Why Private Assets Are Essential: Masters in Business with Stephanie Drescher

Summary

Masters in Business: Why Private Assets Are Essential

Guest: Stephanie Drescher, Chief Client and Product Development Officer at Apollo
Host: Barry Ritholtz
Date: January 2, 2026
Podcast: Bloomberg Masters in Business

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Episode Overview

In this episode, Barry Ritholtz sits down with Stephanie Drescher, a leading force at private investment giant Apollo, to discuss the evolving landscape of private assets. The conversation traverses Drescher’s career from JP Morgan to Apollo, the significant role of private equity and private credit today, why private markets are now essential (not just a “nice-to-have”), and Apollo’s approach to aligning its interests with clients through co-investing, cultural values, and strategic wealth initiatives. Whether you're interested in the mechanics of private market investing, the democratization of alternatives, or the ongoing changes in finance, this episode is packed with insights from a top industry leader.

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Guest Introduction

• Stephanie Drescher: Chief Client and Product Development Officer, Apollo. 20+ years at Apollo, previously at JP Morgan. Key architect of Apollo’s expansion into private markets and wealth management. Regularly named on Barron's Women in Finance.

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Highlights & Key Discussion Points

Early Influences & Career Path

• Family Inspiration: Drescher’s grandmother, a Wall Street Journal reader born in the 1800s, influenced her love of markets from a young age.

  • “She used to read the Wall Street Journal cover to cover every day. Super smart, loved tracking stocks, and so we started to track stocks together.”
    (Stephanie Drescher, 03:33)

• Early Exposure: Interned in a women-led healthcare consulting firm before moving into finance, later joining JP Morgan immediately after business school.

• JP Morgan Experience: Rotated between global divisions (e.g., fixed income in New York, private banking in Geneva), developing an early focus on alternatives for ultra-high-net-worth clients.

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Private Markets: Then and Now

• Alternative Investments in the 90s-2000s:

  • Private markets were niche; clients were primarily large families and ultra-high net worth individuals.
  • “It was very early days and a very small fraction... Now I feel like there are probably dozens [of offerings] on the shelf available for clients every day, every quarter.”
    (Stephanie Drescher, 09:25)

• Market Crises as Catalysts:

  • Both the dot-com bust and the Great Financial Crisis accelerated client interest in alternatives for their more stable, less correlated returns.
  • “They make it look so easy on the investment side. But it actually takes so much work and rigor to be in position to make those big investment calls in those moments in time.”
    (Stephanie Drescher, 12:47)

• Key Principle:

  • “Purchase price matters.” (Stephanie Drescher, 15:02)
  • Investment discipline is crucial—value and timing are central to superior outcomes.

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Apollo’s Culture & Approach

• Role at Apollo: Drescher leads client outreach, product innovation, and global partnerships, bringing an institutional background to wealth.

• Culture Focus: Emphasizes innovation, meritocracy, a high-performance team ethos, and collaborative problem-solving.

  • “I often say to my team, it's we, not me. And that's really powerful.”
    (Stephanie Drescher, 21:10)

• Pandemic Lessons: Maintained culture through deliberate virtual and in-person community building, encouraging casual interactions to foster collaboration.

  • “We have the... ‘casual collision’. That’s really important to our culture to kind of show up.”
    (Stephanie Drescher, 23:14)

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Alignment with Clients: Co-Investing & Performance

• Apollo’s Differentiator: Regularly co-invests alongside clients with substantial balance sheet commitments—far surpassing industry norms.

  • “A commitment from an asset manager might be... 2.5% or 3.5%. It's an outlier if it's a 5% commitment... in one strategy of ours... we are two thirds of that portfolio.”
    (Stephanie Drescher, 25:19)

• Performance First Mentality: Apollo is not AUM-driven but performance- and outcome-driven.

  • “We're not focused on an AUM goal. That is the reward for good performance.”
    (Stephanie Drescher, 26:15)

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Wealth Channel, Distribution, and Innovation

• Strategic Shift to Wealth: Over the past five years, Apollo has transformed wealth management from episodic to a core, global strategic focus—with massive investment in tech and platform partnerships.

• Massive Lift for Wealth Platforms: Success requires scale, relationships, product breadth, education, service, and technology.

  • “We have spent actually a billion dollars, $1 billion from our balance sheet in wealth tech investments alone.”
    (Stephanie Drescher, 28:49)

• Distribution: Spans private banks, wires, RIAs, broker dealers, family offices, and global markets (EMEA, Asia, North and Latin America).

• Innovation in Access:

  • New structures (interval funds, semi-liquid strategies, private market ETFs with State Street) are lowering barriers and improving reporting and liquidity for private investments.
  • “It's a journey, but I think it's already getting better. And I do see a world where it becomes so much easier, more efficient to access.”
    (Stephanie Drescher, 32:34)

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The Case for Private Assets in Portfolios

• No Longer Niche:

  • Private equity, credit, and infrastructure are now essential—providing real diversification, return potential, and institutional-like access for individuals.

