Instead of taking more credit risk, Apollo leverages the long-term, stable nature of its insurance liabilities (8-9 years on average). This "secret asset" provides the flexibility to invest in complex or less liquid assets, capturing an "excess spread" unavailable to institutions like banks with short-term funding.
Related Insights
When high-yield bonds yielded only 4.5% in late 2021, Apollo abstained, viewing it as poor risk-return. Because they invest their own capital heavily alongside clients, they have the discipline to sit out popular but overpriced markets, even if it means forgoing AUM growth that competitors chased.
Apollo often becomes the largest investor in its own funds, using its retirement services arm and balance sheet. This aligns interests by ensuring the firm experiences the same financial outcomes as its clients, which builds significant trust and demonstrates high conviction.
Eagle Capital's competitive edge isn't just stock picking; it’s built on 'duration'—a 35-year history, 5+ year holding periods, and long-term clients. This structural stability attracts top talent and creates a flywheel effect for sustained success in an increasingly short-term world.
Apollo's foundational private equity strategy—seeking value, being contrarian, and investing flexibly across the capital structure—was not siloed. This single philosophy of maximizing return per unit of risk now guides every investment decision across their entire platform, including credit and insurance.
With half its AUM being its own captive insurance capital, Apollo's mindset shifts from a third-party manager to an owner-investor. This changes the client conversation from "here's a new product" to "here's what we're investing our own money in, join us." This deep alignment builds significant trust with LPs.
Eagle Capital's competitive advantage stems from a structure designed for long-term thinking. This includes a multi-decade history, long-term client relationships (avg. 10 years), and a diversified client base. This "duration" allows the firm to invest with a longer time horizon than competitors, which is a growing differentiator.
This concept quantifies a reasonable time horizon for any asset, including stocks, by measuring its sequence of returns risk. It allows financial planners to build institutional-style, liability-driven portfolios for individuals by matching assets to specific future goals.
The firm's core belief, "purchase price matters," reframes the concept of "toxic assets." Any asset, no matter how distressed, can become attractive if the price is right. This mindset allows the firm to act decisively during market dislocations when others are fearful, capitalizing on mispriced complexity.
A steep yield curve makes fixed annuities more attractive for consumers. Life insurers sell more of these products and invest the proceeds into spread assets like corporate bonds, creating a powerful, non-obvious demand driver for the credit markets.
Apollo entered the insurance market by identifying a post-GFC niche in guaranteed products (annuities), realizing it was essentially a spread-lending business they could master. This opportunistic move, not a preconceived plan, evolved into a half-trillion-dollar cornerstone of their firm.