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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, 2020 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 filerAccelerated filer
Non-accelerated filerSmaller 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 classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock APONew York Stock Exchange
6.375% Series A Preferred StockAPO.PR ANew York Stock Exchange
6.375% Series B Preferred StockAPO.PR BNew York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None
As of November 4, 2020 there were 228,815,821 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
OTHER INFORMATION
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, the outbreak of the novel coronavirus disease 2019 (“COVID-19”), the impact of energy market dislocation, 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 our funds and litigation risks, among others. Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. While we are unable to accurately predict the full impact that COVID-19 will have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and containment measures, our compliance with these measures has impacted our day-to-day operations and could disrupt our business and operations, as well as that of the Apollo funds and their portfolio companies, for an indefinite period of time. 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 February 21, 2020 (the “2019 Annual Report”) and quarterly report on Form 10-Q filed with the SEC on May 11, 2020, 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 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; references to our Class A Common Stock (“Class A shares”), Class B Common Stock (“Class B share”), our 6.375% Series A Preferred Stock (“Series A Preferred shares”) and 6.375% Series B Preferred Stock (“Series B Preferred shares” and collectively with the Series A Preferred shares, the “Preferred shares”) 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; and references to dividends to our stockholders for periods prior to the Conversion mean distributions to our shareholders;
“AMH” refers to Apollo Management Holdings, L.P., a Delaware limited partnership, that is an indirect subsidiary of AGM 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 Group” means (i) the Class C Stockholder and its affiliates, including their respective general partners, members and limited partners, (ii) Holdings and its affiliates, including their respective general partners, members and limited partners, (iii) with respect to each Managing Partner, such Managing Partner and such Managing Partner’s group (as defined in Section 13(d) of the Exchange Act), (iv) any former or current investment professional of or other employee of an Apollo employer (as defined below) or the Apollo Operating Group (or such other entity controlled by a member of the Apollo Operating Group) and any member of such person’s group, (v) any former or current executive officer of an Apollo employer or the Apollo Operating Group (or such other entity controlled by a member of the Apollo Operating Group) and any member of such
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person’s group; and (vi) any former or current director of an Apollo employer or the Apollo Operating Group (or such other entity controlled by a member of the Apollo Operating Group) and any member of such person’s group. With respect to any person, Apollo employer means AGM Inc. or such successor thereto or such other entity controlled by AGM Inc. or its successor as may be such person’s employer at such time, but does not include any portfolio companies.
“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 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 governing documents 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;
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“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;
(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 (“AAME PC”), a wholly-owned subsidiary of Apollo Asset Management Europe LLP (“AAME”). AAME PC and AAME are subsidiaries of Apollo and are collectively referred to herein as “ISGI”;
“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 LP (formerly known as Athene Asset Management LLC) (“ISG”), provides asset management and advisory services;
“Athora Holding” refers to Athora Holding, Ltd. (“Athora Holding” and together with its subsidiaries, “Athora”), a strategic platform that acquires or reinsures blocks of insurance business in the German and broader European life insurance market (collectively, the “Athora Accounts”). The Company, through ISGI, 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;
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“capital deployed” or “deployment” represents (i) the aggregate amount of capital that has been invested during a given period (including leverage) by our commitment based funds and SIAs that have a defined maturity date, (ii) purchases of investments (net of sales) by our subscription and contribution based funds and mandates (including leverage), (iii) investments originated by certain of our platform companies, net of syndications to our other funds and accounts, but including syndications to third parties, and (iv) third-party investment activity in opportunities sourced by our teams for which we earn a fee and in which we participate. Deployment excludes offsetting short positions, certain credit derivatives, certain short-dated government securities, and involuntary repayment of loans and bonds;
“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;
“drawdown capital deployed” or “drawdown 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;
“Equity Plan” refers to 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;
“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, 2020 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, 2020 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 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;
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“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, 2020 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, (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 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, as amended (the “Investment Company Act”). 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. (together with its alternative investment vehicles, “ANRP I”), Apollo Natural Resources Partners II, L.P. (together with its alternative investment vehicles, “ANRP II”), Apollo Natural Resources Partners III, L.P. (together with its parallel vehicles and alternative investment vehicles, “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
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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;
“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 and excludes amounts, if any, invested on a financed basis with leverage facilities;
“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
“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 pursuant to 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, 2020 AND DECEMBER 31, 2019
(dollars in thousands, except share data)
As of
September 30, 2020
As of
December 31, 2019
Assets:
Cash and cash equivalents$1,838,646 $1,556,202 
Restricted cash17,694 19,779 
U.S. Treasury securities, at fair value 554,387 
Investments (includes performance allocations of $1,128,160 and $1,507,571 as of September 30, 2020 and December 31, 2019, respectively)3,977,069 3,609,859 
Assets of consolidated variable interest entities:
Cash and cash equivalents805,529 45,329 
Investments, at fair value9,900,593 1,213,169 
Other assets183,598 41,688 
Incentive fees receivable1,028 2,414 
Due from related parties487,453 415,069 
Deferred tax assets, net678,799 473,165 
Other assets318,724 326,449 
Lease assets301,779 190,696 
Goodwill116,958 93,911 
Total Assets$18,627,870 $8,542,117 
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable and accrued expenses$143,664 $94,364 
Accrued compensation and benefits221,185 64,393 
Deferred revenue120,075 84,639 
Due to related parties712,186 501,387 
Profit sharing payable666,734 758,669 
Debt3,151,247 2,650,600 
Liabilities of consolidated variable interest entities:
Debt, at fair value5,646,884 850,147 
Notes payable2,464,267  
Other liabilities806,333 79,572 
Other liabilities169,522 210,740 
Lease liabilities336,769 209,479 
Total Liabilities14,438,866 5,503,990 
Commitments and Contingencies (see note 16)
Stockholders’ Equity:
Apollo Global Management, Inc. stockholders’ equity:
Series A Preferred Stock, 11,000,000 shares issued and outstanding as of September 30, 2020 and December 31, 2019264,398 264,398 
Series B Preferred Stock, 12,000,000 shares issued and outstanding as of September 30, 2020 and December 31, 2019289,815 289,815 
Class A Common Stock, $0.00001 par value, 90,000,000,000 shares authorized, 228,747,302 and 222,994,407 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively  
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Class B Common Stock, $0.00001 par value, 999,999,999 shares authorized, 1 share issued and outstanding as of September 30, 2020 and December 31, 2019  
Class C Common Stock, $0.00001 par value, 1 share authorized, 1 share issued and outstanding as of September 30, 2020 and December 31, 2019  
Additional paid in capital929,524 1,302,587 
Accumulated deficit(396,895) 
Accumulated other comprehensive income (loss)2,722 (4,578)
Total Apollo Global Management, Inc. Stockholders’ equity1,089,564 1,852,222 
Non-Controlling Interests in consolidated entities1,688,906 281,904 
Non-Controlling Interests in Apollo Operating Group1,410,534 904,001 
Total Stockholders’ Equity4,189,004 3,038,127 
Total Liabilities and Stockholders’ Equity$18,627,870 $8,542,117 
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, 2020 AND 2019
(dollars in thousands, except share data)
For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
 2020201920202019
Revenues:
Management fees$433,570 $394,547 $1,240,127 $1,162,788 
Advisory and transaction fees, net73,449 16,440 172,369 67,133 
Investment income (loss):
Performance allocations459,241 254,103 (350,483)682,462 
Principal investment income (loss)50,722 33,393 (25,506)99,020 
Total investment income (loss)509,963 287,496 (375,989)781,482 
Incentive fees1,292 4,238 21,016 5,674 
Total Revenues1,018,274 702,721 1,057,523 2,017,077 
Expenses:
Compensation and benefits:
Salary, bonus and benefits163,197 126,695 453,485 369,527 
Equity-based compensation49,726 42,665 161,268 132,404 
Profit sharing expense191,809 88,610 (68,230)280,335 
Total compensation and benefits404,732 257,970 546,523 782,266 
Interest expense34,889 27,833 98,422 70,243 
General, administrative and other90,822 85,313 259,073 238,814 
Placement fees612 256 1,380 591 
Total Expenses531,055 371,372 905,398 1,091,914 
Other Income (Loss):
Net gains (losses) from investment activities144,472 (19,790)(851,412)44,099 
Net gains from investment activities of consolidated variable interest entities122,119 10,631 14,061 24,728 
Interest income1,485 10,152 13,413 25,938 
Other income (loss), net10,161 (43,144)(3,019)(36,451)
Total Other Income (Loss)278,237 (42,151)(826,957)58,314 
Income (loss) before income tax (provision) benefit765,456 289,198 (674,832)983,477 
Income tax (provision) benefit(89,357)231,896 66,173 195,345 
Net Income (Loss)676,099 521,094 (608,659)1,178,822 
Net (income) loss attributable to Non-Controlling Interests(403,700)(157,824)331,169 (501,672)
Net Income (Loss) Attributable to Apollo Global Management, Inc.272,399 363,270 (277,490)677,150 
Series A Preferred Stock Dividends(4,382)(4,382)(13,148)(13,148)
Series B Preferred Stock Dividends(4,781)(4,782)(14,344)(14,344)
Net Income (Loss) Attributable to Apollo Global Management, Inc. Class A Common Stockholders$263,236 $354,106 $(304,982)$649,658 
Net Income (Loss) Per Share of Class A Common Stock:
Net Income (Loss) Available to Class A Common Stock – Basic$1.11 $1.64 $(1.41)$3.07 
Net Income (Loss) Available to Class A Common Stock – Diluted$1.11 $1.63 $(1.41)$3.06 
Weighted Average Number of Shares of Class A Common Stock Outstanding – Basic227,771,678 205,797,643 227,395,847 202,087,827 
Weighted Average Number of Shares of Class A Common Stock Outstanding – Diluted227,771,678 207,641,323 227,395,847 203,745,454 

See accompanying notes to condensed consolidated financial statements.
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APOLLO GLOBAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(dollars in thousands, except share data)
For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
2020201920202019
Net Income (Loss)$676,099 $521,094 $(608,659)$1,178,822 
Other Comprehensive Income (Loss), net of tax:
Currency translation adjustments, net of tax19,524 (14,616)20,652 (17,021)
Net gain (loss) from change in fair value of cash flow hedge instruments52 50 153 (1,862)
Net gain (loss) on available-for-sale securities 106 (68)(1,242)162 
Total Other Comprehensive Income (Loss), net of tax19,682 (14,634)19,563 (18,721)
Comprehensive Income (Loss)695,781 506,460 (589,096)1,160,101 
Comprehensive (Income) Loss attributable to Non-Controlling Interests(416,781)(144,825)318,906 (485,619)
Comprehensive Income (Loss) Attributable to Apollo Global Management, Inc.$279,000 $361,635 $(270,190)$674,482 

See accompanying notes to condensed consolidated financial statements.
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APOLLO GLOBAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS’ EQUITY (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(dollars in thousands, except share data)

    
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 SharesClass A Common StockClass B SharesClass B Common StockClass C Common Stock
Balance at July 1, 2019200,435,587  1   
Issuance of Class C Common Stock resulting from the Conversion— — — — 1
Payments related to issuances of Class A Common Stock for equity-based awards226,456 — — — — 
Repurchase of Class A Common Stock(143,000)— — — — 
Exchange of AOG Units for Class A Common Stock21,884,253 — — — — 
Reclassifications resulting from the Conversion(222,403,296)222,403,296 (1)1 — 
Balance as at September 30, 2019 222,403,296  1 1 
Balance at January 1, 2019201,400,500  1   
Issuances of Class C Common Stock resulting from the Conversion— — — — 1 
Payments related to issuances of Class A Common Stock for equity-based awards2,737,557 — — — — 
Repurchase of Class A Common Stock(3,719,014)— — — — 
Exchange of AOG Units for Class A Common Stock21,984,253 — — — — 
Reclassifications resulting from the Conversion(222,403,296)222,403,296 (1)1— 
Balance as at September 30, 2019 222,403,296  11


















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 Apollo Global Management, Inc. Stockholders    
 Series A Preferred SharesSeries A Preferred StockSeries B Preferred SharesSeries B Preferred StockAdditional
Paid in
Capital
Retained Earnings (Accumulated Deficit)Accumulated
Other
Comprehensive Loss
Total Apollo
Global
Management,
Inc.
Shareholders’
Equity
Non-
Controlling
Interests in
Consolidated
Entities
Non-
Controlling
Interests in
Apollo
Operating
Group
Total Shareholders’ Equity
Balance at July 1, 2019$264,398 $ $289,815 $ $1,052,259 $(222,007)$(5,192)$1,379,273 $280,662 $881,055 $2,540,990 
Dilution impact of issuance of Class A Common Stock— — — — 17 — — 17 — — 17 
Capital increase related to equity-based compensation— — — — 33,867 — — 33,867 — — 33,867 
Capital contributions— — — — — — — — 555 — 555 
Dividends(4,382)— (4,782)— 22,824 (127,629)— (113,969)(10,944)(122,899)(247,812)
Payments related to issuances of Class A Common Stock for equity-based awards— — — — 860 (4,470)— (3,610)— — (3,610)
Repurchase of Class A Common Stock— — — — (4,610)— — (4,610)— — (4,610)
Exchange of AOG Units for Class A Common Stock— — — — 112,014 — — 112,014 — (95,438)16,576 
Net income 4,382 — 4,782 — — 354,106 — 363,270 7,083 150,741 521,094 
Currency translation adjustments, net of tax— — — — — — (1,625)(1,625)(11,340)(1,651)(14,616)
Net gain from change in fair value of cash flow hedge instruments— — — — — — 25 25 — 25 50 
Net loss on available-for-sale securities — — — — — — (35)(35)— (33)(68)
Reclassification resulting from the Conversion(264,398)264,398 (289,815)289,815 — — — — — — — 
Balance at September 30, 2019$ $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 SharesSeries A Preferred StockSeries B Preferred SharesSeries B Preferred StockAdditional
Paid in
Capital
Retained Earnings (Accumulated Deficit)Accumulated
Other
Comprehensive Loss
Total Apollo
Global
Management,
Inc.
Shareholders’
Equity
Non-
Controlling
Interests in
Consolidated
Entities
Non-
Controlling
Interests in
Apollo
Operating
Group
Total Shareholders’ Equity
Balance at January 1, 2019$264,398 $ $289,815 $ $1,299,418 $(473,276)$(4,159)$1,376,196 $271,522 $804,122 $2,451,840 
Dilution impact of issuance of Class A Common Stock— — — — (8)— — (8)— — (8)
Capital increase related to equity-based compensation— — — — 102,189 — — 102,189 — — 102,189 
Capital contributions— — — — — — — — 1,081 — 1,081 
Dividends(13,148)— (14,344)— (191,796)(127,629)— (346,917)(14,103)(374,619)(735,639)
Payments related to issuances of Class A Common Stock for equity-based awards— — — — 5,690 (48,753)— (43,063)— — (43,063)
Repurchase of Class A Common Stock— — — — (110,726)— — (110,726)— — (110,726)
Exchange of AOG Units for Class A Common Stock— — — — 112,464 — — 112,464 — (95,806)16,658 
Net income13,148 — 14,344 — — 649,658 — 677,150 20,888 480,784 1,178,822 
Currency translation adjustments, net of tax— — — — — — (1,820)(1,820)(13,372)(1,829)(17,021)
Net loss from change in fair value of cash flow hedge instruments— — — — — — (927)(927)— (935)(1,862)
Net gain on available-for-sale securities — — — — — — 79 79 — 83 162 
Reclassifications resulting from the Conversion(264,398)264,398 (289,815)289,815        
Balance at September 30, 2019$ $264,398 $ $289,815 $1,217,231 $ $(6,827)$1,764,617 $266,016 $811,800 $2,842,433 

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The statements below for the three and nine months ended September 30, 2020 represent Apollo Global Management, Inc. as a corporation subsequent to the Conversion:
 Apollo Global Management, Inc. Stockholders    
 Class A Common StockClass B Common StockClass C Common StockSeries A Preferred StockSeries B Preferred StockAdditional
Paid in
Capital
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, 2020229,189,715 1 1 264,398 289,815 1,032,442 (653,745)(3,879)929,031 2,107,870 1,205,036 4,241,937 
Dilution impact of issuance of Class A Common Stock— — — — — (43)— — (43)— — (43)
Capital increase related to equity-based compensation— — — — — 40,620 — — 40,620 — — 40,620 
Capital contributions— — — — — — — — — 8,240 — 8,240 
Dividends/ Distributions— — — (4,382)(4,781)(116,083) — (125,246)(538,513)(99,974)(763,733)
Payments related to issuances of Class A Common Stock for equity-based awards118,587 — — — —  (6,386)— (6,386)— — (6,386)
Repurchase of Class A Common Stock(561,000)— — — — (27,412)— — (27,412)— — (27,412)
Net income (loss)— — — 4,382 4,781 — 263,236 — 272,399 100,021 303,679 676,099 
Currency translation adjustments, net of tax— — — — — — — 6,510 6,510 11,288 1,726 19,524 
Net gain from change in fair value of cash flow hedge instruments— — — — — — — 28 28 — 24 52 
Net loss on available-for-sale securities— — — — — — — 63 63 — 43 106 
Balance at September 30, 2020228,747,302 1 1 $264,398 $289,815 $929,524 $(396,895)$2,722 $1,089,564 $1,688,906 $1,410,534 $4,189,004 
Balance at January 1, 2020222,994,407 1 1 264,398 289,815 1,302,587  (4,578)1,852,222 281,904 904,001 3,038,127 
Equity transaction with Athene Holding— — — — — (54,868)— — (54,868)— 1,214,577 1,159,709 
Consolidation of VIEs— — — — — — — — — 1,895,095 — 1,895,095 
Dilution impact of issuance of Class A Common Stock— — — — — 8,286 — — 8,286 — — 8,286 
Capital increase related to equity-based compensation— — — — — 133,850 — — 133,850 — — 133,850 
Capital contributions— — — — — — — — — 190,093 — 190,093 
Dividends/ Distributions— — — (13,148)(14,344)(428,721) — (456,213)(666,083)(384,274)(1,506,570)
Payments related to issuances of Class A Common Stock for equity-based awards3,270,490 — — — — 28,991 (91,913)— (62,922)— — (62,922)
Repurchase of Class A Common Stock(2,755,095)— — — — (91,617)— — (91,617)— — (91,617)
Exchange of AOG Units for Class A Common Stock5,237,500 — — — — 31,016 — — 31,016 — (16,967)14,049 
Net income (loss)— — — 13,148 14,344 — (304,982)— (277,490)(23,320)(307,849)(608,659)
Currency translation adjustments, net of tax— — — — — — — 7,891 7,891 11,217 1,544 20,652 
Net gain from change in fair value of cash flow hedge instruments— — — — — — — 82 82 — 71 153 
Net loss on available-for-sale securities— — — — — — — (673)(673)— (569)(1,242)
Balance at September 30, 2020228,747,302 1 1 $264,398 $289,815 $929,524 $(396,895)$2,722 $1,089,564 $1,688,906 $1,410,534 $4,189,004 

See accompanying notes to condensed consolidated financial statements.
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APOLLO GLOBAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(dollars in thousands, except share data)
For the Nine Months Ended
September 30,
20202019
Cash Flows from Operating Activities:
Net income (loss)$(608,659)$1,178,822 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Equity-based compensation 161,268 132,404 
Depreciation and amortization 13,058 11,442 
Unrealized (gains) losses from investment activities839,902 (39,250)
Principal investment (income) loss25,506 (99,020)
Performance allocations350,483 (682,462)
Change in fair value of contingent obligations3,629 23,740 
Loss from change in tax receivable agreement liability 38,575 
Deferred taxes, net (114,399)(207,630)
Net loss related to cash flow hedge instruments (1,974)
Non-cash lease expense32,991 34,592 
Other non-cash amounts included in net income (loss), net(6,550)(24,686)
Cash flows due to changes in operating assets and liabilities:
Incentive fees receivable1,386 3,699 
Due from related parties(65,856)(64,891)
Accounts payable and accrued expenses 49,300 25,942 
Accrued compensation and benefits 155,865 92,578 
Deferred revenue 38,805 69,395 
Due to related parties 1,601 56 
Profit sharing payable (82,695)219,564 
Lease liability(16,784)(24,266)
Other assets and other liabilities, net(57,898)(62,247)
Cash distributions of earnings from principal investments16,538 34,311 
Cash distributions of earnings from performance allocations220,948 193,833 
Satisfaction of contingent obligations(12,870)(1,827)
Apollo Fund and VIE related:
Net realized and unrealized (gains) losses from investing activities and debt
154,613 (22,568)
Cash transferred from consolidated VIEs502,153  
Purchases of investments (1,557,686)(309,262)
Proceeds from sale of investments1,691,247 301,591 
Changes in other assets and other liabilities, net(221,180)14,551 
Net Cash Provided by Operating Activities $1,514,716 $835,012 
Cash Flows from Investing Activities:
Purchases of fixed assets$(48,084)$(18,600)
Acquisitions48,518  
Proceeds from sale of investments21,855 2,810 
Purchase of investments(528,462)(15,048)
Purchase of U.S. Treasury securities(1,056,827)(541,530)
Proceeds from maturities of U.S. Treasury securities1,598,357 390,336 
Cash contributions to equity method investments (194,374)(116,498)
Cash distributions from equity method investments141,684 47,869 
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Issuance of related party loans(315)(1,775)
Repayment of related party loans9,040  
Other investing activities1,141 144 
Net Cash Used in Investing Activities $(7,467)$(252,292)
Cash Flows from Financing Activities:
Principal repayments of debt$(16,990)$(29)
Dividends to Preferred Stockholders(27,492)(27,492)
Issuance of debt518,756 1,005,964 
Satisfaction of tax receivable agreement(48,195)(37,234)
Repurchase of Class A Common Stock(91,617)(110,726)
Payments related to deliveries of Class A Common Stock for RSUs (91,913)(48,753)
Dividends paid (428,721)(319,425)
Distributions paid to Non-Controlling Interests in Apollo Operating Group (384,274)(374,619)
Issuance of related party loans(28,280) 
Repayment of related party loans28,280  
Other financing activities(9,890)(18,401)
Apollo Fund and VIE related:
Issuance of debt830,838  
Principal repayment of debt(828,975) 
Issuances of debt within other liabilities of consolidated VIEs68,819  
Distributions paid to Non-Controlling Interests in consolidated entities(146,867)(11,347)
Contributions from Non-Controlling Interests in consolidated entities 189,831 860 
Net Cash Provided by (Used in) Financing Activities $(466,690)$58,798 
Net Increase (Decrease) in Cash and Cash Equivalents, Restricted Cash and Cash Held at Consolidated Variable Interest Entities1,040,559 641,518 
Cash and Cash Equivalents, Restricted Cash and Cash Held at Consolidated Variable Interest Entities, Beginning of Period 1,621,310 662,875 
Cash and Cash Equivalents, Restricted Cash and Cash Held at Consolidated Variable Interest Entities, End of Period $2,661,869 $1,304,393 
Supplemental Disclosure of Cash Flow Information:
Interest paid$88,953 $54,584 
Interest paid by consolidated variable interest entities134,460 10,602 
Income taxes paid28,107 42,253 
Supplemental Disclosure of Non-Cash Investing Activities:
Non-cash distributions from principal investments$(4,678)$(1,098)
Non-cash purchases of other investments, at fair value1,153,316  
Non-cash loss on Athene equity swap(61,261) 
Acquisition of goodwill663  
Contingent consideration(6,208) 
Supplemental Disclosure of Non-Cash Financing Activities:
Capital increases related to equity-based compensation $133,850 $102,189 
Issuance of restricted shares28,991 5,690 
Non-cash issuance of AOG units to Athene1,214,577  
Other non-cash financing activities8,286 (8)
Non-cash distributions paid to Non-Controlling Interests in consolidated variable interest entities(515,558) 
Net Assets Transferred from Consolidated Variable Interest Entity:
Investments, at fair value$9,061,907 $ 
Other assets130,907  
Debt, at fair value(7,344,884) 
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Other liabilities(967,575) 
Non-Controlling interest in consolidated entities related to acquisition (1,382,509) 
Adjustments related to exchange of Apollo Operating Group units:
Deferred tax assets$76,580 $168,058 
Due to related parties(62,531)(39,092)
Additional paid in capital(14,049)(16,658)
Non-Controlling Interest in Apollo Operating Group16,967 95,806 
Reconciliation of Cash and Cash Equivalents, Restricted Cash and Cash and Cash Equivalents Held at Consolidated Variable Interest Entities to the Consolidated Statements of Financial Condition:
Cash and cash equivalents$1,838,646 $1,242,817 
Restricted cash 17,694 19,777 
Cash and cash equivalents held at consolidated variable interest entities805,529 41,799 
Total Cash and Cash Equivalents, Restricted Cash and Cash and Cash Equivalents Held at Consolidated Variable Interest Entities$2,661,869 $1,304,393 

See accompanying notes to condensed consolidated financial statements.
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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, AGM Inc. converted from a Delaware limited liability company named Apollo Global Management, LLC to a Delaware corporation named Apollo Global Management, Inc. (the “Conversion”). 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, 2020, the Company owned, through six intermediate holding companies, 52.9% 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. As of September 30, 2020, Holdings owned 40.4% 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.
Athene and Apollo Strategic Transaction
On February 28, 2020, pursuant to a transaction agreement (the “Transaction Agreement”) between Athene Holding, AGM Inc. and the entities that form the Apollo Operating Group, the Apollo Operating Group issued 29,154,519 non-voting equity interests of the Apollo Operating Group to Athene Holding. As a result, as of September 30, 2020, Athene Holding owned 6.7% of the economic interests in the Apollo Operating Group. See note 15 for further disclosure regarding the Transaction Agreement.
As noted further in note 15, Apollo purchased a 17% incremental equity ownership stake in Athene, bringing Apollo’s beneficial ownership in Athene to 28.0%, at the close of the transaction. This has resulted in Apollo’s indirect ownership in certain VIEs, through Athene, being considered significant such that the Company has the power to direct the activities that most significantly impact the economic performance of these VIEs. Accordingly, there has been a significant increase in consolidated VIE assets, liabilities and Non-Controlling Interests as of September 30, 2020 as compared to December 31, 2019.
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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
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 bestows to its holder certain management rights over the Company. References to the Class A Common Stock, the Class B Common Stock, the Series A Preferred Stock and the Series B Preferred Stock for periods prior to the Conversion means Class A Shares, Class B Share, Series A Preferred Share and Series B Preferred Share of AGM LLC, respectively. 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 generally accepted accounting principles in the United States of America (“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 2019 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
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NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
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. 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.
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 6.
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 $1.5 billion and $253.5 million as of September 30, 2020 and December 31, 2019, 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.
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NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
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.
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
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NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
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 external 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 (loss) 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.
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 or financial liabilities of the consolidated CLOs, whichever are more observable.
Where financial assets are more observable, 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 nonfinancial 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.
Where financial liabilities are more observable, the financial liabilities of the consolidated CLOs are measured at fair value and the financial assets are measured in consolidation as: (i) the sum of the fair value of the financial liabilities, and the carrying value of any nonfinancial liabilities that are incidental to the operations of the CLOs less (ii) the carrying value of any nonfinancial assets that are incidental to the operations of the CLOs. The resulting amount is allocated to the individual financial assets 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.
Certain consolidated VIEs have applied the fair value option for certain investments in private debt securities that otherwise would not have been carried at fair value with gains and losses in net income.
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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 $78.7 million of revenue recognized during the nine months ended September 30, 2020 that was previously deferred as of January 1, 2020.
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.
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.
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NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
The amounts due from fund portfolio companies are recorded in due from related parties, which is discussed further in note 15. 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.
The Company recognizes performance allocations within investment income along with the related principal investment income (as described further below) in the condensed consolidated statements of operations and within the investments line in the condensed consolidated statements of financial condition.
When applicable, the Company may record a general partner obligation to return previously distributed performance allocations. The general partner obligation is based upon an assumed liquidation of a fund’s net assets as of the reporting date and is reported within due to related parties. 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.
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.
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.
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NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
Incentive fees are considered a form of variable consideration 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. 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 and former employees. 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 Class A Common Stock issued under the Company’s 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 and former employees. 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 and former employees that would need to be 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 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.
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. The Company may also use dividends it receives from investments in MidCap, ARI and AINV to compensate employees. These amounts are recorded as profit sharing expense in the Company’s condensed consolidated statements of operations.
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NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
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 entities 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, generally all of the income is 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 resolution 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.
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 ownership interest in the Apollo Operating Group held by Managing Partners and Contributing Partners through their limited partner interests in Holdings. Additionally, Athene holds Non-Controlling Interests in the Apollo Operating Group as a result of the Transaction Agreement. Non-Controlling Interests also include ownership interests in certain consolidated funds and VIEs.
Non-Controlling Interests are presented as a separate component of stockholders’ equity on the Company’s condensed consolidated statements of financial condition. The primary components of Non-Controlling Interests are separately presented in the Company’s consolidated statements of changes in stockholders’ equity to clearly distinguish the interest in the Apollo Operating Group and other ownership interests in the consolidated entities. Net income includes the net income attributable to the holders of Non-Controlling Interests on the Company’s condensed consolidated statements of operations. Profits and losses are allocated to Non-Controlling Interests in proportion to their relative ownership interests regardless of their basis.
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
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NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
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. Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. The Company is unable to predict the adverse impact the COVID-19 pandemic will ultimately have. While such impact may change considerably over time, the estimates and assumptions affecting the Company’s condensed consolidated financial statements are based on information available as of September 30, 2020. Actual results could differ materially from those estimates.
Recent Accounting Pronouncements
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 U.S. 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 U.S. GAAP. The new guidance is effective for the Company on January 1, 2020. The new guidance did not 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 guidance removes the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment (Step 2). Under the 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. The guidance did not have a material impact on the condensed consolidated financial statements of the Company.
    
