Gary Stein - Head, Corporate Communications Josh Harris - Co-Founder, Senior Managing Director Martin Kelly - Chief Financial Officer.

Bill Katz – Citigroup Robert Lee - KBW Mike Carrier - Bank of America Merrill Lynch Ken Worthington - JPMorgan Devin Ryan - JMP Securities Chris Kotowski - Oppenheimer Alex Blostein - Goldman Sachs Craig Siegenthaler - Credit Suisse Chris Harris - Wells Fargo Gerald O’Hara - Jefferies Michael Cyprys - Morgan Stanley.

Good morning and welcome to Apollo Global Management’s 2017 First Quarter Earnings Conference Call. During today's presentation, all callers will be placed in a listen-only mode. And following Management's prepared remarks, the conference call will be open for your questions. This conference call is being recorded.

I would now like to turn the call over to Gary Stein, Head of Corporate Communications..

Great. Thanks, operator. Welcome to our first quarter 2017 earnings call and thanks for joining us. Joining me this morning are Josh Harris, Co-Founder and Senior Managing Director; and Martin Kelly, our Chief Financial Officer.

As a reminder, this call may include forward-looking statements and projections, which do not guarantee future events or performance. Please refer to our most recent SEC filings for risk factors related to these statements.

We’ll be discussing certain non-GAAP measures on this call, which management believes are relevant to assess the financial performance of the business. These non-GAAP measures are reconciled to GAAP figures in our earnings presentation, which is available on the Apollo website.

Earlier this morning, we reported non-GAAP economic net income of $0.82 per share for the first quarter ended March 31, 2017. Apollo also reported distributable earnings to common and equivalent holders of $0.57 per share driving a cash distribution of $0.49 per Class A share.

If you have any questions about the information provided within the earnings presentation or on this call please feel free to follow-up with me or Noah Gunn. With that, I’d like to turn the call over to Josh Harris, Co-Founder and Senior Managing Director of Apollo Global Management..

Apollo Asset Management Europe, or AAME, resulting from the onboarding of new assets from the balance sheet of an existing portfolio company. Subsequent to quarter end, you may have also seen that an entity named AGER, A-G-E-R announced a €2.2 billion capital raise that was primarily sourced through Apollo’s strong network of investor relationships.

AGER is a strategic platform established by Apollo and Athene to acquire or reinsure blocks of insurance business in the German and Briar European life insurance market where we believe that there is a large need for capital. Athene and Apollo will be minority investors in AGER and long term strategic partners.

Similar to Athene, an affiliate of Apollo, AAME will act as advisor with respect to AGER’s investment portfolio. This new business venture is in the early stages and we are optimistic about its growth potential over time.

As it relates to inflows from organic fund raising efforts, the quarter's primary activity included a follow-on closing from our third European Principal Finance Fund bringing total commitments to $2.7 billion at the end of March. And since then we had a $400 million closing in April bringing the fund to over the $3 billion mark.

We continue to believe the fund will meet or exceed the size of its predecessor. There was also more than $1 billion raised across a variety of liquidity performing credit strategies, the most notable of which was total return.

Total Return is a great example of how we can harness the power of our integrated platform to create a differentiated investment solution to help fund our fund investors in their search for yield. As you may recall this unconstrained credit strategy allows us to navigate the opportunity set across the liquid and performing spectrum of our platform.

Total Return recently reached a three-year anniversary key milestone for the consultant channel and the track record continued to thrive. At the end of March, assets in Total Return were approximately $2.3 billion and working on a healthy pipeline of new commitments.

As we think about the outlook for fund raising and asset growth more broadly, we continue to believe that our ninth flagship private equity fund currently in the market will be a meaningful contributor. We now expect a significant closing for that fund to occur before the end of the second quarter.

The Fund VIII still has adequate dry powder to sustain continued investment activity. We currently expect Fund 9 will commence its investment period and these turn-on fees by year end or shortly thereafter. This point leads me to the next area I'd like to discuss which is investing and harvesting.

