Apollo's Jim Zelter on Q2 results: ‘It was a terrific quarter’

Apollo Global Management co-president, CIO and board member Jim Zelter speaks to Yahoo Finance’s Brian Sozzi about the private equity firm’s most recent quarterly results, as well as the recently announced sale of Lumen’s U.S. telecom assets, the Verizon Media deal, the SPAC market and the state of the economy.

Video transcript

BRIAN SOZZI: A solid second quarter out this morning from Apollo Global Management. The alternative asset manager saw record fee-related earnings and strengthen in its key credit business. Apollo also continues its year of aggressive deal-making, announcing a $7.5 billion deal for a large chunk of assets from telecom Lumen Technologies. I spoke to Apollo Global Management company president and CIO Jim Zeltzer earlier today. Take a listen.

JIM ZELTER: It was a terrific quarter. You know, I think if you look at our full announcement and the report, you'll see that not only to be executed across the business in terms of very, very strong returns, exceptional deployment, and exceptional fundraising from all of our channels, a lot of strategic transactions were done in the quarter. We grew some origination platforms with our purchase and our involvement with Victory Park. And at the firm level what we're doing in terms of motive, in terms of fintech partnership, really growing that front end and really bringing technology throughout the whole firm, what we're doing with foundation homes over in the UK in terms of buy-to-let financing.

So really, on the execution front, great strides. And on the strategy front, growth and very thoughtful use of our balance sheet for acquisitions. So really, a two-pronged attack on the opportunity in the marketplace.

BRIAN SOZZI: Where are you finding opportunities right now? And I ask that because valuations are at record highs. But seemingly once a week or multiple times a week, Apollo's out they're making pretty big deals.

JIM ZELTER: Well, you're right, and I think that we have been able to find areas-- I mean, certainly, if you look at the marketplace, valuations are quite strong. But the economy is strong. It's not a surprise. You know, the economic numbers that are coming through are quite strong.

But what we've done is we've just gone back to our original game plan and even the transaction we announced yesterday with Lumen-- Lumen Technologies-- really using our skills of corporate carve-outs and structuring to do in a way that's going to help build and rebuild the digital divide in America. So Lumen, the old CenturyLink, we bought a carve-out of, you know, 6.5 million customers across the Midwest and the East and the Southeast. It will really enable us to put a lot of cap-ex in that business and take it from a copper-- old copper business to a digital fiber network today. So using our skills in that-- obviously, our pending acquisition of Yahoo Finance we're quite excited about but then a variety of other acquisitions in the quarter that we found. So again, using the time-tested strategy of value, complexity, corporate carve-outs, and being thoughtful about how we position our company towards, you know, value but growth, which we've been able to find a path to do so.

BRIAN SOZZI: And since you mentioned it, it should be noted that Apollo Global Management is in the process of acquiring Verizon Media, which is Yahoo Finance's parent company. Jim, since you mentioned it, is that deal still on track to close soon?

JIM ZELTER: Very much so, very much so. Looking forward to it. Tremendous, tremendous workings between two organizations. But yes, all in line and all on pace as projected.

BRIAN SOZZI: What is your-- what's your vision for those series of assets?

JIM ZELTER: Well, you know, we have a variety. You know, certainly, those assets in particular are in our private equity business, which has really been the traditional hallmark of the firm and really embeds in our DNA. But you know, certainly, we believe that those are tremendous assets in terms of the legacy brand, the legacy identity. And infusing cap-ex and fusing management with the existing team but also some new folks, we believe we can create a tremendous amount of value for our investors, which are, you know, the pension funds and endowments of America and around the globe. So a time-tested strategy. We're confident when you buy landmark assets like that that the performance will come through.

So that's just one of many. You know, certainly, we're very active in the whole home-building, what's going on with the, you know, building of homes in America, but also the financing of homes in America. The whole-- you know, household formation, that's a big theme for us these days, certainly. You know, certainly the whole, you know, digital, in terms of not only what we've done yesterday with Lumen, but first digital in terms of really creating more of an infrastructure in the west on that area.

So from our perspective, you know, the ability for us to find areas of growth, yes, the economy's growing. Yes, technology is taking a bigger part of our overall economy, but we're doing it with the Apollo playbook in hand. And also, I would also mention what we did with Motive, you know, that was not only to help us identify and think about investments in the fintech space for our funds, but really embed financial technology throughout the firm in everything we do.

You know, Apollo is a great financial services investor. We have for a couple of decades-- three decades. But at the same time, we've got to-- we need to make sure that we understand what's going on with the democratization of finance, how the markets are changing. And so by doing what we did with Motive, in terms of that strategic JV, really in terms of our fundraising, our product creation, our distribution, but also our insurance businesses and our regular credit businesses, we believe there's a lot that they can add to our playbook and our toolbox.

BRIAN SOZZI: Is-- Jim, is Apollo still long the economic recovery? You-- I'm sure you've seen the stories, hopefully on Yahoo Finance, peak economic growth, earnings growth starting to slow down a little bit in the back half of the year, lots of concerns about the Delta variant and its impact on the economy. How do you see it?

JIM ZELTER: Well, we-- listen, we are along the US, and we are long on global corporate business and the consumer. In the US, you know, I'll just add, it was really-- it was a, you know, exceptional quarter for the economy. The macro data continues to improve. And if you look at where the consumer is, you know, it's in strong shape.

So you know, the big question in the macro right now is the 7 million jobs. And the Fed has convinced folks that they have a view that this is really a temporary inflation blip to the economy. But we are long the US and we are along the consumer, and we feel very good about the high-quality businesses that we have backed and have invested in equity and in debt across our platform.

BRIAN SOZZI: Apollo is getting ready to launch a new fund in 2022. Tell us about that.

JIM ZELTER: Well, you know, certainly, on the legs-- on the back of what we announced yesterday, in terms of our flagship Fund IX, a $25 billion fund with the acquisition yesterday, which we announced, of Lumen, that is going to put us around 73% committed or invested. And that's a number that we would think-- that lead us to believe that in the first half of 2021-22-- excuse me-- we will be launching a Fund X. To our institutional investors. And we don't have a specific date but in the first part of the year.

BRIAN SOZZI: Fair enough. And lastly, before we let you go, Apollo has played a big role in many SPACs that have come to market. How do you see that market evolving over the next 12 months?

JIM ZELTER: Well, you're right. We have found ourselves to be a key player in being a sponsor, being a provider of capital on the equity side, and also, you know, selling businesses to SPACs as well. So in the complex ecosystem, we've had a seat at every table. It's going to continue to refine. It's going to continue to evolve. It's a-- it is a tool for the future, no doubt.

And from our perspective, our ability to be able to add value at each point along the ecosystem-- I continue to believe we'll still sell companies to SPACs. I believe we'll still provide, you know, pipe capital and equity capital and debt capital to competitors SPACs. But there will be a shakeout and-- as there has been going on in the last couple of months amongst the pipe market on the equity side. But in the refinement and the evolution of that product, we will continue to be a significant player.