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Apollo Global Management Inc. is set to use a rare structure to raise $10 billion from insurers, people with knowledge of the matter said, in the latest illustration of the increasing ties between private capital and annuity providers.

The New York-listed firm is employing a special purpose vehicle in order to sell highly rated debt against stakes in a range of its credit funds, said the people, who requested anonymity as the matter is private. These include direct lending, asset-based finance, hybrid capital and investment-grade credit.

The potential deal, among the largest ever of its kind, is at an early stage and terms are still subject to discussions with investors, the people said. Apollo’s spokesperson declined to comment.

Alternative investment firms are increasingly tapping the trillions of dollars worth of insurance capital to keep up their frenetic growth of recent years. Over the last year, Apollo helped build a roughly $5 billion vehicle called Fox Hedge, which sold debt against a number of its assets, including asset-backed securities, direct loans and corporate credit.

Insurers are hunting for higher yields to match their liabilities, and have invested in a number of complex credit strategies such as collateralized fund obligations. These structures and dice private portfolios into bonds allowing their issuers to borrow cheaply against illiquid assets.

Vehicles such as these are structured to achieve investment-grade ratings for their senior debt, meaning insurers can access private credit without having to pay the hefty capital charges regulators apply to junk-rated credit. Moody’s estimates that roughly a third of US life insurers’ $6 trillion cash and invested assets was already tied up in various forms of private credit by the end of 2024.

Photo: Paul Yeung/Bloomberg

Topics Carriers Auto