Hi everyone, I'm Nicolai Tangen, the CEO of Norges Bank Investment Management, the Norwegian sovereign wealth fund. And today we are joined by a true visionary in the world of finance, Marc Rowan, who co-founded Apollo Global Management, which is one of the most influential alternative asset management firms in the world. Now, we are the lucky owner of just under 2% of Apollo, which works out at just under one and a half billion dollars. Marc, thrilled to be here.
Great, thanks for coming. And hopefully you're a happy shareholder.
Marc, in 1984 you said, 'God, I'm just too late, all the money has been made.' You came out of business school. Now, a few years later, you have assets under management at Apollo of 680 billion and the market cap is more than 80 billion. So I think we can say that was not a very accurate statement.
Well, I think it was accurate because it reflected the business at the time. Not only did I say it in '84, I said it in '90 and I said it again in 2001. And the point being, in some ways I was too late for the business that had been done, but the interesting part of the job is it keeps changing. In 2008 we were 40 billion of AUM. In fact, almost every other large firm in our industry today was roughly the same size. And then 13, 14 years later, we're now up to over 700 billion of AUM. Something changed. It's clearly not as a result of our skill and talent. We had to be in the mainstream.
Well, skill and talent helps, right?
Well, look, the skill and talent is to make sure we're positioned with tailwinds behind us by positioning the business the right way. But fundamental change is ultimately what powered our business.
What does it take to start the firm?
It takes a little bit of luck. Look, I had spent the prior six years, from '84 until '90, mastering my craft, so clearly I knew something about business. But one has to be humble and actually accept that there's a fair degree of luck. Because I was actually quite happy doing what I was doing at Drexel Burnham. In some ways, the single best thing that ever happened to me was to be forced to make a change.
Marc, there's been a lot of focus on how you are replacing banks through direct deals with companies. Now, what kind of business are you in a way taking away from them or doing instead of them?
Well, I think it's actually a bit of a misnomer. The press likes to report on this notion of banks and investors fighting over private credit, but I think we have to start with a definition. What is private credit? For most people, it means levered lending or direct lending, which is a below-investment-grade activity. And yes, it is true that the vast majority of levered loans used to be originated in the banking system, and now they are split between being originated in the banking system and being originated in the investment marketplace. And yes, we are engaged in that business, but it is a very small part of our business. I think generally financial pundits and other market participants are missing the bigger trend. To me, private credit encompasses almost every asset on a bank balance sheet: a loan to a customer private, a loan to a company private, a loan to a project private, and so on. And the vast majority of private credit is investment grade. So we look and say, are we replacing the banks? Generally not.
Absolutely. Now, we are only in the public market, right? It's not in our mandate to be in the private market. What are we losing out on?
You're losing out on 80% of the investable market. And if you think about it, public markets do not work the way we think they work. In fact, nothing works the way we think it works. So I look at public markets today and I ask really fundamental questions. Like, in the US, which is the most developed of the capital markets, do we have price discovery in the short term? I don't think so. Think about what's happened in US markets: 80% of volume in the S&P 500, 60-plus percent of the market passive, 10 stocks 39% of the S&P, four stocks have determined basically profitability for the last four years. One stock is larger than every public market other than Japan. That's the universe you're going into.
So you're saying that the public market is very risky?
