October 15, 2025 • 23 mins
In this live episode, recorded at Bloomberg's Investment Management Summit in Singapore, we sit down with Matthew Michelini, head of Asia-Pacific business for Apollo Global Management. We explore his optimism about Japan, driven by its corporate governance reform and the vast $7.5 trillion in consumer deposits. We also discuss how private capital is shaping asset allocation and the challenges posed by intense competition in the private-equity industry.
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Speaker 1 (00:00):
We're excited to bring you a live recording of the
Asia Centric podcast we had at the Bloomberg Investment Management
Summit last week in front of a live audience.
Speaker 2 (00:08):
I hope you enjoyed it.
Speaker 3 (00:23):
Good afternoon. This is a bit of a different setting
for us. Usually we're in a studio with our guests.
Good afternoon, everyone. Thank you so much for being here,
and to our online listeners, thanks for tuning in. It's
good to have you. I'm kat jemy Trieva and.
Speaker 1 (00:39):
I'm John Lee and joining us today, we have Matt Nicolaney,
head of the Asia Pacific region for Apollo Global Management.
Now we've got questions from all around the region, so
there's a lot to dig in. Let's just start. But
first of all, Matt, thanks for joining us.
Speaker 4 (00:55):
Thanks for having me. This feels nothing like a podcast.
I'm I'm very happy to be here with the live
studio audience. I brought my yellow pad because I thought
they're nobody to be watching now.
Speaker 1 (01:06):
Matt, you're very excited about the opportunities in Japan. You've
spoken to Bloomberg News in the past. You've talked about
this seven point five trillion dollars in deposits, then You've
also got the government and you know, the central bank
looking to stimulate prices. You've also got this corporate governance reform.
But in your words, why are you so positive on
(01:29):
the prospects in Japan.
Speaker 4 (01:31):
Good question. There's a couple of things were positive about.
There's certainly some macro changes that are going to lead
to interesting deal activity. There's a cheaper yen. There's corporate
governance reform that's catalyzing a corporate redo of Japan Inc.
And it couldn't come at a better time. Given interest
rates are up, inflation is up, competition globally is up
(01:51):
in a lot of different industrial sectors, so it'll make
for some interesting investment opportunities on that front. Secondly, as
the last panel was talking about, trade is being redone everywhere,
including in Japan, and there's a lot of outbound investment
out of Japan from very good companies in Japan, and
I think private capital is going to play a major
role in helping to facilitate that cross border flow. And
(02:14):
to your point on deposits, you know, consumers for the
last thirty years have really been sitting there with the prices.
I haven't gone anywhere. Interest rates have been zero. They
haven't needed it to do anything with their money. Now,
all of a sudden, they're facing increasing prices across the board.
They haven't seen that trickle through to their deposit rate.
They haven't really seen that trickle through to the investment
(02:34):
product that they're invested in. And they're now starting to ask,
what am I supposed to do? It can't just keep
sitting here in the seven and a half trillion dollars
of deposits, and it's been interesting to watch how some
of those deposits are starting to move.
Speaker 3 (02:48):
Does the election of Senai Takaicha change that at all?
Change your outlook sort of media more long term, because
of course there's more of a focus perhaps on fiscal
stimulus as opposed to monetary policy. Some investors see it
potentially upending central bank moves and direction. What do you think?
Speaker 4 (03:07):
I don't think change in government within reason is changing
the trajectory of what's interesting about Japan. What's interesting about
Japan is corporate governance catalyzing an unlock of really good
businesses that have to finance themselves differently, that have to
set up their business footprints differently, that have to go
pursue growth differently, that's not changing based on who the
(03:27):
elected party is. If you look at the on the
consumer trend again, I don't think that you're going to
see a change. You're going to see higher inflation in Japan,
and people are getting older and they need something better
than deposits and equities. So these trends that we are
excited about, I don't think you're going to change. That's
(03:47):
different from making a commentary on are we excited about
Japan from a macro perspective, like would we go by
if you could go buy on the stock market Japan GDP,
I'm not sure that's what people are excited about. People
are excited about the transaction activity around good companies. That's
going to cause a catalyst for the next five to
ten years. But if you look at the investment, which
(04:08):
is actually quite interesting. You look at the topics, two
thirds of the earnings of the topics are outside Japan.
If you look at Japanese companies, two thirds of M
and A by Japanese companies are outside Japan. You look
at where the banks are growing outside Japan, insurance companies
outside Japan, industrial companies outside Japan. So there's going to
be a lot of interesting to do with Japanese companies.
(04:29):
There's going to be a lot of catalyst driven activity
in Japan. But that doesn't mean that we at Apollo,
for instance, make a call on Japan GDP.
Speaker 1 (04:37):
Japanese corporate's really changing. Is management much more, I guess,
friendly to shareholders and are they allocating capital in a
more efficient manner?
Speaker 4 (04:47):
The short answer is yes. As I've said in the past,
I think that this will be two steps forward, one
step back, as Japan has welcomed foreign capital to help
facilitate this catalyst because foreign equity capital, whether it be
in the public markets or it be in the private markets,
is going to force management and boards to react to
changes in shareholders, changes in shoulder sentiments, and a demand
(05:10):
for shareholder return. And I think Japan has done a
pretty good job welcoming and embracing what foreign capital can provide. Again,
there'll be some areas that foreign capital touches that Japan Inc.
