Inside the rapid rise of funding agreement‑backed notes and other wholesale liabilities powering Apollo’s private credit machine — and the risks building behind it

If you want to understand why private credit keeps swelling even as banks pull back, follow the liabilities. At Apollo Global Management, the world’s most prolific originator of asset‑backed loans, the engine isn’t a new buyout fund or a retail annuity sales surge. It is Athene, Apollo’s in‑house insurer, raising money in wholesale markets to bankroll lending — without leaning on policyholders.

The workhorse is an obscure instrument with an ungainly name: funding agreement‑backed notes, or FABNs. Through a Delaware trust called Athene Global Funding, the insurer sells bonds to big investors and uses the proceeds to buy “funding agreements” from an Athene operating company. Those agreements are promises by the insurer to make fixed payments that match the terms of the notes. For Athene, they count as insurance liabilities rather than holding‑company debt; for investors, they are straightforward income‑paying notes secured by the insurer’s general account.

The appeal is clear. Unlike retail annuities, FABNs arrive in billion‑dollar hunks, carry no lapse risk from customers cashing out early, and are typically rated at or above the operating company’s credit rating — often higher than holding‑company debt. For Apollo, every fresh dollar of Athene liabilities is a dollar of assets to invest into private loans, from aircraft leases to consumer receivables and equipment finance. It is an elegant (critics would say aggressive) way to scale lending capacity with liabilities that regulators and rating agencies still classify as core insurance obligations.

Scale — and a maturity wall The market has ballooned. U.S. insurers had roughly $191 billion of FABNs outstanding at the end of 2024, according to Federal Reserve data compiled by Reuters, eclipsing the pre‑crisis peak. In 2024 Athene was the largest single issuer, and by mid‑2025, analysts and regulators were tracking a sharp pickup in activity across the sector. A clutch of these liabilities fall due in the middle of this decade, including a heavy slug maturing in 2026–27, raising the stakes for orderly refinancing if markets turn choppy.

Apollo and Athene say the structure is conservative: maturities are matched to assets, issuance is diversified by tenor and currency, and the liabilities sit at the operating company, ranking ahead of holding‑company debt. FABNs also travel well internationally; Athene has used European and U.S. programs to reach investors hungry for yield without taking on loan‑level risk.

Not just FABNs FABNs aren’t the only wholesale spigot. Athene has tapped the Federal Home Loan Bank system via “funding agreements” — essentially collateralized advances — which offer flexible, relatively cheap term funding. As of late 2024, Athene was the single largest FHLB borrower among U.S. insurers, and balances remained elevated into 2025, according to industry tallies. The optics are awkward — FHLBs were designed to support housing finance — but for insurers the economics are compelling: advances are low‑cost, available in size, and can be rolled or termed out as needed.

On top of that, Athene has sold junior and hybrid capital securities, and Apollo has pursued other “capital solutions” vehicles that co‑invest alongside the insurer. Together, the toolkit gives Apollo something traditional lenders envy: a supply of elastic, match‑funded liabilities that can be dialed up when spreads widen and opportunities abound.

Why this matters for private credit All of this translates into muscular firepower. As banks retrenched under tighter capital and leverage rules, Apollo’s “asset‑based finance” strategy moved into the gap, originating loans that are secured by pools of hard or financial assets and throwing off contractual cash flows. Many of these deals can be tranched: the safest slices are sold as investment‑grade securities, while insurers like Athene keep senior or mezzanine exposure in their general accounts. In good times it is a spread factory: insurers earn steady income; Apollo collects origination fees and management fees; and borrowers get capital faster than a syndicated bank loan can clear.

The model’s clever twist is that the insurer’s liabilities don’t depend on gathering more consumer savings. Instead of convincing retirees to buy fixed annuities, Athene can raise billions from institutions in a few swipes, then push that money into loans Apollo originates. That is the essence of Apollo’s “flywheel”: permanent capital from insurance, scaled origination, and recurring fees for asset management — all under one roof.