The first quarter's results illustrate that our team continues to successfully identify value oriented opportunities while maintaining our investment discipline across businesses.

In private equity, the $1.6 billion deployed during the quarter was primarily driven by two transactions, to take private acquisition of Apollo Education Group and a sizable acquisition by Chisholm Oil & Gas which is an energy platform in Oklahoma. The team remains active.

The number of potential opportunities in the pipeline – Fund VIII has committed 71% of its capital to date, and we estimate the fund has approximately $3 billion remaining for new commitments.

Over the past couple years, it is clear that our private equity team is in much more active investing capital rather than harvesting the portfolios, resulting in a two to one ratio in favor of deployment. But we are beginning to see the size of a more balanced mix of portfolio activity.

There was nearly $1 billion of gross proceeds realized from private equity during the quarter, just driven by the dividend recap transactions at Verallia, ADT and Vectra given favorable financing markets. We are encouraged by the early monetization opportunities and returns we are seeing from Fund VIII given that it is a young and maturing portfolio.

And we believe a path to increasing realization and cash carry is on the horizon. Turning to credit, while the potential for rising interest rates could provide some pockets of dislocation, rates remain near historic lows, spreads are tight and the market is full of liquidity, a recipe which is leading our team to be cautious.

However we continue to find attractive situations where we believe we can leverage some of our competitive strength such as speed, scale, industry expertise and our integrated platform.

Additionally we made a strategic decision a few years ago to build what has become a sizable direct origination capability, providing us with the flexibility to pivot between broadly syndicated credit when value is more readily available on the market and directly originated non- CUSIP non-traded credit when value is scarce.

We believe this ability to toggle toward opportunity is increasingly important in an extended credit cycle. One recent example of our origination strength is the $800 million debtor-in-possession financing to support Westinghouse Electric Company.

Westinghouse is a longstanding American franchise with 11,000 employees, their nuclear fuel technology helps generate roughly 10% of all electricity in the United States.

While Westinghouse and its advisors had numerous alternative proposals, Apollo was selected because of our fund’s ability to decisively provide a creative and elastic solution amid a complicated restructuring process.

The successful execution of this transaction was made possible by our ability to maneuver a complicated bankruptcy process as well as the scale of our fund’s capital. Turning to real estate for a moment, we are excited to announce that Joe Azelbee [ph] will be joining Apollo starting next Monday as global head of real asset.

Joe has more than three decades of experience, most recently at JP Morgan where he managed a multi-faceted real estate business. Joe will oversee our existing real estate debt and equity strategies and will work closely with our team to pursue complementary growth opportunities within the real assets arena more broadly.

With respect to our financial profile, our balance sheet today is strong and with solid investment performance in our fund, and upside created from strategic investments like Athene, it is only getting stronger. At quarter end, the balance sheet comprised more than $5 per share value, which is more than double the level from just twelve months ago.

This growth was primarily driven by the strong appreciation in the value of Athene as well as a significant increase in the value of our net carried interest receivable, which is at nearly $2 per share at quarter end, and four times our cyclical low, or approximately $0.50 per share just a year ago.

In addition, we have $1.1 billion of cash and an additional $500 million of undrawn revolver, providing us with ample liquidity. Our cash balance reflects the issuance of our first perpetual preferred stock security which occurred during the quarter. The transaction was well received with gross proceeds of $275 million priced at 6 and 3As [ph].

We were pleased by the outcome as it allowed us to diversify our capital structure with permanent financing at an attractive rate. With this enhanced flexibility we continue to pursue strategic capital initiatives, evaluate potential M&A transactions and fund other growth opportunities.

In closing, I'd like to convey our optimism about the future of our business. We are positioned as a leading global alternative investment management franchise, which is driven by a talented and growing team. We're maintaining our investment discipline to achieve best-in-class returns.

We continue to expand the capabilities of our platform which will ultimately benefit the investors in our funds and strategic capital platforms as well as our shareholders. Now I'd like to turn it over to Martin to walk through our financial results in more detail.

