Apollo Global Management Inc

NYSE:APO

Earnings Call Transcript 2020-Q1

[Operator]

Good morning and welcome to Apollo Global Management's first quarter 2020 earnings conference call. During today's presentation, all callers will be placed in a listen-only mode and following management's prepared remarks, the conference call will be open for questions. This conference call is being recorded.

This call may include forward-looking statements and projections, which do not guarantee future events or performance. Please refer to Apollo's most recent SEC filings, including the 8-K Apollo filed this morning, for risk factors related to these statements.

Apollo will be discussing certain non-GAAP measures on this call, which management believes are relevant in assessing the financial performance of the business. These non-GAAP measures are reconciled to GAAP figures in Apollo's earnings presentation, which is available on the company's website. Also, note that nothing on this call constitutes an offer to sell or solicitation of an offer to purchase an interest in Apollo fund.

I would now like to turn the call over to Gary Stein, Head of Investor Relations.

[Gary Stein, Head of Investor Relations.]

Great. Thanks operator. Good morning and welcome everyone to our first quarter 2020 earnings call. We hope you and your families are staying safe in these challenging times.

Joining me this morning are Leon Black, Chairman and Chief Executive Officer, Josh Harris, Co-Founder and Senior Managing Director and Martin Kelly, Chief Financial Officer and Co-Chief Operating Officer. Our Co-President, Jim Zelter, is also on the line and will be available during the Q&A session.

Earlier this morning, we reported distributable earnings of $0.37 per common share, pretax fee-related earnings of $0.52 per share and a cash dividend of $0.42 per share for the first quarter.

With that, I will turn the call over to Leon Black.

[Leon Black, Founder, Chairman, Chief Executive Officer]

Good morning. Thanks Gary and thank you all for joining us. I would like to focus my comments this morning on the unprecedented circumstances we are collectively facing in light of the COVID-19 pandemic. What began as a virus has become a global health and economic crisis of enormous proportions and we, first and foremost, like to extend our thanks to all of the healthcare professionals and frontline workers for their extraordinary dedication through these difficult times. I would also like to thank our Apollo employees for their continued hard work and commitment to the firm over the past couple of months. The enduring strength of our business is a testament to all of their individual contributions. On behalf of the management team, we extend our appreciation.

As the crisis began to unfold a couple of months ago, our first order of business was to ensure the safety, health and wellness of our employees and their families and we continue to monitor their wellbeing provide ongoing support. We then quickly turned our attention to preserving business continuity across the firm. Apollo has rapidly adjusted to working remotely further embracing technology to ensure a relatively seamless transition to work from home environment across the firm's 15 offices around the world. Additionally, over the past couple of months, we have spent a great deal of time with the portfolio companies in the various funds we manage. In early March, we created a portfolio crisis response team, which has been meeting daily and remains in constant communication with the management of our funds portfolio companies ensuring best practices are shared across areas such as healthcare, business operations and capital management.

With respect to the SBA's Paycheck Protection Program or PPP, none of the companies controlled by Apollo or the funds we manage will be utilizing this program. Similarly, although we are still reviewing the guidance recently announced by the Federal Reserve, we do not anticipate that the Main Street Lending Program will provide any relief or financial assistance to companies controlled by us or our funds. We have been able to leverage the knowledge across the Apollo platform to provide advice and support to these businesses. As Josh will discuss in greater detail shortly, the investment portfolios remain in good shape due to our consistent focus on value pricing discipline, conservative underwriting and use of the less leveraged than the industry.

In considering the tremendous pressure that COVID has placed on our society as we unite to fight this pandemic, we have also placed an emphasis on identifying how we can support and empower the communities around us. Between Apollo and current portfolio companies, our shared efforts amount to over $50 million in relief effort contributions globally to-date. Various portfolio companies have also stepped up to provide aid in other ways. As an example, Diamond Resorts is providing free lodging to healthcare workers and first responders while LifePoint as partnered with authorities to set up a temporary hospital and has participated in drive-by COVID testing events. McGraw-Hill Education is offering free access to online Higher Ed coursework and training professors and students to transition to digital learning platform. And Shutterfly and Amissima, among others, secured, funded and donated items such as masks, ventilators and hospital supplies. These are just a handful example out of many and I could not be more proud of our employees and those in our funds' portfolio companies who have assisted and championed these efforts.

Amid these challenging circumstances, we have been able to demonstrate the resiliency of the Apollo model. Now more than ever, Apollo is well-positioned to preserve and drive exceptional value to our investors, which include pension funds representing teachers, firefighters, police officers and government workers, among many others, some of which are on the front lines of the pandemic. We take our fiduciary responsibility to them extremely seriously. Core to Apollo's investment philosophy is our ability to both preserve capital and create value for our investors across cycles, especially during economic uncertainty. Apollo founders have been through five cycles over the past 30 years and each downturn presents unique opportunities as we navigate the dislocation and identify misprice risk.

Our platform is resilient. Our FRE is durable and growing and we are playing offense utilizing our decades of experience in times of dislocation. In fact, one of the hallmarks of the Apollo brand has been to perform at extraordinary levels in times of market and economic volatility. Our investments have been positioned defensively and our funds portfolio companies remain in good shape. Offensively, we have been investing opportunistically and during the quarter, gross purchases were $40 billion across the platform with another approximate $10 billion in April. We have successfully created value through prior market dislocations by playing both defense and offense. And as Josh will described in greater detail shortly, we expect to continue to do so through the challenging economic environment we see ahead.

With that, I would like to turn the call over to Josh to provide an overview of our business operations for the first quarter.

[Josh Harris, Co-Founder, Senior Managing Director]

Thanks Leon. First, I would like to express my heartfelt wishes to everyone listening at this time to you and the families healthy and safe. For the last few months, we have seen our global workforce come together seamlessly, as Leon mentioned, ensure that our people and portfolio companies are supported through a rapidly changing environment. I am incredibly impressed with the way everyone has risen to the occasion. Thank you to all of our employees. You have done a great job.

Turning to the business. I am going to spend some time discussing how we reacted to the significant market volatility that began in late February. But first, let's discuss several critical objectives that we have been accomplishing. Apollo's growth remains a continued focus of management and notwithstanding the difficult first quarter mark-to-market adjustments, we still feel highly confident that we will grow fee related revenues, FRE and AUM in 2020. Notably, as we presented in Investor Day last fall, we believe that FRE and stable FRE margins have durability that are stable, FRE and FRE margins have durability in adverse market environments. Certainly, 2020 is probing us out.

