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Apollo Asset Management, Inc. - Quarter Report: 2019 September (Form 10-Q)

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
  
 
Form 10-Q  
 
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2019 OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                      TO                     
Commission File Number: 001-35107
 
APOLLO GLOBAL MANAGEMENT, INC.
(Exact name of Registrant as specified in its charter) 
 
Delaware
 
20-8880053
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
9 West 57th Street, 43rd Floor
New York, New York 10019
(Address of principal executive offices) (Zip Code)
(212) 515-3200
(Registrant’s telephone number, including area code)
 
 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒   No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒   No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
☒
 
Accelerated filer
 
☐
Non-accelerated filer
 
☐
 
Smaller reporting company
 
☐
 
 
 
 
Emerging growth company
 
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
 
 
☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐   No ☒
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Class A Common Stock
 
APO
 
New York Stock Exchange
6.375% Series A Preferred Stock
 
APO.PR A
 
New York Stock Exchange
6.375% Series B Preferred Stock
 
APO.PR B
 
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None
 
As of November 4, 2019 there were 222,462,062 shares of Class A common stock, 1 share of Class B common stock and 1 share of Class C common stock of the registrant outstanding.

Table of Contents


 
TABLE OF CONTENTS
 
 
 
Page
PART I
 
 
 
 
ITEM 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 1A.
 
 
 
ITEM 2.
 
 
 
ITEM 3.
 
 
 
ITEM 4.
 
 
 
PART II
 
 
 
 
ITEM 1.
 
 
 
ITEM 1A.
 
 
 
ITEM 2.
 
 
 
ITEM 3.
 
 
 
ITEM 4.
 
 
 
ITEM 5.
 
 
 
ITEM 6.
 
 
 




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Forward-Looking Statements
This quarterly report may contain forward-looking statements that are within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements include, but are not limited to, discussions related to Apollo’s expectations regarding the performance of its business, liquidity and capital resources and the other non-historical statements in the discussion and analysis. These forward-looking statements are based on management’s beliefs, as well as assumptions made by, and information currently available to, management. When used in this quarterly report, the words “believe,” “anticipate,” “estimate,” “expect,” “intend” or future or conditional verbs, such as “will,” “should,” “could,” or “may,” and variations of such words or similar expressions are intended to identify forward-looking statements. Although management believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to be correct. These statements are subject to certain risks, uncertainties and assumptions, including risks relating to our dependence on certain key personnel, our ability to raise new credit, private equity, or real assets funds, market conditions generally, our ability to manage our growth, fund performance, changes in our regulatory environment and tax status, the variability of our revenues, net income and cash flow, our use of leverage to finance our businesses and investments by funds we manage and litigation risks, among others. We believe these factors include but are not limited to those described under the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (“SEC”) on March 1, 2019 (the “2018 Annual Report”) and quarterly report on Form 10-Q filed with the SEC on August 6, 2019; as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report and in our other filings with the SEC. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by applicable law.
Terms Used in This Report
Effective September 5, 2019, Apollo Global Management, Inc. converted from a Delaware limited liability company named Apollo Global Management, LLC (“AGM LLC”) to a Delaware corporation named Apollo Global Management, Inc. (“AGM Inc.” and such conversion, the “Conversion”). This quarterly report includes the results for AGM LLC prior to the Conversion and the results for AGM Inc. following the Conversion. In this quarterly report, references to “Apollo,” “we,” “us,” “our” and the “Company” refer collectively to (a) AGM Inc. and its subsidiaries, including the Apollo Operating Group and all of its subsidiaries, following the Conversion and (b) AGM LLC and its subsidiaries, including the Apollo Operating Group and all of its subsidiaries, prior to the Conversion, or as the context may otherwise require; and references to our Class A Common Stock, Class B Common Stock, Series A Preferred Stock and Series B Preferred Stock for periods prior to the Conversion mean the Class A shares, Class B share, Series A preferred shares and Series B preferred shares of AGM LLC, respectively;
“AMH” refers to Apollo Management Holdings, L.P., a Delaware limited partnership, that is an indirect subsidiary of Apollo Global Management, Inc.;
“Apollo funds”, “our funds” and references to the “funds” we manage, refer to the funds (including the parallel funds and alternative investment vehicles of such funds), partnerships, accounts, including strategic investment accounts or “SIAs,” alternative asset companies and other entities for which subsidiaries of the Apollo Operating Group provide investment management or advisory services;
“Apollo Operating Group” refers to (i) the limited partnerships and limited liability companies through which our Managing Partners currently operate our businesses and (ii) one or more limited partnerships or limited liability companies formed for the purpose of, among other activities, holding certain of our gains or losses on our principal investments in the funds, which we refer to as our “principal investments”
“Assets Under Management”, or “AUM”, refers to the assets of the funds, partnerships and accounts to which we provide investment management, advisory, or certain other investment-related services, including, without limitation, capital that such funds, partnerships and accounts have the right to call from investors pursuant to capital commitments. Our AUM equals the sum of:
(i)
the net asset value, or “NAV,” plus used or available leverage and/or capital commitments, or gross assets plus capital commitments, of the credit funds, partnerships and accounts for which we provide investment management or advisory services, other than certain collateralized loan obligations (“CLOs”), collateralized debt obligations (“CDOs”), and certain permanent capital vehicles, which have a fee-generating basis other than the mark-to-market value of the underlying assets;
(ii)
the fair value of the investments of the private equity and real assets funds, partnerships and accounts we manage or advise plus the capital that such funds, partnerships and accounts are entitled to call from investors pursuant to capital commitments, plus portfolio

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level financings; for certain permanent capital vehicles in real assets, gross asset value plus available financing capacity;
(iii)
the gross asset value associated with the reinsurance investments of the portfolio company assets we manage or advise; and
(iv)
the fair value of any other assets that we manage or advise for the funds, partnerships and accounts to which we provide investment management, advisory, or certain other investment-related services, plus unused credit facilities, including capital commitments to such funds, partnerships and accounts for investments that may require pre-qualification or other conditions before investment plus any other capital commitments to such funds, partnerships and accounts available for investment that are not otherwise included in the clauses above.
Our AUM measure includes Assets Under Management for which we charge either nominal or zero fees. Our AUM measure also includes assets for which we do not have investment discretion, including certain assets for which we earn only investment-related service fees, rather than management or advisory fees. Our definition of AUM is not based on any definition of Assets Under Management contained in our operating agreement or in any of our Apollo fund management agreements. We consider multiple factors for determining what should be included in our definition of AUM. Such factors include but are not limited to (1) our ability to influence the investment decisions for existing and available assets; (2) our ability to generate income from the underlying assets in our funds; and (3) the AUM measures that we use internally or believe are used by other investment managers. Given the differences in the investment strategies and structures among other alternative investment managers, our calculation of AUM may differ from the calculations employed by other investment managers and, as a result, this measure may not be directly comparable to similar measures presented by other investment managers. Our calculation also differs from the manner in which our affiliates registered with the SEC report “Regulatory Assets Under Management” on Form ADV and Form PF in various ways;
“Fee-Generating AUM” consists of assets of the funds, partnerships and accounts to which we provide investment management, advisory, or certain other investment-related services and on which we earn management fees, monitoring fees or other investment-related fees pursuant to management or other fee agreements on a basis that varies among the Apollo funds, partnerships and accounts. Management fees are normally based on “net asset value,” “gross assets,” “adjusted par asset value,” “adjusted cost of all unrealized portfolio investments,” “capital commitments,” “adjusted assets,” “stockholders’ equity,” “invested capital” or “capital contributions,” each as defined in the applicable management agreement. Monitoring fees, also referred to as advisory fees, with respect to the structured portfolio company investments of the funds, partnerships and accounts we manage or advise, are generally based on the total value of such structured portfolio company investments, which normally includes leverage, less any portion of such total value that is already considered in Fee-Generating AUM;
“Non-Fee-Generating AUM” refers to AUM that does not produce management fees or monitoring fees. This measure generally includes the following:
(i)
fair value above invested capital for those funds that earn management fees based on invested capital;
(ii)
net asset values related to general partner and co-investment interests;
(iii)
unused credit facilities;
(iv)
available commitments on those funds that generate management fees on invested capital;
(v)
structured portfolio company investments that do not generate monitoring fees; and
(vi)
the difference between gross asset and net asset value for those funds that earn management fees based on net asset value.
“Performance Fee-Eligible AUM” refers to the AUM that may eventually produce performance fees. All funds for which we are entitled to receive a performance fee allocation or incentive fee are included in Performance Fee-Eligible AUM, which consists of the following:
(i)
“Performance Fee-Generating AUM”, which refers to invested capital of the funds, partnerships and accounts we manage, advise, or to which we provide certain other investment-related services, that is currently above its hurdle rate or preferred return, and profit of such funds, partnerships and accounts is being allocated to, or earned by, the general partner in accordance with the applicable limited partnership agreements or other governing agreements;

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(ii)
“AUM Not Currently Generating Performance Fees”, which refers to invested capital of the funds, partnerships and accounts we manage, advise, or to which we provide certain other investment-related services, that is currently below its hurdle rate or preferred return; and
(iii)
“Uninvested Performance Fee-Eligible AUM”, which refers to capital of the funds, partnerships and accounts we manage, advise, or to which we provide certain other investment-related services, that is available for investment or reinvestment subject to the provisions of applicable limited partnership agreements or other governing agreements, which capital is not currently part of the NAV or fair value of investments that may eventually produce performance fees allocable to, or earned by, the general partner.
“AUM with Future Management Fee Potential” refers to the committed uninvested capital portion of total AUM not
currently earning management fees. The amount depends on the specific terms and conditions of each fund;
We use AUM as a performance measure of our funds’ investment activities, as well as to monitor fund size in relation to professional resource and infrastructure needs. Non-Fee-Generating AUM includes assets on which we could earn performance fees;
“Advisory” refers to certain assets advised by Apollo Asset Management Europe PC LLP, a wholly-owned subsidiary of Apollo Asset Management Europe LLP (collectively, “AAME”). The AAME entities are subsidiaries of Apollo;
“Athene Holding” refers to Athene Holding Ltd. (together with its subsidiaries, “Athene”), a leading retirement services company that issues, reinsures and acquires retirement savings products designed for the increasing number of individuals and institutions seeking to fund retirement needs, and to which Apollo, through its consolidated subsidiary Apollo Insurance Solutions Group LLC (formerly known as Athene Asset Management LLC) (“ISG”), provides asset management and advisory services;
“Athora” refers to a strategic platform established to acquire or reinsure blocks of insurance business in the German and broader European life insurance market (collectively, the “Athora Accounts”). The Company, through its consolidated subsidiary, AAME, provides investment advisory services to Athora. Athora Non-Sub-Advised Assets includes the Athora assets which are managed by Apollo but not sub-advised by Apollo nor invested in Apollo funds or investment vehicles. Athora Sub-Advised includes assets which the Company explicitly sub-advises as well as those assets in the Athora Accounts which are invested directly in funds and investment vehicles Apollo manages;
“capital deployed” or “deployment” is the aggregate amount of capital that has been invested during a given period (which may, in certain cases, include leverage) by (i) our commitment based funds and (ii) SIAs that have a defined maturity date;
“Contributing Partners” refer to those of our partners and their related parties (other than our Managing Partners) who indirectly beneficially own (through Holdings) Apollo Operating Group units;
“gross IRR” of a credit fund and the principal finance funds within the real assets segment represents the annualized return of a fund based on the actual timing of all cumulative fund cash flows before management fees, performance fees allocated to the general partner and certain other expenses. Calculations may include certain investors that do not pay fees. The terminal value is the net asset value as of the reporting date. Non-U.S. dollar denominated (“USD”) fund cash flows and residual values are converted to USD using the spot rate as of the reporting date. In addition, gross IRRs at the fund level will differ from those at the individual investor level as a result of, among other factors, timing of investor-level inflows and outflows. Gross IRR does not represent the return to any fund investor;
“gross IRR” of a private equity fund represents the cumulative investment-related cash flows (i) for a given investment for the fund or funds which made such investment, and (ii) for a given fund, in the relevant fund itself (and not any one investor in the fund), in each case, on the basis of the actual timing of investment inflows and outflows (for unrealized investments assuming disposition on September 30, 2019 or other date specified) aggregated on a gross basis quarterly, and the return is annualized and compounded before management fees, performance fees and certain other expenses (including interest incurred by the fund itself) and measures the returns on the fund’s investments as a whole without regard to whether all of the returns would, if distributed, be payable to the fund’s investors. In addition, gross IRRs at the fund level will differ from those at the individual investor level as a result of, among other factors, timing of investor-level inflows and outflows. Gross IRR does not represent the return to any fund investor;
“gross IRR” of a real assets fund excluding the principal finance funds represents the cumulative investment-related cash flows in the fund itself (and not any one investor in the fund), on the basis of the actual timing of cash inflows and outflows (for unrealized investments assuming disposition on September 30, 2019 or other date specified) starting on the date that each investment closes, and the return is annualized and compounded before management fees, performance fees, and certain other expenses (including interest incurred by the fund itself) and measures the returns on the fund’s investments as a whole without regard to whether all

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of the returns would, if distributed, be payable to the fund’s investors. Non-USD fund cash flows and residual values are converted to USD using the spot rate as of the reporting date. In addition, gross IRRs at the fund level will differ from those at the individual investor level as a result of, among other factors, timing of investor-level inflows and outflows. Gross IRR does not represent the return to any fund investor;
“gross return” of a credit or real assets fund is the monthly or quarterly time-weighted return that is equal to the percentage change in the value of a fund’s portfolio, adjusted for all contributions and withdrawals (cash flows) before the effects of management fees, incentive fees allocated to the general partner, or other fees and expenses. Returns for credit funds are calculated for all funds and accounts in the respective strategies excluding assets for Athene, Athora and certain other entities where we manage or may manage a significant portion of the total company assets. Returns of CLOs represent the gross returns on assets. Returns over multiple periods are calculated by geometrically linking each period’s return over time;
“Holdings” means AP Professional Holdings, L.P., a Cayman Islands exempted limited partnership through which our Managing Partners and Contributing Partners indirectly beneficially own their interests in the Apollo Operating Group units;
“inflows” represents (i) at the individual segment level, subscriptions, commitments, and other increases in available capital, such as acquisitions or leverage, net of inter-segment transfers, and (ii) on an aggregate basis, the sum of inflows across the credit, private equity and real assets segments;
“Managing Partners” refer to Messrs. Leon Black, Joshua Harris and Marc Rowan collectively and, when used in reference to holdings of interests in Apollo or Holdings, includes certain related parties of such individuals;
“net IRR” of a credit fund and the principal finance funds within the real assets segment represents the annualized return of a fund after management fees, performance fees allocated to the general partner and certain other expenses, calculated on investors that pay such fees. The terminal value is the net asset value as of the reporting date. Non-USD fund cash flows and residual values are converted to USD using the spot rate as of the reporting date. In addition, net IRR at the fund level will differ from that at the individual investor level as a result of, among other factors, timing of investor-level inflows and outflows. Net IRR does not represent the return to any fund investor;
“net IRR” of a private equity fund means the gross IRR applicable to a fund, including returns for related parties which may not pay fees or performance fees, net of management fees, certain expenses (including interest incurred or earned by the fund itself) and realized performance fees all offset to the extent of interest income, and measures returns at the fund level on amounts that, if distributed, would be paid to investors of the fund. The timing of cash flows applicable to investments, management fees and certain expenses, may be adjusted for the usage of a fund’s subscription facility. To the extent that a fund exceeds all requirements detailed within the applicable fund agreement, the estimated unrealized value is adjusted such that a percentage of up to 20.0% of the unrealized gain is allocated to the general partner of such fund, thereby reducing the balance attributable to fund investors. In addition, net IRR at the fund level will differ from that at the individual investor level as a result of, among other factors, timing of investor-level inflows and outflows. Net IRR does not represent the return to any fund investor;
“net IRR” of a real assets fund excluding the principal finance funds represents the cumulative cash flows in the fund (and not any one investor in the fund), on the basis of the actual timing of cash inflows received from and outflows paid to investors of the fund (assuming the ending net asset value as of September 30, 2019 or other date specified is paid to investors), excluding certain non-fee and non-performance fee bearing parties, and the return is annualized and compounded after management fees, performance fees, and certain other expenses (including interest incurred by the fund itself) and measures the returns to investors of the fund as a whole.  Non-USD fund cash flows and residual values are converted to USD using the spot rate as of the reporting date. In addition, net IRR at the fund level will differ from that at the individual investor level as a result of, among other factors, timing of investor-level inflows and outflows. Net IRR does not represent the return to any fund investor;
“net return” of a credit or real assets fund represents the gross return after management fees, performance fees allocated to the general partner, or other fees and expenses. Returns over multiple periods are calculated by geometrically linking each period’s return over time;
“performance allocations”, “performance fees”, “performance revenues”, “incentive fees” and “incentive income” refer to interests granted to Apollo by an Apollo fund that entitle Apollo to receive allocations, distributions or fees which are based on the performance of such fund or its underlying investments;
“permanent capital vehicles” refers to (a) assets that are owned by or related to Athene or Athora Holding Ltd. (“Athora Holding” and together with its subsidiaries, “Athora”), (b) assets that are owned by or related to MidCap FinCo Designated Activity Company (“MidCap”) and managed by Apollo, (c) assets of publicly traded vehicles managed by Apollo such as Apollo Investment Corporation (“AINV”), Apollo Commercial Real Estate Finance, Inc. (“ARI”), Apollo Tactical Income Fund Inc. (“AIF”), and Apollo Senior Floating Rate Fund Inc. (“AFT”), in each case that do not have redemption provisions or a requirement to return

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capital to investors upon exiting the investments made with such capital, except as required by applicable law and (d) a non-traded business development company from which Apollo earns certain investment-related service fees. The investment management agreements of AINV, AIF and AFT have one year terms, are reviewed annually and remain in effect only if approved by the boards of directors of such companies or by the affirmative vote of the holders of a majority of the outstanding voting shares of such companies, including in either case, approval by a majority of the directors who are not “interested persons” as defined in the Investment Company Act of 1940. In addition, the investment management agreements of AINV, AIF and AFT may be terminated in certain circumstances upon 60 days’ written notice. The investment management agreement of ARI has a one year term and is reviewed annually by ARI’s board of directors and may be terminated under certain circumstances by an affirmative vote of at least two-thirds of ARI’s independent directors. The investment management or advisory arrangements between each of MidCap and Apollo, Athene and Apollo, and Athora and Apollo, may also be terminated under certain circumstances. The agreement pursuant to which Apollo earns certain investment-related service fees from a non-traded business development company may be terminated under certain limited circumstances;
“private equity fund appreciation (depreciation)” refers to gain (loss) and income for the traditional private equity funds (as defined below), Apollo Natural Resources Partners, L.P. (“ANRP I”), Apollo Natural Resources Partners II, L.P. (“ANRP II”), Apollo Natural Resources Partners III, L.P. (“ANRP III”), Apollo Special Situations Fund, L.P., AION Capital Partners Limited (“AION”) and Apollo Hybrid Value Fund, L.P. (together with its parallel funds and alternative investment vehicles, “Hybrid Value Fund”) for the periods presented on a total return basis before giving effect to fees and expenses. The performance percentage is determined by dividing (a) the change in the fair value of investments over the period presented, minus the change in invested capital over the period presented, plus the realized value for the period presented, by (b) the beginning unrealized value for the period presented plus the change in invested capital for the period presented. Returns over multiple periods are calculated by geometrically linking each period’s return over time;
“private equity investments” refer to (i) direct or indirect investments in existing and future private equity funds managed or sponsored by Apollo, (ii) direct or indirect co-investments with existing and future private equity funds managed or sponsored by Apollo, (iii) direct or indirect investments in securities which are not immediately capable of resale in a public market that Apollo identifies but does not pursue through its private equity funds, and (iv) investments of the type described in (i) through (iii) above made by Apollo funds;
“Realized Value” refers to all cash investment proceeds received by the relevant Apollo fund, including interest and dividends, but does not give effect to management fees, expenses, incentive compensation or performance fees to be paid by such Apollo fund;
“Redding Ridge” refers to Redding Ridge Asset Management, LLC and its subsidiaries, which is a standalone, self-managed asset management business established in connection with risk retention rules that manages CLOs and retains the required risk retention interests;
“Remaining Cost” represents the initial investment of the fund in a portfolio investment, reduced for any return of capital distributed to date on such portfolio investment;
“Strategic Investor” refers to the California Public Employees’ Retirement System, or “CalPERS”
“Total Invested Capital” refers to the aggregate cash invested by the relevant Apollo fund and includes capitalized costs relating to investment activities, if any, but does not give effect to cash pending investment or available for reserves;
“Total Value” represents the sum of the total Realized Value and Unrealized Value of investments;
“traditional private equity funds” refers to Apollo Investment Fund I, L.P. (“Fund I”), AIF II, L.P. (“Fund II”), a mirrored investment account established to mirror Fund I and Fund II for investments in debt securities (“MIA”), Apollo Investment Fund III, L.P. (together with its parallel funds, “Fund III”), Apollo Investment Fund IV, L.P. (together with its parallel fund, “Fund IV”), Apollo Investment Fund V, L.P. (together with its parallel funds and alternative investment vehicles, “Fund V”), Apollo Investment Fund VI, L.P. (together with its parallel funds and alternative investment vehicles, “Fund VI”), Apollo Investment Fund VII, L.P. (together with its parallel funds and alternative investment vehicles, “Fund VII”), Apollo Investment Fund VIII, L.P. (together with its parallel funds and alternative investment vehicles, “Fund VIII”) and Apollo Investment Fund IX, L.P. (together with its parallel funds and alternative investment vehicles, “Fund IX”);
“Unrealized Value” refers to the fair value consistent with valuations determined in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), for investments not yet realized and may include payments in kind, accrued interest and dividends receivable, if any, and before the effect of certain taxes.  In addition, amounts include committed and funded amounts for certain investments; and

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“Vintage Year” refers to the year in which a fund’s final capital raise occurred, or, for certain funds, the year in which a fund’s investment period commences as per its governing agreements.

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PART I—FINANCIAL INFORMATION
ITEM 1.     FINANCIAL STATEMENTS
APOLLO GLOBAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
AS OF SEPTEMBER 30, 2019 AND DECEMBER 31, 2018
(dollars in thousands, except share data)
 
As of
September 30, 2019
 
As of
December 31, 2018
Assets:
 
 
 
Cash and cash equivalents
$
1,242,817

 
$
609,747

Restricted cash
19,777

 
3,457

U.S. Treasury securities, at fair value
551,681

 
392,932

Investments (includes performance allocations of $1,480,577 and $912,182 as of September 30, 2019 and December 31, 2018, respectively)
3,472,909

 
2,722,612

Assets of consolidated variable interest entities:
 
 
 
Cash and cash equivalents
41,799

 
49,671

Investments, at fair value
1,163,981

 
1,175,677

Other assets
39,088

 
65,543

Incentive fees receivable
3,093

 
6,792

Due from related parties
440,071

 
378,108

Deferred tax assets, net
530,954

 
306,094

Other assets
278,664

 
192,169

Lease assets
190,618

 
—

Goodwill
88,852

 
88,852

Total Assets
$
8,064,304

 
$
5,991,654

Liabilities and Stockholders’ Equity
 
 
 
Liabilities:
 
 
 
Accounts payable and accrued expenses
$
96,820

 
$
70,878

Accrued compensation and benefits
166,161

 
73,583

Deferred revenue
172,157

 
111,097

Due to related parties
507,113

 
425,435

Profit sharing payable
693,618

 
452,141

Debt
2,348,440

 
1,360,448

Liabilities of consolidated variable interest entities:
 
 
 
Debt, at fair value
828,824

 
855,461

Other liabilities
69,042

 
78,977

Other liabilities
132,023

 
111,794

Lease liabilities
207,673

 
—

Total Liabilities
5,221,871

 
3,539,814

Commitments and Contingencies (see note 15)


 


Stockholders’ Equity:
 
 
 
Apollo Global Management, Inc. stockholders’ equity:
 
 
 
Series A Preferred Shares, 11,000,000 shares issued and outstanding as of December 31, 2018
—

 
264,398

Series A Preferred Stock, 11,000,000 shares issued and outstanding as of September 30, 2019
264,398

 
—

Series B Preferred Shares, 12,000,000 shares issued and outstanding as of December 31, 2018
—

 
289,815

Series B Preferred Stock, 12,000,000 shares issued and outstanding as of September 30, 2019
289,815

 
—

Class A Shares, no par value, unlimited shares authorized, 201,400,500 shares issued and outstanding as of December 31, 2018
—

 
—

Class A Common Stock, $0.00001 par value, 90,000,000,000 shares authorized, 222,403,296 shares issued and outstanding as of September 30, 2019
—

 
—

Class B Shares, no par value, unlimited shares authorized, 1 share issued and outstanding as of December 31, 2018
—

 
—

Class B Common Stock, $0.00001 par value, 999,999,999 shares authorized, 1 share issued and outstanding as of September 30, 2019
—

 
—

Class C Common Stock, $0.00001 par value, 1 share authorized, 1 share issued and outstanding as of September 30, 2019
—

 
—

Additional paid in capital
1,217,231

 
1,299,418

Retained earnings (accumulated deficit)
—

 
(473,276
)
Accumulated other comprehensive loss
(6,827
)
 
(4,159
)
Total Apollo Global Management, Inc. Stockholders’ equity
1,764,617

 
1,376,196

Non-Controlling Interests in consolidated entities
266,016

 
271,522

Non-Controlling Interests in Apollo Operating Group
811,800

 
804,122

Total Stockholders’ Equity
2,842,433

 
2,451,840

Total Liabilities and Stockholders’ Equity
$
8,064,304

 
$
5,991,654

See accompanying notes to condensed consolidated financial statements.

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APOLLO GLOBAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
(dollars in thousands, except share data)
 
For the Three Months Ended
September 30,
 
For the Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 
 
 
 
 
 
Management fees
$
394,547

 
$
358,750

 
$
1,162,788

 
$
987,102

Advisory and transaction fees, net
16,440

 
13,154

 
67,133

 
42,145

Investment income:
 
 
 
 
 
 
 
Performance allocations
254,103

 
124,856

 
682,462

 
129,776

Principal investment income
33,393

 
16,153

 
99,020

 
25,334

Total investment income
287,496

 
141,009

 
781,482

 
155,110

Incentive fees
4,238

 
4,818

 
5,674

 
23,593

Total Revenues
702,721

 
517,731

 
2,017,077

 
1,207,950

Expenses:
 
 
 
 
 
 
 
Compensation and benefits:
 
 
 
 
 
 
 
Salary, bonus and benefits
126,695

 
112,722

 
369,527

 
343,623

Equity-based compensation
42,665

 
50,334

 
132,404

 
123,643

Profit sharing expense
88,610

 
63,059

 
280,335

 
121,327

Total compensation and benefits
257,970

 
226,115

 
782,266

 
588,593

Interest expense
27,833

 
15,209

 
70,243

 
44,168

General, administrative and other
85,313

 
70,657

 
238,814

 
194,851

Placement fees
256

 
746

 
591

 
1,384

Total Expenses
371,372

 
312,727

 
1,091,914

 
828,996

Other Income (Loss):
 
 
 
 
 
 
 
Net gains (losses) from investment activities
(19,790
)
 
155,283

 
44,099

 
20,645

Net gains from investment activities of consolidated variable interest entities
10,631

 
13,001

 
24,728

 
28,746

Interest income
10,152

 
5,411

 
25,938

 
13,517

Other income (loss), net
(43,144
)
 
3,085

 
(36,451
)
 
1,888

Total Other Income (Loss)
(42,151
)
 
176,780

 
58,314

 
64,796

Income before income tax (provision) benefit
289,198

 
381,784

 
983,477

 
443,750

Income tax (provision) benefit
231,896

 
(19,092
)
 
195,345

 
(46,596
)
Net Income
521,094

 
362,692

 
1,178,822

 
397,154

Net income attributable to Non-Controlling Interests
(157,824
)
 
(191,171
)
 
(501,672
)
 
(220,285
)
Net Income Attributable to Apollo Global Management, Inc.
363,270

 
171,521

 
677,150

 
176,869

Series A Preferred Stock Dividends
(4,382
)
 
(4,383
)
 
(13,148
)
 
(13,149
)
Series B Preferred Stock Dividends
(4,782
)
 
(4,781
)
 
(14,344
)
 
(9,350
)
Net Income Attributable to Apollo Global Management, Inc. Class A Common Stockholders
$
354,106

 
$
162,357

 
$
649,658

 
$
154,370

Net Income Per Share of Class A Common Stock:
 
 
 
 
 
 
 
Net Income Available to Class A Common Stock – Basic
$
1.64

 
$
0.77

 
$
3.07

 
$
0.70

Net Income Available to Class A Common Stock – Diluted
$
1.63

 
$
0.77

 
$
3.06

 
$
0.70

Weighted Average Number of Shares of Class A Common Stock Outstanding – Basic
205,797,643

 
200,347,996

 
202,087,827

 
199,837,707

Weighted Average Number of Shares of Class A Common Stock Outstanding – Diluted
207,641,323

 
200,347,996

 
203,745,454

 
199,837,707


See accompanying notes to condensed consolidated financial statements.

- 10-
Table of Contents

APOLLO GLOBAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
(dollars in thousands, except share data)
 
For the Three Months Ended
September 30,
 
For the Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Net Income
$
521,094

 
$
362,692

 
$
1,178,822

 
$
397,154

Other Comprehensive Income (Loss), net of tax:
 
 
 
 
 
 
 
Currency translation adjustments, net of tax
(14,616
)
 
(2,318
)
 
(17,021
)
 
(15,183
)
Net gain (loss) from change in fair value of cash flow hedge instruments
50

 
27

 
(1,862
)
 
79

Net gain (loss) on available-for-sale securities
(68
)
 
(309
)
 
162

 
(546
)
Total Other Comprehensive Income (Loss), net of tax
(14,634
)
 
(2,600
)
 
(18,721
)
 
(15,650
)
Comprehensive Income
506,460

 
360,092

 
1,160,101

 
381,504

Comprehensive Income attributable to Non-Controlling Interests
(144,825
)
 
(189,041
)
 
(485,619
)
 
(206,426
)
Comprehensive Income Attributable to Apollo Global Management, Inc.
$
361,635

 
$
171,051

 
$
674,482

 
$
175,078


See accompanying notes to condensed consolidated financial statements.

- 11-
Table of Contents

APOLLO GLOBAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS’ EQUITY (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
(dollars in thousands, except share data)
The statements below for the three and nine months ended September 30, 2018 represent Apollo Global Management, Inc. as a limited liability company prior to the Conversion:
 
Apollo Global Management, LLC Shareholders
 
 
 
 
 
 
 
 
 
Class A Shares
 
Class B Shares
 
Series A Preferred Shares
 
Series B Preferred Shares
 
Additional
Paid in
Capital
 
Accumulated Deficit
 
Accumulated
Other
Comprehensive Loss
 
Total Apollo
Global
Management,
LLC.
Shareholders’
Equity
 
Non-
Controlling
Interests in
Consolidated
Entities
 
Non-
Controlling
Interests in
Apollo
Operating
Group
 
Total Shareholders’ Equity
Balance at July 1, 2018
201,585,096

 
1

 
$
264,398

 
$
289,815

 
$
1,429,307

 
$
(430,335
)
 
$
(3,130
)
 
$
1,550,055

 
$
269,162

 
$
1,002,760

 
$
2,821,977

Adoption of new accounting guidance
—

 
—

 
—

 
—

 
(34
)
 
33

 
—

 
(1
)
 
—

 
—

 
(1
)
Dilution impact of issuance of Class A shares
—

 
—

 
—

 
—

 
(14
)
 
—

 
—

 
(14
)
 
—

 
—

 
(14
)
Capital increase related to equity-based compensation
—

 
—

 
—

 
—

 
37,173

 
—

 
—

 
37,173

 
—

 
—

 
37,173

Distributions
—

 
—

 
(4,383
)
 
(4,781
)
 
(90,618
)
 
—

 
—

 
(99,782
)
 
(7,394
)
 
(87,096
)
 
(194,272
)
Payments related to issuances of Class A shares for equity-based awards
216,022

 
—

 
—

 
—

 
—

 
(5,590
)
 
—

 
(5,590
)
 
—

 
—

 
(5,590
)
Repurchase of Class A shares
(721,653
)
 
—

 
—

 
—

 
(25,538
)
 
—

 
—

 
(25,538
)
 
—

 
—

 
(25,538
)
Exchange of AOG Units for Class A shares
10,000

 
—

 
—

 
—

 
55

 
—

 
—

 
55

 
—

 
(53
)
 
2

Net income
—

 
—

 
4,383

 
4,781

 
—

 
162,357

 
—

 
171,521

 
11,340

 
179,831

 
362,692

Currency translation adjustments, net of tax
—

 
—

 
—

 
—

 
—

 
—

 
(329
)
 
(329
)
 
(1,729
)
 
(260
)
 
(2,318
)
Net gain from change in fair value of cash flow hedge instruments
—

 
—

 
—

 
—

 
—

 
—

 
13

 
13

 
—

 
14

 
27

Net loss on available-for-sale securities
—

 
—

 
—

 
—

 
—

 
—

 
(154
)
 
(154
)
 
—

 
(155
)
 
(309
)
Balance at September 30, 2018
201,089,465

 
1

 
$
264,398

 
$
289,815

 
$
1,350,331

 
$
(273,535
)
 
$
(3,600
)
 
$
1,627,409

 
$
271,379

 
$
1,095,041

 
$
2,993,829

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2018
195,267,669

 
1

 
$
264,398

 
$
—

 
$
1,579,797

 
$
(379,460
)
 
$
(1,809
)
 
$
1,462,926

 
$
140,086

 
$
1,294,784

 
$
2,897,796

Adoption of new accounting guidance
—

 
—

 
—

 
—

 
(34
)
 
(8,116
)
 
—

 
(8,150
)
 
—

 
(11,210
)
 
(19,360
)
Dilution impact of issuance of Class A shares
—

 
—

 
—

 
—

 
90

 
—

 
—

 
90

 
—

 
—

 
90

Equity issued in connection with Preferred shares offering
—

 
—

 
—

 
289,815

 
—

 
—

 
—

 
289,815

 
—

 
—

 
289,815

Capital increase related to equity-based compensation
—

 
—

 
—

 
—

 
94,238

 
—

 
—

 
94,238

 
—

 
—

 
94,238

Capital contributions
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
146,518

 
—

 
146,518

Distributions
—

 
—

 
(13,149
)
 
(9,350
)
 
(309,780
)
 
—

 
—

 
(332,279
)
 
(29,028
)
 
(348,276
)
 
(709,583
)
Payments related to issuances of Class A shares for equity-based awards
2,202,634

 
—

 
—

 
—

 
—

 
(40,329
)
 
—

 
(40,329
)
 
—

 
—

 
(40,329
)
Repurchase of Class A shares
(1,571,438
)
 
—

 
—

 
—

 
(54,266
)
 
—

 
—

 
(54,266
)
 
—

 
—

 
(54,266
)
Exchange of AOG Units for Class A shares
5,190,600

 
—

 
—

 
—

 
40,286

 
—

 
—

 
40,286

 
—

 
(32,880
)
 
7,406

Net income
—

 
—

 
13,149

 
9,350

 
—

 
154,370

 
—

 
176,869

 
26,035

 
194,250

 
397,154

Currency translation adjustments, net of tax
—

 
—

 
—

 
—

 
—

 
—

 
(1,558
)
 
(1,558
)
 
(12,232
)
 
(1,393
)
 
(15,183
)
Net gain from change in fair value of cash flow hedge instruments
—

 
—

 
—

 
—

 
—

 
—

 
39

 
39

 
—

 
40

 
79

Net loss on available-for-sale securities
—

 
—

 
—

 
—

 
—

 
—

 
(272
)
 
(272
)
 
—

 
(274
)
 
(546
)
Balance at September 30, 2018
201,089,465

 
1

 
$
264,398

 
$
289,815

 
$
1,350,331

 
$
(273,535
)
 
$
(3,600
)
 
$
1,627,409

 
$
271,379

 
$
1,095,041

 
$
2,993,829

The statements below for the three and nine months ended September 30, 2019 represent Apollo Global Management, Inc. as a corporation subsequent to the Conversion:
 
Apollo Global Management, Inc. Stockholders
 
Class A Shares
 
Class A
Common Stock
 
Class B Shares
 
Class B
Common Stock
 
Class C
Common Stock
Balance at July 1, 2019
200,435,587

 
—

 
1

 
—

 
—

Issuance of Class C Common Stock resulting from the Conversion
—

 
—

 
—

 
—

 
1

Payments related to issuances of Class A Common Stock for equity-based awards
226,456

 
—

 
—

 
—

 
—

Repurchase of Class A Common Stock
(143,000
)
 
—

 
—

 
—

 
—

Exchange of AOG Units for Class A Common Stock
21,884,253

 
—

 
—

 
—

 
—

Reclassifications resulting from the Conversion
(222,403,296
)
 
222,403,296

 
(1
)
 
1

 
—

Balance at September 30, 2019
—

 
222,403,296

 
—

 
1

 
1

 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2019
201,400,500

 
—

 
1

 
—

 
—

Issuance of Class C Common Stock resulting from the Conversion
—

 
—

 
—

 
—

 
1

Payments related to issuances of Class A Common Stock for equity-based awards
2,737,557

 
—

 
—

 
—

 
—

Repurchase of Class A Common Stock
(3,719,014
)
 
—

 
—

 
—

 
—

Exchange of AOG Units for Class A Common Stock
21,984,253

 
—

 
—

 
—

 
—

Reclassifications resulting from the Conversion
(222,403,296
)
 
222,403,296

 
(1
)
 
1

 
—

Balance at September 30, 2019
—

 
222,403,296

 
—

 
1

 
1

 
Apollo Global Management, Inc. Stockholders
 
 
 
 
 
 
 
 
 
Series A Preferred Shares
 
Series A Preferred Stock
 
Series B Preferred Shares
 
Series B Preferred Stock
 
Additional
Paid in
Capital
 
Retained Earnings (Accumulated
Deficit)
 
Accumulated
Other
Comprehensive Loss
 
Total Apollo
Global
Management,
Inc.
Stockholders’
Equity
 
Non-
Controlling
Interests in
Consolidated
Entities
 
Non-
Controlling
Interests in
Apollo
Operating
Group
 
Total
Stockholders’
Equity
Balance at July 1, 2019
$
264,398

 
$
—

 
$
289,815

 
$
—

 
$
1,052,259

 
$
(222,007
)
 
$
(5,192
)
 
$
1,379,273

 
$
280,662

 
$
881,055

 
$
2,540,990

Dilution impact of issuance of Class A Common Stock
—

 
—

 
—

 
—

 
17

 
—

 
—

 
17

 
—

 
—

 
17

Capital increase related to equity-based compensation
—

 
—

 
—

 
—

 
33,867

 
—

 
—

 
33,867

 
—

 
—

 
33,867

Capital contributions
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
555

 
—

 
555

Dividends
(4,382
)
 
—

 
(4,782
)
 
—

 
22,824

 
(127,629
)
 
—

 
(113,969
)
 
(10,944
)
 
(122,899
)
 
(247,812
)
Payments related to issuances of Class A Common Stock for equity-based awards
—

 
—

 
—

 
—

 
860

 
(4,470
)
 
—

 
(3,610
)
 
—

 
—

 
(3,610
)
Repurchase of Class A Common Stock
—

 
—

 
—

 
—

 
(4,610
)
 
—

 
—

 
(4,610
)
 
—

 
—

 
(4,610
)
Exchange of AOG Units for Class A Common Stock
—

 
—

 
—

 
—

 
112,014

 
—

 
—

 
112,014

 
—

 
(95,438
)
 
16,576

Net income
4,382

 
—

 
4,782

 
—

 
—

 
354,106

 
—

 
363,270

 
7,083

 
150,741

 
521,094

Currency translation adjustments, net of tax
—

 
—

 
—

 
—

 
—

 
—

 
(1,625
)
 
(1,625
)
 
(11,340
)
 
(1,651
)
 
(14,616
)
Net gain from change in fair value of cash flow hedge instruments
—

 
—

 
—

 
—

 
—

 
—

 
25

 
25

 
—

 
25

 
50

Net loss on available-for-sale securities
—

 
—

 
—

 
—

 
—

 
—

 
(35
)
 
(35
)
 
—

 
(33
)
 
(68
)
Reclassifications resulting from the Conversion
(264,398
)
 
264,398

 
(289,815
)
 
289,815

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Balance at September 30, 2019
$
—

 
$
264,398

 
$
—

 
$
289,815

 
$
1,217,231

 
$
—

 
$
(6,827
)
 
$
1,764,617

 
$
266,016

 
$
811,800

 
$
2,842,433




 
Apollo Global Management, Inc. Stockholders
 
 
 
 
 
 
 
 
 
Series A Preferred Shares
 
Series A Preferred Stock
 
Series B Preferred Shares
 
Series B Preferred Stock
 
Additional
Paid in
Capital
 
Retained Earnings (Accumulated
Deficit)
 
Accumulated
Other
Comprehensive Loss
 
Total Apollo
Global
Management,
Inc.
Stockholders’
Equity
 
Non-
Controlling
Interests in
Consolidated
Entities
 
Non-
Controlling
Interests in
Apollo
Operating
Group
 
Total
Stockholders’
Equity
Balance at January 1, 2019
$
264,398

 
$
—

 
$
289,815

 
$
—

 
$
1,299,418

 
$
(473,276
)
 
$
(4,159
)
 
$
1,376,196

 
$
271,522

 
$
804,122

 
$
2,451,840

Dilution impact of issuance of Class A Common Stock
—

 
—

 
—

 
—

 
(8
)
 
—

 
—

 
(8
)
 
—

 
—

 
(8
)
Capital increase related to equity-based compensation
—

 
—

 
—

 
—

 
102,189

 
—

 
—

 
102,189

 
—

 
—

 
102,189

Capital contributions
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
1,081

 
—

 
1,081

Dividends
(13,148
)
 
—

 
(14,344
)
 
—

 
(191,796
)
 
(127,629
)
 
—

 
(346,917
)
 
(14,103
)
 
(374,619
)
 
(735,639
)
Payments related to issuances of Class A Common Stock for equity-based awards
—

 
—

 
—

 
—

 
5,690

 
(48,753
)
 
—

 
(43,063
)
 
—

 
—

 
(43,063
)
Repurchase of Class A Common Stock
—

 
—

 
—

 
—

 
(110,726
)
 
—

 
—

 
(110,726
)
 
—

 
—

 
(110,726
)
Exchange of AOG Units for Class A Common Stock
—

 
—

 
—

 
—

 
112,464

 
—

 
—

 
112,464

 
—

 
(95,806
)
 
16,658

Net income
13,148

 
—

 
14,344

 
—

 
—

 
649,658

 
—

 
677,150

 
20,888

 
480,784

 
1,178,822

Currency translation adjustments, net of tax
—

 
—

 
—

 
—

 
—

 
—

 
(1,820
)
 
(1,820
)
 
(13,372
)
 
(1,829
)
 
(17,021
)
Net loss from change in fair value of cash flow hedge instruments
—

 
—

 
—

 
—

 
—

 
—

 
(927
)
 
(927
)
 
—

 
(935
)
 
(1,862
)
Net gain on available-for-sale securities
—

 
—

 
—

 
—

 
—

 
—

 
79

 
79

 
—

 
83

 
162

Reclassifications resulting from the Conversion
(264,398
)
 
264,398

 
(289,815
)
 
289,815

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Balance at September 30, 2019
$
—

 
$
264,398

 
$
—

 
$
289,815

 
$
1,217,231

 
$
—

 
$
(6,827
)
 
$
1,764,617

 
$
266,016

 
$
811,800

 
$
2,842,433


See accompanying notes to condensed consolidated financial statements.

- 12-
Table of Contents

APOLLO GLOBAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
(dollars in thousands, except share data)
 
For the Nine Months Ended
September 30,
 
2019
 
2018
Cash Flows from Operating Activities:
 
 
 
Net income
$
1,178,822

 
$
397,154

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Equity-based compensation
132,404

 
123,643

Depreciation and amortization
11,442

 
11,215

Unrealized gains from investment activities
(39,250
)
 
(14,555
)
Principal investment income
(99,020
)
 
(25,334
)
Performance allocations
(682,462
)
 
(129,776
)
Change in fair value of contingent obligations
23,740

 
(7,953
)
Loss from change in tax receivable agreement liability
38,575

 
—

Deferred taxes, net
(207,630
)
 
38,682

Net loss related to cash flow hedge instruments
(1,974
)
 
—

Non-cash lease expense
34,592

 
—

Other non-cash amounts included in net income, net
(24,686
)
 
(18,768
)
Cash flows due to changes in operating assets and liabilities:
 
 
 
Incentive fees receivable
3,699

 
(258
)
Due from related parties
(64,891
)
 
(65,697
)
Accounts payable and accrued expenses
25,942

 
13,135

Accrued compensation and benefits
92,578

 
97,042

Deferred revenue
69,395

 
56,426

Due to related parties
56

 
(912
)
Profit sharing payable
219,564

 
4,457

Lease liability
(24,266
)
 
—

Other assets and other liabilities, net
(62,247
)
 
(7,075
)
Cash distributions of earnings from principal investments
34,311

 
55,913

Cash distributions of earnings from performance allocations
193,833

 
350,012

Satisfaction of contingent obligations
(1,827
)
 
(6,947
)
Apollo Fund and VIE related:
 
 
 
Net realized and unrealized gains from investing activities and debt
(22,568
)
 
(33,341
)
Purchases of investments
(309,262
)
 
(359,847
)
Proceeds from sale of investments
301,591

 
341,745

Changes in other assets and other liabilities, net
14,551

 
(48,071
)
Net Cash Provided by Operating Activities
$
835,012

 
$
770,890

Cash Flows from Investing Activities:
 
 
 
Purchases of fixed assets
$
(18,600
)
 
$
(10,010
)
Proceeds from sale of investments
2,810

 
49,239

Purchase of investments
(15,048
)
 
(80,677
)
Purchase of U.S. Treasury securities
(541,530
)
 
(449,865
)
Proceeds from maturities of U.S. Treasury securities
390,336

 
425,830

Cash contributions to principal investments
(116,498
)
 
(185,372
)
Cash distributions from principal investments
47,869

 
84,036

Issuance of related party loans
(1,775
)
 
(2,995
)
Other investing activities
144

 
210

Net Cash Used in Investing Activities
$
(252,292
)
 
$
(169,604
)
Cash Flows from Financing Activities:
 
 
 
Principal repayments of debt
$
(29
)
 
$
(300,000
)
Issuance of Preferred Stock, net of issuance costs
—

 
289,815

Dividends to Preferred Stockholders
(27,492
)
 
(22,499
)
Issuance of debt
1,005,964

 
303,267

Satisfaction of tax receivable agreement
(37,234
)
 
(50,267
)
Repurchase of Class A Common Stock
(110,726
)
 
(81,858
)
Payments related to deliveries of Class A Common Stock for RSUs
(48,753
)
 
(40,329
)
Dividends paid
(319,425
)
 
(309,780
)
Distributions paid to Non-Controlling Interests in Apollo Operating Group
(374,619
)
 
(348,276
)
Other financing activities
(18,401
)
 
(8,138
)
Apollo Fund and VIE related:
 
 
 
Principal repayment of debt
—

 
(92,153
)
Distributions paid to Non-Controlling Interests in consolidated entities
(11,347
)
 
(24,988
)
Contributions from Non-Controlling Interests in consolidated entities
860

 
147,189

Net Cash Provided by (Used in) Financing Activities
$
58,798

 
$
(538,017
)
Net Increase in Cash and Cash Equivalents, Restricted Cash and Cash Held at Consolidated Variable Interest Entities
641,518

 
63,269

Cash and Cash Equivalents, Restricted Cash and Cash Held at Consolidated Variable Interest Entities, Beginning of Period
662,875

 
848,060

Cash and Cash Equivalents, Restricted Cash and Cash Held at Consolidated Variable Interest Entities, End of Period
$
1,304,393

 
$
911,329

Supplemental Disclosure of Cash Flow Information:
 
 
 
Interest paid
$
54,584

 
$
33,692

Interest paid by consolidated variable interest entities
10,602

 
12,979

Income taxes paid
42,253

 
8,036

Supplemental Disclosure of Non-Cash Investing Activities:
 
 
 
Non-cash distributions from principal investments
$
(1,098
)
 
$
(26,817
)
Non-cash purchases of other investments, at fair value
—

 
194,003

Non-cash sales of other investments, at fair value
—

 
(46,623
)
Supplemental Disclosure of Non-Cash Financing Activities:
 
 
 
Capital increases related to equity-based compensation
$
102,189

 
$
94,238

Issuance of restricted shares
5,690

 
—

Other non-cash financing activities
(8
)
 
90

Adjustments related to exchange of Apollo Operating Group units:
 
 
 
Deferred tax assets
$
168,058

 
$
47,011

Due to related parties
(39,092
)
 
(39,605
)
Additional paid in capital
(16,658
)
 
(7,406
)
Non-Controlling Interest in Apollo Operating Group
95,806

 
32,880

 
 
 
 
Reconciliation of Cash and Cash Equivalents, Restricted Cash and Cash Held at Consolidated Variable Interest Entities to the Condensed Consolidated Statements of Financial Condition:
 
 
 
Cash and cash equivalents
$
1,242,817

 
$
854,574

Restricted cash
19,777

 
3,460

Cash held at consolidated variable interest entities
41,799

 
53,295

Total Cash and Cash Equivalents, Restricted Cash and Cash and Cash Equivalents Held at Consolidated Variable Interest Entities
$
1,304,393

 
$
911,329


See accompanying notes to condensed consolidated financial statements.