• Core, Not Peripheral:

  • “It’s no longer nice to have private markets in a portfolio. It’s a need to have in order to meet the long-term financial goals of the client.”
    (Stephanie Drescher, 39:08)

• Shrinking Public Markets:

  • Fewer public companies mean private markets are critical for exposure to the broad opportunity set.
  • “90% of companies globally are in fact private. So if someone truly wants representative exposure in their portfolio, it's really hard to rationalize eliminating 90%.”
    (Stephanie Drescher, 40:22)

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Liquidity, Semi-Liquidity, and Illiquidity

• Sophisticated Portfolio Construction:
  • Modern portfolios blend public/private and different liquidity profiles to optimize for return and flexibility, breaking free from the traditional 60/40 split.
  • “There are options where private markets can be a part of an overall portfolio, like an ETF format... or an investment grade strategy [that] may be monthly in nature.”
    (Stephanie Drescher, 44:04)

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Rethinking Private Credit & Democratization

• Changing Paradigm:

  • The risk/return and illiquidity tradeoff concepts have shifted—semi-liquid and diversified structures are mainstream and accessible.
  • “The idea of... alternatives being that very high risk portion of a portfolio... that's just no longer the modern thinking.”
    (Stephanie Drescher, 45:10)

• Institutions vs. Individuals:

  • Institutions average 20%+ private market allocations; individuals still lag at ~3%, a gap expected to close rapidly.

• Origination is King:

  • Apollo invests heavily in proprietary origination (16 specialized engines across geographies and sectors) to maximize alpha.

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Regulatory Shifts & Democratization

• Global Trends:

  • Regulatory changes (in the US, EU, UK) are accelerating access to private markets for retirement savers and individuals—a necessary shift given retirement challenges.
  • “There’s a global theme of the desire to allow more access of private markets to the individual...”
    (Stephanie Drescher, 50:40)

• Mismatch in Liquidity Needs:

  • Long time horizons of retirement savings are not well-matched by daily-liquid options—private assets are a better fit.

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Notable Quotes & Memorable Moments

• “Purchase price matters.” (Stephanie Drescher, 15:02)
• “It’s we, not me. And that’s really powerful.” (Stephanie Drescher, 21:10)
• “A commitment from an asset manager might be... 2.5% or 3.5%... in one strategy of ours... we are two thirds of that portfolio.” (Stephanie Drescher, 25:19)
• “We have spent actually a billion dollars, $1 billion from our balance sheet in wealth tech investments alone...” (Stephanie Drescher, 28:49)
• “It’s no longer nice to have private markets in a portfolio. It’s a need to have in order to meet the long-term financial goals of the client.” (Stephanie Drescher, 39:08)
• “90% of companies globally are in fact private. So if someone truly wants representative exposure in their portfolio, it's really hard to rationalize eliminating 90%.” (Stephanie Drescher, 40:22)

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Timestamps for Key Segments

• Early Life and Market Inspiration – 02:38–05:18
• JP Morgan, Early Alternatives Experience – 05:50–09:25
• Impact of Market Crises on Private Markets – 11:16–15:02
• Apollo's Culture and Employee Engagement – 17:58–23:37
• Co-Investing and Client Alignment – 23:37–26:15
• Transforming Wealth Management/Distribution – 27:08–32:34
• Current State of Private Markets – 36:10–39:41
• Shrinking Public Markets and Portfolio Construction – 39:41–44:50
• Liquidity Innovations and Product Design – 42:30–44:50
• Paradigm Shift in Private Credit/Democratization – 44:50–47:00
• Proprietary Origination and Investment Focus – 47:00–50:00
• Regulatory Shifts and Retirement Access – 50:40–53:04

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Final Thoughts & Advice

• To Young Professionals:

  • “Stay curious... if you’re tuned in from a curiosity perspective coupled with kind of strong work ethic, I think that’s a winning recipe.”
    (Stephanie Drescher, 56:54)

• On Change & Adaptation:

  • “The one thing that stays the same is change. And to embrace that and to be flexible...”
    (Stephanie Drescher, 57:48)

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This episode offers a comprehensive guide to the evolution and future of private markets, making the case for their essential role in modern portfolios. Stephanie Drescher combines decades of experience with strategic and practical perspectives, making this a must-listen (and a must-read summary) for anyone interested in the intersection of wealth, innovation, and private investment.

Transcript

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[Stephanie Drescher]

This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

[Barry Ritholtz]

This week on the podcast I have an extra special guest. Stephanie Drescher is chief client and Product Development Officer at private investment giant Apollo. She's been there for over 20 years. She spent a decade before that doing alternatives at JP Morgan. What a fascinating person. Apollo runs $840 billion in client assets and she has really not over overseeing the wealth division, but also worked on a variety of geographies, new products. She's on everybody's best of list. She's been on the Barron's Women in Finance list since inception every year. I thought this conversation was fascinating. If you're remotely interested in private equity, private debt, private credit, private infrastructure, you'll find this conversation absolutely fascinating. With no further ado, Apollo's Stephanie Drescher. Stephanie Drescher, welcome to Bloomberg.

[Stephanie Drescher]

Thank you Barry. Happy to be here.

[Barry Ritholtz]

Happy to have you. So we're going to get into Apollo and your investment philosophy in A bit. But before we do, I just have to start with your background. Bachelor's in Barnard at Columbia, MBA from Columbia Business School. What was the original career plan?

[Stephanie Drescher]

I did always have finance in my sites. So undergrad it was econ and psych. I joke that I use the psych in my day to day field way more than the econ these days. But there was always a draw towards doing something in the financial arena, interest in markets and the like. So very early internships led me down that path.