Martin?.

one, the relative cash flow stability of our fee related earnings; two, realized net carry related to the dividend recap transactions Josh mentioned earlier. In the first quarter, Fund VIII generated $36 million or $0.09 per share of cash carry.

And three, realized net carry driven by the crystallization of a portion of the AAA carry receivable in conjunction with the secondary offering completed by Athene in late March.

We would expect the remaining net carry receivable about at AAA which at the end of March was $145 million and is subject to change based on the valuation of Athene, to be fully monetized over the next twelve months as additional AAA shares are on watch.

Our payout ratio for the first quarter was a bit lower than recent quarters because we were seeing the insurance recovery. Before we open up the lines of questions, I'd just like to flag a couple of new disclosures within our earnings presentation that you may find helpful as you analyze our business.

The first is a new page of supplemental information on our private equity business which provides additional transparency around the composition of the current portfolio and offers insights into the relative maturity and valuation of the primary funds driving economic and distributable carry over time.

The second disclosure is a new line within our profit share expenses which identifies realized profit share compensation that is paid in equity instead of cash.

We've talked before about our approach of paying investment professionals a portion of the carry they receive in shares is subject to vesting and for the first time you’re beginning to see the accounting for that activity in our financials. This is a policy that we're implementing across all our businesses.

Going forward you should still expect the long run performance fee compensation to remain unchanged from the approximate level of 45%. With that, we will now turn the call back to the operator and open the line for any of your questions. .

[Operator Instructions] Our first question comes from the line of Bill Katz of Citigroup..

Why don’t we just start on the – Josh, maybe talked about DRE.

Can you flush that out little bit, maybe talk about the total addressable market that you could foresee for that business and then maybe the flow-back of economics that would be there for Apollo, I presume you're inferring the US allocations as well as advisory fee, so wondering if I am thinking about that correctly..

So you broke up – are you saying AAME? Is that what you are asking about?.

Yes..

Yeah, I mean – look, I think obviously we've raised capital and we're looking to deploy that capital with the buying books of insurance liabilities in Europe and in much the way that we did in the US.

We haven't really -- there's certainly a much Apollo through it, AAME, and throughout our asset management and we will be managing a portion of those assets.

We haven't really disclosed yet exactly the economics of all of that and so we'll probably hesitate but if you think about, is that going to be -- if you think about conceptually what we did with Athene, that's probably a pretty good way to think about it, although obviously they're totally different markets and how all of the economics will work will be different, and the margins will be lower.

.

And we know there's a lot of acronyms and – so AGER – which is Athene, Germany, AGER, that's the attitude to raise the capital €2.2 billion of initial equity capital, that can be levered up quite meaningfully in the European markets. And as Josh mentioned, AAME will be investment advisor for the assets within that AGER entity. .

So you think of AGER as Athene and you think of AAME as AAM, and we apologize for how confusing it is, it confuses even us, we are open to suggestions. That's the way that we've set it up, so AAME, E is Europe, AAME. I don't know if that gives you about as much color as we can give you I think at this point. .

And I would just say it’s early stages for AGER, they just quote – just raising the capital but now well capitalized to go out and look for opportunities to acquire books of business –.

But if you think of $2 billion of equity capital, I mean I think you're aware -- I mean insurance companies can be levered and that gives you a lot of buying power. .

And then my follow up question, nice theme of questions this morning, Josh spent some time talking about the strength in your balance sheet some; can you about a little bit how you think about that a de novo basis versus maybe through acquisitions particularly since receipt going on Gary Clark on to your sort of leadership teams well. .

Yeah, I mean I would say that obviously we're completely flexible to all of that depending on what the best value from our point of view is.

Clearly doing acquisitions – I mean we’ve done a relatively -- Stone Tower was really successful, an acquisition called Gulf Stream was really successful, we've had some other methods but we sort of bring the same value discipline around acquisitions as we do in our private equity business.

