Morning Coffee: Apollo plans to pay its partners in a more volatile way. Barclays not cutting much in Asia after all

efinancialcareers.com:

Times are changing at private equity firm Apollo. Not only is the massive fund trying to alter its culture to become less ruthless and more friendly under new CEO Marc Rowan, but it's rethinking the way it pays its most senior people. 

Following Apollo's results yesterday, the Financial Times notes that Rowan is changing the way it pays four senior executives (Matt Nord and David Sambur, who run private equity, John Zito, deputy chief investment officer of credit, and Grant Kvalheim, president of Athene) so that their compensation is more heavily skewed towards stock instead of returns from investing in Apollo's funds. 

While these most senior staff are getting stock though, speaking on Apollo's results call yesterday, Rowan also explained that pay for partners below them will now skew more heavily towards income from fund investments instead, and away from income derived from management fees. This is as it should be, said Rowan, describing it as a «constant battle» to keep more of Apollo's fee earnings and earnings from its Athene retirement services business for the fund's investors. By comparison, Apollo's partners are «well suited» to understanding the earnings they get from investing in Apollo's funds, and the volatility of those earnings, Rowan added. 

The implication is that most Apollo partners will, in the future, receive a higher proportion of carried interest in their pay and a lower proportion of cash bonuses. This will be a good thing in years when Apollo can actually exit its investments, but in the third quarter of 2023 its income from existing private equity investments was down 92%. 

Rowan said «younger people» entering Apollo are «working hard,» and that he wants to create a firm where they're motivated