Reuters: Apollo’s Second-Quarter Earnings Soar on Fund Values

(Reuters) – Private equity and credit investment firm Apollo Global Management LLC (APO.N: Quote, Profile, Research, Stock Buzz) on Thursday reported a tenfold increase in second-quarter profit as the value of its funds jumped, and it announced its highest dividend since it went public in 2011.

A stock market rally and record-low interest rates in the debt markets have allowed private equity firms such as Apollo to lucratively cash out on some of their investments and have buoyed the value of assets they still hold.

The results were a stark contrast to the second quarter of last year, when Apollo’s earnings fell 66 percent because of market jitters about uncertain global economic growth and Europe’s sovereign debt crisis.

Apollo’s private equity portfolio, which drove most of increase in fund values and cash distributions, appreciated by 5 percent during the second quarter of 2013 compared with 1 percent a year ago.

Economic net income after taxes, which takes into account the mark-to-market value of Apollo’s funds, rose to 50 cents per share from 5 cents a year earlier. The results met the analysts’ average estimate, according to Thomson Reuters I/B/E/S.

Cash from carry, Apollo’s share of the profits of the funds it manages, jumped to $840.5 million from $56 million as it sold shares in companies including Realogy Holdings Corp (RLGY.N: Quote, Profile, Research, Stock Buzz), Charter Communications Inc (CHTR.O: Quote, Profile, Research, Stock Buzz), LyondellBasell Industries NV (LYB.N: Quote, Profile, Research, Stock Buzz) and Evertec Inc (EVTC.N: Quote, Profile, Research, Stock Buzz).

“The bigger story was realized carry which, at over $840 million, beat our estimate by over 35 percent,” Wells Fargo senior analyst Christopher Harris wrote in a note.

Assets under management totaled $113.1 billion at the end of June, compared with $114.3 billion at the end of March, as Apollo returned money to its investors.
“During the quarter we raised nearly $7 billion of new capital across all of our business segments and we generated more than $7 billion of realizations for our investors,” Apollo Chief Executive Officer Leon Black said in a statement.

Although credit assets, such as mezzanine debt investments and collateralized loan obligations, account for 55 percent of Apollo’s portfolio, it was private equity that delivered 88 percent of the cash it received from carry in the second quarter, underscoring the earning power of corporate buyouts in times of strong equity markets.

Apollo said its latest flagship private equity fund, Apollo Investment Fund VIII, had received commitments of about $8.4 billion from investors as of Thursday. The fundraising target is $12 billion.

Apollo declared a second-quarter distribution of $1.32 per share, up from 24 cents a year earlier.

New York-based Apollo was founded in 1990 by Black and former Drexel Burnham colleagues Joshua Harris and Marc Rowan, and completed an initial public offering in March 2011.