Apollo Teams With Ivy to Start Two Funds in Retail Push

Apollo Global Management LLC, the private equity firm whose co-founder Leon Black is pushing to attract more capital from small investors, is teaming up with Ivy Investment Management to offer two new mutual funds.

Ivy, a unit of Waddell & Reed Financial Inc., plans to start separate strategic income and multiasset income funds that will each allocate about 20 percent of their assets to a total return strategy run by Apollo, according to a filing last week with the U.S. Securities and Exchange Commission.

Black said during a February earnings call that Apollo is focusing “more and more” on individual investors, as they only have about 1 percent of assets devoted to alternative assets, compared with as much as 30 percent for institutions such as endowments. Other publicly traded managers of hedge and private equity funds, including Blackstone Group LP and KKR & Co., are also seeking to grow by attracting more money from individuals.

“All the firms are focused on the opportunity in liquid alternatives,” said Luke Montgomery, an analyst at Sanford C. Bernstein & Co. in New York, referring to mutual funds and exchange-traded funds that employ hedge fund-like strategies. “You hear there is a lot of demand, but the uptake is a little bit slower” than such talk would suggest.

Charles Zehren, an Apollo spokesman with Rubenstein Associates, didn’t immediately return a telephone call seeking comment on the new funds. Nor did Roger Hoadley, a spokesman for Waddell & Reed, a publicly traded asset manager based in Overland Park, Kansas.

Sub-Advisory Foray

Apollo co-founder Joshua Harris said during its February earnings call that the firm had contracted to help manage the $6.1 billion Oppenheimer Global Strategic Income Fund. The agreement marked Apollo’s first sub-advisory relationship with a registered mutual fund, he said.

The Ivy Apollo Strategic Income Fund will divvy up its assets among three investment strategies: Apollo’s total return approach and global bond and high-income allocations overseen by Ivy, according to documents filed July 17 with the SEC. The Ivy Apollo Multi-Asset Income Fund will have four strategies: total return and global high income, equity income and real estate.

Apollo’s total return strategy focuses on high yield credit, a category that includes junk bonds, bank loans and mortgage backed securities, according to the filing. New York-based Apollo had about $163 billion of assets under management as of March 31.