Investments

3 Months Ended

Mar. 31, 2014

Schedule of Investments [Abstract]

Investments

INVESTMENTS

The following table represents Apollo’s investments:

	As of March 31,   2014		As of   December 31, 2013
Investments, at fair value	$	2,236,648	$	2,012,027
Other investments	404,028		381,856
Total Investments	$	2,640,676	$	2,393,883

Investments, at Fair Value

Investments, at fair value, consist of financial instruments held by AAA, investments held by the Apollo Credit Senior Loan Fund, L.P. ("Apollo Senior Loan Fund"), the Company’s investment in HFA and other investments held by the Company at fair value. As of March 31, 2014 and December 31, 2013, the net assets of the consolidated funds (excluding VIEs) were $2,176.1 million and $1,971.1 million, respectively. The following investments, except the investment in HFA and Other Investments, are presented as a percentage of net assets of the consolidated funds:

	As of March 31, 2014										As of December 31, 2013
	Fair Value								% of Net Assets of Consolidated Funds		Fair Value								% of Net Assets of Consolidated Funds
Investments, at Fair Value – Affiliates	Private Equity		Credit		Total		Cost				Private Equity		Credit		Total		Cost
Investments held by:
AAA	$	2,147,415	$	—	$	2,147,415	$	1,494,358	98.7	%	$	1,942,051	$	—	$	1,942,051	$	1,494,358	98.5	%
Apollo Senior Loan Fund	—		29,909		29,909		29,612		1.4		—		29,603		29,603		29,226		1.5
HFA	—		58,417		58,417		62,089		N/A		—		39,534		39,534		61,218		N/A
Other Investments	907		—		907		4,081		N/A		839		—		839		4,159		N/A
Total	$	2,148,322	$	88,326	$	2,236,648	$	1,590,140	100.1	%	$	1,942,890	$	69,137	$	2,012,027	$	1,588,961	100.0	%

Securities

As of March 31, 2014 and December 31, 2013, the sole investment held by AAA was its investment in AAA Investments, L.P. (“AAA Investments”), which is measured based on AAA’s share of net asset value of AAA Investments. The following table represents the sole investment of AAA Investments, which constitutes more than five percent of the net assets of the funds that the Company consolidates (excluding VIEs) as of the aforementioned dates:

	As of March 31, 2014							As of December 31, 2013
	Instrument Type	Fair Value		Cost		% of Net Assets of Consolidated Funds		Instrument Type	Fair Value		Cost		% of Net Assets of Consolidated Funds
Athene Holding	Equity	$	2,168,531	$	1,331,942	99.7	%	Equity	$	1,950,010	$	1,331,942	98.9	%

As of March 31, 2014, AAA Investments owned through its subsidiaries the majority of the economic equity of Athene Holding. Athene Holding is the ultimate parent of various insurance company operating subsidiaries. Through its subsidiaries, Athene Holding provides insurance products focused primarily on the retirement market and its business centers primarily on issuing or reinsuring fixed and equity-indexed annuities. See note 13 for further information regarding Athene.

On October 31, 2012, AAA Investments consummated a transaction whereby substantially all of its assets were contributed to Athene in exchange for common shares of Athene Holding, cash and a short term promissory note (the “AAA Transaction”). Following receipt of required regulatory consents, AAA Investments transferred its remaining investments to Athene Holding on July 29, 2013. After the AAA Transaction, Athene Holding was AAA’s only material investment and as of March 31, 2014 and December 31, 2013, AAA, through its investment in AAA Investments, was the largest shareholder of Athene Holding with an economic ownership stake of approximately 72.5% (without giving effect to restricted common shares issued under Athene's management equity plan and conversion of AAA Investments' note receivable), and as of March 31, 2014 and December 31, 2013, effectively held 45% of the voting power of Athene.

As further described in note 17, on April 4, 2014 Athene Holding completed a private placement offering of common equity in which it raised $1.048 billion of primary commitments from third-party institutional and certain existing investors in Athene Holding (the “Athene Private Placement”), which was priced at $26 per common share of Athene Holding. Given the observability of this transaction, and the proximity to the March 31, 2014 financial statement date, the $26 per share price was considered to be the best measure of fair value and was therefore utilized for valuing the Athene investment at March 31, 2014.

