Yahoo Finance

All right, welcome back to Yahoo Finance. Uh, here at the Milken Conference in California. I'm Yahoo Finance Executive Editor Brian Sozzi here with a very special guest. That is Marc Rowan, Apollo CEO. And of course, I should mention Apollo, the parent company of Yahoo Finance. Mark, good to see you.

Nice to see you.

This is the first time we're getting to talk to you after your earnings call on Friday, and I, you said something, many things, which we're going to dive into. You said this, quote, I got to get your comment on this, quote, we have lived through this period of hyper exceptionalism. I believe we are now back to exceptionalism. What's the difference between the two?

Well, think, think about what's happened. If you're anywhere in the world for the last 20 years, you have three large markets, China, Europe, and US. For the last 20 years, we've been the cleanest dirty shirt. All the money in the world has come into the US. Think about what's happened to our indices. 10 companies became 40% of the S&P. One of our companies, Nvidia, was worth more than the market cap of every stock exchange other than Japan. Those 10 companies traded at a 60 PE. All this money came flowing into the US. We were the largest recipients of foreign direct investment three, four years in a row. We were it. What we've done, and I'm not saying what the administration wants to do is wrong. I actually believe what they want to do in terms of resetting our trade relations with the world is the right thing to do. But the way it's being done, in the short term, we introduced uncertainty, and in the long term, we actually damaged the US brand by just moving precipitously, moving in a non-choreographed way. We've given people a reason to think about whether their money is in fact safe here. Now, I believe it is. I believe we are still 60% of all the capital in the world. We have lots of things going for us, but it would be hard to deny we have not moved down a notch.

Well, I know you do not say that the US brand has been damaged. You don't take that, that lightly. Why is investing in America still safe then?

Well, let's start with what your alternatives are. We are the largest capital market in the world. We are 60% of all the capital. We have all the growth. We are at 4% unemployment, and whether people like how we got here or not, we're building infrastructure, we're building semiconductor plants, we're building inflation reduction act, manufacturing. Oh, and now we're adding energy. We're ramping defense production. We're doing next generation data and power. Half the time I worry about capital flow. The other half of the time I worry about where are the workers to actually staff what we're building here. We are it. Every place else in the world has the same issues that we have without many of the advantages. So, people can at the one, on the one hand say, I'm concerned about abrupt changes in US policy and what that might mean. On the other hand, we can still step back and weigh our relative advantages of against our competing blocks, and they are manifold.

Last time I talked to you, Mark, was at our Invest conference in the fall, week after the uh President Trump got uh got elected. And you were rumored to be a potential contender for Treasury Secretary. But now that we have seen the playbook that Secretary Benson has run, the president has run, what would you be doing differently if you were in that seat?

Look, uh, unfair. Treasury Secretary has a very difficult job, and I think is actually doing quite a good job under the circumstances. Let's start with the goal. We are looking to reset our trade relations with the world. We are the freest trading country in the world. Allies and strategic competitors have introduced blocks, which keep us from accessing their market, removing those blocks. This is a fundamentally worthy goal. But imagine if we were going after this with the US and Mexico together, the US, Mexico, and Canada together. The US and Mexico together should be the dominant economic force in the world for the next 50 years. US with advanced manufacturing, knowledge-based manufacturing, Mexico as a source of skilled labor. Northern Mexico should be the biggest boom town in the world. The issues that separate us from Mexico, notwithstanding two significant free trade agreements, have not been resolved. If tariffs are a means to help resolve those issues, that's great. One Mexican industrialist said to me, and I quote, if it takes tariffs to make Mexico great again, so be it. Canada, exactly the same thing. Facing the world with our own markets established and bedded down probably just gives us much more leverage.

Do you agree with Warren Buffett that tariffs are akin to a weapon?

Um, I don't. I think, and I I've said this publicly, I think there are smart tariffs, and there are stupid tariffs. Tariff is just a tool. A weapon gives it a political context or other things.

Are 145% tariffs on China stupid?

That they will certainly cause an abrupt adjustment. So, think about what's happening. We have businesses in the US who have, through no fault of their own, been induced to rely on a system of imports. You're now the 100-year-old toy manufacturer. Your toys are coming into the port in the next couple of months.

