By Chibuike Oguh
(Reuters) -Apollo Global Management Inc posted a 52% jump in fourth-quarter distributable earnings on Friday on the back of strong growth in management and advisory fees in its credit business and said it was not worried about interest rate rises.
The New York-based firm said its distributable earnings, which is cash available to pay dividends to shareholders, rose to $483 million in the three months to Dec. 31, up from $317.4 million a year earlier.
Apollo shares were trading down 2.4% at $68 per share in early afternoon in New York after the earnings fell short of many analysts' expectations. Apollo's distributable earnings per share of $1.05 was slightly lower than the average analyst estimate of $1.10, according to financial data provider Refinitiv.
While Apollo capitalized on strong markets at the end of 2021 to cash out on some of its investments, it did so at a slower pace than its major peers. It generated $4.2 billion in proceeds from exiting positions in the fourth quarter, down from $8.8 billion in the prior quarter.
Blackstone (NYSE:BX) Inc, Carlyle Inc, and KKR & Co (NYSE:KKR) Inc have reported record fourth-quarter earnings that outperformed analyst estimates.
The equity segments of these firms were a major driver of their performance. Apollo, on the other hand, generates most of its earnings from its credit business, where assets outnumber those in its equity divisions by a factor of three to one.
Apollo Chief Executive Marc Rowan said the firm was well-positioned for an expected rise in interest rates because its credit business was not dependant on borrowing costs remaining low.
"The way we have earned excess return is through origination or taking some amount of liquidity risk rather than subordination risk, credit risk or duration risk," Rowan said on Apollo's earnings call on Friday.
Apollo said it deployed $34.6 billion on new investments in the fourth quarter, mostly in its credit division. Its fee-related earnings reached a record $309 million.
Corporate credit and structured credit funds gained 0.9% and 3%, respectively, while the private equity portfolio gained 5.2%. Blackstone, Carlyle and KKR reported appreciation in their private equity funds of 4.8%, 6% and 7%, respectively.
Under generally accepted accounting priniciples (GAAP), net income fell 45% to $234.4 million, compared with $425 million in the previous year, owing to a drop in investment income and a nearly threefold rise in its compensation expenses.
It booked about $1 billion as a one-time, non-cash charge from a previously announced plan to replace carried interest payments to executives with bumper stock awards.
Apollo's total assets under management rose 3.4% to $497.6 billion, driven by growth in retirement services clients in its Athene franchise and strong fundraising. Its unspent capital stood at $47.2 billion at the end of the quarter.