In August 2018, the FASB issued guidance which changes the fair value disclosure requirements. The guidance includes new fair value disclosure requirements and eliminates and modifies certain other fair value disclosure requirements. The Company previously early adopted the eliminated and modified disclosure requirements upon issuance of the guidance during the three month period ended September 30, 2018. The remaining guidance was adopted by the Company on January 1, 2020 and did not have a material impact on the condensed consolidated financial statements of the Company.

In December 2019, the FASB issued guidance intended to simplify the accounting for income taxes. The new guidance eliminates certain exceptions to the existing approach in ASC 740, and clarifies other guidance within the standard. It is effective for the Company on January 1, 2021. The guidance is not expected to have a material impact on the condensed consolidated financial statements of the Company.
3. GOODWILL
The carrying value of goodwill was $117.0 million and $93.9 million as of September 30, 2020 and December 31, 2019, respectively. Goodwill primarily relates to the 2007 reorganization of the Company’s predecessor business (the “2007 Reorganization”) and the Company’s acquisition of Stone Tower Capital LLC and its related management companies (“Stone Tower”) in 2012. As of September 30, 2020, there was $92.2 million, $23.8 million and $1.0 million of goodwill related to the credit, private equity and real assets segments, respectively. As of December 31, 2019, there was $69.8 million, $23.1 million and $1.0 million of goodwill related to the credit, private equity and real assets segments, respectively.
On June 26, 2020, the Company acquired the remaining portion of the PK AirFinance platform. In connection with the acquisition, the Company recognized goodwill of $22.4 million as of the acquisition date. The Company recognized $27.4 million in total goodwill related to the acquisition of the PK AirFinance platform.
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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
4. INVESTMENTS
The following table presents Apollo’s investments: 
As of
September 30, 2020
As of
December 31, 2019
Investments, at fair value$1,884,388 $1,053,556 
Equity method investments964,521 1,048,732 
Performance allocations1,128,160 1,507,571 
Total Investments$3,977,069 $3,609,859 
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 Company is entitled to receive performance allocations. For those investments, changes in fair value are presented in principal investment income.
For the three and nine months ended September 30, 2020, the Company’s investment in Athene Holding, for which the fair value option was elected, met the significance criteria as defined by the SEC. As a result, the following table presents summarized financial information of Athene Holding:
 For the Three Months Ended September 30,For the Nine Months Ended September 30,
2020201920202019
(in millions)
Statements of Operations
Revenues$3,275 $4,584 $6,124 13,002 
Benefits and expenses2,251 4,305 5,401 11,233 
Income before income taxes1,024 279 723 1,769 
Income tax expense (benefit)140 (14)124 $48 
Net income 884 $293 599 1,721 
Net income attributable to noncontrolling interests232  151  
Net income available to Athene shareholders$652 293 $448 1,721 
Preferred stock dividends30 17 67 17 
Net income available to Athene common shareholders$622 276 $381 $1,704 
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,
 2020201920202019
Realized gains on sales of investments, net$155 $ $2,031 $45 
Net change in unrealized gains (losses) due to changes in fair value144,317 (19,790)(853,443)44,054 
Net gains (losses) from investment activities$144,472 $(19,790)$(851,412)$44,099 
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
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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
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, 2020
(4)
December 31, 2019
(4)
Credit(1)
$247,775 $318,054 
Private Equity(2)
624,395 632,540 
Real Assets92,351 98,138 
Total equity method investments(3)
$964,521 $1,048,732 
(1)    The equity method investment in AINV was $40.0 million and $51.0 million as of September 30, 2020 and December 31, 2019, respectively. The value of the Company’s investment in AINV was $24.0 million and $51.3 million based on the quoted market price of AINV as of September 30, 2020 and December 31, 2019, respectively.
(2)    The equity method investment in Fund VIII was $326.6 million and $370.7 million as of September 30, 2020 and December 31, 2019, respectively, representing an ownership percentage of 2.2% and 2.2% as of September 30, 2020 and December 31, 2019, respectively.
(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 receivable recorded within investments in the condensed consolidated statements of financial condition from credit, private equity and real assets funds consisted of the following: 
As of September 30, 2020As of December 31, 2019
Credit$375,305 $418,517 
Private Equity610,269 822,531 
Real Assets142,586 266,523 
Total performance allocations$1,128,160 $1,507,571 
The table below provides a roll forward of the performance allocations balance:
CreditPrivate EquityReal AssetsTotal
Performance allocations, January 1, 2020$418,517 $822,531 $266,523 $1,507,571 
Change in fair value of funds119,555 (203,558)(74,460)(158,463)
Fund distributions to the Company(162,767)(8,704)(49,477)(220,948)
Performance allocations, September 30, 2020$375,305 $610,269 $142,586 $1,128,160 
The change in fair value of funds excludes the general partner obligation to return previously distributed performance allocations, which is recorded in due to related parties in the condensed consolidated statements of financial condition. See note 15 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.
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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
5. PROFIT SHARING PAYABLE
Profit sharing payable consisted of the following:
As of September 30, 2020As of December 31, 2019
Credit$324,000 $314,125 
Private Equity243,362 329,817 
Real Assets99,372 114,727 
Total profit sharing payable$666,734 $758,669 
The table below provides a roll-forward of the profit sharing payable balance:
CreditPrivate EquityReal AssetsTotal
Profit sharing payable, January 1, 2020$314,125 $329,817 $114,727 $758,669 
Profit sharing expense90,284 (76,406)2,088 15,966 
Payments/other(80,409)(10,049)(17,443)(107,901)
Profit sharing payable, September 30, 2020$324,000 $243,362 $99,372 $666,734 
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 condensed consolidated statements of financial condition. See note 15 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 8 for further disclosure regarding deferred equity-based compensation.
6. 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.
Consolidated Variable Interest Entities
As noted further in note 15, Apollo purchased a 17% incremental equity ownership stake in Athene, bringing Apollo’s beneficial ownership in Athene to approximately 28.5% as of September 30, 2020. This has resulted in Apollo’s indirect ownership through Athene in several VIEs being considered significant and therefore Apollo has consolidated the financial positions and results of operations of such VIEs given that the Company also has the power to direct the activities that most significantly impact the economic performance of these VIEs. Accordingly, there has been a significant increase in consolidated VIE assets and liabilities as of September 30, 2020 when compared to December 31, 2019.
Consolidated VIEs include certain CLOs as well as certain funds managed by the Company. Through its role as collateral manager or general partner of these VIEs, the Company has the power to direct the activities that most significantly impact the economic performance of these VIEs. In addition, the Company’s combined interests in these VIEs are significant. The assets are not available to creditors of the Company, and the investors in these consolidated VIEs have no recourse against the assets of the Company. There is no recourse to the Company for the consolidated VIEs’ liabilities.
The Company measures the fair value of the financial assets and the financial liabilities of the CLOs using the fair value of either the financial assets or financial liabilities, whichever is more observable (see note 2 for further discussion). 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. Other assets include amounts due from
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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
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.
The consolidated funds managed by the Company are investment companies and their investments, which include equity securities as well as debt securities, are held at fair value. Other assets of the consolidated funds include interest receivables and receivables from affiliates. Other liabilities include debt held at amortized cost as well as short-term payables.
Included within liabilities of the consolidated VIEs are notes payable related to certain funds managed by the Company. Each series of notes in a respective consolidated VIE participates in distributions from the VIE, including principal and interest from underlying investments, in accordance with the terms of the note series. Amounts allocated to the noteholders reflect amounts that would be distributed if the VIE’s affairs were wound up and its assets sold for cash equal to their respective carrying values, its liabilities satisfied in accordance with their terms, and all the remaining amounts distributed to the noteholders. The respective VIEs that issue the notes payable are marked at their prevailing net asset value, which approximates fair value.
Results from certain funds managed by the Company are reported on a three month lag based upon the availability of financial information.
Net Gains (Losses) 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,
 2020
(1)
2019
(1)
2020
(1)
2019
(1)
Net gains (losses) from investment activities$142,247 $14,892 $(358,497)$38,679 
Net gains (losses) from debt24,249 (5,217)205,518 (16,287)
Interest and other income81,663 7,357 317,714 20,772 
Interest and other expenses(126,040)(6,401)(150,674)(18,436)
Net gains from investment activities of consolidated variable interest entities$122,119 $10,631 $14,061 $24,728 
(1)Amounts reflect consolidation eliminations.
Senior Secured Notes, Subordinated Notes and Secured Borrowings
Included within debt, at fair value and other liabilities are amounts due to third-party institutions by the consolidated VIEs. The following table summarizes the principal provisions of those amounts:
 As of September 30, 2020As of December 31, 2019
 Principal OutstandingWeighted Average Interest RateWeighted Average Remaining Maturity in YearsPrincipal OutstandingWeighted Average Interest RateWeighted Average Remaining Maturity in Years
Senior Secured Notes(2)
$5,172,758 2.95 %6.0$757,628 1.56 %10.2
Subordinated Notes(2)
606,721 N/A
(1)
22.293,572 N/A
(1)
20.4
Secured Borrowings(2)(3)
265,744 2.16 %0.418,976 3.69 %7.8
Total$6,045,223 $870,176 
(1)The subordinated notes do not have contractual interest rates but instead receive distributions from the excess cash flows of the VIEs.
(2)The notes and borrowings of the consolidated VIEs are collateralized by assets held by each respective vehicle and assets of one vehicle may not be used to satisfy the liabilities of another vehicle. As of September 30, 2020 and December 31, 2019, the fair value of these consolidated VIEs’ assets were $6.2 billion and $1.3 billion, respectively.
(3)As of September 30, 2020 and December 31, 2019, secured borrowings consist of consolidated VIEs’ obligations through a repurchase agreement redeemable at maturity with third party lenders. The fair value of the secured borrowings as of September 30, 2020 approximates principal outstanding due to the short term nature of the borrowings. These secured borrowings are classified as a Level
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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
III liability within the fair value hierarchy. The fair value of the secured borrowing as of December 31, 2019 was $19.0 million. This secured borrowing was repaid during the nine months ended September 30, 2020.
The consolidated VIEs’ debt obligations contain various customary loan covenants. As of September 30, 2020, the Company was not aware of any instances of non-compliance with any of these covenants.
As of September 30, 2020, except for the secured borrowings, the contractual maturities for debt of the consolidated VIEs are 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.
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, 2020
As of
December 31, 2019
Assets:
Cash$351,302 $222,481 
Investments 4,352,789 5,418,295 
Receivables41,636 137,165 
Total Assets$4,745,727 $5,777,941 
Liabilities:
Debt and other payables$1,318,305 $3,449,227 
Total Liabilities$1,318,305 $3,449,227 
Apollo Exposure(1)
$154,248 $250,521 
(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 16.
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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
7. 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, 2020
Level ILevel IILevel IIITotalCost
Assets
U.S. Treasury securities, at fair value$1,164,867 $ $ $1,164,867 $1,164,802 
Investments, at fair value:
Investment in Athene Holding 1,548,414  1,548,414 2,093,426 
Other investments 45,011 290,963 
(1)
335,974 299,920 
Total investments, at fair value 1,593,425 290,963 1,884,388 2,393,346 
Investments of VIEs, at fair value 2,017,654 7,831,721 9,849,375 
Investments of VIEs, valued using NAV   51,218 
Total investments of VIEs, at fair value 2,017,654 7,831,721 9,900,593 
Derivative assets(2)
 123  123 
Total Assets$1,164,867 $3,611,202 $8,122,684 $12,949,971 
Liabilities
Debt of VIEs, at fair value$ $1,504,205 $4,142,679 $5,646,884 
Other liabilities of VIEs, at fair value  23,025 23,025 
Contingent consideration obligations(3)
  103,273 103,273 
Derivative liabilities(2)
 89  89 
Total Liabilities$ $1,504,294 $4,268,977 $5,773,271 

 As of December 31, 2019
Level ILevel IILevel IIITotalCost
Assets
U.S. Treasury securities, at fair value$664,249 $ $ $664,249 $642,176 
Investments, at fair value:
Investment in Athene Holding897,052   897,052 590,110 
Other investments 43,094 113,410 
(1)
156,504 135,686 
Total investments, at fair value897,052 43,094 113,410 1,053,556 725,796 
Investments of VIEs, at fair value 891,256 321,069 1,212,325 
Investments of VIEs, valued using NAV   844 
Total investments of VIEs, at fair value 891,256 321,069 1,213,169 
Derivative assets(2)
 249  249 
Total Assets$1,561,301 $934,599 $434,479 $2,931,223 
Liabilities
Liabilities of VIEs, at fair value$ $850,147 $ $850,147 
Contingent consideration obligations(3)
  112,514 112,514 
Derivative liabilities(2)
 93  93 
Total Liabilities$ $850,240 $112,514 $962,754 
(1)    Other investments as of September 30, 2020 and December 31, 2019 excludes $27.4 million and $25.8 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.
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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 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, 2020
Other InvestmentsInvestments of Consolidated VIEsTotal
Balance, Beginning of Period$267,353 $8,015,580 $8,282,933 
Purchases18,507 95,943 114,450 
Sales of investments/distributions(12,477)(185,327)(197,804)
Settlements (196,746)(196,746)
Net realized gains (328)(328)
Changes in net unrealized gains6,700 74,291 80,991 
Cumulative translation adjustment10,239 27,366 37,605 
Transfer into Level III(1)
641 8,829 9,470 
Transfer out of Level III(1)
 (7,887)(7,887)
Balance, End of Period$290,963 $7,831,721 $8,122,684 
Change in net unrealized gains included in net gains from investment activities related to investments still held at reporting date$6,700 $ $6,700 
Change in net unrealized gains included in net gains from investment activities of consolidated VIEs related to investments still held at reporting date (57,888)(57,888)
 For the Three Months Ended September 30, 2019
Other InvestmentsInvestments of Consolidated VIEsTotal
Balance, Beginning of Period$114,439 $301,066 $415,505 
Sale of investments/distributions(932) (932)
Changes in net unrealized gains1,484 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 
 For the Nine Months Ended September 30, 2020
Other InvestmentsInvestments of Consolidated VIEsTotal
Balance, Beginning of Period$113,410 $321,069 $434,479 
Transfer in due to consolidation 7,794,128 7,794,128 
Purchases178,462 955,523 1,133,985 
Sale of investments/distributions(21,855)(369,204)(391,059)
Settlements (634,694)(634,694)
Net realized gains (losses)1,751 (207)1,544 
Changes in net unrealized gains (losses)5,519 (260,265)(254,746)
Cumulative translation adjustment13,309 23,582 36,891 
Transfer into Level III(1)
641 79,465 80,106 
Transfer out of Level III(1)
(274)(77,676)(77,950)
Balance, End of Period$290,963 $7,831,721 $8,122,684 
Change in net unrealized gains included in principal investment income related to investments still held at reporting date$5,519 $ $5,519 
Change in net unrealized gains included in net gains from investment activities of consolidated VIEs related to investments still held at reporting date (105,191)(105,191)
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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 Nine Months Ended September 30, 2019
Other InvestmentsInvestments of Consolidated VIEsTotal
Balance, Beginning of Period$96,370 $295,987 $392,357 
Purchases15,048  15,048 
Sale of investments/distributions(2,810) (2,810)
Changes in net unrealized gains8,057 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 
(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 external pricing services.
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,
20202019
Contingent Consideration ObligationsDebt and Other Liabilities of Consolidated VIEsTotalContingent Consideration Obligations
Balance, Beginning of Period$99,097 $4,258,747 $4,357,844 $93,223 
Issuances 24,690 24,690  
Repayments— (42,025)(42,025)(512)
Net realized gains (1,245)(1,245) 
Changes in net unrealized (gains) losses(1)
4,176 (97,736)(93,560)3,689 
Cumulative translation adjustment 23,273 23,273  
Balance, End of Period$103,273 $4,165,704 $4,268,977 $96,400 
 
For the Nine Months Ended September 30,
20202019
Contingent Consideration ObligationsDebt and Other Liabilities of Consolidated VIEsTotalContingent Consideration Obligations
Balance, Beginning of Period$112,514 $ $112,514 $74,487 
Transfer in due to consolidation 4,291,286 4,291,286  
Issuances 327,618 327,618  
Repayments(12,870)(240,775)(253,645)(1,827)
Net realized gains 2,214 2,214 
Changes in net unrealized (gains) losses(1)
3,629 (239,779)(236,150)23,740 
Cumulative translation adjustment 25,140 25,140  
Balance, End of Period$103,273 $4,165,704 $4,268,977 $96,400 
(1)Changes in fair value of contingent consideration obligations are recorded in profit sharing expense in the condensed consolidated statements of operations.

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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 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, 2020
Fair ValueValuation TechniquesUnobservable InputsRanges
Weighted Average (1)
Financial Assets
Other investments$213,602 Embedded valueN/AN/AN/A
69,395 Discounted cash flowDiscount rate18.0%18.0%
7,966 Third party pricingN/AN/AN/A
Investments of consolidated VIEs:
Bank Loans3,455,160 Discounted cash flowDiscount rate2.8% - 17.6%4.8%
Guideline public companyTEV / EBITDA1.3x - 16.8x10.4x
Guideline public companyTEV / Revenue1.4x1.4x
Third party pricingN/AN/AN/A
Profit Participating Notes2,546,845 Discounted cash flowDiscount rate7.5% - 15.0%14.7%
Equity Securities1,349,575 Discounted cash flowDiscount rate4.4% - 23.0%7.0%
Dividend discount modelDiscount rate9.0% - 13.5%10.7%
Adjusted transaction valuePurchase multiple1.12x1.12x
Guideline public companyDiscount rate14.0%14.0%
Market comparable companiesNTAV multiple0.34x -1.2x0.9x
Market comparable companiesP/E multiple7.7x7.7x
Real Estate382,895 Discounted cash flowDiscount rate6.3% - 13.5%8.3%
Discounted cash flowCapitalization rate5.8% - 8.3%6.9%
Direct capitalizationCapitalization rate5.5% - 8.8%6.6%
Bonds50,800 Discounted cash flowDiscount rate5.0% - 12.6%6.7%
CLO Notes41,229 Third party pricingN/AN/AN/A
Other Equity Investments3,289 Discounted cash flowDiscount rate4.4% - 8.2%6.7%
Warrants1,928 Option modelVolatility49.0% - 62.5%52.8%
Total Investments of Consolidated VIEs7,831,721 
Total Financial Assets$8,122,684 
Financial Liabilities
Liabilities of Consolidated VIEs:
Secured loans$3,587,956 Discounted cash flowDiscount rate2.0% - 11.2%3.4%
Subordinated notes340,999 Discounted cash flowDiscount rate9.0% - 16.0%14.7%
Preferred equity213,724 Discounted cash flowDiscount rate15.0%15.0%
Other liabilities23,025 Discounted cash flowDiscount rate3.5% - 7.5%5.5%
Transactional valueCostN/AN/A
Third party pricingN/AN/AN/A
Guideline public companyTEV / LTM EBITDA5.3x5.3x
Total liabilities of Consolidated VIEs:4,165,704 
Contingent Consideration Obligation$103,273 Discounted cash flowDiscount rate17.0%17.0%
Total Financial Liabilities$4,268,977 
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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, 2019
Fair ValueValuation TechniquesUnobservable InputsRanges
Weighted Average (1)
Financial Assets
Other investments$5,350 Third Party PricingN/AN/AN/A
108,060 Discounted cash flowDiscount Rate15.0% - 16.0%15.6%
Investments of consolidated VIEs:
Equity securities321,069 Book value multipleBook value multiple0.61x0.61x
Discounted cash flowDiscount rate13.1%13.1%
Total Financial Assets$434,479 
Financial Liabilities
Contingent consideration obligation$112,514 Discounted cash flowDiscount rate17.3%17.3%
Total Financial Liabilities$112,514 
N/A        Not applicable
EBITDA        Earnings before interest, taxes, depreciation and amortization
LTM        Last twelve months
NTAV        Net tangible asset value
P/E        Price-to-Earnings
TEV        Total enterprise value
(1)      Unobservable inputs were weighted based on the fair value of the investments included in the range.
Fair Value Measurement of Investment in Athene Holding
As of September 30, 2020, the fair value of Apollo’s Level II investment in Athene Holding was estimated using the closing market price of Athene Holding shares of $34.08 less a DLOM of 16.8%. The DLOM was derived based on the average remaining lock up restrictions on the shares of Athene Holding held by Apollo (36 months from the closing date of the transactions contemplated by the Transaction Agreement) and the estimated volatility in such shares of Athene Holding. The historical share price volatility of a representative set of Athene Holding’s publicly traded insurance peers was calculated over a three year period equivalent to the lock up on the shares of Athene Holding held by Apollo and used as a proxy to estimate the projected volatility in Athene Holding’s shares. As of December 31, 2019, the fair value of Apollo’s Level I investment in Athene Holding was calculated using the closing market price of Athene Holding shares of $47.03.
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
The significant unobservable inputs used in the fair value measurement of bank loans are discount rates. Significant increases (decreases) in any of discount rates would result in a significantly lower (higher) fair value measurement. Where guideline public company method is used to determine fair value, total enterprise value and earnings before interest, taxes, depreciation and amortization (“EBITDA”) are used. The guideline public company method values a business based on trading multiples derived from publicly traded companies that are similar to the subject company.
The significant unobservable inputs used in the fair value measurement of bonds, other equity investments and profit participating notes are discount rates. Significant increases (decreases) in discount rates would result in a significantly lower (higher) fair value measurements.
The significant unobservable inputs used in the fair value measurement of the equity securities include the discount rate applied, purchase multiple, price-to-earnings multiple and net tangible asset value in the valuation models. These
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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
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.
The significant unobservable inputs used in the fair value measurement of real estate are discount rates and capitalization rates. Significant increases (decreases) in any of discount rates and capitalization rates in isolation would result in a significantly lower (higher) fair value measurement.
The significant unobservable inputs used in the fair value measurement of warrants are volatility rates. Significant increases (decreases) in volatility rates would result in a significantly higher (lower) fair value measurement.
Liabilities
The debt obligations of the certain consolidated VIEs, that are CLOs, were measured on the basis of the fair value of the financial assets of those CLOs as the financial assets were determined to be more observable and, as a result, categorized as Level II in the fair value hierarchy.
The significant unobservable inputs used in the fair value measurement of the Company’s liabilities of consolidated VIEs are discount rates. Significant increases (decreases) in discount rates would result in a significantly lower (higher) fair value measurement.
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 16 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.
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 external 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 external 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, if available, 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
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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
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 the 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 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.
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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
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.
8. OTHER ASSETS
Other assets consisted of the following:
As of
September 30, 2020
As of
December 31, 2019
Fixed assets$180,793 $138,359 
Less: Accumulated depreciation and amortization(108,044)(96,347)
Fixed assets, net72,749 42,012 
Deferred equity-based compensation(1)
85,967 132,422 
Prepaid expenses44,178 55,189 
Intangible assets, net25,161 20,615 
Tax receivables57,064 48,106 
Other33,605 28,105 
Total Other Assets$318,724 $326,449 
(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 $57.5 million and $112.4 million, as of September 30, 2020 and December 31, 2019, respectively, is included in other liabilities on the condensed consolidated statements of financial condition.
Depreciation expense was $1.8 million and $2.5 million for the three months ended September 30, 2020 and 2019, respectively, and $4.9 million and $7.1 million for the nine months ended September 30, 2020 and 2019, respectively, and is presented as a component of general, administrative and other expense in the condensed consolidated statements of operations.
9. LEASES
Apollo has operating leases for office space, data centers, and certain equipment under various lease agreements.
The table below presents operating lease expenses:
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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,For the Nine Months Ended September 30,
 2020201920202019
Operating lease cost$9,587 $11,249 $35,566 $30,537 
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,
 2020201920202019
Operating cash flows for operating leases$5,404 $582 $19,360 $20,212 
As of September 30, 2020, the Company’s total lease payments by maturity are presented in the following table:
 Operating Lease Payments
Remaining 2020$5,915 
202136,959 
202236,168 
202333,578 
202431,030 
Thereafter270,469 
Total lease payments$414,119 
Less imputed interest(77,350)
Present value of lease payments$336,769 
The Company has undiscounted future operating lease payments of $250.6 million related to leases that have not commenced that were entered into as of and subsequent to September 30, 2020. 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 by 2022 with lease terms of approximately 15 years.
Supplemental information related to leases is as follows:
As of
September 30, 2020
As of
September 30, 2019
Weighted average remaining lease term (in years)13.712.5
Weighted average discount rate3.1 %1.6 %
As of December 31, 2019, the approximate aggregate minimum future payments required for operating leases under U.S. GAAP applicable to that period were as follows:
20202021202220232024ThereafterTotal
Aggregate minimum future payments$28,094 $40,516 $51,184 $49,383 $47,237 $467,698 $684,112 
10. INCOME TAXES
The Company’s income tax (provision) benefit totaled $(89.4) million and $231.9 million for the three months ended September 30, 2020 and 2019, respectively, and $66.2 million and $195.3 million for the nine months ended September 30, 2020 and 2019, respectively. The Company’s effective tax rate was approximately 11.7% and (80.2)% for the three months ended September 30, 2020 and 2019, respectively, and 9.8% and (19.9)% for the nine months ended September 30, 2020 and 2019, 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
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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
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, state, local and foreign tax authorities. With a few exceptions, as of September 30, 2020, the Company’s U.S. federal, state, local and foreign income tax returns for the years 2017 through 2019 are open under the general statute of limitations provisions and therefore subject to 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 2018. No provisions with respect to these examinations have been recorded.
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, generally all of the income the Company earns is 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 Company’s estimate of income tax assets and liabilities is based on the most recent information available including the tax and book basis of underlying assets of certain partnerships not previously subject to corporate income tax. 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 from the current estimates described herein, but any change is not anticipated to be material.
The Company records additional deferred tax assets as a result of the step-up in the tax basis of assets and intangibles resulting from exchanges of AOG Units for Class A Common Stock by the Managing and Contributing Partners. A related 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 15). 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 the portion of the increase in tax basis related to intangibles is 15 years. The realization of the remaining portion of the increase in tax basis relates to the disposition of the underlying assets to which the step-up is attributed. The associated deferred tax assets 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 AssetIncrease in Tax Receivable Agreement LiabilityIncrease to Additional Paid In Capital
For the Nine Months Ended September 30, 2020$76,580 $62,531 $14,049 
For the Nine Months Ended September 30, 2019$168,058 $39,092 $16,658 
On March 27, 2020, the U.S. federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act is an emergency economic stimulus package in response to the coronavirus outbreak which, among other things, contains numerous income tax provisions. While the Company continues to evaluate the impact of the CARES Act, it does not currently believe it will have a material impact on the Company’s condensed consolidated financial statements or related disclosures.
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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
11. DEBT
Debt consisted of the following:
 As of September 30, 2020As of December 31, 2019
 Outstanding
Balance
Fair ValueAnnualized
Weighted
Average
Interest Rate
Outstanding
Balance
Fair ValueAnnualized
Weighted
Average
Interest Rate
2024 Senior Notes(1)
$497,654 $552,105 
(4)
4.00 %$497,164 $529,333 
(4)
4.00 %
2026 Senior Notes(1)
497,089 575,491 
(4)
4.40 496,704 540,713 
(4)
4.40 
2029 Senior Notes(1)
674,749 792,870 
(4)
4.87 674,727 761,780 
(4)
4.87 
2030 Senior Notes(1)
494,273 501,906 
(4)
2.65    
2039 Senior Secured Guaranteed Notes(1)
316,807 370,392 
(5)
4.77 316,100 354,093 
(5)
4.77 
2048 Senior Notes(1)
296,602 369,164 
(4)
5.00 296,510 350,331 
(4)
5.00 
2050 Subordinated Notes(1)
296,527 296,625 
(4)
4.95 297,008 304,125 
(4)
4.95 
Secured Borrowing I(2)
18,734 18,624 
(3)
1.84 17,921 17,921 
(3)
1.99 
Secured Borrowing II(2)
19,925 19,713 
(3)
1.71    
2014 AMI Term Facility II(2)
   17,266 17,266 
(3)
1.75 
2016 AMI Term Facility I(2)
19,773 19,773 
(3)
1.30 18,915 18,915 
(3)
1.30 
2016 AMI Term Facility II(2)
19,114 19,114 
(3)
1.40 18,285 18,285 
(3)
1.40 
Total Debt$3,151,247 $3,535,777 $2,650,600 $2,912,762 
 
