Yes, so that’s why. But like we said, one is not contingent on the other, because the industrial logic for each makes sense. But as we stated for years now, our investment opportunities well exceed the capital available to us. So our ability to deploy it into the strategy is robust. And as we had been talking, if there were 4 of them, we would have done 4 of them. So that answers that part. In terms of sort of leverage, I mean, we don’t think there’s a meaningful change to our strategy. Obviously, more liquidity, we think, enhances sort of the — and more scale enhances sort of the overall value of the business, and that could change sort of how rating agencies see us, and debt providers see us, et cetera. And so we’re always sort of aware of how we drive our strategy that way.
Gregory Hunt: Yes. And Kyle, initially, out of the box, we’ll have a lower leverage and then build back up to our target that we’ve given everyone.
Kyle Joseph: Yes. Got it. That all makes sense. And then probably a question for Tanner. I think some in the industry were getting optimistic for kind of a post Labor Day pickup in deal activity. Obviously, macro didn’t necessarily cooperate, but just give us your expectations for the remainder of the year and kind of your sense for deal flow into ’24, recognizing there’s a lot of moving pieces with the economy right now.
Tanner Powell: Yes, absolutely. Thanks, Kyle. I think that we did see an increase in activity kind of post Labor Day. As you know, there’s a gestation period for the loans that we’re making. And so ultimate executing on those transactions can be delayed. And certainly, the upper part of the middle market is also influenced by what you see in the syndicated markets. So notwithstanding, I think, overall, the reasons for relatively muted deal activity are still there, as sponsors are grappling with different interest coverage ratios and how they lever business and what they’re doing with those portfolio companies that have been sitting on their balance sheets for — or sitting within their portfolio for a longer period of time.
But we do believe that the back half of the year will reflect an increase relative to what we saw earlier in the year, but still at a relatively muted. I think when you get more conviction around the volatility, so higher interest rates are definitively and objectively more difficult. But I think when sponsors and other owners are making those capital allocation decisions, the volatility also is just as painful. And so even if we do sort of get more conviction that we’re at these higher rates, I think that’s going to be the type of thing that could catalyze more activity. And then the final point I’d make there, as we have and our peers have stated, is one of the tremendous benefits that we have — that we believe over the next several years is there’s still a tremendous amount of private equity dry powder, and some estimate it as much as $2 trillion.
And so even if you see kind of unit activity continuing through the rest of this year, we do see a lot of opportunity as that capital will get utilized in the remainder of its investment period.
Operator: Our next question comes from Arren Cyganovich with Citi.
Arren Cyganovich: I was just wondering if you could talk a little bit about the closed-end funds management and the assets. How familiar you are with them? Was your team responsible for managing those assets? Or is it a different subset of folks at Apollo?
Howard Widra: It’s a different subset of folks, but let me sort of like break that down, like the broad-based syndicated sort of CUSIP strategy is run by the performing credit team, which everybody sits — it used to, I could have said, before COVID, sits together, now they sit together virtually. But that’s run by the performing credit team. The directly originated loans is part — there’s no overlap with our loans because that’s part of what we call the large market direct lending strategy. But the origination of those loans or our go-to-market strategy is consolidated, meaning we call on sponsors across the board and then we originate them. So sort of like the, if you will, like sort of the template of the type of transactions we like to do, they’re covering some by sort market forces for much larger companies versus middle market companies, but the approach to the market is very similar.
And so the strategy with regard to those loans, I would say, is very similar. Again, it’s different people, but same process.
Arren Cyganovich: Do you work on the same investment committee or you have separate investment committee?
Howard Widra: There are separate investment committees for the approval for one or the other. But again, like remember, when we fund these loans, these loans are spread amongst a lot of vehicles, in every case, large market and the mid-cap middle market loans. And so there are often multiple investment committees for the same loan across Apollo anyway, right? So when MidCap does a deal, for example, like that’s approved — separately approved at MFIC and then it’s often separately approved in other places at Apollo, including some individually managed accounts that have their own approval process outside of Apollo. And so there is overlap amongst people, amongst many of those funds and many of these deals. I don’t know we’re sort of seen everywhere, but they are approved differently.
Arren Cyganovich: And then from the rotation perspective, the broadly syndicated market tends to be or at least valuations tend to be a lot more volatile on a quarter-to-quarter basis. If you get into a period of volatility, what would the strategy be from that perspective? Would you just hold them until that volatility subsides? Or I don’t know if necessarily if you’d want to sell them at losses to the extent that you are in that frustration?
Howard Widra: Right. Well, so 2 things. I always say volatility means they go down. But if the volatility offsets different — volatility down. Yes. So obviously, the NAV will be struck a couple of days before closing. So obviously, the day it closes, it will be valued where the market is on that day and it can either move up or down. And our intent is that we follow these names using sort of the Royal wing. Apollo follows these names and will continue to own and follow these names broadly across the platform. So we will have a view on the underlying credit. And I think the thought process would be consistent with how Apollo would do it is that the underlying credit is strong and there’s volatility and credit market changes, we would not expect in a normal course to want to sell things for under the value we received at the market’s pricing that differently.