So the stars and moon aligning and getting something that is strategic for us and it's the same type price well -- they come to you in arbitrary but we're clearly lucky and certainly Garry Parr will be adding to that capability but we're also finding relative to these strategic capital platforms whether it be Athene or Athene Europe, AGER, or any number of other ideas that we have, that mid-cap which you also know about, like that these require some amount of capital contribution from us.

So the capital loss would be used for that. And then there's also the ability to organically bring in teams. So I think all of those things are on the table and we're looking at a lots of different, certainly Gary adds that was one of the significant reasons we did bring in Gary – and capability. .

Our next question comes from the line of Robert Lee of KBW..

Could you maybe – maybe adding some color on fund raising, for fund -- I guess it’s Fund 9, just kind of at this point sense is you're seeing kind of the mix of LPs; does it predominantly kind of – existing KLP.

Or resigning or are you seeing kind of broadening of your LP investor base on nine?.

I think, this is what I would do, because I can't -- unfortunately I don't want to comment specifically on fund 9, but I can comment generally around fund raising which is to say the following. Certainly there's a broadening globalization of the investor base.

What we're finding is that all of our -- and certainly we're seeing consolidation at the investor base, existing relationships and so we're benefiting from those trends.

So we're finding our -- all pretty much all of our LP is getting larger with us, or the vast majority with options but at the same time certainly in Asia, the Middle East, Europe even and we're certainly seeing the globalization.

So if you look at the overall percentage from North America, it's fallen a bit relative -- even though it's grown on an absolute basis it's fallen a bit over the last five years and it would sort of be no probably under 50% at this point, just the shy under 50%. And you’d see regional growth in all of those different regions.

I would say we're finding -- in terms of institutional versus retail we're seeing so -- I mean retail is growing in absolute dollars but it remains between 10% and 15% of our overall business excluding Athene. And you can kind of -- I don't know what to characterize that, that could be characterized as retail or it.

And we're finding that -- truthfully there's so much demand from our institutional clients that we're not -- we have so much capital that we're limiting how much capital that we make available to retail, basically, in a sense that we’re trying to satisfy our institutional fans by the best and after that.

That might make us a little bit different than others. So we're still growing in absolute dollars, that affected our overall platform. So that would be like -- I don't know if that's not enough color but that's sort of the color that I would offer. .

And then maybe as a follow up; in terms of thinking about current and future deployment, I mean obviously you've been active in in Europe. But one of the things I get -- to them feel like we hear too much about -- maybe relative some of your peers is the deployment or investment activity for you guys in Asia.

Now understanding your peak your funds can kind of go anywhere but I mean do you feel you have the kind of Asian footprint you'd like or is that an area of focus where you think you need to kind of put more emphasis?.

Yes, less than 3% of our overall investing is outside of Europe and the US -- North America and so it is for sure that we do have an office inn Hong Kong and Singapore and we have people in Australia but we are -- truthfully and so we have a footprint there.

But in Mumbai, actually in Shanghai but we're not finding the risk return to be as attractive as we're finding in our core markets.

If we're going to go into a market that is foreign to us and have to pay a higher price and have to deal with lack of transparency in the financial statements and possibly in markets that are a minority, in many cases they want to sell control. It has not been a deep value opportunity, Mark.

If you look at what most others are doing in Asia, it's been a lot more relative to growth activity at much higher prices. And so that's not really what we do and so we continue to look in Asia but we can then have a presence in Asia. It's not that we don't do anything in Asia certainly, it was -- did a real estate transaction in Thailand.

But we haven't seen the opportunities and that is different than and refining much more opportunity in our core market and it probably has to do with our differentiated south, we just are not there to pay high prices. And so that limits what will do. .

Our next question comes from the line of Mike Carrier with Bank of America. .

Josh, maybe first on your commentary, just on the shifting from deployment to realizations. I know trying to time or gauge realization activity is tough for you guys and us. But when I think about it may be Fund VIII funny and I look at the performance versus the seasoning, he is still relatively young.

