- Apollo Global Management rolled out its newly formed impact investing unit this week with the announcement of three leaders.
- They are Joanna Reiss, who just joined from middle-market firm Cornell Capital; Lisa Hall, who joined this summer from Georgetown University's Beeck Center for Social Impact and Innovation; and Apollo veteran Marc Becker, who's transitioned internally from the firm's flagship PE fund to focus on impact.
- The three execs spoke with Business Insider about the 4 key ways they believe Apollo will differentiate itself from the pack.
- Many of Apollo's peers including Blackstone, The Carlyle Group and TPG, have impact arms of their own.
- Visit Business Insider's homepage for more stories.
Impact investing has become increasingly popular among large investment firms as investors look to put their money into companies that not only achieve great returns but also help the world, either through providing education to underprivileged communities, keeping the planet clean, or improving diversity and inclusion in the workplace.
Private-equity firms have long held the reputation as a more aggressive type of investor and their takeover practices have been scrutinized by lawmakers, after companies they've bought have gone bankrupt after levering them up with debt.
But in recent years, they've been pouring capital into impact and are trying to put on a friendlier face. In October 2019, TPG raised $1.7 billion for its second Rise fund, after founding the unit in 2016, with a target to raise $3 billion. In February, KKR raised $1.3 billion for a global impact investing fund.
Now, Apollo Global Management, the megafirm with a large lending platform and investments from local newspapers to Expedia, is assembling its own team of impact-investing professionals.
"We're bringing on associates and principals as we speak," said Lisa Hall, chairperson of Apollo's new impact team, which the firm rolled out in a press release this week.
"And I think it's fair to say, I think it'll be one of the most diverse teams Apollo has ever had."
There are currently three to four impact positions Apollo is hiring for and its three co-heads are interviewing candidates both at competitors and at the country's 25 top-ranked business schools.
When the search is complete, the firm is expected to staff a total of ten impact professionals.
"First and foremost, we want people who believe in our mission and what we're trying to accomplish," said Marc Becker, a 24-year Apollo veteran who has become one of the three co-leads on the impact investing team.
"We think it's very compelling."
Apollo will focus on investing in larger, established companies
Business Insider spoke with Becker, Hall, and the third co-leader Apollo just hired last week: Joanna Reiss, who joined from middle market private equity firm Cornell Capital. The trio offered a peek at the firm's plans in impact and how it plans to differentiate itself from other PE firms already in the space.
They pointed to four different ways Apollo would stand out as the investment firm enters the fray after PE firms like The Carlyle Group, Blackstone and TPG have formalized functions within their own organizations over the past decade.
"I don't call them competitors; I call them peers, because we hope everyone is successful," said Becker, who is chair of the board at ADT Security Corp.
Reiss, the newest hire, says the primary differentiator to impact investing at Apollo will be size of investment targets. They'll be going after bigger companies.
"There is a notion that impact is, necessarily, growth or venture stage businesses, which we think is just fundamentally limiting," said Reiss.
"If you take this tool kit that has been honed by a lot of really smart people for a decade plus and apply it to larger businesses, you, by definition, can have greater impact."
After all, larger businesses have more stakeholders, more customers, and their ability to drive change in an industry is, by definition, greater, she said.
Apollo will focus on control deals and create financial incentives tied to impact
Outside of targeting bigger and more established companies, Becker, the Apollo vet, said the firm would hone in exclusively on control deals, rather than minority.
"We want to be able to influence the outcome and drive these business models forward," said Becker. "If you do want to put these metrics in place to drive behavior, that's the only way you can do it."
And a third piece to Apollo's strategy is that it plans to bake in performance incentives within executive compensation that are tied to impact results, added Hall. That will be true for the top executives of the companies in which Apollo will invest, as well as for the Apollo executives who work on the investment.
The executives declined to share specifics on pay structure.
The firm will integrate impact team with Apollo divisions
Lastly, the impact team intends to work closely across Apollo's other divisions rather than functioning in a silo, leaning on the firm's flagship funds, its credit funds and its real-estate funds, to help source deals and execute them.
People familiar with the matter have told Business Insider that Apollo intends to raise $1 billion for its impact-focused investing.
Executives identified education, health, safety and wellness, resource sustainability and tech enabled businesses in manufacturing as sectors of interest. Deals will be done in the middle market, with target companies ranging from $150 million to $500 million in enterprise value.
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