These dolls are going to come with no hair, Mark, because there's you can. There's going to be no bald dolls here.

I'll just say. The way the tariffs work, the importer, that 100-year-old store has to pay the tariff when the goods hit the port. No one has that kind of money. We set this thing up in a way where the goal is worthy, but the method by which we're doing it is actually going to cause significant pain in the US. That's not to say it's not going to cause even more significant pain in China, but if we have the, if we want to actually get a good outcome here, we have to have the ability, actual or perceived, to withstand this for a really long period of time. I'm not sure tariffs are currently set up to do that. And you see exemptions for Apple, exemptions for some of the big companies. My guess, if we see significant Main Street retail bankruptcies, we will see exemptions on goods. So, just a blanket tariff, probably a very blunt instrument.

Of course, uh Apollo owns many, many companies. You get a direct uh line of sight into the health of businesses in the US and around the world. Do you see significant pain financially in the businesses that you own because of the trade war?

No. We don't. Um, think of our, our portfolio is a US-centric and a to a lesser extent a Europe-centric portfolio. Um, on balance, tariffs are kind of not an issue. There are winners and losers across the portfolio. What we do see though is uncertainty. When you don't know what the rules of the game are, you stop investing, you stop hiring, you stop making moves. And that's what in my opinion, we're seeing across the economy. We're seeing uncertainty. We're we're seeing a slowdown. That does not mean that cannot pick up again if we have certainty. But until we have certainty, we're going to see a slowdown.

I think back to your Investor Day, October last year, feels like yesterday in my mind, maybe not in your mind, but you mentioned that you want to double your assets at Apollo by 2029 against the backdrop of a trade war. Can you still do that?

I I think very little of what's happening now is actually impacting our industry. Our industry is being driven by everything we're building. Think about, we're building infrastructure, we're building next generation manufacturing, we're adding to energy supply, we're doing a data and power. All of these things are long-dated and complex. Long-dated and complex does not get financed in the banking system. It does not get financed in the investment grade marketplace. It comes to private capital. Oh, by the way, Europe wants to do everything the US is doing with a not as evolved capital market. I see nothing but demand for capital in the kinds of forms that our industry as a whole has done. And so I am very bullish. I also see expansions of demand for the asset. We started as a relatively small allocation from institutional clients. We then added to it individuals. We then added to it retirement services and insurance companies, Athene. Athene showed in the industry that this could be done and done safely. We then added to it the fixed income bucket of our institutional clients, larger than everything we've seen before. And more recently, we've seen traditional asset managers emerge as potentially very large purchasers of private assets. Among the most interesting things happening in our industry is actually that last statement. We are watching traditional managers redefine what it means to be an active manager from the buying and selling of stocks and bonds to the addition of private assets to heretofore public portfolios. Most consumers, most investors will not do business with Apollo directly or Blackstone or KKR or any of our any of our competitors. They will do business with their traditional asset manager who will access private markets, most likely, through one of the big firms.

Lastly, Mark, we were here one year ago, and I asked you about what was happening on colleges campuses across this country. Now things have gone another direction. You see the the Trump administration giving the business to Harvard, uh giving the business to Columbia. What do you make of what the administration is doing with America's higher education institutions?

A couple of conflicting thoughts. First, US higher education system among our most important competitive advantages. Having said that, imagine how it sounds in government where we have our institutions bragging about the size of their endowment and how few students they admit, where 95% of their faculty and administrators adhere to one political view, where they have failed to adhere to basic norms, where 50 and 60% overhead charges are being leveled against grants to the institutions. This is a system in need of reform. Universities do not reform without outside pressure because there is, for most of them, not all of them, very poor governance. What the administration have done right now, and you can like or not like their tactics, they've gotten everyone's attention. There is a conversation coming about reform and higher education. I'm hoping all of these moves actually lead to a comprehensive re-evaluation of overhead, of free speech, which I am firmly in favor of, versus preferred and non-preferred speech, how these universities are funded, what their purpose in the world is. I want to see our universities strong and as a source of competitive advantage. It's not clear to me that's where they were.

All right, we'll have to leave it there. You've always been gracious with your time. Apollo Global Management CEO, Marc Rowan, we'll talk to you soon.

Thank you. Appreciate it.