[Barry Ritholtz]

And I read somewhere in your background that you were particularly inspired to go into finance by your grandmother. Tell us about that.

[Stephanie Drescher]

That is true. So my father's mother lived with us for a time and believe it or not, she was born in the very, very late 1800s. And while her brother went on to become a doctor, she capped out at an eighth grade education. And so the power of education was always a core value and a focus of hers and my family. And she used to read the Wall Street Journal cover to cover every day. Super smart, loved tracking stocks and so we started to track stocks together.

[Barry Ritholtz]

How old were you at this time?

[Stephanie Drescher]

I don't know, maybe 12. And in a very high tech way we would put it up on the refrigerator and kind of see the changes and the holdings that she had in her portfolio and sometimes overlapped with that of my parents. So that was the early start.

[Barry Ritholtz]

So you get an MBA from Columbia. JP Morgan was the first job right out of school.

[Stephanie Drescher]

It was although there was a mentor right prior to the JP Morgan opportunity that believe it or not, I started babysitting for this family. And I didn't know what the mother did day to day until after a period of time of babysitting. She looked at me and she said, I think your babysitting days are over. And I said I don't know what you're talking about. And she said, I run a women led healthcare consulting firm. Would you like an internship? And I practically fell off my chair and I said I would love an internship.

[Barry Ritholtz]

How old are you at this time? Like 16.

[Stephanie Drescher]

It was late high school maybe early college. Early, early. And it was the most amazing kind of opportunity that someone could give me. Right. Just seeing a professional organization do its thing and all the analysis and client relationship management that went into that. So while I dec healthcare wasn't my thing and consulting wasn't my thing, it was very an easy bridge to JP Morgan and the finance field.

[Barry Ritholtz]

So when you started JPMorgan, what was the role? What areas were you toiling in?

[Stephanie Drescher]

So I started With a rotational opportunity, which was terrific. I had everything from fixed income research to private banking in Geneva.

[Barry Ritholtz]

Did you go to Switzerland?

[Stephanie Drescher]

I did, yeah, for about six months. I realized that I needed to buy all of my groceries during the day because it was closed by the time I got out of work. And then I like to travel on weekends. So importantly though, and seriously, it was a terrific time in my life to be more aware of time zones and cultural nuances and really see kind of a client perspective outside of New York and the U.S. it's a big world. Totally. Yet it also can feel so small once you start to travel and live elsewhere. So that was a terrific opportunity. And then ultimately out of that rotational program ended up in alternatives within the private bank and then we were off to the races.

[Barry Ritholtz]

So alternatives way back then. But before you leave Switzerland, I recall a vacation not too long ago to Lake Geneva. And what's amazing, and we were in this hotel that used to be a castle. And like you think you have some understanding of the gilded age and old money and then you see. No, no, we mean 500 years old money. It's just such a different eye opening. So different than here? Yeah, yeah. Really, really amazing. So you're in the alts group at J.P. morgan. You stay at J.P. morgan for a decade. Tell us a little bit about the work you did there. Yeah.

[Stephanie Drescher]

So it was very early days of speaking to families around the world, the ultra high net worth clients of JP Morgan, about the role of alternatives in their portfolio. And I remember distinctly speaking about the core and satellite within alternatives now kind of private markets as our nomenclature. But it gave me such a great perspective in terms of the educational kind of foundation that we needed to set first with those clients. And I see it now continuing to play out. But my time at JP Morgan and it was a very fast 10 years and an amazing kind of training ground.

[Barry Ritholtz]

Was.

[Stephanie Drescher]

Kind of an assessment of all the different private market strategies from private equity to hedge funds to credit. And the seat was a combination of the buy side. So due diligence on the managers we were going to put on platform and then the sell side in terms of the educational component. To the end. Banker and client Superfund traveled around the world speaking about how alts could factor in to return profiles and diversification, smoother volatility, all at a time when private equity was not on the front page every day. It was very early.

[Barry Ritholtz]

Let's contextualize a little bit. This is the mid to late 90s and early 2000s. The stock market was just screaming higher double digits. Especially the last four years of the 90s. What was it like then? How receptive was the audience to you should consider these private markets. How much smaller was the whole space back then?

[Stephanie Drescher]

Yeah, it was very early days and a very small fraction. I remember if we launched one manager a quarter it was a big deal. Now I feel like there are probably dozens on the shelf available for clients every. Every day, every quarter. The but the transformation was starting to take hold where there were especially the large families recognizing the return potential that a manager in alternatives could provide in their portfolio. And they didn't want to rely. It was very early but they saw that they didn't want to rely exclusively on public market exposure. So you know when we look at actually the percentages in kind of large family office clients today, it matches or frankly exceeds that of an institution. But it's still they started at the ultra high net worth end so much earlier kind of in back in those days than most in wealth. So I think you there were the likes of a JP Morgan client base and a select number of other private banks did start early in showcasing these opportunities. And the adoption as I traveled around the world was strong but it was still kind of storytelling and a lot of niche opportunities where I feel like if we fast forward to today, people recognize that private market solutions can play both the core and satellite in their portfolio as it relates to a complement to the public market exposure.