Our robust FRE is supported by locked-up and long-duration assets, as over 90% of our AUM is in permanent capital vehicles or have a contractual life of five years or more from inception. In April, Athora closed on the acquisition of VIVAT, adding an incremental $45 billion of assets under management and bringing pro forma assets under management at March 31 to $360 billion. In addition, during Investor Day, we announced that minimum dividend of $0.40 per quarter, which we exceeded this quarter and expect to continue to meet or exceed in subsequent quarters, supported solely by a highly durable FRE base.

Lastly on performance fees. These will be realized over a cycle. While we can't predict timing, we are still very confident in the quality of our investment portfolios and returns that they will generate over time. That said, due to the market environment, the portfolio has experienced unrealized mark-to-market volatility during the quarter, which Martin will discuss a bit later. However these portfolios remain in good shape and we don't expect much in the way of impairments over time. While a near term delay in realized performance fees is to be expected as a result of the volatility, we still believe that there will be significant performance fees generated over time. In the meantime, FRE will continue to underpin cash generation and drive our dividend.

Given our value orientation heading into this market dislocation, our portfolios were invested in a defensive manner with the expectation of an economic downturn following a decade long bull market. For example, Private Equity Fund VIII portfolio companies were acquired at a 6.5 times enterprise to EBITDA multiple on average, excluding any cost savings and they had only 3.6 times debt to EBITDA or leverage on average, well below industry levels. We invested with an emphasis on durable business model with strong free cash flow and despite the challenging economic environment, we remain confident that Fund VIII will perform well over time. We recently created a watch list that includes companies in stressed situations. As of March 31, these companies represented less than 5% of the current value of Fund VIII. We continue to work with these companies to support their operations and preserve value.

Looking back to the last crisis provides some context. At their lowest point, Fund VI and Fund VII are 2006 and 2009 vintage funds, were marked at 0.6 times and 0.5 times at the multiple of net committed capital, respectively at their low points which reflected sharply negative but temporary, I underscore temporary, unrealized marks on existing investments and also created a market environment in which we were able to deploy a lot of new capital at very attractive rates of return. Through March 31, 2020, on that same basis, we have achieved multiples on both of those funds of greater than two times. As of the end of the first quarter, Fund VIII was marked at 1.3 times multiple despite the negative unrealized mark-to-market adjustments in the first quarter.

As we previously discussed, with respect to credit, as the credit cycle was aging, we have positioned the portfolio towards higher-quality senior secured credit. We had also proactively decreased our exposure to energy and retail. These allocation decisions were particularly beneficial during the first quarter as our credit business meaningfully outperformed the broader credit indices, down 9% in aggregate compared to negative 13% performance for the S&P Leveraged Loan Index and the Bank of America Merrill Lynch High-Yield Index. Of note, credit strategies are multibillion-dollar credit hedge funds was up nearly 10% year-to-date through Wednesday.

Deployment. Since the portfolios we manage will defensively positioned, we were able to quickly pivot to offense in the first quarter. During the quarter, we were extremely active and as Leon mentioned, we had gross purchases of approximately $40 billion or roughly double that of a typical quarter, with the majority in March. This is a testament to the strength of our global integrated platform and our broad investment expertise across markets and capital structures. Roughly two-thirds of these gross purchases were concentrated in performing credit mandates with the remaining one-third in opportunistic vehicles. Both of those strategies providing liquidity to the broader markets and certain individual companies.

We remained very active in April with approximately $10 billion of gross purchases, aggregating roughly $50 billion of purchases over the last four months. And we continue to monitor a very, very strong pipeline of opportunities across private equity, credit and real assets as the market environment continues to evolve. Our deployment activity during the quarter was indicative of the market backdrop as the Fed moved quickly to enact various monetary and the fiscal authority stimulus programs to support market liquidity and functionality. Markets stabilized across the board.

In our view, some portions of the market moved above fundamental value. As pricing in high-grade credit markets recovered, we reduced exposure locking in substantial gains for our clients and are currently repositioning that capital into more idiosyncratic opportunities to capture very attractive risk return opportunities for our clients. In general, while we believe that the broad markets are ahead of fundamentals, there are still a large number of companies that are over levered and in need of restructuring or additional capital, notwithstanding the supportive efforts of the government.

With the world's largest alternative credit platform, Apollo is uniquely positioned at the intersection of investors seeking yield and companies looking to borrow funds. We are now increasingly focused on dislocation, direct origination and providing capital solutions for franchised assets. For example, in the last week we announced two capital solutions transactions for our Hybrid Value Fund, including a $1.2 billion preferred equity financing led by Apollo for Expedia, a leading travel platform and a $300 million secured note for Cimpress, a leading global e-commerce provider of customized print, signage, merchandise and other marketing products. These investments highlight what we believe is a true advantage of Apollo's integrated platform combining origination, capital markets and deep industry expertise across the firm to deliver attractive risk return opportunities to investors during volatile times.

Fundraising. Moving to fundraising. Apollo's investment capabilities during challenging market conditions is well recognized by our global investor base. To address pockets of market dislocation, we are increasing the target size for certain funds, accelerating the timeline for other fundraisers and launching new strategies. $2 billion dollars of fund raising across several strategies targeting dislocation, origination and capital solutions. The number of incoming calls we are receiving from investors is increasing rapidly.

As an example, in the last month, our third Accord fund, which focuses primarily on dislocated corporate credit, called capital and became fully invested within seven business days and we swiftly launched and have already closed on a new $1.5 billion dollars for Accord III B. We expect fundraising for Accord IV will follow shortly.

In addition, our Hybrid Value franchise has been highly active in providing capital for great businesses. And we expect to launch Hybrid Value Fund II later this year. Finally, we remain in the market for real assets related to strategies such as infrastructure equity and U.S. and Asian real estate, all of which are seeing attractive opportunities emerge in distressed, stressed and capital solutions.

To conclude, since our founding 30 years ago, Apollo has built its reputation on navigating all market environments, but particularly challenging ones. It's very successful on the half of its investors. While our first priority has been and continues to be the wellbeing of the Apollo community and the world at large, we also remain keenly focused on delivering attractive risk return opportunities for our investors and on delivering earnings growth and attractive dividends for our shareholders.

With that, I will hand the call over to Martin to cover some of the financial highlights of the quarter in greater detail. Thank you.

[Martin Kelly]

Great. Thanks Josh. As Leon and Josh mentioned, we have seen a tremendous response from all of our employees through this challenging environment. We quickly moved towards a fully remote work construct to ensure the health and safety of all our employees leaning heavily on our technology platform and robust operational processes. We have been very pleased with the seamless transition of our workforce to this new model of working from home, which coincided with one of the most active investing environments that Apollo has ever seen.