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Table of Contents
APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)


1. ORGANIZATION
Apollo Global Management, Inc. (“AGM Inc.”, together with its consolidated subsidiaries, the “Company” or “Apollo”) is a global alternative investment manager whose predecessor was founded in 1990. Its primary business is to raise, invest and manage credit, private equity and real assets funds as well as strategic investment accounts, on behalf of pension, endowment and sovereign wealth funds, as well as other institutional and individual investors. For these investment management services, Apollo receives management fees generally related to the amount of assets managed, transaction and advisory fees, incentive fees and performance allocations related to the performance of the respective funds that it manages. Apollo has three primary business segments:
•
Credit—primarily invests in non-control corporate and structured debt instruments including performing, stressed and distressed investments across the capital structure;
•
Private equity—primarily invests in control equity and related debt instruments, convertible securities and distressed debt investments; and
•
Real assets—primarily invests in (i) real estate equity and infrastructure equity for the acquisition and recapitalization of real estate and infrastructure assets, portfolios, platforms and operating companies, (ii) real estate and infrastructure debt including first mortgage and mezzanine loans, preferred equity and commercial mortgage backed securities and (iii) European performing and non-performing loans, and unsecured consumer loans.
Organization of the Company
Effective September 5, 2019, Apollo Global Management, Inc. converted from a Delaware limited liability company named Apollo Global Management, LLC to a Delaware corporation named Apollo Global Management, Inc. The Company was formed as a Delaware limited liability company on July 3, 2007, and, until the Conversion, was managed by AGM Management, LLC, which is indirectly wholly-owned and controlled by Leon Black, Joshua Harris and Marc Rowan, its Managing Partners.
As of September 30, 2019, the Company owned, through six intermediate holding companies, 55.2% of the economic interests of, and operated and controlled all of the businesses and affairs of, the Apollo Operating Group through its wholly owned subsidiaries.
AP Professional Holdings, L.P., a Cayman Islands exempted limited partnership (“Holdings”), is the entity through which the Managing Partners and certain of the Company’s other partners (the “Contributing Partners”) indirectly beneficially own interests in each of the entities that comprise the Apollo Operating Group (“AOG Units”). As of September 30, 2019, Holdings owned the remaining 44.8% of the economic interests in the Apollo Operating Group. The Company consolidates the financial results of the Apollo Operating Group and its consolidated subsidiaries. Holdings’ ownership interest in the Apollo Operating Group is reflected as a Non-Controlling Interest in the accompanying condensed consolidated financial statements.
Conversion to a Corporation
On September 4, 2019, AGM LLC notified the New York Stock Exchange (the “NYSE”) that a Certificate of Conversion (the “Certificate of Conversion”) had been filed with the Secretary of State of the State of Delaware. Effective at 12:01 a.m. (Eastern Time) on September 5, 2019 (the “Effective Time”), (i) each Class A share (“Class A Share”) representing limited liability company interests of AGM LLC outstanding immediately prior to the Effective Time converted into one issued and outstanding, fully paid and nonassessable share of Class A common stock, $0.00001 par value per share, of the Company (“Class A Common Stock”), (ii) the Class B share (the “Class B Share”) representing limited liability company interests of AGM LLC outstanding immediately prior to the Effective Time converted into one issued and outstanding, fully paid and nonassessable share of Class B common stock, $0.00001 par value per share, of the Company (the “Class B Common Stock”), (iii) each Series A preferred share (“Series A Preferred Share”) representing limited liability company interests of AGM LLC outstanding immediately prior to the Effective Time converted into one issued and outstanding, fully paid and nonassessable share of Series A preferred stock, having a liquidation preference of $25.00 per share, of the Company (“Series A Preferred Stock”), (iv) each Series B preferred share (“Series B Preferred Share”) representing limited liability company interests of AGM LLC outstanding immediately prior to the Effective Time converted into one issued and outstanding, fully paid and nonassessable share of Series B preferred stock, having a liquidation preference of $25.00 per share, of the Company (“Series B Preferred Stock”) and (v) AGM Management, LLC, a Delaware limited liability company (the “Former Manager”), was granted one issued and outstanding, fully paid and nonassessable share of Class C common stock, $0.00001 par value per share, of the Company (“Class C Common Stock”), which

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

bestows to its holder certain management rights over the Company. Prior to the Effective Time, the Former Manager held all such management powers over the business and affairs of AGM LLC pursuant to the Third Amended and Restated Limited Liability Company Agreement of AGM LLC, dated as of March 19, 2018.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and instructions to the Quarterly Report on Form 10-Q. The condensed consolidated financial statements and these notes are unaudited and exclude some of the disclosures required in annual financial statements. Management believes it has made all necessary adjustments (consisting only of normal recurring items) so that the condensed consolidated financial statements are presented fairly and that estimates made in preparing its condensed consolidated financial statements are reasonable and prudent. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These condensed consolidated financial statements should be read in conjunction with the annual financial statements included in the 2018 Annual Report.
The condensed consolidated financial statements include the accounts of the Company, its wholly-owned or majority-owned subsidiaries, the consolidated entities which are considered to be variable interest entities (“VIEs”) and for which the Company is considered the primary beneficiary, and certain entities which are not considered VIEs but which the Company controls through a majority voting interest. Intercompany accounts and transactions, if any, have been eliminated upon consolidation.
Certain reclassifications, when applicable, have been made to the prior periods’ condensed consolidated financial statements and notes to conform to the current period’s presentation and are disclosed accordingly.
Consolidation
The types of entities with which Apollo is involved generally include subsidiaries (e.g., general partners and management companies related to the funds the Company manages), entities that have all the attributes of an investment company (e.g., funds) and securitization vehicles (e.g., CLOs). Each of these entities is assessed for consolidation on a case by case basis depending on the specific facts and circumstances surrounding that entity.
Pursuant to the consolidation guidance, the Company first evaluates whether it holds a variable interest in an entity. Fees that are customary and commensurate with the level of services provided, and where the Company does not hold other economic interests in the entity that would absorb more than an insignificant amount of the expected losses or returns of the entity, would not be considered a variable interest. Apollo factors in all economic interests including proportionate interests through related parties, to determine if such interests are considered a variable interest. As Apollo’s interests in many of these entities are solely through market rate fees and/or insignificant indirect interests through related parties, Apollo is not considered to have a variable interest in many of these entities and no further consolidation analysis is performed. For entities where the Company has determined that it does hold a variable interest, the Company performs an assessment to determine whether each of those entities qualify as a VIE.
The determination as to whether an entity qualifies as a VIE depends on the facts and circumstances surrounding each entity and therefore certain of Apollo’s funds may qualify as VIEs under the variable interest model whereas others may qualify as voting interest entities (“VOEs”) under the voting interest model. The granting of substantive kick-out rights is a key consideration in determining whether a limited partnership or similar entity is a VIE and whether or not that entity should be consolidated.
Under the variable interest model, Apollo consolidates those entities where it is determined that the Company is the primary beneficiary of the entity. The Company is determined to be the primary beneficiary when it has a controlling financial interest in the VIE, which is defined as possessing both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. When Apollo alone is not considered to have a controlling financial interest in the VIE but Apollo and its related parties under common control in the aggregate have a controlling financial interest in the VIE, Apollo will be deemed the primary beneficiary if it is the party that is most closely associated with the VIE. When Apollo and its related parties not under common control in the aggregate have a controlling financial interest in the VIE, Apollo would be deemed to be the primary beneficiary if substantially all the activities of the entity are performed on behalf of Apollo.

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

Apollo determines whether it is the primary beneficiary of a VIE at the time it becomes initially involved with the VIE and reconsiders that conclusion continuously. Investments and redemptions (either by Apollo, related parties of Apollo or third parties) or amendments to the governing documents of the respective entity may affect an entity’s status as a VIE or the determination of the primary beneficiary.
Assets and liabilities of the consolidated VIEs are primarily shown in separate sections within the condensed consolidated statements of financial condition. Changes in the fair value of the consolidated VIEs’ assets and liabilities and related interest, dividend and other income and expenses are presented within net gains from investment activities of consolidated variable interest entities in the condensed consolidated statements of operations. The portion attributable to Non-Controlling Interests is reported within net income attributable to Non-Controlling Interests in the condensed consolidated statements of operations. For additional disclosures regarding VIEs, see note 5.
Under the voting interest model, Apollo consolidates those entities it controls through a majority voting interest. Apollo does not consolidate those VOEs in which substantive kick-out rights have been granted to the unrelated investors to either dissolve the fund or remove the general partner.
Cash and Cash Equivalents
Apollo considers all highly liquid short-term investments with original maturities of three months or less when purchased to be cash equivalents. Cash and cash equivalents include money market funds and U.S. Treasury securities with original maturities of three months or less when purchased. Interest income from cash and cash equivalents is recorded in interest income in the condensed consolidated statements of operations. The carrying values of the money market funds and U.S. Treasury securities were $302.3 million and $231.8 million as of September 30, 2019 and December 31, 2018, respectively, which approximate their fair values due to their short-term nature and are categorized as Level I within the fair value hierarchy. Substantially all of the Company’s cash on deposit is in interest bearing accounts with major financial institutions and exceed insured limits.
Restricted Cash
Restricted cash includes cash held in reserve accounts used to make required payments in respect of the 2039 Senior Secured Guaranteed Notes. Restricted cash also includes cash deposited at a bank, which is pledged as collateral in connection with leased premises.
U.S. Treasury securities, at fair value
U.S. Treasury securities, at fair value includes U.S. Treasury bills with original maturities greater than three months when purchased. These securities are recorded at fair value. Interest income on such securities is separately presented from the overall change in fair value and is recognized in interest income in the condensed consolidated statements of operations. Any remaining change in fair value of such securities, that is not recognized as interest income, is recognized in net gains (losses) from investment activities in the condensed consolidated statements of operations.
Fair Value of Financial Instruments
Apollo has elected the fair value option for the Company’s investment in Athene Holding, the assets and liabilities of certain of its consolidated VIEs (including CLOs), the Company’s U.S. Treasury securities with original maturities greater than three months when purchased, and certain of the Company’s other investments. Such election is irrevocable and is applied to financial instruments on an individual basis at initial recognition.
The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions.
Except for the Company’s debt obligations, financial instruments are generally recorded at fair value or at amounts whose carrying values approximate fair value. The actual realized gains or losses will depend on, among other factors, future operating results, the value of the assets and market conditions at the time of disposition, any related transaction costs and the timing and manner of sale, all of which may ultimately differ significantly from the assumptions on which the valuations were based.

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Table of Contents
APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

Fair Value Hierarchy
U.S. GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring financial instruments at fair value. Market price observability is affected by a number of factors, including the type of financial instrument, the characteristics specific to the financial instrument and the state of the marketplace, including the existence and transparency of transactions between market participants. Financial instruments with readily available quoted prices in active markets generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination of fair values, as follows:
Level I - Quoted prices are available in active markets for identical financial instruments as of the reporting date. The types of financial instruments included in Level I include listed equities and debt. The Company does not adjust the quoted price for these financial instruments, even in situations where the Company holds a large position and the sale of such position would likely deviate from the quoted price.
Level II - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Financial instruments that are generally included in this category include corporate bonds and loans, less liquid and restricted equity securities and certain over-the-counter derivatives where the fair value is based on observable inputs. These financial instruments exhibit higher levels of liquid market observability as compared to Level III financial instruments.
Level III - Pricing inputs are unobservable for the financial instrument and includes situations where there is little observable market activity for the financial instrument. The inputs into the determination of fair value may require significant management judgment or estimation. Financial instruments that are included in this category generally include general and limited partner interests in corporate private equity and real assets funds, opportunistic credit funds, distressed debt and non-investment grade residual interests in securitizations and CDOs and CLOs where the fair value is based on observable inputs as well as unobservable inputs.
When a security is valued based on broker quotes, the Company subjects those quotes to various criteria in making the determination as to whether a particular financial instrument would qualify for classification as Level II or Level III. These criteria include, but are not limited to, the number and quality of the broker quotes, the standard deviations of the observed broker quotes, and the percentage deviation from independent pricing services.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, a financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument when the fair value is based on unobservable inputs.
Equity Method Investments
For investments in entities over which the Company exercises significant influence but which do not meet the requirements for consolidation and for which the Company has not elected the fair value option, the Company uses the equity method of accounting, whereby the Company records its share of the underlying income or loss of such entities. The Company’s share of the underlying net income or loss of such entities is recorded in principal investment income in the condensed consolidated statements of operations.
The carrying amounts of equity method investments are recorded in investments in the condensed consolidated statements of financial condition. As the underlying entities that the Company manages and invests in are, for U.S. GAAP purposes, primarily investment companies which reflect their investments at estimated fair value, the carrying value of the Company’s equity method investments in such entities approximates fair value.

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Table of Contents
APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

Financial Instruments held by Consolidated VIEs
The Company measures both the financial assets and financial liabilities of the consolidated CLOs in its condensed consolidated financial statements using the fair value of the financial assets of the consolidated CLOs, which are more observable than the fair value of the financial liabilities of the consolidated CLOs. As a result, the financial assets of the consolidated CLOs are measured at fair value and the financial liabilities are measured in consolidation as: (i) the sum of the fair value of the financial assets and the carrying value of any non-financial assets that are incidental to the operations of the CLOs less (ii) the sum of the fair value of any beneficial interests retained by the Company (other than those that represent compensation for services) and the Company’s carrying value of any beneficial interests that represent compensation for services. The resulting amount is allocated to the individual financial liabilities (other than the beneficial interest retained by the Company) using a reasonable and consistent methodology. Under the measurement alternative, net income attributable to Apollo Global Management, Inc. reflects the Company’s own economic interests in the consolidated CLOs including (i) changes in the fair value of the beneficial interests retained by the Company and (ii) beneficial interests that represent compensation for collateral management services.
The consolidated VIEs hold investments that could be traded over-the-counter. Investments in securities that are traded on a securities exchange or comparable over-the-counter quotation systems are valued based on the last reported sale price at that date. If no sales of such investments are reported on such date, and in the case of over-the-counter securities or other investments for which the last sale date is not available, valuations are based on independent market quotations obtained from market participants, recognized pricing services or other sources deemed relevant, and the prices are based on the average of the “bid” and “ask” prices, or at ascertainable prices at the close of business on such day. Market quotations are generally based on valuation pricing models or market transactions of similar securities adjusted for security-specific factors such as relative capital structure priority and interest and yield risks, among other factors. When market quotations are not available, a model based approach is used to determine fair value.
Leases
The Company determines if an arrangement is a lease or contains a lease at inception. Operating leases are included in lease assets and lease liabilities in the condensed consolidated statements of financial condition. The Company does not have any finance leases.
Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease assets and lease liabilities are recognized at the date of commencement of the lease (the “commencement date”) based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its derived incremental borrowing rate based on information available at commencement date in determining the present value of lease payments. The determination of an appropriate incremental borrowing rate requires judgment. The Company determined its incremental borrowing rate based on consideration of market conditions, the Company’s overall creditworthiness, and recent debt and preferred equity issuances. The Company adjusts its rate accordingly based on the term of the leases.
Lease assets also include any lease payments made (e.g. pre-paid rent) and are reduced by any deferred rent liabilities arising from lease escalation provisions and lease incentives within the Company’s lease agreements. Accordingly, as of September 30, 2019, the difference between lease assets and lease liabilities represents the Company’s deferred rent liabilities that are netted against the lease asset amount. Certain lease agreements contain lease escalation or lease incentive provisions based on the terms of the arrangement with the landlord. Lease escalations and lease incentives, if any, are recognized on a straight-line basis over the lease term. The Company’s lease agreements may also include options to extend or terminate the lease. Options to extend would not be included in the lease term until it is reasonably certain that the Company will exercise that option. Lease expense is recognized on a straight-line basis over the lease term and is recorded within general, administrative and other in the condensed consolidated statements of operations. The Company has lease agreements with non-lease components (e.g. estimated operating expenses associated with the lease), which are accounted for separately.
Other Assets
Other assets primarily includes fixed assets, net, deferred equity-based compensation and prepaid expenses. During 2019, the presentation of intangible assets, net was combined with other assets on the condensed consolidated statements of financial condition and the prior period was recast to conform to the current presentation.

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Table of Contents
APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

Deferred Revenue
Apollo records deferred revenue, which is a type of contract liability, when consideration is received in advance of management services provided.
Apollo also earns management fees subject to the Management Fee Offset (described below). When advisory and transaction fees are earned by the management company, the Management Fee Offset reduces the management fee obligation of the fund. When the Company receives cash for advisory and transaction fees, a certain percentage of such advisory and/or transaction fees, as applicable, is allocated as a credit to reduce future management fees, otherwise payable by such fund. Such credit is recorded as deferred revenue in the condensed consolidated statements of financial condition. A portion of any excess advisory and transaction fees may be required to be returned to the limited partners of certain funds upon such fund’s liquidation. As the management fees earned by the Company are presented on a gross basis, any Management Fee Offsets calculated are presented as a reduction to advisory and transaction fees in the condensed consolidated statements of operations.
Additionally, Apollo earns advisory fees pursuant to the terms of the advisory agreements with certain of the portfolio companies that are owned by the funds Apollo manages. When Apollo receives a payment from a portfolio company that exceeds the advisory fees earned at that point in time, the excess payment is recorded as deferred revenue in the condensed consolidated statements of financial condition. The advisory agreements with the portfolio companies vary in duration and the associated fees are received monthly, quarterly or annually. Deferred revenue is reversed and recognized as revenue over the period that the agreed upon services are performed. There was $77.1 million of revenue recognized during the nine months ended September 30, 2019 that was previously deferred as of January 1, 2019.
Under the terms of the funds’ partnership agreements, Apollo is normally required to bear organizational expenses over a set dollar amount and placement fees or costs in connection with the offering and sale of interests in the funds it manages to investors. The placement fees are payable to placement agents, who are independent third parties that assist in identifying potential investors, securing commitments to invest from such potential investors, preparing or revising offering and marketing materials, developing strategies for attempting to secure investments by potential investors and/or providing feedback and insight regarding issues and concerns of potential investors, when a limited partner either commits or funds a commitment to a fund. In certain instances the placement fees are paid over a period of time. Based on the management agreements with the funds, Apollo considers placement fees and organizational costs paid in determining if cash has been received in excess of the management fees earned. Placement fees and organizational costs are normally the obligation of Apollo but can be paid for by the funds. When these costs are paid by the fund, the resulting obligations are included within deferred revenue. The deferred revenue balance will also be reduced during future periods when management fees are earned but not paid.
Revenues
The Company’s revenues are reported in four separate categories that include (i) management fees; (ii) advisory and transaction fees, net; (iii) investment income, which is comprised of performance allocations and principal investment income; and (iv) incentive fees.
On January 1, 2018, the Company adopted new revenue guidance issued by the FASB for recognizing revenue from contracts with customers. The new revenue guidance requires that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services (i.e., the transaction price). When determining the transaction price under the new revenue guidance, an entity may recognize variable consideration only to the extent that it is probable to not be significantly reversed. The new revenue guidance also requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized.
The Company has concluded that its management fees, advisory and transaction fees, and incentive fees are within the scope of the new revenue guidance. For incentive fees, the new revenue guidance delays the timing of certain revenues compared to the prior accounting treatment. These amounts were previously recognized in carried interest income in the condensed consolidated statements of operations and are now recognized within a separate line, incentive fees.
Effective January 1, 2018, the Company implemented a change in accounting principle for performance allocations to be accounted for under guidance applicable to equity method investments, and therefore not within the scope of the new revenue guidance. The accounting change does not change the timing or amount of revenue recognized related to performance allocation arrangements. These amounts were previously recognized within carried interest income in the condensed consolidated statements of operations and carried interest receivable within the condensed consolidated statements of financial condition. As a result of

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Table of Contents
APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

the change in accounting principle, the Company recognizes performance allocations within investment income along with the related principal investment income (as further described below) in the condensed consolidated statements of operations and within the investments line in the condensed consolidated statements of financial condition. The Company applied this change in accounting principle on a full retrospective basis.
Management Fees
Management fees are recognized over time during the periods in which the related services are performed in accordance with the contractual terms of the related agreement. Management fees are generally based on (1) a percentage of the capital committed during the commitment period, and thereafter based on the remaining invested capital of unrealized investments, or (2) net asset value, gross assets or as otherwise defined in the respective agreements. Included in management fees are certain expense reimbursements where the Company is considered the principal under the agreements and is required to record the expense and related reimbursement revenue on a gross basis.
Advisory and Transaction Fees, Net
Advisory fees, including management consulting fees and directors’ fees, are generally recognized over time as the underlying services are provided in accordance with the contractual terms of the related agreement. The Company receives such fees in exchange for ongoing management consulting services provided to portfolio companies of funds it manages. Transaction fees, including structuring fees and arranging fees are generally recognized at a point in time when the underlying services rendered are complete.
The amounts due from fund portfolio companies are recorded in due from related parties, which is discussed further in note 14. Under the terms of the limited partnership agreements for certain funds, the management fee payable by the funds may be subject to a reduction based on a certain percentage of such advisory and transaction fees, net of applicable broken deal costs (“Management Fee Offset”). Advisory and transaction fees are presented net of the Management Fee Offset in the condensed consolidated statements of operations.
Underwriting fees, which are also included within advisory and transaction fees, net, include gains, losses and fees, arising from securities offerings in which one of the Company’s subsidiaries participates in the underwriter syndicate. Underwriting fees are recognized at a point in time when the underwriting is completed. Underwriting fees recognized but not received are recorded in other assets on the condensed consolidated statements of financial condition.
During the normal course of business, the Company incurs certain costs related to certain transactions that are not consummated (“broken deal costs”). These costs (e.g., research costs, due diligence costs, professional fees, legal fees and other related items) are determined to be broken deal costs upon management’s decision to no longer pursue the transaction. In accordance with the related fund agreement, in the event the deal is deemed broken, all of the costs are reimbursed by the funds and then included as a component of the calculation of the Management Fee Offset. If a deal is successfully completed, Apollo is reimbursed by the fund or fund’s portfolio company for all costs incurred and no offset is generated. As the Company acts as an agent for the funds it manages, any transaction costs incurred and paid by the Company on behalf of the respective funds relating to successful or broken deals are recorded net on the Company’s condensed consolidated statements of operations, and any receivable from the respective funds is recorded in due from related parties on the condensed consolidated statements of financial condition.
Investment Income
Investment income is comprised of performance allocations and principal investment income.
Performance Allocations
Performance allocations are a type of performance revenue (i.e., income earned based on the extent to which an entity’s performance exceeds predetermined thresholds). Performance allocations are generally structured from a legal standpoint as an allocation of capital in which the Company’s capital account receives allocations of the returns of an entity when those returns exceed predetermined thresholds. The determination of which performance revenues are considered performance allocations is primarily based on the terms of an agreement with the entity.
As noted above, as a result of a change in accounting principle, the Company recognizes performance allocations within investment income along with the related principal investment income (as described further below) in the condensed

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

consolidated statements of operations and within the investments line in the condensed consolidated statements of financial condition.
Principal Investment Income
Principal investment income includes the Company’s income or loss from equity method investments and certain other investments in entities in which the Company is generally eligible to receive performance allocations. Income from equity method investments includes the Company’s share of net income or loss generated from its investments, which are not consolidated, but in which the Company exerts significant influence. Prior to the change in accounting principle noted above, income from equity method investments was included within other income (loss) in the condensed consolidated statements of operations. All prior periods have been conformed to reflect this change in presentation.
Incentive Fees
Incentive fees are a type of performance revenue. Incentive fees differ from performance allocations in that incentive fees do not represent an allocation of capital but rather a contractual fee arrangement with the entity.
Incentive fees are considered a form of variable consideration under the new revenue recognition guidance as they are subject to clawback or reversal and therefore must be deferred until the fees are probable to not be significantly reversed. Accrued but unpaid incentive fees are reported within incentive fees receivable in the Company’s condensed consolidated statements of financial condition. As noted earlier, prior to the adoption of the new revenue recognition guidance, incentive fees were recognized on an assumed liquidation basis. The Company’s incentive fees primarily relate to the credit segment and are generally received from CLOs, managed accounts and AINV.
Compensation and Benefits
Equity-Based Compensation
Equity-based awards granted to employees and non-employees as compensation are measured based on the grant date fair value of the award. Equity-based awards that do not require future service (i.e., vested awards) are expensed immediately. Equity-based employee awards that require future service are expensed over the relevant service period. In addition, certain restricted share units (“RSUs”) granted by the Company vest based on both continued service and the Company’s receipt of performance revenues, within prescribed periods, sufficient to cover the associated equity-based compensation expense. In accordance with U.S. GAAP, equity-based compensation expense for such awards, if and when granted, will be recognized on an accelerated recognition method over the requisite service period to the extent the performance revenue metrics are met or deemed probable. The Company accounts for forfeitures of equity-based awards when they occur.
Profit Sharing
Profit sharing expense and profit sharing payable primarily consist of a portion of performance revenues earned from certain funds that are allocated to employees, former employees and Contributing Partners. Profit sharing amounts are recognized as the related performance revenues are earned. Accordingly, profit sharing amounts can be reversed during periods when there is a decline in performance revenues that were previously recognized.
Profit sharing amounts are generally not paid until the related performance revenue is distributed to the general partner upon realization of the fund’s investments. Under certain profit sharing arrangements, the Company requires that a portion of certain of the performance revenues distributed to its employees be used to purchase restricted shares of Class A Common Stock issued under the Company’s 2007 Omnibus Equity Incentive Plan, which, effective as of July 22, 2019, was amended, restated and renamed the 2019 Omnibus Equity Incentive Plan (the “Equity Plan”). Prior to distribution of the performance revenue, the Company records the value of the equity-based awards expected to be granted in other assets and other liabilities within the condensed consolidated statements of financial condition. Such equity-based awards are recorded as equity-based compensation expense over the relevant service period once granted.
Additionally, profit sharing amounts previously distributed may be subject to clawback from employees, former employees and Contributing Partners. When applicable, the accrual for potential clawback of previously distributed profit sharing amounts, which is a component of due from related parties on the condensed consolidated statements of financial condition, represents all amounts previously distributed to employees, former employees and Contributing Partners that would need to be

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

returned to the general partner if the Apollo funds were to be liquidated based on the fair value of the underlying funds’ investments as of the reporting date. The actual general partner receivable, however, would not become realized until the end of a fund’s life.
Profit sharing payable also includes contingent consideration obligations that were recognized in connection with certain Apollo acquisitions. Changes in the fair value of the contingent consideration obligations are reflected in the Company’s condensed consolidated statements of operations as profit sharing expense.
The Company has a performance-based incentive arrangement for certain Apollo partners and employees designed to more closely align compensation on an annual basis with the overall realized performance of the Company. This arrangement enables certain partners and employees to earn discretionary compensation based on performance revenue earned by the Company in a given year, which amounts are reflected in profit sharing expense in the accompanying condensed consolidated financial statements.
401(k) Savings Plan
The Company sponsors a 401(k) savings plan (the “401(k) Plan”) whereby U.S.-based employees are entitled to participate in the 401(k) Plan based upon satisfying certain eligibility requirements. The Company matches 50% of eligible annual employee contributions up to 3% of the eligible employees’ annual compensation. Matching contributions vest after three years of service.
General, Administrative and Other
General, administrative and other primarily includes professional fees, occupancy, depreciation and amortization, travel, information technology and administration expenses.
Income Taxes
Prior to the Conversion, certain entities in the Apollo Operating Group operated as partnerships for U.S. federal income tax purposes. As a result, these members of the Apollo Operating Group were not subject to U.S. federal income taxes. However, certain of these entities were subject to New York City unincorporated business taxes (“NYC UBT”) and certain non-U.S. entities were subject to non-U.S. corporate income taxes. Effective September 5, 2019, Apollo Global Management, LLC converted from a Delaware limited liability company to a Delaware corporation named Apollo Global Management, Inc. Subsequent to the Conversion, we expect that all of the income the Company earns will be subject to U.S. corporate income taxes, which could result in an overall higher income tax expense (or benefit) in periods subsequent to the Conversion.
Significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties. The Company recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit is measured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. If a tax position is not considered more likely than not to be sustained, then no benefits of the position are recognized. The Company’s tax positions are reviewed and evaluated quarterly to determine whether or not the Company has uncertain tax positions that require financial statement recognition.
Deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amount of assets and liabilities and their respective tax basis using currently enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period during which the change is enacted. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Use of Estimates
The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Apollo’s most significant estimates include goodwill, intangible assets, income taxes, performance allocations, incentive fees, contingent consideration obligation related to an acquisition, non-cash compensation, and fair value of investments and debt. Actual results could differ materially from those estimates.

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

Recent Accounting Pronouncements
Recently Issued Accounting Standards Effective on January 1, 2019
In February 2016, the FASB issued a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use lease assets and lease liabilities on the statements of financial condition. The most significant among the changes in the standard is the recognition of right-of-use lease assets and lease liabilities by lessees for those leases classified as operating leases. Under the standard, disclosures are required to meet the objectives of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.
The Company adopted the standard effective January 1, 2019 under the simplified transition method. The simplified transition method allows companies to forgo the comparative reporting requirements initially required under the modified retrospective transition approach and apply the new guidance prospectively. The Company also elected to use the practical expedients available under the standard whereby the Company would not need to reassess whether an arrangement is or contains a lease, lease classification, and the accounting for initial direct costs.
The adoption of the standard had an impact on the Company’s condensed consolidated statements of financial condition but did not have an impact on the Company’s condensed consolidated statements of operations, condensed consolidated statements of cash flows or beginning accumulated deficit. The most significant impact was the recognition of right-of-use lease assets and lease liabilities for operating leases. Refer to the condensed consolidated statements of financial condition and note 8 for further information on the impact of the adoption of the standard on the Company’s condensed consolidated financial statements.
Recently Issued Accounting Standards Effective on January 1, 2020
In June 2016, the FASB issued guidance intended to provide financial statement users with more useful information about the expected credit losses on financial instruments held by a reporting entity at each reporting date. To achieve this objective, the new guidance replaces the incurred loss methodology in current GAAP with a methodology that reflects expected credit losses. The new guidance will affect entities to varying degrees depending on the credit quality of the assets held by the entity, their duration, and how the entity applies current GAAP. The new guidance is effective for the Company on January 1, 2020 and early adoption is permitted. The new guidance is not expected to have a material impact on the condensed consolidated financial statements of the Company.
In January 2017, the FASB issued guidance intended to simplify the test for goodwill impairment. The new guidance removes the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment (Step 2). Under the new guidance, a goodwill impairment is calculated as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill in the reporting unit. The guidance is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019, and should be performed prospectively. Early adoption is permitted for interim or annual goodwill impairment tests performed after January 1, 2017. The guidance is not expected to have a material impact on the condensed consolidated financial statements of the Company.
3. INVESTMENTS
The following table presents Apollo’s investments: 
 
As of
September 30, 2019
 
As of
December 31, 2018
Investments, at fair value
$
959,095

 
$
900,959

Equity method investments
1,033,237

 
909,471

Performance allocations
1,480,577

 
912,182

Total Investments
$
3,472,909

 
$
2,722,612


Investments, at Fair Value
Investments, at fair value, consist of investments for which the fair value option has been elected and primarily include the Company’s investment in Athene Holding and investments in debt of unconsolidated CLOs. Changes in the fair value related to these investments are presented in net gains (losses) from investment activities except for certain investments for which the

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

Company is entitled to receive performance allocations. For those investments, changes in fair value are presented in principal investment income.
As of September 30, 2019 and for the three and nine months ended September 30, 2019, no equity method investment held by Apollo met the significance criteria as defined by the SEC. Although the following disclosure is not required by the significance criteria for the nine months ended September 30, 2019, the Company chose to continue to include this information as it was disclosed in its 2018 Annual Report. The following table presents summarized financial information of Athene Holding:
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019(1)
 
2018
 
2019(1)
 
2018
 
(in millions)
Statements of Operations
 
 
 
 
 
 
 
Revenues
$
3,369

 
$
2,576

 
$
9,484

 
$
5,389

Expenses
2,619

 
1,897

 
8,141

 
4,067

Income before income tax provision
750

 
679

 
1,343

 
1,322

Income tax provision
30

 
56

 
19

 
165

Net income
$
720

 
$
623

 
$
1,324

 
$
1,157

(1)
The financial information for the three and nine months ended September 30, 2019 is presented a quarter in arrears and reflects the financial information for the three and nine months ended June 30, 2019, which represents the latest available financial information as of the date of this report.
Net Gains (Losses) from Investment Activities
The following table presents the realized and net change in unrealized gains (losses) reported in net gains (losses) from investment activities: 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Realized gains on sales of investments, net
$
—

 
$
1

 
$
45

 
$
67

Net change in unrealized gains (losses) due to changes in fair value
(19,790
)
 
155,282

 
44,054

 
20,578

Net gains (losses) from investment activities
$
(19,790
)
 
$
155,283

 
$
44,099

 
$
20,645


Equity Method Investments
Apollo’s equity method investments include its investments in the credit, private equity and real assets funds it manages, which are not consolidated, but in which the Company exerts significant influence. Apollo’s share of net income generated by these investments is recorded in principal investment income in the condensed consolidated statements of operations.
Equity method investments consisted of the following:
 
Equity Held as of
 
September 30, 2019
(4) 
December 31, 2018
(4) 
Credit(2)
$
311,108

 
$
279,888

 
Private Equity(1)
623,836

 
534,818

 
Real Assets
98,293

 
94,765

 
Total equity method investments(3)
$
1,033,237

 
$
909,471

 

(1)
The equity method investment in Fund VIII was $398.7 million and $356.6 million as of September 30, 2019 and December 31, 2018, respectively, representing an ownership percentage of 2.2% and 2.2% as of September 30, 2019 and December 31, 2018, respectively.
(2)
The equity method investment in AINV was $52.0 million and $53.9 million as of September 30, 2019 and December 31, 2018, respectively. The value of the Company’s investment in AINV was $47.2 million and $36.7 million based on the quoted market price of AINV as of September 30, 2019 and December 31, 2018, respectively.

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

(3)
Certain funds invest across multiple segments. The presentation in the table above is based on the classification of the majority of such funds’ investments.
(4)
Some amounts included are a quarter in arrears.
Performance Allocations
Performance allocations from credit, private equity and real assets funds consisted of the following: 
 
As of September 30, 2019
 
As of December 31, 2018
Credit
$
371,184

 
$
241,896

Private Equity
939,356

 
520,892

Real Assets
170,037

 
149,394

Total performance allocations
$
1,480,577

 
$
912,182

The table below provides a roll forward of the performance allocations balance:
 
Credit
 
Private Equity
 
Real Assets
 
Total
Performance allocations, January 1, 2019
$
241,896

 
$
520,892

 
$
149,394

 
$
912,182

Change in fair value of funds
184,787

 
553,723

 
23,716

 
762,226

Fund distributions to the Company
(55,499
)
 
(135,259
)
 
(3,073
)
 
(193,831
)
Performance allocations, September 30, 2019
$
371,184

 
$
939,356

 
$
170,037

 
$
1,480,577


The change in fair value of funds excludes the reversal of previously realized performance allocations due to the general partner obligation to return previously distributed performance allocations, which is recorded in due to related parties in the consolidated statements of financial condition. See note 14 for further disclosure regarding the general partner obligation.
The timing of the payment of performance allocations due to the general partner or investment manager varies depending on the terms of the applicable fund agreements. Generally, performance allocations with respect to the private equity funds and certain credit and real assets funds are payable and are distributed to the fund’s general partner upon realization of an investment if the fund’s cumulative returns are in excess of the preferred return.
4. PROFIT SHARING PAYABLE
Profit sharing payable consisted of the following:
 
As of September 30, 2019
 
As of December 31, 2018
Credit
$
252,893

 
$
178,093

Private Equity
369,400

 
205,617

Real Assets
71,325

 
68,431

Total profit sharing payable
$
693,618

 
$
452,141



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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

The table below provides a roll forward of the profit sharing payable balance:
 
Credit
 
Private Equity
 
Real Assets
 
Total
Profit sharing payable, January 1, 2019
$
178,093

 
$
205,617

 
$
68,431

 
$
452,141

Profit sharing expense
97,341

 
212,303

 
7,148

 
316,792

Payments/other
(22,541
)
 
(48,520
)
 
(4,254
)
 
(75,315
)
Profit sharing payable, September 30, 2019
$
252,893

 
$
369,400

 
$
71,325

 
$
693,618


Profit sharing expense includes (i) changes in amounts payable to employees and former employees entitled to a share of performance revenues in Apollo’s funds and (ii) changes to the fair value of the contingent consideration obligations recognized in connection with certain Apollo acquisitions. Profit sharing expense excludes the potential return of profit sharing distributions that would be due if certain funds were liquidated, which is recorded in due from related parties in the consolidated statements of financial condition. See note 14 for further disclosure regarding the potential return of profit sharing distributions.
As discussed in note 2, under certain profit sharing arrangements, the Company requires that a portion of certain of the performance revenues distributed to its employees be used to purchase restricted shares of Class A Common Stock issued under its Equity Plan. Prior to distribution of the performance revenues, the Company records the value of the equity-based awards expected to be granted in other assets and other liabilities within the condensed consolidated statements of financial condition. See note 7 for further disclosure regarding deferred equity-based compensation.
5. VARIABLE INTEREST ENTITIES
As described in note 2, the Company consolidates entities that are VIEs for which the Company has been designated as the primary beneficiary. There is no recourse to the Company for the consolidated VIEs’ liabilities.
Consolidated Variable Interest Entities
Apollo has consolidated VIEs in accordance with the policy described in note 2. Through its role as investment manager of these VIEs, the Company determined that Apollo has the power to direct the activities that most significantly impact the economic performance of these VIEs. Additionally, Apollo determined that its interests, both directly and indirectly from these VIEs, represent rights to returns that could potentially be significant to such VIEs. As a result, Apollo determined that it is the primary beneficiary and therefore should consolidate the VIEs.
Certain CLOs are consolidated by Apollo as the Company is considered to hold a controlling financial interest through direct and indirect interests in these CLOs exclusive of management and performance-based fees received. Through its role as collateral manager of these VIEs, the Company determined that Apollo has the power to direct the activities that most significantly impact the economic performance of these VIEs. These CLOs were formed for the sole purpose of issuing collateralized notes to investors. The assets of these VIEs are primarily comprised of senior secured loans and the liabilities are primarily comprised of debt.
The assets of consolidated CLOs are not available to creditors of the Company. In addition, the investors in these consolidated CLOs have no recourse against the assets of the Company. The Company measures both the financial assets and the financial liabilities of the CLOs using the fair value of the financial assets as further described in note 2. The Company has elected the fair value option for financial instruments held by its consolidated CLOs, which includes investments in loans and corporate bonds, as well as debt obligations and contingent obligations held by such consolidated CLOs. Other assets include amounts due from brokers and interest receivables. Other liabilities include payables for securities purchased, which represent open trades within the consolidated CLOs and primarily relate to corporate loans that are expected to settle within 60 days. As of September 30, 2019 and December 31, 2018, the Company held investments of $42.2 million and $44.2 million, respectively, in consolidated foreign currency denominated CLOs, which eliminate in consolidation.

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

Net Gains from Investment Activities of Consolidated Variable Interest Entities
The following table presents net gains from investment activities of the consolidated VIEs:
 
For the Three Months Ended
September 30,
 
For the Nine Months Ended
September 30,
 
 
2019
(1) 
2018
(1) 
2019
(1) 
2018
(1) 
Net gains from investment activities
$
14,892

 
$
17,898

 
$
38,679

 
$
23,211

 
Net gains (losses) from debt
(5,217
)
 
(6,131
)
 
(16,287
)
 
2,043

 
Interest and other income
7,357

 
8,391

 
20,772

 
27,118

 
Interest and other expenses
(6,401
)
 
(7,157
)
 
(18,436
)
 
(23,626
)
 
Net gains from investment activities of consolidated variable interest entities
$
10,631

 
$
13,001

 
$
24,728

 
$
28,746

 
(1)
Amounts reflect consolidation eliminations.
Senior Secured Notes, Subordinated Notes and Secured Borrowings
Included within debt are amounts due to third-party institutions by the consolidated VIEs. The following table summarizes the principal provisions of the debt of the consolidated VIEs:
 
As of September 30, 2019
 
As of December 31, 2018
 
Principal Outstanding
 
Weighted Average Interest Rate
 
Weighted Average Remaining Maturity in Years
 
Principal Outstanding
 
Weighted Average Interest Rate
 
Weighted Average Remaining Maturity in Years
Senior Secured Notes(2)
$
730,820

 
1.67
%
 
10.4
 
$
768,860

 
1.67
%
 
11.2
Subordinated Notes(2)
90,951

 
N/A

(1) 
20.7
 
95,686

 
N/A

(1) 
21.4
Secured Borrowings(2)(3)
18,976

 
3.82
%
 
8.1
 
18,976

 
3.42
%
 
8.8
Total
$
840,747

 
 
 
 
 
$
883,522

 
 
 
 
(1)
The subordinated notes do not have contractual interest rates but instead receive distributions from the excess cash flows of the VIEs.
(2)
The debt of the consolidated VIEs is collateralized by assets of the consolidated VIEs and assets of one vehicle may not be used to satisfy the liabilities of another vehicle. The fair value of the debt and collateralized assets of the Senior Secured Notes, Subordinated Notes and Secured Borrowings are presented below:
 
As of September 30, 2019
 
As of December 31, 2018
Debt, at fair value
$
828,824

 
$
855,461

Collateralized assets
$
1,244,868

 
$
1,290,891


(3)
Secured borrowings consist of a consolidated VIE’s obligation through a repurchase agreement redeemable at maturity with a third party lender. The fair value of the secured borrowings as of September 30, 2019 and December 31, 2018 was $19.0 million and $19.0 million, respectively.
The consolidated VIEs’ debt obligations contain various customary loan covenants. As of September 30, 2019, the Company was not aware of any instances of non-compliance with any of these covenants.
As of September 30, 2019, the contractual maturities for debt of the consolidated VIEs is greater than 5 years.
Variable Interest Entities Which are Not Consolidated
The Company holds variable interests in certain VIEs which are not consolidated, as it has been determined that Apollo is not the primary beneficiary.

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

The following table presents the carrying amounts of the assets and liabilities of the VIEs for which Apollo has concluded that it holds a significant variable interest, but that it is not the primary beneficiary. In addition, the table presents the maximum exposure to losses relating to these VIEs.
 
As of
September 30, 2019
 
As of
December 31, 2018
Assets:
 
 
 
Cash
$
136,966

 
$
404,660

Investments
5,802,434

 
4,919,118

Receivables
78,748

 
126,873

Total Assets
$
6,018,148

 
$
5,450,651

 
 
 
 
Liabilities:
 
 
 
Debt and other payables
$
3,391,389

 
$
3,673,219

Total Liabilities
$
3,391,389

 
$
3,673,219

 
 
 
 
Apollo Exposure(1)
$
261,111

 
$
244,894

(1)
Represents Apollo’s direct investment in those entities in which Apollo holds a significant variable interest and certain other investments. Additionally, cumulative performance allocations are subject to reversal in the event of future losses, as discussed in note 15.
6. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS
The following tables summarize the Company’s financial assets and financial liabilities recorded at fair value by fair value hierarchy level:
 
As of September 30, 2019
 
Level I
 
Level II
 
Level III
 
Total
 
Cost
Assets
 
 
 
 
 
 
 
 
 
U.S. Treasury securities, at fair value
$
551,681

 
$
—

 
$
—

 
$
551,681

 
$
532,589

Investments, at fair value:
 
 
 
 
 
 
 
 
 
Investment in Athene Holding
804,447

 
—

 
—

 
804,447

 
592,561

Other investments
—

 
42,018

 
112,630

(1) 
154,648

 
136,618

Total investments, at fair value
804,447

 
42,018

 
112,630

 
959,095

 
729,179

Investments of VIEs, at fair value
—

 
864,734

 
298,405

 
1,163,139

 
 
Investments of VIEs, valued using NAV
—

 
—

 
—

 
842

 
 
Total investments of VIEs, at fair value
—

 
864,734

 
298,405

 
1,163,981

 
 
Derivative assets(2)
—

 
468

 
—

 
468

 
 
Total Assets
$
1,356,128

 
$
907,220

 
$
411,035

 
$
2,675,225

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Liabilities of VIEs, at fair value
$
—

 
$
828,824

 
$
—

 
$
828,824

 
 
Contingent consideration obligations(3)
—

 
—

 
96,400

 
96,400

 
 
Derivative liabilities(2)
—

 
89

 
—

 
89

 
 
Total Liabilities
$
—

 
$
828,913

 
$
96,400

 
$
925,313

 
 


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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

 
As of December 31, 2018
 
Level I
 
Level II
 
Level III
 
Total
 
Cost
Assets
 
 
 
 
 
 
 
 
 
U.S. Treasury securities, at fair value
$
392,932

 
$
—

 
$
—

 
$
392,932

 
$
390,336

Investments, at fair value:
 
 
 
 
 
 
 
 
 
Investment in Athene Holding
761,807

 
—

 
—

 
761,807

 
592,572

Other investments
—

 
42,782

 
96,370

(1) 
139,152

 
124,379

Total investments, at fair value
761,807

 
42,782

 
96,370

 
900,959

 
716,951

Investments of VIEs, at fair value
—

 
877,427

 
295,987

 
1,173,414

 
 
Investments of VIEs, valued using NAV
—

 
—

 
—

 
2,263

 
 
Total investments of VIEs, at fair value
—

 
877,427

 
295,987

 
1,175,677

 
 
Derivative assets(2)
—

 
388

 
—

 
388

 
 
Total Assets
$
1,154,739

 
$
920,597

 
$
392,357

 
$
2,469,956

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Liabilities of VIEs, at fair value
$
—

 
$
855,461

 
$
—

 
$
855,461

 
 
Contingent consideration obligations(3)
—

 
—

 
74,487

 
74,487

 
 
Derivative liabilities(2)
—

 
681

 
—

 
681

 
 
Total Liabilities
$
—

 
$
856,142

 
$
74,487

 
$
930,629

 
 

(1)
Other investments as of September 30, 2019 and December 31, 2018 excludes $25.0 million and $17.0 million, respectively, of performance allocations classified as Level III related to certain investments for which the Company has elected the fair value option. The Company’s policy is to account for performance allocations as investments.
(2)
Derivative assets and derivative liabilities are presented as a component of Other assets and Other liabilities, respectively, in the condensed consolidated statements of financial condition.
(3)
Profit sharing payable includes contingent obligations classified as Level III.
The following tables summarize the changes in financial assets measured at fair value for which Level III inputs have been used to determine fair value:
 
For the Three Months Ended September 30, 2019
 
Other Investments
 
Investments of Consolidated VIEs
 
Total
Balance, Beginning of Period
$
114,439

 
$
301,066

 
$
415,505

Sales of investments/distributions
(932
)
 
—

 
(932
)
Changes in net unrealized gains
1,484

 
10,006

 
11,490

Cumulative translation adjustment
(4,054
)
 
(12,667
)
 
(16,721
)
Transfer into Level III(1)
1,693

 
—

 
1,693

Balance, End of Period
$
112,630

 
$
298,405

 
$
411,035

Change in net unrealized gains included in net gains from investment activities related to investments still held at reporting date
$
1,484

 
$
—

 
$
1,484

Change in net unrealized gains included in net gains from investment activities of consolidated VIEs related to investments still held at reporting date
—

 
10,005

 
10,005


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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

 
For the Three Months Ended September 30, 2018
 
Other Investments
 
Investments of Consolidated VIEs
 
Total
Balance, Beginning of Period
$
60,871

 
$
268,623

 
$
329,494

Purchases
22,774

 
7,162

 
29,936

Sale of investments/distributions
(20,972
)
 
—

 
(20,972
)
Net realized gains
1

 
—

 
1

Changes in net unrealized gains
658

 
11,701

 
12,359

Cumulative translation adjustment
972

 
(9,056
)
 
(8,084
)
Transfer out of Level III(1)
(1,616
)
 
—

 
(1,616
)
Balance, End of Period
$
62,688

 
$
278,430

 
$
341,118

Change in net unrealized gains included in net gains from investment activities related to investments still held at reporting date
$
592

 
$
—

 
$
592

Change in net unrealized gains included in net gains from investment activities of consolidated VIEs related to investments still held at reporting date
—

 
11,701

 
11,701

 
For the Nine Months Ended September 30, 2019
 
Other Investments
 
Investments of Consolidated VIEs
 
Total
Balance, Beginning of Period
$
96,370

 
$
295,987

 
$
392,357

Purchases
15,048

 
—

 
15,048

Sale of investments/distributions
(2,810
)
 
—

 
(2,810
)
Changes in net unrealized gains
8,057

 
21,178

 
29,235

Cumulative translation adjustment
(4,799
)
 
(14,644
)
 
(19,443
)
Transfer into Level III(1)
1,693

 
—

 
1,693

Transfer out of Level III(1)
(929
)
 
(4,116
)
 
(5,045
)
Balance, End of Period
$
112,630

 
$
298,405

 
$
411,035

Change in net unrealized gains included in principal investment income related to investments still held at reporting date
$
8,057

 
$
—

 
$
8,057

Change in net unrealized gains included in net gains from investment activities of consolidated VIEs related to investments still held at reporting date
—

 
21,178

 
21,178

 
For the Nine Months Ended September 30, 2018
 
Other Investments
 
Investments of Consolidated VIEs
 
Total
Balance, Beginning of Period 
$
35,701

 
$
132,348

 
$
168,049

Purchases
88,536

 
144,984

 
233,520

Sale of investments/distributions
(49,288
)
 
(14,205
)
 
(63,493
)
Net realized gains (losses)
416

 
(1,112
)
 
(696
)
Changes in net unrealized gains
2,078

 
28,820

 
30,898

Cumulative translation adjustment
43

 
(13,532
)
 
(13,489
)
Transfer into Level III(1)
4,558

 
18,783

 
23,341

Transfer out of Level III(1)
(19,356
)
 
(17,656
)
 
(37,012
)
Balance, End of Period
$
62,688

 
$
278,430

 
$
341,118

Change in net unrealized losses included in principal investment income related to investments still held at reporting date
$
2,012

 
$
—

 
$
2,012

Change in net unrealized gains included in net gains from investment activities of consolidated VIEs related to investments still held at reporting date
—

 
27,664

 
27,664

(1)
Transfers between Level II and III were a result of subjecting the broker quotes on these financial assets to various criteria which include the number and quality of broker quotes, the standard deviation of obtained broker quotes and the percentage deviation from independent pricing services.

