Yep. Thank you very much. Good afternoon, everybody. My name is Bill Katz. I cover the asset managers and retail brokers for Credit Suisse. On behalf of the firm and my team, we're very pleased to be hosting the management team from Apollo Global. With us today is CFO, Mr. Martin Kelly. In the audience, we have Noah Gunn and Melinda Roy, both of the IR Team. Founded in 1990, Apollo has now nearly $550 billion of assets under management across yield, hybrid, and private equity platforms. APO has been a leader in fixed income replacement and insurance outsourcing, including differentiated and broad-based origination capabilities. Martin joined Apollo back in 2012 and served as the co-CEO from 2017 to 2019.
Noah, many of you know, started Apollo, went over, ran the Athene IR effort, and then, came back to the Apollo side. One housekeeping item from our side, just due to the ongoing completion of the Credit Suisse Securitized Products Group, we're not able to cover that as a topic today, for compliance reasons. With that, it's a pleasure to have everyone here today, and, welcome, Martin. Thank you so much for coming.
Thanks, Bill. Thanks for having us.
Okay, wonderful. I think we'll have... I have a bunch of questions here, but if there are any questions in the audience as we get a little toward the end of the presentation, I think we'll try and get a microphone around to those that would like to ask a question. Our first question is to get started from a very big picture perspective. You know, Apollo's been really early, I think, to identify the powerful trend of the fixed income replacement, increasingly global and elevated demand for income at the same time. How would we think about the opportunity for the next several years, and what are the pros and cons associated against higher rates?
Good. Thanks, Bill. It's interesting. fixed income replacement is, I think, a better term than private credit. It's a vast marketplace, and it's interesting. As rates have backed up in the last year or so, credit, fixed income credit is more attractive, relatively than equities. I think we've seen a shift at the margin from equities to fixed income. At the same time, fixed income replacement offers a yield outperformance relative to public sort of cues of credit. What we're building, including with the transaction we can't really talk about, but that's a piece of the overall puzzle, is a whole ecosystem of credit origination that creates a yield outperformance.
It brings 100-200 basis points of yield outperformance relative to comparable credit risk. The yield outperformance is provided through both structure and liquidity risk that's taken in originating that. I actually think it's the most important part of what we're doing as a firm. I think this whole fixed income replacement is a trend that will take many years to play out. The platforms that we're creating, we have 15 platforms today, and between them, before the CS transaction, they originate about $35 billion of credit every year. That will increase a lot once this transaction is fully closed. That's just differentiated product. It's hard to source. It helps. It has multiple impacts around our ecosystem.
It's put onto Athene's balance sheet, so it creates spread-related earnings. It's put onto Athora's balance sheet, where it creates something similar. Then it's attractive to other insurance companies, for the same reasons that Athene finds it attractive. It helps us, and will help us from here on out grow our third-party insurance business. Ultimately, it creates a, you know, an asset-backed financing ecosystem. Super interesting, early stage, highly capital efficient, highly differentiated. The other thing I should mention is it helps our capital solutions business, which is the business that securitizes packages tranches and securitizes risk in asset-backed form.
It brings with it differentiated production of yield, and it creates spread earnings, fee-related earnings, transaction fees, and helps grow out adjacent businesses. For us, I think high rates help, and it's a really exciting time for us as we continue to evolve the platform.
Great. Maybe just a follow-up to that. You mentioned you have sort of $35 billion of origination this past year before thinking about the transaction, which you can't speak to. How important is the origination platform when you're out with clients, talking to them about protecting capital, asset quality perhaps, and now pro forma everything you've done, do you think you're at scale? If so, how scalable can we go from here?
Yeah. No, we're not at scale. We have 15 platforms, give or take, today. I'd say five of those 15 are at scale. When we did our Investor Day, 15 months ago, we said we should be originating about $150 billion of credit per year at the end of year five. These platforms are a piece of that, an important piece of that, but not, you know, not all of it. I think each of the, you know, each of the 10 or so platforms that are not scaled yet have room to go. That's a big focus of ours.