How does that compare to maybe some of the past fund when we start to think about the potential that we could see healing cash realizations over the next two to three years?.

Yeah I think obviously and we have the new disclosure, you can see it, if the average life of our investment is 1.1 years, clearly we made a lot of money in the fund on the buy.

So as we've mentioned to you before, we have acquired the fund from between 5 and 6 times cash flow which is well south, like five multiples south, the private equity averages and about that same amount south of the public markets if you were to express the public markets in terms of EBITDA multiple.

So there are three ways to make money; in equity there's buying, right there they are right and there's adding value along the way.

Much of what we're doing in the portfolio and so a lot of our money, a bunch of the money, was made on the buy and now we're busy adding value and in many cases we’re building platforms unlike ADT, or we’re doing -- turning around company, all other fresh markets, or we’re repositioning and divesting certain things, Rackspace, many of these companies have been public and getting out of certain businesses and emphasizing other businesses.

And so the ultimate exit sometimes does require -- it does require a bit of seasoning and you need to do see -- not only if you can find the right, it’s great but then you need to do the active management of it. And so I think it is still early.

Having said that we are incredibly focused on monetizing the portfolio, because to a large extent we believe that we're heading into the ninth year of an economic recovery. Financing markets are appealing and equity markets are aggressively pricing things in most cases. And so we're doing everything we can.

A lot of what we've been doing in the early part of funding is doing these dividend recaps, right, which allow you -- in many cases the fact that you've already done some stuff and [deposits] have come down, the leverage levels have come down.

For as much less leverage our peers, I want to say it's mid three multiple of EBITDA, so that gives you some room to releverage it. And so we're going to do our best to pull as much money out of the portfolio as we can, as quickly as possible but to your point it is still young and a year is probably too early. And so that's what I would say to it.

So I don't think we're in full swing at by any means but we're also cognizant of the environment and we're going to lean into returning capital to our investors. And it doesn't really make sense to compare it back to -- I mean unfortunately to compare back to ’07, ’08, or ’06, or whatever. I mean ’07 literally was 60% distressed for control.

This is 5% distressed for control. So this portfolio we put together in a wholly different market. In distress for control you can buy get a one price and then if the market tries to sell it. Here a lot of what we're doing is managing and approving companies. And so your ability to move out of it so quickly is different. .

And then Mike, maybe just put a bit of context around the potential Fund VIII relative to the private funds. Appreciating that the construction is different, Fund VI created -- which was a $10 billion fund created about 270 of net carry for IPO after profit share. Fund VII which was a $14.5 billion fund created about 440 [ph].

And so if we can create a double on VIII then that's around $5 of net cash carry to come out over the next number of years. .

I really believe -- I would be really surprised -- I mean our average multiple is about 2.4x across all of our finds and just knowing the portfolio Fund VIII and I'm trying to be measured on the call, I would be -- I think two is a low estimate.

I mean obviously, if the recession hit or whatever, it might take us longer, but we're well on our way to that. And we've seen in five -- we've seen it be as high as three. So the range really – when you look at the range of our funds, the funds that were the toughest funds, are about two.

So six, which is pre-financial crisis before the EBITDA just took a huge hit, that was just about two. And the funds that have done well are approach three or even above three. And so that's how you get to the 2.4. So Martin is giving you appropriately, I think, the more conservative estimate. .

Our next question comes from the line of Ken Worthington of JPMorgan..

Hi good morning.

In terms of your other clothes and vehicles, if you could, can you talk about how they’re positioned in terms of raising new capital? Is the raising of capital likelihood or possibility over the next twelve months or so? And I was particularly interested in kind of where mid-cap stands and now I assume you can't comment on AINV but if you could -- if you were able to I'd be interested in your thoughts in AINV as well.

.

I mean, look, to start with mid-cap. Mid-cap -- we raise money when we need to raise money and obviously the middle market origination strategy is working and mid-cap is doing quite well, and our investors are quite happy.