At December 31, 2013, Athene’s fair value was determined using the embedded value method which was based on the present value of the future expected regulatory distributable income generated by the net assets plus the excess capital (i.e., the capital in excess of what is required to be held against Athene’s liabilities). The net assets of Athene consist of the current and projected assets less the current and projected liabilities related to in force insurance contracts. The assets considered capital in excess are fair valued in accordance with the fair value policies disclosed in note 2. The approach of using actuarially projected asset and liability income to value an insurance company is widely used by market participants in the insurance industry, particularly in private company acquisitions. The embedded value of the in force insurance contracts incorporates actuarial projections of expected income utilizing most recently available policyholder contract and experience data, industry information and assumptions, general economic and market conditions, and other factors deemed relevant, including the cost of capital. In addition, consideration is also given to comparable company multiples in the determination of fair value.

The Company, through its consolidation of AAA, had an approximate 68% fully diluted ownership interest in Athene (after giving effect to restricted common shares issued under Athene's management equity plan and conversion of AAA Investments' note receivable) through AAA’s investment in AAA Investments as of March 31, 2014. AAA Investments’ ownership interest in Athene is held indirectly through its subsidiaries and is comprised of common shares and a promissory note which can be settled in cash or common shares of Athene Holding at AAA Investments’ option. Based on the above, the Company had an approximate 1.7% economic ownership interest in Athene Holding’s equity, as of March 31, 2014 and December 31, 2013. The approximate 1.7% economic ownership interest is calculated as the Company’s approximate 2.5% economic ownership interest in AAA plus the Company’s approximate 0.06% economic ownership interest in AAA Investments multiplied by AAA Investments’ approximate 68% fully diluted ownership interest in Athene, as of March 31, 2014. The remaining ownership interest in AAA is recognized in the Company’s condensed consolidated statements of operations as non-controlling interest in consolidated entities.

Apollo Senior Loan Fund

On December 31, 2011, the Company invested $26.0 million in the Apollo Senior Loan Fund. As a result, the Company became the sole investor in the fund and therefore consolidated the assets and liabilities of the fund. The fund invests in U.S. denominated senior secured loans, senior secured bonds and other income generating fixed-income investments. At least 90% of the Apollo Senior Loan Fund’s portfolio of investments must consist of senior secured, floating rate loans or cash or cash equivalents. Up to 10% of the Apollo Senior Loan Fund’s portfolio may consist of non-first lien fixed income investments and other income generating fixed income investments, including but not limited to senior secured bonds. The Apollo Senior Loan Fund may not purchase assets rated (tranche rating) at B3 or lower by Moody’s, or equivalent rating by another nationally recognized rating agency.

The Company has classified the instruments associated with the Apollo Senior Loan Fund investment as Level II and Level III investments. All Level II and Level III investments of the Apollo Senior Loan Fund were valued using broker quotes. See note 5 for further discussion regarding fair value leveling.

HFA

On March 7, 2011, the Company invested $52.1 million (including expenses related to the purchase) in a convertible note with an aggregate principal amount of $50.0 million and received 20,833,333 stock options issued by HFA, an Australian based specialist global funds management company.

The terms of the convertible note allow the Company to convert the note, in whole or in part, into common shares of HFA at an exchange rate equal to the principal plus accrued payment-in-kind interest (or “PIK” interest) divided by US$0.98 at any time, and convey participation rights, on an as-converted basis, in any dividends declared in excess of $6.0 million per annum, as well as seniority rights over HFA common equity holders. Unless previously converted, repurchased or canceled, the note will be converted on the eighth anniversary of its issuance, on March 11, 2019. Additionally, the note has a percentage coupon interest of 6% per annum, paid via principal capitalization (PIK interest) for the first four years, and thereafter either in cash or via principal capitalization at HFA’s discretion. The PIK interest provides for the Company to receive additional common shares of HFA if the note is converted. The Company has elected the fair value option for the convertible note. The convertible note is valued using an “if-converted basis,” which is based on a hypothetical exit through conversion to common equity (for which a quoted price exists) as of the valuation date. The Company separately presents interest income in the condensed consolidated statements of operations from other changes in the fair value of the convertible note. For the three months ended March 31, 2014 and 2013, the Company recorded $0.9 million and $0.8 million, respectively, in PIK interest income included in interest income in the condensed consolidated statements of operations. The terms of the stock options allow for the Company to acquire 20,833,333 fully paid ordinary shares of HFA at an exercise price in Australian Dollars (“A$”) of A$8.00 (exchange rate of A$1.00 to $0.93 and A$1.00 to $1.04 as of March 31, 2014 and 2013, respectively) per stock option. The stock options became exercisable upon issuance and expire on the eighth anniversary of the issuance date. The stock options are accounted for as a derivative and are valued at their fair value under U.S. GAAP at each reporting date. For the three months ended March 31, 2014 and 2013, the Company recorded an unrealized gain of approximately $18.0 million and $4.0 million, respectively, related to the convertible note and stock options within net gains from investment activities in the condensed consolidated statements of operations.