What we're really focused on is making sure that there's appropriate liquidity risk management, and credit risk management within each of the platforms so that there's not. You know, if there's a dislocation in the market, then the platforms can survive both from a funding perspective and a credit perspective.
Just changing gears a little bit, the other theme that I think you've been early to adopt into or adapt into has been sort of the insurance outsourcing. Initially in the United States, and then more recently, I think outside the United States. I think management's talked about the opportunity for both. As you look out into this year and maybe into 2024 and beyond, you know, where are we in terms of that opportunity set? A lot of your competition is talking about doing exactly what you're doing, if you will. How are you different? How is Apollo differentiated versus that rising competition?
Yeah. It's interesting. I actually think we're quite distinct from all our peers. We started Athene 15 years ago, we started Athene with $20 million of capital. It's now a $240 million business. It was built in the initial eight or 10 years through block transactions, inorganic add-ons. That market has become incredibly competitive. There's actually 120 companies out there that we see bidding for blocks of transactions today in that space. Prices are high, return on capital is not what it was. Athene's business model has evolved in the U.S. to be an organic producer. Last year, Athene produced almost $50 billion of gross, there's no one else that's doing that.
We have four different growth platforms within Athene, or channels, I should say. One is retail origination of annuities. Two is pension risk transfer transactions. Three is reinsurance transactions with others, mostly flow reinsurance. Four is funding agreements. We are able to toggle those channels up or down based on the relative return on equity that we see based on pricing in the market and the capital that's consumed. I would say we're second generation, third generation, in that we have all of the organic growth that we need to satisfy the overall firm's growth objectives without the need to be dependent on any inorganic transactions. It's different outside the U.S. It's much less developed in both Europe and Asia.
We have a platform in Europe called Athora, which has just raised another close to EUR 3 billion of equity to give it capital to seed the next leg of growth in that business. If you look at the timeline of Athora, which we started, I don't know, six or seven years ago, versus that of Athene, which we started 15 years ago, they're actually tracking on very similar progressions. Athora is now about EUR 60 billion of assets, with some announced transactions that have not yet closed, which will take it closer to EUR 100 billion. Over time, Athora will develop organic growth capabilities as well. You know, we don't see much competition in Europe. We don't see much competition in Asia.
The addressable market for both is really significant, but with a focus in Europe on Germany, France, Italy, Belgium, The Netherlands, which is where we've been playing to date. A lot more to do inorganically first outside the U.S., but within the U.S. , you know, we have all the organic growth that we need in today's pricing market.
When you think about, it seems like this is still early days in terms of the denominator of the opportunity to sort of take share either from the entrenched lenders or in terms of the better yield than what's on an insurance balance sheet. What's the risk to the story here? Is it just a credit cycle? Is it interest rates? How should we think about what could be the monkey wrench to this story?
Look, we wanna be good stewards of policyholders' capital. I think there are rate risks, there's regulatory risk, there's political risk. We manage Athene's business at a low leverage and a high capital level. We're very focused on making sure Athene has a fortress balance sheet, and it maintains capital at a higher rating level than its current rating. It has higher equity to reserves than the industry average by a meaningful amount, 11% versus 8%. It has less leverage, 15% versus 25% across the industry. We want to... We have a very active and transparent dialogue with regulators to make sure that they understand what Athene's business model is and what it's not. It's...
There, from a credit risk perspective, we've built the balance sheet. We've created every asset that went on Athene's balance sheet. We merged the asset manager and Athene, 15 months ago. You know, it is our balance sheet, so we're very mindful of that. From a liquidity perspective, we're very careful to have excess liquidity that we can draw on more offensively actually than defensively, given the position of the balance sheet. You know, we focus on all the risk factors that you would expect us to. We spend a lot of time on each of them, but we think it's a very sound balance sheet with transparent reporting.
