Executive Spotlight: Shawn Robinson, Partner, Credit and Co-Head of Private Fixed Income at Apollo

Stewart: Welcome to another edition of the insuranceaum.com podcast. My name's Stewart Foley, I'll be your host. Welcome back to another executive spotlight. We have got a good one for you today. Shawn Robinson, partner at Apollo who works within private IG and corporate solutions. Shawn, man, thanks for being on. We appreciate it.

Shawn: Thank you for having me, Stewart.

Stewart: So we'll start this one off like we start them all. Where did you grow up? What was your first job? Not the fancy one. Not the fancy one. And what's a fun fact?

Shawn: Sure. So grew up in New York City and the surrounding area, first job, 10 to 11 years old. I thanked my mother for it. I went with her to a local hair salon where I was sitting, waiting, packed place, as you can imagine on the weekend. And she let the owner know that I had quite a bit of energy and a lot of time to spare. And I ended up running errands and it turned into for 10, 11-year-old kids who were basically a syndication hub for other jobs. Let my dog out, drop this off, and I was able to interact with a bunch of adults, learn a bit, and I thank her for it.

Stewart: Wow. That's such an investment guy way to put it, a syndication hub for jobs. That's great. And what's your fun fact?

Shawn: Fun fact is throughout my life in varying degrees, I've been involved in martial arts and boxing.

Stewart: Oh wow.

Shawn: You can tell given my age that it's mostly for exercise at this stage, but it's had a profound impact on me, really on the kind of mental side as far as humility and patience and focus. And it does a really good job of balancing out an A-type personality. So I often think of that and do breathing work and when I get too far out of shape, I dig back in.

Stewart: Wow, that's cool. That's a great fun fact. All right, so can you provide an overview of Apollo and help us understand your role at the firm?

Shawn: Absolutely. And there's a lot of views around Apollo, so I'll maybe just level set. So, Apollo's a publicly traded holding company. And if you think of it with two sides, one side of the holding company is Athene and Athene is the largest retirement services company in the world providing guaranteed income. On the other side, you have Apollo Asset Management, alternative asset manager, ~$550 billion of assets under management. And interestingly, particularly for this podcast, Stewart, is $400 billion of it is credit, and most of that credit is investment grade, which as we know is sort of a natural fit from an insurance company portfolio perspective.

Stewart: Wow, that's amazing. I honestly didn't really realize the scale. So how does Apollo approach private credit and what differentiates it about the firm's credit platform? In other words, where does private IG fit within the platform?

Shawn: Sure. So if we just step back first within our credit division, when we think of that platform, we run the gamut from high grade to high yield. And the beauty of it is that we're able to leverage that platform with partners and our colleagues. We work together, it's open format. We really focus more on the substance versus the form. So if there's a transaction or an opportunity, maybe doesn't fit perfectly in one sleeve or the other, we'll come together and figure out how to solve it. Within the credit platform, private IG sits and we run a few businesses. One is a $30 billion private book, which is split out between corporate, roughly 2/3, about 1/3 infrastructure in CTL, so credit tenant leases. Investment grade, longer duration, strong relative value to publics. And when we think of it, we had this discussion in the past, Stewart, and you think of what's the goal and what are we doing and what we focus on is really excess return per unit of risk.

If you think of alternative asset managing, you think of private credit, our value is getting that excess return and essentially having safe-yielding assets with that strong relative value. Simple to say, it's a lot of work, it's a lot of hard work, but thinking of the asset class, it's a, "Okay, what is the premium versus publics? What's the value we can provide? And how can that sit safely in an insurance company portfolio?” When at the end of the day when we boil it down, we're providing income, guaranteed income," so we want to make sure it's safe and we want to make sure we can match it appropriately.

Stewart: That's tremendous. And one of the things, I mean, I'm very lucky that I get a chance to talk to guys like you that sit in some pretty amazing seats and I benefit from your visibility. So when you're looking at the market today, what opportunities are you seeing? Are there any sectors where you've been focused, anything you're avoiding? I mean, it's been a topsy-turvy several weeks here, lot going on and which brings me to, thank you for taking the time to do this with us. But can you give me a little bit of color on the markets?

