Apollo launched "next-generation" mortgage bond that claims to reduce risk and improve credit ratings.

Apollo Global Management Inc. is launching its own mortgage loan bond market, claiming to provide a more diversified and higher-rated structure to reduce risk. As a cornerstone of structured finance, CLOs typically package sub-investment grade corporate loans and slice them into securities of different risk levels for sale. However, concerns this year about declining returns and increasing defaults have led some investors to withdraw from the CLO market. But Apollo CEO Marc Rowan said on a analyst conference call on Wednesday that the demand for top-rated CLO debt has significantly increased in recent years as institutional investors look for new sources of yield. This new product, Apollo Multi-Asset Quality Securities, packages investment-grade private debt into securities that can be sold to institutional investors, with a larger equity cushion. According to Apollo, the underlying assets of this product are more diversified and have lower leverage, with about 85% of its capital structure rated investment-grade by major rating agencies. The company refers to it as "next-generation structured credit tool."