Apollo Explains How Big Tech Is Disrupting Credit Markets

Joe Weisenthal (0:02)

Bloomberg Audio Studios.

Tracy Alloway (0:04)

Podcasts, radio, news. Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:23)

And I'm Joe Weisenthal.

Tracy Alloway (0:25)

Joe, do you remember those stories? I guess they were a bigger deal earlier this year, but they're still kind of out there. Those stories about how the stock market is all about the big tech companies.

Joe Weisenthal (0:36)

Yeah, absolutely. So, yeah, it's still, I mean, it's still-

Tracy Alloway (0:39)

It still is.

Joe Weisenthal (0:39)

It still is.

Tracy Alloway (0:40)

But I think like, at one point earlier this year, there was a number that caught my eye. I think it was like 30% of the S&P 500 came from the Mag 7, so, you know, Alphabet, Microsoft, Nvidia, and all of those. And I guess as all the hype and interest over AI has grown, the importance of tech companies in the equity market has increased in size along with it.

Joe Weisenthal (1:04)

Totally. You know what I think is an interesting step? We're recording this on September 25th. If I look at the major stock indices for the year, the NASDAQ or as we used to write, the tech-heavy NASDAQ is up 28.3. The S&P 500 is up 20.35%, virtually the same. So I think it's telling the degree to which the S&P is becoming the NASDAQ. In fact, that would be a good story or a good headline. That basically the S&P by virtue of the dominance of these handful of mega cap tech companies that dominate both index, the S&P 500 is morphing into the NASDAQ.

Tracy Alloway (1:42)

Listeners, you get to witness how journalism happens in real time. This is how we come up with headlines.

Joe Weisenthal (1:47)

You notice some numbers and you're like, oh, let's see if we can back a story into that.

Tracy Alloway (1:50)

Okay, well, speaking of everything becoming tech, I realized that one thing we haven't really spoken that much about is what tech and all the recent enthusiasm for it actually means for the credit market, for the world of corporate bonds.

Joe Weisenthal (2:04)

Yeah, this is interesting. And there's probably a reason that we don't think about this very often, which is one, is that if you look at the really big tech companies and even like small companies, a lot of it has not historically been credit funded. A lot of it has been equity funded, and VC is equity, and these companies produce so much cash from their earnings, and they can fund themselves out of earnings that credit to some extent hasn't been part of the story. But a few things, A, some of these companies mature and they start to issue debt, and they do have debt, and some of it is to fund buybacks. We're also in a period where a lot of tech is more capital intensive than it had been in the past, and project-based financing is more of an issue, and maybe that's some of the data center plays, et cetera. So I believe there are interesting credit stories that for reasons I can understand have not gotten much attention.

Tracy Alloway (2:57)

There definitely are interesting credit stories, and I am very pleased to say we have the perfect guest today who is going to tell them. We are speaking with Rob bittencourt. He is a partner at Apollo. He is the co-head of Opportunistic Credit. He's also a member of a bunch of different investment committees over there. Rob, thank you so much for coming on Odd Lots.

Rob Bittencourt (3:17)

Tracy, Joe, very excited to be here. Long time listener and fan.

Tracy Alloway (3:21)

All right. Thank you. So let me ask the basic question, but what does the co-head of Opportunistic Credit at Apollo actually do? Opportunistic Credit sounds like something you might get at college. What is it exactly?

Rob Bittencourt (3:36)

So before I describe what I do within Opportunistic Credit, I think it makes sense just to level set. Where does that sit within the broader Apollo platform? Yeah, great. So Apollo is an alternative asset manager in a retirement services business. It manages about $700 billion of AUM, 500 of which sits in our credit business. And I focus on the opportunistic pool of capital, which is about $30 billion. So what is opportunistic? It is not as bad as you make it sound. It is really credit investments on both public and private side, targeting returns of 8 to 13%, broadly speaking. So in terms of what I do within that business, I co-lead a group of 20 analysts who are sector focused and really are tasked with identifying sourcing and underwriting the ultimate investments that go into a series of funds that make that $30 billion AUM pool of capital that I mentioned.