(1)Includes amortization of note discount, as applicable. Outstanding balance is presented net of unamortized debt issuance costs:
As of September 30, 2020As of December 31, 2019
2024 Senior Notes$1,979 $2,394 
2026 Senior Notes2,662 3,014 
2029 Senior Notes5,443 5,928 
2030 Senior Notes4,296  
2039 Senior Secured Guaranteed Notes8,193 8,900 
2048 Senior Notes3,101 3,185 
2050 Subordinated Notes3,473 2,992 
Total$29,147 $26,413 
(2)Apollo Management International LLP (“AMI”), a subsidiary of the Company, entered into several credit facilities (collectively referred to as the “AMI Facilities”) to fund the Company’s investment in certain European CLOs it manages:
FacilityDateLoan Amount
Secured Borrowing IDecember 19, 201915,984 
Secured Borrowing IIMarch 5, 202017,000 
2016 AMI Term Facility IJanuary 18, 201616,870 
2016 AMI Term Facility IIJune 22, 201616,308 
The Secured Borrowings consists of obligations through repurchase agreements redeemable at maturity with third party lenders. The weighted average remaining maturity of Secured Borrowing I and II is 10.9 years.
(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 external pricing services. For instances where broker quotes are not available, a discounted cash flow method is used to obtain a fair value.
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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
(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 external 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.
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 London Inter-bank Offered Rate (“LIBOR”) and the applicable margin as of September 30, 2020 was 1.00%. The commitment fee on the $750 million undrawn 2018 AMH Credit Facility as of September 30, 2020 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, 2020, 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”), at an issue price of 104.812% of par. 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.
2030 Senior Notes—On June 5, 2020, AMH issued $500 million in aggregate principal amount of its 2.65% Senior Notes due 2030 (the “2030 Senior Notes”), at an issue price of 99.704% of par. Interest on the 2030 Senior Notes is payable semi-annually in arrears on June 5 and December 5 of each year. The 2030 Senior Notes will mature on June 5, 2030. The discount is amortized into interest expense on the condensed consolidated statements of operations over the term of the 2030 Senior Notes. The Company is obligated to settle the 2030 Senior Notes for the face amount of $500 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 July 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 July 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.
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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
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.
2050 Subordinated Notes—On December 17, 2019, AMH issued $300 million in aggregate principal amount of its 4.950% Fixed-Rate Resettable Subordinated Notes due 2050 (the “2050 Subordinated Notes”), at an issue price of 100.000% of par. Interest on the 2050 Subordinated Notes is payable semi-annually in arrears on June 17 and December 17 of each year. The 2050 Subordinated Notes will mature on January 14, 2050. The discount is amortized into interest expense on the condensed consolidated statements of operations over the term of the 2050 Subordinated Notes. The Company is obligated to settle the 2050 Subordinated Notes for the face amount of $300 million.
As of September 30, 2020, the indentures governing the 2024 Senior Notes, the 2026 Senior Notes, the 2029 Senior Notes, the 2030 Senior Notes, the 2048 Senior Notes and the 2050 Subordinated 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, 2020, 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,
 2020201920202019
Interest Expense:(1)
2018 AMH Credit Facility$316 $334 $945 $961 
2024 Senior Notes5,163 5,163 15,489 15,489 
2026 Senior Notes5,628 5,629 16,885 16,885 
2029 Senior Notes8,229 8,412 24,687 19,514 
2030 Senior Notes3,465  4,428  
2039 Senior Secured Guaranteed Notes4,111 4,112 12,334 5,071 
2048 Senior Notes3,781 3,781 11,343 11,343 
2050 Subordinated Notes3,742  11,228  
AMI Term Facilities/Secured Borrowings454 402 1,083 980 
Total Interest Expense$34,889 27,833 $98,422 $70,243 
(1)Debt issuance costs incurred are amortized into interest expense over the term of the debt arrangement, as applicable.
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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
12. NET INCOME (LOSS) 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,
2020201920202019
Numerator:
Net income (loss) attributable to Apollo Global Management, Inc. Class A Common Stockholders$263,236   $354,106 $(304,982)$649,658 
Dividends declared on Class A Common Stock(1)
(112,075)(100,355)(413,858)(305,901)
Dividends on participating securities(2)
(4,008)(4,450)(14,863)(13,524)
Earnings allocable to participating securities(5,853)(11,440) 
(3)
(16,003)
Undistributed income (loss) attributable to Class A Common Stockholders: Basic141,300   237,861 (733,703)314,230 
Dilution effect on distributable income attributable to unvested RSUs 1,200  2,355 
Undistributed income (loss) attributable to Class A Common Stockholders: Diluted$141,300 $239,061 $(733,703)$316,585 
Denominator:
Weighted average number of shares of Class A Common Stock outstanding: Basic227,771,678 205,797,643 227,395,847 202,087,827 
Dilution effect of unvested RSUs 1,843,680  1,657,627 
Weighted average number of shares of Class A Common Stock outstanding: Diluted227,771,678 207,641,323 227,395,847 203,745,454 
Net Income per share of Class A Common Stock: Basic(4)
Distributed Income$0.49   $0.50 $1.80 $1.52 
Undistributed Income (Loss)0.62   1.14 (3.21)1.55 
Net Income (Loss) per share of Class A Common Stock: Basic $1.11   $1.64 $(1.41)  $3.07 
Net Income per share of Class A Common Stock: Diluted(4)
Distributed Income$0.49   $0.49 $1.80 $1.51 
Undistributed Income (Loss)0.62   1.14 (3.21)1.55 
Net Income per share of Class A Common Stock: Diluted$1.11   $1.63 $(1.41)$3.06 
(1)See note 14 for information regarding the quarterly dividends declared and paid during 2020 and 2019.
(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 months and nine months ended September 30, 2020, all of the classes of securities were determined to be anti-dilutive. 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.
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
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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
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.
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.
Certain holders of AOG Units are subject to the transfer restrictions set forth in the agreements with the respective holders and may, 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, subject to the terms of the AGM Inc. Certificate of Incorporation. 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 rights and only a de minimis liquidation right. The Class B Common Stock represented 47.2% and 44.8% 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 were entitled to vote together as a single class pursuant to the Company’s governing documents as of September 30, 2020 and 2019, respectively.
The following table summarizes the anti-dilutive securities.
For the Three Months Ended September 30,For the Nine Months Ended September 30,
2020201920202019
Weighted average vested RSUs
137,606 109,317 600,651 527,476 
Weighted average unvested RSUs8,149,823 N/A7,831,201 N/A
Weighted average unexercised options 200,000  202,778 
Weighted average AOG Units outstanding(1)
174,873,808 195,985,046 175,447,257 200,149,596 
Weighted average unvested restricted shares1,148,241 954,304 1,212,620 989,684 
(1)Excludes AOG Units owned by Athene. Athene can only redeem their AOG Units by selling to Apollo or to a different buyer with Apollo’s agreement as detailed in the Liquidity Agreement (see note 15). As these AOG Units are not convertible into shares of Class A Common Stock, they are excluded when calculating diluted net income per share.
13. 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.
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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
During the nine months ended September 30, 2020 and September 30, 2019, the Company awarded Performance Grants of 2.1 million and 1.3 million RSUs to certain employees with a grant date fair value of $81.5 million and $27.6 million, respectively, which vest subject to continued employment 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 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.
Additionally, the Company entered into an agreement in 2018 with several employees under which RSUs would be granted starting in 2020 if year-over-year growth in certain discretionary earnings metrics were attained prior to grant and they remained employed at the grant date. Once granted, the awards vest subject to continued employment and the Company’s receipt of performance revenues sufficient to cover the associated equity-based compensation expense. In connection with these agreements, the Company granted 0.3 million RSUs with a grant date fair value of $11.7 million that were fully vested and expensed during the three months ended June 30, 2020. No additional awards were granted during the three months ended September 30, 2020.
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,
2020201920202019
Equity-based compensation$19,925 $16,456 $77,255 $45,587 
The fair value of all RSU grants made during the nine months ended September 30, 2020 and September 30, 2019 was $185.1 million and $102.2 million, respectively.
The following table presents the forfeiture rates and equity-based compensation expense recognized:
For the Three Months Ended September 30,For the Nine Months Ended September 30,
2020201920202019
Forfeiture rate0.5 %0.5 %6.8 %1.7 %
Equity-based compensation$40,473 $33,771 $133,273 $101,709 
The following table summarizes RSU activity:
UnvestedWeighted Average Grant Date Fair ValueVestedTotal Number of RSUs Outstanding
Balance at January 1, 20209,784,693 $26.38 2,349,618 12,134,311 
(1)
Granted 4,364,141 42.42 — 4,364,141 
Forfeited(949,090)$22.83 (17,185)(966,275)
Vested(2,486,605)30.46 2,486,605 — 
Issued— $28.20 (4,661,031)(4,661,031)
Balance at September 30, 202010,713,139 (2)$32.28 158,007 10,871,146 
(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 2.3 years.
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 Inc. in the Company’s condensed consolidated financial statements.
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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
Below is a reconciliation of the equity-based compensation allocated to AGM Inc.:
For the Nine Months Ended September 30, 2020
Total AmountNon-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$152,998  %$ $152,998 
Other equity-based compensation awards8,270 47.1 3,898 4,372 
Total equity-based compensation$161,268 3,898 157,370 
Less other equity-based compensation awards(2)
(3,898)(23,520)
Capital increase related to equity-based compensation$ $133,850 
For the Nine Months Ended September 30, 2019
Total AmountNon-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 
Other equity-based compensation awards19,150 44.8 8,576 10,574 
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 
(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.
(2)Includes equity-based compensation reimbursable by certain funds.
14. 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. As of September 30, 2020, the holders of Class A Common Stock had limited voting rights.
During the three and nine months ended September 30, 2020 and 2019, 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 January 2019, Apollo increased its authorized share repurchase amount by $250 million, bringing the total authorized repurchase amount to $500 million. On March 12, 2020, Apollo announced that the executive committee of the Company’s board of directors approved a new share repurchase authorization that allows the Company to repurchase up to $500 million of its Class A common stock. This new authorization increased the Company’s capacity to repurchase shares from $80 million of unused capacity under the Company’s previously approved the share repurchase plan authorization. The share repurchase plan authorization 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
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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
the settlement of equity-based awards granted under 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,
20202019
Shares of Class A Common Stock issued in settlement of vested RSUs and share options exercised(1)
4,661,031 4,146,944 
Reduction of shares of Class A Common Stock issued(2)
(1,972,369)(1,585,734)
Shares of Class A Common Stock purchased related to share issuances and forfeitures(3)
581,828 (103,954)
Issuance of shares of Class A Common Stock for equity-based awards3,270,490 2,457,256 
(1)The gross value of shares issued was $216.8 million and $127.2 million for the nine months ended September 30, 2020 and 2019, 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 $91.9 million and $48.8 million for the nine months ended September 30, 2020 and 2019, 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 shares of Class A Common Stock on the open market and retire them. During the nine months ended September 30, 2020 and 2019, we issued 636,425 and 163,024 of such restricted shares and 168,591 and 102,089 of such RSUs under the Equity Plan, respectively, and repurchased 19,549 and 265,113 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 54,597 and 1,865 restricted shares forfeited during the nine months ended September 30, 2020 and 2019, respectively.
Additionally, during the nine months ended September 30, 2020 and 2019, 2,735,546 and 3,453,901 shares of Class A Common Stock were repurchased in open market transactions as part of the publicly announced share repurchase program discussed above, respectively, and such shares were subsequently canceled by the Company. The Company paid $90.7 and $102.4 million for these open market share repurchases during the nine months ended September 30, 2020 and 2019, 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.
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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
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.
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 and at the sole discretion of the executive committee of the board of directors subsequent 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.
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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
Dividend Declaration DateDividend per share of Class A Common StockPayment DateDividend to Class A Common StockholdersDistribution to Non-Controlling Interest Holders in the Apollo Operating GroupTotal Distributions from Apollo Operating GroupDistribution Equivalents on Participating Securities
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, 20190.46 May 31, 201992.2 93.0 185.2 4.1 
July 31, 20190.50 August 30, 2019100.4 101.0 201.4 4.4 
N/A August 15, 2019 4.1 
(1)
4.1  
N/A September 26, 2019 17.8 
(1)
17.8  
October 31, 20190.50 November 29,2019111.5 90.1 201.6 4.4 
For the Year Ended December 31, 2019$2.02 $417.4 $464.7 $882.1 $17.9 
January 30, 2020$0.89 February 28, 2020$205.6 $155.6 $361.2 $7.2 
N/A April 15, 2020 43.0 
(1)
43.0  
May 1, 20200.42May 29, 202096.2 85.7 181.9 3.6 
July 30, 20200.49August 31, 2020112.1 100.0 212.1 4.0 
For the Nine Months Ended September 30, 2020$1.80 $413.9 $384.3 $798.2 $14.8 
(1)    On April 15, 2020 and April 12, 2019, the Company made $0.21 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 15 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.
Non-Controlling Interests
As discussed in note 1, Athene Holding acquired 29,154,519 non-voting equity interests of the Apollo Operating Group, which as of September 30, 2020 represented a 6.7% economic interest in the Apollo Operating Group. 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: 
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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,For the Nine Months Ended September 30,
 2020201920202019
Net income (loss) attributable to Non-Controlling Interests in consolidated entities:
Interest in management companies and a co-investment vehicle(1)
$1,037 $827 $2,316 $2,853 
Other consolidated entities98,984 6,256 (25,636)18,035 
Net income (loss) attributable to Non-Controlling Interests in consolidated entities$100,021 $7,083 $(23,320)$20,888 
Net income (loss) attributable to Non-Controlling Interests in the Apollo Operating Group:
Net income (loss)$676,099 $521,094 $(608,659)$1,178,822 
Net income (loss) attributable to Non-Controlling Interests in consolidated entities(100,021)(7,083)23,320 (20,888)
Net income (loss) after Non-Controlling Interests in consolidated entities576,078 514,011 (585,339)1,157,934 
Adjustments:
Income tax provision (benefit)(2)
89,357 (231,896)(66,173)(195,345)
NYC UBT and foreign tax (provision) benefit(3)
(11,966)(1,913)(22,609)(6,286)
Net income (loss) in non-Apollo Operating Group entities46 38,724 64 39,270 
Series A Preferred Stock Dividends(4,382)(4,382)(13,148)(13,148)
Series B Preferred Stock Dividends(4,781)(4,782)(14,344)(14,344)
Total adjustments68,274 (204,249)(116,210)(189,853)
Net income (loss) after adjustments644,352 309,762 (701,549)968,081 
Weighted average ownership percentage of Apollo Operating Group47.1 %48.7 %46.7 %49.6 %
Net income (loss) attributable to Non-Controlling Interests in Apollo Operating Group$303,679 $150,741 $(307,849)$480,784 
Net Income (loss) attributable to Non-Controlling Interests$403,700 $157,824 $(331,169)$501,672 
Other comprehensive income (loss) attributable to Non-Controlling Interests13,081 (12,999)12,263 (16,053)
Comprehensive Income (Loss) attributable to Non-Controlling Interests$416,781 $144,825 $(318,906)$485,619 
(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 AGM Inc. and its subsidiaries 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.
15. 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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As of
September 30, 2020
As of
December 31, 2019
Due from Related Parties:
Due from credit funds$172,570 $186,495 
Due from private equity funds34,926 27,724 
Due from real assets funds29,749 26,626 
Due from portfolio companies49,826 53,394 
Due from Contributing Partners, employees and former employees200,382 120,830 
Total Due from Related Parties$487,453 $415,069 
Due to Related Parties:
Due to Managing Partners and Contributing Partners$316,387 $302,050 
Due to credit funds8,375 7,213 
Due to private equity funds349,483 191,620 
Due to real assets funds37,941 504 
Total Due to Related Parties$712,186 $501,387 
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 realizes as a result of the increases in tax basis of assets that resulted from the 2007 Reorganization, the Conversion, and other exchanges of AOG Units for Class A Common Stock that have occurred in prior years. AGM Inc. and its subsidiaries retain 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, 2020 and 2019, a $62.5 million and $39.1 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 2020, Apollo made a $48.2 million cash payment pursuant to the tax receivable agreement resulting from the realized tax benefit for the 2019 tax year. Additionally, in connection with this payment, the Company made a corresponding pro rata distribution of $43.0 million ($0.21 per AOG Unit) to the Non-Controlling Interest holders in the Apollo Operating Group. 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.
Due from Contributing Partners, Employees and Former Employees
As of September 30, 2020 and December 31, 2019, 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, 2020 and December 31, 2019, the balance included interest-bearing employee loans receivable of $17.4 million and $17.1 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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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, 2020 and December 31, 2019 of $174.6 million and $88.5 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 $12.8 million and $12.7 million as of September 30, 2020 and December 31, 2019, respectively.
Due to Credit, Private Equity and Real Assets Funds
Based upon an assumed liquidation of certain of the credit, private equity and real assets funds the Company manages, the Company has recorded a general partner obligation to return previously distributed performance allocations, which represents amounts due to these funds. The general partner obligation is recognized based upon an assumed liquidation of a fund’s net assets as of the reporting date. The actual determination and any required payment of any such general partner obligation would not take place until the final disposition of a fund’s investments based on the contractual termination of the fund or as otherwise set forth in the respective limited partnership agreement or other governing document of the fund.
The following table presents the general partner obligation to return previously distributed performance allocations related to certain funds by segment:
As of
September 30, 2020
As of
December 31, 2019
Credit$ $ 
Private Equity348,418 189,252 
Real Assets36,695  
Total general partner obligation$385,113 $189,252 
Athene
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 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 Company began recording fees pursuant to the
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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 LP, 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 Athene 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, 2020
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 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%.
Athene and Apollo Strategic Transaction
On October 28, 2019 Athene Holding, AGM Inc. and the entities that form the Apollo Operating Group entered into the Transaction Agreement, pursuant to which, among other things:
(i) Athene Holding issued, on February 28, 2020 (the “Closing Date”), 35,534,942 Class A common shares of Athene Holding (the “AHL Class A Common Shares”) to certain subsidiaries of the Apollo Operating Group in exchange for (i) issuance by the Apollo Operating Group of 29,154,519 non-voting equity interests of the Apollo Operating Group to AHL and (ii) $350 million in cash (“Share Issuance”);
Athene Holding has granted to AGM Inc. the right to purchase additional AHL Class A Common Shares from 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 issued and outstanding AHL Class A Common Shares, on a fully diluted basis;
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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;
Athene Holding has amended and restated its Twelfth Amended and Restated Bye-laws of Athene Holding to, among other items, eliminate Athene Holding’s multi-class share structure (“Multi-Class Share Elimination”). In connection with the Multi-Class Share Elimination, (i) all of the Class B common shares of Athene Holding would be converted into an equal number of AHL Class A Common Shares on a one-for-one basis and (ii) all of the Class M common shares of Athene Holding was converted into a combination of AHL Class A Common Shares and warrants to purchase AHL Class A Common Shares.
Liquidity Agreement
In connection with the consummation of the Share Issuance and the Multi-Class Share Elimination, AGM Inc. has also entered into a Liquidity Agreement, dated as of the Closing Date, with Athene Holding (the “Liquidity Agreement”), pursuant to which, once each quarter, Athene Holding is entitled to request to sell a number of AOG Units or request AGM Inc. to sell a number of AGM Inc. Class A Common Stock or AOG Units representing at least $50 million, in each case, in exchange for payment of the Cash Amount (as defined below). If Athene Holding intends to exercise such sale request, it will provide a notice of such intent to sell such AOG Units to AGM Inc. Upon receipt of such notice, subject to certain restrictions described below, AGM Inc. will consummate, or, in the case of an AOG Transaction (as defined below), permit the consummation of, one of the following transactions:
a transaction whereby AGM Inc. purchases AOG Units from Athene Holding at a price agreed upon, in good faith, by AGM Inc. and Athene Holding (a “Purchase Transaction”);
if Athene Holding and AGM Inc. do not agree to consummate a Purchase Transaction, AGM Inc. will use its best efforts to consummate a public offering of AGM Inc. Class A Common Stock, the proceeds (net of certain commissions, fees and expenses consistent with customary and prevailing market practices for similar offerings) of which will be used to fund the purchase of AOG Units from Athene Holding (a “Registered Sale”);
if AGM Inc. notifies Athene Holding that it cannot consummate a Registered Sale, upon Athene Holding’s request, AGM Inc. will use its best efforts to consummate a sale of AGM Inc. Class A Common Stock pursuant to an exemption from the registration requirements of the Securities Act, the proceeds (net of certain commissions, fees and expenses consistent with customary and prevailing market practices for similar offerings) of which will be used to fund the purchase of AOG Units from Athene Holding (a “Private Placement,” and collectively with a Purchase Transaction and a Registered Sale, a “Sale Transaction”); or
if AGM Inc. elects (in its sole discretion) not to consummate a Sale Transaction, Athene Holding will be permitted to sell AOG Units in one or more transactions that are exempt from the registration requirements of the Securities Act, subject to certain restrictions (an “AOG Transaction”).
For purposes of this description, “Cash Amount” means (i) in the case of a Registered Sale, the cash proceeds that AGM Inc. receives upon the consummation of a Registered Sale after deducting a capped amount of documented commissions, fees and expenses, (ii) in the case of a Purchase Transaction, the cash proceeds to which AGM Inc. and Athene Holding agree, (iii) in the case of a Private Placement, the cash proceeds that AGM Inc. receives upon the consummation of a Private Placement after deducting a capped amount of documented commissions, fees and expenses and (iv) in the case of an AOG Transaction, the cash proceeds to which the purchaser and Athene Holding agree. Each of the Purchase Transaction, Private Placement, Registered Sale and AOG Transaction are subject to the terms and conditions set forth in the Liquidity Agreement.
In the event that an AOG Transaction is consummated, the buyer of such AOG Units will be prohibited from exchanging such AOG Units into AGM Inc. Class A Common Stock for at least 30 days after such purchase. Athene Holding is prohibited from consummating an AOG Transaction with any purchaser (i) who would, after giving effect to such transfer, own more than 3.5% of the issued and outstanding AGM Inc. Class A Common Stock (on a fully-diluted basis) or (ii) who is a “bad actor” (as defined in Regulation D of the Act) or otherwise a prohibited transferee, as described in the Liquidity Agreement.
Athene Holding’s liquidity rights are subject to certain other limitations and obligations, including that in a Registered Sale or a Private Placement, AGM Inc. will not be required to sell any AGM Inc. Class A Common Stock at a price
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that is less than 90% of the volume-weighted average price of the AGM Inc. Class A Common Stock for the 10 consecutive business days prior to the day Athene Holding submits a notice for sale of AOG Units.
The Liquidity Agreement also provides that Athene Holding is prohibited from transferring its AOG Units other than to an affiliate or pursuant to the options set forth above. AGM Inc. has the right not to consummate a Registered Sale or a Private Placement if the recipient of the Class A Common Stock would receive more than 2.0% of the outstanding and issued shares of AGM Inc. Class A Common Stock. Additionally, AGM Inc. has the right not to consummate an AOG Transaction if the recipient would, following such AOG Transaction, be the beneficial owner of greater than 3.5% of the AOG Units.
On February 28, 2020, Apollo and Athene closed on a strategic transaction as discussed above. In connection with the transaction, Apollo purchased a 17% incremental equity stake in Athene at a premium, bringing Apollo’s beneficial ownership in Athene to 28%, or 35% including shares and warrants owned by related parties and employees, on a fully diluted basis. Apollo has entered into a lock-up agreement restricting transfers of Apollo’s existing and newly acquired shares of Athene for three years from the Closing Date.
As of September 30, 2020 and December 31, 2019, the Company held a 28.5% and an 11.3% ownership interest in the Class A Common Shares of Athene Holding, respectively.
Athora
The Company, through ISGI, provides investment advisory services to certain portfolio companies of Apollo funds and Athora, a strategic platform that acquires or reinsures blocks of insurance business in the German and broader European life insurance market (collectively, the “Athora Accounts”). The Company has commitments to make additional equity investments in Athora of $320.5 million as of September 30, 2020, $293.0 million of which is subject to certain conditions.
Athora Sub-Advised
The Company, through ISGI, 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.

