Apollo Global Management Inc. is set to use a rare structure t
o raise $10 billion from insurers, people with knowledge of the matte
r said, in the lat
est illustration of the i
ncreasing ties between private capital and annuity providers.
The New York-listed firm is employing a special purpose vehicle
in order to sell highly rated debt against stakes in a range of its credit fu
nds, said the people, who requested anonymity as the matter is private. T
hese include dir
ect lending, asset-based fin
ance, hybrid capital and investment-grade credit.
The potential deal, among the largest ever of its kind, is at an early sta
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ge and terms are still subject to discussions with investors, the people
said. Apollo’s spokesperson declined to comment.
Alternative investment firms are increasingly tapping the trillions
of dollars worth of ins
recent years. Over the last year, Apollo helped build a roughly $5
billion vehicle called Fox Hedge, which sold debt
against a number of its
assets, including asset-backed securities, direct loans and corporate credit.
Insurers are hunting for higher yields to match their liabilities, and
have invested in a nu
mber of complex credit strategies such as collateralized fund obligations. These structures slice and dice privat
e portfolios into bonds allowing their issuers to borrow cheaply against illiquid assets.
Vehicles such as these are structured to achieve investment-gra
de ratings for their
senior debt, meaning insurers can access private credit without ha
ving to pay the hefty capital charges regulators apply to junk-rated credit. Moody’s estimates
that roughly a third of US life insurers’ $6 trillion cash and invested ass
ets was already tied up in various forms of private credit by the end of 2024.