Athene Holding Ltd., one of Bermuda’s leading retirement services companies, has amended the terms of its investment management arrangements with Athene Asset Management LLC, a subsidiary of Apollo Global Management, LLC, to support its continued profitable growth and long-term asset outperformance.
“Differentiated asset management has been an integral part of our ability to profitably scale Athene to approximately $100 billion of invested assets,” said Jim Belardi, Chief Executive Officer (CEO) of Athene.
“We believe the revised investment management arrangements will promote continued long-term asset outperformance at Athene and appropriately incentivize long-term investments in capabilities, infrastructure, and people at our asset manager to support our continued profitable growth.”
The revised partnership will see a reduction in Athene’s base fees for services such as investment management, asset allocation and M&A asset diligence, as well as investment compliance and tax, legal and risk management support.
Currently, certain assets in Athene’s portfolio are subject to only a base fee, but under the new arrangements all assets will be subject to an additional sub-allocation fee of between 6.5 and 70 basis points, determined by the alpha-generating ability of each invested asset.
“We believe the Sub-allocation Fees under the new tiered structure are set at a material discount to other investment managers in the marketplace for the underlying assets being sourced,” explained Belardi. “If we were to replicate our existing portfolio allocations for go-forward invested assets above today’s level, under the new framework we would expect Athene’s total fees to be marginally lower than fees under our current framework.”
He continued: “The true benefit of this new fee framework is the alignment provided by the tiered fee structure. Going forward, if portfolio allocations are more heavily-weighted to assets with lower alpha-generating abilities than Athene’s current portfolio, asset management fees would be expected to decline relative to today’s construct.
“Conversely, if a greater proportion of Athene’s portfolio is allocated to differentiated assets with higher alpha-generating abilities, our NIERs would be expected to be higher, and so would our asset management fees relative to today’s construct. We believe imposing an appropriate and consistent fee framework across the assets in Athene’s portfolio will best promote allocation decisions which are driven by the underlying attractiveness and economics of an asset or asset class.”
The new investment management arrangement will initially run for a four-year term, with automatic renewals for each successive two-year period thereafter.
Athene said that the extended contract term would reaffirm its long-term strategic partnership with Apollo and provide greater incentives for Apollo to invest in differentiated investment management capabilities, such as additional personnel and origination platforms, to benefit Athene.