We announced a dividend of $0.42 per share for the quarter, which is fully supported by our after-tax FRE. During the first quarter, we generated fee related earnings of $0.52 per share on a pretax basis. As Josh mentioned, this quarter underscored the strength and stability of our fee related revenues. Management fees declined by just $5 million or 1.4% during the quarter as realization activity in private equity lowered the fee paying AUM base.

The modest impact to management fees resulting from credit and real asset mark-to-market adjustments was offset by capital deployment. The run rate impact on management fees of the widening and credit spreads in March is consistent with the impact we outlined at our Investor Day in November. Costs remain well-controlled, which in conjunction with durable management fees, helped support our FRE margin of 54%, in line with the prior quarter. Notably, over the last 12 months, FRE totaled $2.21 on a per share basis and grew by 8.5% on a dollar basis, driven by 10.6% growth in management fees.

Turning to the incentive business. Notwithstanding the $68 million of gross realized performance fees, our pretax incentive earnings were negative for the quarter. In addition to the traditional costs associated with direct profit share interests in realized carry and financing costs associated with that debt and preferred securities, we incurred one-time costs to wind down our managed account arrangement and we funded our incentive pool with a portion of the realized performance fees. AUM declined by 5% quarter-over-quarter to $316 billion, a result of unrealized mark-to-market adjustments on our portfolio, offset in part by fundraising.

The impact to fee generating AUM during the quarter was more modest, a 2% decline to $242 billion, as our management fee base is largely insulated from unrealized mark-to-market movements. Having said this, on April 1, Athora closed on the acquisition of VIVAT, adding an incremental $45 billion of assets under management for the second quarter and bringing pro forma AUM at March 31 to approximately $360 billion. Of this, permanent capital vehicles amount to more than $200 billion or 57% of our total pro forma AUM.

During the quarter, organic inflows continued to be healthy and in line with previous years at $7 billion, particularly in a quarter without an opportunistic flagship fundraise or a strategic platform acquisition. Flows included capital raised by Athora to fund its acquisition of VIVAT, organic growth at Athene and positive flows across a number of credit funds and managed accounts. Gross redemptions, which was 0.1% of beginning of. AUM, reflecting the largely long-dated nature of our funds' capital. These redemptions were more than offset by inflows into those same strategies.

Turning to investment performance for the quarter. In private equity, price declines of 21.6% were in line with declines in the broad equity markets. Our energy exposure in private equity remains modest at just 4% of invested assets. In credit and real assets, our overall returns of minus 9% and minus 6.5% outperformed their respective market indices as a result of sector allocation decisions and careful security selection.

Our balance sheet was impacted by unrealized negative marks in two respects in the quarter. First, we continue to market our investment in Athene to market, including the additional shares accumulated during the quarter under the equity swap transaction between Apollo and Athene. Since these shares are subject to sale restriction for three years, we take a further discount to the quoted market price to reflect this lock-up. The aggregate impact on our balance sheet of these components was approximately $3 per share.

Second, price declines in our investment portfolios reduced our net carry receivable and created a mark-to-market obligation to return carry of $1.31 per share. Ultimately, we believe this obligation is temporary and will not be realized as we remain confident in Fund VIII and more broadly our platform's ability to generate meaningful realized returns over time. Fund VIII would require an approximate 11% appreciation in value from March 31 to remove this obligation, approximately equal to changes in the broad equity markets in April.

Before I conclude my prepared remarks, I would like to make a few comments regarding liquidity across the firm and our expectations for index inclusion. Apollo remains in a very strong liquidity position with approximately $1.5 billion of liquidity available on our balance sheet. In addition, our dry powder position was robust at the end of the quarter at $41 billion. And as Josh discussed, we see opportunities to raise incremental capital for numerous strategies.

Finally, as it relates to index inclusion, we have amended the company's charter and bylaws to reflect the change in the voting rights of our Class A shareholders. We believe these changes should make us eligible for inclusion in the Russell indices as part of their upcoming June rebalance.

With that, we will now turn the call back to the operator and open the line for any of your questions.

[Operator]

[Operator Instructions]. Our first question comes from the line of Craig Siegenthaler of Credit Suisse.

[Craig Siegenthaler, Credit Suisse]

Thanks. Good morning everyone.

[Leon Black, Founder, Chairman, Chief Executive Officer]

Good morning.

[Craig Siegenthaler, Credit Suisse]

First, just starting with the FRE stability. Can you walk us through the sources of potential future FRE downside, if any? And I am thinking about marks on NAV based vehicles, CLO management fees and performance revenues. And just help us think about if there could be any downside from these sources of the next few quarters?

[Leon Black, Founder, Chairman, Chief Executive Officer]

Why don't you --?

[Martin Kelly]

Sure. It's Martin. Yes, I will take that. Hi Craig. So as I mentioned in the comments, sensitivity that we outlined at the Investor Day to downward marks has sort of proven out to be de minimis number. Probably that's reflected in the Q1 numbers on their part because it could occurred halfway through the quarter. But as I mentioned, deployment and inflows have mitigated that downdraft. So I use the frame of reference and assumptions that you want to make around where the markets go from here to, as I mentioned, what the impact on management fees looks like. But it's entirely consistent with what was laid out. On CLOs, the structure of our CLO vehicles is such that we are not, most of our fees are protected and in base management fees, we don't have a lot of variability to performance fees in the event of the downgrades on CLOs. So I would sort of, as I mentioned, that as low single digit million dollar range for the balance of the year, even assuming there is downgrades ahead of us. And then in terms of performance revenues, it's low right now. And so, I would sort of assume the current run rate is appropriate for the foreseeable future.

[Operator]

Your next question comes from the line of Patrick Davitt of Autonomous Research.

[Patrick Davitt, Autonomous Research]

Hi. Good morning. Sorry. Josh, when you were kind of going through the view that you would be raising bigger funds and accelerating funds, your line I think cut out for everyone, right when you gave the number in terms of AUM. Could you go through that again? The AUM number.

[Josh Harris, Co-Founder, Senior Managing Director]

Yes. I think we are looking at lodging strategies that we expect will accumulate $20 billion over the next quarter. And well, I think the other thing I was saying is that and I was talking about them being broadly across many, many credit strategies, everything from capital solutions, hybrid value to market dislocation strategies such as Accord to stressed and distressed strategies. And so that's what I had said. And a number of other origination strategies. And even though, obviously, the Fed has stabilized the markets and broadly the markets, I think what I said were maybe ahead of fundamentals. So there is a lot of opportunities in a lot of great companies that need capital. And so we are there across the board with the broadest alternative credit platform.