Shawn: Sure. I may go back a little bit. I think literally from last March, it has been wild, right?

Stewart: Really wild.

Shawn: We've had the most rapid run up from a rate perspective, inflation, all these different aspects. And navigating it has been both a challenge and an opportunity. I'd say we've been more on the opportunistic side, picking our spots, on one hand building liquidity for opportunities that you know will come in this environment and you might not know exactly what they're going to be, but they're going to come. So you prepare on that side. And on the other, you're just very judicious with where you invest, how you invest, making sure you get the right structures and the right relative value. So we've been playing both of those sides. I'd say when I step back and I think of private credit opportunities, a lot of times private credit, first thing that comes to mind is leveraged loans, which is a massive, great business, but there's also a huge opportunity in private IG and in fixed income replacement where you're able to provide solutions, provide capital that will deliver increased spread from an investor perspective, but also provide a lot of flexibility for potential issuers.

So I see a big opportunity. I'd say from a more drill-down perspective, we're really focused on the opportunistic side, infrastructure, and project finance, lot to do there, whether it's in renewables and you can go all the way to stadiums. Infrastructure fits really, really well in an insurance company portfolio, it's value add and it's necessary and there's demand for it. Also in credit tenant leases on the CTL side. We've recently, if you go back, say, 6 months to present, there's a bit more financials prior to the latest situations. But you think of financials more like BDCs and funds that have started to tap the market for the last year. I'd say this is just my view, Stewart, I think there's going to be increased focus from new jurisdictions for privates. I think there's going to be, as I mentioned, more infrastructure, there's going to be a lot around green transition financing, whether it's shifting away from carbon, financing that, all under a climate umbrella. It's massive and it's massive for us at Apollo.

Stewart: We had a podcast guest on, Phil Titolo at MassMutual who was talking about, over the last little bit here, quite a while, there's been a massive bank disintermediation trade. And with the disruption that has happened of late, and this is just my opinion, no data, I can't imagine how banks are going to be a larger component of the lending spectrum. It seems as though folks were talking about, "Oh well, once the tenure note comes back up to 4% or whatever, this private credit thing's going to slow down." And it seems like private credit is here to stay and is going to be an increasingly important component of growth of the US economy. What do you think about that statement?

Shawn: I totally agree. It's not a trade, it's not an individual. It's a long-term, repeatable, scalable business. And it's providing creative solutions that issuers, I think, will continue to come back for. I totally agree with that statement.

Stewart: Yeah. So can you talk a little bit about why you think private IG makes sense for insurers and investors like Apollo versus accessing the public markets? And maybe just a little bit of history, you've been at this for a minute. I mean, I look like a gray schnauzer over here. You look much younger than me, but I know you have been at this a long time.

Shawn: I'll take that compliment, Stewart.

Stewart: Absolutely, man. Absolutely. So can you give us a little bit of color on how things have evolved and where you see the opportunity set or how private IG fits?

Shawn: If we go way back where you and I even have to read about it versus experience it, before there were public bond markets, there was a private market and that was effectively providing capital to what we could call early-day project finance and infrastructure. Railroads, mining, canals, basically infrastructure of today. So the market has been around for a long time. And if you're at our age, you've also experienced when markets effectively closed to an extent. Private market doesn't close. Things are choppy, it's open, it's consistent. And from an investor perspective, what it offers is alpha. If you take the view, public markets are index correlated, where are you going to get that excess return and how are you going to get in a safe manner with strong structure? And from a private IG, you're either secured or you're pari on an unsecured basis.

So you're at the top level, you have a seat at the table and you have covenants. So I think that's a big thing just from a raw structure perspective and relative value. It also provides diversification. You can go wider, you can go global. You have different types of companies, whether it's corporate side or infra. It has a track record of lower historical losses and it's an ideal asset liability match. And you can get the duration that you're looking for and you have the ability to really conduct detailed due diligence to onboard credits. And there's a repeatable element to it. And everyone's portfolio is a bit different, but rule of thumb, 40% or so of the credits, even if you take our portfolio, have a repeatable element to them. They always joke around. Most issuers don't pay back. They refinance, they come back again and you can build partnerships.

