You could do worse than simply betting against any "next Berkshire/Warren Buffett" subject in recent years but the alternative asset managers pushing in to insurance remains interesting to me. Apollo/Athene merger is probably the biggest in terms of strategic importance, Brookfield also moving more in this direction with the addition of American National. At the Goldman US Financial Services Conference at the end of '21, Rowan put the strategy succinctly:
"If you think about the alternatives business generally, in the private equity business, everyone understands it, 20% above 8. In the nontraded BDC, the nontraded REIT business, 12.5% over 5 or some metric like that. In the retirement services business, I get 100% over 2.5, but I have to put up $0.08 in capital. Now that $0.08 in capital earns 15% rates of return. So to your point, I can decide whether to hold all that myself or I can through ADIP allow my limited partners to take 2/3 of it."
These combinations create a larger permanent capital base, but they come with greater regulatory scrutiny and limitations. They are also generally commodity businesses that on their own trade at low multiples, especially relative to "pure" alt asset managers. I guess my question is how are people going about valuing these? SOTP doesn't seem appropriate, but neither does counting the insurance flows as simple AUM growth. Do companies like Apollo run the risk of turning into financial conglomerates that trade a perennial discount?