Insights

The following was published by Livewire, 6th July 2026  |  Author: Chris Conway

Eric Hanno explains why Apollo is underweight software and backing hard assets, structured equity and critical infrastructure.

Post-GFC was a halcyon period for private markets, defined by cheap money, plentiful deal supply, less competition, and easy refinancing if problems arose.

The times, they are a'changing.

Ask anyone managing their family budget, let alone a US$100 billion-plus private markets portfolio, and they will tell you money is no longer cheap. More capital is chasing fewer deals, refinancing is harder and, despite all of that, valuations remain elevated.

Artificial intelligence is adding another layer of complexity. While investors are still trying to understand its long-term implications, the technology is already forcing a rethink of which businesses will emerge stronger and which may struggle to adapt.

For Eric Hanno, Partner and Co-Head of Apollo Aligned Alternatives, that combination of high valuations, technological disruption and economic uncertainty has fundamentally changed how he thinks about risk.

“We’re in an environment of elevated valuations in both public and private markets, and the recent and rapid adoption and improvement of AI models has led to an accelerating pace of change,” Hanno says.

Rather than making broad bets on private markets, Apollo is focusing on businesses with durable cash flows, assets that are difficult to disrupt and investment structures designed to protect capital when things do not go to plan.

In the Q&A below, Hanno explains where Apollo is finding opportunities, why it remains cautious on software and how it is navigating a market where uncertainty may be the only certainty.

It's a stock picker's market

While much of the conversation around private markets centres on asset allocation, Hanno believes success over the next decade will come down to investment selection.

“Against that backdrop, we think it is a stock pickers market and having a view on industries and individual company’s right to win is critical when making private market investments,” he says.

That philosophy is shaping everything from Apollo's sector exposures to the types of structures it uses when deploying capital.

Rather than chasing the fastest-growing businesses, the firm is increasingly focused on companies with predictable cash flows, defensible market positions and assets that are less vulnerable to disruption.

AI is both the opportunity and the risk

Apollo is not dismissing AI. Far from it. Hanno says the buildout around AI, including data centres, power and compute, is “incredibly capital intensive”, creating opportunities for large-scale private capital providers.

But he is equally clear that AI is also changing the risk equation.

“AI is having a significant impact on the investment landscape, creating both attractive opportunities but also increasing the potential risks,” he says.

That is why every investment at Apollo is assessed through what Hanno describes as an "AI disruption" framework. The aim is to avoid businesses exposed to significant tail risk and focus instead on companies and assets likely to remain well-positioned for years.

That distinction is already visible in software. Hanno says valuations in parts of public software have reset before operating performance has deteriorated, simply because AI has raised questions about future growth, profitability and even the long-term relevance of some business models.

Why Apollo is underweight software

Apollo’s positioning reflects that caution.

“In AAA, our software exposure is roughly 3%, versus the private equity industry which has ~30% exposure to software,” Hanno says.

That is a notable underweight in an industry where software has long been one of the dominant hunting grounds for private equity.

The issue is not that all software businesses are broken. It is that many were priced for durability at a time when AI may be challenging that durability, while higher interest rates are making capital structures less forgiving.

Hanno points to the 2028 maturity wall as a more immediate risk. A meaningful portion of that debt is already trading below 90 cents in the dollar, which signals investor concern about refinancing through traditional channels.

“As that approaches, companies may have to refinance at higher cost, take on dilutive capital, or face distress, all of which could materially impact equity value in these businesses,” he says.

For investors, the lesson is that headline growth is not enough. Balance sheets, cash flow quality and refinancing risk now matter far more than they did when money was cheap.

The appeal of structured equity

This is where Hanno believes Apollo’s scale and structuring capability can be an advantage.

Rather than simply buying common equity, Apollo can provide capital in forms that sit higher in the capital structure. These instruments may include current coupons, minimum return thresholds and upside participation.

“The answer is Apollo’s scale and structuring expertise, applied to situations where speed and certainty of execution matter enormously to large, sophisticated companies, which can be private equity-owned, founder-owned or public companies,” he says.

In practice, that means Apollo can step in when a company needs capital quickly and traditional lending markets are unavailable or unattractive.

“When a business needs capital quickly, and traditional lending markets are not available, Apollo can act as solution provider at scale and use creative structures to make it a win-win situation,” Hanno says.

The goal is asymmetry. Apollo wants downside protection through structure, while still sharing in equity upside if the company performs.

“We also typically have upside convexity, which creates asymmetric return profiles, where we benefit from strong downside protection, but also share in equity upside,” he says.
 

Hornsea 3 and the return of real assets

One of the clearest examples of Apollo’s approach is its investment in Ørsted’s Hornsea 3 offshore wind project.

Apollo-managed funds have committed US$6.5 billion for a 50% stake in the project, which is expected to become the world’s largest offshore wind farm once complete.

For Hanno, the investment fits the broader AAA playbook: scale, critical infrastructure, long-term demand and assets that are less exposed to technological obsolescence.

“The Ørsted Hornsea 3 transaction is an example of the kind of opportunity we find compelling at Apollo: investing at scale in critical infrastructure that supports long-term economic growth while also advancing the energy transition,” he says.

Hornsea 3 is not a speculative technology bet. It is a major physical asset tied to power demand, decarbonisation and energy security. Once complete, the project is expected to have 2.9GW of capacity and generate enough renewable electricity for more than 3 million UK households.

It also speaks to a broader theme in Apollo’s portfolio construction: hard asset, low obsolescence opportunities, or what Hanno calls “HALO” assets.

“We are focused on AI growth, data centres, power generation and compute, hard asset low obsolescence opportunities that are less susceptible to AI disruption, and structured financing solutions for businesses which are adapting to a higher for longer interest rate environment,” he says.

In a market still marked by uncertainty, that combination of contracted cash flows, physical assets and structural protection is exactly where Apollo believes private capital can find its edge.

This is general information only and does not take into account your personal objectives, financial situation or needs. Before acting on the information, consider its appropriateness to your circumstances and read the Product Disclosure Statement (PDS) and target market determination (TMD) on our website. Fidante Partners Limited ABN 94 002 835 592 AFSL 234668 is the responsible entity and issuer of interests in the Apollo Aligned Alternatives Fund