Doesn't want them to touch, but buy and large we
are seeing that change. I mean five years ago, it
would have been unheard of for US to buy a
big business out of Panasonic, that's a critical supplier to Toyota.
(05:30):
I mean, with labor unions all across Japan, we do
see the change, we do feel the change. It is happening.
It will happen faster than a japan timeframe, but it
won't happen tomorrow.
Speaker 3 (05:41):
What about the other side, So we talked about corporates,
but what about consumers, Because you know, the seven point
four trillion dollars, there's this view that consumers are you know,
they're stashing it under their mattress, so they don't want
to deploy. I mean, how do you convince them.
Speaker 4 (05:59):
Well, as we were joking beforehand, the easiest way is
to double the price of rice. That they need to
do something different. But that's actually what's happening. And the
whole deposit system of Japan is fascinating because if it is,
certainly in a market with too much liquidity in the
banking system. If you look how risk is priced in
Japan versus anywhere else in the world on a risk
(06:22):
adjusted basis and currency adjusted basis, it's still two under
basis points lower than the rest of the world. So
there's too much liquidity in the system. But that deposit
as rates have gone up, the deposit beta on the
average consumer deposit has not gone up, and that's why
you've seen insurance products go, savings products go up. You've
seen subscriptions to the NISA accounts, which is basically equities
(06:44):
go up because there hasn't been a flow through. But
if you look at the other end of the deposit
spectrum with corporates, once you had one increase in rates, okay,
maybe you don't move your money, two increases in rates,
you start to see the move and money to the
online banks. And what the big banks then did is
they said, okay, well we'll just go buy the online banks.
But the point being is that these deposits are actually
looking for something different. Today, no other product exists, no
(07:08):
good product exists for the consumer. And the reason why
is because as a result of the distribution systems in Japan,
you haven't seen the breadth of product that can be
made available to consumer. Because if you're a consumer, the
average consumer with deposit account, you either sit like an MUFG,
Mazuho or SMBC, and MUFG, as a for instance, wants
you to keep your money in cash. The minute that
(07:30):
you start to think about, okay, should I go invest
this into some securities, you walk down the street to Nomora.
But no, although they have a breadth of very good
products and they do well with their customers, by and large,
the average person is not walking in the door for
Nomora for a safe product. They're looking for an investment
product that bears some risk. And so if you're a
depositor looking for an alternative, you don't go to Nomora
(07:52):
as a first port of call. Nor is the distribution
system set up to distribute safe, low spread product. You're
not going to MUFG or SMB or Mazuho because they'd
rather just have you sit in the deposit. And there's
only so much insurance that you want, Like there's only
so much money you want to lock up for the
next thirty years of that deposit. You want access to that.
So the proliferation of product, of safe product for retirees
(08:16):
that has some level of flexibility, I think you'll see
that in massive troves over the next decade.
Speaker 1 (08:22):
And Matt, you just mentioned Nomura, but you know, as
an American firm, what's the reception like when you meet
Japanese management or some of the you know, like some
of these Japanese banks.
Speaker 4 (08:33):
Look, it's go back to where I started, which is
there is an acknowledgment of the role of foreign capital
in Japan and the role that it can play. Point
one point two is, as I mentioned, there's a lot
of cross border m and a cross border flows. You
look at the recent deals we did with Sony, the
recent deals we did with Sumi Tomo, the recent deals
(08:54):
we did with SMBC. These are companies that in Japan
we would have never been doing business with ten years ago,
but we're doing business with them in a major way
outbound from Japan. Now, we have a growing presence in Japan.
We just hired a head of Japan, will continue to
add senior hef to that. You know, it's a balance
between making sure that we have local presence, local touch point,
(09:14):
understand how business is done locally, but also making sure
that we have the full toolkit that we can bring
from you know, across the world to help a company
achieve its goal.
Speaker 3 (09:24):
And I just wanted to pull back, maybe to the
region for the audio only listeners. There's a couple of
screens up here and there's a word bubble, and the
question for the word bubble is what will define Asia
in the next five years? And some of the biggest
words in that bubble are China, multipolar, and uncertainty. Now,
(09:48):
given the uncertainty and if we're looking at Asia more broadly,
you know, where do you see the most opportunity and
conversely kind of where are the biggest risks. I mean
the previous panel, we talked about geopolitics, we talked about headwinds,
and we interviewed Steve in a previous episode, and we
haven't really seen that impacting things yet to a large degree.
(10:10):
So yeah, where do you see those opportunities today?
Speaker 4 (10:14):
It's funny. I came out to Asia four years ago
and I came out because I said, there's like just
a massive opportunity in Asia across a number of dimensions.
And then I talked to a good friend that I
met here who came here ten years ago, said he
came out to Asia for because there's a massive opportunity.
It's all on the comb and twenty years ago, massive
all in the comm But look, I think that there's
a couple of really interesting things that we're at least
(10:36):
investing behind. The first is we talk about this global
industrial renaissance and what that is is, you know, every
twenty or thirty years you have these big, massive capac cycles,
whether it be railroads, telecom, oil and gas, and this
next phase will be around redoing infrastructure or building new infrastructure.
It will be energy infrastructure, energy accretion, and anything related
(10:58):
to AI. And then as the last we'll mentioned, you
have defense and supply chain, especially in this region, and
you're going to see a massive rotation from financial assets
to capital or hard assets over the next five to
ten years. And unlike the last CAPEX cycle in THEW
and tens, it's going to be mostly investment grade companies
that need this capital, not sub investment grade companies. And
(11:20):
it's also going to be longer duration capital that's needed,
not short duration capital, which actually is helpful for private
capital step in because a rule of thumb, banks like
to do short public markets like to do plain vanilla.
