Apollo eyeing $18.5 bln for next flagship fund

  • Apollo Investment Fund IX seen as ‘similar size’ as predecessor
  • Firm sees wrapping up Fund IX capital-raising in 2017
  • Apollo doubles size of Apollo Natural Resources fund

Apollo Global Management said it expects to raise about $18.5 billion for its latest flagship fund, beginning in the current quarter and wrapping up next year.

Apollo Investment Fund VIII, which closed in January 2014, was about 65 percent committed at the end of September, clearing the way for efforts around Fund IX, the firm said.

Josh Harris, co-founder and senior managing director at the firm, said Fund VIII maintained an above-average investment pace, reflecting deal flow that has been in the works over the past couple of years despite pricey buyout valuations.

Apollo has “maintained our value-oriented investment discipline through this period of heightened activity,” Harris said on the firm’s third-quarter analyst conference call on Oct. 28. “The average creation multiple of Fund VIII remains at less than six times adjusted EBITDA, significantly below industry averages.”

The firm assumes Fund IX will be sized similarly to the nearly $18.5 billion raised for Fund VIII, Harris said.

Overall, the firm has deployed more than $12 billion thus far in 2016. It’s on pace to deploy more capital in 2016 than in any other year in the firm’s history, Harris said.

In the third quarter alone, the firm closed deals to buy Diamond Resorts, Outerwall, Amquip and Maxim Crane as well as Constellis, a private security company. Its acquisition of Rackspace closed Nov. 3.

All told, Apollo generated more than $7 billion in capital inflows in the quarter, including $3.5 billion in new assets for Athene, its insurance unit.

Apollo raised $1.1 billion for Apollo Natural Resources Partners Fund II, bringing total commitments to the fund to $3.4 billion, Harris said. That’s double the size of Fund I. Apollo expects to wrap up that pool in this quarter.

On the credit side, the firm said it raised $400 million for its latest Financial Credit Investments fund series. It expects to pull in about $1.6 billion to match its predecessor fund.

It’s also raising its third European Principal Finance Fund, which buys assets and businesses from financial institutions in Europe. Apollo expects the third fund will meet or exceed the $3.4 billion taken in by the firm’s predecessor. A first close on the pool is expected for Q4.

Third-quarter economic net income at Apollo more than doubled to $230.7 million from $104 million.

Action Item: Apollo Q3 results: http://ir.agm.com/phoenix.zhtml?c=214560&p=irol-newsArticle&ID=2217067

Apollo Global Management Chairman and CEO Leon Black (left) takes part in a panel discussion at the Milken Institute Global Conference in Beverly Hills, California, on April 30, 2013. REUTERS/David McNew