For two decades, Apollo has been ruled by a triumvirate led by Leon Black, centre, with Josh Harris, left, and Marc Rowan © FT montage

Hours after last week’s announcement that Apollo Global Management was investigating the relationship between its founder and chairman Leon Black and the late paedophile Jeffrey Epstein, rank-and-file employees received an email that seemed to mark a passage of power at the formidable Wall Street firm.

High-profile investors had already begun distancing themselves from the $414bn asset manager, which some feared could be tarnished by its founder’s financial ties to Epstein. “We know [the media attention] has raised concerns,” Apollo’s message to employees began, adding that the group’s leadership was “focused on the best interests of all our stakeholders, including you”.

Beneath the reassurances, insiders were quick to notice the names signed at the bottom of the document — and which names were missing. For two decades, Apollo has been dominated by a ruling triumvirate led by Mr Black with his partners Marc Rowan and Josh Harris. This time it was Mr Harris leading the response, his name appearing alongside two less senior colleagues. The signatures prompted one former insider to remark: “It’s all Josh now.”

The emergence of a formal hierarchy beneath Apollo’s ruling trio underscores how the group has for several years been striving to reinvent itself as a mature financial corporation. It has become less dependent on volatile leveraged buyouts, amassed a large war chest of permanent capital that can be recycled endlessly into new investments, and burnished its corporate credentials with socially conscious initiatives such as the launch of an impact investment fund that aims to improve the world as well as deliver financial returns.

“Apollo these days is much more than just Leon Black,” said one of the company’s investors.

Several insiders say they were surprised by the tide of scrutiny that followed the revelation earlier this month that Mr Black had paid at least $50m to Epstein since his conviction for soliciting sex from a minor in 2008. Now, the group must project an aura of stability, even as some investors begin to anticipate the day when the public face of Apollo is someone other than the celebrated Mr Black.

Column chart of Assets under management ($bn) showing Apollo’s growth has been driven by its debt business

For most of the 30 years since Apollo’s founding, succession has been all but unthinkable. The group was built up by refugees from Drexel Burnham Lambert, the junk bond house that imploded in 1990 after criminal charges were filed against its executive Michael Milken. Visitors to Mr Black’s office describe a photograph in which the tall and husky Apollo founder towers over executives including Mr Rowan and Mr Harris, young Drexel alumni who cut diminutive figures against the man who recruited them to Apollo. Yet over time, their stature and accomplishments grew.

Apollo long resembled a “dysfunctional family, with all that implies”, Mr Rowan disarmingly told an audience in 2009. The group’s raucous investment committee meetings and minimal bureaucracy fostered innovations such as an early move into buying distressed corporate debt. It also set Apollo apart from rivals such as Blackstone and KKR, which attained a maturity of sorts, evolving a culture more like investment banks or law firms that typically operate by consensus. At Apollo, by contrast, the founders sometimes quarrelled and both Mr Rowan and Mr Harris occasionally wondered aloud about leaving the group, according to former executives. Ultimately, they opted to stay together — and to consolidate control among themselves.

That concentration of power began to dissipate in 2018, when Apollo elevated two longtime executives to “co-president”, giving them a broad remit over investing activities. One was Scott Kleinman, 47, who had joined the group in 1996 and helped to net billions of dollars in profits from Apollo’s 2008 acquisition of the chemicals company LyondellBasell. Associates say his affable style helped to soften Apollo’s cut-throat image. The other, James Zelter, is a decade older, and joined from Citigroup in 2006. He has focused on the firm’s burgeoning credit business. Both names appeared beside Mr Harris’s on last week’s letter to employees.

Apollo’s top management

The triumvirate began spending more time on outside pursuits. Mr Harris juggled sports holdings that include a controlling stake in the Philadelphia 76ers basketball franchise and London’s Crystal Palace football club. Mr Rowan tended to a real estate portfolio that stretches from Tribeca in Manhattan to the Hamptons on Long Island, while also finding time to invest in Beats, the headphone maker that Apple bought in 2014 from rapper Dr Dre. Mr Black’s personal investments have included a restaurant chain called Huddle House and a Pennsylvania environmental services company linked to Epstein, and he chairs New York’s Museum of Modern Art.

The trio held off laying down an explicit succession plan, even as Carlyle Group, Blackstone and KKR groomed a new generation of leaders who would eventually take over from the founders. At 69, Mr Black is several years younger than Stephen Schwarzman, Henry Kravis and other private equity pioneers. With Mr Harris and Mr Rowan still in their fifties, time seemed to be on Apollo’s side.

That may now be changing. In interviews with the Financial Times, several Apollo investors, all of whom requested anonymity to speak candidly about a powerful Wall Street firm, said they feared Mr Black’s continued presence could be damaging to its prospects. “I don’t think until just now we’ve really had the situation . . . where the founder may be destroying value by staying around,” said a top adviser to private equity groups who knows Apollo well.

Apollo’s shares have fallen 8.5 per cent since the scale of Mr Black’s payments to Mr Epstein became public earlier this month.

Line chart of Share price ($) showing Apollo shares hit by news of Leon Black’s payments to Epstein

Mr Black has given no indication that he intends to step down, and Apollo has said that Dechert, the law firm it has appointed to investigate its founder’s Epstein ties, will “conduct a thorough review of, and independently confirm, the information that Mr Black has conveyed”.

Apollo’s chairman says the money was payment for tax advice and other professional services, and he has not been accused of any inappropriate behaviour or wrongdoing. Since last year Mr Black has been personally represented in the Epstein matter by Brad Karp, the chairman of powerhouse law firm Paul Weiss, which has long been favoured by Apollo. Paul Weiss did not respond to a request for comment.

Mr Black is Apollo’s biggest shareholder, with a 23 per cent stake, and cannot be removed from his group’s governing executive committee unless he is barred by court order from serving or is convicted of a felony. While some investors are expressing misgivings, their voices may not carry the weight they once did, now that more than half of Apollo’s assets are “permanent capital” rather than funds that ultimately get returned to investors and have to be replaced.

23% Stake in Apollo held by Leon Black, founder and chairman

If the Apollo founder decided his shareholding could be worth more if he put someone else in charge, insiders say the job is unlikely to fall to Mr Rowan. Charming in person, but seemingly uninterested in developing a public profile, he has little tolerance for the aggravations of administering a large business, according to people who know him. Earlier this year he stepped back from day-to-day management of the insurance and financial services business he has overseen for more than 10 years, announcing an open-ended sabbatical, although he has remained on the Apollo board.

That leaves the field open for Mr Harris, who has embraced his dual roles as sports proprietor and financial tycoon. He has long been a regular on television and this summer opened a profile on the social media network LinkedIn, where he has posted personal musings on technology, the coronavirus pandemic and basketball.

Mr Harris’s ascent would complete the transformation of Apollo, which stayed true to its scrappy and uncompromising approach to making money long after rival private equity group began applying institutional polish. Whether he has the chance may ultimately depend on Mr Black’s nose for financial value.

An unambiguous opinion from Dechert may yet lift the pall that investors sense over Apollo. But a lawyer who has previously advised Apollo said people close to the group could now envisage Mr Black putting money before ego. Their conclusion, he said: “If he’s damaging the stock price, he’ll go.”

Additional reporting by Ortenca Aliaj, Miles Kruppa and Francesca Friday

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