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October 24, 2018  

Apollo Offering Credit Tail-Risk Protection

Apollo Global is developing a product to protect investors against severe deteriorations in credit-market conditions.

The Apollo Tail Convexity Strategy would be available to holders of the New York firm’s separate accounts, but not as a commingled fund. It would aim to produce big profits should those customers’ debt-focused portfolios experience extreme declines in asset values, likely with an eye toward the effects of rising interest rates.

Of the $269 billion that Apollo was running on June 30, the firm’s credit-product business accounted for $183 billion — making it the world’s biggest alternative-credit manager. Its holdings include senior loans and bonds, mezzanine debt, distressed assets, life settlements and mortgage products.

Across its various businesses, Apollo was running $23 billion in separate accounts at midyear. It typically works with large clients, including major pension systems and sovereign wealth funds.

Apollo also runs hedge funds that had a total of $7 billion under management as of June 30 — mostly in Apollo Credit Strategies Master Fund and Apollo Credit Master Fund. The blended net return for those two vehicles was 2% in the first half, 5% in 2017 and 11% in 2016. The return was roughly flat in 2015.