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

The following table summarizes the changes in fair value in financial liabilities measured at fair value for which Level III inputs have been used to determine fair value:
 
For the Three Months Ended September 30,
 
2019
 
2018
 
Contingent Consideration Obligations
 
Contingent Consideration Obligations
Balance, Beginning of Period
$
93,223

 
$
82,000

Payments
(512
)
 
(4,383
)
Changes in net unrealized (gains) losses(1)
3,689

 
83

Balance, End of Period
$
96,400

 
$
77,700

 
For the Nine Months Ended September 30,
 
2019
 
2018
 
Contingent Consideration Obligations
 
Liabilities of Consolidated VIEs & Apollo Funds
 
Contingent Consideration Obligations
 
Total
Balance, Beginning of Period
$
74,487

 
$
12,620

 
$
92,600

 
$
105,220

Payments
(1,827
)
 
(12,620
)
 
(6,947
)
 
(19,567
)
Changes in net unrealized (gains) losses(1)
23,740

 
—

 
(7,953
)
 
(7,953
)
Balance, End of Period
$
96,400

 
$
—

 
$
77,700

 
$
77,700

(1)
Changes in fair value of contingent consideration obligations are recorded in profit sharing expense in the condensed consolidated statements of operations.
The following tables summarize the quantitative inputs and assumptions used for financial assets and liabilities categorized as Level III under the fair value hierarchy:
 
As of September 30, 2019
 
Fair Value
 
Valuation Techniques
 
Unobservable Inputs
 
Ranges
 
Weighted Average
Financial Assets
 
 
 
 
 
 
 
 
 
Other investments
$
5,319

 
Third Party Pricing
 
N/A
 
N/A
 
N/A
107,311

 
Discounted cash flow
 
Discount rate
 
15.0% - 16.0%
 
15.6%
Investments of consolidated VIEs:
 
 
 
 
 
 
 
 
 
Equity securities
298,405

 
Book value multiple
 
Book value multiple
 
0.58x
 
0.58x
 
Discounted cash flow
 
Discount rate
 
11.9%
 
11.9%
Total Financial Assets
$
411,035

 
 
 
 
 
 
 
 
Financial Liabilities
 
 
 
 
 
 
 
 
 
Contingent consideration obligation
$
96,400

 
Discounted cash flow
 
Discount rate
 
17.0%
 
17.0%
Total Financial Liabilities
$
96,400

 
 
 
 
 
 
 
 


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Table of Contents
APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

 
As of December 31, 2018
 
Fair Value
 
Valuation Techniques
 
Unobservable Inputs
 
Ranges
 
Weighted Average
Financial Assets
 
 
 
 
 
 
 
 
 
Other investments
$
6,901

 
Third Party Pricing
 
N/A
 
N/A
 
N/A
89,469

 
Discounted cash flow
 
Discount Rate
 
15.0% - 16.0%
 
15.5%
Investments of consolidated VIEs:
 
 
 
 
 
 
 
 
 
Corporate loans/bonds/CLO notes
4,116

 
Third party pricing
 
N/A
 
N/A
 
N/A
Equity securities
291,871

 
Book value multiple
 
Book value multiple
 
0.65x
 
0.65x
 
Discounted cash flow
 
Discount rate
 
15.2%
 
15.2%
Total investments of consolidated VIEs
295,987

 
 
 
 
 
 
 
 
Total Financial Assets
$
392,357

 
 
 
 
 
 
 
 
Financial Liabilities
 
 
 
 
 
 
 
 
 
Contingent consideration obligation
$
74,487

 
Discounted cash flow
 
Discount rate
 
17.0%
 
17.0%
Total Financial Liabilities
$
74,487

 
 
 
 
 
 
 
 

Fair Value Measurement of Investment in Athene Holding
As of September 30, 2019 and December 31, 2018, the fair value of Apollo’s Level I investment in Athene Holding was calculated using the closing market price of Athene Holding shares of $42.06 and $39.83, respectively.
Discounted Cash Flow Model
When a discounted cash flow model is used to determine fair value, the significant input used in the valuation model is the discount rate applied to present value the projected cash flows. Increases in the discount rate can significantly lower the fair value of an investment and the contingent consideration obligations; conversely decreases in the discount rate can significantly increase the fair value of an investment and the contingent consideration obligations.
Consolidated VIEs
Investments
As of September 30, 2019 and December 31, 2018, the significant unobservable inputs used in the fair value measurement of the equity securities include the discount rate applied and the book value multiples applied in the valuation models. These unobservable inputs in isolation can cause significant increases or decreases in fair value. The discount rate is determined based on the market rates an investor would expect for a similar investment with similar risks. When a comparable multiple model is used to determine fair value, the comparable multiples are generally multiplied by the underlying companies’ earnings before interest, taxes, depreciation and amortization (“EBITDA”) to establish the total enterprise value of the company. The comparable multiple is determined based on the implied trading multiple of public industry peers.
Liabilities
As of September 30, 2019 and December 31, 2018, the debt obligations of the consolidated CLOs were measured on the basis of the fair value of the financial assets of the CLOs as the financial assets were determined to be more observable and, as a result, categorized as Level II in the fair value hierarchy.
Contingent Consideration Obligations
The significant unobservable input used in the fair value measurement of the contingent consideration obligations is the discount rate applied in the valuation models. This input in isolation can cause significant increases or decreases in fair value. The discount rate was based on the hypothetical cost of equity in connection with the acquisition of Stone Tower. See note 15 for further discussion of the contingent consideration obligations.
Valuation of Underlying Investments of Equity Method Investees
As discussed previously, the underlying entities that the Company manages and invests in are primarily investment companies which account for their investments at estimated fair value.

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Table of Contents
APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

On a quarterly basis, Apollo utilizes valuation committees consisting of members from senior management, to review and approve the valuation results related to the investments of the funds it manages. For certain publicly traded vehicles managed by the Company, a review is performed by an independent board of directors. The Company also retains independent valuation firms to provide third-party valuation consulting services to Apollo, which consist of certain limited procedures that management identifies and requests them to perform. The limited procedures provided by the independent valuation firms assist management with validating their valuation results or determining fair value. The Company performs various back-testing procedures to validate their valuation approaches, including comparisons between expected and observed outcomes, forecast evaluations and variance analyses. However, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material.
Credit Investments
The majority of investments in Apollo’s credit funds are valued based on quoted market prices and valuation models. Quoted market prices are valued based on the average of the “bid” and the “ask” quotes provided by multiple brokers wherever possible without any adjustments. Apollo will designate certain brokers to use to value specific securities. In order to determine the designated brokers, Apollo considers the following: (i) brokers with which Apollo has previously transacted, (ii) the underwriter of the security and (iii) active brokers indicating executable quotes. In addition, when valuing a security based on broker quotes wherever possible Apollo tests the standard deviation amongst the quotes received and the variance between the concluded fair value and the value provided by a pricing service. When broker quotes are not available Apollo considers the use of pricing service quotes or other sources to mark a position. When relying on a pricing service as a primary source, Apollo (i) analyzes how the price has moved over the measurement period, (ii) reviews the number of brokers included in the pricing service’s population and (iii) validates the valuation levels with Apollo’s pricing team and traders.
Debt and equity securities that are not publicly traded or whose market prices are not readily available are valued at fair value utilizing a model based approach to determine fair value. Valuation approaches used to estimate the fair value of illiquid credit investments also may include the market approach and the income approach, as previously described above. The valuation approaches used consider, as applicable, market risks, credit risks, counterparty risks and foreign currency risks.
Private Equity Investments
The majority of the illiquid investments within our private equity funds are valued using the market approach, which provides an indication of fair value based on a comparison of the subject company to comparable publicly traded companies and transactions in the industry.
Market Approach
The market approach is driven by current market conditions, including actual trading levels of similar companies and, to the extent available, actual transaction data of similar companies. Judgment is required by management when assessing which companies are similar to the subject company being valued. Consideration may also be given to any of the following factors: (1) the subject company’s historical and projected financial data; (2) valuations given to comparable companies; (3) the size and scope of the subject company’s operations; (4) the subject company’s individual strengths and weaknesses; (5) expectations relating to the market’s receptivity to an offering of the subject company’s securities; (6) applicable restrictions on transfer; (7) industry and market information; (8) general economic and market conditions; and (9) other factors deemed relevant. Market approach valuation models typically employ a multiple that is based on one or more of the factors described above. Enterprise value as a multiple of EBITDA is common and relevant for most companies and industries, however, other industry specific multiples are employed where available and appropriate. Sources for gaining additional knowledge related to comparable companies include public filings, annual reports, analyst research reports, and press releases. Once a comparable company set is determined, Apollo reviews certain aspects of the subject company’s performance and determines how its performance compares to the group and to certain individuals in the group. Apollo compares certain measurements such as EBITDA margins, revenue growth over certain time periods, leverage ratios and growth opportunities. In addition, Apollo compares our entry multiple and its relation to the comparable set at the time of acquisition to understand its relation to the comparable set on each measurement date.
Income Approach
For investments where the market approach does not provide adequate fair value information, Apollo relies on the income approach. The income approach is also used to validate the market approach within our private equity funds. The income approach provides an indication of fair value based on the present value of cash flows that a business or security is expected to generate in the future. The most widely used methodology for the income approach is a discounted cash flow method. Inherent in

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Table of Contents
APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

the discounted cash flow method are significant assumptions related to the subject company’s expected results, the determination of a terminal value and a calculated discount rate, which is normally based on the subject company’s weighted average cost of capital, or “WACC.” The WACC represents the required rate of return on total capitalization, which is comprised of a required rate of return on equity, plus the current tax-effected rate of return on debt, weighted by the relative percentages of equity and debt that are typical in the industry. The most critical step in determining the appropriate WACC for each subject company is to select companies that are comparable in nature to the subject company and the credit quality of the subject company. Sources for gaining additional knowledge about the comparable companies include public filings, annual reports, analyst research reports, and press releases. The general formula then used for calculating the WACC considers the after-tax rate of return on debt capital and the rate of return on common equity capital, which further considers the risk-free rate of return, market beta, market risk premium and small stock premium, if applicable. The variables used in the WACC formula are inferred from the comparable market data obtained. The Company evaluates the comparable companies selected and concludes on WACC inputs based on the most comparable company or analyzes the range of data for the investment.
Debt securities that are not publicly traded or whose market prices are not readily available are valued at fair value utilizing a model based approach to determine fair value. Valuation approaches used to estimate the fair value of hybrid capital investments also may include the market approach and the income approach, as previously described above. The valuation approaches used consider, as applicable, market risks, credit risks, counterparty risks and foreign currency risks.
The value of liquid investments, where the primary market is an exchange (whether foreign or domestic), is determined using period end market prices. Such prices are generally based on the close price on the date of determination.
Real Assets Investments
The estimated fair value of commercial mortgage-backed securities (“CMBS”) in Apollo’s real assets funds is determined by reference to market prices provided by certain dealers who make a market in these financial instruments. Broker quotes are only indicative of fair value and may not necessarily represent what the funds would receive in an actual trade for the applicable instrument. Additionally, the loans held-for-investment are stated at the principal amount outstanding, net of deferred loan fees and costs for certain investments. The loans in Apollo’s real assets funds are evaluated for possible impairment on a quarterly basis. For Apollo’s real assets funds, valuations of non-marketable underlying investments are determined using methods that include, but are not limited to (i) discounted cash flow estimates or comparable analysis prepared internally, (ii) third party appraisals or valuations by qualified real estate appraisers and (iii) contractual sales value of investments/properties subject to bona fide purchase contracts. Methods (i) and (ii) also incorporate consideration of the use of the income, cost, or sales comparison approaches of estimating property values.
Certain of the credit, private equity, and real assets funds may also enter into foreign currency exchange contracts, total return swap contracts, credit default swap contracts, and other derivative contracts, which may include options, caps, collars and floors. Foreign currency exchange contracts are marked-to-market by recognizing the difference between the contract exchange rate and the current market rate as unrealized appreciation or depreciation. If securities are held at the end of the period, the changes in value are recorded in income as unrealized. Realized gains or losses are recognized when contracts are settled. Total return swap and credit default swap contracts are recorded at fair value as an asset or liability with changes in fair value recorded as unrealized appreciation or depreciation. Realized gains or losses are recognized at the termination of the contract based on the difference between the close-out price of the total return or credit default swap contract and the original contract price. Forward contracts are valued based on market rates obtained from counterparties or prices obtained from recognized financial data service providers.

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Table of Contents
APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

7. OTHER ASSETS
Other assets consisted of the following:
 
As of
September 30, 2019
 
As of
December 31, 2018
Fixed assets
$
119,952

 
$
109,039

Less: Accumulated depreciation and amortization
(93,850
)
 
(89,049
)
Fixed assets, net
26,102

 
19,990

Deferred equity-based compensation(1)
117,622

 
80,443

Prepaid expenses
47,823

 
49,648

Intangible assets, net
19,945

 
18,899

Tax receivables
44,374

 
10,464

Other
22,798

 
12,725

Total Other Assets
$
278,664

 
$
192,169


(1)
Deferred equity-based compensation relates to the value of equity-based awards that have been or are expected to be granted in connection with the settlement of certain profit sharing arrangements. A corresponding amount for awards expected to be granted of $98.4 million and $54.5 million, as of September 30, 2019 and December 31, 2018, respectively, is included in other liabilities on the condensed consolidated statements of financial condition.
Depreciation expense was $2.5 million and $2.2 million for the three months ended September 30, 2019 and 2018, respectively, and $7.1 million and $6.4 million for the nine months ended September 30, 2019 and 2018, respectively, and is presented as a component of general, administrative and other expense in the condensed consolidated statements of operations.
8. LEASES
Apollo has operating leases for office space, data centers, and certain equipment under various lease agreements.
The table below presents operating lease expenses:
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Operating lease cost
$
11,249

 
$
9,465

 
$
30,537

 
$
27,957

The following table presents supplemental cash flow information related to operating leases:
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Operating cash flows for operating leases
$
582

 
$
9,592

 
$
20,212

 
$
26,195



- 35-
Table of Contents
APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

As of September 30, 2019, the Company’s total lease payments by maturity are presented in the following table:
 
Operating Leases
Remaining 2019
$
8,607

2020
25,893

2021
24,807

2022
20,674

2023
19,181

Thereafter
156,460

Total lease payments
$
255,622

Less imputed interest
(47,949
)
Present value of lease payments
$
207,673


The Company has undiscounted future operating lease payments of $278.5 million related to leases that have not commenced that were entered into as of and subsequent to September 30, 2019. Such lease payments are not yet included in the table above or the Company’s condensed consolidated statements of financial condition as lease assets and lease liabilities. These operating leases are anticipated to commence between fiscal years 2019 and 2021 with lease terms of approximately 15 years.
Supplemental information related to leases is as follows:
 
As of
September 30, 2019
Weighted average remaining lease term (in years)
12.5

Weighted average discount rate
1.6
%

As of December 31, 2018, the approximate aggregate minimum future payments required for operating leases under U.S. GAAP applicable to that period were as follows:
 
2019
 
2020
 
2021
 
2022
 
2023
 
Thereafter
 
Total
Aggregate minimum future payments
$
39,970

 
$
25,923

 
$
33,022

 
$
36,243

 
$
35,231

 
$
400,889

 
$
571,278


9. INCOME TAXES
The Company’s income tax (provision) benefit totaled $231.9 million and $(19.1) million for the three months ended September 30, 2019 and 2018, respectively, and $195.3 million and $(46.6) million for the nine months ended September 30, 2019 and 2018, respectively. The Company’s effective tax rate was approximately (80.2)% and 5.0% for the three months ended September 30, 2019 and 2018, respectively, and (19.9)% and 10.5% for the nine months ended September 30, 2019 and 2018, respectively.
Under U.S. GAAP, a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Based upon the Company’s review of its federal, state, local and foreign income tax returns and tax filing positions, the Company determined that no unrecognized tax benefits for uncertain tax positions were required to be recorded, including any additional items related to the Conversion. In addition, the Company does not believe that it has any tax positions for which it is reasonably possible that it will be required to record significant amounts of unrecognized tax benefits within the next twelve months.
The primary jurisdictions in which the Company operates are the United States, New York State, New York City, California and the United Kingdom. There are no unremitted earnings with respect to the United Kingdom and other foreign entities.
In the normal course of business, the Company is subject to examination by federal and certain state, local and foreign tax authorities. With a few exceptions, as of September 30, 2019, the Company’s U.S. federal, state, local and foreign income tax returns for the years 2015 through 2017 are open under the general statute of limitations provisions and therefore subject to

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Table of Contents
APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

examination. Currently, the Internal Revenue Service is examining the tax return of a subsidiary for the 2011 tax year. The State and City of New York are examining certain subsidiaries’ tax returns for tax years 2011 to 2013.
Prior to the Conversion, Apollo and certain of its subsidiaries operated in the U.S. as partnerships for income tax purposes. Effective September 5, 2019, Apollo Global Management, Inc. converted from a Delaware limited liability company named Apollo Global Management, LLC to a Delaware corporation named Apollo Global Management, Inc. Subsequent to the Conversion, we expect that all of the income we earn will be subject to U.S. corporate income taxes, which could result in an overall higher income tax expense (or benefit) in periods subsequent to the Conversion. As of September 30, 2019, the Company recorded a net deferred tax benefit of $207.5 million.
The Company’s income tax provision and related income tax assets and liabilities are based on, among other things, an estimate of the impact of the Conversion. This includes the impact of the step-up in tax basis of certain assets related to prior exchanges of the Managing Partners’ and Contributing Partners’ AOG units for Class A Common Stock. Additionally, the estimate includes an analysis, as of September 5, 2019, of the difference between tax and book basis of certain partnerships and related underlying assets and liabilities previously not subject to corporate income taxes.
The Company’s estimate of income tax assets and liabilities is based on the most recent information available; however, the impact of the Conversion cannot be fully determined until the analysis of the tax and book basis of underlying assets of certain partnerships not previously subject to corporate income taxes has been finalized. The Company does not expect such information and analysis to be available until 2020. The tax basis of the partnerships and their underlying assets and liabilities are based on estimates subject to finalization of the Company’s 2019 tax return information. As a result, the impact of the Conversion may differ, possibly materially, from the current estimates described herein.
The Company recorded additional deferred tax assets as a result of the step-up in tax basis of intangibles from subsequent exchanges of AOG Units for Class A Common Stock. A related tax receivable agreement liability is recorded in due to related parties in the condensed consolidated statements of financial condition for the expected payments under the tax receivable agreement entered into by and among APO Corp., the Managing Partners, the Contributing Partners, and other parties thereto (as amended, the “tax receivable agreement”) (see note 14). The benefit the Company obtains from the difference in the tax asset recognized and the related liability results in an increase to additional paid in capital. The amortization period for a portion of these tax basis intangibles is 15 years and the remaining portion relates to the disposition of the underlying assets to which the step-up was attributable. The associated deferred tax assets will reverse over the same corresponding time periods.
The table below presents the impact to the deferred tax asset, tax receivable agreement liability and additional paid in capital related to the exchange of AOG Units for Class A Common Stock.
Exchange of AOG Units
for Class A Common Stock
 
Increase in Deferred Tax Asset
 
Increase in Tax Receivable Agreement Liability
 
Increase to Additional Paid In Capital
For the Nine Months Ended September 30, 2019
 
$
168,058

(1) 
$
39,092

 
$
16,658

For the Nine Months Ended September 30, 2018
 
$
47,011

 
$
39,605

 
$
7,406


(1)
For the nine months ended September 30, 2019, $150.9 million and $38.6 million of the increase in deferred tax asset and the increase in tax receivable agreement liability, respectively, shown above are related to the step-up in assets from AOG Unit exchanges in prior years triggered by the Conversion, and therefore do not increase additional paid in capital, but rather increase income tax benefit and decrease other income, respectively.

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

10. DEBT
Debt consisted of the following:
 
As of September 30, 2019
 
As of December 31, 2018
 
Outstanding
Balance
 
Fair Value
 
Annualized
Weighted
Average
Interest Rate
 
Outstanding
Balance
 
Fair Value
 
Annualized
Weighted
Average
Interest Rate
2024 Senior Notes(1)
$
497,001

 
$
527,393

(4) 
4.00
%
 
$
496,512

 
$
498,736

(4) 
4.00
%
2026 Senior Notes(1)
496,576

 
533,904

(4) 
4.40

 
496,191

 
502,107

(4) 
4.40

2029 Senior Notes(1)
674,719

 
751,179

(4) 
4.87

 
—

 
—

 
—

2039 Senior Secured Guaranteed Notes(1)
315,864

 
348,547

(5) 
4.77

 
—

 
—

 
—

2048 Senior Notes(1)
296,479

 
343,374

(4) 
5.00

 
296,386

 
290,714

(4) 
5.00

2014 AMI Term Facility I(2)
14,860

 
14,860

(3) 
2.00

 
15,633

 
15,633

(3) 
2.00

2014 AMI Term Facility II(2)
16,783

 
16,783

(3) 
1.75

 
17,657

 
17,657

(3) 
1.75

2016 AMI Term Facility I(2)
18,385

 
18,385

(3) 
1.30

 
19,371

 
19,371

(3) 
1.32

2016 AMI Term Facility II(2)
17,773

 
17,772

(3) 
1.40

 
18,698

 
18,698

(3) 
1.70

Total Debt
$
2,348,440

 
$
2,572,197

 
 
 
$
1,360,448

 
$
1,362,916

 
 
 
(1)
Includes amortization of note discount, as applicable. Outstanding balance is presented net of unamortized debt issuance costs:
 
As of September 30, 2019
 
As of December 31, 2018
2024 Senior Notes
$
2,532

 
$
2,946

2026 Senior Notes
3,131

 
3,483

2029 Senior Notes
6,090

 
—

2039 Senior Secured Guaranteed Notes
9,136

 
—

2048 Senior Notes
3,214

 
3,298

(2)
Apollo Management International LLP (“AMI”), a subsidiary of the Company, entered into several five year credit facilities (collectively referred to as the “AMI Facilities”) to fund the Company’s investment in certain European CLOs it manages:
Facility
 
Date
 
Loan Amount
2014 AMI Term Facility I
 
July 3, 2014
 
€
13,636

2014 AMI Term Facility II
 
December 9, 2014
 
€
15,400

2016 AMI Term Facility I
 
January 18, 2016
 
€
16,870

2016 AMI Term Facility II
 
June 22, 2016
 
€
16,308

(3)
Fair value is based on obtained broker quotes. These notes are classified as a Level III liability within the fair value hierarchy based on the number and quality of broker quotes obtained, the standard deviations of the observed broker quotes and the percentage deviation from independent pricing services. For instances where broker quotes are not available, a discounted cash flow method is used to obtain a fair value.
(4)
Fair value is based on obtained broker quotes. These notes are classified as a Level II liability within the fair value hierarchy based on the number and quality of broker quotes obtained, the standard deviations of the observed broker quotes and the percentage deviation from independent pricing services.
(5)
Fair value is based on a discounted cash flow method. These notes are classified as a Level III liability within the fair value hierarchy.
2013 AMH Credit Facilities—On December 18, 2013, AMH and its subsidiaries and certain other subsidiaries of the Company entered into credit facilities (the “2013 AMH Credit Facilities”) with the lenders and issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent for the lenders. The 2013 AMH Credit Facilities provided for (i) a term loan facility to AMH (the “Term Facility”) that included $750 million of term loan from third-party lenders and $271.7 million of term loan held by a subsidiary of the Company and (ii) a $500 million revolving credit facility (the “Revolver Facility”), in each case, with an original maturity date of January 18, 2019. On March 11, 2016, the maturity date of both the Term Facility and the Revolver Facility was extended by two years to January 18, 2021. The extension was determined to be a modification of the 2013 AMH Credit Facilities in accordance with U.S. GAAP.

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

In connection with the issuance of the 2024 Senior Notes, the 2026 Senior Notes and the 2048 Senior Notes (as described below), $250 million, $200 million and $300 million of the proceeds, respectively, were used to repay the entire remaining amount of both the term loan from third-party lenders and the term loan held by a subsidiary of the Company as of March 15, 2018. The Revolver Facility was replaced as of July 11, 2018 by the 2018 AMH Credit Facility, as described below. The 2013 AMH Credit Facilities and all related loan documents were terminated as of July 11, 2018.
2018 AMH Credit Facility—On July 11, 2018, AMH as borrower (the “Borrower”) entered into a new credit agreement (the “2018 AMH Credit Facility”) with the lenders and issuing banks party thereto and Citibank, N.A., as administrative agent for the lenders. The 2018 AMH Credit Facility provides for a $750 million revolving credit facility to the Borrower with a final maturity date of July 11, 2023. The 2018 AMH Credit Facility is to remain available until its maturity, and any undrawn revolving commitments bear a commitment fee. The interest rate on the 2018 AMH Credit Facility is based on adjusted LIBOR and the applicable margin as of September 30, 2019 was 1.00%. The commitment fee on the $750 million undrawn 2018 AMH Credit Facility as of September 30, 2019 was 0.09%.
Borrowings under the 2018 AMH Credit Facility may be used for working capital and general corporate purposes, including, without limitation, permitted acquisitions. The Borrower may incur incremental facilities in respect of the 2018 AMH Credit Facility in an aggregate amount not to exceed $250 million plus additional amounts so long as the Borrower is in compliance with a net leverage ratio not to exceed 4.00 to 1.00. As of September 30, 2019, the 2018 AMH Credit Facility was undrawn.
2024 Senior Notes—On May 30, 2014, AMH issued $500 million in aggregate principal amount of its 4.000% Senior Notes due 2024 (the “2024 Senior Notes”), at an issue price of 99.722% of par. Interest on the 2024 Senior Notes is payable semi-annually in arrears on May 30 and November 30 of each year. The 2024 Senior Notes will mature on May 30, 2024. The discount is amortized into interest expense on the condensed consolidated statements of operations over the term of the 2024 Senior Notes. The Company is obligated to settle the 2024 Senior Notes for the face amount of $500 million.
2026 Senior Notes—On May 27, 2016, AMH issued $500 million in aggregate principal amount of its 4.400% Senior Notes due 2026 (the “2026 Senior Notes”), at an issue price of 99.912% of par. Interest on the 2026 Senior Notes is payable semi-annually in arrears on May 27 and November 27 of each year. The 2026 Senior Notes will mature on May 27, 2026. The discount is amortized into interest expense on the condensed consolidated statements of operations over the term of the 2026 Senior Notes. The Company is obligated to settle the 2026 Senior Notes for the face amount of $500 million.
2029 Senior Notes—On February 7, 2019, AMH issued $550 million in aggregate principal amount of its 4.872% Senior Notes due 2029, at an issue price of 99.999% of par. On June 11, 2019, AMH issued an additional $125 million in aggregate principal amount of its 4.872% Senior Notes due 2029 (the “Additional Notes”). The Additional Notes constitute a single class of securities with the previously issued senior notes due 2029 (collectively, the “2029 Senior Notes”). Interest on the 2029 Senior Notes is payable semi-annually in arrears on February 15 and August 15 of each year. The 2029 Senior Notes will mature on February 15, 2029. The discount is amortized into interest expense on the condensed consolidated statements of operations over the term of the 2029 Senior Notes. The Company is obligated to settle the 2029 Senior Notes for the face amount of $675 million.
2039 Senior Secured Guaranteed Notes—On June 10, 2019, APH Finance 1, LLC (the “Issuer”), a subsidiary of the Company, issued $325 million in aggregate principal amount of its 4.77% Series A Senior Secured Guaranteed Notes due 2039 (the “2039 Senior Secured Guaranteed Notes”). The 2039 Senior Secured Guaranteed Notes are secured by a lien on the Issuer’s and the guarantors’ participation interests in the rights to distributions in relation to a portfolio of equity investments owned by affiliates of the Company in certain existing and future funds managed or advised by subsidiaries of the Company. Interest on the 2039 Senior Secured Guaranteed Notes is payable on a quarterly basis. The 2039 Senior Secured Guaranteed Notes will mature in June 2039, but, unless prepaid to the extent permitted under the indenture governing the 2039 Senior Secured Guaranteed Notes, the anticipated repayment date will be in June 2029. If the Issuer has not repaid or refinanced the 2039 Senior Secured Guaranteed Notes prior to the anticipated repayment date an additional 5.0% per annum will accrue on the 2039 Senior Secured Guaranteed Notes. The issuance costs are amortized into interest expense on the condensed consolidated statements of operations over the expected term of the 2039 Senior Secured Guaranteed Notes.
2048 Senior Notes—On March 15, 2018, AMH issued $300 million in aggregate principal amount of its 5.000% Senior Notes due 2048 (the “2048 Senior Notes”), at an issue price of 99.892% of par. Interest on the 2048 Senior Notes is payable semi-annually in arrears on March 15 and September 15 of each year. The 2048 Senior Notes will mature on March 15, 2048. The discount is amortized into interest expense on the condensed consolidated statements of operations over the term of the 2048 Senior Notes. The Company is obligated to settle the 2048 Senior Notes for the face amount of $300 million.

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

As of September 30, 2019, the indentures governing the 2024 Senior Notes, the 2026 Senior Notes, the 2029 Senior Notes and the 2048 Senior Notes (the “Indentures”) include covenants that restrict the ability of AMH and, as applicable, the guarantors of the notes under the Indentures to incur indebtedness secured by liens on voting stock or profit participating equity interests of their respective subsidiaries, or merge, consolidate or sell, transfer or lease assets. The Indentures also provide for customary events of default.
As of September 30, 2019, the indenture governing the 2039 Senior Secured Guaranteed Notes includes a series of covenants and restrictions customary for transactions of this type, including covenants that (i) require the Issuer to maintain specified reserve accounts to be used to make required payments in respect of the 2039 Senior Secured Guaranteed Notes, (ii) relate to prepayments and related payments of specified amounts, including specified make-whole payments under certain circumstances and (iii) relate to recordkeeping, access to information and similar matters.
The following table presents the interest expense incurred related to the Company’s debt:
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Interest Expense:(1)
 
 
 
 
 
 
 
2013 AMH Credit Facilities
$
—

 
$
80

 
$
—

 
$
2,324

2018 AMH Credit Facility
334

 
232

 
961

 
232

2024 Senior Notes
5,163

 
5,163

 
15,489

 
15,489

2026 Senior Notes
5,629

 
5,629

 
16,885

 
16,885

2029 Senior Notes
8,412

 
—

 
19,514

 
—

2039 Senior Secured Guaranteed Notes
4,112

 
—

 
5,071

 
—

2048 Senior Notes
3,781

 
3,783

 
11,343

 
8,228

AMI Term Facilities
402

 
322

 
980

 
1,010

Total Interest Expense
$
27,833

 
$
15,209

 
$
70,243

 
$
44,168

(1)
Debt issuance costs incurred in connection with the 2013 AMH Credit Facilities, the 2018 AMH Credit Facility, the 2024 Senior Notes, the 2026 Senior Notes, the 2029 Senior Notes, the 2039 Senior Secured Guaranteed Notes and the 2048 Senior Notes are amortized into interest expense over the term of the debt arrangement.

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

11. NET INCOME PER SHARE OF CLASS A COMMON STOCK
The table below presents basic and diluted net income per share of Class A Common Stock using the two-class method:
 
Basic and Diluted
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
 
Numerator:
 
 
 
 
 
 
 
 
Net income attributable to Apollo Global Management, Inc. Class A Common Stockholders
$
354,106

  
$
162,357

 
$
649,658

 
$
154,370

 
Dividends declared on Class A Common Stock(1)
(100,355
)
 
(86,468
)
 
(305,901
)
 
(296,093
)
 
Dividends on participating securities(2)
(4,450
)
 
(4,150
)
 
(13,524
)
 
(13,687
)
 
Earnings allocable to participating securities
(11,440
)
 
(3,633
)
 
(16,003
)
 
—

(3) 
Undistributed income (loss) attributable to Class A Common Stockholders: Basic
237,861

  
68,106

 
314,230

 
(155,410
)
 
Dilution effect on distributable income attributable to unvested RSUs
1,200

 
—

 
2,355

 
—

 
Undistributed income (loss) attributable to Class A Common Stockholders: Diluted
$
239,061

 
$
68,106

 
$
316,585

 
$
(155,410
)
 
Denominator:
 
 
 
 
 
 
 
 
Weighted average number of shares of Class A Common Stock outstanding: Basic
205,797,643

 
200,347,996

 
202,087,827

 
199,837,707

 
Dilution effect of unvested RSUs
1,843,680

 
—

 
1,657,627

 
—

 
Weighted average number of shares of Class A Common Stock outstanding: Diluted
207,641,323

 
200,347,996

 
203,745,454

 
199,837,707

 
Net Income per share of Class A Common Stock: Basic(4)
 
 
 
 
 
 
 
 
Distributed Income
$
0.50

  
$
0.43

 
$
1.52

 
$
1.47

 
Undistributed Income (Loss)
1.14

  
0.34

 
1.55

 
(0.77
)
 
Net Income per share of Class A Common Stock: Basic
$
1.64

  
$
0.77

 
$
3.07

  
$
0.70

 
Net Income per share of Class A Common Stock: Diluted(4)
 
 
 
 
 
 
 
 
Distributed Income
$
0.49

  
$
0.43

 
$
1.51

 
$
1.47

 
Undistributed Income (Loss)
1.14

  
0.34

 
1.55

 
(0.77
)
 
Net Income per share of Class A Common Stock: Diluted
$
1.63

  
$
0.77

 
$
3.06

 
$
0.70

 
(1)
See note 13 for information regarding the quarterly dividends declared and paid during 2019 and 2018.
(2)
Participating securities consist of vested and unvested RSUs that have rights to dividends and unvested restricted shares.
(3)
No allocation of undistributed losses was made to the participating securities as the holders do not have a contractual obligation to share in the losses of the Company with Class A Common Stockholders.
(4)
For the three and nine months ended September 30, 2019, unvested RSUs were determined to be dilutive, and were accordingly included in the diluted earnings per share calculation. For the three and nine months ended September 30, 2019, the share options, AOG Units and participating securities were determined to be anti-dilutive and were accordingly excluded from the diluted earnings per share calculation. For the three and nine months ended September 30, 2018, all of the classes of securities were determined to be anti-dilutive.
The Company has granted RSUs that provide the right to receive, subject to vesting during continued employment, shares of Class A Common Stock pursuant to the Equity Plan. The Company has three types of RSU grants, which we refer to as Plan Grants, Bonus Grants and Performance Grants. “Plan Grants” vest over time (generally one to six years) and may or may not provide the right to receive dividend equivalents on vested RSUs on an equal basis with the Class A Common Stockholders any time a dividend is declared. “Bonus Grants” vest over time (generally three years) and generally provide the right to receive dividend equivalents on both vested and unvested RSUs on an equal basis with the Class A Common Stockholders any time a dividend is declared. “Performance Grants” generally vest over time (three to five years), subject to the Company’s receipt of performance revenues, within prescribed periods, sufficient to cover the associated equity-based compensation expense. Performance Grants provide the right to receive dividend equivalents on vested RSUs and may also provide the right to receive dividend equivalents on unvested RSUs.

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

Any dividend equivalent paid to an employee will not be returned to the Company upon forfeiture of the award by the employee. Vested and unvested RSUs that are entitled to non-forfeitable dividend equivalents qualify as participating securities and are included in the Company’s basic and diluted earnings per share computations using the two-class method. The holder of an RSU participating security would have a contractual obligation to share in the losses of the entity if the holder is obligated to fund the losses of the issuing entity or if the contractual principal or mandatory redemption amount of the participating security is reduced as a result of losses incurred by the issuing entity. The RSU participating securities do not have a mandatory redemption amount and the holders of the participating securities are not obligated to fund losses, therefore, neither the vested RSUs nor the unvested RSUs are subject to any contractual obligation to share in losses of the Company.
Holders of AOG Units are subject to the transfer restrictions set forth in the agreements with the respective holders and may, a limited number of times each year, upon notice (subject to the terms of an exchange agreement), exchange their AOG Units for shares of Class A Common Stock on a one-for-one basis. An AOG Unit holder must exchange one unit in each of the Apollo Operating Group partnerships or limited liability companies to effectuate an exchange for one share of Class A Common Stock.
Apollo Global Management, Inc. has one share of Class B Common Stock outstanding, which is held by BRH Holdings GP, Ltd. (“BRH”). The voting power of the share of Class B Common Stock is reduced on a one vote per one AOG Unit basis in the event of an exchange of AOG Units for shares of Class A Common Stock, as discussed above. The Class B Common Stock has no net income (loss) per share as it does not participate in Apollo’s earnings (losses) or dividends. The Class B Common Stock has no dividend or liquidation rights. The Class B Common Stock represented 44.8% and 52.5% of the total voting power of the Company’s Class A Common Stock and Class B Common Stock with respect to the limited matters upon which they are entitled to vote pursuant to the Company’s governing documents as of September 30, 2019 and 2018, respectively.
The following table summarizes the anti-dilutive securities.
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Weighted average vested RSUs
109,317

 
155,287

 
527,476

 
477,503

Weighted average unvested RSUs
N/A

 
9,592,835

 
N/A

 
8,593,350

Weighted average unexercised options
200,000

 
204,167

 
202,778

 
204,167

Weighted average AOG Units outstanding
195,985,046

 
202,552,808

 
200,149,596

 
203,222,170

Weighted average unvested restricted shares
954,304

 
940,060

 
989,684

 
827,576


12. EQUITY-BASED COMPENSATION
Equity-based awards granted to employees and non-employees as compensation are measured based on the grant date fair value of the award. Equity-based awards that do not require future service (i.e., vested awards) are expensed immediately. Equity-based employee awards that require future service are expensed over the relevant service period. Equity-based awards that require performance metrics to be met are expensed only when the performance metric is met or deemed probable.
RSUs
The Company grants RSUs under the Equity Plan. The fair value of all grants is based on the grant date fair value, which considers the public share price of the Company’s Class A Common Stock subject to certain discounts, as applicable.
The estimated total grant date fair value for Plan Grants and Bonus Grants is charged to compensation expense on a straight-line basis over the vesting period, which for Plan Grants is generally one to six years, with the first installment vesting one year after grant and quarterly vesting thereafter, and for Bonus Grants is generally annual vesting over three years.
During the nine months ended September 30, 2019, the Company awarded Performance Grants of 1.3 million RSUs to certain employees with a grant date fair value of $27.6 million, which vest over time (generally 3 to 5 years) subject to the receipt of performance revenues, within prescribed periods, sufficient to cover the associated equity-based compensation expense. Additionally, the Company modified Plan Grants of 0.5 million RSUs with a grant date fair value of $10.5 million to Performance Grants of 0.5 million RSUs. The modification did not result in a change to the grant date fair value of the awards, as performance conditions that impact vesting are not considered in the determination of the fair value of an award. In accordance with U.S.

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

GAAP, equity-based compensation expense for these and other Performance Grants will be recognized on an accelerated recognition method over the requisite service period to the extent the performance revenue metrics are met or deemed probable. The following table summarizes the equity based compensation expense recognized relating to Performance Grants.
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Equity-based compensation
16,456

 
19,259

 
45,587

 
46,207


Additionally, the Company entered into an agreement in 2018 with several employees under which it expects to grant them RSUs beginning in 2020 if year-over-year growth in certain discretionary earnings metrics is attained prior to grant and they remain employed at the grant date. Once granted, these RSUs will vest based on both continued service and the Company’s receipt of performance revenues, within prescribed periods, sufficient to cover the associated equity-based compensation expense. In accordance with U.S. GAAP, equity-based compensation expense for such awards, if and when granted, will be recognized on an accelerated recognition method over the requisite service period to the extent the performance revenue metrics are met or deemed probable. No equity-based compensation expense was recognized related to these RSUs for the three and nine months ended September 30, 2019.
The fair value of all RSU grants made during the nine months ended September 30, 2019 and 2018 was $102.2 million and $227.1 million, respectively.
The following table presents the actual forfeiture rates and equity-based compensation expense recognized:
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Actual forfeiture rate
0.5
%
 
0.7
%
 
1.7
%
 
8.0
%
Equity-based compensation
$
33,771

 
$
37,166

 
$
101,709

 
$
99,544

The following table summarizes RSU activity:
 
Unvested
 
Weighted Average Grant Date Fair Value
 
Vested
 
Total Number of RSUs Outstanding
 
Balance at January 1, 2019
9,839,968

 
$
26.52

 
2,380,783

 
12,220,751

(1) 
Granted
4,141,766

 
24.66

 
—

 
4,141,766

 
Forfeited
(214,041
)
 
26.01

 
(18,524
)
 
(232,565
)
 
Vested
(2,001,237
)
 
27.71

 
2,001,237

 
—

 
Issued
—

 
23.84

 
(4,146,944
)
 
(4,146,944
)
 
Balance at September 30, 2019
11,766,456

(2)
$
25.67

 
216,552

 
11,983,008

(1) 
 
(1)
Amount excludes RSUs which have vested and have been issued in the form of Class A Common Stock.
(2)
RSUs were expected to vest over the weighted average period of 3.0 years.
Restricted Share Awards—Athene Holding
The Company has granted Athene Holding restricted share awards to certain employees of the Company. Separately, Athene Holding has also granted restricted share awards to certain employees of the Company. Both awards are collectively referred to as the “AHL Awards.” Certain of the AHL Awards function similarly to options as they are exchangeable for Class A shares of Athene Holding upon payment of a conversion price and the satisfaction of certain other conditions. The awards granted are either subject to time-based vesting conditions that generally vest over three to five years or vest upon achieving certain metrics, such as attainment of certain rates of return and realized cash received by certain investors in Athene Holding upon sale of their shares.
The Company records the AHL Awards in other assets and other liabilities in the condensed consolidated statements of financial condition. The fair value of the asset is amortized through equity-based compensation over the vesting period. The fair value of the liability is remeasured each period, with any changes in fair value recorded in compensation expense in the

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

condensed consolidated statements of operations. For AHL Awards granted by Athene Holding, compensation expense related to amortization of the asset is offset, with certain exceptions, by related management fees earned by the Company from Athene.
The grant date fair value of the AHL Awards is based on the share price of Athene Holding, less discounts for transfer restrictions, and has been categorized as Level II within the fair value hierarchy as a result. The AHL Awards that function similarly to options were valued using a multiple-scenario model, which considers the price volatility of the underlying share price of Athene Holding, time to expiration and the risk-free rate, while the other awards were valued using the share price of Athene Holding less any discounts for transfer restrictions.
The following table summarizes the management fees, equity-based compensation expense and actual forfeiture rates for the AHL Awards:
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Management fees
$
(167
)
 
$
1,872

 
$
375

 
$
(14
)
Equity-based compensation
194

 
3,349

 
1,909

 
1,075

Actual forfeiture rate
—
%
 
—
%
 
—
%
 
3.6
%

Equity-Based Compensation Allocation
Equity-based compensation is allocated based on ownership interests. Therefore, the amortization of equity-based compensation is allocated to stockholders’ equity attributable to AGM Inc. and the Non-Controlling Interests, which results in a difference in the amounts charged to equity-based compensation expense and the amounts credited to stockholders’ equity attributable to AGM in the Company’s condensed consolidated financial statements.
Below is a reconciliation of the equity-based compensation allocated to AGM Inc.:
 
For the Nine Months Ended September 30, 2019
 
Total Amount
 
Non-Controlling Interest % in Apollo Operating Group
 
Allocated to Non-Controlling Interest in Apollo Operating Group(1)
 
Allocated to Apollo Global Management, Inc.
RSUs, share options and restricted share awards
$
113,254

 
—
%
 
$
—

 
$
113,254

AHL Awards
1,909

 
44.8

 
855

 
1,054

Other equity-based compensation awards
17,241

 
44.8

 
7,721

 
9,520

Total equity-based compensation
$
132,404

 
 
 
8,576

 
123,828

Less other equity-based compensation awards(2)
 
 
 
 
(8,576
)
 
(21,639
)
Capital increase related to equity-based compensation
 
 
 
 
$
—

 
$
102,189

 
For the Nine Months Ended September 30, 2018
 
Total Amount
 
Non-Controlling Interest % in Apollo Operating Group
 
Allocated to Non-Controlling Interest in Apollo Operating Group(1)
 
Allocated to Apollo Global Management, Inc.
RSUs, share options and restricted share awards
$
108,719

 
—
%
 
$
—

 
$
108,719

AHL Awards
1,075

 
50.2

 
539

 
536

Other equity-based compensation awards
13,849

 
50.2

 
6,950

 
6,899

Total equity-based compensation
$
123,643

 
 
 
7,489

 
116,154

Less other equity-based compensation awards(2)
 
 
 
 
(7,489
)
 
(21,916
)
Capital increase related to equity-based compensation
 
 
 
 
$
—

 
$
94,238


(1)
Calculated based on average ownership percentage for the period considering issuances of Class A shares or Class A Common Stock, as applicable, during the period.

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

(2)
Includes equity-based compensation reimbursable by certain funds.
13. EQUITY
Common Stock
As a result of the Conversion, (i) each Class A Share converted into one share of Class A Common Stock (ii) the Class B Share converted into one share of Class B Common Stock and (iii) the Former Manager was granted one issued and outstanding, fully paid and nonassessable share of Class C Common Stock, which bestows to its holder certain management rights over the Company.
Holders of Class A Common Stock are entitled to participate in dividends from the Company on a pro rata basis. Holders of Class A Common Stock do not elect the members of the Company’s board of directors and have limited voting rights.
During the three and nine months ended September 30, 2019 and 2018, the Company issued shares of Class A Common Stock in settlement of vested RSUs. The Company has generally allowed holders of vested RSUs and exercised share options to settle their tax liabilities by reducing the number of shares of Class A Common Stock issued to them, which the Company refers to as “net share settlement.” Additionally, the Company has generally allowed holders of share options to settle their exercise price by reducing the number of shares of Class A Common Stock issued to them at the time of exercise by an amount sufficient to cover the exercise price. The net share settlement results in a liability for the Company and a corresponding accumulated deficit adjustment.
In February 2016, Apollo announced its adoption of a program to repurchase up to $250 million in the aggregate of its shares of Class A Common Stock, including up to $150 million in the aggregate of its outstanding shares of Class A Common Stock through a share repurchase program and up to $100 million through net share settlement of equity-based awards granted under the Equity Plan. In January 2019, Apollo increased its authorized share repurchase amount by $250 million bringing the total authorized repurchase amount to $500 million, which may be used to repurchase outstanding shares of Class A Common Stock as well as to reduce the number of shares of Class A Common Stock to be issued to employees to satisfy associated tax obligations in connection with the settlement of equity-based awards granted under the the Equity Plan (or any successor equity plan thereto). Shares of Class A Common Stock may be repurchased from time to time in open market transactions, in privately negotiated transactions, pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Exchange Act, or otherwise, with the size and timing of these repurchases depending on legal requirements, price, market and economic conditions and other factors. Apollo is not obligated under the terms of the program to repurchase any of its shares of Class A Common Stock. The repurchase program has no expiration date and may be suspended or terminated by the Company at any time without prior notice.
The table below summarizes the issuance of shares of Class A Common Stock for equity-based awards:
 
For the Nine Months Ended September 30,
 
2019
 
2018
Shares of Class A Common Stock issued in settlement of vested RSUs and share options exercised(1)
4,146,944

 
3,587,931

Reduction of shares of Class A Common Stock issued(2)
(1,585,734
)
 
(1,201,328
)
Shares of Class A Common Stock purchased related to share issuances and forfeitures(3)
(103,954
)
 
(183,969
)
Issuance of shares of Class A Common Stock for equity-based awards
2,457,256

 
2,202,634

(1)
The gross value of shares issued was $127.2 million and $120.6 million for the nine months ended September 30, 2019 and 2018, respectively, based on the closing price of a share of Class A Common Stock at the time of issuance.
(2)
Cash paid for tax liabilities associated with net share settlement was $48.8 million and $40.3 million for the nine months ended September 30, 2019 and 2018, respectively.
(3)
Certain Apollo employees receive a portion of the profit sharing proceeds of certain funds in the form of (a) restricted shares of Class A Common Stock of AGM Inc. that they are required to purchase with such proceeds or (b) RSUs, in each case which equity-based awards generally vest over three years. These equity-based awards are granted under the Company's Equity Plan. To prevent dilution on account of these awards, Apollo may, in its discretion, repurchase of shares of Class A Common Stock on the open market and retire them. During the nine months ended September 30, 2019 and 2018, we issued 163,024 and 673,326 of such restricted shares and 102,089 and 75,636 of such RSUs under the Equity Plan, respectively, and repurchased 265,113 and 830,438 shares of Class A Common Stock in open-market transactions not pursuant to a publicly-announced repurchase plan or program, respectively. In addition, there were 1,865 and 26,857 restricted shares forfeited during the nine months ended September 30, 2019 and 2018, respectively.

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

Additionally, during the nine months ended September 30, 2019 and 2018, 3,453,901 and 1,571,438 shares of Class A Common Stock were repurchased in open market transactions as part of the publicly announced share repurchase program adopted in February 2016, respectively, and such shares were subsequently canceled by the Company. The Company paid $102.4 million and $54.3 million for these open market share repurchases during the nine months ended September 30, 2019 and 2018, respectively.
Preferred Stock Issuance
On March 7, 2017, Apollo issued 11,000,000 6.375% Series A Preferred shares (the “Series A Preferred shares”) for gross proceeds of $275.0 million, or $264.4 million net of issuance costs and on March 19, 2018, Apollo issued 12,000,000 6.375% Series B Preferred shares (the “Series B Preferred shares” and collectively with the Series A Preferred shares, the “Preferred shares”) for gross proceeds of $300.0 million, or $289.8 million net of issuance costs.
As a result of the Conversion, (i) each Series A Preferred Share representing limited liability company interests of AGM LLC outstanding immediately prior to the Effective Time converted into one issued and outstanding, fully paid and nonassessable share of Series A Preferred Stock, having a liquidation preference of $25.00 per share, of the Company and (ii) each Series B Preferred Share representing limited liability company interests of AGM LLC outstanding immediately prior to the Effective Time converted into one issued and outstanding, fully paid and nonassessable share of Series B Preferred Stock, having a liquidation preference of $25.00 per share, of the Company (the Series A Preferred Stock and the Series B Preferred Stock collectively, the “Preferred Stock”).
When, as and if declared by the executive committee of the board of directors of AGM Inc., dividends on the Preferred Stock will be payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning on June 15, 2018 for the Series B Preferred Stock, at a rate per annum equal to 6.375%. Dividends on the Preferred Stock are discretionary and non-cumulative. During 2019, quarterly cash dividends were $0.398438 per share of Series A Preferred Stock and Series B Preferred Stock.
Subject to certain exceptions, unless dividends have been declared and paid or declared and set apart for payment on the Preferred Stock for a quarterly dividend period, during the remainder of that dividend period Apollo may not declare or pay or set apart payment for dividends on any shares of Class A Common Stock or any other equity securities that the Company may issue in the future ranking as to the payment of dividends, junior to the Preferred Stock (“Junior Stock”) and Apollo may not repurchase any Junior Stock. These restrictions were not applicable during the initial dividend period, which was the period from March 19, 2018 to but excluding June 15, 2018 for the Series B Preferred Stock.
The Series A Preferred Stock and the Series B Preferred Stock may be redeemed at Apollo’s option, in whole or in part, at any time on or after March 15, 2022 and March 15, 2023, respectively, at a price of $25.00 per share of Preferred Stock, plus declared and unpaid dividends to, but excluding, the redemption date, without payment of any undeclared dividends. Holders of the Preferred Stock will have no right to require the redemption of the Preferred Stock and there is no maturity date.
If a certain change of control event or a certain tax redemption event occurs prior to March 15, 2022 and March 15, 2023 for the Series A Preferred Stock and the Series B Preferred Stock, respectively, the Preferred Stock may be redeemed at Apollo’s option, in whole but not in part, upon at least 30 days’ notice, within 60 days of the occurrence of such change of control event or such tax redemption event, as applicable, at a price of $25.25 per share of Preferred Stock, plus declared and unpaid dividends to, but excluding, the redemption date, without payment of any undeclared dividends. If a certain rating agency event occurs prior to March 15, 2023, the Series B Preferred Stock may be redeemed at Apollo’s option, in whole but not in part, upon at least 30 days’ notice, within 60 days of the occurrence of such rating agency event, at a price of $25.50 per share of Series B Preferred Stock, plus declared and unpaid dividends to, but excluding, the redemption date, without payment of any undeclared dividends. If (i) a change of control event occurs (whether before, on or after March 15, 2022 and March 15, 2023 for the Series A Preferred Stock and the Series B Preferred Stock, respectively) and (ii) Apollo does not give notice prior to the 31st day following the change of control event to redeem all the outstanding Preferred Stock, the dividend rate per annum on the Preferred Stock will increase by 5.00%, beginning on the 31st day following such change of control event.
The Preferred Stock are not convertible into Class A Common Stock and have no voting rights, except in limited circumstances as provided in the Company’s certificate of incorporation. In connection with the issuance of the Preferred Stock, certain Apollo Operating Group entities issued for the benefit of Apollo a series of preferred units with economic terms that mirror those of the Preferred Stock.