And I'd say one of the top benefits are the other investors in the market. They're smart, they're long-term-minded. When things get rough and they do, things get rough, you have to negotiate, amendments come up, you have to restructure at times, the private market investors, they don't run for the door, they band together, they figure out how to solve the problem and they have a long-term mindset. And frankly, I feel fortunate that I've been able to work in this market with the people that I do because it's definitely a collaborative environment. We're all competitors, we all want to win. But you can think of it as we have different teams, but we play roughly in a league where everyone needs to act responsibly and work together to grow the opportunity set.

Stewart: And your reputation's outstanding in that space. And it's really true. I mean, there really is a community in that space as you're describing it. So just a little... this is me putting my professor hat on for a second. You use the term pari, which is I think slang for pari passu, which means that you're treated the same as... so can you just unpack what you meant when you said, when you used the term pari?

Shawn: Sure. So if we think of let's say a typical private IG structure, to some extent it's an extension of a bank loan from a covenant perspective, both a covenant and a priority. So in all the cases where we're investing, as you said Stewart, pari passu, so you have a seat at the table and you're at the top with banks and other lenders. You also have negative pledge priority debt protections. So that in any scenario where things do get a bit bumpy, there's the inability for you to be crammed out. And in the meantime, you have financial covenants. So that's really the premise. And if you think of it even in more technical levels of whether it's a leverage test and so forth, there may be a quarter turn difference naturally for the duration. If it's a 3, 5 bank loan versus going out 10, 15, 20 years, it makes sense the company is going to need a little more flexibility, so that's fine. But at the end of the day, you're in line and you're senior at the table.

Stewart: Good stuff. So can you walk us through a couple of recent deals or transactions highlights? Obviously nothing proprietary or anything like that, but just some examples?

Shawn: Sure. I'll start with a recent transaction that we did for a US utility where they have a renewable portfolio, 2 operational wind farms. And as I mentioned earlier, we have a really, really strong focus on climate, on ESG, on transition financing. And this was opportunity where... it's a really good example where we leveraged our platform. We had colleagues and partners from public side, from other sections on our infrastructure business. And we basically band together around this opportunity, we have a relationship at the C-suite with the utility and we provided a solution, an entire solution for the financing. And as a result, we would expect to have others to follow. And it's the approach that we take out Apollo is how can we be a great partner and how can we, as I mentioned earlier, set up repeatable opportunities. And the beauty of it is that we can leverage a fantastic platform.

So I mean, I can walk around the floor, hop on the elevator and tap folks on their shoulder and say, "Hey, maybe you're an expert in this space. You understand this better than I do. Can you join us and let's figure it out?" And that's what we were able to deliver in this renewable transaction case. Another recent, relatively recent was for an arena in the UK. Great sponsor, we've done a lot of transactions together and we basically underwrote the entire transaction. We were able to bring in other investors and leverage our team on the ground. So the project portion is underwritten in the private group, but I was able to reach out to our colleagues on the ground in London because it was a construction element, and get their feedback and get their help and work together to basically deliver an entire solution.

Stewart: That's such a cool way to invest. I mean, that is real... it really sounds cool.

Shawn: Yeah. It's a lot of fun. It's a lot of hard work, Stewart, but I mean it's energizing.

Stewart: Yeah, I mean I can tell you love it. I mean I would think I would love it too. That's really cool. So one of the things that comes up is people start talking about ESG and then there's this trade off of, "Well yeah, I'm focused on ESG, but I still need to get a competitive rate of return out of my investment portfolio." And you guys are... you've mentioned that you're focused there. How does Apollo's private IG business support the firm's ESG and sustainability goals?

