Apollo, Athene Targeting DC In-Plan Annuity Market

Apollo Global Management Inc. and its Athene Annuity & Life Co. insurance business emphasized during an investor day presentation that they consider alternative investments and in-plan annuities in defined contribution plans as a future growth area.

The asset manager, which merged with insurance, annuity and pension risk transfer provider Athene in 2022, described to investors Tuesday the “massive need” for retirement products.

Grant Kvalheim, president of Athene Holding Ltd., spoke of a “retirement tsunami” in the U.S. forecast in the coming years, calling it a tailwind that will “exist for several decades.” One product the insurance division is working on that would involve Apollo and a third-party target-date-fund manager is a “future state” TDF that includes both alternative investment and guaranteed income, he said.

“We think the combination could produce 60% or more retirement income compared to a traditional target-date fund with a traditional 4% withdrawal rate—[resulting in] zero chance that the retiree will outlive their assets,” he said. “These products as we are constructing them will provide the flexibility and the liquidity that you need in a target-date fund.”

If the organization does bring a retirement income TDF to market, it will join an increasingly crowded field. There are numerous TDF offerings on the market right now, including those from BlackRock Inc., JPMorganChase, TIAA and a consortium called Income America 5ForLife that includes American Century, Lincoln Financial, Nationwide and others.

“Other plans that you’ve seen announced [by other providers] provide for income, but the individual has to select,” Kvalheim said during the investor day. “I think most of us in this room know: Most people don’t select. They set it and forget it. … All we’re saying is we’re throwing our hat in the ring, and we’re devoting serious assets—people and assets—to try to figure it out.”

During the presentation, Apollo Group CEO Marc Rowan highlighted the $45 trillion global retirement market as one of the firm’s growth pillars. Apollo, he said, believes it can grow over the next five years from about $700 billion in assets under management to about $1.5 trillion via growth channels that also include individual wealth services.

“We, as a society, have done a terrible job of planning for retirement,” Rowan said of the U.S. retirement market. “The vast majority of Americans have not made adequate provisions for retirement.”

He described 401(k) investing as heavily tied to the S&P 500, which in the last several years, he noted, has been dominated by about 10 stocks, with four of them determining much of the returns.

“I jokingly say sometimes that we have leveraged the entire retirement of America to Nvidia’s performance; it just doesn’t seem smart,” he said. “We are going to fix this, and we are in the process of fixing this.”

Rowan tied these products to Athene and its annuity business, which, according to LIMRA data, is by far the largest retail annuity seller in the country.

“Whether it is stable value, tax-advantaged products, going after 401(k) or guaranteed lifetime income, there is no shortage of opportunities in retirement,” he said.

Athene has been in the news regularly over the past year linked to numerous lawsuits involving pension risk transfers.

Law firm Schlichter Bogard LLP has led the class action complaints representing plaintiffs alleging in part that Athene annuities chosen by plan spnosors for transfers were not the safest on the market; companies the lawsuits were filed against include General Electric, AT&T Inc., Lockheed Martin and Alcoa Corp.