YouSaid · the spoken record

Marc Rowan

lines on the record: 76
first: 2024-03-06
most recent: 2024-03-06
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Those four products today we take as mainstream products. Why do we expect that 15 years from now or 20 years from now, the same four products will be as dominant? We will end up with a new set of products and a new set of markets that reflect differing market conditions and different regulatory conditions and different conditions of financial institutions. It's just change.”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“Think it's clear that the largest companies in the world have access to both the banking system and to the investment-grade bond market every day. Medium-sized and smaller companies, no matter how creditworthy, have less access to the banking system and have virtually no access directly to the bond market. And so they increasingly will come through intermediaries. Some of that activity is below investment grade and speculative. That's a perfectly fine business. It's not primarily the business we're in. Some of that business is investment grade and secured, and that is primarily the business that we are in. And so I don't think it's better or worse. I think that we're just looking at evolution. I'm constantly reminded that financial services is not a status quo business. I go back to when I started, beginning a high-yield bond market, not a lot of high-yield bonds, no levered loans, no ETFs, not a lot of securitized product.”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“That I'm talking about for private credit is $40 trillion. Everything that's on a bank balance sheet is actually private credit. Think about that loans to companies, private credit, loans to consumers, private credit. We haven't yet gotten to a more sophisticated view of the market where private can be AA, just less liquid. Public can be triples fee, just more liquid. There is nothing inherently credit sensitive about being public or private. It's just differing degrees of liquidity.”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“It's not a question of market fair. This is when you grow up in a world and private is perceived as risky, insurance companies have always been investors in private placements. It's just the size of the traditional private market has been very, very small. And so a small portion of their asset, so they found themselves invested primarily in public assets. Because 20 years ago, public was safe and private was risky. Well, the world we're in today does not look like that. Even the term private credit, they're just two English language words that sound like they mean something. But for the most part, they mean nothing. In the popular press, people use private credit to refer to a very small sliver of a market. They refer to private credit as direct lending or so called lending to buyouts. This is a below investment grade activity. Sometimes it's really attractive, sometimes it's not so attractive, but it is a one point five trillion dollar market, a large market.”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“Probably none. Therefore, they should be looking at using liquidity as a choice. Are they getting paid for giving up that option to be more liquid? Same for institutions. If you're a pension fund, if you're an endowment, if you're a sovereign wealth fund, sure, you want a portion of your portfolio that's liquid. But how much of it actually needs to be liquid? And so I find myself asking and talking to CIOs today and CEOs today not so much about public or private or liquid or liquid, but are you being adequately compensated for having less liquidity and are you structurally able to be less liquid prudently?”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“Everything is correlated. But I'll make the point on safe and risky in public and safe on risky in private. Because something is private no longer means it's risky. Private goes from AA to Levered Equity. Public A to Levered Equity. We're just talking about degrees of liquidity and whether liquidity or illiquidity is a risk or not. So to a wealthy individual, how many wealthy individuals, high net worth investors, need 100% of their money on Tuesday?”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, was that the case? That probably was when I started in business. That probably was true. Most things that were private were private equity, venture capital, and hedge funds, and things that were public were generally public for the right reasons. Well, is it true today? Right now, I look at the S&P 500, I look at 10 stocks that are nearly 35% of the S&P. I look at those 10 stocks that trade north of a 50 PE. And I say to myself, Is that actually safe? Or is that just a reflection of a liquidity bubble and everyone piling into passive management and everything else? I don't have to conclude that, but my belief of where the world is today is public is safe and risky, and we've seen that. Look at all the tech correction that took place in 2023. Three correlated.”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“But isn't that what's happening? Isn't that what LDI in the UK showed us? Is that there liquidity? It's just not at or near the market price. And I do expect that in risk-off environments, we will actually see much greater price adjustment. And so this comes back. I don't want to go down the rabbit hole of liquidity, but I want to contrast this to what I see taking place in the world. We have this impression. This is my 40th year doing this. And we have an impression in the investment marketplace that private is risky and public is safe.”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“Sell AAA and AAA obligations. The market gapped down. They tried to sell more, the market gap down again. Bank of England had to step in and stabilize the market before major damage happened.”