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

Dividends and Distributions
The table below presents information regarding the quarterly dividends and distributions which were made at the sole discretion of the Former Manager of the Company prior to the Conversion (in millions, except per share data). Certain subsidiaries of AGM Inc. may be subject to U.S. federal, state, local and non-U.S. income taxes at the entity level and may pay taxes and/or make payments under the tax receivable agreement in a given fiscal year; therefore, the net amounts ultimately distributed by AGM Inc. to its Class A Common Stockholders in respect of each fiscal year are generally expected to be less than the net amounts distributed to AOG Unitholders. Subsequent to the Conversion, distributions from AGM Inc. are referred to as dividends.
Dividend Declaration Date
 
Dividend per share of Class A Common Stock
 
Payment Date
 
Dividend to Class A Common Stockholders
 
Distribution to Non-Controlling Interest Holders in the Apollo Operating Group
 
Total Distributions from Apollo Operating Group
 
Distribution Equivalents on Participating Securities
February 1, 2018
 
$
0.66

 
February 28, 2018
 
$
133.0

 
$
133.7

 
$
266.7

 
$
5.4

N/A
 
—

 
April 12, 2018
 
—

 
50.5

(1) 
50.5

 
—

May 3, 2018
 
0.38

 
May 31, 2018
 
76.6

 
77.0

 
153.6

 
4.1

August 2, 2018
 
0.43

 
August 31, 2018
 
86.5

 
87.1

 
173.6

 
4.2

November 1, 2018
 
0.46

 
November 30, 2018
 
92.6

 
93.0

 
185.6

 
4.4

For the year ended December 31, 2018
 
$
1.93

 
 
 
$
388.7

 
$
441.3

 
$
830.0

 
$
18.1

January 31, 2019
 
$
0.56

 
February 28, 2019
 
$
113.3

 
$
113.3

 
$
226.6

 
$
5.0

N/A
 
—

 
April 12, 2019
 
—

 
45.4

(1) 
45.4

 
—

May 2, 2019
 
0.46

 
May 31, 2019
 
92.2

 
93.0

 
185.2

 
4.1

July 31, 2019
 
0.50

 
August 30, 2019
 
100.4

 
101.0

 
201.4

 
4.4

N/A
 
—

 
August 15, 2019
 
—

 
4.1

(1) 
4.1

 
—

N/A
 
—

 
September 26, 2019
 
—

 
17.8

(1) 
17.8

 
—

For the nine months ended September 30, 2019
 
$
1.52

 
 
 
$
305.9

 
$
374.6

 
$
680.5

 
$
13.5


(1)
On April 12, 2018 and April 12, 2019, the Company made a $0.25 and $0.18 per AOG Unit pro rata distribution, respectively, to the Non-Controlling Interest holders in the Apollo Operating Group, in connection with taxes and payments made under the tax receivable agreement. See note 14 for more information regarding the tax receivable agreement. On April 12, 2019, August 15, 2019 and September 26, 2019, the Company made a $0.04, $0.02 and $0.10 per AOG Unit pro rata distribution, respectively, to the Non-Controlling Interest holders in the Apollo Operating Group, in connection with federal corporate estimated tax payments.

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

Non-Controlling Interests
The table below presents equity interests in Apollo’s consolidated, but not wholly-owned, subsidiaries and funds. Net income and comprehensive income attributable to Non-Controlling Interests consisted of the following: 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Net income attributable to Non-Controlling Interests in consolidated entities:
 
 
 
 
 
 
 
Interest in management companies and a co-investment vehicle(1)
$
827

 
$
1,067

 
$
2,853

 
$
4,176

Other consolidated entities
6,256

 
10,273

 
18,035

 
21,859

Net income attributable to Non-Controlling Interests in consolidated entities
$
7,083

 
$
11,340

 
$
20,888

 
$
26,035

 
 
 
 
 
 
 
 
Net income attributable to Non-Controlling Interests in the Apollo Operating Group:
 
 
 
 
 
 
 
Net income
$
521,094

 
$
362,692

 
$
1,178,822

 
$
397,154

Net income attributable to Non-Controlling Interests in consolidated entities
(7,083
)
 
(11,340
)
 
(20,888
)
 
(26,035
)
Net income after Non-Controlling Interests in consolidated entities
514,011

 
351,352

 
1,157,934

 
371,119

Adjustments:
 
 
 
 
 
 
 
Income tax provision (benefit)(2)
(231,896
)
 
19,092

 
(195,345
)
 
46,596

NYC UBT and foreign tax benefit(3)
(1,913
)
 
(2,776
)
 
(6,286
)
 
(6,963
)
Net loss in non-Apollo Operating Group entities
38,724

 
35

 
39,270

 
310

Series A Preferred Stock Dividends
(4,382
)
 
(4,383
)
 
(13,148
)
 
(13,149
)
Series B Preferred Stock Dividends
(4,782
)
 
(4,781
)
 
(14,344
)
 
(9,350
)
Total adjustments
(204,249
)
 
7,187

 
(189,853
)
 
17,444

Net income after adjustments
309,762

 
358,539

 
968,081

 
388,563

Weighted average ownership percentage of Apollo Operating Group
48.7
%
 
50.2
%
 
49.6
%
 
50.3
%
Net income attributable to Non-Controlling Interests in Apollo Operating Group
$
150,741

 
$
179,831

 
$
480,784

 
$
194,250

 
 
 
 
 
 
 
 
Net Income attributable to Non-Controlling Interests
$
157,824

 
$
191,171

 
$
501,672

 
$
220,285

Other comprehensive income (loss) attributable to Non-Controlling Interests
(12,999
)
 
(2,130
)
 
(16,053
)
 
(13,859
)
Comprehensive Income Attributable to Non-Controlling Interests
$
144,825

 
$
189,041

 
$
485,619

 
$
206,426

(1)
Reflects the remaining interest held by certain individuals who receive an allocation of income from certain of the credit funds managed by Apollo.
(2)
Reflects all taxes recorded in our condensed consolidated statements of operations. Of this amount, U.S. federal, state, and local corporate income taxes attributable to APO Corp. are added back to income of the Apollo Operating Group before calculating Non-Controlling Interests as the income allocable to the Apollo Operating Group is not subject to such taxes.
(3)
Reflects NYC UBT and foreign taxes that are attributable to the Apollo Operating Group and its subsidiaries related to its operations in the U.S. as partnerships and in non-U.S. jurisdictions as corporations. As such, these amounts are considered in the income attributable to the Apollo Operating Group.
14. RELATED PARTY TRANSACTIONS AND INTERESTS IN CONSOLIDATED ENTITIES
Management fees, transaction and advisory fees and reimbursable expenses from the funds the Company manages and their portfolio companies are included in due from related parties in the condensed consolidated statements of financial condition. The Company also typically facilitates the payment of certain operating costs incurred by the funds that it manages as well as their related parties. These costs are normally reimbursed by such funds and are included in due from related parties. Other related party transactions include loans to employees and periodic sales of ownership interests in Apollo funds to employees. Due from related parties and due to related parties are comprised of the following:

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

 
As of
September 30, 2019
 
As of
December 31, 2018
Due from Related Parties:
 
 
 
Due from credit funds
$
190,919

 
$
153,687

Due from private equity funds
21,901

 
19,993

Due from real assets funds
34,307

 
42,471

Due from portfolio companies
57,783

 
67,740

Due from Contributing Partners, employees and former employees
135,161

 
94,217

Total Due from Related Parties
$
440,071

 
$
378,108

Due to Related Parties:
 
 
 
Due to Managing Partners and Contributing Partners
$
287,456

 
$
285,598

Due to credit funds
4,212

 
3,444

Due to private equity funds
215,110

 
136,078

Due to real assets funds
335

 
315

Total Due to Related Parties
$
507,113

 
$
425,435


Tax Receivable Agreement
Subject to certain restrictions, each of the Managing Partners and Contributing Partners has the right to exchange his vested AOG Units for the Company’s Class A Common Stock. All Operating Group entities have made, or will make, an election under Section 754 of the U.S. Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), which will result in an adjustment to the tax basis of the assets owned by the Apollo Operating Group at the time of the exchange. These exchanges will result in increases in the basis of underlying assets that will reduce the amount of tax that AGM Inc. and its subsidiaries will otherwise be required to pay in the future.
The tax receivable agreement provides for the payment to the Managing Partners and Contributing Partners of 85% of the amount of cash savings, if any, in U.S. federal, state, local and foreign income taxes that AGM Inc. and its subsidiaries would realize as a result of the increases in tax basis of assets that resulted from the 2007 Reorganization, the Conversion and exchanges of AOG Units for Class A Common Stock. AGM Inc. and its subsidiaries retains the benefit from the remaining 15% of actual cash tax savings. If the Company does not make the required annual payment on a timely basis as outlined in the tax receivable agreement, interest is accrued on the balance until the payment date.
As a result of the exchanges of AOG Units for Class A Common Stock during the nine months ended September 30, 2019 and 2018, a $39.1 million and $39.6 million liability was recorded, respectively, to estimate the amount of the future expected payments to be made by AGM Inc. and its subsidiaries to the Managing Partners and Contributing Partners pursuant to the tax receivable agreement.
In April 2019, Apollo made a $37.2 million cash payment pursuant to the tax receivable agreement resulting from the realized tax benefit for the 2018 tax year. Additionally, in connection with this payment, the Company made a corresponding pro rata distribution of $37.4 million ($0.18 per AOG Unit) to the Non-Controlling Interest holders in the Apollo Operating Group. In April 2018, Apollo made a $50.3 million cash payment pursuant to the tax receivable agreement resulting from the realized tax benefit for the 2017 tax year. Additionally, in connection with this payment, the Company made a corresponding pro rata distribution of $50.5 million ($0.25 per AOG Unit) to the Non-Controlling Interest holders in the Apollo Operating Group.
Due from Contributing Partners, Employees and Former Employees
As of September 30, 2019 and December 31, 2018, due from Contributing Partners, Employees and Former Employees includes various amounts due to the Company including employee loans and return of profit sharing distributions. As of September 30, 2019 and December 31, 2018, the balance included interest-bearing employee loans receivable of $17.0 million and $16.8 million, respectively. The outstanding principal amount of the loans as well as all accrued and unpaid interest is required to be repaid at the earlier of the eighth anniversary of the date of the relevant loan or at the date of the relevant employee’s resignation from the Company.

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

The Company recorded a receivable from the Contributing Partners and certain employees and former employees for the potential return of profit sharing distributions that would be due if certain funds were liquidated as of September 30, 2019 and December 31, 2018 of $103.3 million and $66.3 million, respectively.
Indemnity
Performance revenues from certain funds can be distributed to the Company on a current basis, but are subject to repayment by the subsidiaries of the Apollo Operating Group that act as general partners of the funds in the event that certain specified return thresholds are not ultimately achieved. The Managing Partners, Contributing Partners and certain other investment professionals have personally guaranteed, subject to certain limitations, the obligations of these subsidiaries in respect of this general partner obligation. Such guarantees are several and not joint and are limited to a particular Managing Partner’s or Contributing Partner’s distributions. Pursuant to an existing shareholders agreement, the Company has agreed to indemnify each of the Company’s Managing Partners and certain Contributing Partners against all amounts that they pay pursuant to any of these personal guarantees in favor of certain funds that the Company manages (including costs and expenses related to investigating the basis for or objecting to any claims made in respect of the guarantees) for all interests that the Company’s Managing Partners and Contributing Partners have contributed or sold to the Apollo Operating Group.
Accordingly, in the event that the Company’s Managing Partners, Contributing Partners and certain investment professionals are required to pay amounts in connection with a general partner obligation for the return of previously made distributions with respect to Fund IV, Fund V and Fund VI, the Company will be obligated to reimburse the Company’s Managing Partners and certain Contributing Partners for the indemnifiable percentage of amounts that they are required to pay even though the Company did not receive the certain distribution to which that general partner obligation related. The Company recorded an indemnification liability of $12.7 million and $12.2 million as of September 30, 2019 and December 31, 2018, respectively.
Due to Credit, Private Equity and Real Assets Funds
Based upon an assumed liquidation of certain of the credit, private equity and real assets funds the Company manages, the Company has recorded a general partner obligation to return previously distributed performance allocations, which represents amounts due to these funds. The general partner obligation is recognized based upon an assumed liquidation of a fund’s net assets as of the reporting date. The actual determination and any required payment of any such general partner obligation would not take place until the final disposition of a fund’s investments based on the contractual termination of the fund or as otherwise set forth in the respective limited partnership agreement or other governing document of the fund.
The following table presents the general partner obligation to return previously distributed performance allocations related to certain funds by segment:
 
As of
September 30, 2019
 
As of
December 31, 2018
Credit
$
320

 
$
1,370

Private Equity
213,573

 
135,723

Total general partner obligation
$
213,893

 
$
137,093


Athene
Athene Holding was founded in 2009 to capitalize on favorable market conditions in the dislocated life insurance sector. Athene Holding, through its subsidiaries, is a leading retirement services company that issues, reinsures and acquires retirement savings products designed for the increasing number of individuals and institutions seeking to fund retirement needs. The products and services offered by Athene include fixed and fixed indexed annuity products, reinsurance services offered to third-party annuity providers; and institutional products, such as funding agreements. Athene Holding became an effective registrant under the Exchange Act on December 9, 2016. Athene Holding is currently listed on the New York Stock Exchange under the symbol “ATH”.
The Company provides asset management and advisory services to Athene, including asset allocation services, direct asset management services, asset and liability matching management, mergers and acquisitions, asset diligence hedging and other asset management services. On September 20, 2018, Athene and Apollo agreed to revise the existing fee arrangements (the “amended fee agreement”) between Athene and Apollo. The amended fee agreement was subject to approval by Athene’s shareholders of a bye-law amendment providing that Athene will not elect to terminate the investment management arrangement between Athene

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

and Apollo, except for cause, for a period of four years from the date of the bye-law amendment and thereafter only on each successive two-year anniversary of the expiration of the initial four-year period. On June 10, 2019, the Athene shareholders approved the bye-law amendment and the amended fee agreement took effect retroactive to the month beginning January 1, 2019. The Company began recording fees pursuant to the amended fee agreement on January 1, 2019. The amended fee agreement provides for sub-allocation fees which vary based on portfolio allocation differentiation, as described below.
The amended fee agreement provides for a monthly fee to be payable by Athene to the Company in arrears, with retroactive effect to the month beginning on January 1, 2019, in an amount equal to the following, to the extent not otherwise payable to the Company pursuant to any one or more investment management or sub-advisory agreements or arrangements:
(i)
The Company, through its consolidated subsidiary Apollo Insurance Solutions Group LLC, or ISG, earns a base management fee of 0.225% per year on the aggregate market value of substantially all of the assets in substantially all of the investment accounts of or relating to Athene (collectively, the “Athene Accounts”) up to $103.4 billion (the level of assets in the Athene Accounts as of January 1, 2019, excluding certain assets, the “Backbook Value”) and 0.150% per year on all assets in excess of $103.4 billion (the “Incremental Value”), respectively; plus
(ii)
with respect to each asset in an Account, subject to certain exceptions, that is managed by the Company and that belongs to a specified asset class tier (“core,” “core plus,” “yield,” and “high alpha”), a sub-allocation fee as follows, which will, in the case of assets acquired after January 1, 2019, be subject to a cap of 10% of the applicable asset’s gross book yield:
 
As of
September 30, 2019
Sub-Allocation Fees:
 
Core Assets(1)
0.065
%
Core Plus Assets(2)
0.130
%
Yield Assets(3)
0.375
%
High Alpha Assets(4)
0.700
%
Cash, Treasuries, Equities and Alternatives(5)
—
%
(1)
Core assets include public investment grade corporate bonds, municipal securities, agency residential or commercial mortgage backed securities and obligations of any governmental agency or government sponsored entity that is not expressly backed by the U.S. government.
(2)
Core plus assets include private investment grade corporate bonds, fixed rate first lien commercial mortgage loans (“CML”) and obligations issued or assumed by a financial institution (such an institution, a “financial issuer”) and determined by Apollo to be “Tier 2 Capital” under the Basel III recommendations developed by the Basel Committee on Banking Supervision (or any successor to such recommendations).
(3)
Yield assets include non-agency residential mortgage-backed securities, investment grade collateralized loan obligations, certain asset-backed securities, commercial mortgage-backed securities, emerging market investments, below investment grade corporate bonds, subordinated debt obligations, hybrid securities or surplus notes issued or assumed by a financial issuer, as rated preferred equity, residential mortgage loans, bank loans, investment grade infrastructure debt and certain floating rate commercial mortgage loans.
(4)
High alpha assets include subordinated commercial mortgage loans, below investment grade collateralized loan obligations, unrated preferred equity, debt obligations originated by MidCap, below investment grade infrastructure debt, certain loans originated directly by Apollo and agency mortgage derivatives.
(5)
With respect to Equities and Alternatives, Apollo earns performance revenues of 0% to 20%.
Athora
The Company, through its consolidated subsidiary, AAME, provides investment advisory services to certain portfolio companies of Apollo funds and Athora, a strategic platform established to acquire or reinsure blocks of insurance business in the German and broader European life insurance market (collectively, the “Athora Accounts”).
Athora Sub-Advised
The Company, through AAME, provides sub-advisory services with respect to a portion of the assets in certain portfolio companies of Apollo funds and the Athora Accounts. The Company broadly refers to “Athora Sub-Advised” assets as those assets in the Athora Accounts which the Company explicitly sub-advises as well as those assets in the Athora Accounts which are invested directly in funds and investment vehicles Apollo manages. With limited exceptions, the sub-advisory fee earned by the Company on the Athora Sub-Advised assets is 0.35%.

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FINANCIAL STATEMENTS
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AAA Investments
Apollo, as general partner of AAA Investments, is generally entitled to performance allocations equal to 20% of the realized returns (net of related expenses, including borrowing costs) on AAA Investments’ investment in Athene Holding, except that Apollo is not entitled to receive any performance allocations with respect to the shares of Athene Holding that were acquired (and not in satisfaction of prior commitments to buy such shares) by AAA Investments in the contribution of certain assets by AAA to Athene in October 2012.
The following table presents the performance allocations earned from AAA Investments:
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Performance allocations from AAA Investments, net(1)
$
(40
)
 
$
311

 
$
93

 
$
(4,688
)
(1)
Net of related profit sharing expense.
The following table presents the revenues earned in aggregate from Athene, Athora and AAA Investments:
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Revenues earned in aggregate from Athene, Athora and AAA Investments, net(1)(2)
$
141,273

 
$
290,450

 
$
505,780

 
$
379,275

(1)
Consisting of management fees, sub-advisory fees, performance revenues from Athene, Athora and AAA Investments, as applicable (net of related profit sharing expense) and changes in the market value of the Athene Holding shares owned directly by Apollo. These amounts exclude the deferred revenue recognized as management fees associated with the vesting of AHL Awards granted to employees of Apollo as further described in note 12.
(2)
Gains (losses) on the market value of the shares of Athene Holding owned directly by Apollo were $(19.2) million and $155.5 million for the three months ended September 30, 2019 and 2018, respectively, and $42.6 million and $20.6 million for the nine months ended September 30, 2019 and 2018, respectively.
The following table presents performance allocations and profit sharing payable from AAA Investments:
 
As of
September 30, 2019
 
As of
December 31, 2018
Performance allocations
$
1,733

 
$
1,611

Profit sharing payable
476

 
442


As of September 30, 2019 and December 31, 2018, the Company held a 10.9% and 10.2% economic ownership interest in Athene Holding, respectively.
AAA Investments Credit Agreement
On April 30, 2015, Apollo entered into a revolving credit agreement with AAA Investments (the “AAA Investments Credit Agreement”). Under the terms of the AAA Investments Credit Agreement, the Company shall make available to AAA Investments one or more advances at the discretion of AAA Investments in the aggregate amount not to exceed a balance of $10.0 million at an applicable rate of LIBOR plus 1.5%. The Company receives an annual commitment fee of 0.125% on the unused portion of the loan. As of September 30, 2019 and December 31, 2018, $8.5 million and $6.7 million, respectively, had been advanced by the Company and remained outstanding on the AAA Investments Credit Agreement. AAA Investments was obligated to pay the aggregate borrowings plus accrued interest at the earlier of (a) the third anniversary of the closing date, or (b) the date that was fifteen months following the initial public offering of shares of Athene Holding (the “Maturity Date”). On January 30, 2019, the Company and AAA agreed to extend the maturity date of the AAA Investments Credit Agreement to April 30, 2020.
AINV Amended and Restated Investment Advisory Management Agreement
On May 17, 2018, the board of directors of AINV approved an amended and restated investment advisory management agreement with Apollo Investment Management, L.P., the Company’s consolidated subsidiary, which reduced the base management

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fee and revised the incentive fee on income to include a total return requirement. Effective April 1, 2018, the base management fee was reduced from 2.0% to 1.5% of the average value of AINV’s gross assets (excluding cash or cash equivalents but including other assets purchased with borrowed amounts) at the end of each of the two most recently completed calendar quarters; provided, however, the base management fee would be 1.0% of the average value of AINV’s gross assets (excluding cash or cash equivalents but including other assets purchased with borrowed amounts) that exceeds the product of (i) 200% and (ii) the value of AINV’s net asset value at the end of the most recently completed calendar quarter. In addition, beginning January 1, 2019, the incentive fee on income calculation included a total return requirement with a rolling twelve quarter look-back starting from April 1, 2018. The incentive fee rate remained 20% and the performance threshold remained 1.75% per quarter (7% annualized).
Regulated Entities
Apollo Global Securities, LLC (“AGS”) is a registered broker dealer with the SEC and is a member of the Financial Industry Regulatory Authority, subject to the minimum net capital requirements of the SEC. AGS was in compliance with these requirements at September 30, 2019. From time to time, this entity is involved in transactions with related parties of Apollo, including portfolio companies of the funds Apollo manages, whereby AGS earns underwriting and transaction fees for its services.
15. COMMITMENTS AND CONTINGENCIES
Investment Commitments—As a limited partner, general partner and manager of the Apollo funds, Apollo had unfunded capital commitments as of September 30, 2019 and December 31, 2018 of $1.1 billion and $1.2 billion, respectively, of which $434 million and $469 million related to Fund IX as of September 30, 2019 and December 31, 2018, respectively.
Debt Covenants—Apollo’s debt obligations contain various customary loan covenants. As of September 30, 2019, the Company was not aware of any instances of non-compliance with the financial covenants contained in the documents governing the Company’s debt obligations.
Litigation and Contingencies—Apollo is, from time to time, party to various legal actions arising in the ordinary course of business including claims and lawsuits, reviews, investigations or proceedings by governmental and self-regulatory agencies regarding its business.

On June 20, 2016 Banca Carige S.p.A. (“Carige”) commenced a lawsuit in the Court of Genoa (Italy) (No. 8965/2016), against its former Chairman, its former Chief Executive Officer, AGM Inc. and certain entities (the “Apollo Entities”) organized and owned by investment funds managed by affiliates of AGM Inc. The complaint alleged that AGM Inc. and the Apollo Entities (i) aided and abetted breaches of fiduciary duty to Carige allegedly committed by Carige’s former Chairman and former CEO in connection with the sale to the Apollo Entities of Carige subsidiaries engaged in the insurance business; and (ii) took wrongful actions aimed at weakening Banca Carige’s financial condition supposedly to facilitate an eventual acquisition of Carige. The causes of action were based in tort under Italian law. Carige purportedly seeks damages of €450 million in connection with the sale of the insurance businesses and €800 million for other losses. With judgment no. 3118/2018 published on December 6, 2018, the Court of Genoa fully rejected all the claims raised by Carige against AGM Inc. and the Apollo Entities, also awarding attorneys' fees in their favor for an amount of €428,996.10. Carige filed an appeal on January 3, 2019 before the Court of Appeal of Genoa. The Apollo Entities appeared in the proceedings requesting the Court to reject Banca Carige’s appeal. By decree dated August 12, 2019, the Court of Appeal rejected some preliminary requests made by the former directors, including their request to join insurance companies and other members of the board of directors of Carige in the proceedings. By the same decree, the Court of Appeal scheduled the next hearing on September 22, 2021. Although the case appears to be in its final stages, no reasonable estimate of possible loss, if any, can be made at this time.

On December 12, 2016, the CORE Litigation Trust (the “Trust”), which was created under the Chapter 11 reorganization plan for CORE Media and other affiliated entities, including CORE Entertainment, Inc. (“CORE”), commenced an action in California Superior Court for Los Angeles County, captioned Core Litigation Trust v. Apollo Global Management, LLC, et al., Case No. BC 643732, that was stayed on October 3, 2017, in favor of litigating in New York state court. On November 9, 2017, the Trust commenced an action in the Supreme Court of the State of New York, captioned Core Litigation Trust v. Apollo Global Management, LLC, et al., Index No. 656856/2017. The complaint names as defendants: (i) AGM Inc. and certain AGM Inc. affiliates including the Apollo-managed funds that were CORE’s beneficial owners (the “CORE Funds”), (ii) Twenty-First Century Fox, Inc. (“Fox”) and certain Fox affiliates, (iii) Endemol USA Holding, Inc. (“Endemol”) and certain Endemol-affiliated entities, and (iv) the joint venture through which the CORE Funds and Fox beneficially owned CORE Media and Endemol Shine (the “JV”). The Trust asserts claims against (i) all defendants for tortiously interfering with $360 million in loans under the 2011 loan agreements entered into between CORE and certain Lenders, and (ii) certain defendants for alter-ego and de-facto merger. The

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Trust seeks $240 million in compensatory, unspecified punitive damages, pre-judgment interests, and costs and expenses. Under the parties’ agreement, dated as of August 19, 2019, to settle and release all of the Trust’s claims against Defendants, both the New York and California actions have been dismissed with prejudice.  

On August 3, 2017, a complaint was filed in the United States District Court for the Middle District of Florida against AGM Inc., a senior partner of Apollo and a former principal of Apollo by Michael McEvoy on behalf of a purported class of employees of subsidiaries of CEVA Group, LLC (“CEVA Group”) who purchased shares in CEVA Investment Limited (“CIL”), the former parent company of CEVA Group. The complaint alleged that the defendants breached fiduciary duties to and defrauded the plaintiffs by inducing them to purchase shares in CIL and subsequently participating in a debt restructuring of CEVA Group in which shareholders of CIL did not receive a recovery. On February 9, 2018, the Bankruptcy Court for the Southern District of New York held that the claims asserted in the complaint were assets of CIL, which is a chapter 7 debtor, and that the complaint was null and void as a violation of the automatic stay. McEvoy subsequently revised his complaint to attempt to assert claims that do not belong to CIL. The amended complaint no longer names any individual defendants, but Apollo Management VI, L.P. and CEVA Group have been added as defendants. The amended complaint purports to seek damages of approximately €30 million and asserts, among other things, claims for violations of the Investment Advisers Act of 1940, breach of fiduciary duties, and breach of contract. On December 7, 2018, after receiving permission from the Bankruptcy Court, McEvoy filed his amended complaint in the District Court in Florida. Apollo is currently seeking dismissal of this action and believes that there is no merit to the claims. On October 28, 2019, the District Court in Florida scheduled a hearing for December 3, 2019 on Apollo and CEVA Group’s motions to dismiss. As the case is in its early stages, no reasonable estimate of possible loss, if any, can be made at this time.

On December 21, 2017, Harbinger Capital Partners II, LP, Harbinger Capital Partners Master Fund I, Ltd., Harbinger Capital Partners Special Situations Fund, L.P., Harbinger Capital Partners Special Situations GP, LLC, Harbinger Capital Partners Offshore Manager, L.L.C., Global Opportunities Breakaway Ltd. (in voluntary liquidation), and Credit Distressed Blue Line Master Fund, Ltd. (collectively, “Harbinger”) commenced an action in New York Supreme Court captioned Harbinger Capital Partners II LP et al. v. Apollo Global Management LLC, et al. (No. 657515/2017). The complaint names as defendants (i) AGM Inc., (ii) the funds managed by Apollo that invested in SkyTerra Communications, Inc. (“SkyTerra”) equity before selling their interests to Harbinger under an April 2008 agreement that closed in 2010, and (iii) six former SkyTerra directors, five of whom are current or former Apollo employees.  The complaint alleges that during the period of Harbinger’s various equity and debt investments in SkyTerra, from 2004 to 2010, the defendants concealed from Harbinger material defects in SkyTerra technology that was to be used to create a new mobile wi-fi network.  The complaint alleges that Harbinger would not have made investments in SkyTerra totaling approximately $1.9 billion had it known of the defects, and that the public disclosure of these defects ultimately led to SkyTerra filing for bankruptcy in 2012 (after it had been renamed LightSquared). The complaint asserts claims against (i) all defendants for fraud, civil conspiracy, and negligent misrepresentation, (ii) AGM Inc. and the Apollo-managed funds only for breach of fiduciary duty, breach of contract, and unjust enrichment, and (iii) the SkyTerra director defendants only for aiding and abetting breach of fiduciary duty.  The complaint seeks $1.9 billion in damages, as well as punitive damages, interest, costs, and fees. This action was stayed from February 14, 2018, through June 12, 2019. On February 14, 2018, the defendants moved the United States Bankruptcy Court for the Southern District of New York to reopen the LightSquared bankruptcy proceeding for the limited purpose of enforcing Harbinger’s assignment and release in that bankruptcy of the claims that it asserts in the New York state court action. Briefing and hearing on this motion were adjourned while the state court stay was pending. On June 12, 2019, Harbinger voluntarily discontinued the state action without prejudice subject to a tolling agreement. On June 12, 2019, Apollo voluntarily withdrew its bankruptcy court motion subject to a right to refile the motion if Harbinger were to refile the state court action. Apollo believes these claims are without merit.  Because this action is in its early stages, no reasonable estimate of possible loss, if any, can be made at this time.

Five shareholders filed substantially similar putative class action lawsuits in the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida in March, April, and May 2018, alleging violations of the Securities Act in connection with the January 19, 2018 IPO of ADT Inc. common stock. The actions were consolidated on July 10, 2018, and the case was re-captioned In re ADT Inc. Shareholder Litigation. On August 24, 2018, the state-court plaintiffs filed a consolidated complaint naming as defendants ADT Inc., several ADT officers and directors, the IPO underwriters (including Apollo Global Securities, LLC), AGM Inc. and certain other Apollo affiliates. Plaintiffs generally allege that the registration statement and prospectus for the IPO contained false and misleading statements and failed to disclose material information about certain litigation in which ADT was involved, ADT’s efforts to protect its intellectual property, and competitive pressures ADT faced. Defendants filed motions to dismiss the consolidated complaint on October 23, 2018, and those motions are fully briefed. On May 21, 2018, a similar shareholder class action lawsuit was filed in the United States District Court for the Southern District of Florida, naming

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as defendants ADT, several officers and directors, and AGM Inc. The federal action, captioned Perdomo v. ADT Inc., generally alleges that the registration statement was materially misleading because it failed to disclose ongoing deterioration in ADT’s financial results, along with certain customer and business metrics. On July 20, 2018, several alleged ADT shareholders filed competing motions to be named lead plaintiff in the federal action. On November 20, 2018, the court appointed a lead plaintiff, and on January 15, 2019, the lead plaintiff filed an amended complaint.  The amended complaint names the same Apollo-affiliated defendants as the state-court action, along with three new Apollo entities.  Defendants filed motions to dismiss on March 25, 2019, and those motions are fully briefed.  On July 26, 2019, the state court denied defendants’ motions to dismiss, except it reserved judgment on the question whether it has personal jurisdiction over certain defendants, including the Apollo defendants. On September 12, 2019, all parties to the state and federal actions reached a settlement in principle of both actions, subject to court approval. The settlement requires no payment from any Apollo defendants.

On May 3, 2018, Caldera Holdings Ltd, Caldera Life Reinsurance Company, and Caldera Shareholder, L.P. (collectively, “Caldera”) filed a summons with notice in the Supreme Court of the State of New York, New York County, naming as defendants AGM Inc., Apollo Management, L.P., Apollo Advisors VIII, L.P., Apollo Capital Management VIII, LLC, Athene Asset Management, L.P., Athene Holding, Ltd., and Leon Black (collectively, “Defendants” and all but Athene Holding, Ltd., the “Apollo Defendants”). On July 12, 2018, Caldera filed a complaint, Index No. 652175/2018 (the “Complaint”), alleging three causes of action: (1) tortious interference with prospective business relations/prospective economic advantage; (2) defamation/trade disparagement/injurious falsehood; and (3) unfair competition. The Complaint seeks damages of no less than $1.5 billion, as well as exemplary and punitive damages, attorneys’ fees, interest, and an injunction. Defendants moved to dismiss the Complaint on September 21, 2018 and Caldera filed an amended complaint on January 21, 2019 (the “Amended Complaint”).  Defendants have moved to dismiss the Amended Complaint, and the Apollo Defendants have submitted to the Court a Final Arbitration Award issued on April 26, 2019 in a JAMS arbitration, finding Caldera, Imran Siddiqui, and Ming Dang liable for various causes of action, including breaches of fiduciary duty and/or aiding and abetting thereof.  Oral argument on the motions to dismiss was held on May 31, 2019.  The Apollo Defendants believe that the claims contained in the Complaint lack merit and intend to defend the case vigorously. Because this action is in the early stages, no reasonable estimate of possible loss, if any, can be made at this time.

On March 7, 2019, plaintiff Elizabeth Morrison filed an amended complaint in an action captioned Morrison v. Ray Berry, et. al., Case No. 12808-VCG, pending in the Chancery Court for the State of Delaware, adding as defendants AGM Inc. and certain AGM Inc. affiliates. The original complaint had only named as defendants certain officers and directors (the “TFM defendants”) of The Fresh Market, Inc. (“TFM”), claiming that those defendants breached their fiduciary duties to the TFM shareholders in connection with their consideration and approval of a merger agreement between TFM and certain entities affiliated with Apollo, including by engaging in a sale process that improperly favored AGM Inc., and/or Apollo Management VIII, L.P., by agreeing to an inadequate price and by filing materially deficient disclosures regarding the transaction. In addition to AGM Inc., the amended complaint added as defendants Apollo Overseas Partners (Delaware 892) VIII, L.P., Apollo Overseas Partners (Delaware) VIII, L.P., Apollo Overseas Partners VIII, L.P., Apollo Management VIII, L.P., AIF VIII Management, LLC, Apollo Management, L.P., Apollo Management GP, LLC, Apollo Management Holdings, L.P., Apollo Management Holdings GP, LLC, APO Corp., AP Professional Holdings, L.P., Apollo Advisors VIII, L.P., Apollo Investment Fund VIII, L.P., and Pomegranate Holdings, Inc., and other defendants. The amended complaint alleges that the Apollo defendants aided and abetted the breaches of fiduciary duties by the TFM defendants. After the defendants moved to dismiss the complaint on May 1, 2019, Plaintiff filed a second amended complaint on June 3, 2019, maintaining the same claim against the same Apollo defendants as the prior complaint. Defendants moved to dismiss the second amended complaint on July 12, 2019. The court heard oral argument on the motions on September 23, 2019, and took them under advisement. Apollo believes the claims in this action are without merit. Because this action is in the early stages, no reasonable estimate of possible loss, if any, can be made at this time.

Commitments and Contingencies—Other long-term obligations relate to payments with respect to certain consulting agreements entered into by Apollo Investment Consulting LLC, a subsidiary of Apollo, as well as long-term service contracts. A significant portion of these costs are reimbursable by funds or portfolio companies. As of September 30, 2019, fixed and determinable payments due in connection with these obligations were as follows:
 
Remaining 2019
 
2020
 
2021
 
2022
 
2023
 
Thereafter
 
Total
Other long-term obligations
$
8,884

 
$
8,435

 
$
1,836

 
$
881

 
$
654

 
$
654

 
$
21,344


Contingent Obligations—Performance allocations with respect to certain funds are subject to reversal in the event of future losses to the extent of the cumulative revenues recognized in income to date. If all of the existing investments became

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worthless, the amount of cumulative revenues that have been recognized by Apollo through September 30, 2019 and that would be reversed approximates $2.3 billion. Management views the possibility of all of the investments becoming worthless as remote. Performance allocations are affected by changes in the fair values of the underlying investments in the funds that Apollo manages. Valuations, on an unrealized basis, can be significantly affected by a variety of external factors including, but not limited to, bond yields and industry trading multiples. Movements in these items can affect valuations quarter to quarter even if the underlying business fundamentals remain stable.
Additionally, at the end of the life of certain funds that the Company manages, there could be a payment due to a fund by the Company if the Company, as general partner, has received more performance allocations than was ultimately earned. The general partner obligation amount, if any, will depend on final realized values of investments at the end of the life of each fund or as otherwise set forth in the respective limited partnership agreement of the fund. See note 14 to our condensed consolidated financial statements for further details regarding the general partner obligation.
Certain funds may not generate performance allocations as a result of unrealized and realized losses that are recognized in the current and prior reporting period. In certain cases, performance allocations will not be generated until additional unrealized and realized gains occur. Any appreciation would first cover the deductions for invested capital, unreturned organizational expenses, operating expenses, management fees and priority returns based on the terms of the respective fund agreements.
One of the Company’s subsidiaries, AGS, provides underwriting commitments in connection with securities offerings to the portfolio companies of the funds Apollo manages. As of September 30, 2019, there were no underwriting commitments.
Contingent Consideration—In connection with the acquisition of Stone Tower in April 2012, the Company agreed to pay the former owners of Stone Tower a specified percentage of any future performance revenues earned from certain of the Stone Tower funds, CLOs, and strategic investment accounts. This contingent consideration liability was determined based on the present value of estimated future performance revenue payments, and is recorded in profit sharing payable in the condensed consolidated statements of financial condition. The fair value of the remaining contingent obligation was $96.4 million and $74.5 million as of September 30, 2019 and December 31, 2018, respectively.
The contingent consideration obligations will be remeasured to fair value at each reporting period until the obligations are satisfied and are characterized as Level III liabilities. The changes in the fair value of the contingent consideration obligations is reflected in profit sharing expense in the condensed consolidated statements of operations. See note 6 for further information regarding fair value measurements.
16. SEGMENT REPORTING
Apollo conducts its business primarily in the United States and substantially all of its revenues are generated domestically. Apollo’s business is conducted through three reportable segments: credit, private equity and real assets. Segment information is utilized by our Managing Partners, who operate collectively as our chief operating decision maker, to assess performance and to allocate resources. These segments were established based on the nature of investment activities in each underlying fund, including the specific type of investment made and the level of control over the investment.
The performance is measured by the Company’s chief operating decision maker on an unconsolidated basis because management makes operating decisions and assesses the performance of each of Apollo’s business segments based on financial and operating metrics and data that exclude the effects of consolidation of any of the affiliated funds.
Segment Reporting Changes
During the first quarter of 2019, Apollo’s chief operating decision maker determined that Segment Distributable Earnings, together with its main components including Fee Related Earnings, is the key performance measure used by management in evaluating the performance of Apollo’s credit, private equity and real assets segments. Accordingly, Apollo will no longer report Economic Income. Apollo believes these changes better reflect the manner in which it makes key operating decisions pertaining to resource allocation, capital deployment, budgeting and forecasting, and are consistent with what stockholders consider to be most important in evaluating its performance.
Apollo determined to change the business segment in which it reports certain funds and accounts to align its segment reporting with the manner in which such funds and accounts were managed. Effective January 1, 2019, the European Principal Finance Fund series, which has been historically reported in the credit segment, moved to the real assets segment. Several funds and accounts that generally invest in illiquid opportunistic investments and the latest fund in the Credit Opportunity Fund series,

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which have been historically reported in the credit segment, moved to the private equity segment. Certain commercial real estate mortgage loan assets, previously reported in the credit segment, moved to the real assets segment. These changes affected the composition, but not the determination, of Apollo’s reporting segments.
Apollo changed its definition of “Distributable Earnings” to include depreciation and amortization expenses and renamed it “Segment Distributable Earnings.” Historically, depreciation and amortization expenses were not reflected in Apollo’s calculation of Segment Distributable Earnings. Apollo also renamed “Distributable Earnings after Taxes and Related Payables” to “Distributable Earnings.”
In connection with these changes, all prior periods have been recast to conform to the new presentation. Consequently, this information will be different from the historical segment financial results previously reported by Apollo in its reports filed with the SEC.
Segment Distributable Earnings
Segment Distributable Earnings, or “Segment DE”, is the key performance measure used by management in evaluating the performance of Apollo’s credit, private equity and real assets segments. Management believes the components of Segment DE, such as the amount of management fees, advisory and transaction fees and realized performance fees, are indicative of the Company’s performance. Management uses Segment DE in making key operating decisions such as the following:
•
Decisions related to the allocation of resources such as staffing decisions including hiring and locations for deployment of the new hires;
•
Decisions related to capital deployment such as providing capital to facilitate growth for the business and/or to facilitate expansion into new businesses;
•
Decisions related to expenses, such as determining annual discretionary bonuses and equity-based compensation awards to its employees. With respect to compensation, management seeks to align the interests of certain professionals and selected other individuals with those of the investors in the funds and those of Apollo’s stockholders by providing such individuals a profit sharing interest in the performance fees earned in relation to the funds. To achieve that objective, a certain amount of compensation is based on Apollo’s performance and growth for the year; and
•
Decisions related to the amount of earnings available for dividends to Class A Common Stockholders, holders of RSUs that participate in dividends and holders of AOG Units.
Segment DE is a measure of profitability and has certain limitations in that it does not take into account certain items included under U.S. GAAP. Segment DE represents the amount of Apollo’s net realized earnings, excluding the effects of the consolidation of any of the related funds, Taxes and Related Payables, transaction-related charges and any acquisitions. Transaction-related charges includes equity-based compensation charges, the amortization of intangible assets, contingent consideration and certain other charges associated with acquisitions. In addition, Segment DE excludes non-cash revenue and expense related to equity awards granted by unconsolidated related parties to employees of the Company, compensation and administrative related expense reimbursements, as well as the assets, liabilities and operating results of the funds and variable interest entities that are included in the condensed consolidated financial statements. We believe the exclusion of the non-cash charges related to the 2007 Reorganization for equity-based compensation provides investors with a meaningful indication of our performance because these charges relate to the equity portion of our capital structure and not our core operating performance. Segment DE also excludes impacts of the remeasurement of the tax receivable agreement recorded in other income, which arises from changes in the associated deferred tax balance.
Segment DE may not be comparable to similarly titled measures used by other companies and is not a measure of performance calculated in accordance with U.S. GAAP. We use Segment DE as a measure of operating performance, not as a measure of liquidity. Segment DE should not be considered in isolation or as a substitute for net income or other income data prepared in accordance with U.S. GAAP. The use of Segment DE without consideration of related U.S. GAAP measures is not adequate due to the adjustments described above. Management compensates for these limitations by using Segment DE as a supplemental measure to U.S. GAAP results, to provide a more complete understanding of our performance as management measures it. A reconciliation of Segment DE to its most directly comparable U.S. GAAP measure of income (loss) before income tax provision can be found in this footnote.

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(dollars in thousands, except share data, except where noted)

Fee Related Earnings
Fee Related Earnings (“FRE”) is derived from our segment reported results and refers to a component of Segment DE that is used as a supplemental performance measure to assess whether revenues that we believe are generally more stable and predictable in nature, primarily consisting of management fees, are sufficient to cover associated operating expenses and generate profits. FRE is the sum across all segments of (i) management fees, (ii) advisory and transaction fees, (iii) performance fees earned from business development companies and Redding Ridge Holdings (as defined below) and (iv) other income, net, less (x) salary, bonus and benefits, excluding equity-based compensation, (y) other associated operating expenses and (z) non-controlling interests in the management companies of certain funds the Company manages.
The following tables present financial data for Apollo’s reportable segments.
 
As of and for the Three Months Ended September 30, 2019
 
Credit
Segment
 
Private Equity
Segment
 
Real Assets
Segment
 
Total Reportable
Segments
Management fees
$
198,867

 
$
131,643

 
$
47,862

 
$
378,372

Advisory and transaction fees, net
5,530

 
10,655

 
377

 
16,562

Performance fees(1)
6,449

 
—

 
—

 
6,449

Fee Related Revenues
210,846

 
142,298

 
48,239

 
401,383

Salary, bonus and benefits
(51,746
)
 
(45,807
)
 
(19,306
)
 
(116,859
)
General, administrative and other
(33,403
)
 
(26,603
)
 
(10,734
)
 
(70,740
)
Placement fees
(190
)
 
(65
)
 
(1
)
 
(256
)
Fee Related Expenses
(85,339
)
 
(72,475
)
 
(30,041
)
 
(187,855
)
Other income (loss), net of Non-Controlling Interest
(597
)
 
(135
)
 
(6
)
 
(738
)
Fee Related Earnings
124,910

 
69,688

 
18,192

 
212,790

Realized performance fees
3,530

 
63,742

 
162

 
67,434

Realized profit sharing expense
(1,674
)
 
(22,084
)
 
(65
)
 
(23,823
)
Net Realized Performance Fees
1,856

 
41,658

 
97

 
43,611

Realized principal investment income
5,845

 
8,114

 
415

 
14,374

Net interest loss and other
(6,106
)
 
(8,911
)
 
(3,234
)
 
(18,251
)
Segment Distributable Earnings(2)
$
126,505

 
$
110,549

 
$
15,470

 
$
252,524

Total Assets(2)
$
2,898,125

 
$
3,284,439

 
$
724,171

 
$
6,906,735

(1)
Represents certain performance fees from business development companies and Redding Ridge Holdings LP (“Redding Ridge Holdings”), an affiliate of Redding Ridge.
(2)
Refer below for a reconciliation of total revenues, total expenses, other income (loss) and total assets for Apollo’s total reportable segments to total consolidated revenues, total consolidated expenses, total consolidated other income (loss) and total assets.

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

 
For the Three Months Ended September 30, 2018
 
Credit
Segment
 
Private Equity
Segment
 
Real Assets
Segment
 
Total Reportable
Segments
Management fees
$
167,178

 
$
131,578

 
$
41,149

 
$
339,905

Advisory and transaction fees, net
2,189

 
6,018

 
4,765

 
12,972

Performance fees(1)
7,064

 
—

 
—

 
7,064

Fee Related Revenues
176,431

 
137,596

 
45,914

 
359,941

Salary, bonus and benefits
(44,642
)
 
(38,700
)
 
(18,191
)
 
(101,533
)
General, administrative and other
(31,392
)
 
(22,694
)
 
(9,911
)
 
(63,997
)
Placement fees
(295
)
 
(51
)
 
(400
)
 
(746
)
Fee Related Expenses
(76,329
)
 
(61,445
)
 
(28,502
)
 
(166,276
)
Other income, net of Non-Controlling Interest
265

 
1,448

 
1,680

 
3,393

Fee Related Earnings
100,367

 
77,599

 
19,092

 
197,058

Realized performance fees
11,281

 
77,740

 
4,010

 
93,031

Realized profit sharing expense
(8,986
)
 
(42,842
)
 
(2,352
)
 
(54,180
)
Net Realized Performance Fees
2,295

 
34,898

 
1,658

 
38,851

Realized principal investment income
6,676

 
10,579

 
532

 
17,787

Net interest loss and other
(3,612
)
 
(5,004
)
 
(2,835
)
 
(11,451
)
Segment Distributable Earnings(2)
$
105,726

 
$
118,072

 
$
18,447

 
$
242,245

(1)
Represents certain performance fees from business development companies and Redding Ridge Holdings.
(2)
Refer below for a reconciliation of total revenues, total expenses and other income for Apollo’s total reportable segments to total consolidated revenues, total consolidated expenses and total consolidated other income (loss).
The following table reconciles total consolidated revenues to total revenues for Apollo’s reportable segments:
 
For the Three Months Ended September 30,
 
2019
 
2018
Total Consolidated Revenues
$
702,721

 
$
517,731

Equity awards granted by unconsolidated related parties, reimbursable expenses and other(1)
(19,990
)
 
(23,019
)
Adjustments related to consolidated funds and VIEs(1)
4,079

 
2,445

Performance fees(2)
(250,642
)
 
(119,478
)
Principal investment income
(34,785
)
 
(17,738
)
Total Fee Related Revenues
401,383

 
359,941

Realized performance fees
67,434

 
93,031

Realized principal investment income and other
13,532

 
16,945

Total Segment Revenues
$
482,349

 
$
469,917

(1)
Represents advisory fees, management fees and performance fees earned from consolidated VIEs which are eliminated in consolidation. Includes non-cash revenues related to equity awards granted by unconsolidated related parties to employees of the Company and certain compensation and administrative related expense reimbursements.
(2)
Excludes certain performance fees from business development companies and Redding Ridge Holdings.

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

The following table reconciles total consolidated expenses to total expenses for Apollo’s reportable segments:
 
For the Three Months Ended September 30,
 
2019
 
2018
Total Consolidated Expenses
$
371,372

 
$
312,727

Equity awards granted by unconsolidated related parties, reimbursable expenses and other(1)
(20,563
)
 
(23,153
)
Reclassification of interest expenses
(27,833
)
 
(15,209
)
Transaction-related charges, net(1)
(5,201
)
 
(1,253
)
Charges associated with corporate conversion(2)
(6,994
)
 
—

Equity-based compensation
(15,802
)
 
(17,668
)
Total profit sharing expense(3)
(107,124
)
 
(89,168
)
Total Fee Related Expenses
187,855

 
166,276

Realized profit sharing expense
23,823

 
54,180

Total Segment Expenses
$
211,678

 
$
220,456

(1)
Represents the addition of expenses of consolidated funds and VIEs, transaction-related charges, non-cash expenses related to equity awards granted by unconsolidated related parties to employees of the Company and certain compensation and administrative expenses. Transaction-related charges include equity-based compensation charges, the amortization of intangible assets, contingent consideration and certain other charges associated with acquisitions.
(2)
Represents expenses incurred in relation to the Conversion, as described in note 1.
(3)
Includes unrealized profit sharing expense, realized profit sharing expense and equity based profit sharing expense and other.
The following table reconciles total consolidated other income (loss) to total other loss for Apollo’s reportable segments:
 
For the Three Months Ended September 30,
 
2019
 
2018
Total Consolidated Other Income (Loss)
$
(42,151
)
 
$
176,780

Adjustments related to consolidated funds and VIEs(1)
(10,338
)
 
(12,732
)
Loss from change in tax receivable agreement liability
38,575

 
—

Net (gains) losses from investment activities
19,783

 
(155,262
)
Interest income and other, net of Non-Controlling Interest
(6,607
)
 
(5,393
)
Other Income (Loss), net of Non-Controlling Interest
(738
)
 
3,393

Net interest loss and other
(17,409
)
 
(10,609
)
Total Segment Other Loss
$
(18,147
)
 
$
(7,216
)
(1)
Represents the addition of other income of consolidated funds and VIEs.

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

The following table presents the reconciliation of income (loss) before income tax provision reported in the condensed consolidated statements of operations to Segment Distributable Earnings:
 
For the Three Months Ended September 30,
 
2019
 
2018
Income before income tax provision
$
289,198

 
$
381,784

Transaction-related charges(1)
5,201

 
1,253

Charges associated with corporate conversion(2)
6,994

 
—

Loss from change in tax receivable agreement liability
38,575

 
—

Net income attributable to Non-Controlling Interests in consolidated entities
(7,083
)
 
(11,340
)
Unrealized performance fees
(183,208
)
 
(26,447
)
Unrealized profit sharing expense
61,098

 
8,903

Equity-based profit sharing expense and other(3)
22,203

 
26,085

Equity-based compensation
15,802

 
17,668

Unrealized principal investment (income) loss
(20,411
)
 
49

Unrealized net (gains) losses from investment activities and other
24,155

 
(155,710
)
Segment Distributable Earnings
$
252,524

 
$
242,245

 
(1)
Transaction-related charges include equity-based compensation charges, the amortization of intangible assets, contingent consideration and certain other charges associated with acquisitions.
(2)
Represents expenses incurred in relation to the Conversion, as described in note 1.
(3)
Equity-based profit sharing expense and other includes certain profit sharing arrangements in which a portion of performance fees distributed to the general partner are allocated by issuance of equity-based awards, rather than cash, to employees of Apollo. Equity-based profit sharing expense and other also includes non-cash expenses related to equity awards granted by unconsolidated related parties to employees of Apollo.
The following tables present financial data for Apollo’s reportable segments.
 