The Company has classified the instruments associated with the HFA investment as Level III investments. See note 5 for further discussion regarding fair value leveling.

Net Gains from Investment Activities

Net gains from investment activities in the condensed consolidated statements of operations include net realized gains from sales of investments, and the change in net unrealized gains resulting from changes in fair value of the consolidated funds’ investments and realization of previously unrealized gains. Additionally, net gains from investment activities include changes in the fair value of the investment in HFA and other investments held at fair value. The following tables present Apollo’s net gains from investment activities for the three months ended March 31, 2014 and 2013:

	For the Three Months Ended   March 31, 2014
	Private Equity		Credit		Total
Realized gains on sales of investments	$	—	$	112	$	112
Change in net unrealized gains due to changes in fair values	205,363		17,933		223,296
Net Gains from Investment Activities	$	205,363	$	18,045	$	223,408

	For the Three Months Ended   March 31, 2013
	Private Equity		Credit		Total
Realized gains on sales of investments	$	—	$	242	$	242
Change in net unrealized gains due to changes in fair values	47,770		4,121		51,891
Net Gains from Investment Activities	$	47,770	$	4,363	$	52,133

Other Investments

Other Investments primarily consist of equity method investments. Apollo’s share of operating income generated by these investments is recorded within income from equity method investments in the condensed consolidated statements of operations.

The following table presents income from equity method investments for the three months ended March 31,2014 and 2013:

	For the Three Months Ended   March 31,
	2014				2013
Investments:
Private Equity Funds:
AAA Investments	$	124			$	27
Apollo Investment Fund V, L.P. (“Fund V”)	10				7
Apollo Investment Fund VI, L.P. (“Fund VI”)	(470		)		1,078
Apollo Investment Fund VII, L.P. (“Fund VII”)	9,235				20,413
Apollo Investment Fund VIII, L.P. (“Fund VIII”)	(234		)		—
Apollo Natural Resources Partners, L.P. (“ANRP”)	(14		)		11
AION Capital Partners Limited (“AION”)	2,787				184
Apollo Asia Private Credit Fund, L.P. (“APC”)	2				1
Credit Funds:
Apollo Special Opportunities Managed Account, L.P. (“SOMA”)	450				384
Apollo Value Investment Fund, L.P. (“VIF”)	4				7
Apollo Strategic Value Fund, L.P. (“SVF”)	(1		)		3
Apollo Credit Liquidity Fund, L.P. (“ACLF”)	177				704
Apollo Credit Opportunity Fund I, L.P. (“COF I”)	216				3,574
Apollo Credit Opportunity Fund II, L.P. (“COF II”)	166				888
Apollo Credit Opportunity Fund III, L.P. ("COF III")	658				—
Apollo European Principal Finance Fund, L.P. (“EPF I”)	1,303				(331		)
Apollo European Principal Finance Fund II, L.P. (“EPF II”)	(97		)		63
Apollo Investment Europe II, L.P. (“AIE II”)	146				57
Apollo Palmetto Strategic Partnership, L.P. (“Palmetto”)	861				583
Apollo Senior Floating Rate Fund Inc. (“AFT”)	1				8
Apollo Residential Mortgage, Inc. (“AMTG”)	88			(1)	486			(2)
Apollo European Credit, L.P. (“AEC”)	117				76
Apollo European Strategic Investments, L.P. (“AESI”)	122				152
Apollo Centre Street Partnership, L.P. (“ACSP”)	512				181
Apollo Investment Corporation (“AINV”)	3,176			(1)	(627		)	(2)
Apollo SK Strategic Investments, L.P. ("SK")	80				26
Apollo SPN Investments I, L.P.	182				(413		)
Apollo Tactical Income Fund Inc. (“AIF”)	(1		)		5
Apollo Franklin Partnership, L.P. ("Franklin Fund")	216				—
Apollo Zeus Strategic Investments, L.P. ("Zeus")	148				—
Real Estate:
Apollo Commercial Real Estate Finance, Inc. (“ARI”)	364			(1)	223			(2)
AGRE U.S. Real Estate Fund, L.P.	292				14
CPI Capital Partners North America L.P.	—				58
CPI Capital Partners Asia Pacific, L.P.	(1		)		2
Apollo GSS Holding (Cayman), L.P.	81				(4		)
BEA/AGRE China Real Estate Fund, L.P.	(2		)		—
Other Equity Method Investments:
VC Holdings, L.P. Series A (“Vantium A/B”)	—				13
VC Holdings, L.P. Series C (“Vantium C”)	3,687				(8		)
VC Holdings, L.P. Series D (“Vantium D”)	(1,475		)		(47		)
Other	—				(8		)
Total Income from Equity Method Investments	$	22,910			$	27,790