The Company earns a base management fee on the aggregate market value of substantially all of the investment accounts of or relating to Athora and also a sub-advisory fee on the Athora Sub-Advised assets, which varies depending on the specific asset class.
The following table presents the revenues earned in aggregate from Athene and Athora:
For the Three Months Ended September 30,For the Nine Months Ended September 30,
2020201920202019
Revenues earned in aggregate from Athene and Athora, net(1)(2)
$363,746 $141,273 $(297,924)$505,780 
(1)    Consisting of management fees, sub-advisory fees, performance revenues (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 Athene Holding restricted share awards (“AHL Awards”) granted to employees of Apollo.
(2)    Gains (losses) on the market value of the shares of Athene Holding owned directly by Apollo were $145.0 million and $(19.2) million for the three months ended September 30, 2020 and 2019, respectively, and $(851.4) million and $42.6 million for the nine months ended September 30, 2020 and 2019, 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 December 31, 2019, $8.7 million had been advanced by the Company and
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remained outstanding on the AAA Investments Credit Agreement. As of September 30, 2020, there were no amounts advanced and outstanding on the AAA Investments Credit Agreement and all amounts previously advanced had been repaid. 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 December 31, 2020.
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, 2020. 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.
16. 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, 2020 and December 31, 2019 of $1.0 billion and $1.1 billion, respectively, of which $351.1 million and $394.0 million related to Fund IX.
Debt Covenants—Apollo’s debt obligations contain various customary loan covenants. As of September 30, 2020, 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 ContingenciesApollo 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 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 sought 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, and also awarded 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 Carige’s appeal. On November 21, 2019, Carige and the Apollo Entities entered into a settlement agreement whereby, among other things, each party finally and irrevocably released and discharged the other parties from all their respective claims, actions and/or requests raised in the litigation. Accordingly, immediately after signing the settlement agreement, Carige and the Apollo Entities filed with the Court a joint declaration whereby they reported to the Court that they had waived and withdrawn their respective claims.

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 named any individual defendants, but Apollo Management VI, L.P. and CEVA Group were added as defendants. The amended complaint sought damages of approximately €30 million and asserts, among other things, claims for violations of the Investment Advisers Act of 1940,
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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. On January 18, 2019, Apollo filed a motion to dismiss the amended complaint. A hearing on that motion was held December 3, 2019. On January 6, 2020, the Florida court granted in part Apollo’s motion to dismiss, dismissing McEvoy’s Investment Advisers Act claim with prejudice, and denying without prejudice Apollo’s motion with respect to the remaining claims, and directing the parties to conduct limited discovery, and submit new briefing, solely with respect to the statute of limitations.  On July 30, 2020, Apollo and CEVA filed a joint motion for summary judgment on statute of limitations grounds. Briefing has not yet concluded with respect to Apollo and CEVA’s motion. 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.

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 named 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 alleged 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 alleged 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 asserted 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 sought $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 asserted 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. On June 8, 2020, Harbinger refiled its litigation in New York Supreme Court, captioned Harbinger Capital Partners II, LP et al. v. Apollo Global Management, LLC et al. (No. 652342/2020).  The complaint adds eight new defendants: two former SkyTerra executives, one former SkyTerra consultant, and five entities that were Harbinger’s counterparties in a transaction involving TVCC One Six Holdings LLC (“TVCC”).  It also adds three new claims relating to Harbinger’s contention that the new defendants induced Harbinger to buy TVCC to support SkyTerra’s network even though they allegedly knew that the network had material defects. On August 11, 2020, state court Justice Peter Sherwood entered the parties’ agreed stipulation staying the litigation until the earlier of (i) November 15, 2020, or (ii) a party sending a termination notice (which can only be sent under certain limited circumstances). 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.

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 alleged 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 were 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 as defendants ADT, several officers and directors, and AGM Inc. The federal action, captioned Perdomo v. ADT Inc., generally alleged 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 named the same Apollo-affiliated defendants as the state-court action, along with three new Apollo entities.
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Defendants filed motions to dismiss on March 25, 2019, and those motions were 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 that would resolve both actions. The plaintiffs in the federal action voluntarily dismissed their action on October 28, 2019, and the settlement was submitted to the state court for approval. On October 19, 2020, the state court entered an order preliminarily approving the settlement, directing notice to shareholders, and scheduling a final-approval hearing for January 12, 2021. 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 sought 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 moved to dismiss the Amended Complaint, and the Apollo Defendants 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. On December 20, 2019, the Court issued a Decision and Order dismissing Caldera’s complaint in its entirety as against all Defendants. On December 23, 2019, the Apollo Defendants filed a Notice of Entry of the Decision and Order. On January 8, 2020, Caldera filed a Notice of Appeal.
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 Delaware Court of Chancery, 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., Pomegranate Holdings, Inc., and other defendants. The amended complaint alleged 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. On December 31, 2019, the court issued a decision dismissing certain of the TFM defendants while denying the motions of others. The court deferred ruling on the motions filed by several defendants, including the Apollo-affiliated defendants. On June 1, 2020, the Court granted the Apollo-affiliated defendants’ motion to dismiss.
On October 21, 2019, a putative class action complaint was filed in the Delaware Court of Chancery against Presidio, Inc. (“Presidio”), all of the members of Presidio’s board of directors (including five directors who are affiliated with Apollo), and BC Partners Advisors L.P. and Port Merger Sub, Inc. (together, “BCP”) challenging the then-pending acquisition of Presidio by BCP (the “Merger”).  The action is captioned Firefighters Pension System of City of Kansas City, Missouri Trust v. Presidio, Inc. et al, C.A. No. 2019-0839-JTL.  The original complaint alleged that the Presidio directors breached their fiduciary duties in connection with the negotiation of the Merger and that the disclosures Presidio made in its filings with the SEC in connection with the Merger omitted material information, and that BCP aided and abetted those alleged breaches. On November 5, 2019, the Court of Chancery held a hearing on a motion by plaintiffs to preliminarily enjoin the stockholder vote and denied that motion.  On January 28, 2020, following the closing of the Merger, plaintiffs filed an amended class action complaint, adding as defendants AGM Inc. and AP VIII Aegis Holdings, L.P. (together, the “Apollo Defendants”) and LionTree Advisors, LLC (Presidio’s financial advisor in connection with the Merger).  The amended complaint alleges, among other things, that the Presidio directors breached their fiduciary duties in connection with the Merger, that the filings with the SEC in connection with the Merger omitted material information, that the Apollo Defendants were controlling stockholders of
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Presidio and breached their alleged fiduciary duties to Presidio’s public stockholders, and that BCP, LionTree and the Apollo Defendants aided and abetted breaches of fiduciary duties.  The amended complaint seeks, among other relief, declaratory relief, class certification, and unspecified money damages. The defendants have filed motions to dismiss the amended complaint and filed supporting memoranda April 30, 2020. Oral argument on defendants’ motions to dismiss was held on October 29, 2020, and the court took the argument and submissions under advisement with a decision to follow. 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.
On November 1, 2019, plaintiff Benjamin Fongers filed a putative class action in Illinois Circuit Court, Cook County, against CareerBuilder, LLC (“CareerBuilder”) and AGM Inc.  Plaintiff alleges that in March 2019, CareerBuilder changed its compensation plan so that sales representatives such as Fongers would (i) receive reduced commissions; and (ii) only be able to receive commissions for accounts they originated that were not reassigned to anyone else, a departure from the earlier plan.  Plaintiff also claims that the plan applied retroactively to deprive sales representatives of commissions to which they were earlier entitled.  Plaintiff alleges that AGM Inc. exercises complete control over CareerBuilder and thus, CareerBuilder acts as AGM Inc.’s agent.  Based on these allegations, Plaintiff alleges claims against both defendants for breach of written contract, breach of implied contract, unjust enrichment, violation of the Illinois Sales Representative Act, and violation of the Illinois Wage and Payment Collection Act. The defendants removed the action to the Northern District of Illinois on December 5, 2019, and Plaintiff moved to remand on January 6, 2020. That motion was fully briefed on February 14, 2020. Defendants’ deadline to respond to the complaint is 21 days after the court rules on the remand motion. 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.
On January 15, 2020, DISH Network L.L.C. (“DISH”) filed a lawsuit in the Circuit Court of Cook County, Illinois against Terrier Media Buyer, Inc. d/b/a Cox Media Group (“CMG”), AGM Inc., NBI Holdings, LLC, Camelot Media Buyer, Inc. and Camelot Media Holdings, LLC., among other defendants. DISH’s lawsuit alleges that the defendants engaged in a series of transactions designed to take control of certain local television broadcast stations in a way that deprived DISH of its contractual right to retransmit to its subscribers the signals of certain of the local broadcast television stations. DISH seeks a declaration that it may continue to retransmit under its prior retransmission agreement, among other relief. On the same day it filed its lawsuit, DISH obtained an ex parte temporary restraining order (“TRO”) that enjoined all defendants (i) from taking any action to interfere with performance of a retransmission agreement concerning certain local television stations, (ii) from prohibiting DISH from retransmitting the signals of those stations, and (iii) from otherwise interfering with DISH’s right to retransmit the signals of those stations. On January 24, 2020, the Circuit Court of Cook County extended the TRO. On the same day, the defendants removed the case to the U.S. District Court for the Northern District of Illinois. DISH subsequently moved to remand the case back to state court, which motion was denied, and for leave to name additional AGM Inc. subsidiaries as defendants, which motion was granted in part and denied in part. The court granted DISH leave to name AP IX Titan Holdings GP, LLC and AP IX (PMC) VoteCo, LLC as defendants in DISH’s amended complaint. On May 1, 2020, DISH filed its first amended complaint, which served as the basis for DISH’s request for a preliminary injunction. On July 20, 2020, the court denied DISH’s motion for a preliminary injunction and dissolved the TRO on July 22, 2020. On July 21, 2020, the court denied DISH’s request to stay dissolution of the TRO, and that order was affirmed by the United States Court of Appeals for the Seventh Circuit on July 22, 2020. DISH’s appeal of the district court’s decision denying its request for a preliminary injunction remains pending. DISH filed its opening brief on appeal on September 8, 2020. The defendants filed their response brief on October 22, 2020. While the appeal of the preliminary injunction decision remains pending, proceedings in the district court are continuing. On October 14, 2020, DISH filed a second amended complaint against CMG, AGM Inc., NBI Holdings, LLC, Camelot Media Buyer, Inc., Camelot Media Holdings, LLC and Northwest Broadcasting, Inc. The second amended complaint does not name any other defendant. 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.
In March 2020, Frank Funds, which claims to be a former shareholder of MPM Holdings, Inc. (“MPM”), commenced an action in the Delaware Court of Chancery, captioned Frank Funds v. Apollo Global Management, Inc., et al., C.A. No. 2020-0130, against AGM Inc., certain former MPM directors (including three Apollo officers and employees), and members of the consortium that acquired MPM in a May 2019 merger. The complaint asserts, on behalf of a putative class of former MPM shareholders, a claim against Apollo for breach of its fiduciary duties as MPM’s alleged controlling shareholder in connection with the May 2019 merger in which a consortium acquired MPM. Frank Funds seeks unspecified compensatory damages. Apollo believes the claims in this action are without merit. On July 1, 2020, Apollo moved to dismiss the complaint; briefing on that motion has not yet begun. Because this action is in the early stages, no reasonable estimate of possible loss, if any, can be made at this time.
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On March 12, 2020, AGM Inc. and several investment funds managed by subsidiaries of AGM Inc. (the “Apollo Funds”) were added as defendants in a class action filed by plaintiff Zachary Blair on December 7, 2017, in the Superior Court of California.  Plaintiff alleges he is a former employee of Classic Party Rentals, a party equipment rental company previously owned by the Apollo Funds.  Plaintiff alleges that Classic Party Rentals failed to comply with California wage and hour and related laws, and also has asserted claims based on various provisions of the California labor code and California’s unfair competition laws.  On October 11, 2019, the court certified a class of current and former non-exempt drivers, assistant drivers, and organizer employees of Classic Party Rentals who were paid on an hourly basis and who worked at Classic Party Rentals in California at any time from December 7, 2013, through the date of the class certification order. After being served with the complaint in July 2020, AGM Inc. filed a motion to dismiss all claims against it. That motion remains pending. 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.
On May 29, 2020, plaintiff Vrajeshkumar Patel filed a putative stockholder derivative and class action complaint in the Delaware Court of Chancery against Talos Energy, Inc. (“Talos”), all of the members of Talos’s board of directors (including two Apollo partners), Riverstone Holdings, LLC (“Riverstone”), AGM Inc., and Guggenheim Securities, LLC in connection with the acquisition of certain assets from Castex Energy 2014, LLC and ILX Holdings, LLC in February 2020. The complaint asserts, on behalf of a putative class of shareholders and Talos, direct and derivative claims against Apollo, Riverstone, and the individual defendants for breach of their fiduciary duties. The plaintiff alleges that Apollo and Riverstone comprise a controlling shareholder group. The complaint seeks, among other relief, class certification and unspecified money damages. On August 4, 2020, the defendants filed motions to dismiss the complaint in its entirety. 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. 
On June 3, 2020, a group of former MPM shareholders seeking appraisal of their MPM shares in a consolidated appraisal proceeding, In re Appraisal of MPM Holdings, Inc., C.A. No. 2019-0519 (Del. Ch.), moved for leave to file a verified amended appraisal petition and class-action complaint. In that motion, the petitioners stated that they seek leave to assert claims for breach of fiduciary duty and/or aiding and abetting breaches of fiduciary duty against AGM Inc., an affiliated Apollo fund, certain former MPM directors (including three Apollo officers and employees), and members of the consortium that acquired MPM, based on alleged actions related to the May 2019 merger. The petitioners also seek to consolidate their appraisal proceeding with the Frank Funds action, and notified the Delaware Chancery Court via letter on September 23, 2020, that they had reached an agreement in principle with Frank Funds to consolidate the two cases. The Delaware Court of Chancery has not yet ruled on the motion. 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.
On August 4, 2020, a putative class action complaint was filed in the United States District Court for the District of Nevada against PlayAGS Inc. (“PlayAGS”), all of the members of PlayAGS’s board of directors (including three directors who are affiliated with Apollo), certain underwriters of AGS (including Apollo Global Securities, LLC), as well as AGM Inc., Apollo Investment Fund VIII, L.P., Apollo Gaming Holdings, L.P., and Apollo Gaming Voteco, LLC (these last four parties, together, the “Apollo Defendants”). The complaint asserts claims arising under the Securities Act of 1933 in connection with certain secondary offerings of PlayAGS stock conducted in August 2018 and March 2019, alleging that the registration statements issued in connection with those offerings did not fully disclose certain business challenges facing PlayAGS. Such claims are asserted against all defendants, including Apollo Global Securities, LLC and the Apollo Defendants, as well as all directors (including the directors affiliated with Apollo). The complaint further asserts a control person claim under Section 20(a) of the Securities Exchange Act of 1934 against the Apollo Defendants and the director defendants (including the directors affiliated with Apollo), alleging that the Apollo Defendants and the director defendants were responsible for certain misstatements and omissions by PlayAGS about its business during a putative class period from May 3, 2018 through August 7, 2019. 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, 2020, fixed and determinable payments due in connection with these obligations were as follows:
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Remaining 20202021202220232024ThereafterTotal
Other long-term obligations$9,347 $9,908 $1,947 $703 $703 $ $22,608 
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 worthless, the amount of cumulative revenues that have been recognized by Apollo through September 30, 2020 and that would be reversed approximates $2.0 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 15 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 of related parties of Apollo, including portfolio companies of the funds Apollo manages, as well as third parties. As of September 30, 2020 and December 31, 2019, there were no open 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 $103.3 million and $112.5 million as of September 30, 2020 and December 31, 2019, 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 7 for further information regarding fair value measurements.
17. SEGMENT REPORTING
Apollo conducts its business primarily in the United States 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 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
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FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
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 that participate in dividends.
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, and restructuring charges. 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. Segment DE also excludes impacts of the remeasurement of the tax receivable agreement liability 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.
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 related to business development companies, Redding Ridge Holdings LP (“Redding Ridge Holdings”), an affiliate of Redding Ridge, and MidCap 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.
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(dollars in thousands, except share data, except where noted)
The following tables present financial data for Apollo’s reportable segments.
 As of and for the Three Months Ended September 30, 2020
 Credit
Segment
Private Equity
Segment
Real Assets
Segment
Total Reportable
Segments
Management fees$246,159 $128,446 $51,847 426,452 
Advisory and transaction fees, net51,376 20,108 878 72,362 
Performance fees(1)
2,204   2,204 
Fee Related Revenues299,739 148,554 52,725 501,018 
Salary, bonus and benefits(61,975)(53,451)(29,513)(144,939)
General, administrative and other(40,367)(25,099)(11,869)(77,335)
Placement fees(425)(188) (613)
Fee Related Expenses(102,767)(78,738)(41,382)(222,887)
Other income (loss), net of Non-Controlling Interest(780)23 59 (698)
Fee Related Earnings196,192 69,839 11,402 277,433 
Realized performance fees7,614 2,025 7,806 17,445 
Realized profit sharing expense(7,614)(2,025)(7,806)(17,445)
Net Realized Performance Fees    
Realized principal investment income, net(2)
928 1,598 356 2,882 
Net interest loss and other(14,010)(14,580)(6,216)(34,806)
Segment Distributable Earnings(3)
$183,110 $56,857 $5,542 $245,509 
Total Assets(3)
$4,314,160 $2,873,066 $833,780 $8,021,006 
(1)Represents certain performance fees related to business development companies, Redding Ridge Holdings and MidCap.
(2)Realized principal investment income, net includes dividends from our permanent capital vehicles, net of such amounts used to compensate employees.
(3)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.
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(dollars in thousands, except share data, except where noted)
 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, net5,530 10,655 377 16,562 
Performance fees(1)
6,449   6,449 
Fee Related Revenues210,846 142,298 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 loss, net of Non-Controlling Interest(597)(135)(6)(738)
Fee Related Earnings124,910 69,688 18,192 212,790 
Realized performance fees3,530 63,742 162 67,434 
Realized profit sharing expense(1,674)(22,084)(65)(23,823)
Net Realized Performance Fees1,856 41,658 97 43,611 
Realized principal investment income, net(2)
5,845 8,114 415 14,374 
Net interest loss and other(6,106)(8,911)(3,234)(18,251)
Segment Distributable Earnings (3)
$126,505 $110,549 $15,470 $252,524 
(1)Represents certain performance fees related to business development companies, Redding Ridge Holdings and MidCap.
(2)Realized principal investment income, net includes dividends from our permanent capital vehicles, net of such amounts used to compensate employees.
(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) and total assets.
     The following table reconciles total consolidated revenues to total revenues for Apollo’s reportable segments:
 For the Three Months Ended September 30,
20202019
Total Consolidated Revenues$1,018,274 $702,721 
Equity awards granted by unconsolidated related parties, reimbursable expenses and other(1)
(27,479)(19,990)
Adjustments related to consolidated funds and VIEs(1)
22,084 4,079 
Performance fees(2)
(457,754)(250,642)
Principal investment income(54,107)(34,785)
Total Fee Related Revenues501,018 401,383 
Realized performance fees17,445 67,434 
Realized principal investment income, net and other1,198 13,532 
Total Segment Revenues$519,661 $482,349 
(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 related to business development companies, Redding Ridge Holdings and MidCap.
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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,
20202019
Total Consolidated Expenses$531,055 $371,372 
Equity awards granted by unconsolidated related parties, reimbursable expenses and other(1)
(26,339)(20,563)
Reclassification of interest expenses(34,889)(27,833)
Transaction-related charges, net(1)
(10,835)(5,201)
Charges associated with corporate conversion(2)
(2,829)(6,994)
Equity-based compensation(17,962)(15,802)
Total profit sharing expense(3)
(213,494)(107,124)
Dividend-related compensation expense(1,820) 
Total Fee Related Expenses222,887 187,855 
Realized profit sharing expense17,445 23,823 
Total Segment Expenses$240,332 $211,678 
(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, and restructuring charges.
(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,
20202019
Total Consolidated Other Income (Loss)$278,237 $(42,151)
Adjustments related to consolidated funds and VIEs(1)
(121,425)(10,338)
Loss from change in tax receivable agreement liability 38,575 
Net (gains) losses from investment activities(144,839)19,783 
Interest income and other, net of Non-Controlling Interest(12,671)(6,607)
Other Loss, net of Non-Controlling Interest(698)(738)
Net interest loss and other(33,122)(17,409)
Total Segment Other Loss$(33,820)$(18,147)
(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 Three Months Ended September 30,
20202019
Income before income tax provision$765,456 $289,198 
Transaction-related charges(1)
10,835 5,201 
Charges associated with corporate conversion(2)
2,829 6,994 
Loss from change in tax receivable agreement liability 38,575 
Net income attributable to Non-Controlling Interests in consolidated entities(100,021)(7,083)
Unrealized performance fees(440,310)(183,208)
Unrealized profit sharing expense168,368 61,098 
Equity-based profit sharing expense and other(3)
27,681 22,203 
Equity-based compensation17,962 15,802 
Unrealized principal investment income(49,406)(20,411)
Unrealized net (gains) losses from investment activities and other(157,885)24,155 
Segment Distributable Earnings$245,509 $252,524 
(1)    Transaction-related charges include equity-based compensation charges, the amortization of intangible assets, contingent consideration and certain other charges associated with acquisitions, and restructuring charges.
(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.
 As of and for the Nine Months Ended September 30, 2020
 Credit
Segment
Private Equity
Segment
Real Assets
Segment
Total Reportable
Segments
Management fees$679,109 $381,306 $150,227 1,210,642 
Advisory and transaction fees, net80,399 85,253 5,191 170,843 
Performance fees(1)
8,048   8,048 
Fee Related Revenues767,556 466,559 155,418 1,389,533 
Salary, bonus and benefits(171,789)(149,133)(83,037)(403,959)
General, administrative and other(112,991)(68,863)(35,637)(217,491)
Placement fees(1,089)(295) (1,384)
Fee Related Expenses(285,869)(218,291)(118,674)(622,834)
Other income (loss), net of Non-Controlling Interest(2,167)48 154 (1,965)
Fee Related Earnings479,520 248,316 36,898 764,734 
Realized performance fees37,834 6,717 49,477 94,028 
Realized profit sharing expense(37,530)(7,021)(49,477)(94,028)
Net Realized Performance Fees304 (304)  
Realized principal investment income, net(2)
4,112 5,544 4,028 13,684 
Net interest loss and other(42,981)(41,940)(16,069)(100,990)
Segment Distributable Earnings(3)
$440,955 $211,616 $24,857 $677,428 
Total Assets(3)
$4,314,160 $2,873,066 $833,780 $8,021,006 

(1)Represents certain performance fees related to business development companies, Redding Ridge Holdings and MidCap.
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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
(2)Realized principal investment income, net includes dividends from our permanent capital vehicles, net of such amounts used to compensate employees.
(3)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, 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, net13,888 47,048 5,748 66,684 
Performance fees(1)
16,371   16,371 
Fee Related Revenues602,143 438,825 145,393 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 Interest967 4,024 88 5,079 
Fee Related Earnings364,007 237,567 59,493 661,067 
Realized performance fees24,887 136,429 3,242 164,558 
Realized profit sharing expense(13,069)(63,900)(1,299)(78,268)
Net Realized Performance Fees11,818 72,529 1,943 86,290 
Realized principal investment income, net(2)

16,803 18,079 2,209 37,091 
Net interest loss and other(15,148)(22,694)(8,115)(45,957)
Segment Distributable Earnings(3)
$377,480 $305,481 $55,530 $738,491 

(1)Represents certain performance fees related to business development companies, Redding Ridge Holdings and MidCap.
(2)Realized principal investment income, net includes dividends from our permanent capital vehicles, net of such amounts used to compensate employees.
(3)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.