[Patrick Davitt, Autonomous Research]

You cut out just on the number. And the number was $20 billion.

[Operator]

Your next question comes from the line of Alex Blostein of Goldman Sachs.

[Alex Blostein, Goldman Sachs]

Thanks. Hi. Good morning everybody. So I wanted to ask you guys on the interplay between deployment and fundraising in today's cycle relative to the financial crisis. I am really thinking about what's the same, what's different, where do you see a big opportunity perhaps today for deployment versus the financial crisis? And then zoning in specifically for Fund IX, I think that Fund is over third committed or deployed. What are your expectations specifically for Fund IX deployment over the next, call it, 12 to 18 months at which point maybe we will starting think about the successor fund? Thanks.

[Josh Harris, Co-Founder, Senior Managing Director]

Yes. So, we have seen, let's start with the last part of it, like Fund IX has obviously shifted almost entirely into credit kind of distressed for control, stressed investing and we have seen the pace of that fund go up significantly in the last month-and-a-half. And that's continuing into April. And so we would expect acceleration of the pace of Fund IX and we would expect a shift from traditional private equity to a more distressed for control private equity as we allow for our investors to achieve greater risk return in this market environment.

In terms of the investors, the investors actually, from our point of view and I think this makes us unique, I was just on the phone with our private equity team right before this and we are getting a tremendous amount of, most people are playing defense and we are getting a tremendous amount of incoming from our investors who have identified us as being uniquely positioned in this environment to take advantage of risk return that exists in the marketplace. And so we are getting a lot of incoming. And unlike the financial crisis where people were generally focused on everyone in the industry, I will talk industry-wide, not calling capital. At least in our case, we are not seeing that at all and maybe with the learning of the financial crisis. But we are seeing people actually calling us up and saying, what new funds are you thinking about? Do you have any co-invest opportunities?

In terms of the evolution of our platform and the industry from the financial crisis, I would say on the industry side, the financial crisis was just a massive market dislocation and a breakdown in the markets and then followed by a recession. But there were many, many securities were broad markets were mispriced because of a lack of liquidity in the markets. In this particular crisis, with the appropriate actions of the Federal Reserve and the government, there's a lot of liquidity in the marketplace.

But the economic destruction that's occurring because of the unfortunate virus is likely to lead to a longer economic cycle, more of an L than a V. And so there are many, many companies and many, many situations where the leverage isn't appropriate or they need capital. And so we are seeing much more idiosyncratic opportunities to invest on a security-by-security, company-by-company, asset-by-asset basis. And that exists, probably it's going to require patience and take some time and very, very deep detailed and deep industry and company and asset expertise.

Jim, do you want to add anything?

[Jim Zelter]

No. I think I would just add, the evolution of the markets and capital markets and the role we play is just broader and broader. And as Josh mentioned earlier, our fundraising is going to be on dislocation strategies, capital solutions and distressed. He hit the distressed. But certainly I would say in terms of, we have been saying for a few years that the biggest risk out there was the market structure and hence the activity that we put forth on our Accord and our other drawdown vehicles in the quarter that were trigger-based. And also, as we think about our large cap origination potential platform and the success of Hybrid Value [indiscernible] through relatively newer strategies that we have developed over the last five to seven years. So we have a lot more tools in our toolbox from which to be a very active participant in the markets today.

[Leon Black, Founder, Chairman, Chief Executive Officer]

Just as we...

[Josh Harris, Co-Founder, Senior Managing Director]

Yes. As I have mentioned, well, go ahead.

[Leon Black, Founder, Chairman, Chief Executive Officer]

Just to underscore what Josh and Jim have just said and give you a little historical perspective. We have now been through four and this is our fifth down cycle in 30 years. And I think one of the unique things about Apollo in basically setting up the firm 30 years ago as "a firm of fund for all seasons" is able to play cycles whether they are going up, down or level.

And if you put in perspective, right after the market dislocation 13 years ago, was our Fund VII in private equity. That fund was two-thirds invested in distress. Fund VIII subsequently was less than 5% distressed. So that is the bandwidth vis-à-vis distress for control that can come out of the private equity funds. And as Josh has said, our expectation is that over the next two years, there are going to be a lot more distressed opportunities.

But also to echo what Jim said, we are a very different firm than we were in the first few market dislocations. And our credit platform, the alternative credit platform, just in the last 13 years has grown from $20 billion to something like $240 billion and private equity is now about a quarter of what the firm does. So both the distressed opportunities in private equity, but even as importantly, if not more importantly, what Jim is saying in terms of the opportunities in the alternative credit platform side, we think are going to be massive given the global economic environment.

[Josh Harris, Co-Founder, Senior Managing Director]

Importantly, 80% of our credit platform is performing. So even though we have always been known as a distressed or stressed from 80% of what we are doing in credit is not that. It's a capital solution that is providing capital to great companies and helping them either deal with a stressful situation or grow.

[Operator]

Your next question comes from the line of Bill Katz of Citigroup.

[Bill Katz, Citigroup]

Okay. Thank you very much for taking the questions and all the detailed disclosure. Just sticking with the elevated pace of deployment that you have cited, could you help me understand the waterfall between that incremental pickup and how that might be through fee paying AUM or asset gathering? I am just trying to understand how the economics would then sort of play through to earnings?

[Leon Black, Founder, Chairman, Chief Executive Officer]

Martin, you want to take it?

[Martin Kelly]

Sure. Yes. Bill, I will take that, sure. So let me just frame a few numbers that might help. So we have used this gross purchases, gross price data this quarter in view of the environment that we are in and also just to demonstrate the scale and the breadth of the platform and how active we have been. I view this as a supplementary disclosure this quarter to our typical deployment, which you can see in the documents, which is around $5 billion for the quarter and that's sort of run rate with what's it been.

And that lower number is a narrow definition that's specific to some opportunistic drawdown funds that are the flagships. So of the $40 billion, around a third of that, as Josh mentioned, is in funds that are pursuing higher return targets. Most of that was done after the dislocation started to impact us in mid-February on. And the other two-thirds was in performing vehicles which supports the market through a volatile period. You can see the impact of all the activity in the ending fee-gen AUM. So that's the best I could point to look at. And you can also sort of triangulate that with how dry powder has changed relative to inflows over the quarter.

But I would say, the $40 billion represents some repositioning. There's some sales in there. Some of that's on leverage. But it all sort of translates itself into what you can see as the fee base in the AUM tables.