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“Trading 10% of what it once was. We had an incredibly liquid market, and now we have a less liquid public market. By the way, we now have public markets that are three times their size. Doesn't take a genius to say that's one-third of the liquidity. But we haven't experienced it because everything is liquid on the way up. When we're printing $8 trillion, it all is good. But now when things go the other way, we're finding out that what we thought was liquid is not as liquid as it once was. And I'm not talking about the top 500 stocks. I'm talking specifically about the credit market. I saw an article the other day was saying that the average length of time to sell an investment grade public corporate bond is now five days. We have had the first wholesale failure in a market of liquidity. Think about what happened in the UK in their pension meltdown. Institutions in the UK thought they had market liquidity at or near the market price.”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, let's talk about liquidity anyway. So, this is one of those things, yes, it is less liquid, but we're going through a whole rethink of what liquidity means. So 2008, we had just an unbelievable series of changes that took place in our economy in response to the financial crisis. We essentially redid all of our financial markets, financial regulation. The problem is none of us have experienced that yet for any length of time. Because right after we changed all the rules, we printed $8 trillion and everything went up into the right. Beginning in 22, we started to experience the new world, and in 23, we experienced it more, but we all, myself included, we have a lot to learn about what this new world is. But if you just look at the numbers, trading capital, the capital used for market making is one-tenth today of what it was in 2008.”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“And so I come back to resilient and necessary. If the banking system, while really important and not going away and still vital for the country, is borrowed short and lent long, every dollar that moves out of the banking system and into the investment marketplace actually deleverages the entire system. Think about that. A bank has levered 10 to 12 times when you move credit out of the banking system into a mutual fund, it's zero levered.”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“Investors versus equities. As rates go down, the reverse happens. So there are a lot of ability still of the Fed to influence outcomes, but it is not the direct correlation that you once had. But I also don't think of it in just a monolithic way about, well, the Fed has less control. I think about resilient and necessary. Those are the words that always come back to me. I look at the U.S. and relative to almost every other big capital market, the U.S. is in an extraordinary position. And that is, in my opinion, reflective of the diversity of capital sources that we have. No other place in the world really has what we have. If you look at almost every Asian economy, two products, equity and bank debt. Look at Europe, equity and bank debt. Yeah, there's the beginnings of a fixed income market. There's a high grade, but there is not the diversity of capital sources that you have here.”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it has become tougher and tougher to pull off. I think that to the extent we lived in a world where banks were 100% of the credit market, there was a very direct relationship between Fed action and what happened in the economy. To the extent 80% of credit is now provided by investors. Forget about private credit for the moment, but by investors, there is a less direct but still incredibly important because the alternatives as rates go up. Credit becomes more attractive.”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“To us, yes, it matters much less than it used to. We run in our retirement services business a spread business. And in that spread business, the absolute level of rates is not all that important. What matters is that we are able to earn a spread on our assets versus our liabilities versus our cost of operations such that we are profitable and therefore can both attract new capital, retain the capital we have, and provide investors with a reason to invest with us for the long term.”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“so-called private credit. Have been successful in originating them to the benefit of a theme and others in the insurance industry.”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“To do This is a big market if you get it right. So, long term low cost liabilities that are predictable that you can invest against. Third, you need a scaled, low-cost operating infrastructure. Even though we are not the largest insurer, we are the largest retirement services company, we focus on one product segment. You look at other big insurers, they have diverse operations. In some cases, they don't have scale in any of their businesses, even though they are quite large. We are, as one product based in Iowa, really efficient, very low cost, and that allows us to make money. But the other thing that you need to be successful, an insurance company, a retirement services company, needs to both be and appear to be and project solvency. Regulatorily, you need solvency, rating agencies, you need solvency. And if you're backing 20-year promises, you need solvency. So you need lots of lower risk, higher yielding assets. And we have become at Apollo experts in originating higher quality, higher yielding assets.”