The following table reconciles total consolidated revenues to total revenues for Apollo’s reportable segments:
 For the Nine Months Ended September 30,
20202019
Total Consolidated Revenues$1,057,523 $2,017,077 
Equity awards granted by unconsolidated related parties, reimbursable expenses and other(1)
(88,167)(72,966)
Adjustments related to consolidated funds and VIEs(1)
36,798 5,801 
Performance fees(2)
358,188 (661,828)
Principal investment (income) loss25,191 (101,723)
Total Fee Related Revenues1,389,533 1,186,361 
Realized performance fees94,028 164,558 
Realized principal investment income, net and other10,315 34,564 
Total Segment Revenues$1,493,876 $1,385,483 

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APOLLO GLOBAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except share data, except where noted)
(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 related to business development companies, Redding Ridge Holdings and MidCap.
The following table reconciles total consolidated expenses to total expenses for Apollo’s reportable segments:
 For the Nine Months Ended September 30,
20202019
Total Consolidated Expenses$905,398 $1,091,914 
Equity awards granted by unconsolidated related parties, reimbursable expenses and other(1)
(80,212)(73,270)
Reclassification of interest expenses(98,422)(70,243)
Transaction-related charges, net(1)
(21,546)(28,799)
Charges associated with corporate conversion(2)
(3,893)(17,000)
Equity-based compensation(49,779)(52,462)
Total profit sharing expense(3)
(22,532)(319,767)
Dividend-related compensation expense(6,180) 
Total Fee Related Expenses622,834 530,373 
Realized profit sharing expense94,028 78,268 
Total Segment Expenses$716,862 $608,641 
(1)Represents the addition of expenses of consolidated funds and VIEs, transaction-related charges, non-cash expenses related to equity awards granted by unconsolidated related parties to employees of the Company and certain compensation and administrative expenses. Transaction-related charges include equity-based compensation charges, the amortization of intangible assets, contingent consideration and certain other charges associated with acquisitions, and restructuring charges.
(2)Represents expenses incurred in relation to the Conversion, as described in note 1.
(3)Includes unrealized profit sharing expense, realized profit sharing expense and equity based profit sharing expense and other.
The following table reconciles total consolidated other income (loss) to total other loss for Apollo’s reportable segments:
 For the Nine Months Ended September 30,
20202019
Total Consolidated Other Income (Loss)$(826,957)$58,314 
Adjustments related to consolidated funds and VIEs(1)
(11,157)(23,839)
Loss from change in tax receivable agreement liability 38,575 
Net (gains) losses from investment activities849,293 (44,095)
Interest income and other, net of Non-Controlling Interest(13,144)(23,876)
Other Income (Loss), net of Non-Controlling Interest(1,965)5,079 
Net interest loss and other(97,621)(43,430)
Total Segment Other Loss$(99,586)$(38,351)
(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,
20202019
Income (Loss) before income tax (provision) benefit$(674,832)$983,477 
Transaction-related charges(1)
21,546 28,799 
Charges associated with corporate conversion(2)
3,893 17,000 
Loss from change in tax receivable agreement liability 38,575 
Net (income) loss attributable to Non-Controlling Interests in consolidated entities23,320 (20,888)
Unrealized performance fees452,215 (497,270)
Unrealized profit sharing expense(172,128)177,659 
Equity-based profit sharing expense and other(3)
100,632 63,840 
Equity-based compensation49,779 52,462 
Unrealized principal investment (income) loss45,054 (64,632)
Unrealized net (gains) losses from investment activities and other827,949 (40,531)
Segment Distributable Earnings$677,428 $738,491 

(1)    Transaction-related charges include equity-based compensation charges, the amortization of intangible assets, contingent consideration and certain other charges associated with acquisitions, and restructuring charges.
(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 table presents the reconciliation of Apollo’s total reportable segment assets to total assets:
As of
September 30, 2020
As of
December 31, 2019
Total reportable segment assets$8,021,006 $7,337,517 
Adjustments(1)
10,606,864 1,204,600 
Total assets$18,627,870 $8,542,117 
(1)    Represents the addition of assets of consolidated funds and VIEs and consolidation elimination adjustments.
18. SUBSEQUENT EVENTS

Dividends
On October 29, 2020, the Company declared a cash dividend of $0.51 per share of Class A Common Stock, which will be paid on November 30, 2020 to holders of record at the close of business on November 20, 2020.
On October 29, 2020, 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 15, 2020 to holders of record at the close of business on November 30, 2020.
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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, 2020
Apollo Global Management, Inc. and Consolidated Subsidiaries Consolidated Funds and VIEsEliminationsConsolidated
Assets:
Cash and cash equivalents$1,838,640 $$— $1,838,646 
Restricted cash17,694 — — 17,694 
U.S. Treasury securities, at fair value— — — — 
Investments4,185,949 363 (209,243)3,977,069 
Assets of consolidated variable interest entities:
Cash and cash equivalents— 805,529 — 805,529 
Investments, at fair value— 10,156,109 (255,516)9,900,593 
Other assets— 189,795 (6,197)183,598 
Incentive fees receivable1,028 — — 1,028 
Due from related parties560,942 — (73,489)487,453 
Deferred tax assets, net678,799 — — 678,799 
Other assets319,217 — (493)318,724 
Lease assets301,779 — — 301,779 
Goodwill116,958 — — 116,958 
Total Assets$8,021,006 $11,151,802 $(544,938)$18,627,870 
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable and accrued expenses$143,664 $— $— $143,664 
Accrued compensation and benefits221,185 — — 221,185 
Deferred revenue120,075 — — 120,075 
Due to related parties712,958 — (772)712,186 
Profit sharing payable666,734 — — 666,734 
Debt3,151,247 — — 3,151,247 
Liabilities of consolidated variable interest entities:
Debt, at fair value— 5,927,186 (280,302)5,646,884 
Notes payable— 2,567,353 (103,086)2,464,267 
Other liabilities— 870,202 (63,869)806,333 
Due to related parties— 23,435 (23,435)— 
Other liabilities169,522 — — 169,522 
Lease liabilities336,769 — — 336,769 
Total Liabilities5,522,154 9,388,176 (471,464)14,438,866 
Stockholders’ Equity:
Apollo Global Management, Inc. stockholders’ equity:
Series A Preferred Stock264,398 — — 264,398 
Series B Preferred Stock289,815 — — 289,815 
Additional paid in capital929,524 — — 929,524 
Retained earnings (accumulated deficit)(396,895)81,331 (81,331)(396,895)
Accumulated other comprehensive loss(4,218)(917)7,857 2,722 
Total Apollo Global Management, Inc. stockholders’ equity1,082,624 80,414 (73,474)1,089,564 
Non-Controlling Interests in consolidated entities5,694 1,683,212 — 1,688,906 
Non-Controlling Interests in Apollo Operating Group1,410,534 — — 1,410,534 
Total Stockholders’ Equity2,498,852 1,763,626 (73,474)4,189,004 
Total Liabilities and Stockholders’ Equity$8,021,006 $11,151,802 $(544,938)$18,627,870 
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APOLLO GLOBAL MANAGEMENT, INC.
CONSOLIDATING STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(dollars in thousands, except share data)
As of December 31, 2019
Apollo Global Management, LLC and Consolidated SubsidiariesConsolidated Funds and VIEsEliminationsConsolidated
Assets:
Cash and cash equivalents$1,556,202 $— $— $1,556,202 
Restricted cash19,779 — — 19,779 
U.S. Treasury securities, at fair value554,387 — — 554,387 
Investments3,704,332 595 (95,068)3,609,859 
Assets of consolidated variable interest entities:
Cash and cash equivalents— 45,329 — 45,329 
Investments, at fair value— 1,213,169 — 1,213,169 
Other assets— 41,688 — 41,688 
Incentive fees receivable2,414 — — 2,414 
Due from related parties415,622 — (553)415,069 
Deferred tax assets473,165 — — 473,165 
Other assets327,009 — (560)326,449 
Lease assets190,696 — — 190,696 
Goodwill93,911 — — 93,911 
Total Assets$7,337,517 $1,300,781 $(96,181)$8,542,117 
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable and accrued expenses$94,364 $— $— $94,364 
Accrued compensation and benefits64,393 — — 64,393 
Deferred revenue84,639 — — 84,639 
Due to related parties501,387 — — 501,387 
Profit sharing payable758,669 — — 758,669 
Debt2,650,600 — — 2,650,600 
Liabilities of consolidated variable interest entities:
Debt, at fair value— 893,711 (43,564)850,147 
Other liabilities— 79,762 (190)79,572 
Due to related parties— 923 (923)— 
Other liabilities210,740 — — 210,740 
Lease liabilities209,479 — — 209,479 
Total Liabilities4,574,271 974,396 (44,677)5,503,990 
Stockholders’ Equity:
Apollo Global Management, Inc. stockholders’ equity:
Series A Preferred stock264,398 — — 264,398 
Series B Preferred stock289,815 — — 289,815 
Additional paid in capital1,302,587 — — 1,302,587 
Retained earnings (accumulated deficit)— 26,744 (26,744)— 
Accumulated other comprehensive loss(4,331)(3,379)3,132 (4,578)
Total Apollo Global Management, Inc. stockholders’ equity1,852,469 23,365 (23,612)1,852,222 
Non-Controlling Interests in consolidated entities6,776 303,020 (27,892)281,904 
Non-Controlling Interests in Apollo Operating Group904,001 — — 904,001 
Total Stockholders’ Equity2,763,246 326,385 (51,504)3,038,127 
Total Liabilities and Stockholders’ Equity$7,337,517 $1,300,781 $(96,181)$8,542,117 
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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 2019 Annual Report and quarterly report on Form 10-Q filed with the SEC on May 11, 2020. 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 34 years and lead a team of 1,657 employees, including 547 investment professionals, as of September 30, 2020.
Apollo conducts its business primarily in the United States 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 driven by continued growth in traditional funds and managed accounts as well as growth in asset management services to the insurance industry and in performing credit products. 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, 2020, we had total AUM of $433.1 billion across all of our businesses. More than 90% of our total AUM was in funds with a contractual life at inception of five years or more, and 60% of such AUM was in permanent capital vehicles.
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The following table presents the gross and net returns for Apollo’s credit segment by category type:
 Gross ReturnsNet Returns
CategoryFor the Three Months Ended September 30, 2020For the Nine Months Ended September 30, 2020For the Three Months Ended September 30, 2020For the Nine Months Ended September 30, 2020
Corporate Credit3.5%2.4%3.2%1.5%
Structured Credit4.1%(3.4)%4.1%(3.4)%
Direct Origination3.7%1.6%2.8%(0.8)%
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, 2020, Fund VIII had $2.5 billion of 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, 2020, 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 24% net IRR on a compound annual basis from inception through September 30, 2020. Apollo’s private equity fund appreciation/(depreciation) was 8.0% and (5.4%) for the three and nine months ended September 30, 2020, respectively.
For our real assets segment, there was a total gross return of 3.4% and (2.1)% for the three and nine months ended September 30, 2020, respectively. Included in the gross return are 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.”
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Holding Company Structure
The diagram below depicts our current organizational structure:
apo-20200930_g1.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 4, 2020. As of November 4, 2020, there were 228,815,821 Class A shares, 1 Class B share and 1 Class C share issued and outstanding, and 174,873,808 AOG Units held by Holdings that are exchangeable for Class A shares on a one-for-one basis. In addition, as of November 4, 2020, Athene held 29,154,519 AOG Units that are non-voting equity interests of the Apollo Operating Group and are not exchangeable for Class A shares.
(1)As of November 4, 2020, the Class A shares represented 9.2% of the total voting power of the Class A shares, the Class B share and the Class C share, voting together as a single class, with respect to General Stockholder Matters. As of November 4, 2020, the Class A shares represented 52.8% of the total voting power of the Class A shares and the Class B share with respect to certain 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 Class B share. As of November 4, 2020, the Class B share represented 8.2% of the total voting power of the Class A shares, the Class B share and the Class C share, voting together as a single class, with respect to General Stockholder Matters, and a de minimus economic interest in AGM Inc. As of November 4, 2020, the Class B share represented 47.2% of the total voting power of the Class A shares and the Class B share with respect to certain matters upon which they are entitled to vote as a single class.
(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 36.6% of the limited partner interests in the Apollo Operating Group.
(4)Holdings owns 40.4% 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 shares. Our Managing Partners, through their interests in BRH and Holdings, beneficially own 36.6% of the AOG Units. Our Contributing Partners, through their interests in Holdings, beneficially own 3.8% of the AOG Units.
(5)BRH Holdings GP, Ltd. is the sole member of AGM Management, LLC, which in turns holds our only outstanding Class C share. The Class C share bestows to its holder certain management rights over AGM Inc. As of November 4, 2020, the Class C share represented 82.6% of the total voting power of the Class A shares, the Class B share and the Class C share, voting together as a single class, with respect to General Stockholder Matters, and a de minimus economic interest in AGM Inc.
(6)Represents 52.9% 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 or managing member interests in each Apollo Operating Group entity.
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(7)Represents 6.7% of the limited partner or limited liability company interests in each Apollo Operating Group entity held by Athene Holding Ltd. and/or its affiliates. AOG Units held by Athene are non-voting equity interests of the Apollo Operating Group and are not exchangeable for Class A shares.
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, generally all of the income is 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 8% in the third quarter of 2020, following an increase of 20% in the second quarter of 2020. Global equity markets also appreciated during the quarter, with the MSCI All Country World ex USA Index increasing 5.01% following an increase of 15.6% in the second quarter of 2020.
Conditions in the credit markets also have a significant impact on our business. Credit markets were positive in the third quarter of 2020, with the BofAML HY Master II Index increasing by 4.7%, while the S&P/LSTA Leveraged Loan Index increased by 3.5%. The U.S. 10-year Treasury yield increased during the quarter to 0.69%. On March 16, 2020, the Federal Reserve reduced the benchmark interest rate, lowering it for the first time this year, to a target range of 0% to 0.25%, down from to a target range of 1.50% to 1.75% at the end of 2019.
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 appreciated 4.34% during the third quarter, after appreciating by 1.81% in the second quarter of 2020, while the British pound appreciated 4.21% in the second quarter of 2020, after depreciating 0.10% in the second quarter of 2020. The price of crude oil appreciated by 2.42% during the quarter ended September 30, 2020.
In terms of economic conditions in the U.S., the Bureau of Economic Analysis reported real GDP increased at an annual rate of 33.1%, in the third quarter of 2020, following a decrease of 31.4% in the second quarter of 2020. As of October 2020, the International Monetary Fund estimated that the U.S. economy will contract by 4.3% in 2020 and expand by 3.1% in 2021. The U.S. Bureau of Labor Statistics reported that the U.S. unemployment rate decreased to 7.9% as of September 30, 2020.
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 $20.9 billion and $64.5 billion of capital through the funds it manages during the three and nine months ended September 30, 2020, respectively.
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Capital deployed by our commitment-based funds and SIAs that have a defined maturity date was $2.0 billion and $14.5 billion during the three and nine months ended September 30, 2020, respectively. We believe Apollo’s expertise in credit and its focus on nine core industry sectors, combined with more than 30 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 $13.0 billion and $109.5 billion of capital inflows during the three and nine months ended September 30, 2020, respectively. Apollo returned $1.7 billion and $5.2 billion of capital and realized gains to the investors in the funds it manages during the three and nine months ended September 30, 2020, respectively.
On October 20, 2020, at a regularly scheduled meeting of AGM Inc.’s board of directors, Apollo’s Chairman and Chief Executive Officer, Leon Black, requested that the conflicts committee of the board of directors (comprised of independent directors) retain outside counsel to conduct a thorough review of, and independently confirm, the information that Mr. Black has conveyed about his previous professional relationship with Mr. Jeffrey Epstein. The conflicts committee has retained Dechert LLP as outside counsel to conduct a thorough, independent review which will include interviewing individuals and examining relevant documents.
Managing Business Performance
We believe that the presentation of Segment DE supplements a reader’s understanding of the economic operating performance of each of our segments.
Segment Distributable Earnings and Distributable Earnings
Segment DE is the key performance measure used by management in evaluating the performance of Apollo’s credit, private equity and real assets segments. See note 17 to the condensed consolidated financial statements for more details regarding the components of Segment DE. 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. Specifically, certain deductions considered in the income tax provision under U.S. GAAP, such as the deduction for transaction related charges and equity-based compensation, are taken into account for purposes of the implied tax provision. 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 17 to the condensed consolidated financial statements for more details regarding management’s consideration of Segment DE.
Fee Related Earnings and Fee Related EBITDA
Fee Related Earnings, or “FRE”, 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 17 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.
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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.
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, 2020
CreditPrivate EquityReal AssetsTotal
 (in millions)
Fee-Generating$256,671 $43,921 $35,553 $336,145 
Non-Fee-Generating55,434 32,880 8,686 97,000 
Total Assets Under Management$312,105 $76,801 $44,239 $433,145 
As of September 30, 2019
CreditPrivate EquityReal AssetsTotal
 (in millions)
Fee-Generating$168,096 $46,698 $28,235 $243,029 
Non-Fee-Generating39,562 31,165 8,918 79,645 
Total Assets Under Management$207,658 $77,863 $37,153 $322,674 
As of December 31, 2019
CreditPrivate EquityReal AssetsTotal
 (in millions)
Fee-Generating$172,893 $43,826 $29,727 $246,446 
Non-Fee-Generating42,637 32,962 9,060 84,659 
Total Assets Under Management$215,530 $76,788 $38,787 $331,105 

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, 2020
As of
September 30, 2019
As of
December 31, 2019
(in millions)    
Credit$10,429 $8,581 $10,898 
Private Equity9,450 9,259 9,441 
Real Assets1,977 2,760 2,208 
Total AUM with Future Management Fee Potential$21,856 $20,600 $22,547 
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The following tables present the components of Performance Fee-Eligible AUM for each of Apollo’s three segments:
As of September 30, 2020
CreditPrivate EquityReal AssetsTotal
 (in millions)
Performance Fee-Generating AUM(1)
$21,076 $20,690 $5,562 $47,328 
AUM Not Currently Generating Performance Fees29,028 10,888 618 40,534 
Uninvested Performance Fee-Eligible AUM9,551 27,647 4,621 41,819 
Total Performance Fee-Eligible AUM(2)
$59,655 $59,225 $10,801 $129,681 
As of September 30, 2019
CreditPrivate EquityReal AssetsTotal
 (in millions)
Performance Fee-Generating AUM(1)
$36,397 $24,263 $4,339 $64,999 
AUM Not Currently Generating Performance Fees7,962 7,436 1,136 16,534 
Uninvested Performance Fee-Eligible AUM8,179 30,867 4,540 43,586 
Total Performance Fee-Eligible AUM(2)
$52,538 $62,566 $10,015 $125,119 
As of December 31, 2019
CreditPrivate EquityReal AssetsTotal
 (in millions)
Performance Fee-Generating AUM(1)
$38,560 $22,907 $5,179 $66,646 
AUM Not Currently Generating Performance Fees6,889 8,112 589 15,590 
Uninvested Performance Fee-Eligible AUM9,922 30,084 4,676 44,682 
Total Performance Fee-Eligible AUM(2)
$55,371 $61,103 $10,444 $126,918 
(1)Performance Fee-Generating AUM of $0.5 billion, $2.6 billion and $3.2 billion as of September 30, 2020, September 30, 2019 and December 31, 2019, respectively, are above the hurdle rates or preferred returns and has been deferred to future periods when the fees are probable to not be significantly reversed.
(2)Effective as of June 30, 2020, performance fee-eligible AUM for Athora includes only capital commitments. Prior period performance fee-eligible AUM has been conformed to reflect this change in presentation.
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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, 2020 and the corresponding appreciation required to reach the preferred return or high watermark in order to generate performance fees:
Strategy / FundInvested AUM Not Currently Generating Performance FeesInvestment Period Active > 24 Months
Appreciation Required to Achieve Performance Fees(1)
(in millions)
Credit:
Corporate Credit$21,717 $19,493 3%
Structured Credit3,534 3,534 17%
Direct Origination3,777 3,722 4%
Total Credit29,028 26,749 5%
Private Equity:
Fund IX5,615 5,615 8%
ANRP II1,518 1,518 20%
Hybrid Capital1,247 1,247 148%
Other PE2,508 1,169 91%
Total Private Equity10,888 9,549 38%
Real Assets:
Total Real Assets618 289 > 250bps
Total$40,534 $36,587 
(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, 2020
 CreditPrivate
Equity
Real
Assets
Total
 (in millions)
Fee-Generating AUM based on capital commitments$854 $27,113 $6,347 $34,314 
Fee-Generating AUM based on invested capital2,816 15,220 2,278 20,314 
Fee-Generating AUM based on gross/adjusted assets226,760 1,119 25,871 253,750 
Fee-Generating AUM based on NAV26,241 469 1,057 27,767 
Total Fee-Generating AUM$256,671 $43,921 
(1)
$35,553 $336,145 
(1)The weighted average remaining life of the traditional private equity funds as of September 30, 2020 was 72 months.
 As of September 30, 2019
 CreditPrivate
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 capital1,328 18,685 2,217 22,230 
Fee-Generating AUM based on gross/adjusted assets140,251 743 20,253 161,247 
Fee-Generating AUM based on NAV22,629 421 879 23,929 
Total Fee-Generating AUM$168,096 $46,698 
(1)
$28,235 $243,029 
(1)    The weighted average remaining life of the private equity funds as at September 30, 2019 was 80 months.
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 As of December 31, 2019
 CreditPrivate
Equity
Real AssetsTotal
 (in millions)
Fee-Generating AUM based on capital commitments$3,921 $26,849 $4,932 $35,702 
Fee-Generating AUM based on invested capital1,372 15,743 2,273 19,388 
Fee-Generating AUM based on gross/adjusted assets144,028 814 21,403 166,245 
Fee-Generating AUM based on NAV23,572 420 1,119 25,111 
Total Fee-Generating AUM$172,893 $43,826 
(1)
$29,727 $246,446 
(1)    The weighted average remaining life of the traditional private equity funds as of December 31, 2019 was 80 months.
The following table presents total AUM and Fee-Generating AUM amounts for our credit segment by category type:
 Total AUMFee-Generating AUM
 As of
September 30,
As of
December 31,
As of
September 30,
As of
December 31,
202020192019202020192019
 (in millions)
Corporate Credit$156,440 $111,184 $110,659 $122,895 $93,132 $92,601 
Structured Credit56,451 50,388 52,735 48,445 44,053 45,453 
Direct Origination24,568 18,249 24,234 21,824 16,696 22,031 
Advisory and Other74,646 27,837 27,902 63,507 14,215 12,808 
Total$312,105 $207,658 $215,530 $256,671 $168,096 $172,893 
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 15 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.
The following table presents the aggregate Athene Sub-Allocated Total AUM by asset class:
As of
September 30,
As of December 31,
 202020192019
 (in millions)
Core Assets$48,590 $33,524 $32,346 
Core Plus Assets39,992 31,848 30,132 
Yield Assets56,930 45,953 48,552 
High Alpha6,776 4,286 5,051 
Cash, Treasuries, Equity and Alternatives20,688 9,873 14,220 
Total (1)
$172,976 $125,484 $130,301 
(1)Includes $39.2 billion, $10.3 billion and $10.0 billion of gross assets related to Athene Co-Invest Reinsurance Affiliate 1A Ltd. and $2.5 billion, $1.5 billion and $2.6 billion of unfunded commitments related to Apollo/Athene Dedicated Investment Program (“ADIP”) as of September 30, 2020, September 30, 2019 and December 31, 2019, respectively.
Apollo, through ISGI, provides investment advisory services with respect to certain assets in certain portfolio companies of Apollo funds and 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
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that is not Athora Sub-Advised AUM as “Athora Non-Sub Advised” AUM. See note 15 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,
202020192019
 (in millions)
Sub-Advised AUM$5,563 $3,667 $3,877 
Non-Sub-Advised AUM59,423 10,382 10,019 
Total AUM$64,986 $14,049 $13,896 
The following table presents total AUM and Fee-Generating AUM amounts for our private equity segment:
 Total AUMFee-Generating AUM
 As of
September 30,
As of
December 31,
As of
September 30,
As of
December 31,
202020192019202020192019
 (in millions)
Private Equity Funds$61,063 $62,781 $62,139 $35,932 $39,446 $36,947 
Hybrid Capital10,842 9,108 9,113 3,829 3,154 2,961 
Natural Resources4,896 5,974 5,536 4,160 4,098 3,918 
Total$76,801 $77,863 $76,788 $43,921 $46,698 $43,826 
The following table presents total AUM and Fee-Generating AUM amounts for our real assets segment:
 Total AUMFee-Generating AUM
 As of
September 30,
As of
December 31,
As of
September 30,
As of
December 31,
202020192019202020192019
 (in millions)
Real Estate$32,554 $28,076 $29,401 $26,630 $21,384 $22,890 
Principal Finance6,940 6,934 7,181 5,056 5,113 5,102 
Infrastructure4,745 2,143 2,205 3,867 1,738 1,735 
Total$44,239 $37,153 $38,787 $35,553 $28,235 $29,727 
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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,
 20202019
CreditPrivate EquityReal AssetsTotalCreditPrivate EquityReal AssetsTotal
 