And we're up to about 7 billion of assets and we have a capacity just with our existing equity and capital base to put another two to three billion of assets on the books which is how ultimately the fees that flow based on assets. And I think that we will raise money.

And I think that I would say that given the success of Athene, and I think this is validated by the recent fund raise with AGER, and people are happy -- our investors are happy with these permanent capital, these strategic capital platforms.

And so when we show up with an idea or when we show up and say okay, we need to raise more capital for our existing platforms, we've been met with a good reception, because we've done well by our investors. And so we would expect that to continue. So when, for example, mid-cap needs more capital I would expect they would be able to get more capital.

In terms of AINV, which is a public company, I would shy away from speaking for that company publicly.

Looking at Gary to see if he has anything to add but our general policy is not to really interfere or get in front of the disclosure of other public companies but certainly we certainly hope that they -- and we work with them disclose things appropriately. .

Yes, I think that's right. I don't think we want to speak on behalf of another public company. .

And you know our other public vehicles are all out there, they're smaller but certainly our commercial real estate vehicle which is the biggest of those has been successful in raising capital over time. .

And Athene continues to do exceptionally well, so this is sort of a question of where things could go wrong. Are there any capacity issues or size constraints for Apollo? So Athene is now at 73 billion, it's an acquisitive company.

If it were to do another big deal, Athene could be $100 billion – Athene could be a $100 billion for Apollo and like a heartbeat.

So are there any factors that would prevent or limit or inhibit the liability side for Apollo relative to Athene, if Athene keeps growing as has been the case?.

The answer is no because -- and just remember the relationship between Athene and Apollo. Athene is his own entity, it’s public. Certainly we own -- when all is said and done, between 10% and 15% of Athene, so we are a large equity holder of Athene. And we also receive fees from Athene for managing the assets of Athene.

And so from our point of view, as an interested shareholder certainly, it’s sensible growth from Athene’s point of view and we think they have a great Jim Belardi and the management team, they're quite good, it’s positive. As a shareholder it's also positive to the extent that we continue to manage a greater pool of assets for them.

So from our point of view, there's no real risk or concern about the size of Athene. And obviously Athene certainly has to do -- risk manage to do all the things that are good and match assets and liabilities and do all of the good things that other insurance companies do.

And we certainly from our vantage point are supportive and think that that's going on right now. .

Before we take the next question I just want to say we have somewhat a fairly lengthy queue, so if we could ask the next folks asking questions just limit up to one question, that’s be great. Our prepared remarks were a bit longer than normal just because we have a lot we want to share, thanks. .

Our next question comes from the line of Devin Ryan of JMP Securities..

Just a quick one here within credit, fee generating AUM slipped a little bit in the quarter, I think it was down $5.5 billion. But it also looks like $7 billion of AUM which was 250 basis points away from carry generating, which also looks like it came out of liquid and performing.

So I just like to get more detail on the downtick in the quarter and then any color on your outlook for I guess that business specifically, maybe ability to get that back into the green. .

Sure, Devin, this is Martin. So it was a drop in carry-gens. It's almost exclusively attributed to one fund which we call the credit fund, it's a performing one fund. And its structure is such that it has an annual reset on the incentive which means it has to -- it's pressed every year.

And so -- which we did last year and so it was sort of in carry at year end. It came up just shy of a quarter of a full year to promote for Q1. It has clearly the potential to step back in but it has to earn half a years of promote by the end of Q2. .

It is very close; I mean literally it's just shy of its hurdle and it could easily go -- tell us what the markets are going to do in Q2, Q3 and Q4. .

So just a little bit of mechanical dynamic, that's helpful thank you. .

Our next question comes from the line of Chris Kotowski of Oppenheimer. .

Yeah, I guess the realized carry at $155 million on private equity was more than we were looking for and a nice surprise. But I guess a couple of questions; one, you said out of Fund VIII it was mainly dividend recaps and I guess you touched on it a bit.