[Barry Ritholtz]

So you join Apollo in 2004. I'm kind of curious. A few years earlier we have the dot com implosion. A few years later we have the great financial crisis. I hate when people call these once a century events because they seem to happen a lot more frequently than that. But how significant were those giant public events to telling the story of hey, here's some private market investments that you don't have the same sort of volatility and regular explosions.

[Stephanie Drescher]

Yeah, no, you're right. They were such an incredibly important backdrop to why alternatives, why private markets. And in fact when I was still in my seat at JP Morgan but Apollo was offering then our private equity flagship fund 5 the.com boom was just at its tail and was starting to fracture. You saw the signs and Apollo came onto the platform and was talking a value story. And for the first several weeks there wasn't as much take up. And then as the market started to change dramatically there was this wake up call of whoa, you know what, let's look at value again. And that kind of was the tail end of the story for that fundraise back around the 2000 period. Fast forward to the great financial crisis. It was such an incredible time at that point. I was already in my Apollo seat to see the investment committee dynamic. And there were moments that thankfully, because we were so steeped on the credit side, in addition to obviously our view of private equity, where we could back up the truck on certain credits with conviction. And I look back now with honestly, such pride for the decisions that were made in that period of time and frankly, many subsequently during moments of dislocation where they make it look so easy on the investment side. But it actually takes so much work and rigor to be in position to make those big investment calls in those moments in time. But it served us incredibly well and continues to even Liberation Day right post when the market started to move materially. There wasn't that much time. Within 48 hours. There was kind of a correction from the volatility that we saw on household issuers and names. But thankfully, based on our scale and knowledge of those capital structures, we were able to put about 25 billion of dollars to work in just a few days and were one of the biggest market participants during that moment of dislocation.

[Barry Ritholtz]

You know, you mentioned high conviction investments. I recall in the mid to late 2000s, people tossed around the phrase toxic assets. And my attitude was always, there's no such thing as toxic assets. There are only toxic prices. Everything discounted enough become, eventually becomes attractive.

[Stephanie Drescher]

Look, we are one of our kind of taglines that you'll hear internally and externally is purchase price matters.

[Barry Ritholtz]

Yeah, 100% what you pay for something is going to have a giant impact on what the subsequent returns are going to be.

[Stephanie Drescher]

Totally. And you know that that does, it does require discipline, especially when multiples are going to kind of stratospheric levels. But you know, it has, that strategy has borne out in a very kind of productive and successful way for us, maintaining that discipline. But as you're saying, like spotting those moments where investments are mispriced or not well understood, and being willing to deal with that complexity at the right place, at the right price in order to generate the outcome we want.

[Barry Ritholtz]

Really, really interesting. Coming up, we continue our conversation with Stephanie Drescher, Apollo's chief client and product development officer, discussing her career at Apollo. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

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[Barry Ritholtz]

I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Stephanie Drescher. She is Apollo's chief Client and and Product Development officer. Apollo runs about $840 billion in client assets. So I love this title. But I got to think people are wondering what's a day in the life of Apollo's chief Client and Product Development officer like? It sounds like that's a really wide bit of land.

[Stephanie Drescher]

It's a fun job. So I've been at Apollo now 21 years and when I first started I built out the institutional side of the business globally. So sovereign wealth funds think the DB public pension plans and that was very much our core client base with an episodic offering through a private bank or a wire from time to time as, as that market evolved and matured into a very robust global business there. It was clear to Mark Rowan, now CEO and I that at some point complementing that institutional business with a wealth strategy was in our future. We wanted to make sure though that we chose the right moment to really lean in to wealth because it, it does take a massive commitment and I'm sure we'll talk more about it. So in my role, I am fortunate enough to build out our business as it relates to our client set of offerings, our product development as well as our partnerships with our distributors, with our investors and just making sure that as we continue to innovate, we meet our clients where they are and often kind of co author the types of offerings that are most meaningful to them. So in any given day I get to think about our set of products and what we're innovating. I get to speak with our clients and partners, existing and prospects. I manage a large group of people and our talent and I lean in with a very keen focus on culture which means a lot to me.

[Barry Ritholtz]

So that's really interesting. How would you describe. Describe Apollo's culture and what do you do to help shape that?

[Stephanie Drescher]

So, look, since the day I joined, there have been certain common themes to our culture, which I think have always kind of propelled us forward as a firm. Now public, but very much feels like a partnership. And the first one is making sure that we continue to innovate, to feel very entrepreneurial and to empower our people to kind of find those opportunities and pursue them in an appropriate way. We manage the firm as a meritocracy, so we want to give people responsibility and let them kind of, really kind of have the greatest impact that they can for their own professional careers as well as for the firm. And we want to have a winning, high performance culture, meaning even with all the success that we've had, we want to maintain that, propel it forward, and continue that high level of performance. And importantly, we do it together. So it's not about any one person. I often say to my team, it's we, not me. And that's really powerful. So when we bring everything that Apollo has to offer, we call it kind of the one Apollo to any client situation or any goal, we can use that power of the firm to be successful and to allow us all to win.

[Barry Ritholtz]

Really, really interesting, you know, so the biggest complaint I heard from various corporate executives during the pandemic was how do we maintain the corporate culture we've spent so much time and energy trying to build over the years? Suddenly everybody's at home on a Zoom call in their pajamas. How do you maintain corporate culture like that?