Private capital fills in what's in the gaps. So that's
going to be a major one. I think the other
major positive for this region is really catalyzed by some
(11:42):
of the geopolitical trends. You are going to see more
regionalization than you've seen in the past. Regionalization at least
I believe will ultimately center around the big economic polls
the US and China, and that will provide a really
good basis of trade company growth and trends that will
(12:02):
be independent of the West. They'll be somewhat correlated, but independent,
and that will attract capital because in portfolio is one
of the biggest things on investors' minds right now is
how do you get diversification? And historically Asia hasn't really
offered that diversification because one, you've had globalization, global trends,
global capital, and investor behavior buying when things are high
(12:24):
and selling when things are low. So I think that
you're going to see over the next five to ten
years a massive tailwind for capital formation in Asia, supported
by regionalization and the last two things. Look, I think
that how consumers, how savers save out here, whether you're
saving for retirement or you're saving for accumulation, is going
to benefit from all the global tail winds out here.
(12:45):
But kind of on steroids.
Speaker 3 (12:47):
I think you had mentioned that before with Bloomberg News
where you said that US tariffs kind of prompted clients
to diversify outside the US. There was that moment you know,
sell America or US is no longer safe. Are you
still seeing that kind of push to diversify.
Speaker 4 (13:03):
Well, I think what we ended up seeing was sell
US dollar sell SELLAR assets, and then like I think
a month later in the data it all came back.
But no, it's still top of every investor's mind. How
do I build a diversified portfolio? Like I understand that
I might be, as our CEO says, invested in the
cleanest dirty shirt in the US. And the trends in
(13:24):
the US are still very good on a relative basis.
That said, things are pretty volatile and things can change.
And where do I get diversification in scale? You can
get a niche diversification. Where do I get the diversification
in scale? I think that Asia will prove to be
one of those sources of diversifiers over time. I think
privates private assets from non risky all the way to
(13:46):
risky will prove to be a diversifier to public markets
as well. I think these are some of the major
sources of diversification.
Speaker 3 (13:52):
Speaking of your CEO, Yeah, let's do that funny you
mentioned that.
Speaker 1 (13:58):
Your CEO, mak Roland, he said some you know, interesting statements.
So he said, what if we're fundamentally wrong about investing?
Speaker 4 (14:06):
Now?
Speaker 1 (14:06):
I think he insinuated that maybe this traditional sixty forty
equity bond portfolio is broken now from where we sit today, Look,
public markets have been on fire, like the Hangsaying Index
is up over thirty five percent, Singapore is up, you know,
fifteen percent. Credit spreads a time. I don't want to
put you on the spot in defending your CEO, but
(14:27):
can you please explain oho.
Speaker 4 (14:30):
I like to joke that, you know, I've really grown
up at Apollo my career, and so I've been tired
to be a purchase price matters investor. But as a result,
I've missed the equity run up in a video run up,
the bitcoin run up, the gold run up. And but
don't worry, I'm still hanging on strong with my thirteen
percent compounded every single year, no volatility. But in all seriousness,
(14:52):
I think it depends on what outcome you're looking to achieve.
And I think what March point is when you used
to buy the sixty forty of public stocks public bonds,
that was in a market structure that was very different
twenty five years ago. When that rubric was put together,
the equity markets represented a broad, diversified mix of earnings
from the US or from the world, and you had
(15:15):
rates and equities inversely correlating. The problem is that those
markets buy and large became flow markets, really overtaken by
passive money. And so it's not as if you have
a bunch of stock analysts doing work on should I
buy Nvidia at this price or should I sell it
at that price. You have the market buying the video
when infos go up, and the market selling the video
(15:35):
when infos go down, or when deleveraging it happens, or
leveraging happens, and so you have all these flow driven
factors that at this point represent beta. Because it's just flow,
it's not necessarily fundamental investing. And Mark asked the question
has public active investing gone stupider just as a rhetorical question,
because obviously it hasn't yet it's underperformed for ten years
(15:58):
running because it's really hard to beat the flows trying
to be a fundamental investor. So, from our perspective, where
a purchase price matters investor, especially where we're investing, for
every dollar we invest, fifty cents of that goes onto
our own balance sheet for a twenty year obligation. We
start with the cash flows and so where can you
still get a fundamental driven return. We think it's in
(16:18):
the private markets. The difference between private markets again twenty
five years ago and today is that used to be
only risky assets, and now given that banks have really
pushed a lot of their lending out into the public
market or into the investment marketplace in the US, and
you see the demand for private capital increasing in Europe
as well as in Asia. You see now safe private,
(16:40):
risky private, safe public, risky public. So I think Mark's
point is you will see a different portfolio mix going forward.
Sixty forty won't be good enough anymore. That's not how
you get a diversified, stable portfolio return. You have to
have a mix of public and private, and you will
dial up and down the risk based on your risk profile,
and dial up and down the liquidity based on your
liquid that he needs.
Speaker 3 (17:01):
But given the demand for private in the private space,
I mean, how frothy is it getting? You know, are
there deals that your competitors are doing that you're just
kind of shaking your head at.
Speaker 4 (17:13):
Well, So I'd say a few things on that.