But is there more potential in Fund VIII to do -- to generate through dividend recaps or from here should we be looking mainly to sales?.

I think it’s going to be all of the above. I don't think we're out of the capacity -- I mean literally if you think about it right you're managing the overall leverage level.

And so at the portfolio the EBITDA is going up, and debt is being repaid -- you regenerate the ability to dividend recaps, plus this is only – it was like three or four companies out of, I don’t know, 25. We're not even close but look, I think as time wears on you'll see certainly us doing IPOs and selling more things.

But I think that we're certainly not out of capacity. .

And then just related to the 20 million of realized carry out Fund VII, I thought that was still in escrow -- and that it wasn't eligible for generating carry?.

Yes, so that relates to tax distributions that we received in the first quarter related to Fund VII activity last year. .

Our next question comes from the line of Alex Blostein of Goldman Sachs..

Question for you guys around the credit business and just kind of the carry that's sitting there right now. So roughly $400 million I guess of gross carry, the bulk of that is sitting in a drawdown funds.

I guess given your comments around where we are in the credit cycle in general of being likely more of a net seller than a net buyer, how should we think about I guess the pace of monetization of the carry specifically from credit side of the business? The private equity side I guess is a little bit more clear. .

Yeah, I'll take a crack, it's hard to frame, Alex. So in the ground today in credit we have $28 billion of money that's in carry and that associated with that is the $400 million gross carry receivable you referenced. In addition to that, there is a trajectory around how and when that gets monetized.

In addition to that there's dry powder of about 10, and with fund raising and so that will be on top of that. If you look back in the last couple years the realized credit carry has been quite volatile. Last year it was $150 million. In the first quarter we clipped about 20-odd, so I would say it's likely to be lower than last year.

But it really depends on the market environment and putting money to work and raising new capital as much as it does monetizing that one event. .

Our next question comes from the line of Craig Siegenthaler of Credit Suisse..

Thanks. What are your updated thoughts behind C-corp conversion and what would you need to see from tax reform in order to make the conversion –.

We were just like smiling because we knew -- we wouldn't get away with that one. Look, we strictly try not to speculate, I mean obviously the lower the corporate rate goes, obviously the reason for this structure is to avoid double taxation, and to allow for carried interest to flow to investors directly, which I guess is the same thing.

The lower the corporate rate goes, the less effective the structure is and you weigh it against the complexity of having the structure. So I think that certainly if the tax -- Trump tax plan as we understand it in the public comes to fruition, certainly we will be looking very hard at that.

But that's about all we can say at this point, because it's highly speculative what's going to happen. And secondly, there's a lot of details that matter that aren't out there. So it’s sort of very speculative but certainly the 15% rate is out there and you know that certainly makes us -- will make us look harder at the structure and in of itself. .

Our next question comes from the line of Chris Harris of Wells Fargo..

Thanks. As it relates to the balance sheet, you guys mentioned the possibility for M&A opportunities.

What is your philosophy there and what kind of things could you guys essentially be looking at?.

Yes, our philosophy is we look at -- I mean go back to your finance 101 class, we look at our cost of capital and then we try -- we look at whether an acquisition is accretive financially and then we look at the strategic fit with our platform in terms of either things that we -- teams that we think we can back and create funding for and or things that broaden -- will broaden our overall and be ancillary to our overall relationship with our existing investors.

So for example I think we said before that we're really small in real assets and real estate and that's an area that would make sense to add. Certainly in credit, there are lots of different parts of credit which are ancillary to our business where we could add.

And then I'd say the last thing -- that's sort of our philosophy on how we approach it both financially and strategically.

We've certainly been -- and as someone mentioned before, like we've brought in Gary Parr – we hired Gary Parr, he now works with us and amongst other duties that he has run strategy and we're taking a hard look at a lot of different things. The only thing I’d mention is that we generally shy away from cost driven acquisitions.