Shawn: That's a great question. So maybe I'll start with... I'll see if you agree with me, Stewart. If I went back a few years and ESG was mentioned, it was, came more from a ‘do no harm’ perspective than from a ‘how do we do good?’ How do we optimize? How do we make sure that the right things are being done? And I feel that if in the US particularly, it was a little bit behind, just as far as being addressed. Fast forward, we really took the view that it's absolutely important, it's critical. And you know what, it's not mutually exclusive. You don't necessarily have to give up to be successful. You don't have to give up basis points. And I'm super impressed with what's happened in the overall market the last few years. And I think everybody has come together. And if you take it to what we're doing at Apollo, is we have credit teams that work in direct partnership with our ESG teams.

So it's fully integrated. We underwrite our credits from a credit perspective and from an ESG perspective. And again, there's commonality between the two and we look at it from a firm view. I think they're ahead of the curve and they're helping us drive that in everyone's respective portfolio. So we can look at it from that perspective and then we can look at it from the top and there's areas of energy transition, it's going to be a little bit dirty for a while. How do you address that? Because that has to happen too. And in the meantime what solutions can be provided? But we're all over it and I think it's awesome.

Stewart: I think so too. It just sounds like an amazing, amazing shop and that takes me to where I've gone before. So I taught for quite a little bit and I had a lot of students who you say insurance and they roll their eyes. They only know the consumer brands that are advertising for personal auto or whatever. And what's somewhat lost is the idea that insurance companies are very smart money and it is a very good career path for someone who's interested in being an institutional investor. I mean, this is just as sincere as I could be. If I was a guy coming out of college and to go to work for you and your team would be hitting a fricking lottery, it's a phenomenal opportunity in a phenomenal environment. If you can go back to when you were coming out of college and you were 21, 22, 23, whatever, what advice would you give somebody at that stage of the game to end up in your seat today? What are the important things that they should be thinking about and doing?

Shawn: I would say, particularly when you're younger, be open-minded, be curious, ask a lot of questions. Don't think of mistakes as fatal. You're going to make some, so you're going to catch a few bruises, and surround yourself with folks that you can learn from. And I think that's really key in my mind and even in my experience.

Stewart: That's great. I just think you've done an amazing job. It's an amazing firm that you're with and I really appreciate you taking the time to be on with us. I've got one more, this is my new for 2023 question that I don't know if this... I mean asked ChatGPT to give me some questions. It didn't help me much. I got to be honest with you. So this is my own, so here we go. And we've gotten some really interesting answers to this. Who would you most like to have lunch with alive or dead? How about that?

Shawn: That is a…

Stewart: That's a good one, yeah? It wouldn't have to be one person, it could be a group. You could have a table of four, you and three others. Whatever, however it works.

Shawn: Probably sounds a bit cliche, but I've always wanted to sit down with Buffett.

Stewart: Oh, there you go. Yeah.

Shawn: It's on my list.

Stewart: That's cool. Yeah, I mean you never know. I don't know if he listens to our podcast, but we can hope. That's really cool. I mean I've worked for a firm that was owned by Berkshire and had the chance to be in the room with him a couple of times for a couple of hours each time. And it's amazing the wisdom that he shares and it's also amazing how somewhat common sense it is. I think that's a really cool choice. And particularly in your seat, how he views markets and how he views opportunities, that'd be a good conversation.

Shawn: When I was younger, it would have to be, just given background, it'd have to be Bruce Lee.

Stewart: Really? Oh, that's cool. Well, a table with Bruce Lee and Warren Buffet, that would be really cool.

Shawn: Be one heck of a meal.

Stewart: Heck of a meal, right? You don't know what you're going to get. So listen man, thanks for being on. I really appreciate you taking the time and sharing your thoughts with us. I learned a lot like I always do. But this was really enjoyable. I hope you think about doing it again.

Shawn: Absolutely. Stewart, thanks for having me as a guest. Always great to speak with you.

Stewart: Thanks so much. I appreciate it. We've been joined by Shawn Robinson, partner at Apollo and working in the private IG and corporate solutions team. Thanks for listening. If you like us, please rate us and review us on Apple Podcast. We certainly appreciate that. My name is Stewart Foley and this is the insuranceaum.com podcast.

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