Speaker 3 (17:16):
You'll feel free to name them.
Speaker 4 (17:21):
We're going to list all the competitors and what they're doing. Look,
we've said, as a general statement on the market, valuations
are high, like really high. No matter where you look,
valuations are high. And as a general investment philosophy, we
are de risking, not risking up. There's a time to
take risk. Now doesn't feel like a time to take risk,
whether that be an investment grade or that be an equity.
(17:42):
In our risk taking business, we only have to make
five good decisions a year, five companies that have some
level of complexity around capital structure, business plan, carve out
or management changeover or something. But in terms of is
it frothy? I think one of the questions as we
talk about this now too, as we now translate this
to you know, credit, it's always a question of alternatives,
(18:04):
and so a lot of people will ask the question
around private credit. And the question around private credit is, yes,
it is cyclical. Yes we're at the top of the cycle.
You are still earning the long term average return of equities.
Where would you rather be? It's a de risking trade
to go from equities to private credit. Then now asking
about does it has the industry gotten frothy? So like
let's ask what the industry is supposed to do the
industry is supposed to deliver excess return per unit of risk.
(18:28):
Do we think that people are going to be able
to consistently deliver that buying from banks, buying from markets,
buying from other sponsors. Probably not. Probably not. Our general
belief in our platform is that origination, controlling origination is
ultimately what leads to excess return over a long period
of time, as Marx likes to say, creating that which
(18:48):
does not exist. You know, as an asset manager, you
take in money and you invest in something that already exists.
If you are a private or an alts manager and
you are effectively taking in money and buying something that
somebody else has created, the sustainable alpha has already been
armed out. It's already been taken by the originator. So
our view is that there are a lot of private
firms out there that are not focused on origination like
(19:11):
they should be. Our view has been that we need
to ramp up our origination because that's the way to
continue to deliver our investor's access return.
Speaker 1 (19:19):
Matt, I have to get your thoughts on a crazy
stat that went viral last week. Now, there was a
Bloomberg round table in London that had a spokesperson from
a POLO but also Morgan Stanley and KKR and Atlasa
Woods from KKR said that there's nineteen thousand private equity
funds in the US versus fourteen thousand McDonald stores. I
(19:42):
don't know why she's comparing McDonald's stores with private equity funds,
but without putting words in your mouth, is this industry
due for consolidation?
Speaker 4 (19:51):
Well, it's interesting. That's a good stat and I heard
it about eighteen months ago. I oftentimes steal it myself.
You would imagine that there's going to be quite a
bit of console and a flushing out of some of
these managers, and then you'll probably see it on the
equity side, you'll see it in the credit side. But
wherever you have that many firms, like firms are either
going to benefit from scale or firms are just going
(20:13):
to be masters of their craft. They're not going to
be incentivized by growing their firm. They're going to be
very disciplined in how they manage investors capital. And that's
what you've seen, even in some of the more mature
segments of the alts world, is that you've either seen
the big get bigger, or you've seen the true artisans,
the true crafts just really maintain their discipline with their craft.
Speaker 3 (20:33):
So is Apollo going to get involved in that.
Speaker 4 (20:37):
On the consolidation side, well, we did recently buy a
company called Bridge, which is in the real estate side,
but most of our growth has actually been organic. We've
had some really big acquisitions. We bought Credit Sweez's warehouse
business about a two years ago, which was a massive
transformation for our asset back franchise. We bought Bridge, which
was a real estate equity platform. We bought Iridium very
(20:59):
recently from my Levit. So we will complement our capabilities
along the way. But by and large we've got a
very strong culture. Mark has done an amazing job defining
what our culture is and rallying around that, and every
partner we on board, whether from the outside or acquisition,
is a risk to our culture, and so that has
(21:19):
to be managed very carefully. As we say internally, we
can only grow as fast as we can onboard people
into our culture. So onboarding a really massive firm into
our culture would be a would probably be a high bar, as.
Speaker 3 (21:30):
My guess, very diplomatic answer, and we are running down
the clock. But one thing that we were talking about
before being on stage is just in terms of risks globally.
I mean, we've talked about how some of the geopolitical
risks are, you know, the uncertainty, the bipolar world. I mean,
(21:50):
very broad question, but what are you kind of most
concerned about? What do you think investors should be more
concerned about? And you could even borrow from that word
class that we had earlier.
Speaker 4 (22:02):
Look, I think there's lots of things to be nervous
about from a risk perspective. That's why we've generally de
risked our book from a pure asia lens, what do
I see? I think I mentioned this at one point,
but I just have this vision that in the Cold
War that there was still like the batphone, that if
the world was going to end, you picked up the
phone and said, wait, are you sure that you meant that?
(22:23):
And so I want to believe that that exists today
as a little bit of a human, a little bit
of an optimist. But I do think that the biggest
risk is a breakdown in communication, like the back channel communication,
like yes, let's always make sure that we have the
baseline of this and everything else we can fight over.
I think that that's probably one of the biggest risks.
I think the other biggest risk is really seeing in
(22:43):
terms of band of outcomes, is how Europe comes together.
How does it come together as a fence union, how
does it come together as a capital markets union. It's
talked a lot about the need for private capital to
reinvigorate the economy and how the countries pulled together to
incentivize that private capital. Could neither be a once in
(23:03):
a generation opportunity or you know, they won't get their
act together. But I think that those are some of
the things that will cause a wide band of outcomes.
