NEW YORK Asset manager Apollo Global Management LLC (APO.N) said on Friday it is monitoring details of the expected U.S. tax reform after its fourth-quarter earnings beat forecasts, as sturdy financial markets buoyed its buyout investments.
A steady stock market and a recovery in the energy sector have helped to lift the performance of private equity managers, who took a drubbing a year ago when oil prices slumped below $30 a barrel.
"We need to know a lot more about what the tax reform is going to look like down the pike," Leon Black, Apollo's billionaire chairman and chief executive officer, said in response to questions on how possible changes to the U.S. tax code may affect the firm.
"It's a brave new world for all of us."
President Donald Trump has promised to change the U.S. tax law that could include reducing the corporate tax rate to as low as 15 percent.
Other possible changes include imposing an import tax, ending an income tax break for those who work in private equity, and prohibiting companies from deducting interest expense from taxable income.
Apollo reported an economic net income, a key earnings metric for U.S. private equity firms that accounts for unrealized investment gains or losses, of $452.4 million after taxes, more than 14 times the $30.9 million earned a year earlier.
That translates to an economic net income of 98 cents a share. Analysts had expected Apollo to post earnings of 76 cents, according to Thomson Reuters I/B/E/S.
The New York-based firm said in a statement its earnings were lifted in part by the successful stock market listing of its portfolio company Athene Holding Ltd (ATH.N), a fixed service annuity provider.
Athene shares jumped over 9 percent in its stock market debut last month and currently trade about 18 percent above the offer price.
The performance of Apollo's private equity investments outshone other segments. Returns for its buyout business jumped 13.5 percent in 2016, outpacing a 9.5 percent rise in the S&P 500 stock index .SPX.
Apollo's credit investments, which account for around 70 percent of the firm's business, appreciated 11.2 percent last year.
Distributable earnings after taxes, which show cash available to pay dividends, jumped 1.8 times from a year ago to $226 million.
In 2016, Apollo invested a total of $16 billion, the most in any year. It managed a total of $192 billion as of the end of December.
(Reporting by Koh Gui Qing; Editing by Chizu Nomiyama and Phil Berlowitz)