[Leon Black, Founder, Chairman, Chief Executive Officer]

But most of the $40 billion rate or a lot of it would be on behalf of our big insurance clients or in our performing credit vehicles...

[Josh Harris, Co-Founder, Senior Managing Director]

Correct.

[Leon Black, Founder, Chairman, Chief Executive Officer]

Which it would not be in the $5 billion and generally that obviously would not ultimately affect fee paying, fee generating AUM for the most part. So you are going to have to pick up incremental capital in those performing credit vehicles to generate the fee paying AUM. And you are going to have to see asset growth in the insurance entities. But on an underlying basis, we feel like that was enormously productive, enormously. So just because it's not translating into fee generating AUM, it's going to translate into a much stronger performance for all those vehicles relative to peers and therefore ultimately into fundraising, which is where you come back around to the $20 billion number and ultimately the opportunity for our insurance platforms to grow.

[Operator]

Your next question comes from the line of Glenn Schorr of Evercore.

[Glenn Schorr, Evercore]

Thanks very much. Two quick ones, one PE, one insurance. On the PE side, I am going to aggregate a bunch of comments you said. But portfolio strong, low entry, more close, low leverage, reduce energy, reduce retail and you defined less than 5% as stressed. So I am sure, the mark on the quarter obviously was almost 22%. I am curious what you think where the market overreacted to? And then, if you could talk about April improvement because it was good month in the market at Athene and ADT obviously got better. But just curious if you could sum that all together for us

[Leon Black, Founder, Chairman, Chief Executive Officer]

Yes. I mean, our marks are basically a function, our short term marks are a function to a large extent, are driven by like market volatility. And so obviously we have many, many different ways of valuing companies. But certainly, we are a prisoner to how the market looks at things on a very short term basis in the short term relative to unrealized marks going forward. So that's really the sum of it.

I mean it's not that the underlying companies are, like I said, I believe our portfolio is in very, very good shape. And the underlying companies themselves, the 5% number is meant to connote how we really feel that we don't really feel like we have a lot of issues. And as we look at and we listen to our investors and try to assess what's going on out there in the world away from us, we think we are in very, very good shape. And we are spending a lot of time, I mean, working on new investments. And obviously, we are not ignoring our portfolio. But the truth of the matter is the marks are for the most part driven by the public markets in a variety of industries and that's not something we can control in the short term.

I would say, the 11% that Martin threw out of the S&P rise would get rid of the clawback. And you can look at our public companies. You will see it's ahead of the S&P. And so you get the same reversion on the upside as you do on the downside and that's just unfortunately how the accounting works. But I don't think it's really that consistent in the short run with how the positive nature of how we see our portfolio is doing.

[Martin Kelly]

Yes. And I would just underscore, we use public comps extensively. Most of our book is comped against public data. And the dispersion in the marks this quarter was really wide depending on what sector, what industry vertical our portfolio companies set in. So a very volatile period. March 31 didn't catch it at the lows, but it was certainly a lot lower than it is today. And so we expect that to translate into ups. Obviously, in our private books when we go through that process at the end of this quarter as it's coming through to publish.

[Leon Black, Founder, Chairman, Chief Executive Officer]

Yes. As of March 31, there's a real lack of differentiation in the stock market. Everything just came down. And things, you are a prisoner to that in terms of how you mark your books. That's how you mark it to a large extent.

[Operator]

Your next question comes from the line of Jeremy Campbell of Barclays.

[Jeremy Campbell, Barclays]

Hi. Thanks guys. I just wanted to clarify one thing on that Martin question. Martin, when you said 11% to remove the impairments on Fund VIII, were you talking about quarter-end? And with the S&P up about 11%, we are kind of already there. And then Josh, I know you have mentioned just now that your book, you think, is ahead. So I am just trying to triangulate that to where we might be sitting today on the marks and the impairment level.

[Martin Kelly]

Yes. So the clawback or the negative carry, if you like, is a mark-to-market concept and it will reverse and eliminate with an uplift in valuations. And so across the whole portfolio, we would need 11%. It so happens that the broad equity markets are also up by the same number as a guide or as a proxy up. And as Josh mentioned, our public positions are up by more. And we will see where the privates end up for the quarter once we go through that process. But 11% is what's needed to take the clawback back to zero and that takes that issue off the table.

[Jim Zelter]

I would also like to just add something Josh said about the market not differentiating. Look, there have been many roads to Rome in terms of our industry. We have taken a much more conservative road than many of our peers. There is a real difference in playing growth and paying an average of 11 to 12 times EBITDA and levering it seven times versus what we have done in our model which is to buy companies at 6.5 times and lever them at 3.5 times.

We just haven't played the same levered growth model as many others in our industry. And when a sharp correction comes like this, you have to be almost into it and obviously you have to look at it on a case-by-case method, which is what we do. But that's why when we look at our portfolio, there's only 5% of the names that we have put on our watch list. That portfolio is in very good shape.

[Leon Black, Founder, Chairman, Chief Executive Officer]

Right. We clearly have a very, on a detailed basis, company-by-company, industry-by-industry, we have a very different view of the valuation of our portfolio over time than the market is currently reflecting as of March 31.

[Operator]

Your next question comes from the line of Ken Worthington of JPMorgan.

[Ken Worthington, JPMorgan]

Hi. Good morning. A Form 4 hit on Wednesday night on insider selling a bit over $20 million worth of stock. I know this is just a drop in the bucket in terms of management ownership. But can you talk about how the 10b-5 plans work. And since ESG is getting so much more attention these days, how much control insiders have in terms of selling stock in the days immediately preceding an earnings release?

[Martin Kelly]

Yes. I will comment on that. It was a 10b5-1 that was filed last year and with different price points embedded within the grid. And so it took effect in the last week based on where prices were. So it was all predetermined and submitted some time back.

[Josh Harris, Co-Founder, Senior Managing Director]

Yes. I would just add that the Apollo founders have restricted liquidity, given the notification, information text and other requirements that are put upon them as part of this process. So as Martin said, the sales were actually initiated last November. And then we will put into 10b5-1 which plays out over a long time based on price and volume considerations that are set well in advance.

[Operator]

Your next question comes from the line of Robert Lee with KBW.

[Robert Lee, KBW]

Great. Thanks for taking my questions and I hope everyone is doing well. Can you just remind us on the VIVAT, the $45 billion kind of the fee impact, the economic impact? And then also, thinking of it being in Athora, I would certainly expect this environment should create opportunities eventually for them. Can you just remind us on their kind of capacity for transactions over the coming year or so and available capital?

