the investable market.

And if you think about it, public markets do not work the way we think they work. In fact, nothing works the way we think it works. So I look at public markets today and I ask really fundamental questions like, in the US, which is the most developed of the capital markets, do we have price discovery in the short term? I don't think so. Think about what's happened in US markets: 80% of volume S&P 500, 60 plus% of the market passive, 10 stocks 39% of the S&P, four stocks have determined basically profitability for the last four years. Yeah, one stock is larger than every public market other than Japan. That's the universe you're going into.

So you saying that um, the public market is very risky?

I'm not saying it's risky, I'm saying it's indexed and correlated, and it is about cap Capital flows now. It is not about price discovery of an individual security in the short term.

Think about people who are supposed to be able to outperform the index, active managers. How have active managers done? Well, basically 90 plus perc of the time for the past 20 years, they have failed to beat the index. Did they get stupider? No, the structure of our Market has changed. It doesn't mean bad, it just means indexed and correlated. And so an investor, particularly an international investor who wants to express an opinion in the US, no longer comes in and buys a basket of Securities they buy the index.

I think investors including institutions like yours you may not own private Equity but you will own Equity that is private you you may or and many do already they own Spotify they own open AI they own any number of tech companies that have remained private well why should it stop there I think there'll be or 100 companies that are private for which Equity can be raised maybe that is the new form of active management active ownership of companies or PE without the leverage and without the fund that's that's a ways out still the next five years is going to be about fixed income replacement.

Is there such a thing as an Apollo investment philosophy?

There is. It's, and I, I've said it, it's purchase price matters. So what does it mean? This is, so there are lots of strategies that one can employ. There's someone who's a great, great internationalist. There's someone who's a great macro trader. There's someone who's great at chasing growth. We are great at finding value. Sometimes that value comes from trading hard work for purchase price, as in our private equity portfolio and asset management. But if you translate it over to fixed income, it's finding excess return per unit of risk. So how do we get paid more for a single A-rated company from a single A-rated company than they could otherwise get in the public market marketplace?

Has it ever been difficult to stay true to the philosophy?

Oh, it's been very difficult, uh, especially when the US is printing 8 trillion dollars over a period of time and random companies have multi-billion dollar valuations overnight. So what do you do now then? Uh, what do you do then? You, you try to manage a lot of Type A personalities and convince them that doing nothing is the best thing.

So this is the time where you're holding back a bit?

We're definitely holding back in adjusting how we invest right now. We want returns. So if I give you the credit market return, reaching down the capital structure and taking more subordinated risk feels like a bad, bad idea today, right? Using your people and your resources to get paid for origination and structure, but being senior in the capital structure feels like a tremendously good use of time, right? And that's what we've been doing.

What are the main risks in these markets and what, what could trigger something more, more serious?

So I look at the risk today. Look, the, the risks in front of us in, in some way are obvious. We have geopolitics as one of the most overriding risk. But not even geopolitics, politics. I mean, we right now in the US, I will tell you, things feel great. Not only do we have growth and we have very low unemployment, we have a backlog of fiscal stimulus that hasn't even hit yet. Three years ago, we passed nearly two trillion in infrastructure bill. It's still being built. Nothing's built yet. Two years ago, $52 billion for semiconductor plants. Not a single plant is open yet. A year ago, Inflation Reduction Act to encourage manufacturing of EVs and other things here. Not a single plant open. Last three years in a row, we've been the largest recipient of foreign direct investment, and we're ramping defense production. All of those things are fiscally stimulative against a backdrop of no legal immigration. That is a pretty good setup. We've raised rates 500 basis points. What happened? Home prices went up, stocks went up, capital markets are fully liquid. This is a pretty good setup. Oh, by the way, we're, we're have a $2 trillion deficit in peace time with a 4% unemployment. That's a worry. So one can look at geopolitics, one can look at politics or governance as another.

And how, how big a worry is the deficit to me?

Um, it doesn't, it's not a short-term worry, but it is ultimately a long-term worry.

How do you cope with stress?

I don't find the job tremendously stressful. I literally believe we are the luckiest people in the world to be able to do this. This, the slogan we have here is, "We get to do this." Anytime someone tells me in the firm they don't like what they're doing, it's time for them to have another job within the Apollo system or to find something else to do. If you come in pretty often and you don't think, "I get to do this," this is not the right job for you. "I get to do this."