I don't think anyone in the industry has as transparent a disclosure framework as Athene in terms of stress testing, risk analysis, credit risk stratification. We wanna be as transparent as we can so that we have the confidence of different constituents, that they know what Athene is.
Okay. Super. All right. Another big theme I wanna talk a little about, is maybe turn to global wealth opportunity. I think we and many other investors expect it to be a very long tail opportunity. It could be $200 trillion denominator, $300 trillion denominator. It doesn't matter which one it is, it's both very large. Also I think we've seen in the news flow for the industry, some players we follow, some outside our coverage universe. That there's no more pro cyclicality to the business.
Mm-hmm.
Your CEO, Marc Rowan, on the call, a little while ago, fourth quarter call, really, I thought spoke very bullishly around the momentum into 2023. Unlike many of your peers, you don't really have any sort of legacy assets that you have to deal with any elevated redemptions, if you will. Can we dig in a little bit in terms of what products and how you think about expanding distribution potential, penetrating new clients, existing clients, how to think about the multi-vector growth of product versus distribution?
Yeah. Complicated question, complicated business. I would say when we did our Investor Day 15 months ago, we had three big priorities at the time, and we've since announced another six, actually. Of those three, this is the most complex. Capital Solutions business is doing extremely well, and we can talk about that. The origination platform business I spoke about to start with. Global Wealth is... There's, you know, there's no question that the addressable market for Global Wealth is larger than the combined institutional market. Over time, as retirees need safe, retirement income, the opportunity is really significant. We think we are, you know, despite the growth and the successes of others in the industry, in the business, we're still very, very early stage in the development of it.
The way we think about retail is it's a, it's an ecosystem. You need to have the right products, you need to have the right distribution capabilities, you need to have the right team and technology, and you need to be accessing each of the geographies. We're doing all of the above. It's... I don't think that the sell-off in the markets last year and the, and the capping of some funds out there, will affect the attractiveness of the product, to the retail community over time. I think properly structured, properly sold, in a proper part of a portfolio, it has a home that we feel as strongly about today as we did 6-12 months ago. We're not, we're not concerned about that.
The build-out requires, it requires products that can both be an alternative to product that's already out there. As you look for shelf space on distributors, you need a product that's going to be something that can sit side by side product that's already there as a choice for investors. You also need product which is a differentiator. We're working on both. Our focus is on creating differentiated products that we think is appealing to retail investors. We've said that we have five different products in the market today aimed at retail investors. By the end of next year, we expect that to be nine. That's across both North America and increasingly into Europe.
Some of the product development that we have that we think is distinct is a product we call AAA, Apollo Aligned Alternatives, which is a sort of credit profile like equity portfolio, which has been a large part of the reason that Athene has done so well over the last decade. It's had this equity portfolio, which is really investments, equity investments in credit businesses like the platforms. We are in the process of rolling that out to retail investors. We've recently unveiled a product called Athene Altitude, which is a variable annuity wrapped set of Apollo funds. Think about a tax-deferred credit, Apollo credit fund in a annuity with tax deferral over some lengthy period of time. There are other products that we are.
They're part of the five. There are others that we are working on that mirror the development of some of the new initiatives that we're working on that we'll unveil over the next quarter or two. We expect between, you know, accessing distribution, getting shelf space, accessing it both in the U.S. and Europe, we'll have, you know, meaningful penetration over time. I would argue that our ambition is pretty modest. We said if we raise $50 billion of capital cumulatively over five years, we said we'd do $6 billion in 2022, which we did. It sort of, it increases to an annual rate of $15 billion annually by year five. I think that's a very realistic and feasible target.
When you, Just going back to the AAA for a moment, that seems like it's. We'll talk about the wealth management side, but it also seems like a great opportunity on the institutional side. How are you marketing that into the sort of the network, if you will? How, how does that like differentiate itself versus some of the either existing businesses that are out there or other yield portfolios that you're trying to compete for those shelf space?