Speaker 3 (23:11):
Thanks so much for joining us today. It was a
great conversation.
Speaker 4 (23:14):
Thank you very much for having me fun. Thank you
We're excited to bring you a live recording of the
Asia Centric podcast we had at the Bloomberg Investment Management
Summit last week in front of a live audience.
Speaker 2 (00:08):
I hope you enjoyed it.
Speaker 3 (00:23):
Good afternoon. This is a bit of a different setting
for us. Usually we're in a studio with our guests.
Good afternoon, everyone. Thank you so much for being here,
and to our online listeners, thanks for tuning in. It's
good to have you. I'm kat jemy Trieva and.
Speaker 1 (00:39):
I'm John Lee and joining us today, we have Matt Nicolaney,
head of the Asia Pacific region for Apollo Global Management.
Now we've got questions from all around the region, so
there's a lot to dig in. Let's just start. But
first of all, Matt, thanks for joining us.
Speaker 4 (00:55):
Thanks for having me. This feels nothing like a podcast.
I'm I'm very happy to be here with the live
studio audience. I brought my yellow pad because I thought
they're nobody to be watching now.
Speaker 1 (01:06):
Matt, you're very excited about the opportunities in Japan. You've
spoken to Bloomberg News in the past. You've talked about
this seven point five trillion dollars in deposits, then You've
also got the government and you know, the central bank
looking to stimulate prices. You've also got this corporate governance reform.
But in your words, why are you so positive on
(01:29):
the prospects in Japan.
Speaker 4 (01:31):
Good question. There's a couple of things were positive about.
There's certainly some macro changes that are going to lead
to interesting deal activity. There's a cheaper yen. There's corporate
governance reform that's catalyzing a corporate redo of Japan Inc.
And it couldn't come at a better time. Given interest
rates are up, inflation is up, competition globally is up
(01:51):
in a lot of different industrial sectors, so it'll make
for some interesting investment opportunities on that front. Secondly, as
the last panel was talking about, trade is being redone everywhere,
including in Japan, and there's a lot of outbound investment
out of Japan from very good companies in Japan, and
I think private capital is going to play a major
role in helping to facilitate that cross border flow. And
(02:14):
to your point on deposits, you know, consumers for the
last thirty years have really been sitting there with the prices.
I haven't gone anywhere. Interest rates have been zero. They
haven't needed it to do anything with their money. Now,
all of a sudden, they're facing increasing prices across the board.
They haven't seen that trickle through to their deposit rate.
They haven't really seen that trickle through to the investment
(02:34):
product that they're invested in. And they're now starting to ask,
what am I supposed to do? It can't just keep
sitting here in the seven and a half trillion dollars
of deposits, and it's been interesting to watch how some
of those deposits are starting to move.
Speaker 3 (02:48):
Does the election of Senai Takaicha change that at all?
Change your outlook sort of media more long term, because
of course there's more of a focus perhaps on fiscal
stimulus as opposed to monetary policy. Some investors see it
potentially upending central bank moves and direction. What do you think?
Speaker 4 (03:07):
I don't think change in government within reason is changing
the trajectory of what's interesting about Japan. What's interesting about
Japan is corporate governance catalyzing an unlock of really good
businesses that have to finance themselves differently, that have to
set up their business footprints differently, that have to go
pursue growth differently, that's not changing based on who the
(03:27):
elected party is. If you look at the on the
consumer trend again, I don't think that you're going to
see a change. You're going to see higher inflation in Japan,
and people are getting older and they need something better
than deposits and equities. So these trends that we are
excited about, I don't think you're going to change. That's
(03:47):
different from making a commentary on are we excited about
Japan from a macro perspective, like would we go by
if you could go buy on the stock market Japan GDP,
I'm not sure that's what people are excited about. People
are excited about the transaction activity around good companies. That's
going to cause a catalyst for the next five to
ten years. But if you look at the investment, which
(04:08):
is actually quite interesting. You look at the topics, two
thirds of the earnings of the topics are outside Japan.
If you look at Japanese companies, two thirds of M
and A by Japanese companies are outside Japan. You look
at where the banks are growing outside Japan, insurance companies
outside Japan, industrial companies outside Japan. So there's going to
be a lot of interesting to do with Japanese companies.
(04:29):
There's going to be a lot of catalyst driven activity
in Japan. But that doesn't mean that we at Apollo,
for instance, make a call on Japan GDP.
Speaker 1 (04:37):
Japanese corporate's really changing. Is management much more, I guess,
friendly to shareholders and are they allocating capital in a
more efficient manner?
Speaker 4 (04:47):
The short answer is yes. As I've said in the past,
I think that this will be two steps forward, one
step back, as Japan has welcomed foreign capital to help
facilitate this catalyst because foreign equity capital, whether it be
in the public markets or it be in the private markets,
is going to force management and boards to react to
changes in shareholders, changes in shoulder sentiments, and a demand
(05:10):
for shareholder return. And I think Japan has done a
pretty good job welcoming and embracing what foreign capital can provide. Again,
there'll be some areas that foreign capital touches that Japan Inc.
Doesn't want them to touch, but buy and large we
are seeing that change. I mean five years ago, it
would have been unheard of for US to buy a
big business out of Panasonic, that's a critical supplier to Toyota.
(05:30):
I mean, with labor unions all across Japan, we do
see the change, we do feel the change. It is happening.
