Updated, 7:33 p.m. | Apollo Global Management on Wednesday reported a decline in second-quarter income as it earned less from selling its investments and allocated more of that profit to employees.
Apollo, the giant private equity and credit investor, said that its economic net income — a measure of profit that includes unrealized investment gains — declined 6 percent, to $207.5 million, compared with a year earlier. The profit amounted to 52 cents a share, falling short of the 66 cents forecast by analysts surveyed by Thomson Reuters.
Apollo said a chief reason for the decline was more profit-sharing expense, the part of profit that is given to employees and former employees. The expense was $160.6 million in the second quarter, compared with $127.2 million a year earlier.
Apollo said that the higher expenses were the result of the appreciation of particular funds in the firm that pay more of their profit to employees. It also said a higher provision for taxes contributed to the decline.
At the same time, Apollo earned less from selling its investments. Apollo said its distributable earnings — a profit measure that reflects the cash that can be given to investors — fell 62 percent, to $227.1 million.
Underpinning that decline was a drop in realized profit in Apollo’s private equity business. That segment reported $198 million of realized gains, compared with $738.2 million a year earlier.
Still, the private equity funds appreciated roughly 5 percent in the quarter, Apollo said.
The lackluster results are a shift from the bountiful profits Apollo reported for last year, $1.9 billion, when Leon D. Black, the chief executive, said the firm was “selling everything that’s not nailed down.” The pace of selling has tapered off somewhat. Apollo has now fallen short of analysts’ expectations for two consecutive quarters.
But it did continue to take advantage of the buoyant stock markets that have helped its rivals, like the Blackstone Group, the Carlyle Group and Kohlberg Kravis Roberts, report higher profits. In the recent quarter, Apollo sold shares in companies it had already taken public, including Berry Plastics, Sprouts Farmers Market and the industrial company Rexnord.
Apollo said its assets under management rose to $167.5 billion by the end of June, compared with $113.1 billion a year earlier.
The firm, which is based in New York, uses nonstandard methods to report profit. According to generally accepted accounting principles, Apollo’s profit rose 22 percent, to $71.7 million. The firm declared a dividend of 46 cents a share.
While the heady market has allowed private equity firms to reap large gains, it also presents a serious challenge for the firms as they seek new investments at bargain prices. Joshua Harris, a senior managing director at Apollo, said in a conference call with analysts that the firm’s new $18.4 billion private equity fund had invested about 15 percent of its capital since it started last year.
Mr. Harris added that Apollo, whose credit business accounts for $105.7 billion of its assets under management, would welcome a faster-than-expected increase in interest rates. That could cause assets prices to fall and create investment opportunities for the firm, he said.
“We’ve historically outperformed in those scenarios,” Mr. Harris said. Such a market shock would “likely result in more rapid deployment of our credit and private equity funds.”