The good thing about AAA is it has a track record. It has a 10-year+ track record because it is what has been up until now the equity portfolio of Athene, what we call the alternatives portfolio. It has, over that period of time, generated 12%-13% returns. That is, you know. The construct is all of that portfolio was dropped into this AAA structure, and now we're bringing in third-party capital side by side to pari passu with Athene's interest. It has stood, you know, it has stood the test of a decade of performance and has performed nicely in that period of time. You know, it's offered as an equity product which has the profile of a credit risk.
That's something that we're finding is very attractive. How are we accessing it? We're accessing it largely through the large wirehouses, who find it as a distinct product.
Maybe just staying on that theme for a moment, I've been sort of asking this of a bunch of management teams that are here today, I'm sure will come up tomorrow. I think there's sort of a dimension of the early success for some of your peers in 2020, 2021 was on the back of low interest rates, different correlations, higher yield on these portfolios. Rates have moved up a little bit. You mentioned earlier that you're looking through the short-termism. The long term is still pretty good. What are you hearing or what is your team hearing from the field around financial behavior, financial advisor behavior, and how to deal with sort of this fixed income replacement wave?
As rates are higher, is it just easier to buy a cash management account, a short duration bond fund with overnight liquidity versus maybe what you and others are trying to do?
You're still earning a few hundred basis points more than you would otherwise if you're in. The spread differential between fixed income replacement is the same today as it was six months ago, 12 months ago. You're still, for what we think is a similar credit risk profile, earning 100 to 200 basis points more than you would otherwise. The attractiveness is, you know, in absolute terms, it's not as much of a pickup, but you would take it if you can get comfortable with the risk profile and the liquidity profile. We're not seeing any drop-off in appetite for that product.
Okay. You'd mentioned, again, your target of $50 billion. Is that simply... What were some of the inputs that went into that? Is that the same number of products you have, well, you expected to have at this point in time? In terms of the number of distributors that you're working with, is that better or worse relative to when you set those expectations back in the Investor Day?
Look, I think we're tracking at least as well as we expected to. You know, a number of the products that are now in the pipeline weren't conceived back then. It was a plan or, you know, an ambition that we would do that. It's now. I think if you could actually take that question and apply it much more broadly. If you look at our platform today and look at where we were at the Investor Day, we had three big priorities: capital solutions, originations, and global wealth. We had put out some targets around growth for fee-related earnings and spread-related earnings. We have now, I think, significantly de-risked any growth, any revenue growth in the plan, not just in retail product capability, but across the suite.
We're now focused on, and we talked about this on the call last week, we had the original three. We have another six. We've got plenty to do. They each have, I think, significant upside potential. We're really focused right now on executing what we think is a really clear plan in front of us. You know, I would expect that the five products, which becomes nine, will grow a bit, but it's as important now to make sure we're getting access to not just the wirehouses, but growing out the family office network, RIAs, IBDs in Europe, as well as in the U.S. and in Asia as well. You know, it would seem that getting to $15 billion of annual inflows by 2026 is a, is a pretty achievable goal.
Okay. Okay. Can I ask just one more on this topic?
Absolutely.
Well, look, 'cause your sponsors are triggering some other questions for me. Maybe we'll talk about it later on margins. I think you've been the last couple of years between de novo and inorganically building a pretty strong distribution infrastructure. Can you just level set for where we are today in terms of how many people you have on the ground? Because you have different distribution channels in the U.S. and outside the United States, so obviously a big fan. Can you sort of talk about where you are today versus maybe where we started from and how to think about like the seasoning of that productivity, opportunity set?
Sure. We, across the firm, we've had two or three years of meaningful investment in people, bringing senior people on board, and that's largely behind us. We had the benefit in this space of buying Griffin Capital, and that transaction closed about one year ago. That significantly changed our capabilities in the U.S. As I look at where else we need to invest around the firm, this is one of the few areas where we need to make some more investments. Not significant, but some. And I think, you know, family office access is really important, and has some really significant prospects. And we have the senior team in place, but need some more people on those teams. You know, for the most part, we have what we need.
