Not All Apollo Fees Were Created Equal

In 2007, CalPERS invested $600 million for around a 9% stake in Apollo Global Management. Per usual, it got help from then-unregistered placement agent ARVCO, which is run by former CalPERS board member Alfred Villalobos.

But this wasn’t a typical Apollo-ARVCO arrangement, in which Apollo would pay ARVCO 1% of the pension system’s capital commitment (above a certain threshold), according to documents released earlier this month by CalPERS. Instead, Apollo paid ARVCO $13.2 million over two installments, which worked out to approximately 2.2 percent.

Not only is this fee unusually high vis-a-vis industry standards, but it also breaks with a tradition of placement agents lowering their commissions for follow-on business with the same investor. Then again, Apollo also kept paying ARVCO to get cash from CalPERS, even after the pension system owned part of Apollo’s management company. There was nothing usual about this business…