As of and for the Nine Months Ended September 30, 2019
 
Credit
Segment
 
Private Equity
Segment
 
Real Assets
Segment
 
Total Reportable
Segments
Management fees
$
571,884

 
$
391,777

 
$
139,645

 
$
1,103,306

Advisory and transaction fees, net
13,888

 
47,048

 
5,748

 
66,684

Performance fees(1)
16,371

 
—

 
—

 
16,371

Fee Related Revenues
602,143

 
438,825

 
145,393

 
1,186,361

Salary, bonus and benefits
(146,515
)
 
(129,307
)
 
(57,031
)
 
(332,853
)
General, administrative and other
(92,546
)
 
(75,427
)
 
(28,956
)
 
(196,929
)
Placement fees
(42
)
 
(548
)
 
(1
)
 
(591
)
Fee Related Expenses
(239,103
)
 
(205,282
)
 
(85,988
)
 
(530,373
)
Other income, net of Non-Controlling Interest
967

 
4,024

 
88

 
5,079

Fee Related Earnings
364,007

 
237,567

 
59,493

 
661,067

Realized performance fees
24,887

 
136,429

 
3,242

 
164,558

Realized profit sharing expense
(13,069
)
 
(63,900
)
 
(1,299
)
 
(78,268
)
Net Realized Performance Fees
11,818

 
72,529

 
1,943

 
86,290

Realized principal investment income
16,803

 
18,079

 
2,209

 
37,091

Net interest loss and other
(15,148
)
 
(22,694
)
 
(8,115
)
 
(45,957
)
Segment Distributable Earnings(2)
$
377,480

 
$
305,481

 
$
55,530

 
$
738,491

Total Assets(2)
$
2,898,125

 
$
3,284,439

 
$
724,171

 
$
6,906,735

(1)
Represents certain performance fees from business development companies and Redding Ridge Holdings.

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

(2)
Refer below for a reconciliation of total revenues, total expenses, other loss and total assets for Apollo’s total reportable segments to total consolidated revenues, total consolidated expenses, total consolidated other income (loss) and total assets.
 
For the Nine Months Ended September 30, 2018
 
Credit
Segment
 
Private Equity
Segment
 
Real Assets
Segment
 
Total Reportable
Segments
Management fees
$
470,070

 
$
346,275

 
$
121,627

 
$
937,972

Advisory and transaction fees, net
6,484

 
29,992

 
5,070

 
41,546

Performance fees(1)
18,105

 
—

 
—

 
18,105

Fee Related Revenues
494,659

 
376,267

 
126,697

 
997,623

Salary, bonus and benefits
(134,192
)
 
(121,304
)
 
(57,069
)
 
(312,565
)
General, administrative and other
(85,603
)
 
(59,010
)
 
(29,435
)
 
(174,048
)
Placement fees
(850
)
 
(134
)
 
(400
)
 
(1,384
)
Fee Related Expenses
(220,645
)
 
(180,448
)
 
(86,904
)
 
(487,997
)
Other income, net of Non-Controlling Interest
2,260

 
1,839

 
1,903

 
6,002

Fee Related Earnings
276,274

 
197,658

 
41,696

 
515,628

Realized performance fees(2)
29,030

 
245,152

 
55,625

 
329,807

Realized profit sharing expense(2)
(23,313
)
 
(132,102
)
 
(32,222
)
 
(187,637
)
Net Realized Performance Fees
5,717

 
113,050

 
23,403

 
142,170

Realized principal investment income
16,887

 
37,988

 
5,678

 
60,553

Net interest loss and other
(11,082
)
 
(15,619
)
 
(6,712
)
 
(33,413
)
Segment Distributable Earnings(3)
$
287,796

 
$
333,077

 
$
64,065

 
$
684,938

(1)
Represents certain performance fees from business development companies and Redding Ridge Holdings.
(2)
Excludes realized performance fees and realized profit sharing expense settled in the form of shares of Athene Holding during the nine months ended September 30, 2018.
(3)
Refer below for a reconciliation of total revenues, total expenses and other income (loss) for Apollo’s total reportable segments to total consolidated revenues, total consolidated expenses and total consolidated other income (loss).
The following table reconciles total consolidated revenues to total revenues for Apollo’s reportable segments:
 
For the Nine Months Ended September 30,
 
2019
 
2018
Total Consolidated Revenues
$
2,017,077

 
$
1,207,950

Equity awards granted by unconsolidated related parties, reimbursable expenses and other(1)
(72,966
)
 
(62,132
)
Adjustments related to consolidated funds and VIEs(1)
5,801

 
6,063

Performance fees(2)
(661,828
)
 
(126,332
)
Principal investment income
(101,723
)
 
(27,926
)
Total Fee Related Revenues
1,186,361

 
997,623

Realized performance fees(3)
164,558

 
329,807

Realized principal investment income and other
34,564

 
58,026

Total Segment Revenues
$
1,385,483

 
$
1,385,456

(1)
Represents advisory fees, management fees and performance fees earned from consolidated VIEs which are eliminated in consolidation. Includes non-cash revenues related to equity awards granted by unconsolidated related parties to employees of the Company and certain compensation and administrative related expense reimbursements.
(2)
Excludes certain performance fees from business development companies and Redding Ridge Holdings.
(3)
Excludes realized performance fees settled in the form of shares of Athene Holding during the nine months ended September 30, 2018.

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

The following table reconciles total consolidated expenses to total expenses for Apollo’s reportable segments:
 
For the Nine Months Ended September 30,
 
2019
 
2018
Total Consolidated Expenses
$
1,091,914

 
$
828,996

Equity awards granted by unconsolidated related parties, reimbursable expenses and other(1)
(73,270
)
 
(61,724
)
Reclassification of interest expenses
(70,243
)
 
(44,168
)
Transaction-related charges, net(1)
(28,799
)
 
3,800

Charges associated with corporate conversion(2)
(17,000
)
 
—

Equity-based compensation
(52,462
)
 
(51,131
)
Total profit sharing expense(3)
(319,767
)
 
(187,776
)
Total Fee Related Expenses
530,373

 
487,997

Realized profit sharing expense(4)
78,268

 
187,637

Total Segment Expenses
$
608,641

 
$
675,634

(1)
Represents the addition of expenses of consolidated funds and VIEs, transaction-related charges, non-cash expenses related to equity awards granted by unconsolidated related parties to employees of the Company and certain compensation and administrative expenses. Transaction-related charges include equity-based compensation charges, the amortization of intangible assets, contingent consideration and certain other charges associated with acquisitions.
(2)
Represents expenses incurred in relation to the Conversion, as described in note 1.
(3)
Includes unrealized profit sharing expense, realized profit sharing expense and equity based profit sharing expense and other.
(4)
Excludes realized profit sharing expense settled in the form of shares of Athene Holding during the nine months ended September 30, 2018.
The following table reconciles total consolidated other income (loss) to total other loss for Apollo’s reportable segments:
 
For the Nine Months Ended September 30,
 
2019
 
2018
Total Consolidated Other Income (Loss)
$
58,314

 
$
64,796

Adjustments related to consolidated funds and VIEs(1)
(23,839
)
 
(27,924
)
Loss from change in tax receivable agreement liability
38,575

 
—

Net (gains) losses from investment activities
(44,095
)
 
(20,560
)
Interest income and other, net of Non-Controlling Interest
(23,876
)
 
(10,310
)
Other Income, net of Non-Controlling Interest
5,079

 
6,002

Net interest loss and other
(43,430
)
 
(30,886
)
Total Segment Other Loss
$
(38,351
)
 
$
(24,884
)
(1)
Represents the addition of other income of consolidated funds and VIEs.

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

The following table presents the reconciliation of income before income tax provision reported in the condensed consolidated statements of operations to Segment Distributable Earnings:
 
For the Nine Months Ended September 30,
 
2019
 
2018
Income before income tax provision
$
983,477

 
$
443,750

Transaction-related charges(1)
28,799

 
(3,800
)
Charges associated with corporate conversion(2)
17,000

 
—

Loss from change in tax receivable agreement liability
38,575

 
—

Net income attributable to Non-Controlling Interests in consolidated entities
(20,888
)
 
(26,035
)
Unrealized performance fees(3)
(497,270
)
 
203,475

Unrealized profit sharing expense(3)
177,659

 
(58,360
)
Equity-based profit sharing expense and other(4)
63,840

 
58,499

Equity-based compensation
52,462

 
51,131

Unrealized principal investment (income) loss
(64,632
)
 
32,627

Unrealized net (gains) losses from investment activities and other
(40,531
)
 
(16,349
)
Segment Distributable Earnings
$
738,491

 
$
684,938

 
(1)
Transaction-related charges include equity-based compensation charges, the amortization of intangible assets, contingent consideration and certain other charges associated with acquisitions.
(2)
Represents expenses incurred in relation to the Conversion, as described in note 1.
(3)
Includes realized performance fees and realized profit sharing expense settled in the form of shares of Athene Holding during the nine months ended September 30, 2018.
(4)
Equity-based profit sharing expense and other includes certain profit sharing arrangements in which a portion of performance fees distributed to the general partner are allocated by issuance of equity-based awards, rather than cash, to employees of Apollo. Equity-based profit sharing expense and other also includes non-cash expenses related to equity awards granted by unconsolidated related parties to employees of Apollo.
The following table presents the reconciliation of Apollo’s total reportable segment assets to total assets:
 
As of
September 30, 2019
 
As of
December 31, 2018
Total reportable segment assets
$
6,906,735

 
$
4,791,646

Adjustments(1)
1,157,569

 
1,200,008

Total assets
$
8,064,304

 
$
5,991,654

(1)
Represents the addition of assets of consolidated funds and VIEs and consolidation elimination adjustments.
17. SUBSEQUENT EVENTS
On October 27, 2019 Athene Holding Ltd., a Bermuda exempted company (“AHL”), AGM and the entities that form the Apollo Operating Group entered into a Transaction Agreement (the “Transaction Agreement”), pursuant to which, among other things:
•
(i) AHL will issue 27,959,184 Class A common shares of AHL (the “AHL Class A Common Shares”) to certain subsidiaries of the Apollo Operating Group in exchange for an issuance by the Apollo Operating Group of 29,154,519 non-voting equity interests of the Apollo Operating Group to AHL and (ii) AGM, through the Apollo Operating Group, will purchase an additional $350 million of AHL Class A Common Shares (the “Share Issuance”);
•
AHL has granted to AGM the right to purchase additional AHL Class A Common Shares from the closing date of the Share Issuance (the “Closing Date”) until 180 days thereafter to the extent the issued and outstanding AHL Class A Common Shares beneficially owned by Apollo and certain of its related parties and employees (collectively, the “Apollo Parties”) (inclusive of AHL Class A Common Shares over which any such persons have a valid proxy) do not equal at least 35% of the

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)

issued and outstanding AHL Class A Common Shares, on a fully diluted basis (the “Conditional Right”);
•
A representative of the Apollo Operating Group will have the right to purchase up to that number of AHL Class A Common Shares that would increase by up to 5% the percentage of the issued and outstanding AHL Class A Common Shares beneficially owned by the Apollo Parties (inclusive of AHL Class A Common Shares over which any such persons have a valid proxy), calculated on a fully diluted basis (the “Facility Right”, and together with the Share Issuance and the Conditional Right, the “Share Transactions”);
•
AHL will make certain amendments to the Twelfth Amended and Restated Bye-laws of AHL (the “Bye-laws”), by way of amending and restating the Bye-laws (the “Thirteenth Amended and Restated Bye-laws”), which include, among other items, the elimination of AHL’s current multi-class share structure.
The consummation of the Share Issuance and the other transactions contemplated by the Transaction Agreement are subject to the satisfaction or waiver of specified closing conditions, including (i) the approval of the Thirteenth Amended and Restated Bye-laws and the Share Transactions by AHL’s shareholders, (ii) the receipt of required governmental and regulatory approvals for the Share Transactions, and the approval of the NYSE for the listing of the AHL Class A Common Shares to be issued by AHL in connection with the Share Issuance, (iii) the absence of any applicable law or regulation or order that prohibits the transactions contemplated by the Transaction Agreement, and the absence of any pending or threatened proceeding by any governmental entity or any investigation by any governmental entity seeking any such order, and (iv) certain other customary closing conditions, including, among other things, delivery of certain transaction documents contemplated by the Transaction Agreement, accuracy of representations and warranties and compliance with covenants by the parties.
The Company expects the Transaction Agreement to have a material impact on its condensed consolidated financial statements related to its investment in Athene Holding and corresponding Non-controlling Interests. Upon consummation of the Transaction Agreement, the fair value of the Company’s investment in Athene Holding will be calculated using the closing market price of AHL Class A Common Shares, less a discount due to a lack of marketability, as a result of a lock-up on existing and newly acquired AHL Class A Common Shares for three years from the initial closing date. In addition, the Company may have to consolidate certain entities in which it has an indirect ownership interest through its investment in Athene Holding, with a portion attributable to Non-controlling Interests.
Dividends
On October 31, 2019, the Company declared a cash dividend of $0.50 per share of Class A Common Stock, which will be paid on November 29, 2019 to holders of record at the close of business on November 20, 2019.
On October 31, 2019, the Company declared a cash dividend of $0.398438 per share of Series A Preferred Stock and Series B Preferred Stock, which will be paid on December 16, 2019 to holders of record at the close of business on November 29, 2019.

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ITEM 1A.     UNAUDITED SUPPLEMENTAL PRESENTATION OF STATEMENTS
OF FINANCIAL CONDITION
APOLLO GLOBAL MANAGEMENT, INC.
CONSOLIDATING STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(dollars in thousands, except share data)
 
As of September 30, 2019
 
Apollo Global Management, Inc. and Consolidated Subsidiaries
 
Consolidated Funds and VIEs
 
Eliminations
 
Consolidated
Assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,242,813

 
$
4

 
$
—

 
$
1,242,817

Restricted cash
19,777

 
—

 
—

 
19,777

U.S. Treasury securities, at fair value
551,681

 
—

 
—

 
551,681

Investments
3,558,632

 
563

 
(86,286
)
 
3,472,909

Assets of consolidated variable interest entities:
 
 
 
 
 
 
 
Cash and cash equivalents
—

 
41,799

 
—

 
41,799

Investments, at fair value
—

 
1,163,981

 
—

 
1,163,981

Other assets
—

 
39,088

 
—

 
39,088

Incentive fees receivable
3,093

 
—

 
—

 
3,093

Due from related parties
440,985

 
—

 
(914
)
 
440,071

Deferred tax assets, net
530,954

 
—

 
—

 
530,954

Other assets
279,330

 
—

 
(666
)
 
278,664

Lease assets
190,618

 
—

 
—

 
190,618

Goodwill
88,852

 
—

 
—

 
88,852

Total Assets
$
6,906,735

 
$
1,245,435

 
$
(87,866
)
 
$
8,064,304

Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Accounts payable and accrued expenses
$
96,820

 
$
—

 
$
—

 
$
96,820

Accrued compensation and benefits
166,161

 
—

 
—

 
166,161

Deferred revenue
172,157

 
—

 
—

 
172,157

Due to related parties
507,113

 
—

 
—

 
507,113

Profit sharing payable
693,618

 
—

 
—

 
693,618

Debt
2,348,440

 
—

 
—

 
2,348,440

Liabilities of consolidated variable interest entities:
 
 
 
 
 
 
 
Debt, at fair value
—

 
870,979

 
(42,155
)
 
828,824

Other liabilities
—

 
69,338

 
(296
)
 
69,042

Due to related parties
—

 
1,284

 
(1,284
)
 
—

Other liabilities
132,023

 
—

 
—

 
132,023

Lease liabilities
207,673

 
—

 
—

 
207,673

Total Liabilities
4,324,005

 
941,601

 
(43,735
)
 
5,221,871

 
 
 
 
 
 
 
 
Stockholders’ Equity:
 
 
 
 
 
 
 
Apollo Global Management, Inc. stockholders’ equity:
 
 
 
 
 
 
 
Series A Preferred Stock
264,398

 
—

 
—

 
264,398

Series B Preferred Stock
289,815

 
—

 
—

 
289,815

Additional paid in capital
1,217,231

 
—

 
—

 
1,217,231

Retained earnings (accumulated deficit)
—

 
20,642

 
(20,642
)
 
—

Accumulated other comprehensive loss
(6,546
)
 
(4,684
)
 
4,403

 
(6,827
)
Total Apollo Global Management, Inc. stockholders’ equity
1,764,898

 
15,958

 
(16,239
)
 
1,764,617

Non-Controlling Interests in consolidated entities
6,032

 
287,876

 
(27,892
)
 
266,016

Non-Controlling Interests in Apollo Operating Group
811,800

 
—

 
—

 
811,800

Total Stockholders’ Equity
2,582,730

 
303,834

 
(44,131
)
 
2,842,433

Total Liabilities and Stockholders’ Equity
$
6,906,735

 
$
1,245,435

 
$
(87,866
)
 
$
8,064,304


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APOLLO GLOBAL MANAGEMENT, INC.
CONSOLIDATING STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(dollars in thousands, except share data)
 
As of December 31, 2018
 
Apollo Global Management, LLC and Consolidated Subsidiaries
 
Consolidated Funds and VIEs
 
Eliminations
 
Consolidated
Assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
609,743

 
$
4

 
$
—

 
$
609,747

Restricted cash
3,457

 
—

 
—

 
3,457

U.S. Treasury securities, at fair value
392,932

 
—

 
—

 
392,932

Investments
2,811,445

 
558

 
(89,391
)
 
2,722,612

Assets of consolidated variable interest entities:
 
 
 
 
 
 
 
Cash and cash equivalents
—

 
49,671

 
—

 
49,671

Investments, at fair value
—

 
1,175,985

 
(308
)
 
1,175,677

Other assets
—

 
65,543

 
—

 
65,543

Incentive fees receivable
6,792

 
—

 
—

 
6,792

Due from related parties
379,525

 
—

 
(1,417
)
 
378,108

Deferred tax assets
306,094

 
—

 
—

 
306,094

Other assets
192,806

 
—

 
(637
)
 
192,169

Goodwill
88,852

 
—

 
—

 
88,852

Total Assets
$
4,791,646

 
$
1,291,761

 
$
(91,753
)
 
$
5,991,654

Liabilities and Shareholders’ Equity
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Accounts payable and accrued expenses
$
70,878

 
$
—

 
$
—

 
$
70,878

Accrued compensation and benefits
73,583

 
—

 
—

 
73,583

Deferred revenue
111,097

 
—

 
—

 
111,097

Due to related parties
425,435

 
—

 
—

 
425,435

Profit sharing payable
452,141

 
—

 
—

 
452,141

Debt
1,360,448

 
—

 
—

 
1,360,448

Liabilities of consolidated variable interest entities:
 
 
 
 
 
 
 
Debt, at fair value
—

 
899,651

 
(44,190
)
 
855,461

Other liabilities
—

 
79,244

 
(267
)
 
78,977

Due to related parties
—

 
1,787

 
(1,787
)
 
—

Other liabilities
111,794

 
—

 
—

 
111,794

Total Liabilities
2,605,376

 
980,682

 
(46,244
)
 
3,539,814

 
 
 
 
 
 
 
 
Shareholders’ Equity:
 
 
 
 
 
 
 
Apollo Global Management, LLC shareholders’ equity:
 
 
 
 
 
 
 
Series A Preferred shares
264,398

 
—

 
—

 
264,398

Series B Preferred shares
289,815

 
—

 
—

 
289,815

Additional paid in capital
1,299,418

 
—

 
—

 
1,299,418

Accumulated deficit
(473,275
)
 
17,673

 
(17,674
)
 
(473,276
)
Accumulated other comprehensive loss
(3,925
)
 
(2,479
)
 
2,245

 
(4,159
)
Total Apollo Global Management, LLC shareholders’ equity
1,376,431

 
15,194

 
(15,429
)
 
1,376,196

Non-Controlling Interests in consolidated entities
5,717

 
295,885

 
(30,080
)
 
271,522

Non-Controlling Interests in Apollo Operating Group
804,122

 
—

 
—

 
804,122

Total Shareholders’ Equity
2,186,270

 
311,079

 
(45,509
)
 
2,451,840

Total Liabilities and Shareholders’ Equity
$
4,791,646

 
$
1,291,761

 
$
(91,753
)
 
$
5,991,654


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ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with Apollo Global Management, Inc.’s condensed consolidated financial statements and the related notes included within this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that are subject to known and unknown risks and uncertainties. Actual results and the timing of events may differ significantly from those expressed or implied in such forward-looking statements due to a number of factors, including those included in the section entitled “Risk Factors” in the 2018 Annual Report and quarterly report on Form 10-Q filed with the SEC on August 6, 2019. The highlights listed below have had significant effects on many items within our condensed consolidated financial statements and affect the comparison of the current period’s activity with those of prior periods.
General
Our Businesses
Founded in 1990, Apollo is a leading global alternative investment manager. We are a contrarian, value-oriented investment manager in credit, private equity and real assets with significant distressed expertise and a flexible mandate in the majority of our funds which enables our funds to invest opportunistically across a company’s capital structure. We raise, invest and manage funds on behalf of some of the world’s most prominent pension, endowment and sovereign wealth funds as well as other institutional and individual investors. Apollo is led by our Managing Partners, Leon Black, Joshua Harris and Marc Rowan, who have worked together for more than 33 years and lead a team of 1,352 employees, including 459 investment professionals, as of September 30, 2019.
Apollo conducts its business primarily in the United States and substantially all of its revenues are generated domestically. These businesses are conducted through the following three reportable segments:
(i)
Credit—primarily invests in non-control corporate and structured debt instruments including performing, stressed and distressed instruments across the capital structure;
(ii)
Private equity—primarily invests in control equity and related debt instruments, convertible securities and distressed debt instruments; and
(iii)
Real assets—primarily invests in (i) real estate equity and infrastructure equity for the acquisition and recapitalization of real estate and infrastructure assets, portfolios, platforms and operating companies, (ii) real estate and infrastructure debt including first mortgage and mezzanine loans, preferred equity and commercial mortgage backed securities and (iii) European performing and non-performing loans, and unsecured consumer loans.
These business segments are differentiated based on the varying investment strategies. The performance is measured by management on an unconsolidated basis because management makes operating decisions and assesses the performance of each of Apollo’s business segments based on financial and operating metrics and data that exclude the effects of consolidation of any of the managed funds.
Our financial results vary since performance fees, which generally constitute a large portion of the income we receive from the funds that we manage, as well as the transaction and advisory fees that we receive, can vary significantly from quarter to quarter and year to year. As a result, we emphasize long-term financial growth and profitability to manage our business.
In addition, the growth in our Fee-Generating AUM during the last year has primarily been in our credit segment. The average management fee rate for these new credit products is at market rates for such products and in certain cases is below our historical rates. Also, due to the complexity of these new product offerings, the Company has incurred and will continue to incur additional costs associated with managing these products. To date, these additional costs have been offset by realized economies of scale and ongoing cost management.
As of September 30, 2019, we had total AUM of $322.7 billion across all of our businesses. More than 90% of our total AUM was in funds with a contractual life at inception of seven years or more, and 50% of such AUM was in permanent capital vehicles.
As of December 31, 2017, Fund IX held its final closing, raising a total of $23.5 billion in third-party capital and approximately $1.2 billion of additional capital from Apollo and affiliated investors for total commitments of $24.7 billion. On December 31, 2013, Fund VIII held a final closing raising a total of $17.5 billion in third-party capital and approximately $880 million of additional capital from Apollo and affiliated investors, and as of September 30, 2019, Fund VIII had $3.0 billion of

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uncalled commitments remaining. Additionally, Fund VII held a final closing in December 2008, raising a total of $14.7 billion, and as of September 30, 2019, Fund VII had $1.8 billion of uncalled commitments remaining. We have consistently produced attractive long-term investment returns in our traditional private equity funds, generating a 39% gross IRR and a 25% net IRR on a compound annual basis from inception through September 30, 2019. Apollo’s private equity fund appreciation was 3.6% and 11.1% for the three and nine months ended September 30, 2019, respectively.
For our real assets segment, total gross return was 4.6% and 9.3% for the three and nine months ended September 30, 2019, respectively. The gross return represents gross return for U.S. Real Estate Fund I and U.S. Real Estate Fund II including co-investment capital, Asia Real Estate Fund including co-investment capital, the European Principal Finance funds, and infrastructure equity funds.
For further detail related to fund performance metrics across all of our businesses, see “—The Historical Investment Performance of Our Funds.”
Subsequent to December 31, 2018, the Company determined to change the business segment in which it reports certain funds and accounts to align its segment reporting with the manner in which such funds and accounts were managed. Effective January 1, 2019, the European Principal Finance Fund series, which has been historically reported in the credit segment, moved to the real assets segment. Several funds and accounts that generally invest in illiquid opportunistic investments and the latest fund in the Credit Opportunity Fund series, which have been historically reported in the credit segment, moved to the private equity segment. Certain commercial real estate mortgage loan assets, previously reported in the credit segment, moved to the real assets segment. These changes affected the composition, but not the determination, of Apollo’s reporting segments. 
Holding Company Structure
The diagram below depicts our current organizational structure:structurechart11519.jpg
Note: The organizational structure chart above depicts a simplified version of the Apollo structure. It does not include all legal entities in the structure. Ownership percentages are as of November 1, 2019.
(1)
As of November 1, 2019, the Class A Common Stock represented 55.2% of the total voting power of the Class A Common Stock and the Class B Common Stock with respect to the limited matters upon which they are entitled to vote pursuant to the certificate of incorporation of AGM Inc. (“COI”).
(2)
Our Managing Partners own BRH Holdings GP, Ltd., which in turn holds our only outstanding share of Class B Common Stock. As of November 1, 2019, the Class B Common Stock represented 44.8% of the total voting power of the Class A Common Stock and the Class

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B Common Stock with respect to the limited matters upon which they are entitled to vote and a de minimis economic interest in AGM Inc.
(3)
Through BRH Holdings, L.P., our Managing Partners indirectly beneficially own through estate planning vehicles, limited partner interests in Holdings. Our Managing Partners’ economic interests are represented by their indirect beneficial ownership, through Holdings, of 40.5% of the limited partner interests in the Apollo Operating Group.
(4)
Holdings owns 44.8% of the limited partner or limited liability company interests in each Apollo Operating Group entity. The AOG Units held by Holdings are exchangeable for Class A Common Stock. Our Managing Partners, through their interests in BRH and Holdings, beneficially own 40.5% of the AOG Units. Our Contributing Partners, through their interests in Holdings, beneficially own 4.2% of the AOG Units.
(5)
BRH Holdings GP, Ltd. is the sole member of AGM Management, LLC, our Former Manager. In connection with the Conversion, AGM Management, LLC was granted one issued and outstanding share of Class C Common Stock, which bestows to its holder certain management rights over AGM Inc. Except as required by the General Corporation Law of the State of Delaware (“DGCL”) or as expressly otherwise provided in the COI, for so long as certain conditions are satisfied (as set forth in the COI), the exclusive voting power for all purposes relating to holders of capital stock is vested in the holder of the Class C Common Stock.
(6)
Represents 55.2% of the limited partner or limited liability company interests in each Apollo Operating Group entity, held through the intermediate holding companies. AGM Inc. also indirectly owns 100% of the general partner interests in each Apollo Operating Group entity.
Each of the Apollo Operating Group entities holds interests in different businesses or entities organized in different jurisdictions.
Our structure is designed to accomplish a number of objectives, the most important of which are as follows:
•
Historically, we were a holding company that was qualified as a partnership for U.S. federal income tax purposes. Our intermediate holding companies enabled us to maintain our partnership status and to meet the qualifying income exception. Effective September 5, 2019, Apollo Global Management, LLC converted from a Delaware limited liability company to a Delaware corporation named Apollo Global Management, Inc.
•
We have historically used multiple management companies to segregate operations for business, financial and other reasons. Going forward, we may increase or decrease the number of our management companies, partnerships or other entities within the Apollo Operating Group based on our views regarding the appropriate balance between (a) administrative convenience and (b) continued business, financial, tax and other optimization.
Conversion to a C Corporation
Effective September 5, 2019, Apollo Global Management, LLC converted from a Delaware limited liability company to a Delaware corporation named Apollo Global Management, Inc. Prior to the Conversion, a portion of the investment income, performance allocations and principal investment income we earned was not subject to corporate-level tax in the United States. Subsequent to the Conversion, we expect that all of the income we earn will be subject to U.S. corporate income taxes, which could result in an overall higher income tax expense (or benefit) in periods subsequent to the Conversion.
Business Environment
As a global investment manager, we are affected by numerous factors, including the condition of financial markets and the economy. Price fluctuations within equity, credit, commodity, foreign exchange markets, as well as interest rates, which may be volatile and mixed across geographies, can significantly impact the valuation of our funds’ portfolio companies and related income we may recognize.
In the U.S., the S&P 500 Index increased by 1.2% in the third quarter of 2019, following an increase of 3.8% in the second quarter of 2019. Outside the U.S., global equity markets declined during the quarter, with the MSCI All Country World ex USA Index decreasing 0.9% following an increase of 4.1% in the second quarter of 2019.
Conditions in the credit markets also have a significant impact on our business. Credit markets were positive in the third quarter of 2019, with the BofAML HY Master II Index increasing 1.2%, while the S&P/LSTA Leveraged Loan Index increased 1.0%. The U.S. 10-year Treasury yield fell during the quarter to 1.7%. On October 30, 2019, the Federal Reserve reduced the benchmark interest rate, lowering it for the third time this year, to a target range of 1.50% to 1.75%.
Foreign exchange rates can materially impact the valuations of our investments and those of our funds that are denominated in currencies other than the U.S. dollar. Relative to the U.S. dollar, the Euro depreciated 4.2% in the third quarter of 2019, after appreciating by 1.4% in the second quarter of 2019, while the British pound depreciated 3.2% in the third quarter of

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2019, after depreciating 2.6% in the second quarter of 2019. The price of crude oil depreciated by 7.5% during the quarter ended September 30, 2019.
In terms of economic conditions in the U.S., the Bureau of Economic Analysis reported real GDP increased at an annual rate of 1.9% in the third quarter of 2019, following an increase of 2.0% in the second quarter of 2019. As of October 2019, the International Monetary Fund estimated that the U.S. economy will expand by 2.4% in 2019 and 2.1% in 2020. Additionally, the U.S. unemployment rate fell to 3.5% as of September 30, 2019, a 50-year low.
Regardless of the market or economic environment at any given time, Apollo relies on its contrarian, value-oriented approach to consistently invest capital on behalf of its fund investors by focusing on opportunities that management believes are often overlooked by other investors. As such, Apollo’s global integrated investment platform deployed $2.9 billion and $12.3 billion of capital through the funds it manages during the three and nine months ended September 30, 2019, respectively. We believe Apollo’s expertise in credit and its focus on nine core industry sectors, combined with more than 29 years of investment experience, has allowed Apollo to respond quickly to changing environments. Apollo’s core industry sectors include chemicals, manufacturing and industrial, natural resources, consumer and retail, consumer services, business services, financial services, leisure, and media/telecom/technology. Apollo believes that these attributes have contributed to the success of its private equity funds investing in buyouts and credit opportunities during both expansionary and recessionary economic periods.
In general, institutional investors continue to allocate capital towards alternative investment managers for more attractive risk-adjusted returns in a low interest rate environment, and we believe the business environment remains generally accommodative to raise larger successor funds, launch new products, and pursue attractive strategic growth opportunities, such as continuing to grow the assets of our permanent capital vehicles. As such, Apollo had $15.9 billion and $53.1 billion of capital inflows during the three and nine months ended September 30, 2019, respectively. While Apollo continues to attract capital inflows, it also continues to generate realizations for fund investors. Apollo returned $2.0 billion and $5.9 billion of capital and realized gains to the investors in the funds it manages during the three and nine months ended September 30, 2019, respectively.
Managing Business Performance
We believe that the presentation of Segment Distributable Earnings, or “Segment DE”, supplements a reader’s understanding of the economic operating performance of each of our segments.
Segment Distributable Earnings and Distributable Earnings
Segment Distributable Earnings is the key performance measure used by management in evaluating the performance of Apollo’s credit, private equity and real assets segments. See note 16 to the condensed consolidated financial statements for more details regarding the components of Segment DE. Distributable Earnings (“DE”) represents Segment DE less estimated current corporate, local and non-U.S. taxes as well as the current payable under Apollo’s tax receivable agreement. DE is net of preferred dividends, if any, to the Series A and Series B Preferred Stockholders. DE excludes the impacts of the remeasurement of deferred tax assets and liabilities which arises from changes in estimated future tax rates. The economic assumptions and methodologies that impact the implied income tax provision are similar to those methodologies and certain assumptions used in calculating the income tax provision for Apollo’s condensed consolidated statements of operations under U.S. GAAP. Management believes that excluding the remeasurement of the tax receivable agreement and deferred taxes from Segment DE and DE, respectively, is meaningful as it increases comparability between periods. Remeasurement of the tax receivable agreement and deferred taxes are estimates that may change due to changes in the interpretation of tax law.
We believe that Segment DE is helpful for an understanding of our business and that investors should review the same supplemental financial measure that management uses to analyze our segment performance. This measure supplements and should be considered in addition to and not in lieu of the results of operations discussed below in “—Overview of Results of Operations” that have been prepared in accordance with U.S. GAAP. See note 16 to the condensed consolidated financial statements for more details regarding management’s consideration of Segment DE.

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Fee Related Earnings and Fee Related EBITDA
Fee Related Earnings is derived from our segment reported results and refers to a component of Segment DE that is used as a supplemental performance measure. See note 16 to the condensed consolidated financial statements for more details regarding the components of FRE.
Fee related EBITDA is a non-U.S. GAAP measure derived from our segment reported results and is used to assess the performance of our operations as well as our ability to service current and future borrowings. Fee related EBITDA represents FRE plus amounts for depreciation and amortization. “Fee related EBITDA +100% of net realized performance fees” represents Fee related EBITDA plus realized performance fees less realized profit sharing expense.
We use Segment DE, DE, FRE and Fee related EBITDA as measures of operating performance, not as measures of liquidity. These measures should not be considered in isolation or as a substitute for net income or other income data prepared in accordance with U.S. GAAP. The use of these measures without consideration of their related U.S. GAAP measures is not adequate due to the adjustments described above.
Segment Strategies
Apollo determined to change the business segment in which it reports certain funds and accounts to align its segment reporting with the manner in which such funds and accounts were managed. Effective January 1, 2019, the European Principal Finance Fund series, which has been historically reported in the credit segment, moved to the real assets segment. Several funds and accounts that generally invest in illiquid opportunistic investments and the latest fund in the Credit Opportunity Fund series, which have been historically reported in the credit segment, moved to the private equity segment. Certain commercial real estate mortgage loan assets, previously reported in the credit segment, moved to the real assets segment. These changes affected the composition, but not the determination, of Apollo’s reporting segments.
In order to better reflect the grouping of synergistic credit strategies across the funds, accounts and permanent capital vehicles managed within our credit segment, Apollo has re-aligned its credit segment around four main strategies: corporate credit, structured credit, direct origination and advisory and other. The underlying assets managed within, and strategies employed by, Apollo’s credit segment have not changed as a result of this re-alignment.
Apollo has re-aligned its private equity segment around three strategies: traditional private equity, hybrid capital and natural resources. Hybrid capital includes our recently launched hybrid value strategy, other funds and accounts that generally invest in illiquid opportunistic investments and the latest fund in the Credit Opportunity Fund series.
Apollo has re-aligned its real assets segment around three strategies: real estate, principal finance and infrastructure. Real estate includes the commercial real estate mortgage loan assets discussed above, among other types of real estate assets. Principal finance includes our European Principal Finance Fund series.
Operating Metrics
We monitor certain operating metrics that are common to the alternative investment management industry. These operating metrics include Assets Under Management, capital deployed and uncalled commitments.
Assets Under Management
The tables below present Fee-Generating and Non-Fee-Generating AUM by segment:
 
As of September 30, 2019
 
Credit
 
Private Equity
 
Real Assets
 
Total
 
(in millions)
Fee-Generating
$
168,096

 
$
46,698

 
$
28,235

 
$
243,029

Non-Fee-Generating
39,562

 
31,165

 
8,918

 
79,645

Total Assets Under Management
$
207,658

 
$
77,863

 
$
37,153

 
$
322,674


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As of September 30, 2018
 
Credit
 
Private Equity
 
Real Assets
 
Total
 
(in millions)
Fee-Generating
$
134,003

 
$
47,065

 
$
22,541

 
$
203,609

Non-Fee-Generating
29,044

 
31,960

 
5,567

 
66,571

Total Assets Under Management
$
163,047

 
$
79,025

 
$
28,108

 
$
270,180

 
As of December 31, 2018
 
Credit
 
Private Equity
 
Real Assets
 
Total
 
(in millions)
Fee-Generating
$
144,071

 
$
46,633

 
$
23,663

 
$
214,367

Non-Fee-Generating
30,307

 
28,453

 
7,132

 
65,892

Total Assets Under Management
$
174,378

 
$
75,086

 
$
30,795

 
$
280,259

The table below presents AUM with Future Management Fee Potential, which is a component of Non-Fee-Generating AUM, for each of Apollo’s three segments.
 
As of
September 30, 2019
 
As of
September 30, 2018
 
As of
December 31, 2018
 
(in millions)    
Credit
$
8,581

 
$
8,209

 
$
8,725

Private Equity
9,259

 
10,646

 
10,555

Real Assets
2,760

 
1,392

 
2,097

Total AUM with Future Management Fee Potential
$
20,600

 
$
20,247

 
$
21,377

The following tables present the components of Performance Fee-Eligible AUM for each of Apollo’s three segments:
 
As of September 30, 2019
 
Credit
 
Private Equity
 
Real Assets
 
Total
 
(in millions)
Performance Fee-Generating AUM(1)
$
36,397

 
$
24,263

 
$
4,339

 
$
64,999

AUM Not Currently Generating Performance Fees
13,997

 
7,436

 
1,136

 
22,569

Uninvested Performance Fee-Eligible AUM
8,179

 
30,867

 
4,540

 
43,586

Total Performance Fee-Eligible AUM
$
58,573

 
$
62,566

 
$
10,015

 
$
131,154

 
As of September 30, 2018
 
Credit
 
Private Equity
 
Real Assets
 
Total
 
(in millions)
Performance Fee-Generating AUM(1)
$
33,308

 
$
26,153

 
$
2,065

 
$
61,526

AUM Not Currently Generating Performance Fees
6,707

 
4,037

 
1,426

 
12,170

Uninvested Performance Fee-Eligible AUM
7,687

 
35,004

 
5,320

 
48,011

Total Performance Fee-Eligible AUM
$
47,702

 
$
65,194

 
$
8,811

 
$
121,707


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As of December 31, 2018
 
Credit
 
Private Equity
 
Real Assets
 
Total
 
(in millions)
Performance Fee-Generating AUM(1)
$
23,574

 
$
22,974

 
$
2,019

 
$
48,567

AUM Not Currently Generating Performance Fees
17,857

 
3,850

 
2,662

 
24,369

Uninvested Performance Fee-Eligible AUM
8,483

 
35,749

 
4,659

 
48,891

Total Performance Fee-Eligible AUM
$
49,914

 
$
62,573

 
$
9,340

 
$
121,827

(1)
Performance Fee-Generating AUM of $2.6 billion, $4.7 billion and $0.2 billion as of September 30, 2019, September 30, 2018 and December 31, 2018, respectively, are above the applicable hurdle rates or preferred returns, but in accordance with the adoption of the revenue recognition standard effective January 1, 2018, recognition of performance fees associated with such Performance Fee-Generating AUM have been deferred to future periods when the fees are probable to not be significantly reversed.
The following table presents AUM Not Currently Generating Performance Fees for funds that have invested capital for more than 24 months as of September 30, 2019 and the corresponding appreciation required to reach the preferred return or high watermark in order to generate performance fees:
Strategy / Fund
 
Invested AUM Not Currently Generating Performance Fees
 
Investment Period Active > 24 Months
 
Appreciation Required to Achieve Performance Fees(1)
 
 
(in millions)
 
 
Credit:
 
 
 
 
 
 
Corporate Credit
 
$
5,464

 
$
5,456

 
3%
Structured Credit
 
1,772

 
1,241

 
9%
Direct Origination
 
171

 
—

 
N/A
Advisory and Other
 
6,590

 
—

 
N/A
Total Credit
 
13,997

 
6,697

 
4%
Private Equity:
 
 
 
 
 
 
ANRP I
 
314

 
314

 
107%
Hybrid Capital
 
2,290

 
1,793

 
89%
Other PE
 
4,832

 
306

 
66%
Total Private Equity
 
7,436

 
2,413

 
88%
Real Assets:
 
 
 
 
 
 
Total Real Assets
 
1,136

 
403

 
> 250bps
Total
 
$
22,569

 
$
9,513

 
 
(1)
All investors in a given fund are considered in aggregate when calculating the appreciation required to achieve performance fees presented above. Appreciation required to achieve performance fees may vary by individual investor. Funds with an investment period less than 24 months are “N/A”.
The components of Fee-Generating AUM by segment are presented below:
 
As of September 30, 2019
 
Credit
 
Private
Equity
 
Real
Assets
 
Total
 
(in millions)
Fee-Generating AUM based on capital commitments
$
3,888

 
$
26,849

 
$
4,886

 
$
35,623

Fee-Generating AUM based on invested capital
1,328

 
18,685

 
2,217

 
22,230

Fee-Generating AUM based on gross/adjusted assets
140,251

 
743

 
20,253

 
161,247

Fee-Generating AUM based on NAV
22,629

 
421

 
879

 
23,929

Total Fee-Generating AUM
$
168,096

 
$
46,698

(1) 
$
28,235

 
$
243,029

(1)
The weighted average remaining life of the traditional private equity funds as of September 30, 2019 was 80 months.

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As of September 30, 2018
 
Credit
 
Private
Equity
 
Real
Assets
 
Total
 
(in millions)
Fee-Generating AUM based on capital commitments
$
3,403

 
$
26,982

 
$
5,440

 
$
35,825

Fee-Generating AUM based on invested capital
1,151

 
18,610

 
6,446

 
26,207

Fee-Generating AUM based on gross/adjusted assets
109,276

 
903

 
10,604

 
120,783

Fee-Generating AUM based on NAV
20,173

 
570

 
51

 
20,794

Total Fee-Generating AUM
$
134,003

 
$
47,065

(1) 
$
22,541

 
$
203,609

(1)
The weighted average remaining life of the traditional private equity funds as of September 30, 2018 was 89 months.
 
As of December 31, 2018
 
Credit
 
Private
Equity
 
Real Assets
 
Total
 
(in millions)
Fee-Generating AUM based on capital commitments
$
3,403

 
$
26,849

 
$
5,419

 
$
35,671

Fee-Generating AUM based on invested capital
1,020

 
18,601

 
6,659

 
26,280

Fee-Generating AUM based on gross/adjusted assets
119,525

 
776

 
11,435

 
131,736

Fee-Generating AUM based on NAV
20,123

 
407

 
150

 
20,680

Total Fee-Generating AUM
$
144,071

 
$
46,633

(1) 
$
23,663

 
$
214,367

(1)
The weighted average remaining life of the traditional private equity funds as of December 31, 2018 was 89 months.
The following table presents total AUM and Fee-Generating AUM amounts for our credit segment by category type:
 
Total AUM
 
Fee-Generating AUM
 
As of
September 30,
 
As of
December 31,
 
As of
September 30,
 
As of
December 31,
 
2019
 
2018
 
2018
 
2019
 
2018
 
2018
 
(in millions)
Corporate Credit
$
111,184

 
$
90,908

 
$
98,188

 
$
93,132

 
$
77,848

 
$
82,812

Structured Credit
50,388

 
40,996

 
42,693

 
44,053

 
36,038

 
37,932

Direct Origination
18,249

 
14,296

 
16,715

 
16,696

 
13,306

 
14,395

Advisory and Other
27,837

 
16,847

 
16,782

 
14,215

 
6,811

 
8,932

Total
$
207,658

 
$
163,047

 
$
174,378

 
$
168,096

 
$
134,003

 
$
144,071

Investment Management Agreement - ISG
Apollo, through its consolidated subsidiary, ISG, provides asset management services to Athene with respect to assets in the Athene Accounts, including asset allocation services, direct asset management services, asset and liability matching management, mergers and acquisitions, asset diligence, hedging and other asset management services and receives management fees for providing these services. The Company, through ISG, also provides sub-allocation services with respect to a portion of the assets in the Athene Accounts. See note 14 to the condensed consolidated financial statements for more details regarding the fee rates of the investment management and sub-allocation fee arrangements with respect to the assets in the Athene Accounts.

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The following table presents the aggregate Athene Sub-Allocated Total AUM by asset class:
 
As of September 30, 2019
 
(in millions)
Core Assets
$
33,524

Core Plus Assets
31,848

Yield Assets
45,953

High Alpha
4,286

Cash, Treasuries, Equity and Alternatives
9,873

Total
$
125,484

Investment Advisory and Sub-Advisory Agreements - AAME
Apollo, through AAME, sub-advises the Athora Accounts and broadly refers to “Athora Sub-Advised” assets as those assets in the Athora Accounts which the Company explicitly sub-advises as well as those assets in the Athora Accounts which are invested directly in funds and investment vehicles Apollo manages. The Company refers to the portion of the Athora AUM that is not Athora Sub-Advised AUM as “Athora Non-Sub Advised” AUM. See note 14 to the condensed consolidated financial statements for more details regarding the fee arrangements with respect to the assets in the Athora Accounts.
The following table presents Athora Sub-Advised and Athora Non-Sub-Advised AUM:
 
As of
September 30,
 
As of
December 31,
 
2019
 
2018
 
2018
 
(in millions)
Sub-Advised AUM
$
3,667

 
$
1,962

 
$
3,032

Non-Sub-Advised AUM
10,382

 
6,040

 
4,952

Total AUM
$
14,049

 
$
8,002

 
$
7,984

The following table presents total AUM and Fee-Generating AUM amounts for our private equity segment:
 
Total AUM
 
Fee-Generating AUM
 
As of
September 30,
 
As of
December 31,
 
As of
September 30,
 
As of
December 31,
 
2019
 
2018
 
2018
 
2019
 
2018
 
2018
 
(in millions)
Private Equity Funds
$
62,781

 
$
65,189

 
$
60,680

 
$
39,446

 
$
39,573

 
$
39,519

Hybrid Capital
9,108

 
9,025

 
8,886

 
3,154

 
3,396

 
3,025

Natural Resources
5,974

 
4,811

 
5,520

 
4,098

 
4,096

 
4,089

Total
$
77,863

 
$
79,025

 
$
75,086

 
$
46,698

 
$
47,065

 
$
46,633

The following table presents total AUM and Fee-Generating AUM amounts for our real assets segment:
 
Total AUM
 
Fee-Generating AUM
 
As of
September 30,
 
As of
December 31,
 
As of
September 30,
 
As of
December 31,
 
2019
 
2018
 
2018
 
2019
 
2018
 
2018
 
(in millions)
Real Estate
$
28,076

 
$
20,359

 
$
21,971

 
$
21,384

 
$
16,252

 
$
16,873

Principal Finance
6,934

 
7,119

 
7,050

 
5,113

 
5,659

 
5,468

Infrastructure
2,143

 
630

 
1,774

 
1,738

 
630

 
1,322

Total
$
37,153

 
$
28,108

 
$
30,795

 
$
28,235

 
$
22,541

 
$
23,663


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The following tables summarize changes in total AUM for each of Apollo’s three segments:
 
For the Three Months Ended September 30,
 
2019
 
2018
 
Credit
 
Private Equity
 
Real Assets
 
Total
 
Credit
 
Private Equity
 
Real Assets
 
Total
 
 
Change in Total AUM(1):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning of Period
$
201,216

 
$
77,148

 
$
33,498

 
$
311,862

 
$
163,222

 
$
78,867

 
$
27,363

 
$
269,452

Inflows
11,505

 
516

 
3,906

 
15,927

 
4,290

 
509

 
1,098

 
5,897

Outflows(2)
(3,647
)
 
(13
)
 
—

 
(3,660
)
 
(4,651
)
 
(16
)
 
—

 
(4,667
)
Net Flows
7,858

 
503

 
3,906

 
12,267

 
(361
)
 
493

 
1,098

 
1,230

Realizations
(615
)
 
(989
)
 
(357
)
 
(1,961
)
 
(347
)
 
(1,016
)
 
(386
)
 
(1,749
)
Market Activity(3)
(801
)
 
1,201

 
106

 
506

 
533

 
681

 
33

 
1,247

End of Period
$
207,658

 
$
77,863

 
$
37,153

 
$
322,674

 
$
163,047

 
$
79,025

 
$
28,108

 
$
270,180

(1)
At the individual segment level, inflows include new subscriptions, commitments, capital raised, other increases in available capital, purchases, acquisitions, and portfolio company appreciation. Outflows represent redemptions, other decreases in available capital and portfolio company depreciation. Realizations represent fund distributions of realized proceeds. Market activity represents gains (losses), the impact of foreign exchange rate fluctuations and other income.
(2)
Outflows for Total AUM include redemptions of $0.3 billion and $1.3 billion during the three months ended September 30, 2019 and 2018, respectively.
(3)
Includes foreign exchange impacts of $(1.6) billion, $(106.0) million and $(160.7) million for credit, private equity and real assets, respectively, during the three months ended September 30, 2019, and foreign exchange impacts of $(330.2) million, $(19.2) million and $(14.2) million for credit, private equity and real assets, respectively, during the three months ended September 30, 2018.
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
Credit
 
Private Equity
 
Real Assets
 
Total
 
Credit
 
Private Equity
 
Real Assets
 
Total
 
(in millions)
Change in Total AUM(1):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning of Period
$
174,378

 
$
75,086

 
$
30,795

 
$
280,259

 
$
144,807

 
$
80,694

 
$
23,427

 
$
248,928

Inflows
42,406

 
3,361

 
7,302

 
53,069

 
30,857

 
3,778

 
6,301

 
40,936

Outflows(2)
(8,926
)
 
(154
)
 
(399
)
 
(9,479
)
 
(11,236
)
 
(175
)
 
—

 
(11,411
)
Net Flows
33,480

 
3,207

 
6,903

 
43,590

 
19,621

 
3,603

 
6,301

 
29,525

Realizations
(1,335
)
 
(3,541
)
 
(1,025
)
 
(5,901
)
 
(2,234
)
 
(4,623
)
 
(1,855
)
 
(8,712
)
Market Activity(3)
1,135

 
3,111

 
480

 
4,726

 
853

 
(649
)
 
235

 
439

End of Period
$
207,658

 
$
77,863

 
$
37,153

 
$
322,674

 
$
163,047

 
$
79,025

 
$
28,108

 
$
270,180

(1)
At the individual segment level, inflows include new subscriptions, commitments, capital raised, other increases in available capital, purchases, acquisitions and portfolio company appreciation. Outflows represent redemptions, other decreases in available capital and portfolio company depreciation. Realizations represent fund distributions of realized proceeds. Market activity represents gains (losses), the impact of foreign exchange rate fluctuations and other income.
(2)
Outflows for Total AUM include redemptions of $2.3 billion and $1.6 billion during the nine months ended September 30, 2019 and 2018, respectively.
(3)
Includes foreign exchange impacts of $(1.6) billion, $(133.8) million and $(138.2) million for credit, private equity and real assets, respectively, during the nine months ended September 30, 2019, and foreign exchange impacts of $(1.1) billion, $(66.2) million and $(56.2) million for credit, private equity and real assets, respectively, during the nine months ended September 30, 2018.

