Rowan explains Athene's growth is limited by assets that earn spread, not by capital or liabilities.
“The growth in the business is not limited by capital. It is not limited by liabilities. It is limited by assets, because it only makes sense to grow if you can earn spread.”
Rowan declares this the golden age of annuities given the money flowing into retirement services.
“Amazing amount of money flowing into retirement services, particularly annuities. I would say the golden age of annuities,”
Rowan says institutional investors prefer locking in 5% tax-free returns after a decade of low rates.
“They prefer 5% to 2%. It's no more we can make it really complicated, but when they're they've had a decade of very low ability to provide for retirement income, all of a sudden, can lock in 5% plus tax free for the next decade.”
Rowan credits Australia's superannuation success partly to giving public investors access to private markets under supervision.
“But a big part of the return, superannuation, the design of it was to give public investors access to private markets under professional supervision.”
Rowan questions why $12-13 trillion in 401k plans are daily liquid for fifty-year investments.
“What are these people invested in? They don't know. Well, I'll tell you, on the whole, they're invested in daily liquid mutual funds and ETFs for fifty years.”
Rowan explains Athene's diversification strategy of taking 25% of everything Apollo originates rather than 100% of anything.
“Athene does not want a 100% of anything that we originate. They wanna be a diversified investor. They want 25% of everything and a 100% of nothing.”
Rowan critiques $12-13 trillion in 401k accounts being entirely in liquid S&P index funds.
“What do they own. They own daily liquid stock index funds generally S and P for fifty years.”
Rowan says Australian superannuation with private market access delivers 50-60% better outcomes.
“The returns have been nothing short of spectacular. Outcomes for investors can be not a little better 5060% better.”
Rowan predicts a change in administration will introduce illiquidity into 401(k)s, creating substantial industry demand.
“It's my belief that if we have a change in administration, we will have in a very short period of time illiquidity introduced into 04/2001 ks.”
Rowan criticizes forcing $12-13 trillion in 401(k)s into daily liquid index funds for fifty-year periods based on flawed assumptions.
“we have 12 to $13,000,000,000,000 in 04/2001 and we're forcing these really long term investors to own daily liquid index funds for a period of time, fifty years.”
Rowan predicts a new administration would quickly allow illiquid investments in 401(k)s, creating substantial industry demand.
“That will not just benefit Apollo, that will be another source of demand for the industry of a magnitude that will be quite substantial.”
Rowan claims Apollo's private markets plus guaranteed income offering is 60% better, not just 5-10% better.
“the outcome that we can offer with access to private markets and guaranteed income is not 5% better or 10% better, it's 60% better.”
Rowan defines Apollo's role as asset origination, creating risk that doesn't exist in traditional markets.
“Our role is to originate the assets. If we originate good risk that offers excess return per unit of risk, we will prosper, and we will have lots of buyers for our product, our own balance sheet, funds, individuals, institutions, insurance companies, four zero one ks, and so on.”
Rowan warns that ten companies dominate the S&P, joking the U.S. retirement system is essentially levered to NVIDIA.
“We have 10 companies that dominate the S and P. We've essentially, as I sometimes joke, we've levered the entirety of the retirement system of The U. S. To NVIDIA.”
Rowan argues an extra one percent compounded return in 401(k) investments results in 50% to 100% better retirement outcomes.
“And if you go to the extreme and you take retirees, for instance, in four zero one k, an extra percent compounded over the duration of how long you're going to be in there is a 50% to 100% better outcome by having better investments.”
Rowan explains banks excel at short-term lending while Apollo excels at long-term lending backed by retirement liabilities.
“And if you think about people like us, we borrow really long because we back retirement liabilities. And institutions, pension funds, endowments, sovereign wealth funds, they borrow really long.”
Rowan says Athene's exposure to levered lending is 0.4% and software exposure is 0.1%.
“Our exposure to levered lending, which people sometimes call private credit is de minimis. Rounds closer zero than to 1% came in at 0.4%. Our exposure to software, 0.1%.”
Rowan completes list of demand sources including traditional asset managers and 401(k)s.
“of our institutional clients, plus traditional asset managers and plus four zero one ks and DC.”