Apollo Global Management Investor Day Presentation Deck
Structured Credit Terms Have Changed Since the Financial Crisis
PRE-CRISIS (1.0)
Pre-2008 Mortgage-Backed Securities (MBS)
Subprime properties with de minimis value; 'synthetic' or
'derivatives' used rather than holding underlying bonds
Securitizations of securitizations (i.e. CDO²)
EXAMPLE
Collateral
Leverage on Leverage
Event of Default Triggers
Diversification
Market Participants /
Investor Base
Asset Liability Management
Funding
Other
Market Value-based with limited buffer
Concentrated, e.g. in highly cyclical residential real estate
properties
Leveraged investors, including structured investment
vehicles (SIVS), Wall Street balance sheets, and hedge funds
Long-term assets funded by short-term liabilities (e.g.
commercial paper) creating roll risk
Permitted greater leverage, in many cases 20x+
with fewer risk constraints
Relied on ratings agencies; relatively little direct diligence
performed
Source: Federal Reserve Stability Report. Reflects Apollo views.
APOLLO RETIREMENT SERVICES BUSINESS UPDATE 2022
POST-CRISIS (2.0/3.0)
Collateralized Loan Obligations (CLO)
Collateralized by first lien senior secured bank loans;
always overcollateralized
More conservative, limited leverage
Cash Flow or Par Value requiring significant impairment
Forced diversification, 10% max per industry, and
1-2% max per obligor
Long-term asset managers, including insurance companies
and pension funds (i.e. 'real-money')
Funding sources matched to assets
Documentation more investor friendly, shorter trading
period during which managers actively manage loan
portfolio, limiting extension risk
Actively managed/diligenced by managers with real
"skin in the game"
88View entire presentation