[Stephanie Drescher]

It's so important, frankly, whether we're all in the office to maintain that culture or certainly the challenges during the pandemic making sure, certainly during that, during kind of that Covid period of creating forums, even if it was remote, to maintain the connectivity was really important to have different. I remember many different kind of lunchtime meetings that we would have on Zoom, or our family community group would have different webinars where it was the employee as parent and then their children, frankly, were involved as well. I think it's kind of fostering that sense of community, even if it is, in fact remote. And then thankfully, once in office, I know as I was passing through the sixth floor here at Bloomberg, I saw the very deliberate kind of floor plan that you have and food and beverage kind of accessible to employees.

[Barry Ritholtz]

Everybody has to go through six. It causes all these random meetings that you have. Oh, I haven't seen you in a long Time. How's everything going? Because everybody shows up for coffee or treats.

[Stephanie Drescher]

Totally. And we have the same. So ours is on the eighth floor, but we call it the casual collision. And that's really important to our culture to kind of show up certainly as soon as we could do, do so from a practical perspective and allow for that collaboration. It's super important for people to share and get to the best answer possible together.

[Barry Ritholtz]

So I want to talk about the wealth channel, but before I get there, I have to ask about something that Apoll does that not every large private markets firm does. You have talked about realigning the interest of the firm with clients, making sure that you're on the same side of trades. And towards that end, Apollo is a regular co investor along with clients in certain projects. Tell us about that.

[Stephanie Drescher]

Yeah, so from a kind of balance sheet perspective, we are often one of, if not the largest investor side by side with our third party clients in the investments and strategies that we manage. So through our retirement services business athene, as well as our third party business, we invest side by side. And so the decisions we make on behalf of the balance sheet are aligned with the outcomes of the strategies in which we invest third party capital. So we often say, well, we can't guarantee the outcome, we guarantee a shared outcome. And that means a lot to us in terms of our commitment and focus, but also to our clients because they know how important it is to us in multiple ways.

[Barry Ritholtz]

I would imagine if anybody has hesitation on a investment, if you see the private equity firm co investing along with you, that has to be a big confidence driver.

[Stephanie Drescher]

It is. And in certain instances, like when you look across the industry, a commitment from an asset manager might be at the 2.5% or 3.5%. It's an outlier if it's a 5%.

[Barry Ritholtz]

Commitment, but not double digits.

[Stephanie Drescher]

Exactly where in one strategy of ours which has a diversified portfolio of private markets, we are two thirds of that portfolio. So when we say that it's meaningful to our balance sheet, we mean it.

[Barry Ritholtz]

How does that work in terms of direct stakes and performance fees? Like if you're most of the invested assets, that has to have an impact on what the balance sheet looks like. How do you guys align that?

[Stephanie Drescher]

So look, we are performance first. At the end of the day. Our relationships and the trust that we build are over time, through performance and through service. I mean, we want to make sure that our partners feel our support in just about every way. So for us, it's never about a particular fe of one Type or another. Ultimately we're not focused on an AUM goal. That is the reward for good performance. And as long as we are making the best investment decisions and showing up frankly as a best in class partner for our clients, that is what drives our business forward.

[Barry Ritholtz]

So let's talk a little bit about the wealth channel, which is where you focus some of your time early in your career at Apollo. Tell us how this has changed over the past 20 years and tell us a little bit about what type of clients show up there.

[Stephanie Drescher]

Yeah, so the wealth business I saw certainly in my very early days of J.P. morgan, but then for my first kind of 16 plus years at Apollo, the private bank or wire was really more the exception than the rule. It was more of a episodic type of relationship that all completely transformed into a strategic commitment from all of us at Apollo starting about four or five years ago. So when Mark Rowan took the reins as CEO, all the stars aligned to build a wealth business to complement the institutional. And that that decision truly needed to come from the top CEO on down. Because it is strategic, it's not transactional. If you're going to do it well, it needs to be a long term commitment to the channel. And in my view, there are actually only a small number of firms that can really show up and do this well in partnership with all the financial intermediaries involved with wealth. And the reason I say that is when you look at what's required, it's a pretty massive lift. You need to make sure that you build out the right relationships and you need the team globally in place to do that across channels and geographies. You need to make sure that the product mix is extensive enough so that you're relevant as it pertains to our investment capability. But you want to make sure that you're showing up with the right structures for the right clients. Then there's the educational component, there's the servicing, there's technology. For example, we have spent actually a billion dollars, $1 billion from our balance sheet in wealth tech investments alone to make sure that we're partnering and investing in firms that will help the industry. So I think there are very few that can do that well and truly meet the wealth clients in order to meet their portfolio needs.

[Barry Ritholtz]

So within that channel, family offices, high net wealth sovereign funds, are you also selling through other intermediaries like brokerage firms or RIAs. Tell us a little bit about that.

[Stephanie Drescher]

Yes. So the, the channels represented in wealth include the private banks and wires as one channel, the independents, which includes RIAs and and independent broker dealers. Family office is also kind of under our wealth umbrella. That's the ultra high net worth space selectively and then we have geographic focus outside of the US across EMEA and Asia. The rest of North America is covered appropriately out of Canada and latam. Each of those channels are represented while each has differences and we definitely approach them with different resourcing and commitments. The common denominator of all of them is helping the intermediary, the advisor or the banker or the CIO of the family office either build for retirement in the case of their underlying client or build to a certain level of wealth. Whether it's you know, a wire like a UBS or a Morgan Stanley and their set of advisors or you name kind of an ria, we want to show up to that intermediary with offerings that are going to work for their platform and their base and make sure that we can speak to semi liquid as well as drawdown and really kind of listen closely to what they're looking to provide their clients.