We'll partner with third parties and enter into arrangements where we share economics or pay a fee to do that. We're largely built out. We have, between institutional and global wealth distribution, we have, around 250 people today, up from less than 100 two years ago. You know, the team size and shape has changed meaningfully, and our capabilities have, along with it.
All right. More product, more distribution, seasoning of the team on the ground.
Yeah.
Okay.
Yeah.
Let's switch gears a little bit more and talk about capital markets. It's another area you've sort of mentioned a couple times today. It's a sort of a growth opportunity, strategic opportunity. First off, how diversified is the capital solutions revenue by asset class and/or by transaction type? I think you said your stated goal is to double that revenue stream by 2026 to $500 million. I think you sort of reiterated that just with earnings just a couple days ago. How much of that target's gonna rely on deployment and then versus maybe the run rate of the business as you're scaling up?
This is a really interesting business that when we did our Investor Day, we were running at $250 million per year of fees, and we set a target of $500 million over five years. We did more than $400 million last year in year one. We remain very confident that that plan can be achieved. If I was to describe the scope and scale of the business, we have in our current ecosystem, we have 3,000 borrowers who interact with Apollo. That is a source of that's a team we've built out to sort of cover corporates. We also have a sponsor coverage effort.
Both of those are focused on credit origination and we've capable teams. We've built out the senior teams. Both of those businesses are doing really well. We also have the platforms which need securitization financing and syndication. That's another part of it. Then we have our portfolio companies in our PE business, which is also a part of it. The number of transactions we did last year that added up to that $400 million of fees was about 150 distinct transactions. Some equity, but mostly debt. This is a business that's just gotten great traction. I think across each of those areas, corporate borrowers, sponsor lending, platforms, and our existing fund business, it has great momentum.
As we build new businesses, including in climate, secondaries, infrastructure, each of those businesses comes with an opportunity to create syndication opportunities and earn fees. Really, really exciting. The team has done a terrific job, actually, with strong momentum and, you know, it seems like the target is very, very feasible at this stage.
I see you smile a lot with these targets. I'm gonna have to say
I like this business.
Maybe one last one on this, we'll move on. Again, accounting might be a little different from one company to the next, but one of your peers has sort of a P&L with pretty high margins on capital markets, if you will. Should we be thinking that this is a particularly accretive opportunity set over time above your run rate margin?
Yeah. We're working through how we comp people off the business. Yeah, it's reasonably high margin. That's probably an appropriate assumption.
Okay, cool.
Yep.
I don't know if we have questions in the audience. I'm happy to keep going, maybe just take a little break for a second. Anyone has a question? It's hard to see. I don't see hands going up. All right, don't be shy. All right, maybe turn to a different topic, maybe private equity. A couple of questions here. How to think about prospective returns on equity, if you will, IRRs, versus prior cycles. I guess in my head, I'm thinking sort of cost of borrow is up a little bit. Maybe it's the right assumption, maybe not, that it might be a little bit less leverage in the system, just given where we sit in terms of the cycle of leverage in the economy, and time, right?
The flywheel is a little slower to sort of crank through everything a little bit. Those are all work against IRRs, if you will.
Mm-hmm.
Is it fair to think that past could be prologue? Is there a different algorithm that investors should be thinking about with returns?
Yeah. It, actually, the fundamental economics, and IRR targets of the business have not changed, actually. We still plan for a 20% + IRR in the business, more than 2 times return on capital. You know, the factors that you, that you outlined, Bill, are important. You know, getting capital, back to LPs quickly is a key focus. That, you know, the less time money has in the ground, the higher the IRR on that money. That's important. Like, as we sit here today in this environment, you know, it really is a time that plays to the strengths of Apollo. It's like this is the time that we're known to be, you know, good at what we do. This is...