Change in Total AUM(1):
Beginning of Period$300,454 $73,301 $39,851 $413,606 $201,216 $77,148 $33,498 $311,862 
Inflows (2)
7,110 1,701 4,147 12,958 8,595 516 3,906 13,017 
Outflows(3)
(4,959)(108)— (5,067)(3,647)(13)— (3,660)
Net Flows2,151 1,593 4,147 7,891 4,948 503 3,906 9,357 
Realizations(419)(1,082)(227)(1,728)(615)(989)(357)(1,961)
Market Activity(2)(4)
9,919 2,989 468 13,376 2,109 1,201 106 3,416 
End of Period$312,105 $76,801 $44,239 $433,145 $207,658 $77,863 $37,153 $322,674 
(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)For the three months ended September 30, 2020, market activity includes mark-to-market changes and investment income of Athene, which had previously been reported as inflows. Prior period numbers have been recast to conform to the current presentation.
(3)Outflows for Total AUM include redemptions of $0.7 billion and $0.3 billion during the three months ended September 30, 2020 and 2019, respectively.
(4)Includes foreign exchange impacts of $3.2 billion, $88.6 million and $172.3 million for credit, private equity and real assets, respectively, during the three months ended September 30, 2020, and 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.
For the Nine Months Ended September 30,
 20202019
CreditPrivate EquityReal AssetsTotalCreditPrivate EquityReal AssetsTotal
 (in millions)
Change in Total AUM(1):
Beginning of Period$215,530 $76,788 $38,787 $331,105 $174,378 $75,086 $30,795 $280,259 
Inflows(2)
98,726 3,949 6,776 109,451 31,797 3,361 7,302 42,460 
Outflows(3)
(11,585)(169)(517)(12,271)(8,927)(154)(399)(9,480)
Net Flows87,141 3,780 6,259 97,180 22,870 3,207 6,903 32,980 
Realizations(1,584)(2,785)(817)(5,186)(1,335)(3,541)(1,025)(5,901)
Market Activity(2)(4)
11,018 (982)10 10,046 11,745 3,111 480 15,336 
End of Period$312,105 $76,801 $44,239 $433,145 $207,658 $77,863 $37,153 $322,674 
(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)For the nine months ended September 30, 2020, market activity includes mark-to-market changes and investment income of Athene, which had previously been reported as inflows. Prior period numbers have been recast to conform to the current presentation.
(3)Outflows for Total AUM include redemptions of $1.9 billion and $2.3 billion during the nine months ended September 30, 2020 and 2019, respectively.
(4)Includes foreign exchange impacts of $2.7 billion, $119.2 million and $133.1 million for credit, private equity and real assets, respectively, during the nine months ended September 30, 2020, and 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.
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    Three Months Ended September 30, 2020
Total AUM was $433.1 billion at September 30, 2020, an increase of $19.5 billion, or 4.7%, compared to $413.6 billion at June 30, 2020. The net increase was primarily due to client transactions which increased insurance assets under management and market activity of $13.4 billion. More specifically, the net increase was due to:
Net flows of $7.9 billion primarily related to:
a $4.1 billion increase related to funds we manage in the real assets segment primarily consisting of $3.0 billion of net segment transfers and $0.8 billion of subscriptions; and
a $2.2 billion increase related to funds we manage in the credit segment primarily consisting of (i) an increase of $5.1 billion in AUM in the advisory and other category and (ii) $1.9 billion of subscriptions across the corporate credit funds we manage; these increases were offset by $3.6 billion of net segment transfers; and
a $1.6 billion increase related to funds we manage in the private equity segment primarily consisting of $1.1 billion of subscriptions related to the private equity funds we manage.    
Market activity of $13.4 billion related to (i) $9.9 billion of appreciation in the funds we manage in the credit segment, primarily related to the market activity of Athene, (ii) $3.0 billion of appreciation in the funds we manage in the private equity segment, primarily related to Fund VIII, as well as (iii) $0.5 billion of appreciation in the funds we manage in the real assets segment.
Realizations of $1.7 billion primarily related to $1.1 billion related to funds we manage in the private equity segment primarily consisting of distributions from Fund VIII.     
    Nine Months Ended September 30, 2020
Total AUM was $433.1 billion at September 30, 2020, an increase of $102.0 billion, or 30.8%, compared to $331.1 billion at December 31, 2019. The net increase was primarily due to client transactions which increased insurance assets under management. More specifically, the net increase was due to:
Net flows of $97.2 billion primarily related to:
an $87.1 billion increase related to funds we manage in the credit segment primarily consisting of (i) an increase in AUM in the advisory and other category, (ii) an increase in AUM as Athene closed its reinsurance transaction with Jackson National Life Insurance Company, which added $28 billion of AUM, and (iii) $12.3 billion of subscriptions across the corporate credit funds we manage, primarily due to an additional $6 billion of new commitments for Apollo Strategic Origination Partners, a new origination platform expected to provide approximately $12 billion in financings over the next three years;
a $3.8 billion increase related to funds we manage in the private equity segment primarily consisting of $2.4 billion of subscriptions across the traditional private equity and hybrid value funds we manage; and
a $6.3 billion increase related to funds we manage in the real assets segment primarily consisting of $4.8 billion of net segment transfers and $0.9 billion of subscriptions.
Market activity of $10.0 billion, primarily related to $11.0 billion of appreciation in the funds we manage in the credit segment, primarily related to the market activity of Athene.
Realizations of $(5.2) billion primarily related to:
$(2.8) billion related to funds we manage in the private equity segment primarily consisting of distributions of $1.4 billion and $0.4 billion from Fund VIII and certain hybrid capital funds, respectively; and
$(1.6) billion related to funds we manage in the credit segment primarily consisting of distributions from the corporate credit 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,
 20202019
CreditPrivate EquityReal AssetsTotalCreditPrivate EquityReal AssetsTotal
 
Change in Fee-Generating AUM(1):
Beginning of Period$254,332 $43,840 $31,606 $329,778 $163,089 $47,082 $25,965 $236,136 
Inflows (2)
5,552 277 4,059 9,888 6,554 94 2,653 9,301 
Outflows(3)
(7,069)(229)(185)(7,483)(3,882)(266)(241)(4,389)
Net Flows(1,517)48 3,874 2,405 2,672 (172)2,412 4,912 
Realizations(211)(130)(167)(508)(265)(251)(78)(594)
Market Activity(4)
4,067 163 240 4,470 2,600 39 (64)2,575 
End of Period$256,671 $43,921 $35,553 $336,145 $168,096 $46,698 $28,235 $243,029 
(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)For the three months ended September 30, 2020, market activity includes mark-to-market changes and investment income of Athene, which had previously been reported as inflows. Prior period numbers have been recast to conform to the current presentation.
(3)Outflows for Fee-Generating AUM include redemptions of $0.7 billion and $0.3 billion during the three months ended September 30, 2020 and 2019, respectively.
(4)Includes foreign exchange impacts of $3.0 billion, $14.9 million and $129.8 million for credit, private equity and real assets, respectively, during the three months ended September 30, 2020, and 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.
For the Nine Months Ended September 30,
 20202019
CreditPrivate EquityReal AssetsTotalCreditPrivate EquityReal AssetsTotal
 (in millions)
Change in Fee-Generating AUM(1):
Beginning of Period$172,893 $43,826 $29,727 $246,446 $144,071 $46,633 $23,663 $214,367 
Inflows(2)
93,807 1,723 6,785 102,315 22,383 1,418 5,601 29,402 
Outflows(3)
(14,074)(1,252)(861)(16,187)(9,634)(699)(724)(11,057)
Net Flows79,733 471 5,924 86,128 12,749 719 4,877 18,345 
Realizations(681)(676)(368)(1,725)(544)(762)(363)(1,669)
Market Activity(4)
4,726 300 270 5,296 11,820 108 58 11,986 
End of Period$256,671 $43,921 $35,553 $336,145 $168,096 $46,698 $28,235 $243,029 
(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)For the nine months ended September 30, 2020, market activity includes mark-to-market changes and investment income of Athene, which had previously been reported as inflows. Prior period numbers have been recast to conform to the current presentation.
(3)Outflows for Fee-Generating AUM include redemptions of $1.8 billion and $2.3 billion during the nine months ended September 30, 2020 and 2019, respectively.
(4)Includes foreign exchange impacts of $2.6 billion, $2.1 million and $100.2 million for credit, private equity and real assets, respectively, during the nine months ended September 30, 2020, and 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.
    Three Months Ended September 30, 2020
Total Fee-Generating AUM was $336.1 billion at September 30, 2020, an increase of $6.4 billion or 1.9%, compared to $329.8 billion at June 30, 2020. The net increase was primarily due to:
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Market activity of $4.5 billion primarily related to a $4.1 billion increase related to funds we manage in the credit segment, primarily as a result of the market activity of Athene; and
Net flows of $2.4 billion primarily related to:
a $3.9 billion increase related to funds we manage in the real assets segment primarily consisting of (i) $2.8 billion of net segment transfers and (ii) $0.5 billion of subscriptions across the real estate funds we manage; and
a $(1.5) billion decrease related to funds we manage in the credit segment primarily consisting of (i) $2.9 billion of net segment transfers and (ii) $2.6 billion of fee-generating capital reductions; offset by an increase of $4.4 billion in AUM in the advisory and other category.
    Nine Months Ended September 30, 2020
Total Fee-Generating AUM was $336.1 billion at September 30, 2020, an increase of $89.7 billion or 36.4%, compared to $246.4 billion at December 31, 2019. The net increase was primarily due to net flows of $86.1 billion primarily related to:
a $79.7 billion increase related to funds we manage in the credit segment primarily consisting of (i) an increase in AUM in the advisory and other category, (ii) an increase in AUM as Athene closed its reinsurance transaction with Jackson National Life Insurance Company, which added $28 billion of AUM, and (iii) $3.1 billion of subscriptions across the corporate credit funds we manage; and
a $5.9 billion increase related to funds we manage in the real assets segment primarily consisting of $4.6 billion of net segment transfers and $1.0 billion of fee-generating capital deployment, primarily related to the commencement of U.S. Real Estate Fund III’s investment period.
Deployment, Drawdown Deployment and Uncalled Commitments
During the three months ended September 30, 2020, the Company modified the definition of deployment to include net purchases, certain originations and net syndications to provide a more accurate representation of market activity across all the funds and accounts the Company manages. Prior period deployment figures have been recast to conform to this change in definition. The prior definition of deployment was limited to purchases in our commitment based funds and SIAs that have a defined maturity date, and has been renamed “drawdown deployment”.
Uncalled commitments, by contrast, represent 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.
Deployment, drawdown deployment 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. Deployment, drawdown deployment 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 deployment, drawdown deployment and uncalled commitments as key operating metrics since we believe the results are measures of our funds’ investment activities.
Deployment
The following table summarizes deployment across all funds by segment:
 For the Three Months Ended September 30,For the Nine Months Ended September 30,
 2020201920202019
 (in millions)(in millions)
Credit$16,173 $13,692 $46,864 $40,361 
Private Equity 758 1,571 10,514 7,940 
Real Assets3,998 3,421 7,098 8,639 
Total deployment$20,929 $18,684 $64,476 $56,940 

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Drawdown Deployment
The following table summarizes drawdown deployment 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,
 2020201920202019
 (in millions)(in millions)
Credit(1)
$1,064 $1,367 $7,351 $4,710 
Private Equity 131 $986 5,739 6,641 
Real Assets819 619 1,372 1,695 
Total capital deployed$2,014 $2,972 $14,462 $13,046 
(1)Prior period numbers were recast to include Apollo Accord Master Fund, L.P. (“Accord”) and other defined maturity date funds.
Uncalled Commitments
The following table summarizes the uncalled commitments by segment:
As of
September 30, 2020
As of
December 31, 2019
 (in millions)
Credit$24,035 $11,591 
Private Equity33,921 36,346 
Real Assets6,082 5,736 
Total uncalled commitments(1)
$64,038 $53,673 
(1)As of September 30, 2020 and December 31, 2019, $45.8 billion and $46.4 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 shares. 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 shares. 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 shares.
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 VI generated a 12% gross IRR and a 9% net IRR since its inception through September 30, 2020, while Fund V generated a 61% gross IRR and a 44% net IRR since its inception through September 30, 2020. 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 2019 Annual Report and “Item 1A. Risk
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Factors—The current, and uncertain future, impact of the COVID-19 outbreak is expected to continue to impact our business, financial condition and results of operations” in the quarterly report on Form 10-Q filed with the SEC on May 11, 2020.
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 $500 million of AUM and/or form part of a flagship series of funds.
All amounts are as of September 30, 2020, unless otherwise noted:
($ in millions)Vintage
Year
Total AUMCommitted
Capital
Total Invested CapitalRealized ValueRemaining CostUnrealized ValueTotal ValueGross
IRR
Net
IRR
Private Equity:
Fund IX2018$24,600 $24,729 $5,571 $691 $5,175 $5,829 $6,520 19 %(2)%
Fund VIII201318,221 18,377 16,048 10,166 10,098 14,387 24,553 15 10 
Fund VII20082,953 14,677 16,461 31,838 2,459 679 32,517 33 24 
Fund VI2006647 10,136 12,457 21,132 405 21,135 12 
Fund V2001261 3,742 5,192 12,721 120 12,723 61 44 
Fund I, II, III, IV & MIA(2)
Various13 7,320 8,753 17,400 — — 17,400 39 26 
Traditional Private Equity Funds(3)
$46,695 $78,981 $64,482 $93,948 $18,257 $20,900 $114,848 39 %24 
ANRP II20162,446 3,454 2,667 1,393 2,005 1,657 3,050 
ANRP I2012319 1,323 1,149 1,014 615 110 1,124 (1)(5)
AION2013568 826 690 328 442 461 789 — 
Hybrid Value Fund20193,441 3,238 1,911 241 1,779 2,004 2,245 27 21 
Total Private Equity$53,469 $87,822 $70,899 $96,924 $23,098 $25,132 $122,056 
Credit:
FCI III2017$2,718 $1,906 $2,607 $1,374 $1,908 $1,982 $3,356 22 %17 %
FCI II20132,249 1,555 2,957 1,989 1,726 1,602 3,591 
FCI I2012— 559 1,516 1,975 — — 1,975 11 
SCRF IV (6)
20172,180 2,502 4,604 2,504 2,178 2,033 4,537 (1)(3)
SCRF III2015— 1,238 2,110 2,428 — — 2,428 18 14 
SCRF II2012— 104 467 528 — — 528 15 12 
SCRF I2008— 118 240 357 — — 357 33 26 
Accord IV20201,057 1,052 26 — 27 31 31 
NM1
NM1
Accord IIIB20201,789 1,761 520 197 352 347 544 
NM1
NM1
Accord III2019800 886 2,331 2,229 316 351 2,580 
NM1
NM1
Accord II(7)
2018— 781 801 821 — — 821 16 12 
Accord I(7)
2017— 308 111 113 — — 113 10 
Total Credit$10,793 $12,770 $18,290 $14,515 $6,507 $6,346 $20,861 
Real Assets:
European Principal Finance Funds
EPF III(4)
2017$4,944 $4,576 $3,217 $1,220 $2,266 $2,873 $4,093 21 %10 %
EPF II(4)
20121,315 3,485 3,552 4,434 676 609 5,043 14 
EPF I(4)
2007244 1,518 1,995 3,356 — 3,365 23 17 
U.S. RE Fund III(8)
N/A527 527 43 — 43 47 47 
NM1
NM1
U.S. RE Fund II(5)
20161,086 1,243 893 515 642 676 1,191 13 10 
U.S. RE Fund I(5)
2012216 652 635 805 147 129 934 13 10 
Asia RE Fund II(8)
N/A279 278 71 — 71 74 74 
NM1
NM1
Asia RE Fund(5)
2017686 719 442 206 288 386 592 17 12 
AIOF II(8)
N/A864 865 92 — 92 93 93 
NM1
NM1
AIOF I20181,125 897 801 334 561 732 1,066 
NM1
NM1
Total Real Assets$11,286 $14,760 $11,741 $10,870 $4,786 $5,628 $16,498 
(1)Data has not been presented as the fund’s effective date is 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.
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(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 $1.17 as of September 30, 2020.
(5)U.S. RE Fund I, U.S. RE Fund II and Asia RE Fund had $156 million, $771 million and $375 million of co-investment commitments as of September 30, 2020, 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 $1.29 as of September 30, 2020.
(6)Remaining cost for certain of our credit funds may include physical cash called, invested or reserved for certain levered investments.
(7)Gross and Net IRR have been presented for these funds as they have a defined maturity date of less than 24 months and have substantially liquidated.
(8)Vintage Year is not yet applicable as these funds have not had their final closings.
Credit
The following table presents the gross and net returns for Apollo’s credit segment by category type:
 Gross ReturnsNet Returns
CategoryFor the Three Months Ended September 30, 2020For the Nine Months Ended September 30, 2020For the Three Months Ended September 30, 2020For the Nine Months Ended September 30, 2020
Corporate Credit3.5 %2.4 %3.2 %1.5 %
Structured Credit4.1 (3.4)4.1 (3.4)
Direct Origination3.7 1.6 2.8 (0.8)
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, 2020:
Total Invested CapitalTotal ValueGross IRR
 (in millions) 
Distressed for Control$7,795 $18,823 29 %
Non-Control Distressed5,558 8,842 71 
Total13,353 27,665 49 
Corporate Carve-outs, Opportunistic Buyouts and Other Credit(1)
51,129 87,183 21 
Total$64,482 $114,848 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, 2020 and such information was deemed not meaningful. All amounts are as of September 30, 2020:
Fund VIII(1)
Total Invested CapitalTotal Value
 (in millions)
Corporate Carve-outs$2,704 $5,760 
Opportunistic Buyouts12,777 18,032 
Distressed(2)
567 761 
Total$16,048 $24,553 
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Fund VII(1)
Total Invested CapitalTotal Value
 (in millions)
Corporate Carve-outs$2,539 $3,466 
Opportunistic Buyouts4,339 10,498 
Distressed/Other Credit(2)
9,583 18,553 
Total$16,461 $32,517 
(1)Committed capital less unfunded capital commitments for Fund VIII and Fund VII were $16.1 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, 2020), our private equity funds have invested $59.1 billion, of which $20.8 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, 2020. 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.
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 ISGI:
Total Returns(1)
IPO Year(2)
Total AUMFor the Three Months Ended September 30, 2020For the Nine Months Ended September 30, 2020For the Three Months Ended September 30, 2019For the Nine Months Ended September 30, 2019
Credit:(in millions)
MidCap(3)
N/A$8,124 %%%13 %
AIF2013332 (11)%17 %
AFT2011362 (11)%%
AINV/Other(4)
20044,475 (10)(45)%41 %
Real Assets:
ARI20096,964 (5)%(44)%%24 %
Total$20,257 
(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 2% and 3% for the three months ended September 30, 2020 and September 30, 2019, respectively, and 0% and 9% for the nine months ended September 30, 2020 and September 30, 2019, respectively.
(4)Total AUM is as of June 30, 2020. Refer to www.apolloic.com for the most recent financial information on AINV. Included within Total AUM of AINV/Other is $1.7 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, 2020, Apollo managed approximately $29 billion of total AUM in SIAs, which include capital deployed from certain SIAs across Apollo’s credit, private equity and real assets funds.
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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:
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, 2020, approximately 55% 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 45% 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, 2020 was 73%, 19% and 19%, 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 2019 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, 2020
For the Three Months Ended September 30, 2020For the Nine Months Ended September 30, 2020
 Performance Fees Receivable on an Unconsolidated BasisUnrealized Performance FeesRealized Performance FeesTotal Performance FeesUnrealized Performance FeesRealized Performance FeesTotal Performance Fees
 (in thousands)
Credit:
Corporate Credit (1)
$152,204 $37,063 $6,436 $43,499 $133,590 $22,777 $156,367 
Structured Credit125,366 (5,061)— (5,061)(65,276)13,846 (51,430)
Direct Origination54,772 7,002 3,381 10,383 (9,967)9,258 (709)
Advisory and Other27,360 27,360 — 27,360 27,360 — 27,360 
Total Credit359,702 66,364 9,817 76,181 85,707 45,881 131,588 
Total Credit, net of profit sharing payable/expense51,558 33,553 2,204 35,757 43,150 8,352 51,502 
Private Equity:
Fund VIII532,239 328,709 — 328,709 (183,292)— (183,292)
Fund VII(1)(2)
46 2,702 28 2,730 (111,531)499 (111,032)
Fund VI(2)
17,595 (90)37 (53)(180)646 466 
Fund IV and V (1)
— (43)— (43)(204)— (204)
ANRP I and II(1)(2)
166 — 15 15 (21,418)275 (21,143)
Hybrid Value Fund49,535 20,346 — 20,346 49,535 — 49,535 
Other(1)(3)
10,688 4,251 1,945 6,196 (110,538)5,297 (105,241)
Total Private Equity610,269 355,875 2,025 357,900 (377,628)6,717 (370,911)
Total Private Equity, net of profit sharing payable/expense366,908 227,837 — 227,837 (230,714)(304)(231,018)
Real Assets:
Principal Finance(1)
112,942 27,413 — 27,413 (98,820)35,025 (63,795)
U.S. RE Fund I and II(1)
8,783 (8,067)3,514 (4,553)(29,592)8,138 (21,454)
AIOF I17,063 (2,174)4,292 2,118 (1,126)6,314 5,188 
Other(1)(3)
6,961 486 — 486 (27,829)— (27,829)
Total Real Assets145,749 17,658 7,806 25,464 (157,367)49,477 (107,890)
Total Real Assets, net of profit sharing payable/expense46,440 10,554 — 10,554 (92,522)— (92,522)
Total$1,115,720 $439,897 $19,648 $459,545 $(449,288)$102,075 $(347,213)
Total, net of profit sharing payable(4)/expense
$464,906 $271,944 $2,204 $274,148 $(280,086)$8,048 $(272,038)

