Advanced Credit Solutions is a tiny finance firm based in Luxembourg that was founded by a Belgian and wo
rks with insurers. Despite its outwardly bland appearance, the business it does is anything but.
The little-known outfit is the brains behind Fox Hedge, a roughly $5 billion fund created for Apollo Global Management Inc., according to people with knowledge o
f the situation. It’s a highly complicated investment vehicle that pushes the boundaries of just how creative the
titans of private capital can be when putting regulated insurance capital to work.
In recent years Apollo and other peers with private equity roots have been buying up swaths of the life assuranc
ountain of savings. But there’s a snag. Using this cash for riskier, more lucrative bets on private credit and similar asse
ts often inflicts hefty capital charges on insurers. And safer harbors like Tre
asuries and mortgage bonds don’t usually offer the returns that fund managers want to entice clients.
As private markets boom, insurers are desperate not to miss out.
That’s where Fox Hedge steps in. Working with ACS, Apollo bundled up a smorgasbord of assets plucked from its o
n funds, including safer assets and racier stuff like real-estate debt, into
See more beautiful photo albums Here >>>
a Bermuda-based vehicle. They then sold bonds against it with investment-grade ratings and unusually long lifespans.
The plan was to give an insurer private credit-style returns while only having to set aside a fraction of the regulatory capital
needed if directly investing in such assets, multiple people with knowledge say. The 40-year final maturity was built to m
atch the needs of an insurance company with long-term liabilities.
Apollo didn’t need to go far to find its main buyer. Most of the debt was snapped up by its own insurer, Athene — about 86% of it as of December, Moody’s estimates.