If we look at Fund X, our latest fund, which we're still closing, we have three transactions that are closed. They're all interesting. We have a number of distressed positions which will either become distressed or pull to par and have a high IRR on them. Then we have a really healthy pipeline. I, you know, I think, you know, if you pair this with our capital solutions business and our creative financing where we can structure financing transactions that help close PE transactions, that's a somewhat distinct capability that we have. I feel, you know, as good about this business as I ever have. I think the returns and the expectations of LPs, frankly, are the same as what they've been.
Got you. Just on, I think on the fourth quarter conference call, Marc had sort of suggested that Fund X, which I think was originally $25 relative, same size roughly to Fund IX, is now within striking distance. I think that was the term he used.
Yep.
What does striking distance mean?
It means close to.
Like hand grenades and horseshoes, right? What's changed at the margin in the last few months that would sort of push you off to 25?
I would say I do feel that we're gonna be at or close to, so it's not, it's not a long way away from that target. The market for traditional PE funds is busy, and it remains busy. There's 75% of GPs are in the market at the same time wanting capital. You know, and in a year when equity prices sold off a lot as did fixed income, there's just less capacity in the market. I think, I think our pluses are we are, we are known to be good investors in this type of climate. And the predecessor Fund IX is a really well-constructed fund which is, which has great returns, 38% IRR to date. The flip side of that is it's just, it's crowded.
You know, it's not a factor which I think is unique to us. It's just the market's busier than it has been. It's interesting. It's not really affecting other funds. As we come to market with new businesses like infrastructure, a secondaries business in GP/LP financing, climate and so on, we're not seeing the same crowding. I do think it's important that we get Fund X closed at or close to the size that we indicated. Relative to where we were a fund ago, given everything else that's going on at the firm these days, it is less important, right? Economically, it's less important.
Mm-hmm. Gotcha.
Yeah.
Okay. any questions out here? Maybe turning a little bit, I know we're running a little out of time. As we roll into 23, I think one of the bull cases was... One hope was 22 everybody had the denominator effect. Markets were down, allocations relatively high. The hope was that in 23, some of those allocations would free up a little bit and then start to get this flywheel moving a little bit in terms of allocations and maybe fund return or capital return, if you will. How are those conversations evolving, hearing throughout the day today that things seem like they might be opening up a little bit, not a ton, but directionally moving up a little bit. Within those allocations, where absolutely investor LPs sort of incrementally focused on?
Yeah. Look, we feel last year was a record year of inflows and fundraising for us. We had $128 billion across the firm, across asset manager and Athene. Both were records actually. This year we see it being higher still, across both pieces of it. Even though the world is more focused on credit and yield investing, as we look at 2023, we see more of the money coming from what we call opportunistic funds. That's Fund X, but it's our secondaries business, it's climate, a European Principal Finance business, infrastructure, and a series of other funds. You know, we feel very confident actually, you know, with the targets that we've put out there.
At the same time, credit is growing away from the initiatives that we spoke about. Actually, you know, people wanting access to sort of all season credit, what we call multi-credit in managed account format is really attractive right now. You know, so the backup and the crowding really seems to be in that one area. I think the traction we're getting across the rest of the platform is really strong. We, we saw it with raising more money for Athene in its equity sidecar, which we just announced $2 billion of an equity raise for. Athora, the European spread lending business has closed close to EUR 3 billion of capital in the last quarter. There's lots of traction around the platform.
We're pretty confident that we're gonna have a, you know, a higher year in 2023 than we had in 2022.
Just digging into maybe some of the smaller side. You mentioned a couple times in this conversation about infrastructure, secondaries, climate. Can you level set for us where those assets are collectively today, and is it just the J-curve of the successor funds, is the opportunity set here? What are some of the other growth drivers to building those assets?
A slightly different answer for each of those three. Infrastructure, we're midway through investing our second fund. That's a business that's done great. Its track record is really strong. It's brought together teams from across the firm to invest in that, you know, pretty broad asset class. Climate is a newer strategy, seeded by one of our strategic partners, which is a multi-decade, you know, green transition business, equity and debt. The secondaries business is probably newer still. We've brought across a team from BlackRock. We've raised a significant amount of capital from one of our strategic partners to invest in that business. That's something that will be both GP and LP financings. It'll be equity and credit. It'll be fund level financings. It'll be continuation funds.
