The topic getting insiders at Apollo excited right now

One topic dominates conversations within the walls of leading alternative asset manager Apollo, according to Matt O'Mara, a Partner at Apollo Global Management.

"The biggest conversation is about credit. We've had yields that have been zero for the past decade-plus, so credit investors have effectively not gotten paid", O'Mara says.

The sharp moves higher in interest rates have created volatility across public and private markets as investors reposition after being squeezed along the risk curve, by zero interest rates, into equities.

And whilst volatility can be unnerving for many investors, the silver lining is that for the first time in many years, investors can earn mid to high single-digit returns from investment grade credit and higher in sub-investment grade credit.

"So there is a rebalancing between debt and equity, and that has created a lot of excitement within our credit business," O'Mara says.

For those not familiar, Apollo is a leading global alternatives manager listed on the NYSE, with more than US$600 billion in assets under management. O'Mara manages the alternatives portfolio for Apollo's retirement services balance sheet and looks across the spectrum of private markets including private equity, credit, and real assets.

O'Mara calls out two reasons that Apollo favours private markets over publicly traded markets. Firstly, he says there is a strong case for embracing the illiquidity premium in private markets. Investors can achieve a higher return if they are willing to forgo some liquidity.

It appears investors are warming to this view with a Livewire survey finding that 46.5% of investors are willing to invest for three years or more to achieve a higher return.

O'Mara also shared Apollo's view that there is no alpha left in public markets. He says the mass adoption of index funds has resulted in extreme concentration in the S&P 500, with five stocks accounting for 25% of the index.

"The way we see that play out in the data is that very few managers outperform their index, even over short periods. But when you lengthen that time horizon, it is next to none", O'Mara says.

In this interview, O’Mara discusses the importance of alignment for investor outcomes, the case for embracing illiquidity and where Apollo is putting their capital to work.

You can watch the full interview with Matt O'Mara by clicking on the player below.

Time codes

• 0:00 - Introduction
• 1:30 - How Apollo operate and the power of alignment
• 2:49 - The most significant conversation taking place at Apollo right now
• 3:55 - The role of private fixed income in retirement
• 6:02 - There’s no alpha left in public markets
• 8:15 - The case for embracing illiquidity
• 9:45 - Where Apollo is most active right now
• 11:16 - How Apollo selects investments
• 14:18 - The effect of rising rates on the opportunity set for Apollo

Seeking to provide excess return along the risk-reward spectrum

Founded in 1990, Apollo is a high-growth alternative asset management and retirement services firm. Apollo seeks to provide its clients excess return at every point along the risk-reward spectrum from investment grade to private equity with a focus on three business strategies: equity, hybrid, and yield. Find out more here