Apollo Global Management Inc. is seeking to raise over $5 billion for a new evergreen fund focused on investment-grade opportunities originating from its high-grade capital solutions business. The fund, known as the Total Return Investment Grade fund, will co-invest alongside Apollo’s Athene insurance arm and target institutional investors. It will offer investors periodic liquidity with certain limitations. The fund’s portfolio will also include high-grade asset-backed securities.
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Apollo’s Investment-Grade Strategy: Seeking Higher Yields
Apollo highlighted during its October investor day that this strategy has the potential to outperform the average investment-grade corporate bond yield by approximately 200 basis points. This enhanced return is attributed to the yields generated by Apollo’s IG Capital Solutions Business, which specializes in providing customized financing solutions for companies seeking to increase their debt levels. This new investment-grade fund will be integrated into Apollo’s broader multi-credit strategy, which also encompasses a non-investment-grade fund.
A key element of Apollo’s approach involves strategically placing investment-grade products originated by its capital solutions business onto the balance sheets of Athene and other third-party insurers. These institutions typically require investment-grade rated assets to meet their investment mandates. This dynamic creates a synergistic relationship between Apollo’s origination capabilities and the demand from insurers seeking higher-yielding, investment-grade assets.
Capitalizing on Corporate Investment Needs
Over the past year, Apollo has underwritten $18 billion in investment-grade deals for prominent companies including Air France-KLM, Intel Corp., Vonovia SE, and BP Plc. The firm anticipates significant long-term demand for investment-grade financing, projecting that corporations will require $75 trillion in capital expenditures and investments over the next decade. This demand spans various sectors, including energy transition, digital infrastructure, power, and utilities. Apollo is positioning itself to capitalize on these opportunities through its specialized investment-grade strategy.
Conclusion: Apollo’s Strategic Focus on Investment-Grade Opportunities
Apollo’s pursuit of a $5 billion investment-grade fund underscores its commitment to generating attractive returns in the fixed-income market. By leveraging its capital solutions expertise and the demand from institutional investors, Apollo aims to capitalize on the growing need for investment-grade financing across diverse sectors. The firm’s strategic alignment with Athene and its focus on originating high-quality deals positions it to deliver compelling risk-adjusted returns for its investors.
