While Black faced pressure in the immediate aftermath of Epstein’s arrest last year, investor angst was rekindled by a New York Times report that he had wired at least $50 million to Epstein after his 2008 conviction for soliciting prostitution from a teenage girl.
The article didn’t accuse Black of breaking the law. Apollo shares have fallen about 12% since the story was published on Oct. 12.
“We are firmly committed to transparency,” Apollo said Friday in a statement, noting that Black has been communicating regularly with investors. “Although Apollo never did business with Jeffrey Epstein, Leon has requested an independent, outside review regarding his previous professional relationship with Mr. Epstein.”
In a letter to Apollo’s limited partners this month, Black said he deeply regretted having had any involvement with Epstein. Black said he had turned to him for matters such as taxes, estate planning and philanthropy, and that nothing in the Times’ report was inconsistent with an earlier description of their ties.
It will be tough for investors to cut ties completely with Apollo as private equity funds typically lock up capital for years -- a trade-off many are willing to make with the promise of high-flying returns. And unless the inquiry unearths something more damning, clients may ultimately decide to look the other way, said three investors who asked not to be identified.
It’s particularly unappealing for clients to pull away given the firm’s stellar returns. Apollo’s flagship private equity fund, which opened to investors in 2001, has delivered annual gains of 44%, Bloomberg reported in January.
But even yield-starved investors looking to pump more money into private equity may choose to go elsewhere in future, as rivals flood the market with new offerings.
“It’s a very competitive race for capital and one thing that we continue to see in fundraising is it is in many ways more similar to a political process than a capital-raising process,” said Sarah Sandstrom, partner at Campbell Lutyens, which helps private equity firms raise money. “You are telling your story, creating relationships with investors.”
--With assistance from Sonali Basak and Sabrina Willmer.
This article was provided by Bloomberg News.