[Leon Black, Founder, Chairman, Chief Executive Officer]

Sure. So Rob, I will take the first one and then Josh, maybe you take the second one. So VIVAT closed into Athora on April 1, $45 billion. So that fee, all of those assets are fee paying from that date. The fee construct for Athora is similar to how it has been with Athene, in the sense that there's a base management fee, which is lower than it was at Athene given the flexibility or the lower flexibility on managing assets in a European regulatory context.

And then there's a sub-advisory component to it. And so the sum of the two are important to the overall economics. The sub-advisory will be low and it will grow over time. And so over time, over a period of years, I would expect that the economics will approximate that of Athene on a dollar-to-dollar basis. But the speed at which that occurs is really dependent on how quickly the sub-advisory asset base grows and in what asset classes.

[Josh Harris, Co-Founder, Senior Managing Director]

Yes. But when you go out two or three years, we would expect it to be similar to Athene once it ramps on a profitability per AUM basis. So that maybe at least gives you a flavor. But it's going to take a little while to get there depending on our sub-advisory.

So going into your first question. Look, the insurance industry, right, has been a very good area in terms of acquisitions for us and for our platforms. And that's just to remind everyone that's because there's been a lot of regulatory pressure on capital. And so big insurance companies have been selling books of business and kind of rightsizing their own businesses. And there has been a tremendous pressure on people's ability to generate yield.

And when I look at this environment and pressure on capital, so when I look at this environment, I think this environment will enhance and magnify all those trends. Athora just closed on VIVAT and it used up all its capital. But I will say that it closed in a really unique position. That entity closed in a really unique position having a pristine balance sheet. And so it's a very well-positioned to create yield. And our investors have been very supportive of providing more capital to the extent opportunities arise and I think there will be more opportunities.

I think Athene has been going back to, we were talking a lot about. We raised the ADIP fund to invest side-by-side with Athene. And we were talking about a number of about $70 billion in possible dry powder there. And so, we do see the ability to, we think that the industry pressures are going to magnify and we think that we will have opportunities over time. I think, in a period of volatility like this, usually it takes people some period of time, a quarter or two quarters or however long, to sort out like the volatility and rethink their strategies. And so in the short run, you might see a little slowdown. But like, we do think long run, that's going to continue to be a really good area for our platforms and for us.

[Leon Black, Founder, Chairman, Chief Executive Officer]

And I would just say, Athora raised additional capital in the first quarter, which you can see in the numbers. And so part of that was to complete the funding necessary for VIVAT. But there's still about EUR1 billion of excess capital that has been committed to Athora for other acquisitions over time.

[Operator]

Your next question comes from the line of Devin Ryan of JMP Securities.

[Devin Ryan, JMP Securities]

Great. Good morning everyone. My question is really about kind of the shifting tides here more broadly in the landscape. It sounds like there's going to be a lot to do across your organization. But in these moments, there can be kind of new structural opportunities that get created, like Athene coming out of the last crisis. And so I am just thinking about maybe what some of those could look like? Real estate has been a difficult area for the firm to scale. But that landscape is shifting. Potentially some distressed opportunities coming out of this moment. And so I am curious kind of where real estate fits today as an opportunity to potentially substantially scale or acquire a platform? And maybe same question on infrastructure or anything else I am not thinking about. But it would just seem that you guys typically are pretty smart in these moments when you have pretty extreme dislocation. And so maybe there are some things that could be bigger structural opportunities.

[Leon Black, Founder, Chairman, Chief Executive Officer]

I will start and I will turn it over to Jim. I mean, I would say broadly across the board whether it be infrastructure, whether it be real estate, I mean, obviously, when the opportunity turns from more of a growth and high valuation growth environment to a more opportunistic credit-driven environment, we tend to scale our platforms, whether it be on yield where we have been doing really well on real estate anyway or even in the more opportunistic funds, we tend to shift the dial from buying equities in a traditional way to doing more so-called distressed for control or stressed. And so across the board, we are going to see opportunities and all of our platforms are going to scale in a positive way relative to kind of the other environment.

But Jim, why don't you get into more specifics?

[Jim Zelter]

Yes. I would say that it's our view that like we saw in 2008, changing evolution, what makes our business interesting is, we can obviously invest in assets and we can also be a rescue or a variety of capital solution for a company. So to your point, there are opportunities for us to play both sides of that. And I would suspect in real estate, we have a large business in the debt side, less from the equity side. So that ability to originate, whether it's broadly more in the triple-net lease space or other areas on real estate, I think you will see us expand.

We obviously put our foot in the ground about 24 months ago with the purchase of the infrastructure platform from GE. That's been very well received and the performance has been terrific. So, I think what you are going to see for us strategically expanding now is our robust model tells us that origination in a variety of areas, whether it's credit, real estate, infrastructure, we can continue to expand. And I do think that there are some things, I will give you one little nugget to think about.

There certainly is going to be an impact in the CLO market with what's going on with CCC baskets. There's going to be a limitation on CLOs being a solution provider. And therefore, we think about the breadth of the $20 billion that Josh and Leon have talked about, our ability to have vehicles that can fill those cracks and fill those opportunities is really critical to our business. So yes, whenever there's a period like this of dislocation, the sands of origination change, the sands of platforms change and I suspect we will be not only providing solutions for companies and pools of assets, but also holistically which will endure too and order of the benefit of APO as the platform.

[Operator]

Your next question comes from the line of Brian Bedell of Deutsche Bank.

[Brian Bedell, Deutsche Bank]

Great. Thanks. Good morning folks. Just a couple of clarifications and then a question for Josh. Just Martin, on the clawback, is that just simply mathematical? If you would reverse that if the returns got above the hurdle or would you use a lower allocation rate and be more conservative against future downturns? And then, just on the timing of the $20 billion fundraising cash, if you could give us the time frame on that? I don't know if I missed that or not. But the broader question, Josh, is on the $40 billion or really $50 billion of gross purchases, taking opportunities in this environment on the performing credit. How would you compare this to the environment in 1Q 2016 where we also had a dislocation albeit it that was quite brief? And so do you see more opportunities in this environment? Or just the Fed credit backstop sort of also make this more of a short-lived performing credit opportunity?

[Josh Harris, Co-Founder, Senior Managing Director]

So I mean on the second one, I think it would be much longer lived because at the end of the day, the economy itself is really, really hurting. And when the Federal Reserve steps in, obviously that creates great market functionality. But what it can't do is, it can't throw, there's a lot of companies that have no revenues. I was looking at the consensus, GDP estimates in the second quarter down 30%. No one knows. But when you add, when you take all the averages, you are talking about down 30%. And then how fast and we don't really see, like I said in some of my other comments, I think this is going to take a while. Consumer behavior is going to change.