[Barry Ritholtz]

So the challenge we always see on on the RIA side is on the private it seems everything is sort of a one off. And whereas on the public side the custodianship is standardized, the reporting is standardized, all the compliance and due diligence is pretty, you know, turnkey. Tell us about a the challenges of all the private investments that may not all be identical. And is there a solution out there, a platform in development that might make this more like a turnkey, more public security like than private?

[Stephanie Drescher]

It's a journey, but I think it's already getting better. And I do see a world where it becomes so much easier, more efficient to access. If we look at what we're already seeing when we think about an interval fund structure where you can buy many different underlying strategies. It's point and click through Advisor, but it's point and click. There isn't kind of the fulsome subscription process that we've seen. There's innovation which we have worked on in partnership with State street for example, where there are ETF structures of which private markets are a part. And I think the technology is moving from kind of more of an analog to digital in just kind of the, the plumbing and the infrastructure that supports the private market's overall ecosystem. There's definitely a lot of time and effort to try to simplify the processes. I think it's going to go hand in hand with an evolution that's already starting where allocators are looking to managers like ourselves and to not only offer specific parts or specific strategies, but to increasingly offer more holistic solutions. So a bundle of private market solutions which could be multi strategy going to eventually kind of multi strategy, multi manager as well, which can then be housed not only in the accounts, brokerage accounts or self directed that we see so often today, but in a range of pools of capital in models and a number of discretionary pools of capital that are highly applicable for private markets.

[Barry Ritholtz]

Really, really interesting. Coming up, we continue our conversation with Stephanie Drescher, Apollo's chief client and product development officer, discussing the state of private markets today. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

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[Barry Ritholtz]

I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest is Stephanie Drescher. She is the chief client and product development officer at private investment giant Apollo, helping to oversee $840 billion in client assets. So we're living in a moment where private credit and private equity, they used to be a small niche. That's no longer the case. Not only are they mainstream, they're one of the fastest growing parts of the investment world. Tell us a little bit about what's happening in that space and what's driving that shift.

[Stephanie Drescher]

Yeah, I think there's been a transformation in terms of public and private holdings in a portfolio. And what does it mean to be safe or risky? I think historically people have thought that because something was liquid in the public markets, it was inherently safe or frankly, safer than something less liquid in the private markets. And as we look at 2022 and frankly, many moments of dislocation in the public markets, there's now a much clearer Recognition that the public markets can be both safe and risky, as can the private markets markets. Because when we look at the public markets, let's say the S&P 500, for example, the performance and frankly moments of underperformance have been so concentrated in terms of the attribution to roughly seven stocks. Sometimes people will say 10 stocks. But when there's so much concentration or frankly, lack of diversification in the public markets creates a moment where people start to zoom out and say, frankly, what if the toolkit for my equity piece of the portfolio should have a combination of both public and private? And frankly, what if my fixed income segment of the portfolio should have both public and private? Then the toolkit for advisors and for families is much broader to create that excess return. And what we've seen is the desire to incorporate the private markets not just as an add on to an otherwise traditional 60, 40 portfolio, but rather thinking of it as part of their core holdings and equity and debt, and now thinking simply of alternatives as an alternative to public stocks and bonds.

[Barry Ritholtz]

So 60, 40 becomes 50, 30, 20 or 602020 or something along those lines.

[Stephanie Drescher]

Yeah. Or it could even keep whatever percentages are split between public, between equity and debt, but have both the public and private options available within each of those percentages to maximize the return, to maximize diversification and to reduce the volatility. It's a game changer. It's no longer nice to have private markets in a portfolio. It's a need to have in order to meet the long term financial goals of the client.

[Barry Ritholtz]

So one of the things I can't help but notice over the course of my career, which began more or less around the same time as yours in the mid-90s, is that the total number of public equities has shrunk dramatically. The Wilshire 5000 is about 3400 stocks. The S&P 500 still 502 stocks. Because of A shares, it's a little over 500. But even the Russell 2000 and some of the other broader indexes, far fewer public names in there. How much is the shrinking of the public float driving activity onto the private side?

[Stephanie Drescher]

I think it's very real. You're right, it's about half the number of public companies. It was just even a couple of decades ago. At the same time, when you look at the number of companies, total number of companies globally, 90% of the are in fact private. So if someone truly wants representative exposure in their portfolio, it's really hard to rationalize eliminating 90% of the total number of companies out there. Right. And focusing exclusively on public because it's liquid. Realistically, one needs to look at what is the return profile goal for the portfolio? What type of illiquidity can someone accept and then create a portfolio that allows for that excess return? Institutions have realized that now over decades and they've been the beneficiaries of that excess return by accepting some amount of illiquidity. With the advent of new structures in the private market, certainly for wealth and increasingly even for institutions, you can, you can select offerings out there that provide more interim liquidity. It's, it's not your atm, no one should think that it is. But it provides a much broader suite of solutions across a range of liquidity profiles, offering far more liquidity than one would have received in a traditional private equity drawdown structure. In our view, as we develop portfolios with our clients, depending on what they're looking for in terms of underlying return and liquidity, we believe there's a role for a mix of both more more liquid private markets structures as well as drawdown, depending on the strategy.