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Total AUM was $322.7 billion at September 30, 2019, an increase of $10.8 billion, or 3.5%, compared to $311.9 billion at June 30, 2019. The net increase was primarily due to:
Net flows of $12.3 billion primarily related to:
•
a $7.9 billion increase related to funds we manage in the credit segment primarily consisting of an increase in AUM relating to Athene of $7.2 billion driven by portfolio company activity, subscriptions of $1.9 billion across the corporate credit funds we manage and an increase in leverage of $0.7 billion throughout the segment; these increases were partially offset by net segment transfers of $2.7 billion;
•
a $3.9 billion increase related to funds we manage in the real assets segment primarily consisting of net segment transfers of $2.6 billion and an increase in leverage of $1.1 billion related to the real estate funds we manage; and
•
a $0.5 billion increase related to funds we manage in the private equity segment primarily consisting of an increase in leverage of $0.4 billion related to Fund IX.
Market activity of $0.5 billion primarily related to $1.2 billion of appreciation in the funds we manage in the private equity segment, partially offset by $0.8 billion of depreciation in the funds we manage in the credit segment.
Offsetting these increases were:
Realizations of $2.0 billion primarily related to:
•
$1.0 billion related to funds we manage in the private equity segment primarily consisting of distributions from Fund VIII and other traditional private equity funds of $0.6 billion and $0.2 billion, respectively;
•
$0.6 billion related to funds we manage in the credit segment primarily consisting of distributions from the structured credit funds we manage; and
•
$0.4 billion related to funds we manage in the real assets segment related to the real estate funds we manage.
Total AUM was $322.7 billion at September 30, 2019, an increase of $42.4 billion, or 15.1%, compared to $280.3 billion at December 31, 2018. The net increase was primarily due to:
Net flows of $43.6 billion primarily related to:
•
a $33.5 billion increase related to funds we manage in the credit segment primarily consisting of (i) an increase in AUM relating to Athene of $16.7 billion as a result of portfolio company activity, (ii) an increase in AUM in the advisory and other category as a result of the acquisition of Aspen Insurance Holdings Limited and Athora’s acquisition of Generali Belgium, which added approximately $7.5 billion and $6.5 billion of AUM, respectively, and (iii) subscriptions of $6.0 billion across the corporate credit funds we manage; these increases were offset by net segment transfers of $5.3 billion;
•
a $6.9 billion increase related to funds we manage in the real assets segment primarily consisting of net segment transfers of $5.3 billion and an increase in leverage of $1.1 billion related to the real estate funds we manage; and
•
a $3.2 billion increase related to funds we manage in the private equity segment consisting of subscriptions of $2.7 billion primarily related to certain traditional private equity fund co-investments and certain hybrid capital funds of $1.4 billion and $0.8 billion, respectively.
Market activity of $4.7 billion primarily related to $3.1 billion of appreciation in the funds we manage in the private equity segment, primarily related to Fund VIII, as well as $1.1 billion and $0.5 billion of appreciation in the funds we manage in the credit and real assets segments, respectively.
Offsetting these increases were:
Realizations of $5.9 billion primarily related to:
•
$3.5 billion related to funds we manage in the private equity segment primarily consisting of distributions of $1.2 billion, $1.1 billion and $0.5 billion from Fund VIII, Fund VI and certain hybrid capital funds, respectively;
•
$1.3 billion related to funds we manage in the credit segment primarily consisting of distributions from the direct origination and structured credit funds we manage; and
•
$1.0 billion related to funds we manage in the real assets segment primarily consisting of distributions from the principal finance and real estate funds we manage.

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The following tables summarize changes in Fee-Generating AUM for each of Apollo’s three segments:
 
For the Three Months Ended September 30,
 
2019
 
2018
 
Credit
 
Private Equity
 
Real Assets
 
Total
 
Credit
 
Private Equity
 
Real Assets
 
Total
 
 
Change in Fee-Generating AUM(1):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning of Period
$
163,089

 
$
47,082

 
$
25,965

 
$
236,136

 
$
132,602

 
$
47,835

 
$
21,798

 
$
202,235

Inflows
9,464

 
94

 
2,653

 
12,211

 
3,765

 
277

 
1,110

 
5,152

Outflows(2)
(3,883
)
 
(266
)
 
(241
)
 
(4,390
)
 
(2,810
)
 
(844
)
 
(52
)
 
(3,706
)
Net Flows
5,581

 
(172
)
 
2,412

 
7,821

 
955

 
(567
)
 
1,058

 
1,446

Realizations
(265
)
 
(251
)
 
(78
)
 
(594
)
 
(119
)
 
(243
)
 
(367
)
 
(729
)
Market Activity(3)
(309
)
 
39

 
(64
)
 
(334
)
 
565

 
40

 
52

 
657

End of Period
$
168,096

 
$
46,698

 
$
28,235

 
$
243,029

 
$
134,003

 
$
47,065

 
$
22,541

 
$
203,609

(1)
At the individual segment level, inflows include new subscriptions, commitments, capital raised, other increases in available capital, purchases, acquisitions and portfolio company appreciation. Outflows represent redemptions, other decreases in available capital and portfolio company depreciation. Realizations represent fund distributions of realized proceeds. Market activity represents gains (losses), the impact of foreign exchange rate fluctuations and other income.
(2)
Outflows for Fee-Generating AUM include redemptions of $0.3 billion and $1.3 billion during the three months ended September 30, 2019 and 2018, respectively.
(3)
Includes foreign exchange impacts of $(828.8) million, $(13.0) million and $(100.8) million for credit, private equity and real assets, respectively, during the three months ended September 30, 2019, and foreign exchange impacts of $(228.2) million, $(4.0) million and $(35.3) million for credit, private equity and real assets, respectively, during the three months ended September 30, 2018.
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
Credit
 
Private Equity
 
Real Assets
 
Total
 
Credit
 
Private Equity
 
Real Assets
 
Total
 
(in millions)
Change in Fee-Generating AUM(1):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning of Period
$
144,071

 
$
46,633

 
$
23,663

 
$
214,367

 
$
116,352

 
$
34,063

 
$
18,550

 
$
168,965

Inflows
32,993

 
1,418

 
5,601

 
40,012

 
28,503

 
24,924

 
5,353

 
58,780

Outflows(2)
(9,635
)
 
(699
)
 
(724
)
 
(11,058
)
 
(10,355
)
 
(11,287
)
 
(52
)
 
(21,694
)
Net Flows
23,358

 
719

 
4,877

 
28,954

 
18,148

 
13,637

 
5,301

 
37,086

Realizations
(544
)
 
(762
)
 
(363
)
 
(1,669
)
 
(1,249
)
 
(698
)
 
(1,398
)
 
(3,345
)
Market Activity(3)
1,211

 
108

 
58

 
1,377

 
752

 
63

 
88

 
903

End of Period
$
168,096

 
$
46,698

 
$
28,235

 
$
243,029

 
$
134,003

 
$
47,065

 
$
22,541

 
$
203,609

(1)
At the individual segment level, inflows include new subscriptions, commitments, capital raised, other increases in available capital, purchases, acquisitions and portfolio company appreciation. Outflows represent redemptions, other decreases in available capital and portfolio company depreciation. Realizations represent fund distributions of realized proceeds. Market activity represents gains (losses), the impact of foreign exchange rate fluctuations and other income.
(2)
Outflows for Fee-Generating AUM include redemptions of $2.3 billion and $1.6 billion during the nine months ended September 30, 2019 and 2018, respectively.
(3)
Includes foreign exchange impacts of $(874.8) million, $(15.4) million and $(106.0) million for credit, private equity and real assets, respectively, during the nine months ended September 30, 2019, and foreign exchange impacts of $(602.3) million, $(12.3) million and $(87.8) million for credit, private equity and real assets, respectively, during the nine months ended September 30, 2018.
Total Fee-Generating AUM was $243.0 billion at September 30, 2019, an increase of $6.9 billion or 2.9%, compared to $236.1 billion at June 30, 2019. The net increase was primarily due to:
Net flows of $7.8 billion primarily related to:
•
a $5.6 billion increase related to funds we manage in the credit segment primarily consisting of an increase in AUM relating to Athene of $7.2 billion driven by portfolio company activity and an increase relating to fee-generating capital deployment of $0.8 billion; these increases were partially offset by net segment transfers of $2.4 billion and fee-generating capital reduction of $0.5 billion; and

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•
a $2.4 billion increase related to funds we manage in the real assets segment primarily consisting of $2.4 billion of net segment transfers.
Offsetting these increases were decreases related to realizations and market activity throughout the segments of $0.6 billion and $0.3 billion, respectively.
Total Fee-Generating AUM was $243.0 billion at September 30, 2019, an increase of $28.7 billion or 13.4%, compared to $214.4 billion at December 31, 2018. The net increase was primarily due to:
Net flows of $29.0 billion primarily related to:
•
a $23.4 billion increase related to funds we manage in the credit segment primarily consisting of (i) an increase in AUM relating to Athene of $16.7 billion as a result of portfolio company activity, (ii) an increase in AUM in advisory and other as a result of Athora’s acquisition of Generali Belgium, which added approximately $6.5 billion of AUM and (iii) an increase relating to fee-generating capital deployment of $3.4 billion; these increases were partially offset by fee-generating capital reduction of $2.0 billion;
•
a $4.9 billion increase related to funds we manage in the real assets segment primarily consisting of net segment transfers of $4.6 billion and $0.7 billion of fee-generating deployment, primarily related to certain infrastructure funds; and
•
a $0.7 billion increase related to funds we manage in the private equity segment primarily consisting of fee-generating capital deployment of $1.4 billion, offset by fee-generating capital reduction of $0.5 billion.
Market activity of $1.4 billion primarily related to:
•
a $1.2 billion increase related to funds we manage in the credit segment as a result of appreciation across the corporate credit funds we manage.
Capital Deployed and Uncalled Commitments
Capital deployed is the aggregate amount of capital that has been invested during a given period by our commitment-based funds, SIAs that have a defined maturity date and funds and SIAs in our real estate debt strategy. Uncalled commitments, by contrast, represents unfunded capital commitments that certain of Apollo’s funds and SIAs have received from fund investors to fund future or current fund investments and expenses.
Capital deployed and uncalled commitments are indicative of the pace and magnitude of fund capital that is deployed or will be deployed, and which therefore could result in future revenues that include management fees, transaction fees and performance fees to the extent they are fee-generating. Capital deployed and uncalled commitments can also give rise to future costs that are related to the hiring of additional resources to manage and account for the additional capital that is deployed or will be deployed. Management uses capital deployed and uncalled commitments as key operating metrics since we believe the results measure our fund’s investment activities.
Capital Deployed
The following table summarizes the capital deployed for funds and SIAs with a defined maturity date by segment:
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
(in millions)
 
(in millions)
Credit
$
1,264

 
$
485

 
$
4,010

 
$
1,986

Private Equity
986

 
513

 
6,641

 
3,681

Real Assets
619

 
253

 
1,695

 
1,227

Total capital deployed
$
2,869

 
$
1,251

 
$
12,346

 
$
6,894


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Uncalled Commitments
The following table summarizes the uncalled commitments by segment:
 
As of
September 30, 2019
 
As of
December 31, 2018
 
(in millions)
Credit
$
8,971

 
$
8,066

Private Equity
38,459

 
41,585

Real Assets
5,590

 
5,980

Total uncalled commitments(1)
$
53,020

 
$
55,631

(1)
As of September 30, 2019 and December 31, 2018, $44.3 billion and $48.5 billion, respectively, represented the amount of capital available for investment or reinvestment subject to the provisions of the applicable limited partnership agreements or other governing agreements of the funds, partnerships and accounts we manage. These amounts exclude uncalled commitments which can only be called for fund fees and expenses.
The Historical Investment Performance of Our Funds
Below we present information relating to the historical performance of our funds, including certain legacy Apollo funds that do not have a meaningful amount of unrealized investments, and in respect of which the general partner interest has not been contributed to us.
When considering the data presented below, you should note that the historical results of our funds are not indicative of the future results that you should expect from such funds, from any future funds we may raise or from your investment in our Class A Common Stock.
An investment in our Class A Common Stock is not an investment in any of the Apollo funds, and the assets and revenues of our funds are not directly available to us. The historical and potential future returns of the funds we manage are not directly linked to returns on our Class A Common Stock. Therefore, you should not conclude that continued positive performance of the funds we manage will necessarily result in positive returns on an investment in our Class A Common Stock. However, poor performance of the funds that we manage would cause a decline in our revenue from such funds, and would therefore have a negative effect on our performance and in all likelihood the value of our Class A Common Stock.
Moreover, the historical returns of our funds should not be considered indicative of the future results you should expect from such funds or from any future funds we may raise. There can be no assurance that any Apollo fund will continue to achieve the same results in the future.
Finally, our private equity IRRs have historically varied greatly from fund to fund. For example, Fund IV generated a 12% gross IRR and a 9% net IRR since its inception through September 30, 2019, while Fund V generated a 61% gross IRR and a 44% net IRR since its inception through September 30, 2019. Accordingly, the IRR going forward for any current or future fund may vary considerably from the historical IRR generated by any particular fund, or for our private equity funds as a whole. Future returns will also be affected by the applicable risks, including risks of the industries and businesses in which a particular fund invests. See “Item 1A. Risk Factors—Risks Related to Our Businesses—The historical returns attributable to our funds should not be considered as indicative of the future results of our funds or of our future results or of any returns expected on an investment in our Class A shares and our Preferred shares” in the 2018 Annual Report.

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Investment Record
The following table summarizes the investment record by segment of Apollo’s significant commitment-based funds that have a defined maturity date in which investors make a commitment to provide capital at the formation of such funds and deliver capital when called as investment opportunities become available. The funds included in the investment record table below have greater than $500 million of AUM and/or form part of a flagship series of funds.
All amounts are as of September 30, 2019, unless otherwise noted:
($ in millions)
Vintage
Year
 
Total AUM
 
Committed
Capital
 
Total Invested Capital
 
Realized Value
 
Remaining Cost
 
Unrealized Value
 
Total Value
 
Gross
IRR
 
Net
IRR
 
Private Equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fund IX
2018
 
$
24,847

 
$
24,729

 
$
2,779

 
$
—

 
$
2,779

 
$
2,917

 
$
2,917

 
NM

(1) 
NM

(1) 
Fund VIII
2013
 
21,241

 
18,377

 
15,815

 
6,447

 
12,622

 
17,771

 
24,218

 
18
%
 
13
%
 
Fund VII
2008
 
3,709

 
14,677

 
16,461

 
31,196

 
2,803

 
1,722

 
32,918

 
33

 
25

 
Fund VI
2006
 
645

 
10,136

 
12,457

 
21,114

 
405

 
19

 
21,133

 
12

 
9

 
Fund V
2001
 
261

 
3,742

 
5,192

 
12,720

 
120

 
2

 
12,722

 
61

 
44

 
Fund I, II, III, IV & MIA(2)
Various
 
13

 
7,320

 
8,753

 
17,400

 
—

 
—

 
17,400

 
39

 
26

 
Traditional Private Equity Funds(3)
 
 
$
50,716

 
$
78,981

 
$
61,457

 
$
88,877

 
$
18,729

 
$
22,431

 
$
111,308

 
39
%
 
25
%
 
ANRP II
2016
 
3,357

 
3,454

 
2,193

 
923

 
1,778

 
2,098

 
3,021

 
25

 
14

 
ANRP I
2012
 
556

 
1,323

 
1,144

 
978

 
650

 
322

 
1,300

 
4

 
—

 
AION
2013
 
784

 
826

 
689

 
291

 
491

 
661

 
952

 
18

 
9

 
Hybrid Value Fund
2019
 
3,243

 
3,238

 
530

 
12

 
527

 
536

 
548

 
NM

(1) 
NM

(1) 
Total Private Equity
 
 
$
58,656

 
$
87,822

 
$
66,013

 
$
91,081

 
$
22,175

 
$
26,048

 
$
117,129

 
 
 
 
 
Credit:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Structured Credit Funds
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FCI III
2017
 
$
2,632

 
$
1,906

 
$
2,329

 
$
862

 
$
1,901

 
$
2,025

 
$
2,887

 
28
%
 
21
%
 
FCI II
2013
 
2,213

 
1,555

 
2,707

 
1,734

 
1,661

 
1,568

 
3,302

 
8

 
5

 
FCI I
2012
 
110

 
559

 
1,516

 
1,975

 
—

 
—

 
1,975

 
11

 
8

 
SCRF IV (6)
2017
 
3,051

 
2,502

 
3,542

 
1,615

 
2,254

 
2,287

 
3,902

 
NM

(1) 
NM

(1) 
SCRF III
2015
 
—

 
1,238

 
2,110

 
2,428

 
—

 
—

 
2,428

 
18

 
14

 
SCRF II
2012
 
—

 
104

 
467

 
528

 
—

 
—

 
528

 
15

 
12

 
SCRF I
2008
 
—

 
118

 
240

 
357

 
—

 
—

 
357

 
33

 
26

 
Total Credit
 
 
$
8,006

 
$
7,982


$
12,911

 
$
9,499

 
$
5,816

 
$
5,880

 
$
15,379

 
 
 
 
 
Real Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
European Principal Finance Funds
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EPF III(4)
2017
 
$
4,683

 
$
4,469

 
$
2,034

 
$
50

 
$
1,984

 
$
2,242

 
$
2,292

 
23
%
 
9
%
 
EPF II(4)
2012
 
1,675

 
3,412

 
3,352

 
4,099

 
822

 
867

 
4,966

 
15

 
9

 
EPF I(4)
2007
 
229

 
1,411

 
1,855

 
3,115

 
—

 
10

 
3,125

 
23

 
17

 
U.S. RE Fund II(5)
2016
 
1,217

 
1,243

 
823

 
375

 
603

 
723

 
1,098

 
16

 
12

 
U.S. RE Fund I(5)
2012
 
332

 
648

 
631

 
706

 
220

 
242

 
948

 
14

 
11

 
Asia RE Fund(5)
2017
 
648

 
709

 
395

 
204

 
241

 
300

 
504

 
20

 
14

 
Infrastructure Equity Fund
2018
 
997

 
897

 
782

 
88

 
725

 
809

 
897

 
NM

(1) 
NM

(1) 
Total Real Assets
 
 
$
9,781

 
$
12,789

 
$
9,872

 
$
8,637

 
$
4,595

 
$
5,193

 
$
13,830

 
 
 
 
 
(1)
Data has not been presented as the fund commenced investing capital less than 24 months prior to the period indicated and such information was deemed not meaningful.
(2)
The general partners and managers of Funds I, II and MIA, as well as the general partner of Fund III, were excluded assets in connection with the 2007 Reorganization. As a result, Apollo did not receive the economics associated with these entities. The investment performance of these funds, combined with Fund IV, is presented to illustrate fund performance associated with Apollo’s Managing Partners and other investment professionals.
(3)
Total IRR is calculated based on total cash flows for all funds presented.
(4)
Funds are denominated in Euros and historical figures are translated into U.S. dollars at an exchange rate of €1.00 to $1.09 as of September 30, 2019.
(5)
U.S. RE Fund I, U.S. RE Fund II and Asia RE Fund had $152 million, $771 million and $366 million of co-investment commitments as of September 30, 2019, respectively, which are included in the figures in the table. A co-invest entity within U.S. RE Fund I is denominated in pound sterling and translated into U.S. dollars at an exchange rate of £1.00 to $1.23 as of September 30, 2019.
(6)
Remaining cost for certain of our credit funds may include physical cash called, invested or reserved for certain levered investments.

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Private Equity
The following table summarizes the investment record for distressed investments made in our traditional private equity fund portfolios, since the Company’s inception. All amounts are as of September 30, 2019:
 
Total Invested Capital
 
Total Value
 
Gross IRR
 
(in millions)
 
 
Distressed for Control
$
7,915

 
$
19,021

 
29
%
Non-Control Distressed
5,416

 
8,448

 
71

Total
13,331

 
27,469

 
49

Corporate Carve-outs, Opportunistic Buyouts and Other Credit(1)
48,126

 
83,839

 
21

Total
$
61,457

 
$
111,308

 
39
%
 
(1)
Other Credit is defined as investments in debt securities of issuers other than portfolio companies that are not considered to be distressed.
The following tables provide additional detail on the composition of the Fund VIII and Fund VII private equity portfolios based on investment strategy. Amounts for Fund I, II, III, IV, V, VI and IX are included in the table above but not presented below as their remaining value is less than $100 million, the fund has been liquidated or the fund commenced investing capital less than 24 months prior to September 30, 2019 and such information was deemed not meaningful. All amounts are as of September 30, 2019:
Fund VIII(1) 
 
Total Invested Capital
 
Total Value
 
(in millions)
Corporate Carve-outs
$
2,673


$
6,069

Opportunistic Buyouts
12,597


17,295

Distressed(2)
545


854

Total
$
15,815

 
$
24,218

Fund VII(1) 
 
Total Invested Capital
 
Total Value
 
(in millions)
Corporate Carve-outs
$
2,540


$
3,736

Opportunistic Buyouts
4,338


10,580

Distressed/Other Credit(2)
9,583


18,602

Total
$
16,461

 
$
32,918

(1)
Committed capital less unfunded capital commitments for Fund VIII and Fund VII were $15.7 billion and $14.4 billion, respectively, which represents capital commitments from limited partners to invest in such funds less capital that is available for investment or reinvestment subject to the provisions of the applicable limited partnership agreement or other governing agreements.
(2)
The distressed investment strategy includes distressed for control, non-control distressed and other credit.
During the recovery and expansionary periods of 1994 through 2000 and late 2003 through the first half of 2007, our private equity funds invested or committed to invest approximately $13.7 billion primarily in traditional and corporate partner buyouts. During the recessionary periods of 1990 through 1993, 2001 through late 2003 and the recessionary and post recessionary periods (beginning the second half of 2007 through September 30, 2019), our private equity funds have invested $54.2 billion, of which $19.7 billion was in distressed buyouts and debt investments when the debt securities of quality companies traded at deep discounts to par value. Our average entry multiple for Fund VIII, VII and VI was 5.7x, 6.1x and 7.7x, respectively, as of September 30, 2019. Our average entry multiple for a private equity fund is the average of the total enterprise value over an applicable adjusted earnings before interest, taxes, depreciation and amortization, which may incorporate certain adjustments based on the investment team’s estimates and we believe captures the true economics of our funds’ investments in portfolio companies. The average entry multiple of actively investing funds may include committed investments not yet closed.

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Credit
The following table presents the gross and net returns for Apollo’s credit segment by category type:
 
Gross Returns
 
Net Returns
Category
For the Three Months Ended September 30, 2019
 
For the Nine Months Ended September 30, 2019
 
For the Three Months Ended September 30, 2019
 
For the Nine Months Ended September 30, 2019
Corporate Credit
    1.8
%
 
    8.2
%
 
    1.5
%
 
    7.4
%
Structured Credit
1.8

 
10.3

 
1.4

 
8.5

Direct Origination
2.9

 
9.4

 
2.2

 
7.0

Permanent Capital
The following table summarizes the investment record for our permanent capital vehicles by segment, excluding Athene-related and Athora-related assets managed or advised by ISG and AAME:
 
 
 
 
 
Total Returns(1)
 
IPO Year(2)
 
Total AUM
 
For the Three Months Ended September 30, 2019
 
For the Nine Months Ended September 30, 2019
 
For the Three Months Ended September 30, 2018
 
For the Nine Months Ended September 30, 2018
Credit:
 
 
(in millions)
 
 
 
 
 
 
 
 
MidCap(3)
N/A
 
$
8,556

 
4
%
 
13
%
 
6
%
 
15
%
AIF
2013
 
375

 
5
 
 
17

 
2
 
 
5

AFT
2011
 
403

 
1
 
 
9

 
—

 
4

AINV/Other(4)
2004
 
5,238

 
5
 
 
41

 
—

 
4

Real Assets:
 
 
 
 
 
 
 
 
 
 
 
ARI
2009
 
6,715

 
7
 %
 
24
%
 
6
 %
 
10
%
Total
 
 
$
21,287

 
 
 
 
 
 
 
 
(1)
Total returns are based on the change in closing trading prices during the respective periods presented taking into account dividends and distributions, if any, as if they were reinvested without regard to commission.
(2)
An initial public offering (“IPO”) year represents the year in which the vehicle commenced trading on a national securities exchange.
(3)
MidCap is not a publicly traded vehicle and therefore IPO year is not applicable. The returns presented are a gross return based on NAV. The net returns based on NAV were 3% and 4% for the three months ended September 30, 2019 and 2018, respectively, and 9% and 11% for the nine months ended September 30, 2019 and September 30, 2018, respectively.
(4)
Included within Total AUM of AINV/Other is $1.9 billion of AUM related to a non-traded business development company from which Apollo earns investment-related service fees, but for which Apollo does not provide management or advisory services. Total returns exclude performance related to this AUM.
SIAs
As of September 30, 2019, Apollo managed approximately $26 billion of total AUM in SIAs, which include capital deployed from certain SIAs across Apollo’s credit, private equity and real assets funds.
Overview of Results of Operations
Revenues
Advisory and Transaction Fees, Net. As a result of providing advisory services with respect to actual and potential credit, private equity, and real assets investments, we are entitled to receive fees for transactions related to the acquisition and, in certain instances, disposition of portfolio companies as well as fees for ongoing monitoring of portfolio company operations and directors’ fees. We also receive advisory fees for advisory services provided to certain credit funds. In addition, monitoring fees are generated on certain structured portfolio company investments. Under the terms of the limited partnership agreements for certain funds, the management fee payable by the funds may be subject to a reduction based on a certain percentage of such advisory and transaction fees, net of applicable broken deal costs (“Management Fee Offset”). Such amounts are presented as a reduction to advisory and transaction fees, net, in the condensed consolidated statements of operations (see note 2 to our condensed consolidated financial statements for more detail on advisory and transaction fees, net).
The Management Fee Offsets are calculated for each fund as follows:

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•
65%-100% for certain credit funds, gross advisory, transaction and other special fees;
•
65%-100% for private equity funds, gross advisory, transaction and other special fees; and
•
65%-100% for certain real assets funds, gross advisory, transaction and other special fees.
Management Fees. The significant growth of the assets we manage has had a positive effect on our revenues. Management fees are typically calculated based upon any of “net asset value,” “gross assets,” “adjusted par asset value,” “adjusted costs of all unrealized portfolio investments,” “capital commitments,” “invested capital,” “adjusted assets,” “capital contributions,” or “stockholders’ equity,” each as defined in the applicable limited partnership agreement and/or management agreement of the unconsolidated funds.
Performance Fees. The general partners of our funds are entitled to an incentive return of normally up to 20% of the total returns of a fund’s capital, depending upon performance of the underlying funds and subject to preferred returns and high water marks, as applicable. Performance fees, categorized as performance allocations, are accounted for as an equity method investment, and effectively, the performance fees for any period are based upon an assumed liquidation of the funds’ assets at the reporting date, and distribution of the net proceeds in accordance with the funds’ allocation provisions. Performance fees categorized as incentive fees, which are not accounted as an equity method investment, are deferred until fees are probable to not be significantly reversed. Prior to the adoption of the new revenue recognition guidance, incentive fees were recognized on an assumed liquidation basis. The majority of performance fees are comprised of performance allocations.
As of September 30, 2019, approximately 51% of the value of our funds’ investments on a gross basis was determined using market-based valuation methods (i.e., reliance on broker or listed exchange quotes) and the remaining 49% was determined primarily by comparable company and industry multiples or discounted cash flow models. For our credit, private equity and real assets segments, the percentage determined using market-based valuation methods as of September 30, 2019 was 73%, 18% and 16%, respectively. See “Item 1A. Risk Factors—Risks Related to Our Businesses—Our funds’ performance, and our performance, may be adversely affected by the financial performance of our funds’ portfolio companies and the industries in which our funds invest” in the 2018 Annual Report for a discussion regarding certain industry-specific risks that could affect the fair value of our private equity funds’ portfolio company investments.
In our private equity funds, the Company does not earn performance fees until the investors in the fund have achieved cumulative investment returns on invested capital (including management fees and expenses) in excess of an 8% hurdle rate. Additionally, certain of our credit and real assets funds have various performance fee rates and hurdle rates. Certain of our credit and real assets funds allocate performance fees to the general partner in a similar manner as the private equity funds. In our private equity, certain credit and real assets funds, so long as the investors achieve their priority returns, there is a catch-up formula whereby the Company earns a priority return for a portion of the return until the Company’s performance fees equate to its incentive fee rate for that fund; thereafter, the Company participates in returns from the fund at the performance fee rate. Performance fees, categorized as performance allocations, are subject to reversal to the extent that the performance fees distributed exceed the amount due to the general partner based on a fund’s cumulative investment returns. The Company recognizes potential repayment of previously received performance fees as a general partner obligation representing all amounts previously distributed to the general partner that would need to be repaid to the Apollo funds if these funds were to be liquidated based on the current fair value of the underlying funds’ investments as of the reporting date. The actual general partner obligation, however, would not become payable or realized until the end of a fund’s life or as otherwise set forth in the respective limited partnership agreement of the fund.

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The table below presents an analysis of Apollo’s (i) performance fees receivable on an unconsolidated basis and (ii) realized and unrealized performance fees for Apollo’s combined segments:
 
As of
September 30, 2019
 
For the Three Months Ended September 30, 2019
 
For the Nine Months Ended September 30, 2019
 
Performance Fees Receivable on an Unconsolidated Basis
 
Unrealized Performance Fees
 
Realized Performance Fees
 
Total Performance Fees
 
Unrealized Performance Fees
 
Realized Performance Fees
 
Total Performance Fees
 
(in thousands)
Credit:
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate Credit(1)
$
74,154

 
$
15,491

 
$
2,666

 
$
18,157

 
$
66,570

 
$
10,132

 
$
76,702

Structured Credit
187,441

 
9,252

 
2,677

 
11,929

 
45,768

 
19,213

 
64,981

Direct Origination
102,876

 
9,094

 
4,636

 
13,730

 
22,553

 
11,913

 
34,466

Total Credit
$
364,471

 
$
33,837

 
$
9,979

 
$
43,816

 
$
134,891

 
$
41,258

 
$
176,149

Total Credit, net of profit sharing expense
117,867

 
20,283

 
8,305

 
28,588

 
76,762

 
28,189

 
104,951

Private Equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fund VIII(2)
$
796,534

 
$
173,585

 
$
57,270

 
$
230,855

 
$
355,339

 
$
124,803

 
$
480,142

Fund VII(1)(2)
220

 
(66,978
)
 
700

 
(66,278
)
 
(90,215
)
 
2,177

 
(88,038
)
Fund VI(2)
16,151

 
567

 
889

 
1,456

 
28,040

 
2,808

 
30,848

Fund IV and V(1)
—

 
109

 
—

 
109

 
(1,144
)
 
—

 
(1,144
)
ANRP I and II(1)(2)
48,372

 
(5,645
)
 
2,445

 
(3,200
)
 
14,058

 
3,100

 
17,158

Other(1)(3)
82,493

 
11,998

 
2,438

 
14,436

 
29,624

 
3,541

 
33,165

Total Private Equity
$
943,770

 
$
113,636

 
$
63,742

 
$
177,378

 
$
335,702

 
$
136,429

 
$
472,131

Total Private Equity, net of profit sharing expense
578,416

 
83,016

 
41,658

 
124,674

 
228,367

 
72,529

 
300,896

Real Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal Finance
$
127,624

 
$
20,660

 
$
—

 
$
20,660

 
$
5,443

 
$
1,760

 
$
7,203

U.S. RE Fund I & II
13,287

 
420

 
—

 
420

 
(2,871
)
 
1,645

 
(1,226
)
Infrastructure Equity Fund
10,220

 
5,143

 
—

 
5,143

 
10,220

 
—

 
10,220

Other(3)
18,906

 
3,189

 
162

 
3,351

 
7,562

 
(163
)
 
7,399

Total Real Assets
$
170,037

 
$
29,412

 
$
162

 
$
29,574

 
$
20,354

 
$
3,242

 
$
23,596

Total Real Assets, net of profit sharing expense
98,712

 
18,811

 
97

 
18,908

 
14,482

 
1,943

 
16,425

Total
$
1,478,278

 
$
176,885

 
$
73,883

 
$
250,768

 
$
490,947

 
$
180,929

 
$
671,876

Total, net of profit sharing expense(4)
$
794,995

 
$
122,110

 
$
50,060

 
$
172,170

 
$
319,611

 
$
102,661

 
$
422,272

(1)
As of September 30, 2019, certain credit funds and certain private equity funds had $0.3 million and $213.6 million, respectively, in general partner obligations to return previously distributed performance fees. The fair value gain on investments and income at the fund level needed to reverse the general partner obligations for certain credit funds and certain private equity funds was $1.1 million and $1,622.6 million, respectively, as of September 30, 2019.
(2)
As of September 30, 2019, the remaining investments and escrow cash of Fund VIII were valued at 132% of the fund’s unreturned capital, which was above the required escrow ratio of 115%. As of September 30, 2019, the remaining investments and escrow cash of Fund VII, Fund VI, ANRP I and ANRP II were valued at 60%, 38%, 51% and 109% of the fund’s unreturned capital, respectively, which were below the required escrow ratio of 115%. As a result, these funds are required to place in escrow current and future performance fee distributions to the general partner until the specified return ratio of 115% is met (at the time of a future distribution) or upon liquidation. As of September 30, 2019, Fund VII had $128.5 million of gross performance fees, or $73.1 million net of profit sharing, in escrow. As of September 30, 2019, Fund VI had $167.6 million of gross performance fees, or $112.4 million net of profit sharing, in escrow. As of September 30, 2019, ANRP I had $40.2 million of gross performance fees, or $25.2 million net of profit sharing, in escrow. As of September 30, 2019, ANRP II had $21.0 million of gross performance fees, or $14.3 million net of profit sharing, in escrow. With respect to Fund VII, Fund VI, ANRP II and ANRP I, realized performance fees currently distributed to the general partner are limited to potential tax distributions and interest on escrow balances per the funds’ partnership agreements. Performance fees receivable as of September 30, 2019 and realized performance fees include interest earned on escrow balances that is not subject to contingent repayment.
(3)
Other includes certain SIAs.
(4)
There was a corresponding profit sharing payable of $693.6 million as of September 30, 2019, including profit sharing payable related to amounts in escrow and contingent consideration obligations of $96.4 million.
The general partners of certain of our credit funds accrue performance fees, categorized as performance allocations, when the fair value of investments exceeds the cost basis of the individual investors’ investments in the fund, including any allocable share of expenses incurred in connection with such investments, which we refer to as “high water marks.” These high water marks are applied on an individual investor basis. Certain of our credit funds have investors with various high water marks, the achievement of which is subject to market conditions and investment performance.
Performance fees from our private equity funds and certain credit and real assets funds are subject to contingent repayment by the general partner in the event of future losses to the extent that the cumulative performance fees distributed from

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inception to date exceeds the amount computed as due to the general partner at the final distribution. These general partner obligations, if applicable, are included in due to related parties on the condensed consolidated statements of financial condition.
The following table summarizes our performance fees since inception for our combined segments through September 30, 2019:
 
Performance Fees Since Inception(1)
 
Undistributed by Fund and Recognized
 
Distributed by Fund and Recognized(2)
 
Total Undistributed and Distributed by Fund and Recognized(3)
 
General Partner Obligation(3)
 
Maximum Performance Fees Subject to Potential Reversal(4)
 
(in millions)
Credit:
 
 
 
 
 
 
 
 
 
Corporate Credit
$
74.2

 
$
1,082.0

 
$
1,156.2

 
$
0.3

 
$
92.6

Structured Credit
187.4

 
143.5

 
330.9

 
—

 
166.9

Direct Origination
102.9

 
12.0

 
114.9

 
—

 
97.9

Total Credit
364.5

 
1,237.5

 
1,602.0

 
0.3

 
357.4

Private Equity:
 
 
 
 
 
 
 
 
 
Fund VIII
796.5

 
555.4

 
1,351.9

 
—

 
1,147.0

Fund VII
0.2

 
3,130.9

 
3,131.1

 
128.9

 
335.8

Fund VI
16.2

 
1,663.9

 
1,680.1

 
—

 
3.8

Fund IV and V
—

 
2,053.1

 
2,053.1

 
30.4

 
0.5

ANRP I and II
48.4

 
93.4

 
141.8

 
12.0

 
66.5

Other
82.5

 
707.1

 
789.6

 
42.3

 
107.8

Total Private Equity
943.8

 
8,203.8

 
9,147.6

 
213.6

 
1,661.4

Real Assets:
 
 
 
 
 
 
 
 
 
Principal Finance
127.6

 
363.3

 
490.9

 
—

 
255.5

U.S. RE Fund I and II
13.3

 
27.8

 
41.1

 
—

 
29.1

Infrastructure Equity Fund
10.2

 
—

 
10.2

 
—

 
10.2

Other(5)
18.9

 
36.9

 
55.8

 
—

 
27.8

Total Real Assets
170.0

 
428.0

 
598.0

 
—

 
322.6

Total
$
1,478.3

 
$
9,869.3

 
$
11,347.6

 
$
213.9

 
$
2,341.4

(1)
Certain funds are denominated in Euros and historical figures are translated into U.S. dollars at an exchange rate of €1.00 to $1.09 as of September 30, 2019. Certain funds are denominated in pound sterling and translated into U.S. dollars at an exchange rate of £1.00 to $1.23 as of September 30, 2019.
(2)
Amounts in “Distributed by Fund and Recognized” for the CPI, Gulf Stream Asset Management, LLC (“Gulf Stream”), Stone Tower Capital LLC and its related companies (“Stone Tower”) funds and SIAs are presented for activity subsequent to the respective acquisition dates.
(3)
Amounts were computed based on the fair value of fund investments on September 30, 2019. Performance fees have been allocated to and recognized by the general partner. Based on the amount allocated, a portion is subject to potential reversal or, to the extent applicable, has been reduced by the general partner obligation to return previously distributed performance fees at September 30, 2019. The actual determination and any required payment of any such general partner obligation would not take place until the final disposition of the fund’s investments based on contractual termination of the fund.
(4)
Represents the amount of performance fees that would be reversed if remaining fund investments became worthless on September 30, 2019. Amounts subject to potential reversal of performance fees include amounts undistributed by a fund (i.e., the performance fees receivable), as well as a portion of the amounts that have been distributed by a fund, net of taxes and not subject to a general partner obligation to return previously distributed performance fees, except for those funds that are gross of taxes as defined in the respective funds’ governing documents.
(5)
Other includes certain SIAs.
Expenses
Compensation and Benefits. Our most significant expense is compensation and benefits expense. This consists of fixed salary, discretionary and non-discretionary bonuses, profit sharing expense associated with the performance fees earned from credit, private equity, and real assets funds and compensation expense associated with the vesting of non-cash equity-based awards.

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Our compensation arrangements with certain partners and employees contain a significant performance-based incentive component. Therefore, as our net revenues increase, our compensation costs rise. Our compensation costs also reflect the increased investment in people as we expand geographically and create new funds.
In addition, certain professionals and selected other individuals have a profit sharing interest in the performance fees earned in relation to our private equity, certain credit and real assets funds in order to better align their interests with our own and with those of the investors in these funds. Profit sharing expense is part of our compensation and benefits expense and is generally based upon a fixed percentage of credit, private equity and real assets performance fees. Profit sharing expense can reverse during periods when there is a decline in performance fees that were previously recognized. Profit sharing amounts are normally distributed to employees after the corresponding investment gains have been realized and generally before preferred returns are achieved for the investors. Therefore, changes in our unrealized performance fees have the same effect on our profit sharing expense. Profit sharing expense increases when unrealized performance fees increases. Realizations only impact profit sharing expense to the extent that the effects on investments have not been recognized previously. If losses on other investments within a fund are subsequently realized, the profit sharing amounts previously distributed are normally subject to a general partner obligation to return performance fees previously distributed back to the funds. This general partner obligation due to the funds would be realized only when the fund is liquidated, which generally occurs at the end of the fund’s term. However, indemnification obligations also exist for realized gains with respect to Fund IV, Fund V and Fund VI, which, although our Managing Partners and Contributing Partners would remain personally liable, may indemnify our Managing Partners and Contributing Partners for 17.5% to 100% of the previously distributed profits regardless of the fund’s future performance. See note 14 to our condensed consolidated financial statements for further information regarding the Company’s indemnification liability.
Each Managing Partner receives $100,000 per year in base salary for services rendered to us. Additionally, our Managing Partners can receive other forms of compensation. In addition, AHL Awards (as defined in note 12 to our condensed consolidated financial statements) and other equity-based compensation awards have been granted to the Company and certain employees, which amortize over the respective vesting periods. The Company grants equity awards to certain employees, including RSUs, restricted Class A Common Stock and options, that generally vest and become exercisable in quarterly installments or annual installments depending on the contract terms over a period of three to six years. In some instances, vesting of an RSU is also subject to the Company’s receipt of performance fees, within prescribed periods, sufficient to cover the associated equity-based compensation expense. See note 12 to our condensed consolidated financial statements for further discussion of equity-based compensation.
Other Expenses. The balance of our other expenses includes interest, placement fees, and general, administrative and other operating expenses. Interest expense consists primarily of interest related to the 2013 AMH Credit Facilities, the 2018 AMH Credit Facility, the 2024 Senior Notes, the 2026 Senior Notes, the 2029 Senior Notes, the 2039 Senior Secured Guaranteed Notes and the 2048 Senior Notes as discussed in note 10 to our condensed consolidated financial statements. Placement fees are incurred in connection with our capital raising activities. General, administrative and other expenses includes occupancy expense, depreciation and amortization, professional fees and costs related to travel, information technology and administration. Occupancy expense represents charges related to office leases and associated expenses, such as utilities and maintenance fees. Depreciation and amortization of fixed assets is normally calculated using the straight-line method over their estimated useful lives, ranging from two to sixteen years, taking into consideration any residual value. Leasehold improvements are amortized over the shorter of the useful life of the asset or the expected term of the lease. Intangible assets are amortized based on the future cash flows over the expected useful lives of the assets.
Other Income (Loss)
Net Gains (Losses) from Investment Activities. Net gains (losses) from investment activities include both realized gains and losses and the change in unrealized gains and losses in our investment portfolio between the opening reporting date and the closing reporting date. Net unrealized gains (losses) are a result of changes in the fair value of unrealized investments and reversal of unrealized gains (losses) due to dispositions of investments during the reporting period. Significant judgment and estimation goes into the assumptions that drive these models and the actual values realized with respect to investments could be materially different from values obtained based on the use of those models. The valuation methodologies applied impact the reported value of investment company holdings and their underlying portfolios in our condensed consolidated financial statements.
Net Gains (Losses) from Investment Activities of Consolidated Variable Interest Entities. Changes in the fair value of the consolidated VIEs’ assets and liabilities and related interest, dividend and other income and expenses subsequent to consolidation are presented within net gains (losses) from investment activities of consolidated variable interest entities and are attributable to Non-Controlling Interests in the condensed consolidated statements of operations.

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Other Income (Losses), Net. Other income (losses), net includes gains (losses) arising from the remeasurement of foreign currency denominated assets and liabilities, remeasurement of the tax receivable agreement liability and other miscellaneous non-operating income and expenses.
Income Taxes. Prior to the Conversion, certain entities in the Apollo Operating Group operated as partnerships for U.S. federal income tax purposes. As a result, these members of the Apollo Operating Group were not subject to U.S. federal income taxes. However, certain of these entities were subject to New York City unincorporated business taxes (“NYC UBT”) and certain non-U.S. entities were subject to non-U.S. corporate income taxes. Effective September 5, 2019, Apollo Global Management, LLC converted from a Delaware limited liability company to a Delaware corporation named Apollo Global Management, Inc. Subsequent to the Conversion, we expect that all of the income the Company earns will be subject to U.S. corporate income taxes, which could result in an overall higher income tax expense (or benefit) in periods subsequent to the Conversion.
Significant judgment is required in determining the provision for income taxes and in evaluating income tax positions, including evaluating uncertainties. We recognize the income tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained upon examination, including resolutions of any related appeals or litigation, based on the technical merits of the positions. The tax benefit is measured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. If a tax position is not considered more likely than not to be sustained, then no benefits of the position are recognized. The Company’s income tax positions are reviewed and evaluated quarterly to determine whether or not we have uncertain tax positions that require financial statement recognition or de-recognition.
Deferred tax assets and liabilities are recognized for the expected future tax consequences, using currently enacted tax rates, of differences between the carrying amount of assets and liabilities and their respective tax basis. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period when the change is enacted. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Non-Controlling Interests
For entities that are consolidated, but not 100% owned, a portion of the income or loss and corresponding equity is allocated to owners other than Apollo. The aggregate of the income or loss and corresponding equity that is not owned by the Company is included in Non-Controlling Interests in the condensed consolidated financial statements. The Non-Controlling Interests relating to Apollo Global Management, Inc. primarily include the 44.8% and 50.2% ownership interest in the Apollo Operating Group held by the Managing Partners and Contributing Partners through their limited partner interests in Holdings as of September 30, 2019 and 2018, respectively. Non-Controlling Interests also include limited partner interests in certain consolidated funds and VIEs.
The authoritative guidance for Non-Controlling Interests in the condensed consolidated financial statements requires reporting entities to present Non-Controlling Interest as equity and provides guidance on the accounting for transactions between an entity and Non-Controlling Interests. According to the guidance, (1) Non-Controlling Interests are presented as a separate component of stockholders’ equity on the Company’s condensed consolidated statements of financial condition, (2) net income (loss) includes the net income (loss) attributable to the Non-Controlling Interest holders on the Company’s condensed consolidated statements of operations, (3) the primary components of Non-Controlling Interest are separately presented in the Company’s condensed consolidated statements of changes in stockholders’ equity to clearly distinguish the interests in the Apollo Operating Group and other ownership interests in the consolidated entities and (4) profits and losses are allocated to Non-Controlling Interests in proportion to their ownership interests regardless of their basis.