(1)As of September 30, 2020, certain credit funds, certain private equity funds, and certain real asset funds had $0.8 million, $348.4 million, and $36.7 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, certain private equity funds and certain real assets funds was $0.8 million, $2,804.2 million and $70.1 million, respectively, as of September 30, 2020.
(2)As of September 30, 2020, the remaining investments and escrow cash of Fund VII, Fund VI, ANRP I and ANRP II were valued at 41%, 34%, 21% and 76% 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, 2020, Fund VII had $128.5 million of gross performance fees, or $73.2 million net of profit sharing, in escrow. As of September 30, 2020, Fund VI had $167.6 million of gross performance fees, or $112.4 million net of profit sharing, in escrow. As of September 30, 2020, ANRP I had $40.2 million of gross performance fees, or $26.0 million net of profit sharing, in escrow. As of September 30, 2020, ANRP II had $31.2 million of gross performance fees, or $18.7 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 these funds’ partnership agreements. Performance fees receivable as of September 30, 2020 and realized performance fees for the three and nine months ended September 30, 2020 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 $650.8 million as of September 30, 2020, including profit sharing payable related to amounts in escrow and contingent consideration obligations of $103.3 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
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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 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, 2020:
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$152.2 $1,193.3 $1,345.5 $0.8 $175.0 
Structured Credit125.3 170.5 295.8 — 124.5 
Direct Origination54.8 46.6 101.4 — 54.3 
Advisory and Other27.4 — 27.4 — 27.4 
Total Credit359.7 1,410.4 1,770.1 0.8 381.2 
Private Equity:
Fund VIII532.2 818.6 1,350.8 — 1,061.4 
Fund VII— 3,132.1 3,132.1 209.2 132.4 
Fund VI17.6 1,663.9 1,681.5 — 0.7 
Fund IV and V— 2,053.1 2,053.1 30.7 0.3 
ANRP I and II0.2 104.7 104.9 32.0 — 
Hybrid Value Fund49.5 — 49.5 — 49.5 
Other10.8 735.2 746.0 76.5 50.3 
Total Private Equity610.3 8,507.6 9,117.9 348.4 1,294.6 
Real Assets:
Principal Finance112.9 420.4 533.3 13.4 279.7 
U.S. RE Fund I and II8.8 36.0 44.8 15.7 24.0 
AIOF I17.0 6.3 23.3 — 20.0 
Other(5)
7.0 36.8 43.8 7.6 15.1 
Total Real Assets145.7 499.5 645.2 36.7 338.8 
Total$1,115.7 $10,417.5 $11,533.2 $385.9 $2,014.6 
(1)Certain funds are denominated in Euros and historical figures are translated into U.S. dollars at an exchange rate of €1.00 to $1.17 as of September 30, 2020. Certain funds are denominated in pound sterling and translated into U.S. dollars at an exchange rate of £1.00 to $1.29 as of September 30, 2020.
(2)Amounts in “Distributed by Fund and Recognized” for the Citi Property Investors (“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. Amounts exclude certain performance fees from business development companies and Redding Ridge Holdings LP (“Redding Ridge Holdings”), an affiliate of Redding Ridge.
(3)Amounts were computed based on the fair value of fund investments on September 30, 2020. 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, 2020. 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, 2020. 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.
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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.
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 15 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 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 shares 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 13 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 2024 Senior Notes, the 2026 Senior Notes, the 2029 Senior Notes, the 2030 Senior Notes, the 2039 Senior Secured Guaranteed Notes, the 2048 Senior Notes and the 2050 Subordinated Notes as discussed in note 11 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.
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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.
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, generally all of the income is 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 resolution 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 40.4% and 44.8% 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, 2020 and 2019, respectively. Additionally, as of September 30, 2020, Athene holds a 6.7% Non-Controlling Interest in the Apollo Operating Group as a result of the Transaction Agreement. 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, 2020 and 2019. 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
 2020201920202019
Revenues:(in thousands)(in thousands)
Management fees$433,570 $394,547 $39,023 9.9%$1,240,127 $1,162,788 $77,339 6.7%
Advisory and transaction fees, net73,449 16,440 57,009 346.8172,369 67,133 105,236 156.8
Investment income (loss):
Performance allocations459,241 254,103 205,138 80.7(350,483)682,462 (1,032,945)NM
Principal investment income (loss)50,722 33,393 17,329 51.9(25,506)99,020 (124,526)NM
Total investment income (loss)509,963 287,496 222,467 77.4(375,989)781,482 (1,157,471)NM
Incentive fees1,292 4,238 (2,946)(69.5)21,016 5,674 15,342 270.4
Total Revenues1,018,274 702,721 315,553 44.91,057,523 2,017,077 (959,554)(47.6)
Expenses:
Compensation and benefits:
Salary, bonus and benefits163,197 126,695 36,502 28.8453,485 369,527 83,958 22.7
Equity-based compensation49,726 42,665 7,061 16.5161,268 132,404 28,864 21.8
Profit sharing expense191,809 88,610 103,199 116.5(68,230)280,335 (348,565)NM
Total compensation and benefits404,732 257,970 146,762 56.9546,523 782,266 (235,743)(30.1)
Interest expense34,889 27,833 7,056 25.498,422 70,243 28,179 40.1
General, administrative and other90,822 85,313 5,509 6.5259,073 238,814 20,259 8.5
Placement fees612 256 356 139.11,380 591 789 133.5
Total Expenses531,055 371,372 159,683 43.0905,398 1,091,914 (186,516)(17.1)
Other Income (Loss):
Net gains (losses) from investment activities144,472 (19,790)164,262 NM(851,412)44,099 (895,511)NM
Net gains (losses) from investment activities of consolidated variable interest entities122,119 10,631 111,488 NM14,061 24,728 (10,667)(43.1)
Interest income1,485 10,152 (8,667)(85.4)13,413 25,938 (12,525)(48.3)
Other income (loss), net10,161 (43,144)53,305 NM(3,019)(36,451)33,432 (91.7)
Total Other Income (Loss)278,237 (42,151)320,388 NM(826,957)58,314 (885,271)NM
Income (Loss) before income tax (provision) benefit765,456 289,198 476,258 164.7(674,832)983,477 (1,658,309)NM
Income tax (provision) benefit(89,357)231,896 (321,253)NM66,173 195,345 (129,172)(66.1)
Net Income (Loss)676,099 521,094 155,005 29.7(608,659)1,178,822 (1,787,481)NM
Net income (loss) attributable to Non-Controlling Interests(403,700)(157,824)(245,876)155.8331,169 (501,672)832,841 NM
Net Income (Loss) Attributable to Apollo Global Management, Inc.272,399 363,270 (90,871)(25.0)(277,490)677,150 (954,640)NM
Series A Preferred Stock Dividends(4,382)(4,382)— (13,148)(13,148)— 
Series B Preferred Stock Dividends(4,781)(4,782)(14,344)(14,344)— 
Net Income (Loss) Attributable to AGM Class A Shareholders$263,236 $354,106 $(90,870)(25.7)%$(304,982)$649,658 $(954,640)NM
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.
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) a pandemic, which has resulted in uncertainty and disruption in the global economy and financial markets. While we are unable to accurately predict the full impact that COVID-19 will have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and containment measures, our compliance with these measures has impacted our day-to-day operations and could disrupt our business and operations, as well as that of the Apollo Funds and their portfolio companies, for an indefinite period of time.
Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019
In this section, references to 2020 refer to the three months ended September 30, 2020 and references to 2019 refer to the three months ended September 30, 2019.
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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.
Management fees increased by $39.0 million to $433.6 million in 2020 from $394.5 million in 2019. This change was primarily attributable to an increase in management fees earned from Athene and Athora of $29.9 million and $20.5 million, respectively. This increase was offset, in part by a decrease in management fees earned from Fund VIII and Fund VII of $4.5 million and $2.9 million, respectively, in 2020. For additional details regarding changes in management fees in each segment, see “—Segment Analysis” below.
Advisory and transaction fees, net, increased by $57.0 million to $73.4 million in 2020 from $16.4 million in 2019. This change was primarily driven by advisory and transaction fees earned related to a long-term strategic investment for an underlying real estate portfolio.
Performance allocations increased by $205.1 million to $459.2 million in 2020 from $254.1 million in 2019. This change was primarily attributable to increased performance allocations earned from Fund VIII, Fund VII and Athora of $89.5 million, $69.0 million and $27.4 million, respectively, in 2020.
The increase in performance allocations from Fund VIII was primarily driven by appreciation in the value of the fund’s investments in private and public portfolio companies primarily in the consumer services, financial services, media, telecom, technology, and consumer and retail sectors in 2020. The increase in performance allocations from Fund VII was primarily driven by appreciation in the value of the fund’s investments in a public portfolio company in the consumer and retail sector. The increase in performance allocations from Athora was driven by appreciation in the valuation of the underlying portfolio.
Principal investment income increased by $17.3 million to $50.7 million in 2020 from $33.4 million in 2019. This change was primarily driven by increases 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 Athora, Fund IX and Fund VII of $6.2 million, $6.2 million and $3.9 million, respectively, during 2020.
Expenses
Compensation and benefits increased by $146.8 million to $404.7 million in 2020 from $258.0 million in 2019. This change was primarily attributable to an increase in profit sharing expense of $103.2 million due to a corresponding increase in performance allocations during 2020. 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. Additionally, salary, bonus and benefits increased by $36.5 million primarily due to an increase in headcount, and equity-based compensation increased $7.1 million due to higher amortization expenses associated with previously granted performance awards.
Included in profit sharing expense is $8.3 million for 2020 related to the Incentive Pool. There was no profit sharing expense related to the Incentive Pool for 2019. See “—Profit Sharing Expense” in the Critical Accounting Policies section for an overview of the Incentive Pool.
Interest expense increased by $7.1 million to $34.9 million in 2020 from $27.8 million in 2019, primarily due to additional interest expense incurred as a result of the issuances of the 2030 Senior Notes and 2050 Subordinated Notes, as described in note 11 to our condensed consolidated financial statements.
General, administrative and other expenses increased by $5.5 million to $90.8 million in 2020 from $85.3 million in 2019 primarily due to an increase in professional fees and technology expenses.
Other Income (Loss)
Net gains from investment activities increased by $164.3 million to $144.5 million in 2020 from net losses of $19.8 million in 2019. As discussed in note 15, the Company acquired an additional 35.5 million shares of Athene Holding, as a result of the Transaction Agreement, increasing the Company’s total ownership of Athene Holding’s shares to 54.6 million at September 30, 2020 as compared to 19.1 million shares as of September 30, 2019. Net gains from investment activities in 2020 were primarily attributable to appreciation in the share price of Athene Holding and the Company’s acquisition of additional shares of Athene Holding pursuant to the Transaction Agreement. See note 7 and 15 to the condensed consolidated financial statements for further information regarding the Company’s investment in Athene Holding.
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Net gains from investment activities of consolidated VIEs increased by $111.5 million to $122.1 million in 2020 from $10.6 million in 2019. This change was primarily driven by gains from newly consolidated funds during 2020 as discussed in note 6 to the condensed consolidated financial statements.
Interest income decreased by $8.7 million to $1.5 million in 2020 from $10.2 million in 2019 primarily due to decreased interest income earned from U.S. Treasury securities as a result of lower interest rates during 2020.
Other income increased by $53.3 million to $10.2 million in 2020 from a loss of $(43.1) million in 2019. The loss in 2019 was primarily attributable to losses from the change in tax receivable agreement liability, which did not occur during 2020.
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 14 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 earned by the Company was not subject to corporate-level tax in the United States. Subsequent to the Conversion, generally all of the Company’s income is subject to U.S. corporate income taxes, which may result in an overall higher income tax expense (or benefit) in periods after the Conversion. The provision for income taxes includes federal, state and local income taxes in the United States and foreign income taxes.
The income tax provision was $89.4 million in 2020, compared to the income tax benefit of $231.9 million in 2019. The change was primarily related to: (i) the significant deferred tax benefit retained by the Company upon Conversion in 2019 for the step-up in assets from prior year exchanges of AOG Units for Class A shares, (ii) all earnings becoming subject to corporate-level taxation subsequent to Conversion, and (iii) during the third quarter of 2020, the reduction of prior periods unrealized book losses generated from the market dislocation due to the impacts of COVID-19. The provision for income taxes includes, federal, state, local and foreign income taxes resulting in an effective income tax rate of 11.7% and (80.2)% for 2020 and 2019, respectively. The most significant reconciling items between the U.S. federal statutory income tax rate and the effective income tax are due to the following: (i) income passed through to Non-Controlling Interests, (ii) foreign, state and local income taxes including NYC UBT, and (iii) impacts upon Conversion in 2019 noted above (see note 10 to the condensed consolidated financial statements for further details regarding the Company’s income tax provision).
Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019
In this section, references to 2020 refer to the nine months ended September 30, 2020 and references to 2019 refer to the nine months ended September 30, 2019.
Revenues
Management fees increased by $77.3 million to $1.2 billion in 2020. This change was primarily attributable to an increase in management fees earned from Athene and Athora of $56.7 million and $37.0 million, respectively, partially offset by a decrease in management fees earned from Fund VIII and Fund VII of $9.7 million and $8.1 million, respectively. For additional details regarding changes in management fees in each segment, see “—Segment Analysis” below.
Advisory and transaction fees, net, increased by $105.2 million to $172.4 million in 2020 from $67.1 million in 2019. This increase was primarily driven by advisory and transaction fees earned in relation to a long-term strategic investment for an underlying real estate portfolio as well as net advisory and transaction fees earned with respect to certain portfolio companies in the media, telecom and technology industries and an increase in structuring fees earned from a company in the consumer and retail industry.
Performance allocations decreased by $1,032.9 million to $(350.5) million in 2020 from $682.5 million in 2019. The pandemic resulting from COVID-19 and the actions taken in response have caused severe disruption to the global economy and financial markets. In line with public equity and credit indices, we have experienced significant unrealized mark-to-market losses in our underlying funds. The decrease in performance allocations were primarily attributable to decreased performance allocations earned from Fund VIII and Structured Credit Recovery Fund IV (“SCRF IV”) of $723.0 million and $104.7 million, respectively, during 2020.
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The decrease in performance allocations from Fund VIII was primarily driven by depreciation in the value of the fund’s investments in public portfolio companies primarily in the manufacturing and industrial and financial services sectors, and in private portfolio companies primarily in the consumer services, leisure and natural resources sectors during 2020. The decrease in performance allocations from SCRF IV was primarily driven by the fund’s mark-to-market losses on its investments in structured credit products due to widespread market sell-off and spread widening during 2020.
Principal investment income decreased by $124.5 million to $(25.5) million in 2020 from $99.0 million in 2019. This change was primarily driven by decreases 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, AION and Redding Ridge of $80.7 million, $13.6 million and $13.4 million, respectively.
Incentive fees increased by $15.3 million to $21.0 million in 2020 from $5.7 million in 2019. This change was primarily attributable to an increase in incentive fees earned from Athene of $13.9 million in 2020.
Expenses
Compensation and benefits decreased by $235.7 million to $546.5 million in 2020 from $782.3 million in 2019. This change was primarily attributable to a decrease in profit sharing expense of $348.6 million due to a corresponding decrease in performance allocations during 2020, as compared to the same period in 2019. 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. The decrease in profit sharing expense was partially offset by an increase in salary, bonus and benefits of $84.0 million, primarily attributable to an increase in headcount. Additionally, there was an increase in equity-based compensation of $28.9 million due to higher amortization expenses associated with previously granted performance awards.
Included in profit sharing expense is $51.2 million and $17.0 million for 2020 and 2019, 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 $28.2 million to $98.4 million in 2020 from $70.2 million in 2019, primarily due to additional interest expense incurred as a result of the timing of issuances of debt arrangements, as described in note 11 to our condensed consolidated financial statements.
General, administrative and other expenses increased by $20.3 million to $259.1 million in 2020 from $238.8 million in 2019. This change was primarily driven by an increase in professional fees and occupancy expenses during 2020.
Other Income (Loss)
Net losses from investment activities were $851.4 million in 2020 as compared to net gains from investment activities of $44.1 million in 2019. As discussed in note 15, the Company acquired an additional 35.5 million shares of Athene Holding, as a result of the Transaction Agreement, increasing the Company’s total ownership of Athene Holding’s shares to 54.6 million at September 30, 2020 as compared to 19.1 million shares as of September 30, 2019. Net losses from investment activities in 2020 were primarily attributable to the depreciation in the share price of Athene Holding and the Company’s acquisition of additional shares of Athene Holding pursuant to the Transaction Agreement. See note 7 and 15 to the condensed consolidated financial statements for further information regarding the Company’s investment in Athene Holding.
Net losses from investment activities of consolidated VIEs were $14.1 million in 2020, as compared to net gains from investment activities of consolidated VIEs of $24.7 million in 2019. This change was primarily driven by losses from newly consolidated funds during 2020, as discussed in note 6 to the condensed consolidated financial statements.
Interest income decreased by $12.5 million to $13.4 million in 2020 from $25.9 million in 2019, primarily due to decreased interest income earned from U.S. Treasury securities as a result of lower interest rates in 2020.
Other loss, net was $3.0 million in 2020, as compared to $36.5 million in 2019. The loss in 2019 was primarily attributable to losses from the change in tax receivable agreement liability, which did not occur during 2020.
Income Tax Provision
The income tax benefit decreased to $66.2 million in 2020 from $195.3 million in 2019. The change was primarily related to: (i) the significant benefit retained by the Company upon Conversion in 2019 for the step-up in assets from prior year exchanges of AOG Units for Class A shares, (ii) all earnings becoming subject to corporate-level taxation subsequent to Conversion, and (iii) in 2020, the year-to-date unrealized mark-to-market losses generated from the recent market dislocation
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due to the impacts of COVID-19. The provision for income taxes includes federal, state, local and foreign income taxes resulting in an effective income tax rate of 9.8% and (19.9)% for 2020 and 2019, respectively. 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, (ii) foreign, state and local income taxes, including NYC UBT, and (iii) impacts upon Conversion in 2019 noted above (see note 10 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 17 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.
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 ChangePercentage ChangeFor the Nine Months Ended September 30,Total ChangePercentage Change
 2020201920202019
 (in thousands)(in thousands)
Credit:
Management fees$246,159 $198,867 $47,292 23.8%$679,109 $571,884 $107,225 18.7%
Advisory and transaction fees, net51,376 5,530 45,846 NM80,399 13,888 66,511 478.9
Performance fees(1)
2,204 6,449 (4,245)(65.8)8,048 16,371 (8,323)(50.8)
Fee Related Revenues299,739 210,846 88,893 42.2767,556 602,143 165,413 27.5
Salary, bonus and benefits(61,975)(51,746)(10,229)19.8(171,789)(146,515)(25,274)17.3
General, administrative and other(40,367)(33,403)(6,964)20.8(112,991)(92,546)(20,445)22.1
Placement fees(425)(190)(235)123.7(1,089)(42)(1,047)NM
Fee Related Expenses(102,767)(85,339)(17,428)20.4(285,869)(239,103)(46,766)19.6
Other income (loss), net of Non-Controlling Interest(780)(597)(183)30.7(2,167)967 (3,134)NM
Fee Related Earnings196,192 124,910 71,282 57.1479,520 364,007 115,513 31.7
Realized performance fees7,614 3,530 4,084 115.737,834 24,887 12,947 52.0
Realized profit sharing expense(7,614)(1,674)(5,940)354.8(37,530)(13,069)(24,461)187.2
Net Realized Performance Fees 1,856 (1,856)(100.0)304 11,818 (11,514)(97.4)
Realized principal investment income, net (2)
928 5,845 (4,917)(84.1)4,112 16,803 (12,691)(75.5)
Net interest loss and other(14,010)(6,106)(7,904)129.4(42,981)(15,148)(27,833)183.7
Segment Distributable Earnings$183,110 $126,505 $56,605 44.7%$440,955 $377,480 $63,475 16.8%
(1)Represents certain performance fees related to business development companies and Redding Ridge Holdings, and MidCap.
(2)Realized principal investment income, net includes dividends from our permanent capital vehicles, net of such amounts used to compensate employees.
Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019
In this section, references to 2020 refer to the three months ended September 30, 2020 and references to 2019 refer to the three months ended September 30, 2019.
Management fees increased by $47.3 million to $246.2 million in 2020 from $198.9 million in 2019. This change was primarily attributable to an increase in management fees earned from Athene and Athora of $28.3 million and $15.0 million, respectively.
Advisory and transaction fees, net increased by $45.8 million to $51.4 million in 2020 from $5.5 million in 2019. This increase was primarily driven by advisory and transaction fees earned related to a long-term strategic investment for an underlying real estate portfolio during 2020.
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Performance fees decreased by $4.2 million to $2.2 million in 2020 from $6.4 million in 2019, primarily attributable to a decrease in performance fees generated from AINV and a non-traded business development company of $2.2 million and $2.0 million, respectively.
Salary, bonus and benefits expense increased by $10.2 million to $62.0 million in 2020 from $51.7 million in 2019 primarily due to an increase in headcount.
General, administrative and other expense increased by $7.0 million to $40.4 million in 2020 from $33.4 million in 2019 primarily driven by an increase in professional fees in 2020.
Realized performance fees increased by $4.1 million to $7.6 million in 2020 from $3.5 million in 2019. This change was primarily attributable to an increase in realized performance fees generated from an SIA. The increase in realized performance fees generated from the SIA was primarily a result of profits generated from sales of opportunistic investments in 2020.
Realized profit sharing expense increased by $5.9 million to $7.6 million in 2020 from $1.7 million in 2019 as a result of a corresponding increase in realized performance fees as described above and an increase 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 $2.7 million related to the Incentive Pool for 2020. There was no profit sharing expense related to the Incentive Pool for 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 $4.9 million to $0.9 million in 2020 from $5.8 million in 2019. This change was primarily attributable to a decrease in realizations from Apollo’s equity ownership in MidCap and Redding Ridge Holdings.
Net interest loss and other increased by $7.9 million to $14.0 million in 2020 from $6.1 million in 2019, primarily due to additional interest expense incurred as a result of the timing of issuances of debt arrangements, as described in note 11 to our condensed consolidated financial statements, as well as a decrease in interest income earned from U.S. Treasury securities as a result of lower interest rates in 2020.
Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019
In this section, references to 2020 refer to the nine months ended September 30, 2020 and references to 2019 refer to the nine months ended September 30, 2019.
Management fees increased by $107.2 million to $679.1 million in 2020 from $571.9 million in 2019. This change was primarily attributable to an increase in management fees earned from Athene and Athora of $51.5 million and $32.5 million, respectively.
Advisory and transaction fees, net increased by $66.5 million to $80.4 million in 2020 from $13.9 million in 2019. This increase was primarily driven by advisory and transaction fees earned in relation to a long-term strategic investment for an underlying real estate portfolio and structuring fees earned related to portfolio companies in the energy and consumer and retail industries during 2020.
Performance fees decreased by $8.3 million to $8.0 million in 2020 from $16.4 million in 2019, primarily attributable to a decrease in performance fees earned from Redding Ridge Holdings of $6.4 million, as Redding Ridge Holdings achieved its annualized hurdle rate during 2019 but did not do so in 2020, as well as decreases in performance fees generated from a non-traded business development company and AINV of $5.8 million and $2.2 million, respectively.
Salary, bonus and benefits expense increased by $25.3 million to $171.8 million in 2020 from $146.5 million in 2019 primarily due to an increase in headcount.
General, administrative and other expense increased by $20.4 million to $113.0 million in 2020 from $92.5 million in 2019. The change was primarily driven by increases in professional fees, technology expense and occupancy costs in 2020.
Realized performance fees increased by $12.9 million to $37.8 million in 2020 from $24.9 million in 2019. This change was primarily attributable to an increase in realized performance fees generated from an insurance-linked securities portfolio, an SIA and certain CLOs of $13.9 million, $5.1 million and $5.0 million, respectively, partially offset by a decrease in realized performance fees generated from FCI I of $12.0 million.
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The increase in realized performance fees from the SIA was attributable to sales of opportunistic investments across a number of sectors. The increase in realized performance fees from certain CLOs was attributable to crystallization of performance fees as the CLOs liquidated during 2020. The decrease in realized performance fees generated from FCI I was primarily driven by realizations of the fund’s investments in various life settlement policies during 2019, while the fund had no realized performance fees during 2020.
Realized profit sharing expense increased by $24.5 million to $37.5 million in 2020 from $13.1 million in 2019, as a result of a corresponding increase in realized performance fees as described above, and an increase 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 $19.4 million and $0.1 million related to the Incentive Pool for 2020 and 2019, 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 $12.7 million to $4.1 million in 2020 from $16.8 million in 2019. This change was primarily attributable to a decrease in realizations from Apollo’s equity ownership in MidCap and Redding Ridge Holdings of $7.2 million and $1.0 million, respectively.
Net interest loss and other increased by $27.8 million to $43.0 million in 2020 from $15.1 million in 2019, primarily due to additional interest expense incurred as a result of the timing of issuances of debt arrangements, as described in note 11 to our condensed consolidated financial statements. Additionally, the increase was partially due to one-time costs to wind down a managed account arrangement incurred during 2020.
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 ChangePercentage ChangeFor the Nine Months Ended September 30,Total ChangePercentage Change
 2020201920202019
 (in thousands)(in thousands)
Private Equity:
Management fees$128,446 $131,643 $(3,197)(2.4)%$381,306 $391,777 $(10,471)(2.7)%
Advisory and transaction fees, net20,108 10,655 9,453 88.785,253 47,048 38,205 81.2
Fee Related Revenues148,554 142,298 6,256 4.4466,559 438,825 27,734 6.3
Salary, bonus and benefits(53,451)(45,807)(7,644)16.7(149,133)(129,307)(19,826)15.3
General, administrative and other(25,099)(26,603)1,504 (5.7)(68,863)(75,427)6,564 (8.7)
Placement fees(188)(65)(123)189.2(295)(548)253 (46.2)
Fee Related Expenses(78,738)(72,475)(6,263)8.6(218,291)(205,282)(13,009)6.3
Other income, net23 (135)158 NM48 4,024 (3,976)(98.8)
Fee Related Earnings69,839 69,688 151 0.2248,316 237,567 10,749 4.5
Realized performance fees2,025 63,742 (61,717)(96.8)6,717 136,429 (129,712)(95.1)
Realized profit sharing expense(2,025)(22,084)20,059 (90.8)(7,021)(63,900)56,879 (89.0)
Net Realized Performance Fees 41,658 (41,658)(100.0)(304)72,529 (72,833)NM
Realized principal investment income1,598 8,114 (6,516)(80.3)5,544 18,079 (12,535)(69.3)
Net interest loss and other(14,580)(8,911)(5,669)63.6(41,940)(22,694)(19,246)84.8
Segment Distributable Earnings$56,857 $110,549 $(53,692)(48.6)%$211,616 $305,481 $(93,865)(30.7)%
Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019
In this section, references to 2020 refer to the three months ended September 30, 2020 and references to 2019 refer to the three months ended September 30, 2019.
Management fees decreased by $3.2 million to $128.4 million in 2020 from $131.6 million in 2019. This change was primarily attributable to a decrease in management fees earned from Fund VIII and Fund VII of $4.5 million and $2.9 million, respectively, partially offset by an increase in management fees earned from Hybrid Value Fund of $4.0 million.
Advisory and transaction fees, net increased by $9.5 million to $20.1 million in 2020 from $10.7 million in 2019. This change was primarily attributable to a transaction fee earned with respect to a portfolio company in the media, telecom and technology industry.
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Salary, bonus and benefits expense increased by $7.6 million to $53.5 million in 2020 from $45.8 million in 2019 primarily due to an increase in headcount.
Realized performance fees decreased by $61.7 million to $2.0 million in 2020 from $63.7 million in 2019. This change was primarily attributable to a decrease in realized performance fees generated from Fund VIII of $57.2 million. The realized performance fees generated from Fund VIII during 2019 were the result of sales and income generated from investments primarily in the financial services sector. Fund VIII had no realized performance fees during 2020.
Realized profit sharing expense decreased by $20.1 million to $2.0 million in 2020 from $22.1 million in 2019, as a result of the decrease in realized performance fees as described above, partially offset by an increase 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 $1.2 million of expense related to the Incentive Pool for 2020. There was no profit sharing expense related to the Incentive Pool for 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 $6.5 million to $1.6 million in 2020 from $8.1 million in 2019. This change was primarily attributable to a decrease in realizations from Apollo’s equity ownership in Fund VIII of $7.2 million.
Net interest loss and other increased by $5.7 million to $14.6 million in 2020 from $8.9 million in 2019, primarily due to a decrease in interest income earned from U.S. Treasury securities as a result of lower interest rates in 2020, as well as additional interest expense incurred as a result of the timing of issuances of debt arrangements, as described in note 11 to our condensed consolidated financial statements.
Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019
In this section, references to 2020 refer to the nine months ended September 30, 2020 and references to 2019 refer to the nine months ended September 30, 2019.
Management fees decreased by $10.5 million to $381.3 million in 2020 from $391.8 million in 2019. This change was primarily attributable to a decrease in management fees earned from Fund VIII and Fund VII of $9.7 million and $8.1 million, respectively, partially offset by an increase in management fees earned from Hybrid Value Fund of $8.8 million.
Advisory and transaction fees, net increased by $38.2 million to $85.3 million in 2020 from $47.0 million in 2019. This change was primarily attributable to transaction fees earned with respect to a portfolio company in the media, telecom and technology industry and a structuring fee earned from a portfolio company in the consumer and retail industry in 2020.
Salary, bonus and benefits expense increased by $19.8 million to $149.1 million in 2020 from $129.3 million in 2019 primarily due to an increase in headcount.
General, administrative and other expense decreased by $6.6 million to $68.9 million in 2020 from $75.4 million in 2019. The change was primarily driven by a decrease in professional fees and fund organizational expenses in 2020.
Realized performance fees decreased by $129.7 million to $6.7 million in 2020 from $136.4 million in 2019. This change was primarily attributable to a decrease in realized performance fees generated from Fund VIII of $126.8 million. The realized performance fees earned from Fund VIII in 2019 were the result of sales and income generated from investments primarily in the business services, manufacturing and industrial, financial services and leisure sectors. Fund VIII had no realized performance fees during 2020.
Realized profit sharing expense decreased by $56.9 million to $7.0 million in 2020 from $63.9 million in 2019, as a result of the corresponding decrease in realized performance fees as described above as well as a decrease in the 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 $3.0 million and $16.9 million of expenses related to the Incentive Pool for 2020 and 2019, 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 $12.5 million to $5.5 million in 2020 from $18.1 million in 2019. This change was primarily attributable to a decrease in realizations from Apollo’s equity ownership in Fund VIII of $15.6 million partially offset by an increase in realizations from Apollo’s equity ownership in Fund IX of $2.7 million.
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Net interest loss and other increased by $19.2 million to $41.9 million in 2020 from $22.7 million in 2019 primarily due to additional interest expense incurred as a result of the timing of issuances of debt arrangements, as described in note 11 to our condensed consolidated financial statements as well as a decrease in interest income earned from U.S. Treasury securities as a result of lower interest rates in 2020. Additionally, the increase was partially due to one-time costs to wind down a managed account arrangement incurred during 2020.
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 ChangePercentage ChangeFor the Nine Months Ended September 30,Total ChangePercentage Change
 2020201920202019
 (in thousands)(in thousands)
Real Assets:
Management fees$51,847 $47,862 $3,985 8.3%$150,227 $139,645 $10,582 7.6%
Advisory and transaction fees, net878 377 501 132.9%5,191 5,748 (557)(9.7)
Fee Related Revenues52,725 48,239 4,486 9.3%155,418 145,393 10,025 6.9
Salary, bonus and benefits(29,513)(19,306)(10,207)52.9%(83,037)(57,031)(26,006)45.6
General, administrative and other(11,869)(10,734)(1,135)10.6%(35,637)(28,956)(6,681)23.1
Placement fees— (1)(100.0)— (1)(100.0)
Fee Related Expenses(41,382)(30,041)(11,341)37.8%(118,674)(85,988)(32,686)38.0
Other income (loss), net of Non-Controlling Interest59 (6)65 NM154 88 66 75.0
Fee Related Earnings11,402 18,192 (6,790)(37.3)%36,898 59,493 (22,595)(38.0)
Realized performance fees7,806 162 7,644 NM49,477 3,242 46,235 NM
Realized profit sharing expense(7,806)(65)(7,741)NM(49,477)(1,299)(48,178)NM
Net Realized Performance Fees 97 (97)(100.0)% 1,943 (1,943)(100.0)
Realized principal investment income356 415 (59)(14.2)%4,028 2,209 1,819 82.3
Net interest loss and other(6,216)(3,234)(2,982)92.2%(16,069)(8,115)(7,954)98.0
Segment Distributable Earnings$5,542 $15,470 $(9,928)(64.2)%$24,857 $55,530 $(30,673)(55.2)%
Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019
In this section, references to 2020 refer to the three months ended September 30, 2020 and references to 2019 refer to the three months ended September 30, 2019.
Management fees increased by $4.0 million to $51.8 million in 2020 from $47.9 million in 2019. This change was primarily attributable to an increase in management fees earned from Apollo U.S. Real Estate Fund III, Athene, and Athora of $1.6 million, $1.4 million, and $1.4 million, respectively. Apollo U.S. Real Estate Fund III became effective during the three months ended June 30, 2020 and earned a full quarter of management fees for the three months ended September 30, 2020.
Salary, bonus and benefits increased by $10.2 million to $29.5 million in 2020 from $19.3 million in 2019 primarily due to an increase in headcount.
Realized performance fees increased by $7.6 million to $7.8 million in 2020 from $0.2 million in 2019. This change was primarily attributable to an increase in realized performance fees generated from Apollo Infrastructure Opportunities Fund (“AIOF”) I and Apollo U.S. Real Estate Fund II of $4.3 million and $3.0 million, respectively.
The increase in realized performance fees from AIOF I was primarily a result of full and partial realizations of infrastructure related assets and recurring yield from certain unrealized projects. The increase in realized performance fees from Apollo U.S. Real Estate Fund II was primarily the result of industrial asset realizations in 2020.
Realized profit sharing expense increased by $7.7 million to $7.8 million in 2020 from $0.1 million in 2019, as a result of the corresponding increase in realized performance fees as described above and an increase 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 $4.4 million of expense related to the Incentive Pool for 2020. 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.
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Net interest loss and other increased by $3.0 million to $6.2 million in 2020 from $3.2 million in 2019, primarily due to additional interest expense incurred as a result of the timing of issuances of debt arrangements, as described in note 11 to our condensed consolidated financial statements as well as a decrease in interest income earned from U.S. Treasury securities as a result of lower interest rates in 2020.
Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019
In this section, references to 2020 refer to the nine months ended September 30, 2020 and references to 2019 refer to the nine months ended September 30, 2019.
Management fees increased by $10.6 million to $150.2 million in 2020 from $139.6 million in 2019. This change was primarily attributable to an increase in management fees earned from Athene and Athora of $5.5 million and $4.5 million, respectively.
Salary, bonus and benefits expense increased by $26.0 million to $83.0 million in 2020 from $57.0 million in 2019 primarily due to an increase in headcount.
General, administrative and other expense increased by $6.7 million to $35.6 million in 2020 from $29.0 million in 2019. The change was primarily driven by an increase in professional fees, occupancy costs, and technology expenses in 2020.
Realized performance fees increased by $46.2 million to $49.5 million in 2020 from $3.2 million in 2019. The increase in realized performance fees in 2020 was primarily attributable to realized performance fees generated from EPF III and AIOF I of $34.1 million and $6.3 million, respectively.
The increase in realized performance fees from EPF III was a result of the sale of investments in logistics assets in 2020, while the fund had no realizations during 2019. The increase in realized performance fees from AIOF I was primarily a result of full and partial realizations of infrastructure related assets and recurring yield from certain unrealized projects.
Realized profit sharing expense increased by $48.2 million to $49.5 million in 2020 from $1.3 million in 2019 as a result of the corresponding increase in realized performance fees as described above, and an increase 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 $28.8 million related to the Incentive Pool for 2020. There was no profit sharing expense related to the Incentive Pool for 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 increased by $1.8 million to $4.0 million in 2020 from $2.2 million in 2019. This change was primarily attributable to an increase in realizations from Apollo’s equity ownership in EPF III.
Net interest loss and other increased by $8.0 million to $16.1 million in 2020 from $8.1 million in 2019 primarily due to additional interest expense incurred as a result of the timing of issuances of debt arrangements, as described in note 11 to our condensed consolidated financial statements as well as a decrease in interest income earned from U.S. Treasury securities as a result of lower interest rates in 2020.
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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,
2020201920202019
(in thousands, except per share data)
Segment Distributable Earnings$245,509 $252,524 $677,428 $738,491 
Taxes and related payables(31,257)(20,895)(74,490)(50,409)
Preferred dividends(9,163)(9,164)(27,492)(27,492)
Distributable Earnings205,089 222,465 575,446 660,590 
Add back: Tax and related payables attributable to common and equivalents14,678 18,765 51,698 44,017 
Distributable Earnings before certain payables(1)
219,767 241,230 627,144 704,607 
     Percent to common and equivalents54 %56 %54 %56 %
Distributable Earnings before other payables attributable to common and equivalents118,674 135,089 338,658 394,580 
Less: Taxes and related payables attributable to common and equivalents(14,678)(18,765)(51,698)(44,017)
Distributable Earnings attributable to common and equivalents(2)
$103,996 $116,324 $286,960 $350,563 
Distributable Earnings per share(3)
$0.47 $0.54 $1.30 $1.60 
(Retained) contributed capital per share(3)
0.04 (0.04)0.12 (0.14)
Net dividend per share(3)
$0.51 $0.50 $1.42 $1.46 
(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 that participate in dividends 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 to 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,
2020201920202019
(in thousands)
Net Income (Loss) Attributable to Apollo Global Management, Inc. Class A Common Stockholders$263,236 $354,106 $(304,982)$649,658 
Preferred dividends9,163 9,164 27,492 27,492 
Net income (loss) attributable to Non-Controlling Interests in consolidated entities100,021 7,083 (23,320)20,888 
Net income (loss) attributable to Non-Controlling Interests in the Apollo Operating Group303,679 150,741 (307,849)480,784 
Net Income (Loss)$676,099 $521,094 $(608,659)$1,178,822 
Income tax provision (benefit)89,357 (231,896)(66,173)(195,345)
Income Before Income Tax Provision (Benefit)$765,456 $289,198 $(674,832)$983,477 
Transaction-related charges(1)
10,835 5,201 21,546 28,799 
Charges associated with corporate conversion(2)
2,829 6,994 3,893 17,000 
Loss from change in tax receivable agreement liability— 38,575 — 38,575 
Net income (loss) attributable to Non-Controlling Interests in consolidated entities(100,021)(7,083)23,320 (20,888)
Unrealized performance fees(440,310)(183,208)452,215 (497,270)
Unrealized profit sharing expense168,368 61,098 (172,128)177,659 
Equity-based profit sharing expense and other(3)
27,681 22,203 100,632 63,840 
Equity-based compensation17,962 15,802 49,779 52,462 
Unrealized principal investment (income) loss(49,406)(20,411)45,054 (64,632)
Unrealized net (gains) losses from investment activities and other(157,885)24,155 827,949 (40,531)
Segment Distributable Earnings(4)
$245,509 $252,524 $677,428 $738,491 
Taxes and related payables(31,257)(20,895)(74,490)(50,409)
Preferred dividends(9,163)(9,164)(27,492)(27,492)
Distributable Earnings$205,089 $222,465 $575,446 $660,590 
Preferred dividends9,163 9,164 27,492 27,492 
Taxes and related payables31,257 20,895 74,490 50,409 
Realized performance fees(17,445)(67,434)(94,028)(164,558)
Realized profit sharing expense17,445 23,823 94,028 78,268 
Realized principal investment income, net(2,882)(14,374)(13,684)(37,091)
Net interest loss and other34,806 18,251 100,990 45,957 
Fee Related Earnings$277,433 $212,790 $764,734 $661,067 
Depreciation, amortization and other, net3,369 2,927 9,192 8,239 
Fee Related EBITDA$280,802 $215,717 $773,926 $669,306 
Realized performance fees17,445 67,434 94,028 164,558 
Realized profit sharing expense(17,445)(23,823)(94,028)(78,268)
Fee Related EBITDA + 100% of Net Realized Performance Fees$280,802 $259,328 $773,926 $755,596 
(1)Transaction-related charges include contingent consideration, equity-based compensation charges and the amortization of intangible assets and certain other charges associated with acquisitions, and restructuring charges.
(2)Represents expenses incurred in relation to the Conversion, as described in note 1 to the condensed consolidated financial statements.
(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 in unconsolidated related parties granted to employees of Apollo.
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(4)See note 17 to the condensed consolidated financial statements for more details regarding Segment Distributable Earnings for the combined segments.
The table below sets forth a reconciliation of Class A Common Stock Outstanding to our Distributable Earnings Shares Outstanding:
As of
September 30, 2020
As of
September 30, 2019
As of
December 31, 2019
Total Class A Common Stock Outstanding228,747,302 222,403,296 222,994,407 
Non-GAAP Adjustments:
Participating Apollo Operating Group Units204,028,327 180,361,308 180,111,308 
Vested RSUs158,007 216,552 2,349,618 
Unvested RSUs Eligible for Dividend Equivalents8,086,467 8,770,229 6,610,369 
Distributable Earnings Shares Outstanding441,020,103 411,751,385 412,065,702 
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 11 and 14 to the condensed consolidated financial statements, respectively. The Company had cash and cash equivalents of $1.8 billion at September 30, 2020.
Due to the COVID-19 pandemic, there has been volatility in the financial markets. While the Company is not aware of any events that would result in an immediate impact to our liquidity needs, we continue to monitor developments on the global spread of COVID-19 as additional information is obtained.
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, 2020. 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,
 20202019
 (in thousands)
Operating Activities$1,514,716 $835,012 
Investing Activities(7,467)(252,292)
Financing Activities(466,690)58,798 
Net Increase (Decrease) in Cash and Cash Equivalents, Restricted Cash and Cash Held at Consolidated Variable Interest Entities$1,040,559 $641,518 
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.
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During the nine months ended September 30, 2020 and 2019, 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 consolidated funds and from 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.
During the nine months ended September 30, 2020 and 2019, cash used by investing activities primarily reflects purchases of U.S. Treasury securities and other investments and net contributions to equity method investments, offset partially 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, 2020, cash used in financing activities primarily reflects dividends to Class A Common Stockholders, distributions to Non-Controlling interest holders, and repurchases of Class A Common Stock, partially offset by proceeds from the issuance of the 2030 Senior Notes. Net cash used in financing activities also reflects the financing activity of our consolidated funds and VIEs, which primarily reflects net cash inflows from issuance of debt and net contributions to Non-Controlling interest holders in consolidated VIEs.
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 shareholders and distributions to Non-Controlling interest holders.
Future Debt Obligations
The Company had long-term debt of $3.2 billion at September 30, 2020, which includes $3.1 billion of notes with maturities in 2024, 2026, 2029, 2030, 2039, 2048 and 2050. See note 11 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 $1.0 billion at September 30, 2020, of which $351.1 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 16 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 11 and 14 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).
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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.
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, generally all of the income is 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. The 2018 AMH Credit Facility has a final maturity date of July 11, 2023.
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 14 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 the executive committee of our board of directors.
Our current intention is to distribute to our Class A Common Stockholders on a quarterly basis substantially all of our Distributable Earnings attributable to Class A Common Stockholders, in excess of amounts determined by the executive committee of our board of directors to be necessary or appropriate to provide for the conduct of our business and, at a minimum, a quarterly dividend of $0.40 per share.
On October 29, 2020, the Company declared a cash dividend of $0.51 per Class A share, which will be paid on November 30, 2020 to holders of record at the close of business on November 20, 2020. Also, the Company declared a cash dividend of $0.398438 per share of Series A Preferred share and Series B Preferred share which will be paid on December 15, 2020 to holders of record at the close of business on November 30, 2020.
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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 15 to the condensed consolidated financial statements.
Share Repurchases
For information regarding the Company’s share repurchase program, see note 14 to the condensed consolidated financial statements.
Athora
On April 14, 2017, Apollo made a commitment of €125 million to purchase new Class B-1 equity interests in Athora, a strategic platform that acquires and reinsures traditional closed life insurance policies and provides capital and reinsurance solutions to insurers in Europe which, as of April 2020 was fully drawn. 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.
As part of an ongoing capital raise in connection with Athora’s acquisition of VIVAT N.V., Apollo exercised its preemptive rights and made an additional incremental commitment of approximately €58 million to purchase new Class B-1 equity interests in Athora. In addition, in April 2020, Apollo purchased Class C-2 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. Through its share ownership, Apollo has approximately 19% of the total voting power in Athora, and Athene holds shares in Athora representing 10% of the total voting power in Athora. In addition, Athora shares held by funds and other accounts managed by Apollo represent, in the aggregate, approximately 16% of the total voting power in Athora.
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, 2020, the remaining investments and escrow cash of Fund VII, Fund VI, ANRP I and ANRP II were valued at 41%, 34%, 21% and 76% 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. Realized performance fees currently distributed to the general partner are limited to potential tax distributions and interest on escrow balances per these funds’ partnership agreements.
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 15 to the condensed consolidated financial statements for further information regarding the Company’s indemnification liability.
Investment Management Agreements - ISG
The Company provides asset management and advisory services to Athene as described in note 15 to the condensed consolidated financial statements.
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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 amended 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.
Strategic Transaction with Athene Holding
On October 27, 2019 Athene Holding, AGM Inc. and the entities that form the Apollo Operating Group entered into the Transaction Agreement. Pursuant to the Transaction Agreement, Athene Holding issued, on February 28, 2020, 35,534,942 AHL Class A Common Shares to certain subsidiaries of the Apollo Operating Group in exchange for (i) issuance by the Apollo Operating Group of 29,154,519 non-voting equity interests of the Apollo Operating Group to Athene Holding and (ii) $350 million in cash. See note 18 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.
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.
The COVID-19 pandemic has created disruption and uncertainty in the global economy and financial markets. Although we cannot predict with certainty the full magnitude of the economic ramifications, we have accounted for pandemic-related circumstances when applying judgments and assumptions and updated our estimates accordingly when and as applicable.
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
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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 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 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.
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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 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 external 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 external 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 this Annual Report on Form 10-K. 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 11 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 and certain RSU awards for which vesting is contingent, in part, on the realization of performance fees in a specified period. The Company established these programs to attract and retain,
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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 Company 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 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 4, 6, and 7 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 13 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
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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.
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 corporation named Apollo Global Management, Inc. Subsequent to the Conversion, generally all of the income is 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 resolution 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 7 to our condensed consolidated financial statements for a discussion of the Company’s fair value measurements.
We continue to monitor the impact of COVID-19 in our valuation considerations. Any updated information available from the portfolio companies and relevant market data as of the date of this report were incorporated in Apollo’s valuation considerations. Where an updated forecast was not available, Apollo’s valuation assumed change in the portfolio company’s performance guided by relevant market data and our understanding of the underlying business.
As discussed in Note 7 to the condensed consolidated financial statements, 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 external 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. Please refer to Note 7 of this report for more details on valuation techniques employed by Apollo to determine fair value of its investments in credit, private equity and real assets investments. The following section outlines some of the additional considerations with respect to COVID-19 that are incorporated in our valuation approach.
    Credit Investments
The majority of investments in Apollo’s credit funds are valued based on quoted market prices. Quoted market prices are considered to be indicative of fair value, incorporating all the risks and uncertainties associated with the underlying instrument in the prevailing market environment. Apollo’s valuation team further analyzes how prices have moved over the measurement period within each asset class and sector and compared it with the relevant benchmark indices.
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. Apollo’s privately valued credit portfolio is concentrated in bank loans to middle-market companies, loans backed by commercial real estate, aviation and other asset backed loans, and life settlements. Valuation approaches used to estimate the fair value of illiquid credit investments may also include the market approach and the income approach. Most private debt instruments are valued utilizing discounted cash flow models where the key valuation drivers are market yield/credit spread, timing of cash flows and recovery of principal amount. Some of the considerations incorporated in determining the key valuation inputs in our model-based valuation approaches include but are not limited to:
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relative liquidity and change in liquidity profile of an asset class compared to underlying assets in an observable benchmark;
specific contractual terms such as LIBOR floor, covenants or extension features;
portfolio company specific business strength or weakness as it relates to COVID-19;
portfolio company’s liquidity profile;
expected maturity of debt instruments, which could be different than the contractual maturity;
requested or granted amendments or deferrals; and
expected recovery and timing of recovery for distressed debt instruments.
    Private Equity Investments
Over two thirds of Apollo’s private equity investments are valued using a market approach or an observable market price making overall portfolio returns in-line with relevant benchmark indices. Some of the additional considerations incorporated in valuation approaches includes but are not limited to:
relative liquidity and change in liquidity profile of the portfolio company;
portfolio company-specific business strength or weakness as it relates to COVID-19.
    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. Debt and equity securities that are not publicly traded or whose market prices are not readily available, such as private commercial real estate debt and equity investments in entities that own real estate, are valued at fair value utilizing a model-based approach to determine fair value. Some of the considerations incorporated in our model-based valuation approaches includes but are not limited to:
property type specific considerations of potential disruption e.g., higher impact on hospitality or retail than residential;
individual property specific considerations: region and sub-market, tenant profile and liquidity profile;
requested or granted amendments or deferrals;
expected maturity of debt instruments; for example, debt maturing in near term are priced utilizing extensions assuming borrowers may not re-finance in the current market environment; and
loans evaluated for possible impairment.
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 16 to our condensed consolidated financial statements for a discussion of guarantees and contingent obligations.
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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, 2020:
Remaining 20202021202220232024ThereafterTotal
 (in thousands)
Operating lease obligations(1)
$5,908 $41,043 $48,324 $50,027 $47,478 $471,899 $664,679 
Other long-term obligations(2)
9,347 9,908 1,947 703 703 — 22,608 
2018 AMH Credit Facility(3)
169 675 675 358 — — 1,877 
2024 Senior Notes(3)
5,000 20,000 20,000 20,000 508,333 — 573,333 
2026 Senior Notes(3)
5,500 22,000 22,000 22,000 22,000 530,983 624,483 
2029 Senior Notes(3)
8,222 32,886 32,886 32,886 32,886 810,818 950,584 
2030 Senior Notes(3)
3,313 13,250 13,250 13,250 13,250 571,912 628,225 
2039 Senior Secured Guaranteed Notes(3)(4)
3,876 15,503 15,503 15,503 15,503 395,063 460,951 
2048 Senior Notes(3)
3,750 15,000 15,000 15,000 15,000 648,750 712,500 
2050 Subordinated Notes(3)
3,713 14,850 14,850 14,850 14,850 671,844 734,957 
Secured Borrowing I86 345 345 345 345 20,816 22,282 
Secured Borrowing II85 339 339 339 339 22,394 23,835 
2016 AMI Term Facility I64 257 257 257 257 19,782 20,874 
2016 AMI Term Facility II67 268 268 19,264 — — 19,867 
Obligations$49,100 $186,324 $185,644 $204,782 $670,944 $4,164,261 $5,461,055 
(1)Operating lease obligations excludes $133.4 million of other operating expenses associated with operating leases.
(2)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.
(3)See note 11 of the condensed consolidated financial statements for further discussion of these debt obligations.
(4)Payments based on anticipated repayment date of July 2029.