[Barry Ritholtz]

So let's talk about liquidity and semi liquidity as well as illiquidity. The academic perspective has always been hey, when you're moving into an illiquid market, you get the benefit of the illiquidity premium. It's a smaller market, it's less efficient. There's opportunities to create alpha here, but the trade off is your money is locked up for three years, for five years, for seven years, whatever it is, when first with the semi liquid products, are you giving up some of that upside in exchange for semi liquidity?

[Stephanie Drescher]

Our view is that the structure and the design should marry the underlying assets in the portfolio.

[Barry Ritholtz]

So two year credit notes are going to be more liquid than perpetual open ended.

[Stephanie Drescher]

Exactly. So we have, in our view, the strategies within private markets are so wide ranging, which to your point, in terms of portfolio construction, our view is that since a private market holding can span everything from short term investment grade credit all the way through to your traditional kind of private equity drawdown, that's a very, very wide range. And when you think broadly about that type of exposure, why shouldn't an allocation in a portfolio be maybe even 50% to private markets, just given the breadth and applicability of the underlying assets, from the short dated investment grade credit all the way through to more traditional private private equity. But to your point, there are options where private markets can be a part of an overall portfolio, like an ETF format, where it is in fact daily as Part of a broader portfolio or if you go to kind of an investment grade strategy, it may be monthly in nature. But you're right, the trade off for stepping out a bit on the liquidity curve, albeit not too much further, is a pickup in the excess return.

[Barry Ritholtz]

Really interesting. I'm not going to quote you exactly, but I did read something you had said about private credit is that you see a full on fundamental rethink taking place in the space. Explain what you mean by fundamental rethink.

[Stephanie Drescher]

You know the, the idea of, of private markets or alternative of our alternatives being that very high risk portion of a portfolio and therefore a small percentage of one's allocation locked up for a long period of time. That's just no longer the modern thinking of the use of private markets in a portfolio. There's no reason right now why an advisor and a banker can't think in a far more flexible way about how they are meeting the need to save for retirement or the ability to build wealth with private market structures in mind. So it kind of goes back to that idea of public markets being safe and private markets being risky. That's no longer kind of the thinking in the market. I think most intermediaries have really challenged that historical way of building portfolios and they want the same benefits that the institutions have now had for decades. The reality is that the size of the wealth market in terms of assets held by families, by individuals is about the same size as that held by institutions, each about 150 trillion or so globally. The institutions right now have an average allocation of over 20% to private markets. The individual on average 3%.

[Barry Ritholtz]

Yeah, I was going to say single digits, clearly.

[Stephanie Drescher]

Absolutely.

[Barry Ritholtz]

And all of the. When we look at the projections and a variety of war game scenarios, this looks like this is going to continue to grow over the next decade. I know this is a speculative question and no one really knows, but how large can the private markets get relative to, to the public markets? Can they be the same size eventually?

[Stephanie Drescher]

Look, our view is that origination is the great differentiator. So we focus not as kind of aum, as a limiter, but rather origination and making.

[Barry Ritholtz]

Define that because when I hear origination I'm thinking not all private investments are created the same.

[Stephanie Drescher]

Right. It's the ability to create proprietary investment opportunities is in our view a huge differentiator for a platform. And we partner with financial intermediaries and that is additive in terms of the flow of investment opportunities. But not exclusively. In fact, over the last almost 15 years now, we've built out 16 proprietary origination engines so that we can create that investment alpha in house for the benefit of our clients. And that proprietary origination fuels our underlying portfolios, which ultimately in our view, is critical to delivering on the return.

[Barry Ritholtz]

So those 16 different engines, I'm going to assume they're each in a different type of space.

[Stephanie Drescher]

Exactly.

[Barry Ritholtz]

So real assets, infrastructure, private credit, private debt, which isn't always the exact same thing. Private equity, there's got to be many more. What, what other spaces are you, what other geographies are you looking at? What other spaces are you looking at? What's the product mix look like?

[Stephanie Drescher]

Yeah, so on the origination side, it is quite broad. Think everything from fleet finance to fleet jets, ships, all the above, and even trucking. There's a whole range in terms of everything from aviation to kind of ground transport. There's consumer finance, there's specialty finance, there's mortgages. So it's quite broad in terms of the reach, but it's ultimately originating the investment in what we call kind of the industrial renaissance. And the need for that private capital is real and additive to what could otherwise be found in the public markets.

[Barry Ritholtz]

Hmm. Really, really fascinating. But before I get to I only have you for a limited amount of time. Before I get to my favorite questions, let me just ask you one more question. What do you think investors who are looking at the private markets aren't thinking about or talking about, but should be? What sort of topics? Geographies, policy issues, what's out there that is getting overlooked but should, perhaps shouldn't.