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Results of Operations
Below is a discussion of our condensed consolidated results of operations for the three and nine months ended September 30, 2019 and 2018. For additional analysis of the factors that affected our results at the segment level, see “—Segment Analysis” below:
 
For the Three Months Ended
September 30,
 
Amount
Change
 
Percentage
Change
 
For the Nine Months Ended September 30,
 
Amount
Change
 
Percentage
Change
 
2019
 
2018
 
 
2019
 
2018
 
Revenues:
(in thousands)
 
 
 
(in thousands)
 
 
Management fees
$
394,547

 
$
358,750

 
$
35,797

 
10.0
 %
 
$
1,162,788

 
$
987,102

 
$
175,686

 
17.8
 %
Advisory and transaction fees, net
16,440

 
13,154

 
3,286

 
25.0

 
67,133

 
42,145

 
24,988

 
59.3

Investment income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Performance allocations
254,103

 
124,856

 
129,247

 
103.5

 
682,462

 
129,776

 
552,686

 
425.9

Principal investment income
33,393

 
16,153

 
17,240

 
106.7

 
99,020

 
25,334

 
73,686

 
290.9

Total investment income
287,496

 
141,009

 
146,487

 
103.9

 
781,482

 
155,110

 
626,372

 
403.8

Incentive fees
4,238

 
4,818

 
(580
)
 
(12.0
)
 
5,674

 
23,593

 
(17,919
)
 
(76.0
)
Total Revenues
702,721

 
517,731

 
184,990

 
35.7

 
2,017,077

 
1,207,950

 
809,127

 
67.0

Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and benefits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Salary, bonus and benefits
126,695

 
112,722

 
13,973

 
12.4

 
369,527

 
343,623

 
25,904

 
7.5

Equity-based compensation
42,665

 
50,334

 
(7,669
)
 
(15.2
)
 
132,404

 
123,643

 
8,761

 
7.1

Profit sharing expense
88,610

 
63,059

 
25,551

 
40.5

 
280,335

 
121,327

 
159,008

 
131.1

Total compensation and benefits
257,970

 
226,115

 
31,855

 
14.1

 
782,266

 
588,593

 
193,673

 
32.9

Interest expense
27,833

 
15,209

 
12,624

 
83.0

 
70,243

 
44,168

 
26,075

 
59.0

General, administrative and other
85,313

 
70,657

 
14,656

 
20.7

 
238,814

 
194,851

 
43,963

 
22.6

Placement fees
256

 
746

 
(490
)
 
(65.7
)
 
591

 
1,384

 
(793
)
 
(57.3
)
Total Expenses
371,372

 
312,727

 
58,645

 
18.8

 
1,091,914

 
828,996

 
262,918

 
31.7

Other Income (Loss):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net gains (losses) from investment activities
(19,790
)
 
155,283

 
(175,073
)
 
NM

 
44,099

 
20,645

 
23,454

 
113.6

Net gains from investment activities of consolidated variable interest entities
10,631

 
13,001

 
(2,370
)
 
(18.2
)
 
24,728

 
28,746

 
(4,018
)
 
(14.0
)
Interest income
10,152

 
5,411

 
4,741

 
87.6

 
25,938

 
13,517

 
12,421

 
91.9

Other income, net
(43,144
)
 
3,085

 
(46,229
)
 
NM

 
(36,451
)
 
1,888

 
(38,339
)
 
NM

Total Other Income (Loss)
(42,151
)
 
176,780

 
(218,931
)
 
NM

 
58,314

 
64,796

 
(6,482
)
 
(10.0
)
Income before income tax (provision) benefit
289,198

 
381,784

 
(92,586
)
 
(24.3
)
 
983,477

 
443,750

 
539,727

 
121.6

Income tax (provision) benefit
231,896

 
(19,092
)
 
250,988

 
NM

 
195,345

 
(46,596
)
 
241,941

 
NM

Net Income
521,094

 
362,692

 
158,402

 
43.7

 
1,178,822

 
397,154

 
781,668

 
196.8

Net income attributable to Non-Controlling Interests
(157,824
)
 
(191,171
)
 
33,347

 
(17.4
)
 
(501,672
)
 
(220,285
)
 
(281,387
)
 
127.7

Net Income Attributable to Apollo Global Management, Inc.
363,270

 
171,521

 
191,749

 
111.8

 
677,150

 
176,869

 
500,281

 
282.9

Series A Preferred Stock Dividends
(4,382
)
 
(4,383
)
 
1

 
—

 
(13,148
)
 
(13,149
)
 
1

 
—

Series B Preferred Stock Dividends
(4,782
)
 
(4,781
)
 
(1
)
 
—

 
(14,344
)
 
(9,350
)
 
(4,994
)
 
53.4

Net Income Attributable to Apollo Global Management, Inc. Class A Common Stockholders
$
354,106

 
$
162,357

 
$
191,749

 
118.1
 %
 
$
649,658

 
$
154,370

 
$
495,288

 
320.8
 %
Note:
“NM” denotes not meaningful. Changes from negative to positive amounts and positive to negative amounts are not considered meaningful. Increases or decreases from zero and changes greater than 500% are also not considered meaningful.
Revenues
Our revenues and other income include fixed components that result from measures of capital and asset valuations and variable components that result from realized and unrealized investment performance, as well as the value of successfully completed transactions.
Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018
Management fees increased by $35.8 million for the three months ended September 30, 2019 as compared to the three months ended September 30, 2018. This change was primarily attributable to an increase in management fees earned from Athene of $23.0 million, as well as modest increases across our segments, during the three months ended September 30, 2019 as compared

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to the same period in 2018. For additional details regarding changes in management fees in each segment, see “—Segment Analysis” below.
Advisory and transaction fees, net, increased by $3.3 million for the three months ended September 30, 2019 as compared to the three months ended September 30, 2018. This change was primarily attributable to an increase in net advisory and transaction fees earned with respect to Fund VIII’s portfolio companies of $2.9 million during the three months ended September 30, 2019 as compared to the same period in 2018.
Performance allocations increased by $129.2 million for the three months ended September 30, 2019 as compared to the three months ended September 30, 2018. The increase in performance allocations was primarily attributable to increased performance allocations earned from Fund VIII and EPF III of $141.7 million and $29.5 million, respectively, partially offset by decreases in performance allocations earned from Fund VII and Fund VI of $29.8 million and $26.4 million, respectively, for the three months ended September 30, 2019 as compared to the same period in 2018.
The increase in performance allocations from Fund VIII was primarily driven by greater appreciation in the value of the fund’s investments in portfolio companies primarily in the manufacturing and industrial, consumer services and financial services sectors, during the three months ended September 30, 2019 as compared to the same period during 2018. The increase in performance allocations from EPF III was primarily driven by the fund achieving its annualized hurdle rate during the three months ended September 30, 2019, which did not occur in the same period during 2018. The decrease in performance allocations from Fund VII was primarily attributable to depreciation in the value of the fund’s investments in public portfolio companies primarily in the natural resources sector and private investments in the media, telecom and technology sectors during the three months ended September 30, 2019 as compared to the same period during 2018. The decrease in performance fees from Fund VI was primarily driven by decreased appreciation in the value of the fund’s investments in public portfolio companies primarily in the leisure and chemicals sectors, during the three months ended September 30, 2019 as compared to the same period during 2018.
Principal investment income increased by $17.2 million for the three months ended September 30, 2019, as compared to the three months ended September 30, 2018. This change was primarily driven by an increase in the value of investments held by certain Apollo funds and other entities in which the Company has a direct interest, mainly with respect to Fund VIII of $17.0 million during the three months ended September 30, 2019 as compared to the same period in 2018.
Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018
Management fees increased by $175.7 million for the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018. This change was primarily attributable to an increase in management fees earned from Athene and Fund IX of $89.2 million and $79.5 million, respectively, during nine months ended September 30, 2019, compared to the same period during 2018. For additional details regarding changes in management fees in each segment, see “—Segment Analysis” below.
Advisory and transaction fees, net, increased by $25.0 million for the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018. This change was primarily attributable to an increase in net advisory and transaction fees earned with respect to Fund IX’s investments in portfolio companies and Hybrid Value Fund’s investments in portfolio companies of $14.0 million and $10.1 million, respectively, during the nine months ended September 30, 2019, as compared to the same period during 2018.
Performance allocations increased by $552.7 million for the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018. The increase in performance allocations was primarily attributable to increased performance allocations earned from Fund VIII, SCRF IV and Fund VI of $498.0 million, $30.4 million and $29.9 million, respectively, partially offset by a decrease in performance allocations earned from Fund VII of $95.9 million during the nine months ended September 30, 2019, as compared to the same period during 2018.
The increase in performance allocations from Fund VIII was primarily driven by greater appreciation in the value of the fund’s investments in private portfolio companies primarily in the manufacturing and industrial and consumer services sectors, and appreciation in the value of the fund’s investments in public portfolio companies in the business services and financial services sectors, during the nine months ended September 30, 2019 as compared to the same period during 2018. The increase in performance fees from SCRF IV was primarily driven by income from the fund’s investments in CLO liabilities and synthetic structured CDOs during the nine months ended September 30, 2019 as compared to the same period during 2018. The increase in performance fees from Fund VI was primarily driven by appreciation in the value of the fund’s investments in public portfolio companies primarily in the leisure sector, during the nine months ended September 30, 2019 as compared to the same period during 2018. The decrease in performance allocations from Fund VII was primarily attributable to depreciation in the value of the fund’s investments in public portfolio companies primarily in the natural resources and business services sectors and depreciation of the fund’s private

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investments primarily in the media, telecom and technology sector during the nine months ended September 30, 2019 as compared to the same period during 2018.
Principal investment income increased by $73.7 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. This change was primarily driven by an increase in the value of investments held by certain Apollo funds and other entities in which the Company has a direct interest, mainly with respect to Fund VIII of $59.4 million during the nine months ended September 30, 2019 as compared to the same period in 2018.
Incentive fees decreased by $17.9 million for the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018. This change was primarily attributable to a decrease in incentive fees earned from AINV and a strategic investment account of $11.9 million and $8.8 million, respectively, during the nine months ended September 30, 2019 as compared to the same period in 2018. The decrease in incentive fees earned from AINV was a result of the amended and restated investment management agreement with AINV which was revised to be on a total return measure, as described in note 14 to our condensed consolidated financial statements.
Expenses
Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018
Compensation and benefits increased by $31.9 million for the three months ended September 30, 2019, as compared to the three months ended September 30, 2018. This change was primarily attributable to an increase in profit sharing expense of $25.6 million due to a corresponding increase in performance allocations during the three months ended September 30, 2019, as compared to the same period in 2018. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance allocations in the period. In addition, salary, bonus and benefits increased by $14.0 million primarily due to an increase in headcount.
Included in profit sharing expense is $16.3 million for the three months ended September 30, 2018 related to a performance based incentive arrangement for certain Apollo partners and employees designed to more closely align compensation with the overall realized performance of the Company on an annual basis (referred to herein as the “Incentive Pool”). There was no profit sharing expense related to the Incentive Pool for the three months ended September 30, 2019. Allocations to participants in the Incentive Pool contain both a fixed component and a discretionary component, each of which may vary year to year. The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period. See “—Profit Sharing Expense” in the Critical Accounting Policies section for an overview of the Incentive Pool.
Interest expense increased by $12.6 million for the three months ended September 30, 2019, as compared to the three months ended September 30, 2018, primarily due to additional interest expense incurred during the three months ended September 30, 2019 as a result of the issuances of the 2029 Senior Notes and 2039 Senior Secured Guaranteed Notes, as described in note 10 to our condensed consolidated financial statements.
General, administrative and other expenses increased by $14.7 million for the three months ended September 30, 2019, as compared to the three months ended September 30, 2018, primarily due to an increase in professional fees and fund organizational expenses during the three months ended September 30, 2019, as compared to the same period in 2018.
Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018
Compensation and benefits increased by $193.7 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. This change was primarily attributable to an increase in profit sharing expense of $159.0 million due to a corresponding increase in performance allocations during the nine months ended September 30, 2019, as compared to the same period in 2018. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance allocations in the period. In addition, salary, bonus and benefits increased by $25.9 million primarily due to an increase in headcount.
Included in profit sharing expense is $17.0 million and $50.7 million for the nine months ended September 30, 2019 and 2018, respectively, related to the Incentive Pool. See “—Profit Sharing Expense” in the Critical Accounting Policies section for an overview of the Incentive Pool.
Interest expense increased by $26.1 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018, primarily due to additional interest expense incurred during the nine months ended September 30, 2019 as a result of the issuances of the 2029 Senior Notes and 2039 Senior Secured Guaranteed Notes, as described in note 10 to our condensed consolidated financial statements.

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General, administrative and other expenses increased by $44.0 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. This change was primarily driven by an increase in professional fees and fund organizational expenses during the nine months ended September 30, 2019 as compared to the same period in 2018.
Other Income (Loss)
Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018
Net losses from investment activities were $19.8 million for the three months ended September 30, 2019, as compared to net gains from investment activities of $155.3 million for the three months ended September 30, 2018. This change was primarily attributable to a loss on the Company’s investment in Athene Holding during the three months ended September 30, 2019 as compared to a gain on the Company’s investment in Athene Holding during the three months ended September 30, 2018. See note 6 to the condensed consolidated financial statements for further information regarding the Company’s investment in Athene Holding.
Net gains from investment activities of consolidated VIEs decreased by $2.4 million for the three months ended September 30, 2019, as compared to the three months ended September 30, 2018, primarily driven by a decrease in net gains from Champ, L.P. during the three months ended September 30, 2019, as compared to the same period in 2018. See note 5 to the condensed consolidated financial statements for details regarding net gains from investment activities of consolidated VIEs.
Interest income increased by $4.7 million for the three months ended September 30, 2019, as compared to the three months ended September 30, 2018, primarily due to increased interest income earned from U.S. Treasury securities held during the three months ended September 30, 2019, as compared to the same period in 2018.
Other loss, net was $43.1 million during the three months ended September 30, 2019, as compared to other income, net of $3.1 million during the three months ended September 30, 2018. This change was primarily attributable to losses from the change in tax receivable agreement liability during the three months ended September 30, 2019.
Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018
Net gains from investment activities increased by $23.5 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. This change was primarily attributable to increased appreciation on the Company’s investment in Athene Holding during the nine months ended September 30, 2019, as compared to the same period in 2018. See note 6 to the condensed consolidated financial statements for further information regarding the Company’s investment in Athene Holding.
Net gains from investment activities of consolidated VIEs decreased by $4.0 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018, primarily driven by a decrease in net gains from Champ, L.P. during the nine months ended September 30, 2019, as compared to the same period in 2018. See note 5 to the condensed consolidated financial statements for details regarding net gains from investment activities of consolidated VIEs.
Interest income increased by $12.4 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018, primarily due to increased interest income earned from U.S. Treasury securities held during the nine months ended September 30, 2018, as compared to the same period in 2018.
Other loss, net was $36.5 million during the nine months ended September 30, 2019, as compared to other income, net of $1.9 million during the nine months ended September 30, 2018. This change was primarily attributable to losses from the change in tax receivable agreement liability during the nine months ended September 30, 2019.
Net Income Attributable to Non-Controlling Interests and Series A and Series B Preferred Stockholders
For information related to net income attributable to Non-Controlling Interests and net income attributable to Series A and Series B Preferred Stockholders, see note 13 to the condensed consolidated financial statements.
Income Tax Provision
Effective September 5, 2019, Apollo Global Management, LLC, a Delaware limited liability company, converted to a Delaware corporation named Apollo Global Management, Inc. Prior to the Conversion, a portion of the investment income, performance allocations and principal investment income we earned was not subject to corporate-level tax in the United States. Subsequent to the Conversion, we expect that all of the income we earn will be subject to U.S. corporate income taxes, which could result in an overall higher income tax expense (or benefit) in periods subsequent to the Conversion. The provision for income taxes includes federal, state and local income taxes in the United States and foreign income taxes.

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Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018
The income tax provision decreased by $251.0 million for the three months ended September 30, 2019, as compared to the three months ended September 30, 2018. The decrease in the income tax provision was primarily related to the benefit recorded as a result of the following Conversion related items: (i) the step-up in assets from prior exchanges of AOG Units for Class A shares and (ii) the inclusion of certain partnerships previously not subject to federal income taxes. The additional benefit is offset by the mix of earnings when comparing the amount of earnings that are subject to corporate-level tax to those earnings that are not subject to corporate-level tax as such earnings are passed through to Non-Controlling Interests. The provision for income taxes includes federal, state, local and foreign income taxes resulting in an effective income tax rate of (80.2)% and 5.0% for the three months ended September 30, 2019 and 2018, respectively. Excluding the impact of the Conversion, the Company’s estimated effective tax rate would have been approximately 8.5% for the three months ended September 30, 2019. The most significant reconciling items between our U.S. federal statutory income tax rate and our effective income tax rate were due to the following: (i) income passed through to Non-Controlling Interests and (ii) the impacts upon Conversion noted above (see note 9 to the condensed consolidated financial statements for further details regarding the Company’s income tax provision).
Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018
The income tax provision decreased by $241.9 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. The decrease in the income tax provision was primarily related to the benefit recorded as a result of the following Conversion related items: (i) the step-up in assets from prior exchanges of AOG Units for Class A shares and (ii) the inclusion of certain partnerships previously not subject to federal income taxes. The additional benefit is offset by the mix of earnings when comparing the amount of earnings that are subject to corporate-level tax to those earnings that are not subject to corporate-level tax as such earnings are passed through to Non-Controlling Interests. The provision for income taxes includes federal, state, local and foreign income taxes resulting in an effective income tax rate of (19.9)% and 10.5% for the nine months ended September 30, 2019 and 2018, respectively. Excluding the impact of the Conversion, the Company’s estimated effective tax rate would have been approximately 6.3% for the nine months ended September 30, 2019. The most significant reconciling items between our U.S. federal statutory income tax rate and our effective income tax rate were due to the following: (i) income passed through to Non-Controlling Interests and (ii) the impacts upon Conversion noted above (see note 9 to the condensed consolidated financial statements for further details regarding the Company’s income tax provision).
Segment Analysis
Discussed below are our results of operations for each of our reportable segments. They represent the segment information available and utilized by our executive management, which consists of our Managing Partners, who operate collectively as our chief operating decision maker, to assess performance and to allocate resources. See note 16 to our condensed consolidated financial statements for more information regarding our segment reporting.
Our financial results vary, since performance fees, which generally constitute a large portion of the income from the funds that we manage, as well as the transaction and advisory fees that we receive, can vary significantly from quarter to quarter and year to year. As a result, we emphasize long-term financial growth and profitability to manage our business.

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Credit
The following table sets forth our segment statement of operations information and our supplemental performance measure, Segment Distributable Earnings, within our credit segment.
 
For the Three Months Ended September 30,
 
Total Change
 
Percentage Change
 
For the Nine Months Ended September 30,
 
Total Change
 
Percentage Change
 
2019
 
2018
 
 
 
2019
 
2018
 
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
Credit:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Management fees
$
198,867

 
$
167,178

 
$
31,689

 
19.0
 %
 
$
571,884

 
$
470,070

 
$
101,814

 
21.7
 %
Advisory and transaction fees, net
5,530

 
2,189

 
3,341

 
152.6

 
13,888

 
6,484

 
7,404

 
114.2

Performance fees(1)
6,449

 
7,064

 
(615
)
 
(8.7
)
 
16,371

 
18,105

 
(1,734
)
 
(9.6
)
Fee Related Revenues
210,846

 
176,431

 
34,415

 
19.5

 
602,143

 
494,659

 
107,484

 
21.7

Salary, bonus and benefits
(51,746
)
 
(44,642
)
 
(7,104
)
 
15.9

 
(146,515
)
 
(134,192
)
 
(12,323
)
 
9.2

General, administrative and other
(33,403
)
 
(31,392
)
 
(2,011
)
 
6.4

 
(92,546
)
 
(85,603
)
 
(6,943
)
 
8.1

Placement fees
(190
)
 
(295
)
 
105

 
(35.6
)
 
(42
)
 
(850
)
 
808

 
(95.1
)
Fee Related Expenses
(85,339
)
 
(76,329
)
 
(9,010
)
 
11.8

 
(239,103
)
 
(220,645
)
 
(18,458
)
 
8.4

Other income (loss), net of Non-Controlling Interest
(597
)
 
265

 
(862
)
 
NM

 
967

 
2,260

 
(1,293
)
 
(57.2
)
Fee Related Earnings
124,910

 
100,367

 
24,543

 
24.5

 
364,007

 
276,274

 
87,733

 
31.8

Realized performance fees
3,530

 
11,281

 
(7,751
)
 
(68.7
)
 
24,887

 
29,030

 
(4,143
)
 
(14.3
)
Realized profit sharing expense
(1,674
)
 
(8,986
)
 
7,312

 
(81.4
)
 
(13,069
)
 
(23,313
)
 
10,244

 
(43.9
)
Net Realized Performance Fees
1,856

 
2,295

 
(439
)
 
(19.1
)
 
11,818

 
5,717

 
6,101

 
106.7

Realized principal investment income
5,845

 
6,676

 
(831
)
 
(12.4
)
 
16,803

 
16,887

 
(84
)
 
(0.5
)
Net interest loss and other
(6,106
)
 
(3,612
)
 
(2,494
)
 
69.0

 
(15,148
)
 
(11,082
)
 
(4,066
)
 
36.7

Segment Distributable Earnings
$
126,505

 
$
105,726

 
$
20,779

 
19.7
 %
 
$
377,480

 
$
287,796

 
$
89,684

 
31.2
 %
(1)
Represents certain performance fees from business development companies and Redding Ridge Holdings.
Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018
Management fees increased by $31.7 million for the three months ended September 30, 2019, as compared to the three months ended September 30, 2018. This change was primarily attributable to an increase in management fees earned from Athene and Athora of $20.6 million and $2.0 million, respectively, as well as modest increases across other credit funds and investment vehicles during the three months ended September 30, 2019, as compared to the same period during 2018.
Advisory and transaction fees, net increased by $3.3 million for the three months ended September 30, 2019, as compared to the three months ended September 30, 2018. This change was primarily attributable to an increase in net transaction and advisory fees earned from Athene and advisory assets of $1.7 million and $1.2 million, respectively, during the three months ended September 30, 2019, as compared to the same period during 2018.
Salary, bonus and benefits expense increased by $7.1 million for the three months ended September 30, 2019, as compared to the three months ended September 30, 2018 primarily due to an increase in headcount.
General, administrative and other increased by $2.0 million during the three months ended September 30, 2019, as compared to the three months ended September 30, 2018. The change was primarily driven by an increase fund organizational expenses and technology expenses during the three months ended September 30, 2019, as compared to the same period in 2018.
Realized performance fees decreased by $7.8 million during the three months ended September 30, 2019, as compared to the same period in 2018. This change was primarily attributable to a decrease in realized performance fees generated from a strategic investment account of $11.0 million during the three months ended September 30, 2019 as compared to the three months ended September 30, 2018. The decrease in realized performance fees generated from the strategic investment account was primarily driven by decreased income and sales proceeds from the private lending and opportunistic strategies during the three months ended September 30, 2019, as compared to the three months ended September 30, 2018.
Realized profit sharing expense decreased by $7.3 million during the three months ended September 30, 2019, as compared to the same period in 2018, as a result of a corresponding decrease in realized performance fees as described above. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is $1.0 million related to the Incentive Pool for the three months ended September 30, 2018. There was no realized profit sharing expense related to the Incentive Pool for the three

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months ended September 30, 2019. The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period.
Net interest loss and other increased by $2.5 million for the three months ended September 30, 2019, as compared to the three months ended September 30, 2018, primarily due to additional interest expense incurred during the three months ended September 30, 2019 as a result of the issuances of the 2029 Senior Notes and 2039 Senior Secured Guaranteed Notes, as described in note 10 to our condensed consolidated financial statements.
Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018
Management fees increased by $101.8 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. This change was primarily attributable to an increase in management fees earned from Athene and Athora of $75.4 million and $4.7 million, respectively, during the nine months ended September 30, 2019, as compared to the same period during 2018.
Advisory and transaction fees, net increased by $7.4 million during the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. This increase was primarily driven by increases in net advisory and transaction fees earned with respect to FCI III, Athene and advisory assets of $2.8 million, $2.1 million and $1.2 million, respectively, during the nine months ended September 30, 2019, as compared to the same period during 2018.
Performance fees decreased by $1.7 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. This change was primarily attributable to a decrease in performance fees earned from AINV of $11.9 million during the nine months ended September 30, 2019, as compared to the same period during 2018, as a result of the amended and restated investment management agreement with AINV which was revised to a total return measure, as described in note 14 to our condensed consolidated financial statements. This decrease in performance fees was partially offset by increased performance fees from Redding Ridge Holdings and a business development company of $6.3 million and $3.8 million during the nine months ended September 30, 2019, as compared to the same period during 2018. The performance fees from Redding Ridge Holdings and the business development company were primarily driven by the vehicles achieving their annualized hurdle rates during the nine months ended September 30, 2019, which did not occur during the same period during 2018.
Salary, bonus and benefits expense increased by $12.3 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018 primarily due to an increase in headcount.
General, administrative and other increased by $6.9 million during the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. The change was primarily driven by an increase in technology expenses and fund organizational expenses during the nine months ended September 30, 2019, as compared to the same period in 2018.
Other income, net of Non-Controlling Interest decreased by $1.3 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. This change was primarily attributable to income from the assignment of a CLO collateral management agreement during the nine months ended September 30, 2018.
Realized performance fees decreased by $4.1 million during the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. This change was primarily attributable to a decrease in realized performance fees generated from two strategic investment accounts of $13.3 million and $8.8 million, respectively, offset by an increase in realized performance fees generated from FCI I and Apollo Credit Master Fund Ltd. (“Credit Fund”) of $12.0 million and $3.2 million, respectively, during the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018. The decrease in realized performance fees generated from the first strategic investment account was primarily driven by decreased income and sales proceeds from the private lending and opportunistic strategies during the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. The decrease in realized performance fees generated from the other strategic investment account was driven by lesser income generated from CLO investments during the nine months ended September 30, 2019 as compared to the same period during 2018. The increase in realized performance fees generated from FCI I was primarily driven by realizations of the fund’s investments in various life settlement policies during the nine months ended September 30, 2019, while the fund had no realized performance fees during the nine months ended September 30, 2018. The increase in realized performance fees generated from Credit Fund was primarily driven by the appreciation of its bank loan investments during the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018.
Realized profit sharing expense decreased by $10.2 million during the nine months ended September 30, 2019, as compared to the same period in 2018, as a result of a corresponding decrease in realized performance fees as described above. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is $0.1 million and $2.4 million related to the Incentive Pool for the nine months ended September 30, 2019 and 2018, respectively. The Incentive Pool is separate from the fund related

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profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period.
Net interest loss and other increased by $4.1 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018, primarily due to additional interest expense incurred during the nine months ended September 30, 2019 as a result of the issuances of the 2029 Senior Notes and 2039 Senior Secured Guaranteed Notes, as described in note 10 to our condensed consolidated financial statements.
Private Equity
The following table sets forth our segment statement of operations information and our supplemental performance measure, Segment Distributable Earnings, within our private equity segment.
 
For the Three Months Ended September 30,
 
Total Change
 
Percentage Change
 
For the Nine Months Ended September 30,
 
Total Change
 
Percentage Change
 
2019
 
2018
 
 
 
2019
 
2018
 
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
Private Equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Management fees
$
131,643

 
$
131,578

 
$
65

 
—
 %
 
$
391,777

 
$
346,275

 
$
45,502

 
13.1
 %
Advisory and transaction fees, net
10,655

 
6,018

 
4,637

 
77.1

 
47,048

 
29,992

 
17,056

 
56.9

Fee Related Revenues
142,298

 
137,596

 
4,702

 
3.4

 
438,825

 
376,267

 
62,558

 
16.6

Salary, bonus and benefits
(45,807
)
 
(38,700
)
 
(7,107
)
 
18.4

 
(129,307
)
 
(121,304
)
 
(8,003
)
 
6.6

General, administrative and other
(26,603
)
 
(22,694
)
 
(3,909
)
 
17.2

 
(75,427
)
 
(59,010
)
 
(16,417
)
 
27.8

Placement fees
(65
)
 
(51
)
 
(14
)
 
27.5

 
(548
)
 
(134
)
 
(414
)
 
309.0

Fee Related Expenses
(72,475
)
 
(61,445
)
 
(11,030
)
 
18.0

 
(205,282
)
 
(180,448
)
 
(24,834
)
 
13.8

Other income (loss), net
(135
)
 
1,448

 
(1,583
)
 
NM

 
4,024

 
1,839

 
2,185

 
118.8

Fee Related Earnings
69,688

 
77,599

 
(7,911
)
 
(10.2
)
 
237,567

 
197,658

 
39,909

 
20.2

Realized performance fees
63,742

 
77,740

 
(13,998
)
 
(18.0
)
 
136,429

 
245,152

 
(108,723
)
 
(44.3
)
Realized profit sharing expense
(22,084
)
 
(42,842
)
 
20,758

 
(48.5
)
 
(63,900
)
 
(132,102
)
 
68,202

 
(51.6
)
Net Realized Performance Fees
41,658

 
34,898

 
6,760

 
19.4

 
72,529

 
113,050

 
(40,521
)
 
(35.8
)
Realized principal investment income
8,114

 
10,579

 
(2,465
)
 
(23.3
)
 
18,079

 
37,988

 
(19,909
)
 
(52.4
)
Net interest loss and other
(8,911
)
 
(5,004
)
 
(3,907
)
 
78.1

 
(22,694
)
 
(15,619
)
 
(7,075
)
 
45.3

Segment Distributable Earnings
$
110,549

 
$
118,072

 
$
(7,523
)
 
(6.4
)%
 
$
305,481

 
$
333,077

 
$
(27,596
)
 
(8.3
)%
Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018
Advisory and transaction fees, net increased by $4.6 million for the three months ended September 30, 2019, as compared to the three months ended September 30, 2018. This change was primarily attributable to an increase in net advisory and transaction fees earned with respect to Fund VIII’s investments in portfolio companies and Fund IX’s investments in portfolio companies of $2.9 million and $1.9 million, respectively, during the three months ended September 30, 2019, as compared to the same period during 2018.
Salary, bonus and benefits expense increased by $7.1 million for the three months ended September 30, 2019 as compared to the three months ended September 30, 2018 primarily due to an increase in headcount.
General, administrative and other increased by $3.9 million during the three months ended September 30, 2019, as compared to the three months ended September 30, 2018. The change was primarily driven by increased fund organizational expenses related to ANRP III, professional fees and other miscellaneous expenses during the three months ended September 30, 2019, as compared to the same period in 2018.
Realized performance fees decreased by $14.0 million for the three months ended September 30, 2019, as compared to the three months ended September 30, 2018. This change was primarily attributable to a decrease in realized performance fees generated from Fund VIII of $14.1 million during the three months ended September 30, 2019 as compared to the three months ended September 30, 2018. The decrease in realized performance fees from Fund VIII was primarily driven by a decrease in profits realized from investment sales and income from the fund’s investments. The realized performance fees from Fund VIII during the three months ended September 30, 2019 were the result of sales and income generated from investments primarily in the financial services sector. The realized performance fees during the three months ended September 30, 2018 were the result of sales and income generated from investments primarily in the business services, leisure and consumer services sectors.

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Realized profit sharing expense decreased by $20.8 million during the three months ended September 30, 2019, as compared to the same period in 2018, as a result of a corresponding decrease in realized performance fees as described above, and a decrease in profit sharing expense related to the Incentive Pool. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is $14.6 million related to the Incentive Pool for the three months ended September 30, 2018. There was no realized profit sharing expense related to the Incentive Pool for the three months ended September 30, 2019. The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period.
Realized principal investment income decreased by $2.5 million for the three months ended September 30, 2019, as compared to the same period in 2018. This change was primarily attributable to a decrease in realizations from Apollo’s equity ownership interest in Fund VIII of $2.0 million, during the three months ended September 30, 2019, as compared to the same period in 2018.
Net interest loss and other increased by $3.9 million for the three months ended September 30, 2019, as compared to the three months ended September 30, 2018, primarily due to additional interest expense incurred during the three months ended September 30, 2019 as a result of the issuances of the 2029 Senior Notes and 2039 Senior Secured Guaranteed Notes, as described in note 10 to our condensed consolidated financial statements.
Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018
Management fees increased by $45.5 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. This change was primarily attributable to the commencement of Fund IX’s investment period in April 2018, resulting in an increase of $79.5 million in management fees during the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. The increase in management fees was partially offset by decreased management fees earned from Fund VIII and COF III of $22.1 million and $6.0 million, respectively, during the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018.
Advisory and transaction fees, net increased by $17.1 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. This change was primarily attributable to an increase in net advisory and transaction fees earned with respect to Fund IX’s investments in portfolio companies and Hybrid Value Fund’s investments in portfolio companies of $14.0 million and $10.1 million, respectively, during the nine months ended September 30, 2019, as compared to the same period during 2018. The increase in net advisory and transaction fees was partially offset by decreased net advisory and transaction fees earned from Fund VIII’s investments in portfolio companies of $5.7 million during the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018.
Salary, bonus and benefits expense increased by $8.0 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018 primarily due to an increase in headcount.
General, administrative and other increased by $16.4 million during the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. The change was primarily driven by increased professional fees and fund organizational expenses related to ANRP III during the nine months ended September 30, 2019, as compared to the same period in 2018.
Other income, net increased by $2.2 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. The change was primarily driven by the reversal of a liability relating to a favorable judgment in a legal proceeding during the nine months ended September 30, 2019.
Realized performance fees decreased by $108.7 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. This change was primarily attributable to decreases in realized performance fees generated from Fund VIII, ANRP II, and Fund VII of $80.4 million, $5.2 million, and $4.5 million, respectively, during the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018.
The realized performance fees from Fund VIII during the nine months ended September 30, 2019 were the result of sales and income generated from investments primarily in the business services, manufacturing and industrial, financial services and leisure sectors. The realized performance fees during the nine months ended September 30, 2018 were the result of sales and income generated from investments primarily in the financial services, business services, manufacturing and industrial, and leisure sectors. The realized performance fees from ANRP II during the nine months ended September 30, 2019 were the result of a tax distribution and income earned on an escrow account balance and the realized performance fees during the same period in 2018 were the result of sales generated from investments in the natural resources sector. The realized performance fees from Fund VII

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during the nine months ended September 30, 2019 were the result of income earned on an escrow account balance and the realized performance fees during the same period in 2018 were the result of a tax distribution.
Realized profit sharing expense decreased by $68.2 million during the nine months ended September 30, 2019, as compared to the same period in 2018, as a result of a corresponding decrease in realized performance fees as described above, and a decrease in profit sharing expense related to the Incentive Pool. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is $16.9 million and $39.3 million related to the Incentive Pool for the nine months ended September 30, 2019 and 2018, respectively. The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period.
Realized principal investment income decreased by $19.9 million for the nine months ended September 30, 2019, as compared to the same period in 2018. This change was primarily attributable to a decrease in realizations from Apollo’s equity ownership interest in Fund VIII, COF III and Fund VII of $10.4 million, $2.4 million and $2.1 million, respectively, during the nine months ended September 30, 2019, as compared to the same period in 2018.
Net interest loss and other increased by $7.1 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018, primarily due to additional interest expense incurred during the nine months ended September 30, 2019 as a result of the issuances of the 2029 Senior Notes and 2039 Senior Secured Guaranteed Notes, as described in note 10 to our condensed consolidated financial statements.
Real Assets
The following table sets forth our segment statement of operations information and our supplemental performance measure, Segment Distributable Earnings, within our real assets segment.
 
For the Three Months Ended September 30,
 
Total Change
 
Percentage Change
 
For the Nine Months Ended September 30,
Total Change
 
Percentage Change
 
2019
 
2018
 
 
 
2019
 
2018
 
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
Real Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Management fees
$
47,862

 
$
41,149

 
$
6,713

 
16.3
 %
 
$
139,645

 
$
121,627

 
$
18,018

 
14.8
 %
Advisory and transaction fees, net
377

 
4,765

 
(4,388
)
 
(92.1
)
 
5,748

 
5,070

 
678

 
13.4

Fee Related Revenues
48,239

 
45,914

 
2,325

 
5.1

 
145,393

 
126,697

 
18,696

 
14.8

Salary, bonus and benefits
(19,306
)
 
(18,191
)
 
(1,115
)
 
6.1

 
(57,031
)
 
(57,069
)
 
38

 
(0.1
)
General, administrative and other
(10,734
)
 
(9,911
)
 
(823
)
 
8.3

 
(28,956
)
 
(29,435
)
 
479

 
(1.6
)
Placement fees
(1
)
 
(400
)
 
399

 
(99.8
)
 
(1
)
 
(400
)
 
399

 
(99.8
)
Fee Related Expenses
(30,041
)
 
(28,502
)
 
(1,539
)
 
5.4

 
(85,988
)
 
(86,904
)
 
916

 
(1.1
)
Other income (loss), net of Non-Controlling Interest
(6
)
 
1,680

 
(1,686
)
 
NM

 
88

 
1,903

 
(1,815
)
 
(95.4
)
Fee Related Earnings
18,192

 
19,092

 
(900
)
 
(4.7
)
 
59,493

 
41,696

 
17,797

 
42.7

Realized performance fees
162

 
4,010

 
(3,848
)
 
(96.0
)
 
3,242

 
55,625

 
(52,383
)
 
(94.2
)
Realized profit sharing expense
(65
)
 
(2,352
)
 
2,287

 
(97.2
)
 
(1,299
)
 
(32,222
)
 
30,923

 
(96.0
)
Net Realized Performance Fees
97

 
1,658

 
(1,561
)
 
(94.1
)
 
1,943

 
23,403

 
(21,460
)
 
(91.7
)
Realized principal investment income
415

 
532

 
(117
)
 
(22.0
)
 
2,209

 
5,678

 
(3,469
)
 
(61.1
)
Net interest loss and other
(3,234
)
 
(2,835
)
 
(399
)
 
14.1

 
(8,115
)
 
(6,712
)
 
(1,403
)
 
20.9

Segment Distributable Earnings
$
15,470

 
$
18,447

 
$
(2,977
)
 
(16.1
)%
 
$
55,530

 
$
64,065

 
$
(8,535
)
 
(13.3
)%
Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018
Management fees increased by $6.7 million for the three months ended September 30, 2019, as compared to the three months ended September 30, 2018. This change was primarily attributable to an increase in management fees earned from Athene of $4.4 million, along with modest increases in management fees earned across most of our real assets funds during the three months ended September 30, 2019, as compared to the same period during 2018.
Advisory and transaction fees, net decreased by $4.4 million for the three months ended September 30, 2019, as compared to the three months ended September 30, 2018. This change was primarily attributable to a decrease in net advisory and transaction fees earned with respect to an India-based fund of $3.5 million during the three months ended September 30, 2019, as compared to the same period during 2018.
Salary, bonus and benefits increased by $1.1 million during the three months ended September 30, 2019, as compared to the three months ended September 30, 2018 primarily due to an increase in headcount.

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Other income, net of Non-Controlling Interest decreased by $1.7 million for the three months ended September 30, 2019, as compared to the three months ended September 30, 2018 primarily due to a gain related to the acquisition of management contracts for India-based funds during the three months ended September 30, 2018.
Realized performance fees decreased by $3.8 million for the three months ended September 30, 2019, as compared to the three months ended September 30, 2018. The decrease in realized performance fees was primarily attributable to decreases in realized performance fees generated from EPF II and strategic investment accounts of $2.6 million and $1.1 million, respectively, during the three months ended September 30, 2019, as compared to the three months ended September 30, 2018. The decrease in realized performance fees from EPF II is primarily due to the realization of a UK commercial real estate investment held by the fund during the three months ended September 30, 2018, while the fund had no realizations during the three months ended September 30, 2019. The decrease in realized performance fees from strategic investment accounts was primarily driven by lower profits allocated from underlying fund investments for the three months ended September 30, 2019, as compared to the same period during 2018.
Realized profit sharing expense decreased by $2.3 million during the three months ended September 30, 2019, as compared to the same period in 2018, as a result of a corresponding decrease in realized performance fees as described above. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is $0.7 million related to the Incentive Pool for the three months ended September 30, 2018. There was no realized profit sharing expense related to the Incentive Pool for the three months ended September 30, 2019. The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period.
Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018
Management fees increased by $18.0 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. This change was primarily attributable to an increase in management fees earned from Athene of $13.5 million, along with modest increases in management fees earned across most of our real assets funds during the nine months ended September 30, 2019, as compared to the same period during 2018.
Other income, net of Non-Controlling Interest, decreased by $1.8 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018 primarily due to a gain from the acquisition of management contracts related to India-based funds during the nine months ended September 30, 2018.
Realized performance fees decreased by $52.4 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. The decrease in realized performance fees was primarily attributable to decreases in realized performance fees generated from EPF II and strategic investment accounts of $41.6 million and $8.3 million, respectively, during the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. Realized performance fees from EPF II decreased primarily due to the realizations of UK hotel assets and UK commercial real estate investments held by the fund during the nine months ended September 30, 2018, while the fund had no realizations during the nine months ended September 30, 2019. The decrease in realized performance fees from strategic investment accounts was primarily driven by lower realized profits allocated from underlying fund investments for the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018.
Realized profit sharing expense decreased by $30.9 million during the nine months ended September 30, 2019, as compared to the same period in 2018, as a result of a corresponding decrease in realized performance fees as described above, and a decrease in profit sharing expense related to the Incentive Pool. In any period the blended profit sharing percentage is impacted by the respective profit sharing ratios of the funds generating performance fees in the period. Included in realized profit sharing expense is $9.0 million related to the Incentive Pool for the nine months ended September 30, 2018. There was no realized profit sharing expense related to the Incentive Pool for the nine months ended September 30, 2019. The Incentive Pool is separate from the fund related profit sharing expense and may result in greater variability in compensation and have a variable impact on the blended profit sharing percentage during a particular period.
Realized principal investment income decreased by $3.5 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. This change was primarily attributable to a decrease in realizations from Apollo’s equity ownership interest in EPF II of $4.3 million during the nine months ended September 30, 2019, as compared to the same period in 2018. The decrease in realized principal investment income was partially offset by an increase in realizations from Apollo’s equity ownership interest in ARI of $1.1 million during the nine months ended September 30, 2019, as compared to the same period in 2018.
Net interest loss and other increased by $1.4 million for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018, primarily due to additional interest expense incurred during the nine months ended

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September 30, 2019 as a result of the issuances of the 2029 Senior Notes and 2039 Senior Secured Guaranteed Notes, as described in note 10 to our condensed consolidated financial statements.
Summary of Distributable Earnings
The following table is a reconciliation of Distributable Earnings per share of common and equivalent to net dividend per share of common and equivalent.
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
(in thousands, except per share data)
Segment Distributable Earnings
$
252,524

 
$
242,245

 
$
738,491

 
$
684,938

Taxes and related payables
(20,895
)
 
(9,734
)
 
(50,409
)
 
(34,770
)
Preferred dividends
(9,164
)
 
(9,164
)
 
(27,492
)
 
(22,499
)
Distributable Earnings
222,465

 
223,347

 
660,590

 
627,669

Add back: Tax and related payables attributable to common and equivalents
18,765

 
7,702

 
44,017

 
28,677

Distributable Earnings before certain payables(1)
241,230

 
231,049

 
704,607

 
656,346

Percent to common and equivalents
56
%
 
51
%
 
56
%
 
51
%
Distributable Earnings before other payables attributable to common and equivalents
135,089

 
117,835

 
394,580

 
334,736

Less: Taxes and related payables attributable to common and equivalents
(18,765
)
 
(7,702
)
 
(44,017
)
 
(28,677
)
Distributable Earnings attributable to common and equivalents(2)
$
116,324

 
$
110,133

 
$
350,563

 
$
306,059

Distributable Earnings per share(3)
$
0.54

 
$
0.54

 
$
1.60

 
$
1.52

Retained capital per share(3)
(0.04
)
 
(0.08
)
 
(0.14
)
 
(0.25
)
Net dividend per share(3)
$
0.50

 
$
0.46

 
$
1.46

 
$
1.27

(1)
Distributable Earnings before certain payables represents Distributable Earnings before the deduction for the estimated current corporate taxes and the amounts payable under Apollo’s tax receivable agreement.
(2)
“Common and equivalents” consists of total shares of Class A Common Stock outstanding and RSUs that participate in dividends.
(3)
Per share calculations are based on end of period Distributable Earnings Shares Outstanding, which consists of total shares of Class A Common Stock outstanding, AOG Units and RSUs that participate in dividends.

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Summary of Non-U.S. GAAP Measures
The table below sets forth a reconciliation of net income attributable Apollo Global Management, Inc. Class A Common Stockholders to our non-U.S. GAAP performance measures:
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
(in thousands)
 
 
 
 
Net Income Attributable to Apollo Global Management, Inc. Class A Common Stockholders
$
354,106

 
$
162,357

 
$
649,658

 
$
154,370

Preferred dividends
9,164

 
9,164

 
27,492

 
22,499

Net income attributable to Non-Controlling Interests in consolidated entities
7,083

 
11,340

 
20,888

 
26,035

Net income attributable to Non-Controlling Interests in the Apollo Operating Group
150,741

 
179,831

 
480,784

 
194,250

Net Income
$
521,094

 
$
362,692

 
$
1,178,822

 
$
397,154

Income tax provision (benefit)
(231,896
)
 
19,092

 
(195,345
)
 
46,596

Income Before Income Tax Provision (Benefit)
$
289,198

 
$
381,784

 
$
983,477

 
$
443,750

Transaction-related charges(1)
5,201

 
1,253

 
28,799

 
(3,800
)
Charges associated with corporate conversion(2)
6,994

 
—

 
17,000

 
—

Loss from change in tax receivable agreement liability
38,575

 
—

 
38,575

 
—

Net income attributable to Non-Controlling Interests in consolidated entities
(7,083
)
 
(11,340
)
 
(20,888
)
 
(26,035
)
Unrealized performance fees(3)
(183,208
)
 
(26,447
)
 
(497,270
)
 
203,475

Unrealized profit sharing expense(3)
61,098

 
8,903

 
177,659

 
(58,360
)
Equity-based profit sharing expense and other(4)
22,203

 
26,085

 
63,840

 
58,499

Equity-based compensation
15,802

 
17,668

 
52,462

 
51,131

Unrealized principal investment (income) loss
(20,411
)
 
49

 
(64,632
)
 
32,627

Unrealized net (gains) losses from investment activities and other
24,155

 
(155,710
)
 
(40,531
)
 
(16,349
)
Segment Distributable Earnings(5)
$
252,524

 
$
242,245

 
$
738,491

 
$
684,938

Taxes and related payables
(20,895
)
 
(9,734
)
 
(50,409
)
 
(34,770
)
Preferred dividends
(9,164
)
 
(9,164
)
 
(27,492
)
 
(22,499
)
Distributable Earnings
$
222,465

 
$
223,347

 
$
660,590

 
$
627,669

Preferred dividends
9,164

 
9,164

 
27,492

 
22,499

Taxes and related payables
20,895

 
9,734

 
50,409

 
34,770

Realized performance fees
(67,434
)
 
(93,031
)
 
(164,558
)
 
(329,807
)
Realized profit sharing expense
23,823

 
54,180

 
78,268

 
187,637

Realized principal investment income
(14,374
)
 
(17,787
)
 
(37,091
)
 
(60,553
)
Net interest loss and other
18,251

 
11,451

 
45,957

 
33,413

Fee Related Earnings
$
212,790

 
$
197,058

 
$
661,067

 
$
515,628

Depreciation, amortization and other, net
2,927

 
2,657

 
8,239

 
7,739

Fee Related EBITDA
$
215,717

 
$
199,715

 
$
669,306

 
$
523,367

Realized performance fees(6)
67,434

 
93,031

 
164,558

 
329,807

Realized profit sharing expense(6)
(23,823
)
 
(54,180
)
 
(78,268
)
 
(187,637
)
Fee Related EBITDA + 100% of Net Realized Performance Fees
$
259,328

 
$
238,566

 
$
755,596

 
$
665,537

(1)
Transaction-related charges include contingent consideration, equity-based compensation charges and the amortization of intangible assets and certain other charges associated with acquisitions.
(2)
Represents expenses incurred in relation to the Conversion, as described in note 1 to the condensed consolidated financial statements.
(3)
Includes realized performance fees and realized profit sharing expense settled in the form of shares of Athene Holding during the nine months ended September 30, 2018.
(4)
Equity-based profit sharing expense and other includes certain profit sharing arrangements in which a portion of performance fees distributed to the general partner are allocated by issuance of equity-based awards, rather than cash, to employees of Apollo. Equity-based profit

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sharing expense and other also includes non-cash expenses related to equity awards in unconsolidated related parties granted to employees of Apollo.
(5)
See note 16 to the condensed consolidated financial statements for more details regarding Segment Distributable Earnings for the combined segments.
(6)
Excludes realized performance fees and realized profit sharing expense settled in the form of shares of Athene Holding during the nine months ended September 30, 2018.
Liquidity and Capital Resources
Overview
Apollo’s business model primarily derives revenues and cash flows from the assets it manages. Apollo targets operating expense levels such that fee income exceeds total operating expenses each period. The company intends to distribute to its stockholders on a quarterly basis substantially all of its distributable earnings after taxes and related payables in excess of amounts determined to be necessary or appropriate to provide for the conduct of the business. As a result, the Company requires limited capital resources to support the working capital or operating needs of the business. While primarily met by cash flows generated through fee income received, liquidity needs are also met (to a limited extent) through proceeds from borrowings and equity issuances as described in notes 10 and 13 to the condensed consolidated financial statements, respectively. The Company had cash and cash equivalents of $1,242.8 million at September 30, 2019.
Primary Sources and Uses of Cash
The Company has multiple sources of short-term liquidity to meet its capital needs, including cash on hand, annual cash flows from its activities, and available funds from the Company’s $750 million revolving credit facility as of September 30, 2019. The Company believes these sources will be sufficient to fund our capital needs for at least the next twelve months. If the Company determines that market conditions are favorable after taking into account our liquidity requirements, we may seek to issue additional senior notes, preferred equity, or other financing instruments.
The section below discusses in more detail the Company’s primary sources and uses of cash and the primary drivers of cash flows within the Company’s condensed consolidated statements of cash flows:
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
(in thousands)
Operating Activities
$
835,012

 
$
770,890

Investing Activities
(252,292
)
 
(169,604
)
Financing Activities
58,798

 
(538,017
)
Net Increase in Cash and Cash Equivalents, Restricted Cash and Cash Held at Consolidated Variable Interest Entities
$
641,518

 
$
63,269

Operating Activities
The Company’s operating activities support its investment management activities. The primary sources of cash within the operating activities section include: (a) management fees, (b) advisory and transaction fees, (c) realized performance revenues, and (d) realized principal investment income. The primary uses of cash within the operating activities section include: (a) compensation and non-compensation related expenses, (b) placement fees, and (c) interest and taxes.
•
During the nine months ended September 30, 2019 and 2018, cash provided by operating activities primarily includes cash inflows from the receipt of management fees, advisory and transaction fees, realized performance revenues, and realized principal investment income, offset by cash outflows for compensation, general, administrative, and other expenses. Net cash provided by operating activities also reflects the operating activity of our consolidated funds and VIEs, which primarily include cash inflows from the sale of investments offset by cash outflows for purchases of investments.
Investing Activities
The Company’s investing activities support growth of its business. The primary sources of cash within the investing activities section include distributions from investments. The primary uses of cash within the investing activities section include: (a) capital expenditures, (b) investment purchases, including purchases of U.S. Treasury securities, and (c) equity method investments in the funds we manage.

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•
During the nine months ended September 30, 2019 and 2018, cash used by investing activities primarily reflects purchases of U.S. Treasury securities and other investments and net contributions to equity method investments, offset by proceeds from maturities of U.S. Treasury securities.
Financing Activities
The Company’s financing activities reflect its capital market transactions and transactions with owners. The primary sources of cash within the financing activities section includes proceeds from debt and preferred equity issuances. The primary uses of cash within the financing activities section include: (a) distributions, (b) payments under the tax receivable agreement, (c) share repurchases, (d) cash paid to settle tax withholding obligations in connection with net share settlements of equity-based awards, and (e) repayments of debt.
•
During the nine months ended September 30, 2019, cash provided by financing activities primarily reflects proceeds from the issuance of the 2029 Senior Notes and 2039 Senior Secured Guaranteed Notes, partially offset by dividends to Class A Common Stockholders and Non-Controlling interest holders.
•
During the nine months ended September 30, 2018, cash used by financing activities primarily reflected repayments on the term loan facility to AMH and dividends to Class A Common Stockholders and Non-Controlling interest holders, partially offset by proceeds from the issuance of the Series B Preferred shares and the 2048 Senior Notes.
Future Debt Obligations
The Company had long-term debt of $2.3 billion at September 30, 2019, which includes $2.3 billion of senior notes with maturities in 2024, 2026, 2029, 2039 and 2048. See note 10 to the condensed consolidated financial statements for further information regarding the Company’s debt arrangements.
Contractual Obligations, Commitments and Contingencies
The Company had unfunded general partner commitments of $1.1 billion at September 30, 2019, of which $434 million related to Fund IX. For a summary and a description of the nature of the Company’s commitments, contingencies and contractual obligations, see note 15 to the condensed consolidated financial statements and “—Contractual Obligations, Commitments and Contingencies”. The Company’s commitments are primarily fulfilled through cash flows from operations and (to a limited extent) through borrowings and equity issuances as described in notes 10 and 13 to the condensed consolidated financial statements, respectively.
Consolidated Funds and VIEs
The Company manages its liquidity needs by evaluating unconsolidated cash flows; however, the Company’s financial statements reflect the financial position of Apollo as well as Apollo’s consolidated funds and VIEs. The primary sources and uses of cash at Apollo’s consolidated funds and VIEs include: (a) raising capital from their investors, which have been reflected historically as Non-Controlling Interests of the consolidated subsidiaries in our financial statements, (b) using capital to make investments, (c) generating cash flows from operations through distributions, interest and the realization of investments, (d) distributing cash flow to investors, and (e) issuing debt to finance investments (CLOs).
Other Liquidity and Capital Resource Considerations
Future Cash Flows
Our ability to execute our business strategy, particularly our ability to increase our AUM, depends on our ability to establish new funds and to raise additional investor capital within such funds. Our liquidity will depend on a number of factors, such as our ability to project our financial performance, which is highly dependent on our funds and our ability to manage our projected costs, fund performance, access to credit facilities, compliance with existing credit agreements, as well as industry and market trends. Also during economic downturns the funds we manage might experience cash flow issues or liquidate entirely. In these situations we might be asked to reduce or eliminate the management fee and performance fees we charge, which could adversely impact our cash flow in the future.
An increase in the fair value of our funds’ investments, by contrast, could favorably impact our liquidity through higher management fees where the management fees are calculated based on the net asset value, gross assets or adjusted assets. Additionally, higher performance fees not yet realized would generally result when investments appreciate over their cost basis which would not have an impact on the Company’s cash flow until realized.

