Apollo Adds New Investment Flavor: Commodities

Apollo Management has begun making good on its plans to broaden its investment palate as it anticipates life as a publicly traded entity. Last month the mega-firm hired Neal Shear, Morgan Stanley’s former head of trading, to launch a commodities trading business.

The move is consistent with Apollo Management’s plan to pursue new investment avenues as mega-buyout opportunities dwindle. Further evidence of diversification includes the firm’s expansion of its global credit and distressed debt team and its allocation of $1 billion toward buying the discounted debt of its own portfolio companies.

Apollo Management recently filed to go public on the New York Stock Exchange as a way to raise capital to enter areas like commodities trading and real estate, as well as to raise money for new acquisitions. With plans for the commodities business under way, an expansion of the firm’s real estate operations may be next. Such an expansion would remain separate from Apollo Management’s existing ownerships of REITs and real estate-focused retail and leisure companies.

Apollo Management spokesman Steven Anreder noted that even though the firm filed to list itself on the NYSE, the filing is “simply a registration,” and the firm is not currently raising new money. Part of the reason buyout firms go public is to raise capital for acquisitions. The Blackstone Group, for instance, used a portion of its IPO proceeds to buy structured credit fund manager GSO Capital Partners earlier this year. Similarly, an IPO would provide Apollo Management the capital to enter new areas via acquisition. But a possible delay in moving from a private Goldman Sachs trading platform to the Big Board, coupled with the hiring of Shear, may indicate that this expansion won’t happen via acquisition, after all.

Anreder declined to comment on the commodities business beyond confirming Shear’s hire, which was first reported by Bloomberg. Shear left his post as chairman of trading at Morgan Stanley in February. He is building team based in New York.

A delay of Apollo Management’s public debut wouldn’t be surprising, considering that its peer, the Blackstone Group, has lost more than half of its value since listing a portion of its general partnership last June. And Apollo Management hasn’t fared too well in trading itself: Since it began trading on the Goldman Sachs-run exchange in August, the firm’s stock has lost more than 40 percent of its value. Apollo Management’s filing to trade on the NYSE occurred in early April, narrowly beating a May deadline.—E.G.