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I see that APO hit ET's $25 today. I'm not sure if he added or not. In any event, another reminder for me to make sure I buy cheaply enough. That is not only an APO statement, but an all stock statement. Of course, "cheap" varies depending upon the stock. I'm not necessarily saying any specific metric, such as low PE. Rather, a high enough risk-adjusted return estimate bar, however you measure that.

In the case of APO, as ET alluded to, the distribution is significant. At $25, I think it is cheap enough even if some things go wrong. About 13x FRE makes it reasonably priced on FRE alone, and given the pipeline of FRE growth, I'd be pretty surprised if that didn't continue nicely for at least the near-term future. If I get a roughly $2 and generally growing distribution from a $25 price, things will work out ok. Not true at every price. Thus, "buy cheap enough".


On market valuations, BX was valued highly at the IPO. Others have been valued much higher in the past. For example, APO was at $32 back at the beginning of 2014, when AUM was roughly 60% of what it is now. So, the market was giving APO a bit better valuation then. What was different then was that incentive fees were flowing in and the distribution was very large.

This goes back to a point I tried to make the other day, but don't think I made clearly. It may be that incentive fees are rewarded when they happen and disregarded when they don't. While I agree with Leon Black, that the market should value them on some cyclical multiple. In the very brief history we have, it seems like they were/are valued as they happen. That is, when the incentive fees are there, they are given value. When they are down, the market value is taken away.

Although there is a lot of talk about FRE, it may be that APO doesn't actually get much of a valuation until incentive fees hit, and the distribution drives the price up.

Those are just some thoughts. I have no great insight into how the stocks will trade.
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