(Bloomberg) -- Apollo Global Management Inc. reported higher first-quarter profit as the firm raked in more management fees and originated a record $40 billion of private credit, a key area of growth.

Adjusted net income rose 26% to $1.06 billion, or $1.72 a share, New York-based Apollo said Thursday in a statement. That was 7 cents less than the average estimate of analysts surveyed by Bloomberg.

Apollo’s Athene insurance arm reduced its exposure to floating rate debt and alternative investments generated lighter returns, contributing to the lower-than-expected profit. Spread-related earnings, the measure of Athene’s profitability, increased 19% to $817 million for the three months ended March 31.

Fee-related earnings rose 16% to $462 million, fueled by growth in management fees from Athene clients, third-party fundraising and capital invested across Apollo’s yield and hybrid strategies.

Capital formation was $40 billion for the quarter, with $20 billion coming from Athene and $20 billion from asset management. 

“Capital formation is an important part of our business, but we have to be very careful to be measured in capital formation and not simply accept money at all costs at all times,” Chief Executive Officer Marc Rowan said on an earnings call with analysts.

Apollo shares were roughly unchanged at $107.75 at 9:46 a.m. in New York. The firm has notched the best performance among its biggest publicly traded US peers this year.

The first quarter followed a record year for the alternative-asset manager, which made more money in 2023 than it did the preceding decade. Rowan has said Apollo would originate $200 billion to $250 billion of private credit annually in five years, up from about $100 billion at the end of last year, setting a new growth target on a strategic priority for the firm.

Apollo is targeting $125 billion of private credit origination this year. 

Recent lawsuits targeting risk transfers from corporate pensions to Athene will have a chilling affect on transaction volumes across the industry, Rowan said. The cost of funds associated with pension-risk transfers had become less attractive this year, even before the litigation, he said.

Assets under management increased 12% from a year earlier to $671 billion. Fee-generating assets under management reached $506 billion.

Income from selling private equity assets remained slow, with Apollo reporting $21 million of principal investing income for the period.

Other first-quarter highlights:

  • Credit assets under management rose $63 billion to $501 billion
  • Equity assets increased $6 billion to $107 billion, while hybrid assets rose by $5 billion to $64 billion
  • The direct origination portfolio increased 3.9% and the hybrid value strategy rose 4%
  • Flagship private equity gained 2.8%
  • Dry powder was $65 billion at the end of March

--With assistance from Erin Fuchs.

(Updates with additional earnings details starting in 5th paragraph)

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