[Stephanie Drescher]

So what I'm seeing more and more is a global trend of the democratization for private markets. And as I look at what's happening certainly in our own backyard in terms of the executive orders around 401k and then I look to, to Europe and I see their regulation around the LTIF 2.0 or I look even to the UK and I see regs in the UK and France in terms of certain requirements and percentages to private markets in their retirement plans. To me there's a global theme of the desire to allow more access of private markets to the individual and through their advisors, through the intermediaries, to truly be able to adequately plan for retirement. And we see obviously the state of kind of retirees here in the US and there's a dire need to give them through managed accounts, through target date, access to investments that will provide that additional excess return. And as we think about it, Most of those 401s have time, Horizons of decades yet the solutions they have available to them are daily liquid. That mismatch does not need to exist. And with the changes that we're seeing come out of dc, we're hopeful that the framework for the benefit of those retirement plans will continue to be one that shifts from the historical view of maximizing those pools of capital to the lowest possible fee to one where they look to maximize outcome and truly maximize the result for those participants.

[Barry Ritholtz]

Really very fascinating. Let's jump to our final five questions that I ask all of my guests, starting with tell us about your mentors who helped shape your career.

[Stephanie Drescher]

Well, I mentioned in a prior part of our series someone that I used to babysit for who gave me my first shot in a healthcare consulting firm. So she will remain part of my kind of my personal advisory board while at JP Morgan. Mary Erdos is kind of rock star status in my book and an amazing mentor throughout my career. And then, you know, many at Apollo that I won't name because I won't embarrass them, but that have been incredible sponsors of my career with a lot of opportunities just to continue to grow and develop as a professional.

[Barry Ritholtz]

Let's talk about books. What are you reading? What are some of your favorites?

[Stephanie Drescher]

So. Well, in terms of what I'm reading right now, there's a book called Such Good People, which I will give a disclaimer. It's written by Amy Bloomfeld and she is a great close friend from college. And it's a great read. And so I'm at the end and I don't want it to end. So that's a great one. I was actually just away this weekend and I have to say I was struck when I was in the Berkshires and I was struck by the fall foliage and just amazing this year. Beautiful. Like coming. You know, I live and work in New York City, so seeing those surroundings and being back in nature, it did make me think of Emerson and Thoreau, who I did love. And it's been a while since I've read their works, but it inspired me to go back and dust that off.

[Barry Ritholtz]

Let's talk about what's keeping you entertained these days. What are you doing streaming or listening to?

[Stephanie Drescher]

Other than you?

[Barry Ritholtz]

Well, this doesn't count. Give us a different one.

[Stephanie Drescher]

Okay. Well, one that is top of mind. Who we actually just had participate live at a client forum of ours is Dr. David Sinclair of Lifespan, and he is affiliated with Harvard and his work fascinates me in terms of.

[Barry Ritholtz]

Is that the Happiness series?

[Stephanie Drescher]

Oh, I love that, too.

[Barry Ritholtz]

Longitudinal study.

[Stephanie Drescher]

That's a different one. And I love that professor as well in terms of the value of happiness at different stages of our lives. Love that. But this actually relates to longevity more in terms of genetics and all the research and science and even drug development that is going into the kind of health and wellness from a longevity perspective.

[Barry Ritholtz]

The Health Span study, is that what this one is?

[Stephanie Drescher]

Yes, exactly. And research that they're already doing in terms of eyes that could have applicability to many other parts of our body. So I just find it kind of a fascinating field that I think will develop so much over time. And of course, from a work perspective, as I think frankly of the work of both of those Harvard professors and doctors and is how does it tie into the high performance culture and mindset that we have as a firm? Like, how do we take that thinking and try to think about our own employees over time?

[Barry Ritholtz]

And our final two questions, what sort of advice would you give to a recent college grad interested in a career in investing, privates, alternative investings? What's your advice?

[Stephanie Drescher]

Well, first off, go for it, because I think there's still so much growth ahead. I would just say stay curious because as we think about the innovation that's happening just about from every angle of product innovation and channels and frankly, even applicability of AI to what we do today, if you're tuned in from a curiosity perspective coupled with kind of strong work ethic, I think that's a winning recipe.

[Barry Ritholtz]

And our final question, what do you know about the world of alternative and private market investing today? Would have been useful 30 years ago or so when you were first getting started?

[Stephanie Drescher]

Well, no fun if you have the answer key right. But look, I would say the one thing that stays the same is change. And to embrace that and to be flexible, to recognize that there will be so much evolution and change that continues in front of us from an industry and certainly as someone starting, if someone's starting out now, to kind of enjoy that ride and recognize that there will be many chapters that unfold and the best we can kind of try to see where that puck is going, but certainly embrace that there's so much more innovation and opportunity to come.

[Barry Ritholtz]

Really, really interesting. Thank you, Stephanie, for being so generous with your time. We have been speaking with Stephanie Drescher, Apollo's chief client and product development officer. If you enjoy this conversation, check out any of the 589 we've done over the previous 11 and a half years. You can find those at iTunes, Spotify, YouTube, Bloomberg, wherever you find your favorite podcast. And be sure and Check out my new book, how not to Invest the Ideas, Numbers and Behavior that Destroys wealth and how to Avoid Them. Wherever you get your books at, I would be remiss if I didn't thank the crack team that helps put these conversations together each week. Alexis Noriega is my video producer. Sean Russo is my researcher. Anna Luke is my producer. Sage Bauman is the head of Podcast podcasts at Bloomberg. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.

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