The questions regulators are asking Rapid growth and financial engineering invite scrutiny. State insurance supervisors and federal watchdogs are probing three weak spots.

*First, rollover risk.* Although the industry largely abandoned the short‑term, extendible FABNs that seized up in 2008, the market still leans on three‑to‑five‑year maturities. A simultaneous dash for the exits by investors could force issuers to refinance under stress, just as private‑credit assets are least liquid. Regulators and rating agencies have floated soft guardrails — for example, treating FABNs above a certain share of liabilities as a warning sign — and insurers now map maturities more carefully to asset cash flows.

*Second, opacity.* FABNs are backed by the insurer’s general account, not a segregated pool of loans. Investors rely on the issuer’s credit quality and risk management. When the underlying assets include bespoke private loans and affiliated structures, outsiders must take more on trust. The industry says governance has improved, with enhanced disclosure on asset‑backed finance exposures and the use of independent trustees and auditors for FABN trusts.

*Third, mission creep.* The FHLB advances that insurers use are anchored in a housing‑system mandate. Consumer advocates question whether low‑cost, government‑sponsored funding should lubricate private‑credit expansion. The FHLB overseer has called for a tighter alignment between advances and mortgage support, though concrete restrictions on insurer borrowing have yet to materialize.

What could go wrong — and right In a benign economy with steady rates, the model hums. FABNs and FHLB advances are rolled without fuss, spreads stay juicy, and Apollo’s machine converts liabilities into loan assets and fee income. Trouble arrives if credit stresses hit just as maturities bunch. A spike in defaults across asset‑based finance — say, if used‑car prices slump or consumer delinquencies rise — could pressure the insurer’s earnings while funding costs rise. In an extreme scenario, investors might demand higher coupons to roll FABNs, compressing spreads and forcing a slowdown in new lending.

Yet the same volatility can create opportunity. Apollo prides itself on buying when others are forced to de‑risk. In early 2025, after a burst of market turbulence widened corporate spreads, the firm deployed substantial capital into public credit, armed in part with cash Athene had raised through funding agreements. The ability to summon wholesale liabilities on short notice is exactly what allows Apollo to play offense when others cannot.

A moving target for policy How this evolves now sits with regulators. The National Association of Insurance Commissioners has stepped up its review of private‑equity‑linked insurers, data‑mining exposures and scrutinizing cross‑affiliate trades. Washington’s Financial Stability Oversight Council has flagged “non‑traditional liabilities” like FABNs and FHLB borrowing as a potential channel of systemic risk. None of this is a verdict against the model; it is a nudge toward thicker cushions and cleaner disclosures as the market matures.

Explainer: How a FABN works • An Athene affiliate (Athene Global Funding) issues medium‑term notes to investors.
• The trust uses proceeds to buy a “funding agreement” from Athene’s Iowa operating insurer.
• The funding agreement is a promise to pay interest and principal on a set schedule; the trust pledges that agreement to a trustee.
• Investors receive payments from the trust; their credit exposure is to the insurer’s general account, not to a specific pool of loans.
• Athene invests the proceeds — often into Apollo‑originated private credit — while managing assets and liabilities to match maturities.

The bottom line A decade ago, Apollo’s insurance arm was best known for selling annuities to Main Street savers. Today, Athene is also a wholesale funding powerhouse. By tapping FABNs, FHLB advances and hybrid securities, it has built a capital stack designed for speed and scale in private credit. That design is powering Apollo’s rise — and quietly redrawing the lines between insurance and banking.

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*Sources (selected):* Financial Times coverage of FABNs and Apollo’s structure (Sept. 2025); Reuters Breakingviews analysis of FABN growth and risk metrics (June 2025); Athene Global Funding Offering Memorandum (May 2025); Retirement Income Journal analysis of insurer borrowing from the FHLB system (June 2025); Apollo/Athene earnings materials (Q2 2025).