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 AGM Inc. and its subsidiaries 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 16 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, 2020 as follows ($ in millions):
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FundApollo and Related Party Commitments% of Total Fund CommitmentsApollo Only (Excluding Related Party) CommitmentsApollo Only (Excluding Related Party) % of Total Fund CommitmentsApollo and Related Party Remaining CommitmentsApollo 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 — — 
Financial Credit Investment IV, L.P. (“FCI IV”)177.3 23.07 14.3 1.86 177.3 14.3 
Financial Credit Investment III, L.P. (“FCI III”)224.3 11.76 0.1 0.01 110.6 0.1 
Financial Credit Investment II, L.P. (“FCI II”)244.6 15.72 — — 114.9 — 
Financial Credit Investment I, L.P. (“FCI I”)151.3 27.07 — — — — 
SCRF IV416.1 16.63 33.1 1.32 37.1 2.8 
MidCap1,859.7 77.32 126.9 5.27 74.7 6.4 
Apollo Moultrie Credit Fund, L.P.400.0 100.00 — — 185.0 — 
Apollo Accord Fund IV, L.P.75.7 7.19 25.7 2.44 73.7 25.0 
Apollo Accord Master Fund III, L.P.225.1 25.40 0.1 0.01 97.8 — 
Apollo Revolver Fund, L.P.322.1 61.31 10.2 1.94 322.1 10.2 
Apollo Strategic Origination Partners6,121.2 50.50 121.2 1.00 6,121.2 121.2 
Athora(1)(4)
1,319.4 32.53 214.1 5.28 108.6 27.5 
Other Credit4,203.5 Various211.7 Various1,654.9 87.5 
Private Equity:
Fund IX1,917.5 7.75 455.9 1.84 1,464.3 351.1 
Fund VIII1,543.5 8.40 396.8 2.16 219.5 58.1 
Fund VII467.2 3.18 178.1 1.21 60.0 23.1 
Fund VI246.3 2.43 6.1 0.06 9.7 0.2 
Fund V100.0 2.67 0.5 0.01 6.2 — 
Fund IV100.0 2.78 0.2 0.01 0.5 — 
AION151.0 18.28 50.0 6.05 17.8 5.7 
ANRP I376.1 28.43 10.1 0.76 47.8 1.0 
ANRP II481.2 13.93 25.9 0.75 108.8 5.8 
ANRP III650.1 46.44 27.0 1.93 640.8 26.6 
A.A. Mortgage 625.0 80.31 — — 200.0 — 
Apollo Rose II, L.P.887.1 51.01 33.0 1.9 325.8 12.4 
Champ, L.P.197.4 78.25 27.2 10.8 16.5 2.5 
Apollo Royalties Management, LLC108.6 100.00 — — — — 
Hybrid Value Fund847.0 26.16 63.8 1.97 368.4 28.0 
Hybrid Value Fund II776.2 55.44 26.2 1.87 776.2 26.2 
COF III358.1 10.45 36.4 1.06 72.4 8.0 
Asia Private Credit Fund126.5 55.12 0.1 0.04 31.9 — 
AEOF125.5 12.01 25.5 2.44 92.5 18.8 
Other Private Equity857.6 Various104.8 Various171.3 46.0 
Real Assets:
U.S. RE Fund III319.5 60.59 9.5 1.81 319.5 9.5 
U.S. RE Fund II(2)
670.7 53.95 4.9 0.39 253.3 1.4 
U.S. RE Fund I(2)
434.5 66.69 16.5 2.53 79.5 2.7 
Asia RE Fund(2)
386.8 53.77 8.4 1.16 188.2 3.7 
Asia RE Fund II278.1 100.00 3.1 1.12 278.1 3.1 
AIOF I(3)
241.1 26.87 8.9 0.99 105.2 4.2 
EPF III(1)
609.4 13.32 74.6 1.63 225.2 28.6 
EPF II(1)
412.0 11.82 60.2 1.73 92.4 18.0 
EPF I(1)
314.9 20.74 20.7 1.37 50.8 4.7 
Other Real Assets749.7 Various16.5 Various367.8 13.5 
Other:
Apollo SPN Investments I, L.P.12.8 0.26 12.8 0.26 7.5 7.5 
Total$31,591.4 $2,514.2 $15,676.6 $1,006.0 
(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 $1.17 as of September 30, 2020.
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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 $1.29 as of September 30, 2020. Figures for U.S. RE Fund II and Asia RE Fund include co-investment commitments.
(3)Figures for AIOF I include Apollo Infra Equity US Fund, L.P. and Apollo Infra Equity International Fund, L.P. commitments.
(4)Apollo only (excluding related party) remaining commitments excludes a €250 million unfunded commitment that is subject to satisfaction of certain conditions.
On April 30, 2015, Apollo entered into the AAA Investments Credit Agreement (see note 15 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, 2030 Senior Notes, 2039 Senior Secured Guaranteed Notes, the 2048 Senior Notes and the 2050 Subordinated Notes will have future impacts on our cash uses. See note 11 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 16 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 of related parties of Apollo, including portfolio companies of the funds Apollo manages, as well as third parties. As of September 30, 2020, 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 Global Risk Committee comprised of various members of senior management including the Company’s Co-Presidents, Co-Chief Operating Officers, Chief Legal Officer, Global Head of Human Capital, Chief Risk Officer, Head of Enterprise Risk Management and Head of Internal Audit. The risk committee is tasked with
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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.
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 provides analyses of select market and credit risk components to various members of senior management. 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.
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
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evaluates periodically for appropriateness. We intend to continue to monitor this risk going forward and continue to monitor our exposure to all market factors.
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, 2020, we do not expect any counterparty to default on its obligations and therefore do not expect to incur any loss due to counterparty default.
Certain of our funds’ investments include lower-rated and comparable quality unrated distressed investments and other instruments. Investments in such debt instruments are accompanied by a greater degree of risk of loss due to default by the issuer because such debt instruments are generally unsecured and subordinated to other creditors of the issuer. These issuers generally have high levels of indebtedness and can be more sensitive to adverse market conditions, such as a recession or increasing interest rates, as compared to higher rated issuers. We seek to minimize risk exposure by subjecting each prospective investment to rigorous credit analysis and by making investment decisions based upon objectives that include capital preservation and appreciation, and industry and issuer diversification.
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 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.
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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 SEC 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 in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC 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. We have not experienced any material impact to our internal control over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

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PART II—OTHER INFORMATION
ITEM 1.    LEGAL PROCEEDINGS
See note 16 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 2019 Annual Report and our Quarterly Report for the quarter ended March 31, 2020 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, 2020.
The risks described in our 2019 Annual Report and our Quarterly Report for the quarter ended March 31, 2020 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 4, 2020, August 18, 2020, and August 31, 2020, we issued 143,072, 9,998, and 12,328 shares of Class A shares, 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 $7.1 million, $0.5 million, and $0.6 million, 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 shares 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, 2020. From July 1, 2020 through September 30, 2020, the Company paid approximately $6.4 million in cash to satisfy tax withholding and cash settlement obligations in lieu of issuing shares of Class A Common Stock upon the vesting of equity awards representing 129,064 shares of Class A Common Stock.
Period
Total number of Class A Common Stock purchased(1)
Average price paid per share
Total number of Class A Common Stock purchased as part of publicly announced plans or programs(2)
Approximate dollar value of Class A Common Stock that may yet be purchased under the plans or programs (3)
July 1, 2020 through July 31, 2020— $— — $420,274,885 
August 1, 2020 through August 31, 2020561,000 $48.86 541,451 $387,433,190 
September 1, 2020 through September 30, 2020— $— — $387,433,190 
Total561,000 
(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. See note 14 to the condensed consolidated financial statements for further information on Class A Common Stock.
(2)    Pursuant to a share repurchase program that was publicly announced on March 12, 2020, 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 granted under the 2019 Equity Plan (or any successor equity plan thereto). This new authorization increased the Company’s capacity to repurchase shares from $80 million of unused capacity under the Company’s previously approved share repurchase plan. 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.
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(3)     Amounts have been adjusted to account for reductions of Class A Common Stock to satisfy associated tax obligations in connection with the settlement of equity-based awards granted to employees under the Equity Plan.
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
4.18
4.19

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Exhibit
Number
  Exhibit Description
4.20
4.21
*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
104Cover Page Interactive Data File (embedded within the Inline XBRL document).
*Filed herewith.

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 6, 2020By:/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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