Apollo plans infra fundraising after $1bn deal with GE

The firm will use the newly acquired power and midstream assets as a platform to revive its infrastructure strategy.

New York-based Apollo Global Management plans to use a recent $1 billion deal with General Electric as the foundation for a dedicated infrastructure strategy, its executives said during a recent earnings call.

Apollo co-president Scott Kleinman called the recent acquisition of power and midstream assets from GE Capital, the US company’s investment arm, an “attractive base” for its new infrastructure business. He said it will complement not only the firm’s $1.5 billion infrastructure debt strategy but also an equity fund Apollo is planning to launch.

“The foundation of this platform will have what we believe is an attractive portfolio of cash-generating assets from its inception,” Kleinman said.

He added that the “crux of the focus” for the infrastructure fund will be to invest in core-plus or value-added assets and to seek net returns between 10 and 13 percent.

The deal with GE will seed the initiative and includes 20 assets in sectors including renewable energy, natural gas and midstream infrastructure. In purchasing the assets, Apollo established a “sourcing and flow arrangement” with GE and will potentially buy more assets from the company in the future.

This is a renewed effort on Apollo’s part to launch an infrastructure strategy. In April 2017, the firm hired Joe Azelby, who had served as chief executive of global real assets at JPMorgan Asset Management for 18 years, to build out an infrastructure programme. However, according to a Bloomberg report in May, Azelby left Apollo, disagreeing with the firm’s approach to attracting investors to its planned infrastructure funds. When contacted at the time, Apollo did not respond to a request for comment. It also did not comment for this story.

However, Azelby does not appear on the company’s website and there is no mention of an infrastructure strategy. Only real estate comprises Apollo’s real assets business at present, according to the firm’s website.

Infrastructure is also missing from an investor presentation Apollo made in August, with only real estate being presented as part of its real assets business. It is unclear then which infrastructure debt strategy Kleinman referred to during the earnings call.

The firm, which manages $270 billion in assets, has invested heavily in upstream energy and natural resources. The move into infrastructure comes at a time when demand for the asset class is high among institutional investors. In 2018, Fund managers raised $68.21 billion as of early September, according to Infrastructure Investor data.