I don't think as the opening itself will take a while and be very staged, there will be ups and downs to it. And unfortunately, we are going to go through in a difficult economy for a decent longer term period of time. And so ultimately a lot of the leverage that existed in the system is too high for cash flows that don't exist over a medium term. And therefore there's going to have to be a deleveraging of the system where capital is key and providing liquidity is key. So I think it will be a much longer situation than you saw in 2016, which was pretty much of a V and sort of more sentiment-based.

In terms of the $20 billion, go ahead. Go ahead, Jim.

[Jim Zelter]

I am sorry. Go ahead, Josh. Sorry.

[Josh Harris, Co-Founder, Senior Managing Director]

No. In terms of the $20 billion, we said we are going to, we expect it's over the next year is what we said.

[Jim Zelter]

And I would add one thing. As Josh said, 2016, 2015, 2016 was about oil and Chinese growth. This is much longer lasting. And I think the theme that we have been talking about and addressing in our platform is, yes, the IG market is open. For the best companies, whether it's Boeing yesterday, massive liquidity because of the Fed programs in the IG marketplace. But in the broad economy, the asset-backed-businesses, franchise finance, SME lending, those industries and those funding vehicles are still, I don't want to say they are broken, but there's sand in the gears and there's underlying economic concerns.

So when we think about the breadth of our platform and what's going on in the headlines in the last few weeks, very interesting. The Fed and Treasury and the government's done a great job. But as Josh and I are talking about, just the extensive impact, you can shut the economy down in a few days, it takes weeks, months and quarters to restart it. And it's that type of environment that we will be active in the breadth of our business.

[Operator]

Your next question comes from the line of Gerry O'Hara of Jefferies.

[Gerry O'Hara, Jefferies]

Great. Thanks for squeezing me in. Perhaps just one on kind of the insurance business and sort of the impact of this sort of low rate environment, how you kind of see that growing, I guess, on an organic basis? And then if memory serves, the liquidity discount that was cited in this quarter with respect to Athene, is that sort of it comes down over time, if I am recalling that correctly? But perhaps, you could kind of refresh us on how that works from a valuation perspective going forward? Thank you.

[Leon Black, Founder, Chairman, Chief Executive Officer]

Martin, do you want to grab that?

[Martin Kelly]

Yes. So Gerry, that's quick one. So yes, the discount is just a term of the lockup and the volatility in the stock. So it's formulaic. It's like an option pricing model. It burns off with time, subject to where it all goes from here. So if vol was flat, you would expect to see a straight line drop off, but it will do whatever vol does between now and three years from now.

[Leon Black, Founder, Chairman, Chief Executive Officer]

I mean, generally I would say, the insurance companies continue to grow organically. You can look at the first quarter and see that. But the low rates really should pressure. It can create a lot of more strategic transactions, sales of books of business, sales of businesses, the ability to buy large chunks of liabilities as some of the other trends that I talked about earlier start to impact the industry at large. And so those people that have capital and those people that have the ability to invest add a little bit of a higher return in a appropriate risk-adjusted way. Those companies and we count our platforms among those companies will be there to be helpful and supportive of the industry in terms how the industry itself is going to restructure.

[Operator]

Your next question comes from the line of Chris Harris of Wells Fargo.

[Chris Harris, Wells Fargo]

Thanks. Hi guys. if we are sitting here six months from now and COVID is still around and there are no meetings or limited travel, how might that impact your ability to fundraise going forward? And in particular, wondering about the successor to Fund IX?

[Leon Black, Founder, Chairman, Chief Executive Officer]

Yes. So I mean I have been actually amazed. I mean I have been on just many, many Zoom calls with Asia, with States, with other geographies around the globe. And there have been a number of annual meetings that have been over video, over Zoom or other services. And like I said, we have been closing capital. The investors, other people have been where they have fundraisings and process has been continuing to close. And so the industry at large has moved very quickly online.

And so I mean I would say, it hasn't really missed a beat, which is surprising to say that but at least that's my observation so far. And like I said earlier also, unlike the financial crisis where we did have a small number even for us but there was a broader number for others of LPs that said, look, if you don't have to make a capital call, don't make a capital call and we are not open for business. We really haven't seen that.

Certainly, from our point of view, we are seeing like people go the other way and say, do you have co-invest? What new funds are you raising like? And I mentioned the Accord III B fund where we literally in a month or three weeks after we have spend Accord III much more quickly than we thought closed $1.5 billion.

And that was a lot of incoming and that was way ahead. When we started it, we had penciled it in to take another 30 or 60 days longer and people were just moving much more quickly. So, we haven't seen the concern that you are raising has not manifested itself. And if anything, I see it sort of slightly going the other way.

[Martin Kelly]

I would amplify on that. I mean, why do institutions give us money? They give us money, one, for performance. And, two, they give us money because we have created a chemistry of trust and a relationship over time. We have been at this 30 years now. We have a AAA group of institutional investors. And as long as we keep performing, the world, I mean, in the last few years has broken up to the haves and have-nots.

The large private equity funds that have been in business and have created this chemistry have garnered outsized percentages of the money that's out there. And there's a lot of capital out there. In an ultra-low interest rate environment, there is a lot of cash still around looking for yields, looking for returns. And so I would agree with Josh. If anything, this will continue to play to our benefit as long as we perform because we already do have 30-year relationships with the large pools of capital that exists.

More specifically to Fund IX, again we are bullied. Look, I have been able to perform in good times and bad. But clearly distressed environments have played in our favor historically over the last 30 years with five downcycles. But in Fund IX, we are about a third invested. That was a $25 billion fund. So even with outsized opportunities that's probably is going to be at least 18 to 24 months before we are out fundraising again there.

[Operator]

Your next question --

[Jim Zelter]

Right. And I have heard, just to underscore Leon's point, like I have heard from a lot of investors that the bigger branded players in general, the trusted players like, it's much harder now. If you don't know someone you are trying to raise a first time fund and you are trying to do the first meeting or resume or the second or third or the fifth, it's much harder. But for someone you have been in business with for many years, we are benefiting and the large branded funds are benefiting from that trend.

[Operator]

Your next question comes from the line of Michael Cyprys of Morgan Stanley.

[Michael Cyprys, Morgan Stanley]

Hi. Good morning. Thanks for squeezing me in here. Just a bigger picture question. Curious for your views or perspectives, what sort of changes we could see the consumer and corporate behavior on the other side of this crisis? And also given the growing deficits and concerns around state and local budget shortfalls and central bank actions, I guess, what sort of implications do you see for inflation, tax rates and the investing landscape?

