Apollo clients eye tie to Epstein
Leon Black helped start Apollo Global Management three decades ago out of the ashes of a junk-bond scandal and built a $400 billion private-equity powerhouse, handling the investments of institutions around the globe, from public pension systems in California to sovereign wealth funds controlled by foreign governments.
But now some of his clients are asking pointed questions about his judgment, as his association with a notorious sex offender threatens to cloud his future.
In the past two weeks — since The New York Times detailed more than $50 million in payments and contributions from Black to Jeffrey Epstein — Apollo’s clients have begun demanding answers about that relationship. In at least one case, an investor has decided not to hand Apollo any more of its money for the time being.
Apollo will report its quarterly earnings Thursday, and an analyst note frominvestmentfirmKeefe, Bruyette & Woods said the effect of Black’s dealings with Epstein on client relations will be a “focal point” of the private equity firm’s earnings call.
“Investors are concerned about reputational risk,” Kenneth Worthington, an analyst at JPMorgan Chase who covers the company’s shares, wrote in a client note.
Black, 69, is Apollo’s chief executive and chair. He startedthe firm with other former employees of Drexel Burnham Lambert, the investment bank that collapsed in 1990 amid a trading investigation that sent the since-pardoned Michael Milken to prison. Black has long been the face and voice of Apollo: In securities filings, Apollo names five people who are so vital to its business that the loss of their serviceswould have a “material adverse effect” on the firm.
In plainer terms, Apollo’s business suffers without a few key people. And Black’s name comes first.
“Apollo has always been closely associated with its founder and leader,” said SabrinaHowell, an assistant professor of finance at New YorkUniversity. In the short term, she said, “Apollo’s brand will certainly suffer.”
William Katz, an analyst who covers Apollo shares at Citigroup Global Markets, said the issue was so-called headline risk: the chance that Black shows up again and again in negative news reports.
“It will come down to the nature of those headlines,” Katz said.