Apollo earmarks $350 million to revamp software and open up private markets

The investment and what it targets

Apollo plans to spend around $350 million upgrading its tech stack, with a focus on tools that help investors see prices and transact more easily in private markets. President Jim Zelter told analysts Tuesday that part of the outlay will back the trading unit, which plans to offer more information on private credit and will be mostly centered in Austin.

"We will write off our software and eliminate the systems previously relied on as we update and take advantage of new technologies in a much faster way," Zelter said on a call following third quarter earnings. He added that custody and settlement will be done with partners, not in house, aiming to make buying and selling private assets feel as simple and familiar as possible.

Transparency push meets resistance

Last month, Apollo began publishing its own estimated daily values for assets across its $850 billion credit business. That step could nudge competitors to open up too, given worries over what those loans are actually worth within the $1.8 trillion private credit sector. Some peers are unhappy, arguing that more frequent marks cut against private credit's appeal of sidestepping mark to market swings.

"There are people who are resistant to change," Chief Executive Officer Marc Rowan said on the call. "The private market has benefited for a long time from managed volatility. Managed volatility fools no one." As Zelter put it, "We would not be able to do market-making without data," but there is still room to improve that data.

Better tools can help investors see opportunities others might miss. We're hosting our first ever investor livestream on 11/17 to show you how to use ChatGPT and Claude to invest like a pro, hosted by Briefs Finance CEO Jaspreet Singh. Save your seat.

Building the trading engine

In 2014, Apollo set up its trading arm, began selling larger slices of loans it had originated to outside investors, and started handling client buy-and-sell flows - essentially market making. It has been hiring talent from Wall Street banks and said it expects the amount traded to exceed $40 billion by year end.

Earlier this year, Apollo chose Austin as its second headquarters. The new hub will host much of the trading operation along with teams focused on new products, distributions, and the investing infrastructure used by both Apollo and its Athene unit.

The bottom line for investors

This is a sizable tech spend aimed at making private markets act a bit more like public ones - clearer pricing, smoother execution, and more data. It may also pressure rivals to lift the veil on private credit, a shift worth watching if your portfolio leans on that $1.8 trillion market. Separately, Zelter said plans are in motion to reshape executive pay to better align with shareholders over a longer horizon.

Learning how to use new technology can give investors a thoughtful advantage. On 11/17, our CEO Jaspreet Singh goes live for our first ever investor livestream on how to use ChatGPT and Claude to invest like a pro. Register to join him.