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Income Taxes
Effective September 5, 2019, Apollo Global Management, LLC, a Delaware limited liability company, converted to a Delaware corporation named Apollo Global Management, Inc. Subsequent to the Conversion, we expect that all of the income we earn will be subject to U.S. corporate income taxes, which could result in an overall higher income tax expense (or benefit) in periods subsequent to the Conversion.
Consideration of Financing Arrangements
As noted above, in limited circumstances, the Company may issue debt or equity to supplement its liquidity. The decision to enter into a particular financing arrangement is made after careful consideration of various factors including the Company’s cash flows from operations, future cash needs, current sources of liquidity, demand for the Company’s debt or equity, and prevailing interest rates.
Revolver Facility
Under the Company’s 2018 AMH Credit Facility, the Company may borrow in an aggregate amount not to exceed $750 million and may incur incremental facilities in an aggregate amount not to exceed $250 million plus additional amounts so long as the Borrower is in compliance with a net leverage ratio not to exceed 4.00 to 1.00. Borrowings under the 2018 AMH Credit Facility may be used for working capital and general corporate purposes, including without limitation, permitted acquisitions. As of September 30, 2019, the 2018 AMH Credit Facility was undrawn.
Dividends and Distributions
For information regarding the quarterly dividends and distributions which were made at the sole discretion of the Company’s Former Manager prior to the Conversion to Class A Common Stockholders, Non-Controlling Interest holders in the Apollo Operating Group and participating securities, see note 13 to the condensed consolidated financial statements.
Although the Company expects to pay dividends according to our dividend policy, we may not pay dividends according to our policy, or at all, if, among other things, we do not have the cash necessary to pay the intended dividends. To the extent we do not have cash on hand sufficient to pay dividends, we may have to borrow funds to pay dividends, or we may determine not to pay dividends. The declaration, payment and determination of the amount of our quarterly dividends are at the sole discretion of our Board.
On October 31, 2019, the Company declared a cash dividend of $0.50 per share of Class A Common Stock, which will be paid on November 29, 2019 to holders of record at the close of business on November 20, 2019. Also, the Company declared a cash dividend of $0.398438 per share of Series A Preferred Stock and Series B Preferred Stock which will be paid on December 16, 2019 to holders of record at the close of business on November 29, 2019.
Tax Receivable Agreement
The tax receivable agreement provides for the payment to the Managing Partners and Contributing Partners of 85% of the amount of cash savings, if any, in U.S. federal, state, local and foreign income taxes that AGM Inc. and its subsidiaries realizes subject to the agreement. For more information regarding the tax receivable agreement, see note 14 to the condensed consolidated financial statements.
AGM Share Repurchases
For information regarding the Company’s share repurchase program, see note 13 to the condensed consolidated financial statements.
AINV Share Purchases
On March 11, 2016, it was announced that Apollo intended to embark on a program to purchase $50 million of AINV’s common stock, subject to certain regulatory approvals. Under the program, shares may be purchased from time to time in open market transactions and in accordance with applicable law. As of September 30, 2019, Apollo had purchased approximately 871 thousand shares, or approximately $4.9 million of AINV’s common stock.
Athora
On April 14, 2017, Apollo made an unfunded commitment of €125 million to purchase new Class B-1 equity interests in Athora, a strategic platform established to acquire traditional closed life insurance policies and provide capital and reinsurance

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solutions to insurers in Europe. In January 2018, Apollo purchased Class C-1 equity interests in Athora that represent a profits interest in Athora which, upon meeting certain vesting triggers, will be convertible by Apollo into additional Class B-1 equity interests in Athora. Apollo and Athene are minority investors in Athora with a long term strategic relationship and aggregate voting power of 35% and 10%, respectively. For more information regarding unfunded general partner commitments, see “—Contractual Obligations, Commitments and Contingencies”.
Fund VIII, Fund VII, Fund VI, ANRP I and ANRP II Escrow
As of September 30, 2019, the remaining investments and escrow cash of Fund VIII were valued at 132% of the fund’s unreturned capital, which was above the required escrow ratio of 115%. As of September 30, 2019, the remaining investments and escrow cash of Fund VII, Fund VI, ANRP I and ANRP II were valued at 60%, 38%, 51% and 109% of the fund’s unreturned capital, respectively, which were below the required escrow ratio of 115%. As a result, these funds are required to place in escrow current and future performance fee distributions to the general partner until the specified return ratio of 115% is met (at the time of a future distribution) or upon liquidation.
Clawback
Performance fees from our private equity funds and certain credit and real assets funds are subject to contingent repayment by the general partner in the event of future losses to the extent that the cumulative performance fees distributed from inception to date exceeds the amount computed as due to the general partner at the final distribution. See “—Overview of Results of Operations—Performance Fees” for the maximum performance fees subject to potential reversal by each fund.
Indemnification Liability
The Company recorded an indemnification liability in the event that our Managing Partners, Contributing Partners and certain investment professionals are required to pay amounts in connection with a general partner obligation to return previously distributed performance fees. See note 14 to the condensed consolidated financial statements for further information regarding the Company’s indemnification liability.
Investment Management Agreements - Athene Asset Management
The Company provides asset management and advisory services to Athene as described in note 14 to the condensed consolidated financial statements. On September 20, 2018, Athene and Apollo agreed to revise the existing fee arrangements (the “amended fee agreement”) between Athene and Apollo. The amended fee agreement was subject to approval by Athene’s shareholders of a bye-law amendment providing that Athene will not elect to terminate the investment management arrangement between Athene and Apollo, except for cause, for a period of four years from the date of the bye-law amendment and thereafter only on each successive two-year anniversary of the expiration of the initial four-year period. On June 10, 2019, the Athene shareholders approved the bye-law amendment and the amended fee agreement took effect retroactive to the month beginning January 1, 2019. The Company began recording fees pursuant to the amended fee agreement on January 1, 2019. The amended fee agreement provides for sub-allocation fees which vary based on portfolio allocation differentiation, as described below.
The base management fee covers a range of investment services that Athene receives from the Company, including investment management, asset allocation, mergers and acquisition asset diligence and certain operational support services such as investment compliance, tax, legal and risk management support, among others. Additionally, the amended fee agreement provides for a possible payment by the Company to Athene, or a possible payment by Athene to the Company, equal to 0.025% of the Incremental Value as of the end of each year, beginning on December 31, 2019, depending upon the percentage of Athene’s investments that consist of core assets and core plus assets. In furtherance of yield support for Athene, if more than 60% of Athene’s invested assets which are subject to the sub-allocation fees are invested in core and core plus assets, Athene will receive a 0.025% fee reduction on the Incremental Value. As an incentive for differentiated asset management, if less than 50% of Athene’s invested assets which are subject to the sub-allocation fee are invested in core and core plus assets, thereby reflecting a higher allocation toward assets with the highest alpha-generating abilities, Athene will pay an additional fee of 0.025% on Incremental Value.
The amended fee agreement is intended to provide for further alignment of interests between Athene and the Company. On the Backbook Value, assuming constant portfolio allocations, the near-term impact of the amended fee agreement is anticipated to be immaterial. On the Incremental Value, assuming the same allocations as the Backbook Value, total fees paid by Athene to the Company are expected to be marginally lower than fees paid by Athene to the Company would have been under the prior fee arrangement. If invested asset allocations are more heavily weighted to assets with lower alpha-generating abilities than Athene’s current investment portfolio, the fees that Athene pays to the Company under the Fee Agreement would be expected to decline relative to the prior fee arrangement. Conversely, if a greater proportion of Athene’s investment portfolio is allocated to differentiated assets with higher alpha-generating abilities, Athene’s net investment earned rates would be expected to increase, and so would the fees Athene pays to the Company relative to the prior fee arrangement.

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Strategic Transaction with Athene Holding
On October 27, 2019 Athene Holding, AGM and the entities that form the Apollo Operating Group entered into a Transaction Agreement (the “Transaction Agreement”), pursuant to which, AGM, through the Apollo Operating Group, will purchase $350 million of AHL Class A Common Shares. The consummation of the other transactions contemplated by the Transaction Agreement are subject to certain closing conditions and regulatory approvals. See note 17 to the condensed consolidated financial statements for further information regarding the Transaction Agreement with Athene Holding.
Equity-Based Profit Sharing Expense
Profit sharing amounts are generally not paid until the related performance fees are distributed to the general partner upon realization of the fund’s investments. Under certain profit sharing arrangements, a portion of the performance fees distributed to the general partner is allocated by issuance of equity-based awards, rather than cash, to employees. See note 2 to the condensed consolidated financial statements for further information regarding the accounting for the Company’s profit sharing arrangements.
Strategic Relationship Agreement with CalPERS
On April 20, 2010, the Company announced that it entered into a strategic relationship agreement with CalPERS. The strategic relationship agreement provides that Apollo will reduce fees charged to CalPERS on funds it manages, or in the future will manage, solely for CalPERS by $125 million over a five-year period or as close a period as required to provide CalPERS with that benefit. The agreement further provides that Apollo will not use a placement agent in connection with securing any future capital commitments from CalPERS. As of September 30, 2019, the Company had reduced fees charged to CalPERS on the funds it manages by approximately $108.4 million.
Critical Accounting Policies
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon the condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that could affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results could differ from these estimates. A summary of our significant accounting policies is presented in note 2 to our condensed consolidated financial statements. The following is a summary of our accounting policies that are affected most by judgments, estimates and assumptions.
Consolidation
The Company assesses all entities with which it is involved for consolidation on a case by case basis depending on the specific facts and circumstances surrounding each entity. Pursuant to the consolidation guidance, the Company first evaluates whether it holds a variable interest in an entity. Apollo factors in all economic interests including proportionate interests through related parties, to determine if such interests are to be considered a variable interest. As Apollo’s interest in many of these entities is solely through market rate fees and/or insignificant indirect interests through related parties, Apollo is generally not considered to have a variable interest in many of these entities under the guidance and no further consolidation analysis is performed. For entities where the Company has determined that it does hold a variable interest, the Company performs an assessment to determine whether each of those entities qualify as a VIE.
The determination as to whether an entity qualifies as a VIE depends on the facts and circumstances surrounding each entity and therefore certain of Apollo’s funds may qualify as VIEs under the variable interest model whereas others may qualify as voting interest entities (“VOEs”) under the voting interest model. The granting of substantive kick-out rights is a key consideration in determining whether a limited partnership or similar entity is a VIE and whether or not that entity should be consolidated.
Under the voting interest model, Apollo consolidates those entities it controls through a majority voting interest. Apollo does not consolidate those VOEs in which substantive kick-out rights have been granted to the unaffiliated investors to either dissolve the fund or remove the general partner.
 Under the variable interest model, Apollo consolidates those entities where it is determined that the Company is the primary beneficiary of the entity. The Company is determined to be the primary beneficiary if it holds a controlling financial interest in the VIE defined as possessing both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. If Apollo alone is not considered to have a controlling financial interest in the VIE but Apollo and its related parties under common control in the aggregate have a controlling financial interest in the VIE, Apollo will still be deemed to be the primary beneficiary if it is the party within the related party group that is most closely associated with

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the VIE. If Apollo and its related parties not under common control in the aggregate have a controlling financial interest in a VIE, then Apollo is deemed to be the primary beneficiary if substantially all the activities of the entity are performed on behalf of Apollo. Apollo determines whether it is the primary beneficiary of a VIE at the time it becomes initially involved with the VIE and reconsiders that conclusion continuously. Investments and redemptions (either by Apollo, related parties of Apollo or third parties) or amendments to the governing documents of the respective entity may affect an entity’s status as a VIE or the determination of the primary beneficiary.
The assessment of whether an entity is a VIE and the determination of whether Apollo should consolidate such VIE requires judgment by our management. Those judgments include, but are not limited to: (i) determining whether the total equity investment at risk is sufficient to permit the entity to finance its activities without additional subordinated financial support, (ii) evaluating whether the holders of equity investment at risk, as a group, can make decisions that have a significant effect on the success of the entity, (iii) determining whether the equity investors have proportionate voting rights to their obligations to absorb losses or rights to receive the expected residual returns from an entity and (iv) evaluating the nature of the relationship and activities of those related parties with shared power or under common control for purposes of determining which party within the related-party group is most closely associated with the VIE. Judgments are also made in determining whether a member in the equity group has a controlling financial interest including power to direct activities that most significantly impact the VIE’s economic performance and rights to receive benefits or obligations to absorb losses that could be potentially significant to the VIE. This analysis considers all relevant economic interests including proportionate interests held through related parties.
Revenue Recognition
Performance Fees. We earn performance fees from our funds as a result of such funds achieving specified performance criteria. Such performance fees generally are earned based upon a fixed percentage of realized and unrealized gains of various funds after meeting any applicable hurdle rate or threshold minimum.
Performance allocations are performance fees that are generally structured from a legal standpoint as an allocation of capital to the Company. Performance allocations from certain of the funds that we manage are subject to contingent repayment and are generally paid to us as particular investments made by the funds are realized. If, however, upon liquidation of a fund, the aggregate amount paid to us as performance fees exceeds the amount actually due to us based upon the aggregate performance of the fund, the excess (in certain cases net of taxes) is required to be returned by us to that fund. We account for performance allocations as an equity method investment, and accordingly, we accrue performance allocations quarterly based on fair value of the underlying investments and separately assess if contingent repayment is necessary. The determination of performance allocations and contingent repayment considers both the terms of the respective partnership agreements and the current fair value of the underlying investments within the funds. Estimates and assumptions are made when determining the fair value of the underlying investments within the funds and could vary depending on the valuation methodology that is used. See “Investments, at Fair Value” below for further discussion related to significant estimates and assumptions used for determining fair value of the underlying investments in our credit, private equity and real assets funds.
Incentive fees are performance fees structured as a contractual fee arrangement rather than a capital allocation. Incentive fees are generally received from the management of CLOs, managed accounts and AINV. For a majority of our incentive fees, once the quarterly or annual incentive fees have been determined, there is no look-back to prior periods for a potential contingent repayment, however, certain other incentive fees can be subject to contingent repayment at the end of the life of the entity. In accordance with the new revenue recognition standard, certain incentive fees are considered a form of variable consideration and therefore are deferred until fees are probable to not be significantly reversed. There is significant judgment involved in determining if the incentive fees are probable to not be significantly reversed, but generally the Company will defer the revenue until the fees are crystallized or are no longer subject to clawback or reversal. Prior to the adoption of the new revenue recognition guidance, incentive fees were recognized on an assumed liquidation basis.
Management Fees. Management fees related to our credit funds, can be based on net asset value, gross assets, adjusted cost of all unrealized portfolio investments, capital commitments, adjusted assets, capital contributions, or stockholders’ equity all as defined in the respective partnership agreements. The credit management fee calculations that consider net asset value, gross assets, adjusted cost of all unrealized portfolio investments and adjusted assets are normally based on the terms of the respective partnership agreements and the current fair value of the underlying investments within the funds. Estimates and assumptions are made when determining the fair value of the underlying investments within the funds and could vary depending on the valuation methodology that is used. The management fees related to our private equity funds, by contrast, are generally based on a fixed percentage of the committed capital or invested capital. The corresponding fee calculations that consider committed capital or invested capital are both objective in nature and therefore do not require the use of significant estimates or assumptions. The management fees related to our real assets funds are generally based on a specific percentage of the funds’ stockholders’ equity or committed or net invested capital or the capital accounts of the limited partners. See “Investments, at Fair Value” below for

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further discussion related to significant estimates and assumptions used for determining fair value of the underlying investments in our credit, private equity and real assets funds.
Investments, at Fair Value
On a quarterly basis, Apollo utilizes valuation committees consisting of members from senior management, to review and approve the valuation results related to the investments of the funds it manages. For certain publicly traded vehicles managed by Apollo, a review is performed by an independent board of directors. The Company also retains independent valuation firms to provide third-party valuation consulting services to Apollo, which consist of certain limited procedures that management identifies and requests them to perform. The limited procedures provided by the independent valuation firms assist management with validating their valuation results or determining fair value. The Company performs various back-testing procedures to validate their valuation approaches, including comparisons between expected and observed outcomes, forecast evaluations and variance analyses. However, because of the inherent uncertainty of valuation, the estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material.
The fair values of the investments in our funds can be impacted by changes to the assumptions used in the underlying valuation models. For further discussion on the impact of changes to valuation assumptions see “Item 7A. Quantitative and Qualitative Disclosures About Market Risk—Sensitivity” in our 2018 Annual Report. There have been no material changes to the valuation approaches utilized during the periods that our financial results are presented in this report.
Fair Value of Financial Instruments
Except for the Company’s debt obligations (each as defined in note 10 to our condensed consolidated financial statements), Apollo’s financial instruments are recorded at fair value or at amounts whose carrying values approximate fair value. See “—Investments, at Fair Value” above. While Apollo’s valuations of portfolio investments are based on assumptions that Apollo believes are reasonable under the circumstances, the actual realized gains or losses will depend on, among other factors, future operating results, the value of the assets and market conditions at the time of disposition, any related transaction costs and the timing and manner of sale, all of which may ultimately differ significantly from the assumptions on which the valuations were based. Financial instruments’ carrying values generally approximate fair value because of the short-term nature of those instruments or variable interest rates related to the borrowings.
Profit Sharing Expense. Profit sharing expense is primarily a result of agreements with our Contributing Partners and employees to compensate them based on the ownership interest they have in the general partners of the Apollo funds. Therefore, changes in the fair value of the underlying investments in the funds we manage and advise affect profit sharing expense. The Contributing Partners and employees are allocated approximately 30% to 50%, of the total performance fees which is driven primarily by changes in fair value of the underlying fund’s investments and is treated as compensation expense. Additionally, profit sharing expenses paid may be subject to clawback from employees, former employees and Contributing Partners to the extent not indemnified. When applicable, the accrual for potential clawback of previously distributed profit sharing amounts, which is a component of due from related parties on the condensed consolidated statements of financial condition, represents all amounts previously distributed to employees, former employees and Contributing Partners that would need to be returned to the general partner if the Apollo funds were to be liquidated based on the current fair value of the underlying funds’ investments as of the reporting date. The actual general partner receivable, however, would not become realized until the end of a fund’s life.
Several of the Company’s employee remuneration programs are dependent upon performance fee realizations, including the Incentive Pool, and dedicated performance fee rights.  The Company established these programs to attract and retain, and provide incentive to, partners and employees of the Company and to more closely align the overall compensation of partners and employees with the overall realized performance of the Company.  Dedicated performance fee rights entitle their holders to payments arising from performance fee realizations.  The Incentive Pool enables certain partners and employees to earn discretionary compensation based on realized performance fees in a given year, which amounts are reflected in profit sharing expense in the Company’s condensed consolidated financial statements.  Amounts earned by participants as a result of their performance fee rights (whether dedicated or Incentive Pool) will vary year-to-year depending on the overall realized performance of the Company (and, in the case of the Incentive Pool, on their individual performance). There is no assurance that the Company will continue to compensate individuals through the same types of arrangements in the future and there may be periods when the executive committee of the Company’s manager determines that allocations of realized performance fees are not sufficient to compensate individuals, which may result in an increase in salary, bonus and benefits, the modification of existing programs or the use of new remuneration programs.  Reductions in performance fee revenues could also make it harder to retain employees and cause employees to seek other employment opportunities.
Fair Value Option. Apollo has elected the fair value option for the Company’s investment in Athene Holding, the assets and liabilities of certain of its consolidated VIEs (including CLOs), the Company’s U.S. Treasury securities with original

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maturities greater than three months when purchased and certain of the Company’s other investments. Such election is irrevocable and is applied to financial instruments on an individual basis at initial recognition. See notes 3, 5, and 6 to the condensed consolidated financial statements for further disclosure.
Equity-Based Compensation. Equity-based compensation is accounted for in accordance with U.S. GAAP, which requires that the cost of employee services received in exchange for an award is generally measured based on the grant date fair value of the award. Equity-based awards that do not require future service (i.e., vested awards) are expensed immediately. Equity-based employee awards that require future service are recognized over the relevant service period. In addition, certain RSUs granted by the Company vest subject to continued employment and the Company’s receipt of performance fees, within prescribed periods, sufficient to cover the associated equity-based compensation expense. In accordance with U.S. GAAP, equity-based compensation expense for such awards, if and when granted, will be recognized on an accelerated recognition method over the requisite service period to the extent the performance fee metrics are met or deemed probable. The addition of these performance measures helps to promote the interests of our Class A Common Stockholders and fund investors by making RSU vesting contingent on the realization and distribution of profits on our funds. Forfeitures of equity-based awards are accounted for when they occur. Apollo’s equity-based awards consist of, or provide rights with respect to, AOG Units, RSUs, share options, restricted shares, AHL Awards and other equity-based compensation awards. For more information regarding Apollo’s equity-based compensation awards, see note 12 to our condensed consolidated financial statements. The Company’s assumptions made to determine the fair value on grant date are embodied in the calculations of compensation expense.
A significant part of our compensation expense is derived from amortization of RSUs. The fair value of all RSU grants after March 29, 2011 is based on the grant date fair value, which considers the public share price of the Company. The Company has three types of RSU grants, which we refer to as Plan Grants, Bonus Grants, and Performance Grants. Plan Grants may or may not provide the right to receive dividend equivalents until the RSUs vest and, for grants made after 2011, the underlying shares are generally issued by March 15th after the year in which they vest. For Plan Grants, the grant date fair value is based on the public share price of the Company, and is discounted for transfer restrictions and lack of dividends until vested if applicable. Bonus Grants provide the right to receive dividend equivalents on both vested and unvested RSUs and Performance Grants provide the right to receive dividend equivalents on vested RSUs and may also provide the right to receive dividend equivalents on unvested RSUs. Both Bonus Grants and Performance Grants are generally issued by March 15th of the year following the year in which they vest. For Bonus Grants and Performance Grants, the grant date fair value for the periods presented is based on the public share price of the Company, and is discounted for transfer restrictions.
We utilized the present value of a growing annuity formula to calculate a discount for the lack of pre-vesting dividends on certain Plan Grant and Performance Grant RSUs.
We utilize the Finnerty Model to calculate a marketability discount on the Plan Grant, Bonus Grant and Performance Grant RSUs to account for the lag between vesting and issuance. The Finnerty Model provides for a valuation discount reflecting the holding period restriction embedded in a restricted security preventing its sale over a certain period of time.
The Finnerty Model proposes to estimate a discount for lack of marketability such as transfer restrictions by using an option pricing theory. This model has gained recognition through its ability to address the magnitude of the discount by considering the volatility of a company’s stock price and the length of restriction. The concept underpinning the Finnerty Model is that a restricted security cannot be sold over a certain period of time. Further simplified, a restricted share of equity in a company can be viewed as having forfeited a put on the average price of the marketable equity over the restriction period (also known as an “Asian Put Option”). If we price an Asian Put Option and compare this value to that of the assumed fully marketable underlying security, we can effectively estimate the marketability discount. The inputs utilized in the Finnerty Model are (i) length of holding period, (ii) volatility and (iii) dividend yield.
Bonus Grants constitute a component of the discretionary annual compensation awarded to certain of our professionals. During 2016, the Company increased the default portion of annual compensation to be awarded as a discretionary Bonus Grant relative to the portion awarded in previous years. The increase in the proportion of discretionary annual compensation awarded as a Bonus Grant has generally been offset by a decrease in discretionary annual cash bonuses. These changes are intended to further align the interests of Apollo’s employees and stakeholders and strengthen the long-term commitment of our partners and employees.
Income Taxes
Prior to the Conversion, certain entities in the Apollo Operating Group operated as partnerships for U.S. federal income tax purposes. As a result, these members of the Apollo Operating Group were not subject to U.S. federal income taxes. However, certain of these entities were subject to NYC UBT and certain non-U.S. entities were subject to non-U.S. corporate income taxes. Effective September 5, 2019, Apollo Global Management, LLC converted from a Delaware limited liability company to a Delaware

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corporation named Apollo Global Management, Inc. Subsequent to the Conversion, we expect that all of the income the Company earns will be subject to U.S. corporate income taxes, which could result in an overall higher income tax expense (or benefit) in periods subsequent to the Conversion.
Significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties. The Company recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit is measured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. If a tax position is not considered more likely than not to be sustained, then no benefits of the position are recognized. The Company’s tax positions are reviewed and evaluated quarterly to determine whether or not the Company has uncertain tax positions that require financial statement recognition.
Deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amount of assets and liabilities and their respective tax basis using currently enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period during which the change is enacted. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Fair Value Measurements
See note 6 to our condensed consolidated financial statements for a discussion of the Company’s fair value measurements.
Recent Accounting Pronouncements
A list of recent accounting pronouncements that are relevant to Apollo and its industry is included in note 2 to our condensed consolidated financial statements.
Off-Balance Sheet Arrangements
In the normal course of business, we engage in off-balance sheet arrangements, including transactions in derivatives, guarantees, commitments, indemnifications and potential contingent repayment obligations. See note 15 to our condensed consolidated financial statements for a discussion of guarantees and contingent obligations.
Contractual Obligations, Commitments and Contingencies
The Company’s material contractual obligations consisted of lease obligations, contractual commitments as part of the ongoing operations of the funds and debt obligations. Fixed and determinable payments due in connection with these obligations are as follows as of September 30, 2019:
 
Remaining 2019
 
2020
 
2021
 
2022
 
2023
 
Thereafter
 
Total
 
(in thousands)
Operating lease obligations(8)
$
8,607

 
$
27,452

 
$
38,151

 
$
39,664

 
$
37,803

 
$
382,423

 
$
534,100

Other long-term obligations(1)
8,884

 
8,435

 
1,836

 
881

 
654

 
654

 
21,344

2018 AMH Credit Facility(2)
169

 
675

 
675

 
675

 
358

 
—

 
2,552

2024 Senior Notes(3)
5,000

 
20,000

 
20,000

 
20,000

 
20,000

 
508,333

 
593,333

2026 Senior Notes(4)
5,500

 
22,000

 
22,000

 
22,000

 
22,000

 
552,983

 
646,483

2029 Senior Notes(5)
8,222

 
32,886

 
32,886

 
32,886

 
32,886

 
847,651

 
987,417

2039 Senior Secured Guaranteed Notes(6)
3,876

 
15,503

 
15,503

 
15,503

 
15,503

 
565,289

 
631,177

2048 Senior Notes(7)
3,750

 
15,000

 
15,000

 
15,000

 
15,000

 
663,750

 
727,500

2014 AMI Term Facility I
74

 
297

 
15,100

 
—

 
—

 
—

 
15,471

2014 AMI Term Facility II
73

 
294

 
294

 
16,859

 
—

 
—

 
17,520

2016 AMI Term Facility I
60

 
239

 
239

 
239

 
239

 
18,633

 
19,649

2016 AMI Term Facility II
62

 
249

 
249

 
249

 
17,912

 
—

 
18,721

Obligations
$
44,277

 
$
143,030

 
$
161,933

 
$
163,956

 
$
162,355

 
$
3,539,716

 
$
4,215,267


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(1)
Includes (i) payments on management service agreements related to certain assets and (ii) payments with respect to certain consulting agreements entered into by the Company. Note that a significant portion of these costs are reimbursable by funds.
(2)
The commitment fee as of September 30, 2019 on the $750 million undrawn 2018 AMH Credit Facility was 0.09%. See note 10 of the condensed consolidated financial statements for further discussion of the 2018 AMH Credit Facility.
(3)
$500 million of the 2024 Senior Notes matures in May 2024. The interest rate on the 2024 Senior Notes as of September 30, 2019 was 4.00%. See note 10 of the condensed consolidated financial statements for further discussion of the 2024 Senior Notes.
(4)
$500 million of the 2026 Senior Notes matures in May 2026. The interest rate on the 2026 Senior Notes as of September 30, 2019 was 4.40%. See note 10 of the condensed consolidated financial statements for further discussion of the 2026 Senior Notes.
(5)
$675 million of the 2029 Senior Notes matures in February 2029. The interest rate on the 2029 Senior Notes as of September 30, 2019 was 4.87%. See note 10 of the condensed consolidated financial statements for further discussion of the 2029 Senior Notes.
(6)
$325 million of the 2039 Senior Secured Guaranteed Notes matures in June 2039. The interest rate on the 2039 Senior Secured Guaranteed Notes as of September 30, 2019 was 4.77%. See note 10 of the condensed consolidated financial statements for further discussion of the 2039 Senior Secured Guaranteed Notes.
(7)
$300 million of the 2048 Senior Notes matures in March 2048. The interest rate on the 2048 Senior Notes as of September 30, 2019 was 5.00%. See note 10 of the condensed consolidated financial statements for further discussion of the 2048 Senior Notes.
(8)
Operating lease obligations excludes $134.8 million of other operating expenses.
Note:
Due to the fact that the timing of certain amounts to be paid cannot be determined or for other reasons discussed below, the following contractual commitments have not been presented in the table above.
(i)
As noted previously, we have entered into a tax receivable agreement with our Managing Partners and Contributing Partners which requires us to pay to our Managing Partners and Contributing Partners 85% of any tax savings received by APO Corp. from our step-up in tax basis. The tax savings achieved may not ensure that we have sufficient cash available to pay this liability and we might be required to incur additional debt to satisfy this liability.
(ii)
Debt amounts related to the consolidated VIEs are not presented in the table above as the Company is not a guarantor of these non-recourse liabilities.
(iii)
In connection with the Stone Tower acquisition, the Company agreed to pay the former owners of Stone Tower a specified percentage of any future performance fees earned from certain of the Stone Tower funds, CLOs and strategic investment accounts. This contingent consideration liability is remeasured to fair value at each reporting period until the obligations are satisfied. See note 15 to the condensed consolidated financial statements for further information regarding the contingent consideration liability.
(iv)
Commitments from certain of our subsidiaries to contribute to the funds we manage and certain related parties.
Commitments
Certain of our management companies and general partners are committed to contribute to the funds we manage and certain related parties. While a small percentage of these amounts are funded by us, the majority of these amounts have historically been funded by our related parties, including certain of our employees and certain Apollo funds. The table below presents the commitment and remaining commitment amounts of Apollo and its related parties, the percentage of total fund commitments of Apollo and its related parties, the commitment and remaining commitment amounts of Apollo only (excluding related parties), and the percentage of total fund commitments of Apollo only (excluding related parties) for each credit, private equity and real assets fund as of September 30, 2019 as follows ($ in millions):

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Fund
Apollo and Related Party Commitments
 
% of Total Fund Commitments
 
Apollo Only (Excluding Related Party) Commitments
 
Apollo Only (Excluding Related Party) % of Total Fund Commitments
 
Apollo and Related Party Remaining Commitments
 
Apollo Only (Excluding Related Party) Remaining Commitments
Credit:
 
 
 
 
 
 
 
 
 
 
 
Apollo Credit Opportunity Fund II, L.P. (“COF II”)
$
30.5

 
1.93
%
 
$
23.4

 
1.48
%
 
$
0.8

 
$
0.6

Apollo Credit Opportunity Fund I, L.P. (“COF I”)
449.2

 
30.26

 
29.7

 
2.00

 
237.1

 
4.2

Financial Credit Investment IV, L.P. (“FCI IV”)
193.5

 
31.50

 
10.5

 
1.71

 
193.5

 
10.5

FCI III
224.3

 
11.76

 
0.1

 
0.01

 
100.3

 
—

Financial Credit Investment II, L.P. (“FCI II”)
245.3

 
15.77

 
—

 
—

 
115.9

 
—

FCI I
151.3

 
27.07

 
—

 
—

 
—

 
—

SCRF IV
416.1

 
16.63

 
33.1

 
1.32

 
109.0

 
8.8

MidCap
1,672.9

 
80.23

 
110.9

 
5.32

 
31.0

 
31.0

Apollo Moultrie Credit Fund, L.P.
400.0

 
100.00

 
—

 
—

 
135.0

 
—

Apollo Accord Master Fund II, L.P.
116.6

 
22.57

 
11.6

 
2.25

 
20.4

 
7.6

Apollo Accord Master Fund III, L.P.
225.1

 
25.40

 
0.1

 
0.01

 
225.1

 
0.1

Athora(1)
645.8

 
27.37

 
136.2

 
5.77

 
447.5

 
94.5

Other Credit
3,634.2

 
Various

 
179.8

 
Various

 
1,505.0

 
87.4

Private Equity:
 
 
 
 
 
 
 
 
 
 
 
Fund IX
1,914.5

 
7.74

 
470.2

 
1.90

 
1,750.7

 
434.0

Fund VIII
1,543.5

 
8.40

 
396.4

 
2.16

 
257.1

 
67.1

Fund VII
467.2

 
3.18

 
178.1

 
1.21

 
60.9

 
23.2

Fund VI
246.3

 
2.43

 
6.1

 
0.06

 
9.7

 
0.2

Fund V
100.0

 
2.67

 
0.5

 
0.01

 
6.2

 
—

Fund IV
100.0

 
2.78

 
0.2

 
0.01

 
0.5

 
—

AION
151.5

 
18.34

 
50.0

 
6.05

 
20.2

 
6.5

ANRP I
426.1

 
32.21

 
10.1

 
0.76

 
59.7

 
1.1

ANRP II
561.2

 
16.25

 
26.0

 
0.75

 
200.5

 
9.2

ANRP III
648.1

 
49.71

 
28.1

 
2.16

 
648.1

 
28.1

A.A. Mortgage Opportunities, L.P.
625.0

 
80.31

 
—

 
—

 
261.6

 
—

Apollo Rose, L.P.
299.1

 
100.00

 
—

 
—

 
—

 
—

Apollo Rose II, L.P.
887.1

 
51.01

 
33.0

 
1.9

 
394.6

 
14.9

Champ, L.P.
183.6

 
78.25

 
25.3

 
10.8

 
15.3

 
2.4

Apollo Royalties Management, LLC
108.6

 
100.00

 
—

 
—

 
—

 
—

Apollo Hybrid Value Fund, L.P.
834.2

 
25.76

 
89.2

 
2.75

 
693.9

 
74.2

COF III
358.1

 
10.45

 
83.1

 
2.43

 
75.0

 
18.7

Apollo Asia Private Credit Fund, L.P.
126.5

 
55.12

 
0.1

 
0.04

 
31.9

 
—

AEOF
125.5

 
12.01

 
25.5

 
2.44

 
92.6

 
18.8

Other Private Equity
708.7

 
Various

 
103.6

 
Various

 
160.4

 
46.7

Real Assets:
 
 
 
 
 
 
 
 
 
 
 
U.S. RE Fund III
317.1

 
71.68

 
7.1

 
1.60

 
317.1

 
7.1

U.S. RE Fund II(2)
697.2

 
56.08

 
4.7

 
0.38

 
290.1

 
7.0

U.S. RE Fund I(2)
434.0

 
66.98

 
16.4

 
2.52

 
81.3

 
2.7

CPI Capital Partners Europe, L.P.(1)
6.0

 
0.47

 
—

 
—

 
—

 
—

CPI Capital Partners Asia Pacific, L.P.
6.9

 
0.53

 
0.5

 
0.04

 
0.1

 
—

Asia RE Fund(2)
376.9

 
53.12

 
8.4

 
1.18

 
240.5

 
5.9

Infrastructure Equity Fund(3)
246.1

 
27.43

 
13.1

 
1.46

 
59.7

 
2.7

EPF III(1)
609.4

 
13.63

 
72.6

 
1.62

 
332.3

 
40.7

EPF II(1)
410.1

 
12.02

 
60.2

 
1.76

 
92.8

 
18.0

Apollo European Principal Finance Fund, L.P. (“EPF I”)(1)
292.8

 
20.74

 
19.3

 
1.37

 
47.4

 
4.4

Other Real Assets
682.9

 
Various

 
0.9

 
Various

 
24.7

 
0.2

Other:
 
 
 
 
 
 
 
 
 
 
 
Apollo SPN Investments I, L.P.
12.5

 
0.27

 
12.5

 
0.27

 
7.2

 
7.2

Total
$
22,911.5

 
 
 
$
2,276.6

 
 
 
$
9,352.7

 
$
1,085.7

(1)
Apollo’s commitment in these funds is denominated in Euros and translated into U.S. dollars at an exchange rate of €1.00 to $1.09 as of September 30, 2019.

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(2)
Figures for U.S. RE Fund I include base, additional, and co-investment commitments. A co-investment vehicle within U.S. RE Fund I is denominated in pound sterling and translated into U.S. dollars at an exchange rate of £1.00 to $1.23 as of September 30, 2019. Figures for U.S. RE Fund II and Asia RE Fund include co-investment commitments.
(3)
Figures for Apollo Infrastructure Equity Fund include Apollo Infra Equity US Fund, L.P. and Apollo Infra Equity International Fund, L.P. commitments.
On April 30, 2015, Apollo entered into the AAA Investments Credit Agreement (see note 14 of our condensed consolidated financial statements for further disclosure regarding this facility). The 2018 AMH Credit Facility, 2024 Senior Notes, 2026 Senior Notes, 2029 Senior Notes, 2039 Senior Secured Guaranteed Notes and 2048 Senior Notes will have future impacts on our cash uses. See note 10 of our condensed consolidated financial statements for information regarding the Company’s debt arrangements.
Contingent Obligation—Performance fees with respect to certain credit and private equity funds and real assets funds is subject to reversal in the event of future losses to the extent of the cumulative performance fees recognized in income to date. See note 15 of our condensed consolidated financial statements for a description of our contingent obligation.
One of the Company’s subsidiaries, AGS, provides underwriting commitments in connection with securities offerings to the portfolio companies of the funds Apollo manages. As of September 30, 2019, there were no underwriting commitments.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our predominant exposure to market risk is related to our role as investment manager and general partner for our funds and the sensitivity to movements in the fair value of their investments and resulting impact on performance fees and management fee revenues. Our direct investments in the funds also expose us to market risk whereby movements in the fair values of the underlying investments will increase or decrease both net gains (losses) from investment activities and income (loss) from equity method investments. For a discussion of the impact of market risk factors on our financial instruments see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Investments, at Fair Value.”
The fair value of our financial assets and liabilities of our funds may fluctuate in response to changes in the value of investments, foreign exchange, commodities and interest rates. The net effect of these fair value changes impacts the gains and losses from investments in our condensed consolidated statements of operations. However, the majority of these fair value changes are absorbed by the Non-Controlling Interests.
The Company is subject to a concentration risk related to the investors in its funds. Although there are more than 1,000 investors in Apollo’s active credit, private equity and real assets funds, no individual investor accounts for more than 10% of the total committed capital to Apollo’s active funds.
Risks are analyzed across funds from the “bottom up” and from the “top down” with a particular focus on asymmetric risk. We gather and analyze data, monitor investments and markets in detail, and constantly strive to better quantify, qualify and circumscribe relevant risks.
Each risk management process is subject to our overall risk tolerance and philosophy and our enterprise-wide risk management framework. This framework includes identifying, measuring and managing market, credit and operational risks at each segment, as well as at the fund and Company level.
Each segment runs its own investment and risk management process subject to our overall risk tolerance and philosophy:
•
Our credit and real assets funds continuously monitor a variety of markets for attractive trading opportunities, applying a number of traditional and customized risk management metrics to analyze risk related to specific assets or portfolios, as well as, fund-wide risks.
•
The investment process of our private equity funds involves a detailed analysis of potential acquisitions, and investment management teams assigned to monitor the strategic development, financing and capital deployment decisions of each portfolio investment.
The Company has established a risk committee comprised of various members of senior management including the Company’s Chief Financial Officer, Chief Legal Officer, and the Company’s Chief Risk Officer. The risk committee is tasked with assisting the Company in monitoring and managing enterprise-wide risk. The risk committee generally meets on a quarterly basis and reports to senior management of the Company at such times as the committee deems appropriate and at least on an annual basis.

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On at least a monthly basis, the Company’s risk department provides a summary analysis of fund level market and credit risk to the portfolio managers of the Company’s funds and the heads of the various business segments. On a periodic basis, the Company’s risk department presents a consolidated summary analysis of fund level market and credit risk to the Company’s risk committee. In addition, the Company’s Chief Risk Officer reviews specific investments from the perspective of risk mitigation and discusses such analysis with the Company’s risk committee and/or the executive committee of the Company’s Board at such times as the Company’s Chief Risk Officer determines such discussions are warranted. On an annual basis, the Company’s Chief Risk Officer provides senior management of the Company with a comprehensive overview of risk management along with an update on current and future risk initiatives.
Impact on Management Fees—Our management fees are based on one of the following:
•
capital commitments to an Apollo fund;
•
capital invested in an Apollo fund;
•
the gross, net or adjusted asset value of an Apollo fund, as defined; or
•
as otherwise defined in the respective agreements.
Management fees could be impacted by changes in market risk factors and management could consider an investment permanently impaired as a result of (i) such market risk factors causing changes in invested capital or in market values to below cost, in the case of certain credit funds and our private equity funds or (ii) such market risk factors causing changes in gross or net asset value, for the credit funds. The proportion of our management fees that are based on NAV is dependent on the number and types of our funds in existence and the current stage of each fund’s life cycle.
Impact on Advisory and Transaction Fees—We earn transaction fees relating to the negotiation of credit, private equity and real assets transactions and may obtain reimbursement for certain out-of-pocket expenses incurred. Subsequently, on a quarterly or annual basis, ongoing advisory fees, and additional transaction fees in connection with additional purchases, dispositions, or follow-on transactions, may be earned. Management Fee Offsets and any broken deal costs, if applicable, are reflected as a reduction to advisory and transaction fees. Advisory and transaction fees will be impacted by changes in market risk factors to the extent that they limit our opportunities to engage in credit, private equity and real assets transactions or impair our ability to consummate such transactions. The impact of changes in market risk factors on advisory and transaction fees is not readily predicted or estimated.
Impact on Performance Fees—We earn performance fees from our funds as a result of such funds achieving specified performance criteria. Our performance fees will be impacted by changes in market risk factors. However, several major factors will influence the degree of impact:
•
the performance criteria for each individual fund in relation to how that fund’s results of operations are impacted by changes in market risk factors;
•
whether such performance criteria are annual or over the life of the fund;
•
to the extent applicable, the previous performance of each fund in relation to its performance criteria; and
•
whether each funds’ performance fee distributions are subject to contingent repayment.
As a result, the impact of changes in market risk factors on performance fees will vary widely from fund to fund. The impact is heavily dependent on the prior and future performance of each fund, and therefore is not readily predicted or estimated.
Market Risk—We are directly and indirectly affected by changes in market conditions. Market risk generally represents the risk that values of assets and liabilities or revenues and expenses will be adversely affected by changes in market conditions. Market risk is inherent in each of our investments and activities, including equity investments, loans, short-term borrowings, long-term debt, hedging instruments, credit default swaps and derivatives. Just a few of the market conditions that may shift from time to time, thereby exposing us to market risk, include fluctuations in interest and currency exchange rates, equity prices, changes in the implied volatility of interest rates and price deterioration. Volatility in debt and equity markets can impact our pace of capital deployment, the timing of receipt of transaction fee revenues and the timing of realizations. These market conditions could have an impact on the value of fund investments and rates of return. Accordingly, depending on the instruments or activities impacted, market risks can have wide ranging, complex adverse effects on our results from operations and our overall financial condition. We monitor market risk using certain strategies and methodologies which management evaluates periodically for appropriateness. We intend to continue to monitor this risk going forward and continue to monitor our exposure to all market factors.

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Interest Rate Risk—Interest rate risk represents exposure we and our funds have to instruments whose values vary with the change in interest rates. These instruments include, but are not limited to, loans, borrowings, investments in interest bearing securities and derivative instruments. We may seek to mitigate risks associated with the exposures by having our funds take offsetting positions in derivative contracts. Hedging instruments allow us to seek to mitigate risks by reducing the effect of movements in the level of interest rates, changes in the shape of the yield curve, as well as, changes in interest rate volatility. Hedging instruments used to mitigate these risks may include related derivatives such as options, futures and swaps.
Credit Risk—Certain of our funds are subject to certain inherent risks through their investments.
Certain of our entities invest substantially all of their excess cash in open-end money market funds and money market demand accounts, which are included in cash and cash equivalents. The money market funds invest primarily in government securities and other short-term, highly liquid instruments with a low risk of loss. We continually monitor the funds’ performance in order to manage any risk associated with these investments.
Certain of our funds hold derivative instruments that contain an element of risk in the event that the counterparties may be unable to meet the terms of such agreements. We seek to minimize our risk exposure by limiting the counterparties with which our funds enter into contracts to banks and investment banks who meet established credit and capital guidelines. As of September 30, 2019, we do not expect any counterparty to default on its obligations and therefore do not expect to incur any loss due to counterparty default.
Foreign Exchange Risk—Foreign exchange risk represents exposures our funds have to changes in the values of current fund holdings and future cash flows denominated in other currencies and investments in non-U.S. companies. The types of investments exposed to this risk include investments in foreign subsidiaries, foreign currency-denominated loans, foreign currency-denominated transactions, and various foreign exchange derivative instruments whose values fluctuate with changes in currency exchange rates or foreign interest rates. Instruments used to mitigate this risk are foreign exchange options, currency swaps, futures and forwards. These instruments may be used to help insulate our funds against losses that may arise due to volatile movements in foreign exchange rates and/or interest rates.
In our capacity as investment manager of the funds we manage, we continuously monitor a variety of markets for attractive opportunities for managing risk. For example, certain of the funds we manage may put in place foreign exchange hedges or borrowings with respect to certain foreign currency denominated investments to provide a hedge against foreign exchange exposure.
Non-U.S. Operations—We conduct business throughout the world and are continuing to expand into foreign markets. We currently have offices outside the U.S. in Toronto, London, Frankfurt, Madrid, Luxembourg, Mumbai, Delhi, Singapore, Hong Kong, Shanghai and Tokyo and have been strategically growing our international presence. Our fund investments and our revenues are primarily derived from our U.S. operations. With respect to our non-U.S. operations, we are subject to risk of loss from currency fluctuations, social instability, changes in governmental policies or policies of central banks, expropriation, nationalization, unfavorable political and diplomatic developments and changes in legislation relating to non-U.S. ownership. Our funds also invest in the securities of companies which are located in non-U.S. jurisdictions. As we continue to expand globally, we will continue to focus on monitoring and managing these risk factors as they relate to specific non-U.S. investments.
ITEM 4.
CONTROLS AND PROCEDURES
We maintain “disclosure controls and procedures”, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives.
Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) are effective at the reasonable assurance level to accomplish their objectives of ensuring that information we are required to disclose

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in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
No changes in our internal control over financial reporting (as such term is defined in Rules 13a–15(f) and 15d–15(f) under the Exchange Act) occurred during our most recent quarter, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
See note 15 to our condensed consolidated financial statements for a summary of the Company’s legal proceedings.
ITEM 1A.    RISK FACTORS
For a discussion of our potential risks and uncertainties, see the information under the heading "Risk Factors" in our 2018 Annual Report and our Quarterly Report for the quarter ended June 30, 2019, which are accessible on the Securities and Exchange Commission's website at www.sec.gov. There have been no material changes to the risk factors for the three months ended September 30, 2019.
The risks described in our 2018 Annual Report and our Quarterly Report for the quarter ended June 30, 2019 are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/ or operating results.
ITEM 2.
UNREGISTERED SALE OF EQUITY SECURITIES
On August 2, 2019, August 5, 2019, August 15, 2019, August 20, 2019, August 26, 2019 and August 27, 2019 we issued 182,698, 5,902, 26,338, 8,889, 1,185 and 1,444 shares of Class A Common Stock, respectively, net of taxes to Apollo Management Holdings, L.P., a subsidiary of Apollo Global Management, Inc., in connection with issuances of stock to participants in the Equity Plan for an aggregate purchase price of $5.8 million, $0.2 million, $0.9 million, $0.3 million, $42.4 thousand and $51.6 thousand, respectively. The issuance was exempt from registration under the Securities Act in accordance with Section 4(a)(2) and Rule 506(b) thereof, as transactions by the issuer not involving a public offering. We determined that the purchaser of Class A Common Stock in the transactions, Apollo Management Holdings, L.P., was an accredited investor.
Issuer Purchases of Equity Securities
The following table sets forth purchases of our Class A Common Stock made by us or on our behalf during the fiscal quarter ended September 30, 2019.
Period
 
Number of Shares of Class A Common Stock Purchased(1)
 
Average Price
Paid per Share
 
Class A Common Stock Purchased as Part of Publicly Announced Plans or Programs(2)
 
Approximate Dollar Value of Class A Common Stock that May be Purchased Under the Plan or Programs
July 1, 2019 through July 31, 2019
 
—

 
$
—

 
—

 
$
227,407,649

August 1, 2019 through August 31, 2019
 
143,000

 
32.23

 
116,662

 
223,647,633

September 1, 2019 through September 30, 2019
 
—

 
—

 
—

 
223,647,633

Total
 
143,000

 
 
 
116,662

 
 
(1)
Certain Apollo employees receive a portion of the profit sharing proceeds of certain funds in the form of (a) restricted Class A Common Stock of AGM Inc. that they are required to purchase with such proceeds or (b) RSUs, in each case which equity-based awards generally vest over three years. These equity-based awards are granted under the Company's Equity Plan. To prevent dilution on account of these awards, Apollo may, in its discretion, repurchase Class A Common Stock on the open market and retire them. During the three months ended September 30, 2019, we repurchased 26,338 shares of Class A Common Stock at an average price paid per share of $32.23 in open-market transactions not pursuant to a publicly-announced repurchase plan or program on account of these awards. See note 13 to the condensed consolidated financial statements for further information on Class A Common Stock.
(2)
Pursuant to a publicly announced share repurchase program, the Company is authorized to repurchase up to $500 million in the aggregate of its Class A Common Stock, including through the repurchase of outstanding Class A Common Stock and through a reduction of Class A Common Stock to be issued to employees to satisfy associated tax obligations in connection with the settlement of equity-based awards

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granted under the Equity Plan (or any successor equity plan thereto). Class A Common Stock may be repurchased from time to time in open market transactions, in privately negotiated transactions, pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Exchange Act, or otherwise, with the size and timing of these repurchases depending on legal requirements, price, market and economic conditions and other factors. The Company is not obligated under the terms of the program to repurchase any of its Class A Common Stock. The repurchase program has no expiration date and may be suspended or terminated by the Company at any time without prior notice. Class A Common Stock repurchased as part of this program are canceled by the Company. Reductions of Class A Common Stock issued to employees to satisfy associated tax obligations in connection with the settlement of equity-based awards granted under the Equity Plan are not included in the table.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5.
OTHER INFORMATION
Not applicable.

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ITEM 6.
EXHIBITS
 
Exhibit
Number
  
Exhibit Description
 
 
3.1
  
 
 
3.2
  
 
 
3.3
  
 
 
4.1
  
 
 
 
4.2
 
 
 
 
4.3
 
 
 
 
4.4
 
 
 
 
4.5
 
 
 
4.6
 
 
 
 
4.7
 
 
 
 
4.8
 
 
 
 

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Exhibit
Number
  
Exhibit Description
 
 
4.9
 
 
 
 
4.10
 
 
 
 
4.11
 
 
 
 
4.12
 
 
 
 
4.13
 
 
 
 
4.14
 
 
 
 
4.15
 
 
 
 
4.16
 
 
 
 
*4.17
 
 
 
 
+10.1
 
 
 
 
*+10.2
 
 
 
 
+10.3
 
 
 
 

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Exhibit
Number
  
Exhibit Description
 
 
+10.4
 
 
 
 
+10.5
 
 
 
 
+10.6
 
 
 
 
+10.7
 
 
 
 
+10.8
 
 
 
 
*+10.9
 
 
 
 
*+10.10
 
 
 
 
*+10.11
 
 
 
 
*+10.12
 
 
 
 
10.13
 
 
 
 
10.14
 
 
 
 

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Exhibit
Number
  
Exhibit Description
 
 
10.15
 
Sixth Amended and Restated Exchange Agreement, dated as of September 5, 2019, by and among Apollo Global Management, Inc., Apollo Principal Holdings I, L.P., Apollo Principal Holdings II, L.P., Apollo Principal Holdings III, L.P., Apollo Principal Holdings IV, L.P., Apollo Principal Holdings V, L.P., Apollo Principal Holdings VI, L.P., Apollo Principal Holdings VII, L.P., Apollo Principal Holdings VIII, L.P., Apollo Principal Holdings IX, L.P., Apollo Principal Holdings X, L.P., Apollo Principal Holdings XI, LLC, Apollo Principal Holdings XII, L.P., AMH Holdings (Cayman), L.P. and the Apollo Principal Holders (as defined therein) from time to time party thereto(incorporated by reference to Exhibit 99.3 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on September 5, 2019 (File No. 001-35107)).
 
 
 
*31.1
 
 
 
*31.2
 
 
 
*32.1
 
 
 
*32.2
 
 
 
 
101.INS
 
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
 
 
*101.SCH
 
XBRL Taxonomy Extension Schema Document
 
 
*101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
*101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
*101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
 
 
*101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 
104
 
Cover Page Interactive Data File (embedded within the Inline XBRL document).

*
Filed herewith.
+
Management contract or compensatory plan or arrangement.

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
 
 
 
Apollo Global Management, Inc.
 
 
(Registrant)
 
 
 
Date: November 5, 2019
By:
/s/ Martin Kelly
 
 
Name:
Martin Kelly
 
 
Title:
Chief Financial Officer and Co-Chief Operating Officer
(principal financial officer and authorized signatory)

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