Apollo CEO: 'We’ve had a soft landing,' and it will likely continue

Thank you. Thanks for having me. Appreciate it.

Very little. Very little. The way I go through it is you think about what's happening in the economy and what's happening in the US. Three years ago we decided to build infrastructure. There's no infrastructure opened. Two years ago, semiconductor plants. No semiconductor plants opened. A year ago, Inflation Reduction Act. None of those plants opened. We've been reshoring our supply chain. The US has been the largest recipient of foreign direct investment the last three years in a row. Something tells me we're ramping defense production. All of those things are stimulative to employment, and it does not surprise me. Everyone who wants a job has a job, which means it's very hard to dent the economy. Maybe financial markets, yes, but the underlying economy is strong.

I think we've had a soft landing. When rates have gone up 400 basis points and the wheels haven't come off the buses, I think that's the definition of a soft landing. Will it continue? I think so.

Look, interest rates, the level of interest rates always matter. I'd say it matters almost in reverse. I think investors kind of deceive themselves that they were good investors for the past decade rather than riding an era of very low interest rates. Look at what's happened in real estate, look at what's happened in other sensitive investments. You thought you were the best investor in the world, you moved to Austin, Texas, you bought all multifamily, it was going great. The changing cap rate has halved your investment, and now your 3.5% mortgage is being refinanced at 7.2%. You did everything right, you just didn't watch what was happening to rates.

Look, we are in a liquidity-driven, interest rate-driven, sentiment-driven market. I sometimes ask, particularly academics, do we even have price discovery anymore in US markets? It's not clear, especially when you look at what a hard time active management of equities has. People who have spent their whole lives becoming good investors, and they as an industry have failed to beat the market 93% of the time for 20 years. Did these people get stupider? No. But did the structure of markets change so that we have positive reinforcement of cyclical flows into index funds and other forms of passive investing? I think we have fundamental changes in market structure that we have not dealt with as a society yet.

Look, I'm not in the stock picking business. Very few people come in every day and try to buy 45 or 50 PE stocks. It's just not what we do. I look at the broader trend. We used to have 8,000 public companies, we now have 4,000 public companies. People think most of the action is in public markets. 80% of companies over $100 million of revenue and 80% of employment is in private companies. How do investors have exposure to private companies? The answer is they don't. Institutional investors have it through a product, private equity, but most investors don't have any exposure to private markets. We are just, as an investment world, dipping our toe into private credit. So if you think of the two big buckets that investors have, debt and equity, debt is going first. In debt, there are things like rating agencies that tell investors the level of quality between public and the level of quality between private. If investors can earn higher returns and have better diversification of private markets, or by adding private markets to a public portfolio, they'll do that. It'll take time. And equity, I joke that not only may they not own private equity funds, but they will own equity that is private. It's our job as an industry to create products that allow investors to come into this marketplace to get the benefits of higher returns and diversification.

Look, we are worldwide, it's not just the US. Everywhere in the Western world at least, we have aging populations, we have governments who are doing less, and we've had an era of very low interest rates. For the most part, people have not saved appropriately for retirement. How do we get out of it? Slowly. There's no magic bullet. You look at places around the world where they've done an amazing job, take Australia's superannuation funds. What's been the secret? The secret in part has been savings on an annual basis, matching from employers, but a big part of the return, the design of superannuation was to give public investors access to private markets under professional supervision. Contrast that to what we're doing in the US. We have between $12 and $13 trillion in 401(k) plans. What are these people invested in? They don't know. Well, I'll tell you, on the whole they're invested in daily liquid mutual funds and ETFs for 50 years. Why are they daily liquid for 50 years? I don't know. We haven't thought about it in a really long time. Giving people access to the totality of a marketplace, public and private markets, I do think is heading our way. For our industry, not just for Apollo, this is a very bullish thing. We have built a whole industry out of a very small bucket called alternatives. We are branching out now and taking over pieces of the fixed income bucket of our large investors, particularly the investment grade private credit bucket. It will not surprise me on the horizon to also think about equity across public and private markets, and not just in private equity fund format.

Look, it's hard to give you the endgame, but I say very tongue-in-cheek, unfortunately, the fight against anti-Semitism is a growth industry. That's what we're seeing right now. The protests we're seeing on college campuses, are they anti-Semitic? They are absolutely anti-Semitic. Are they anti-American? They are anti-American. They're actually anti-Western. We're thought of as these protests are leftist. I used to think of the left as liberal. Now the left is illiberal. Where is this going? I think the vast majority of professors at these universities, the vast majority of students, the vast majority of people in this country totally get that there is a way and a right to protest. People should have free speech, people should protest. But there is also a way to take over, to cause damage, to threaten, and to intimidate. This is a failure of leadership. You look at places like University of Florida, University of Texas, and Vanderbilt, where the leader came out and said free speech, yes, right to protest, yes, time and place appropriate. They don't have the problems that you have on other campuses where the leader was somewhat ill-defined in terms of the rights and the notion that we've been catering to a small group of people who hold extremist views. They're entitled to those extremist views. What they're not entitled to is to impose their will on the rest. So I do think we're getting a little bit of snapback here where people are just tired of it.

Look, we are a purchase price matters, value-oriented firm. The way value is created today is usually in places that are undergoing substantial change. Media as an industry, I don't have to tell you sitting at Yahoo, media is undergoing substantial change. The notion that you could come in and build on a great business and try to navigate through these turbulent times, I think is where we create value. We historically have been long investors in media. We've done it across almost every sector in media. Obviously right now we are invested in Yahoo, we are also invested in Legendary. By bringing along a respected industry partner, Sony, I think we look at this as just an interesting opportunity to create value in an industry undergoing change.

Total pleasure. Thanks.