The breadth of that business, I think will be quite broad. Up to now, we've done financing for LPs through our capital solutions business. This effort is really to bring it all together under one leadership team. You know, that's nascent in terms of a new business, but we think has great potential. You know, there's a lot of seeds in the ground that we feel really good about. Some are, you know, some are more mature than others.
Great. Let's turn to some of the financial guidance you provided on the conference call. You laid out targets for 2023. If I have my numbers right, 25% FRE growth, 20% SRE growth. Maybe one at a time. On the FRE side, how do we think about a normalized level of expense growth through to the cycle? Seems like you're on the other side now of a pretty big investment cycle. Obviously, actually you gave 20% revenue growth and 25% FRE growth. I would assume some margin improvement.
Yep.
Where do we go? Like what's a normalized pace of expense growth if there is such a thing?
Yeah. We said more than 20% revenue growth and less than 20% cost growth. On the cost, it's actually Headcount growth is normalizing down. You should expect comp growth this year to be in the mid-teens type area. Factoring in, you know, carryover from last year and new hires this year and comp increases and so on. That's settling into a zone that I think should be a longer term expectations for comp growth. Non-comp is a year behind that. Non-comp, we've outfitted every office around the world. We've invested in technology. We've returned from COVID. Non-comp in Q4 was a step up from what it had been through last year. That's a good run rate for next year.
You'll see a higher year-over-year comparison for non-comp, and then that'll settle down into a, you know, I would think a low double digit type range from there on out. I think margin improvement is important. We had 54% margin last year. We expect that to be north of 60% over the five-year period. I would expect that to be gradual versus a stairstep, given the factors I just walked through. We're definitely focused on margin improvement as well as top-line revenue growth.
John, on the SRE side, I think that stock initially reacted a little poorly to the guidance, at least from what we pieced together on the SRE.
Yep.
Can you talk a little bit about maybe...? It seems like it's a conservative guide, at least from a model perspective. Can you talk a little about, like, what were some of the underlying macro factors you took into consideration, what the forward curve looked like? I think you gave some guidance on spread. Anything you can help to factor in, like, what you're thinking about the market and the environment over the next year or so?
One thing we're really focused on is capital efficiency around the group. it is more capital efficient for us to fund Athene's growth at the group level through third-party capital, through this equity sidecar called ADIP. that also legitimizes the fees in that you have third parties buying in in size to take the same fee structure that the asset manager is taking. That's an important part of it. We also, you know, if anything, we're trying to contain SRE growth. We're not looking to maximize SRE in any one-year period. We're looking at a long-term growth rate in SRE. Athene's business is growing so rapidly that we are looking to create a long-term sustainable growth pattern in the business.
The puts and takes are the rate curve, which we're assuming stays where it is. The benefits that Athene's had from higher rates on its business will taper out as the year goes on. We are trying to create more of a fortress balance sheet as we focus on that. We're bringing the allocation to alternatives down a bit to give us dry powder for when things become more interesting, if they do. We're using more third-party capital. You know, when you... I do think 20% is an appropriate number. Unless something changes that we're not currently contemplating, that's what you should expect for the year ahead. Like 20% SRE growth, 25% FRE growth, that's 90% + of the firm's overall earnings.
Right.
That's pretty good. That's our plan. You know, we'd look to transition that into growth into 2024.
I did a terrible job interviewing, so I apologize. I have, like, another 10, 15 questions. We have 14 seconds. I don't. I think we're in the red now.
Maybe I took too long. Too long answering questions.
No, no. Thank you very much. On behalf of Credit Suisse, really appreciate you spending some time with us today. I know it's a very busy time for you, thank you very much.
Thanks for having us. Thank you.
Bye.