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“That doesn't guarantee you'll be successful. The next piece is you need long-term low cost liabilities. Initially, as a startup company in two thousand eight, we had no right to participate in this market, but two thousand eight was a very tumultuous period of time. Lots of companies were looking to get back to their quote home market, and people were selling off old blocks of business. We bought old blocks of business, and we did it successfully and got to scale, and we acquired a large amount of low-cost business. Today, that same opportunity, by the way, is no longer available because there are not big blocks for sale. The interest rate environment is different. There's not the same tumultuous need to sell. And so we are now the largest originator, organic originator, the sale of new products through traditional channels in the retirement business. Last year, we did some 60 plus billion. This year we're”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“I assure you it's not my talent. I'm fortunate that nearly 10,000 people make me look good most days, not every day, but most days. So if you think about our industry, in our industry you need four things to be successful. Easiest of those things is capital. If you are a responsible investor and you sell investors on a long-term business plan, you should be able to raise capital. But if you look at our industry, the public companies in the retirement services business over the last decade have raised virtually no capital, fundamentally investors have decided they do not trust the public companies as good stewards of capital, and in fact the vast majority of these companies have paid out their current book value as dividends over the last decade. So I start with, while capital should be easy, capital for this industry is actually quite hard, and so we showed up in two thousand eight with capital.”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, it comes from a very simple business model. We are at a theme in one business. We're in the business of retirement services. And therefore we don't guarantee or don't insure your life. We don't ensure your health. We don't ensure your home. We don't ensure your automobile or any other form of catastrophe. We simply ensure your retirement. And we do that through annuities and we do that through pension. Those simple liabilities are locked in and they are essentially a means for individuals to save. We have a retirement crisis in this country. People have not saved enough, so security is unlikely to provide a good standard of living for the vast majority of people. And so we also have a system that encourages retirement savings. Retirement savings in insurance products are tax-free. They build up tax-free. And someone commits to these policies for five years.”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“Number of small companies that add up to essentially nothing. Assets have not traditionally been a weak spot for the insurance industry. It's been liabilities.”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“Jumping around insurance, you have to really look at it over a long period of time. Almost all of the problems that have come in the insurance industry of any scale for a hundred years have come from traditional companies who have made poor choices as to their liabilities. We spend a lot of time today talking about assets, but most poor decisions have come from liabilities. Think about people who reinsure asbestos risk. Think about people who provided DNO insurance to the Enrons and others of the world. Think about people who insured Japanese earthquake and meltdown risk. Think about all of the mispricing in financial markets, whether it's what GE did on long-term health care or it's what many companies did on variable annuity. These are liability problems. The asset problems in the insurance industry have actually been quite modest over a really long period of time. You have executive life, you have mutual benefit, and then you have a large...”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“Defined outcome that they want, therefore they are willing to commit their money for lengthy periods of time so long as they are obtaining the right risk and reward, and they are not focused on day-to-day liquidity. They're focused on the ultimate return for this piece of their portfolio. The other half of our money comes from the insurance industry, including our own affiliated insurer Athene and money we manage for Athora, our European affiliate, as well as a number of third-party insurers. And insurers, unlike the banking system, they borrow long and lend long, and everything therefore is asset matched. If you look at Apollo today, there is nothing that is daily redeemable.”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, yes and no. I mean, private asset management has not caused the decline of the banking system. The banking system has been shrinking in the U.S. as a percentage of the total while it's been growing for a very long time. So just to set levels, the banking system today is roughly 20% of corporate and consumer credit in the U.S. The rest of it is not, quote, private credit, it's investors. If you think about it at a very macro level, regulators, governments, they're really only two choices for credit. You can have credit come from the banking system, or you can have credit come from the investment marketplace. But now to your question, if you think about the banking system, the banking system borrow short and lends long. They are always mismatched. If you think about what we do, and different than many, half of our money comes from individuals and institutions who are seeking a rate of return. They have no maturity.”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm not sure it's better. I think you have to look at the structure of our business. So I assume by other institutions you're really talking about the banking sector.”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I just think globally about the shape of our business. So we are today a $650 billion asset manager, roughly $500 billion of that is credit and $150 billion of that are various forms of equity, quite frankly, just math. We do better on the $500 billion when rates are higher, up to the point that you have economic distress. And most of our equity, they are pretty savvy about how they borrow and how they lock in interest rates and using fixed rate and other hedging instruments. So generally we have upside to the level of interest rates.”
2024-03-06 · Conversations with Tyler · Marc Rowan on Financial Market Evolution and University Governance · IDENTIFIED FROM THE TRANSCRIPT · source