It will happen faster than a japan timeframe, but it
won't happen tomorrow.
Speaker 3 (05:41):
What about the other side, So we talked about corporates,
but what about consumers, Because you know, the seven point
four trillion dollars, there's this view that consumers are you know,
they're stashing it under their mattress, so they don't want
to deploy. I mean, how do you convince them.
Speaker 4 (05:59):
Well, as we were joking beforehand, the easiest way is
to double the price of rice. That they need to
do something different. But that's actually what's happening. And the
whole deposit system of Japan is fascinating because if it is,
certainly in a market with too much liquidity in the
banking system. If you look how risk is priced in
Japan versus anywhere else in the world on a risk
(06:22):
adjusted basis and currency adjusted basis, it's still two under
basis points lower than the rest of the world. So
there's too much liquidity in the system. But that deposit
as rates have gone up, the deposit beta on the
average consumer deposit has not gone up, and that's why
you've seen insurance products go, savings products go up. You've
seen subscriptions to the NISA accounts, which is basically equities
(06:44):
go up because there hasn't been a flow through. But
if you look at the other end of the deposit
spectrum with corporates, once you had one increase in rates, okay,
maybe you don't move your money, two increases in rates,
you start to see the move and money to the
online banks. And what the big banks then did is
they said, okay, well we'll just go buy the online banks.
But the point being is that these deposits are actually
looking for something different. Today, no other product exists, no
(07:08):
good product exists for the consumer. And the reason why
is because as a result of the distribution systems in Japan,
you haven't seen the breadth of product that can be
made available to consumer. Because if you're a consumer, the
average consumer with deposit account, you either sit like an MUFG,
Mazuho or SMBC, and MUFG, as a for instance, wants
you to keep your money in cash. The minute that
(07:30):
you start to think about, okay, should I go invest
this into some securities, you walk down the street to Nomora.
But no, although they have a breadth of very good
products and they do well with their customers, by and large,
the average person is not walking in the door for
Nomora for a safe product. They're looking for an investment
product that bears some risk. And so if you're a
depositor looking for an alternative, you don't go to Nomora
(07:52):
as a first port of call. Nor is the distribution
system set up to distribute safe, low spread product. You're
not going to MUFG or SMB or Mazuho because they'd
rather just have you sit in the deposit. And there's
only so much insurance that you want, Like there's only
so much money you want to lock up for the
next thirty years of that deposit. You want access to that.
So the proliferation of product, of safe product for retirees
(08:16):
that has some level of flexibility, I think you'll see
that in massive troves over the next decade.
Speaker 1 (08:22):
And Matt, you just mentioned Nomura, but you know, as
an American firm, what's the reception like when you meet
Japanese management or some of the you know, like some
of these Japanese banks.
Speaker 4 (08:33):
Look, it's go back to where I started, which is
there is an acknowledgment of the role of foreign capital
in Japan and the role that it can play. Point
one point two is, as I mentioned, there's a lot
of cross border m and a cross border flows. You
look at the recent deals we did with Sony, the
recent deals we did with Sumi Tomo, the recent deals
(08:54):
we did with SMBC. These are companies that in Japan
we would have never been doing business with ten years ago,
but we're doing business with them in a major way
outbound from Japan. Now, we have a growing presence in Japan.
We just hired a head of Japan, will continue to
add senior hef to that. You know, it's a balance
between making sure that we have local presence, local touch point,
(09:14):
understand how business is done locally, but also making sure
that we have the full toolkit that we can bring
from you know, across the world to help a company
achieve its goal.
Speaker 3 (09:24):
And I just wanted to pull back, maybe to the
region for the audio only listeners. There's a couple of
screens up here and there's a word bubble, and the
question for the word bubble is what will define Asia
in the next five years? And some of the biggest
words in that bubble are China, multipolar, and uncertainty. Now,
(09:48):
given the uncertainty and if we're looking at Asia more broadly,
you know, where do you see the most opportunity and
conversely kind of where are the biggest risks. I mean
the previous panel, we talked about geopolitics, we talked about headwinds,
and we interviewed Steve in a previous episode, and we
haven't really seen that impacting things yet to a large degree.
(10:10):
So yeah, where do you see those opportunities today?
Speaker 4 (10:14):
It's funny. I came out to Asia four years ago
and I came out because I said, there's like just
a massive opportunity in Asia across a number of dimensions.
And then I talked to a good friend that I
met here who came here ten years ago, said he
came out to Asia for because there's a massive opportunity.
It's all on the comb and twenty years ago, massive
all in the comm But look, I think that there's
a couple of really interesting things that we're at least
(10:36):
investing behind. The first is we talk about this global
industrial renaissance and what that is is, you know, every
twenty or thirty years you have these big, massive capac cycles,
whether it be railroads, telecom, oil and gas, and this
next phase will be around redoing infrastructure or building new infrastructure.
It will be energy infrastructure, energy accretion, and anything related
(10:58):
to AI. And then as the last we'll mentioned, you
have defense and supply chain, especially in this region, and
you're going to see a massive rotation from financial assets
to capital or hard assets over the next five to
ten years. And unlike the last CAPEX cycle in THEW
and tens, it's going to be mostly investment grade companies
that need this capital, not sub investment grade companies. And
(11:20):
it's also going to be longer duration capital that's needed,
not short duration capital, which actually is helpful for private
capital step in because a rule of thumb, banks like
to do short public markets like to do plain vanilla.