[Josh Harris, Co-Founder, Senior Managing Director]

Well, I will start and maybe Jim or Leon can pile on. I would say that certainly consumer behavior, I mean, consumers represent 70% of the U.S. GDP. And clearly everything from all types of services, certainly restaurants, certainly events, people, Disney is talking about the capacity of their parks being lower. So kind of restaurants, events, meetings, there will be a significant change in the consumer behavior in terms of people's willingness to interact with others for some period of time unless there's a vaccination or a cure found, which I think is more hopeful. But it continues to be unclear whether that's going to happen.

So you are going to see a lot of that. You are going to see an acceleration of what people do online obviously. And so those would be some of the considerations that I would talk about. In terms of inflation, there's just really no hint of inflation right now. There's just a massive lack of demand because consumers are just not buying what they were buying. And so even though you would expect that when there's this massive influx of money and massive fiscal stimulus there might be inflation.

It's well below the targets that have been laid out there by the Federal Reserve and others. And there's a lot of slack in the global economy and a lot of slack in the U.S. economy. And so you might see it selectively. But it's just not showing up right now. And you can just look at the price of oil and commodities, right and see certainly that part of it which tends to correlate is way down.

So I don't know, Jim or Leon, if you have any other comments?

[Leon Black, Founder, Chairman, Chief Executive Officer]

I think you hit them, Josh. I think the idea of higher rates any time soon, let's say, for this decade we are going to be in a very low rate environment. And there's going to be, the government were piling on a lot of debt. But I think Josh really hit the two most important points.

[Operator]

Your next question comes from the line of Mike Carrier of Bank of America.

[Mike Carrier, Bank of America]

Hi. Good morning and thanks for taking the question. Just a question on the private versus public. So on the public market, there's a bounce back and sort of interesting policy moves and some hopes on reopening. But the economic outlook of private company fundamentals seem to paint a different outlook. And it looks like you were able to take advantage and create value on the public side in March and April. Can you provide some more color? And just what way we can try to assess the portfolio companies bridge the gap until the economy returns to like a new normal including how much capital is in reserve in the funds?

[Josh Harris, Co-Founder, Senior Managing Director]

Yes. Look, I will start probably and then, Martin, I don't know how much of those numbers that we released. But I would say that, look, we came into this with very low leverage and a lot of liquidity and very few covenants and very low maturities or amortization and a lot of flexibility in our credit documents. So we sort of did a lot of the planning in advance. We have been, I think publicly saying for a while that we foresaw that something, we didn't know what but that we worried about volatility and economic downturns and something could happen.

And so our portfolio today from a liquidity and from an amortization standpoint is in very good shape. And the fact that we bought it at very low multiples is serving us very well. And the cash flows themselves are not uniformly but hanging in there pretty significantly. And we are underweight energy. We are underweight retail. And a lot of the sectors that have been hit the hardest, travel and all that and things like that, we just didn't have a lot of that leisure hotels.

And so, like we are very well positioned right now from a portfolio standpoint. Obviously what you would do and should do is think about how do you preserve liquidity? What can you do to do that? And raising capital and a marketplace that we think is technically driven and ahead of itself. And so we are looking at opportunities to do that.

I mean, Martin, I don't know if you want to add on the fund liquidity. We have ample liquidity. I mean we spend a lot of time on this. I don't know what it really is. But we are very focused on funding liquidity. There's ample liquidity. We have more than enough liquidity for any sort of issues. And what we are now spending a lot of time on, enormous time on is like how do we spend the excess liquidity and funding on offense. And so that's how we are spending our time. I don't know if we released the numbers.

[Martin Kelly]

Yes. I think that covers it

[Leon Black, Founder, Chairman, Chief Executive Officer]

And if I could just add. I think that question, Josh, obviously addressed it for us, but it's the other side of that coin that gets us being very thoughtful and optimistic about our landscape because many other firms, investors, companies out there are probably a bit more levered and whether it's the solutions we brought to Expedia or Cimpress this past week, many, many, many tools we have will allow us to be that provider of solution capital. So again, well, it may not be as relevant to Apollo because of our discipline and value, it's certainly relevant for many, many other swaths of the economy.

[Josh Harris, Co-Founder, Senior Managing Director]

Yes. And we are obviously ahead of, because we have been playing so much offense. We are looking across the landscape and we have 40 just in private equity alone and Jim can take the credit, we have 40 open to buys. We have reviewed hundreds and hundreds of companies and not everyone was thinking the way we were thinking. And so that provides, we are going to have opportunities and not just private equity based companies but public companies. It was really hard to predict. The fact that, I mean, no one predicted the kind of revenue loss that has existed. And basically in many, many industries, when you have no revenues and you have fixed costs, like there's a need for cash to get over the hump at a minimum. And so we have a very large funnel of opportunities to take advantage of.

[Operator]

Your next question comes from the line of Chris Kotowski of Oppenheimer.

[Chris Kotowski, Oppenheimer]

Yes. Good morning. Thanks. I just wanted to go back to slide 12 and the clawback liability because last quarter you had the realized loss in Constellis. And then you said, okay, the next whatever it was $100 million or so of realized gains would be dedicated there. And years ago, KKR had this concept of a netting hole of mark-to-market positions that could only be refilled with realized gains. But what you are saying is, this $1.31 of clawback liability that just goes away even with unrealized appreciation. And so if you had 11% or more appreciation and then had realized gains, that would generate distributable earnings then?

[Leon Black, Founder, Chairman, Chief Executive Officer]

Yes, Chris, for sure. So it's a point in time mark-to-market. It's the same on the negative side on the clawback or the payable side as it is on the upside. And so we determined what we think are the appropriate valuations for all the companies in the fund and the portfolio. And then we impute carry off that. And this arises because Fund VIII has made prior distributions of carry. And so at a point in time at March 31, using those unrealized marks, that would be the imputed repayment. But it reverses itself with unrealized appreciation at the same way that normal carry is sort of created and booked with appreciation. So it's symmetrical.

[Operator]

Thank you. That was our final question for this morning. I will now return the call to Gary Stein for any additional or closing comments.

[Gary Stein, Head of Investor Relations.]

Great. Thanks operator and thanks everyone. Appreciate spending time with us this morning and we look forward to speaking with you again shortly. If you have any questions, please feel free to reach out to me or Ann. Thanks.

[Leon Black, Founder, Chairman, Chief Executive Officer]

Stay healthy.

[Operator]

Thank you for participating in the Apollo Global Management's first quarter 2020 earnings conference call. You may now disconnect your lines and have a wonderful day.