(1) Amounts are for the three months ended December 31, 2013, respectively.

(2) Amounts are for the three months ended December 31, 2012, respectively.

Other investments as of March 31, 2014 and December 31, 2013 consisted of the following:

	Equity Held as of
	March 31, 2014			% of Ownership			December 31, 2013			% of Ownership
Investments:
Private Equity Funds:
AAA Investments	$	1,293		0.057	%		$	1,168		0.057	%
Fund IV	8			0.023			9			0.019
Fund V	97			0.019			94			0.020
Fund VI	8,992			0.104			9,964			0.103
Fund VII	127,509			1.263			137,960			1.258
Fund VIII	16,169			3.098			4,310			3.996
ANRP	3,898			0.821			3,735			0.831
AION	11,365			7.135			6,425			9.970
APC	35			0.045			49			0.046
Credit Funds:
SOMA	7,282			0.843			6,833			0.853
VIF	155			0.070			151			0.124
SVF	14			0.032			17			0.079
ACLF	4,737			3.297			4,559			3.341
COF I	10,016			1.850			10,077			1.850
COF II	3,421			1.413			5,015			1.428
COF III	11,748			2.444			6,720			2.450
EPF I	16,585			1.367			19,332			1.363
EPF II	32,739			1.838			23,212			1.994
AIE II	4,642			2.834			4,500			2.772
Palmetto	16,915			1.186			16,054			1.186
AFT	96			0.034			95			0.034
AMTG(3)	4,047		(1)	0.637		(1)	4,015		(2)	0.632		(2)
AEC	2,580			1.076			2,482			1.230
AESI	4,111			0.990			3,732			0.956
ACSP	9,056			2.474			7,690			2.465
AINV(4)	59,128		(1)	3.004		(1)	55,951		(2)	2.933		(2)
SK	1,794			1.012			1,714			0.997
Apollo SPN Investments I, L.P.	4,353			0.721			4,457			0.828
CION Investment Corporation	1,000			0.463			1,000			0.716
AIF	93			0.036			94			0.036
Franklin Fund	10,395			9.162			10,178			9.107
Zeus	2,770			3.386			1,678			3.383
Apollo Lincoln Fixed Income Fund, L.P.	600			0.990			—			—
Apollo Structured Credit Recovery Master Fund III, L.P.	425			2.439			—			—
Apollo Total Return Fund L.P.	80			0.080			—			—
Real Estate:
ARI(3)	11,427		(1)	1.499		(1)	11,550		(2)	1.500		(2)
AGRE U.S. Real Estate Fund, L.P.	9,175			1.845			9,473			1.845
CPI Capital Partners North America, L.P.	257			0.417			272			0.416
CPI Capital Partners Europe, L.P.	5			0.001			5			0.001
CPI Capital Partners Asia Pacific, L.P.	105			0.042			106			0.042
Apollo GSS Holding (Cayman), L.P.	3,583			4.751			3,670			3.460
BEA/AGRE China Real Estate Fund, L.P.	70			1.031			72			1.031
Other Equity Method Investments:
Vantium A/B	15			6.450			15			6.450
Vantium C	528			2.071			1,233			2.071
Vantium D	715			6.345			2,190			6.345
Total Other Investments	$	404,028					$	381,856

(1) Amounts are as of December 31, 2013.

(2) Amounts are as of September 30, 2013.

(3) Investment value includes the fair value of RSUs granted to the Company as of the grant date. These amounts are not considered in the percentage of ownership until the RSUs are vested and issued to the Company, at which point the RSUs are converted to common stock and delivered to the Company.

(4) The value of the Company’s investment in AINV was $56,102 and $57,249 based on the quoted market price as of March 31, 2014 and December 31, 2013, respectively.