Private capital fills in what's in the gaps. So that's
going to be a major one. I think the other
major positive for this region is really catalyzed by some
(11:42):
of the geopolitical trends. You are going to see more
regionalization than you've seen in the past. Regionalization at least
I believe will ultimately center around the big economic polls
the US and China, and that will provide a really
good basis of trade company growth and trends that will
(12:02):
be independent of the West. They'll be somewhat correlated, but independent,
and that will attract capital because in portfolio is one
of the biggest things on investors' minds right now is
how do you get diversification? And historically Asia hasn't really
offered that diversification because one, you've had globalization, global trends,
global capital, and investor behavior buying when things are high
(12:24):
and selling when things are low. So I think that
you're going to see over the next five to ten
years a massive tailwind for capital formation in Asia, supported
by regionalization and the last two things. Look, I think
that how consumers, how savers save out here, whether you're
saving for retirement or you're saving for accumulation, is going
to benefit from all the global tail winds out here.
(12:45):
But kind of on steroids.
Speaker 3 (12:47):
I think you had mentioned that before with Bloomberg News
where you said that US tariffs kind of prompted clients
to diversify outside the US. There was that moment you know,
sell America or US is no longer safe. Are you
still seeing that kind of push to diversify.
Speaker 4 (13:03):
Well, I think what we ended up seeing was sell
US dollar sell SELLAR assets, and then like I think
a month later in the data it all came back.
But no, it's still top of every investor's mind. How
do I build a diversified portfolio? Like I understand that
I might be, as our CEO says, invested in the
cleanest dirty shirt in the US. And the trends in
(13:24):
the US are still very good on a relative basis.
That said, things are pretty volatile and things can change.
And where do I get diversification in scale? You can
get a niche diversification. Where do I get the diversification
in scale? I think that Asia will prove to be
one of those sources of diversifiers over time. I think
privates private assets from non risky all the way to
(13:46):
risky will prove to be a diversifier to public markets
as well. I think these are some of the major
sources of diversification.
Speaker 3 (13:52):
Speaking of your CEO, Yeah, let's do that funny you
mentioned that.
Speaker 1 (13:58):
Your CEO, mak Roland, he said some you know, interesting statements.
So he said, what if we're fundamentally wrong about investing?
Speaker 4 (14:06):
Now?
Speaker 1 (14:06):
I think he insinuated that maybe this traditional sixty forty
equity bond portfolio is broken now from where we sit today, Look,
public markets have been on fire, like the Hangsaying Index
is up over thirty five percent, Singapore is up, you know,
fifteen percent. Credit spreads a time. I don't want to
put you on the spot in defending your CEO, but
(14:27):
can you please explain oho.
Speaker 4 (14:30):
I like to joke that, you know, I've really grown
up at Apollo my career, and so I've been tired
to be a purchase price matters investor. But as a result,
I've missed the equity run up in a video run up,
the bitcoin run up, the gold run up. And but
don't worry, I'm still hanging on strong with my thirteen
percent compounded every single year, no volatility. But in all seriousness,
(14:52):
I think it depends on what outcome you're looking to achieve.
And I think what March point is when you used
to buy the sixty forty of public stocks public bonds,
that was in a market structure that was very different
twenty five years ago. When that rubric was put together,
the equity markets represented a broad, diversified mix of earnings
from the US or from the world, and you had
(15:15):
rates and equities inversely correlating. The problem is that those
markets buy and large became flow markets, really overtaken by
passive money. And so it's not as if you have
a bunch of stock analysts doing work on should I
buy Nvidia at this price or should I sell it
at that price. You have the market buying the video
when infos go up, and the market selling the video
(15:35):
when infos go down, or when deleveraging it happens, or
leveraging happens, and so you have all these flow driven
factors that at this point represent beta. Because it's just flow,
it's not necessarily fundamental investing. And Mark asked the question
has public active investing gone stupider just as a rhetorical question,
because obviously it hasn't yet it's underperformed for ten years
(15:58):
running because it's really hard to beat the flows trying
to be a fundamental investor. So, from our perspective, where
a purchase price matters investor, especially where we're investing, for
every dollar we invest, fifty cents of that goes onto
our own balance sheet for a twenty year obligation. We
start with the cash flows and so where can you
still get a fundamental driven return. We think it's in
(16:18):
the private markets. The difference between private markets again twenty
five years ago and today is that used to be
only risky assets, and now given that banks have really
pushed a lot of their lending out into the public
market or into the investment marketplace in the US, and
you see the demand for private capital increasing in Europe
as well as in Asia. You see now safe private,
(16:40):
risky private, safe public, risky public. So I think Mark's
point is you will see a different portfolio mix going forward.
Sixty forty won't be good enough anymore. That's not how
you get a diversified, stable portfolio return. You have to
have a mix of public and private, and you will
dial up and down the risk based on your risk profile,
and dial up and down the liquidity based on your
liquid that he needs.
Speaker 3 (17:01):
But given the demand for private in the private space,
I mean, how frothy is it getting? You know, are
there deals that your competitors are doing that you're just
kind of shaking your head at.
Speaker 4 (17:13):
Well, So I'd say a few things on that.
Speaker 3 (17:16):
You'll feel free to name them.
