Athene's Hidden Value Makes Apollo More Appealing.

A straightforward approach to valuing Athene reveals hidden upside in Apollo

Among alternative asset managers, Apollo Global (APO) is the most socially valuable by far.

For many, this statement may seem bizarre and irrelevant. But here is an old quote from Buffett (2006 BRK Annual Meeting):

You can imagine that if you were the only person on a desert island, would you rather have a doctor, a lawyer, or a money manager? You'd probably want a doctor. If you had a bunch of people on a desert island, you'd want someone who could build a house or grow food. You wouldn't necessarily need someone who could create financial derivatives.

Apollo isn’t a doctor, but through Athene’s annuities, it provides financial security to millions of individual retirees. (If you are unfamiliar with Apollo and its subsidiary Athene, please read my free introduction.)

Other alternative asset managers primarily work with large pension funds and life insurers. But that’s not the same as serving individual human beings directly. While firms like KKR (KKR) and Brookfield (BN) have replicated Apollo’s model, Apollo remains by far the most significant player in individual retirement among all alt asset managers.

Why does this matter? Because we’re in a period of uncertainty with still uknown duration, scale, and consequences. So far, alternative asset managers have sold off due to market turmoil, not because of fundamental shifts in the macro environment. But if the latter comes, I’d rather be invested with the one that resembles a doctor the most.

Due to the drop, Apollo is getting moderately attractive. I realized it because I figured out a simple method to value Athene. It is so simple that I cannot explain why I have not used it before. And Athene’s value turned out higher than I thought.