So in the investment world, not that we don't try to get cost but sort of buying something so that you can cut a lot of cost out of it. By and large our assets are people, that doesn't tend to work that well. So philosophically we're certainly going to look at opportunities where we can buy it well up and adds accretively to revenue.

There's not a lot of overlap in cost reduction. .

Our next question comes from the line of Gerry O’Hara of Jefferies..

Thanks for squeezing me in. Just circling back to AGRE for a moment.

Is that something that is -- it seems obviously it's regional in nature but is that something that we could potentially expect to see for other European countries or areas in that area just given the differentiation of strategies rule was, what have you? And also perhaps what you see is attractive in that particular market trade area – maybe you kind of start it there?.

Sure. So first of all, I'm not trying to be cute but it's AGER and the reason I am correcting you is that AGRE is Apollo Real Estate. So we're trying to make it wildly confusing to everyone, including ourselves. But in terms of AGER, yes, that's a pan-European platform.

The reason that we named it AGER was that we started with an acquisition that Athene made in Germany and they contributed that German asset to the pool, we raised €2.2 billion, we contributed that asset and so we now have a company. But certainly they're going to look at all kinds of different things in Europe and it’s a broad European platform.

What makes that attractive is that, that rates in Europe are near zero and very very low and that's putting tremendous pressure on insurance companies that have originated liabilities where they promised their insureds a certain rate of return in the life insurance business.

And so because rates have fallen, there's these legacy books of business that are very much hurting the profitability of the insurance companies and the capital ratios of the insurance companies in Europe.

And so they're looking for ways to raise capital and so we see it as an opportunity to be -- to buy things at very – buy books of liabilities at very very low rates that that give us sustainable liabilities. And so there's a big I’d say a restructuring going on in that industry that is providing an opportunity for us to in essence create some value. .

Our next question comes from the line of Michael Cyprys of Morgan Stanley. .

Thanks for squeezing me in here. Just wanted to come back to your points on the direct origination capabilities that, you mentioned Josh as a differentiator.

Just curious if you could elaborate on that a bit more just in terms of how you've been building out your direct origination capabilities of US, Europe, any sticks you could share maybe in terms of the size of the keep today versus a couple years ago? And just maybe you could talk a little about how you’re building that out currently than your peers, what's differentiated?.

Yes.

So I would say that certainly through -- there's Apollo, right and then there's related entity such as Mid-cap that -- and so I would say that when you – problem related entities whether it be feet on the street in terms of originating middle market loans, whether it be our ability to process structured credit and line up liabilities streams like CLO liability, structured real estate credit, whether it be in aircraft, finance, lease team where we can buy aircraft and leave some back or provide Bsing [ph] to earth.

So we have these capabilities – whether it be energy credit where we felt the capability to analyse different basins in terms of the geology and the actual natural resources themselves, like we're continually or whether it be in Europe our capability of offering insurance, products to insurance companies because of our knowledge and expertise in that area.

We're are and continue to be building out this ability to get out of the firefight with the central banks in terms of zero rates, and the public markets being affected by that. And so when we look at the public markets of credit, it's really -- it's really very very historic lows. And so we're trying to create alpha.

There's not -- our ability to life settlements, capability to buy insurance assets. You know, life insurance policies. So we have all these platforms across our credit business that increasingly are specialized in nature and providing this capability.

And when you add up all of the origination capability, both inside and outside Apollo where we have perpetual management contract sure in the hundreds. So I think that it's certainly as are greater than 100. I think it certainly is an advantage and I think that we're going to continue to invest and look for opportunities to grow that. .

Our final question comes from the line of Brian Bedell of Deutsche Bank. .

Yes, I think he dropped. End of Q&A.

And that does conclude the Q&A session for today. I'll turn the floor back over to Gary Stein for any additional or closing remarks. .

Thanks operator and thanks everybody for joining us today. As I noted previously, if you have any follow up questions, please feel free to circle back to Noah Gunn or me. .

Thank you. This does conclude today's conference call. You may now disconnect..