Speaker 4 (17:21):
We're going to list all the competitors and what they're doing. Look,
we've said, as a general statement on the market, valuations
are high, like really high. No matter where you look,
valuations are high. And as a general investment philosophy, we
are de risking, not risking up. There's a time to
take risk. Now doesn't feel like a time to take risk,
whether that be an investment grade or that be an equity.
(17:42):
In our risk taking business, we only have to make
five good decisions a year, five companies that have some
level of complexity around capital structure, business plan, carve out
or management changeover or something. But in terms of is
it frothy? I think one of the questions as we
talk about this now too, as we now translate this
to you know, credit, it's always a question of alternatives,
(18:04):
and so a lot of people will ask the question
around private credit. And the question around private credit is, yes,
it is cyclical. Yes we're at the top of the cycle.
You are still earning the long term average return of equities.
Where would you rather be? It's a de risking trade
to go from equities to private credit. Then now asking
about does it has the industry gotten frothy? So like
let's ask what the industry is supposed to do the
industry is supposed to deliver excess return per unit of risk.
(18:28):
Do we think that people are going to be able
to consistently deliver that buying from banks, buying from markets,
buying from other sponsors. Probably not. Probably not. Our general
belief in our platform is that origination, controlling origination is
ultimately what leads to excess return over a long period
of time, as Marx likes to say, creating that which
(18:48):
does not exist. You know, as an asset manager, you
take in money and you invest in something that already exists.
If you are a private or an alts manager and
you are effectively taking in money and buying something that
somebody else has created, the sustainable alpha has already been
armed out. It's already been taken by the originator. So
our view is that there are a lot of private
firms out there that are not focused on origination like
(19:11):
they should be. Our view has been that we need
to ramp up our origination because that's the way to
continue to deliver our investor's access return.
Speaker 1 (19:19):
Matt, I have to get your thoughts on a crazy
stat that went viral last week. Now, there was a
Bloomberg round table in London that had a spokesperson from
a POLO but also Morgan Stanley and KKR and Atlasa
Woods from KKR said that there's nineteen thousand private equity
funds in the US versus fourteen thousand McDonald stores. I
(19:42):
don't know why she's comparing McDonald's stores with private equity funds,
but without putting words in your mouth, is this industry
due for consolidation?
Speaker 4 (19:51):
Well, it's interesting. That's a good stat and I heard
it about eighteen months ago. I oftentimes steal it myself.
You would imagine that there's going to be quite a
bit of console and a flushing out of some of
these managers, and then you'll probably see it on the
equity side, you'll see it in the credit side. But
wherever you have that many firms, like firms are either
going to benefit from scale or firms are just going
(20:13):
to be masters of their craft. They're not going to
be incentivized by growing their firm. They're going to be
very disciplined in how they manage investors capital. And that's
what you've seen, even in some of the more mature
segments of the alts world, is that you've either seen
the big get bigger, or you've seen the true artisans,
the true crafts just really maintain their discipline with their craft.
Speaker 3 (20:33):
So is Apollo going to get involved in that.
Speaker 4 (20:37):
On the consolidation side, well, we did recently buy a
company called Bridge, which is in the real estate side,
but most of our growth has actually been organic. We've
had some really big acquisitions. We bought Credit Sweez's warehouse
business about a two years ago, which was a massive
transformation for our asset back franchise. We bought Bridge, which
was a real estate equity platform. We bought Iridium very
(20:59):
recently from my Levit. So we will complement our capabilities
along the way. But by and large we've got a
very strong culture. Mark has done an amazing job defining
what our culture is and rallying around that, and every
partner we on board, whether from the outside or acquisition,
is a risk to our culture, and so that has
(21:19):
to be managed very carefully. As we say internally, we
can only grow as fast as we can onboard people
into our culture. So onboarding a really massive firm into
our culture would be a would probably be a high bar, as.
Speaker 3 (21:30):
My guess, very diplomatic answer, and we are running down
the clock. But one thing that we were talking about
before being on stage is just in terms of risks globally.
I mean, we've talked about how some of the geopolitical
risks are, you know, the uncertainty, the bipolar world. I mean,
(21:50):
very broad question, but what are you kind of most
concerned about? What do you think investors should be more
concerned about? And you could even borrow from that word
class that we had earlier.
Speaker 4 (22:02):
Look, I think there's lots of things to be nervous
about from a risk perspective. That's why we've generally de
risked our book from a pure asia lens, what do
I see? I think I mentioned this at one point,
but I just have this vision that in the Cold
War that there was still like the batphone, that if
the world was going to end, you picked up the
phone and said, wait, are you sure that you meant that?
(22:23):
And so I want to believe that that exists today
as a little bit of a human, a little bit
of an optimist. But I do think that the biggest
risk is a breakdown in communication, like the back channel communication,
like yes, let's always make sure that we have the
baseline of this and everything else we can fight over.
I think that that's probably one of the biggest risks.
I think the other biggest risk is really seeing in
(22:43):
terms of band of outcomes, is how Europe comes together.
How does it come together as a fence union, how
does it come together as a capital markets union. It's
talked a lot about the need for private capital to
reinvigorate the economy and how the countries pulled together to
incentivize that private capital. Could neither be a once in
(23:03):
a generation opportunity or you know, they won't get their
act together. But I think that those are some of
the things that will cause a wide band of outcomes.
Speaker 3 (23:11):
Thanks so much for joining us today. It was a
great conversation.
Speaker 4 (23:14):
Thank you very much for having me fun. Thank you
Hosts And Creators
John Lee
Tom Corbett
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