📰 Apollo is Ready to Dance on Banking's Grave & Plans to Double Assets by 2029

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Estimated read time: 4 minutes

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Apollo’s new partnership with Citigroup marks a major shift in the financial landscape, signalling a potential handover of influence from traditional banking giants to private asset managers/private equity firms. This deal is more than a collaboration—it's a clear sign that buy-side firms like Apollo are becoming the dominant players in modern finance.

Here’s the article. Scroll down to read key takeaways and commercial implications on the topic.

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📰 Apollo is Ready to Dance on Banking’s Grave

TL;DR: Apollo's recent deal with Citigroup to finance $25bn of leveraged loans highlights the growing influence of private asset managers. While banks like Citi were once the leaders, regulatory constraints post-2008 have shifted the balance. Apollo, leveraging its flexible asset management model, is now positioned to become a dominant financial force. The partnership and Apollo's ambitious growth goals underscore a potential passing of the torch from traditional banking to alternative asset management.

Key Takeaways:

1. Apollo’s Ambition: Apollo aims to transform into a “next-generation financial services business,” doubling its assets under management to $1.5 trillion.

2. Banking’s Decline: Citi, once a financial juggernaut, has seen its market cap fall, signalling a waning dominance of traditional banking post-2008.

3. Shift in Power: Regulatory restrictions have limited banks’ investment capabilities, allowing private asset managers like Apollo to step into their role.

4. Strategic Partnerships: Apollo’s collaboration with Citigroup, focusing on leveraged loans, showcases its ability to capitalise on bank connections and expand its reach.

5. Future Growth: With diversified income streams, Apollo expects to achieve a market cap of $135bn by 2029, solidifying its position in the financial sector.

Commercial Implications:

1. Asset Managers' Growing Influence: With regulatory pressures limiting banks’ capacity to take on balance-sheet risk, private asset managers like Apollo are increasingly filling the gap, reshaping financial markets and deal-making.

2. Erosion of Traditional Banking Dominance: Citi’s fall from its mid-2000s peak, as contrasted with Apollo's rise, illustrates how regulatory constraints have shifted the balance of power from banks to asset managers.

3. Increased Private Credit Activity: The Apollo-Citi deal highlights the booming demand for private credit, driven by the high demand for leveraged loans in acquisitions and mergers.

4. Potential Challenges: While Apollo benefits from expanding into banking-like activities, its reliance on private markets brings challenges, including maintaining long-term liquidity and managing risks in volatile markets.

5. Market Valuation Shifts: If Apollo meets its growth targets, the firm’s valuation could double, signalling a continued rise of asset management firms over traditional banks in shaping the global financial system.

Example Interview Question & Answer On Today’s Article

Question: How has Apollo’s partnership with Citigroup reshaped the dynamics between traditional banking and private asset management?

Answer: Apollo's partnership with Citigroup exemplifies the growing influence of private asset managers in areas traditionally dominated by banks. Regulatory constraints have forced banks to limit their investment activities, allowing firms like Apollo to step into more aggressive financing roles. By leveraging their flexibility and access to vast amounts of capital, private equity firms like Apollo are positioning themselves as critical players in deal-making and investment, reshaping the financial landscape by capturing market share from banks constrained by regulatory limitations.

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