* Q3 post-tax ENI per share 98 cents vs Street view 73 cents
* Private equity portfolio appreciated by 8 percent in the quarter
* Q3 distribution of 40 cents per Class A share (New throughout, updates with details from the conference call, analyst comment, shares)
By Greg Roumeliotis
NEW YORK, Nov 9 Apollo Global Management LLC , the alternative asset manager headed by billionaire Leon Black, on Friday reported better-than-expected third-quarter earnings as the value of its assets soared and it sold stakes in some companies.
This year's stock market rally has buoyed the valuation of assets held by firms such as Apollo, which buys and sells companies through its funds. Apollo also has a corporate credit investment arm which has overtaken its private equity unit in assets under management.
"Our total assets under management reached $110 billion at the end of the third quarter, reinforcing our leadership position as a multi-product, solutions-driven provider of alternative investment strategies," Black, who co-founded Apollo in 1990, said in a statement.
Credit accounted for $60.1 billion of Apollo's assets, up 168 percent from a year ago, thanks to a large extent to the acquisition of alternative credit manager Stone Tower Capital LLC in April 2012.
The New York-based investment group beat analysts' expectations as its buyout portfolio appreciated by 8 percent during the quarter. By comparison, the private equity portfolio of Blackstone Group LP rose 7.1 percent, KKR & Co LP saw a 6.1 percent rise, while Carlyle Group LP reported a 5 percent rise.
Apollo shares rose 2 percent, trading at $14.33 in the early afternoon on the New York Stock Exchange.
Apollo said total economic net income (ENI) - a measure of profitability that takes into account the market value of its assets - was $434 million for the third quarter, compared with a $1.16 billion loss for the same period in 2011.
This translated into ENI of 98 cents per share after taxes. The consensus view was for 73 cents, according to a poll of analysts by Thomson Reuters I/B/E/S.
"Overall a strong quarter for Apollo. Fundraising continues at a healthy clip, the distribution continues to pace above peers, and returns appear to have come in at the high end of the group," Barclays analysts wrote in a research note.
Apollo's management fee revenue jumped 30 percent year-on-year on the accumulation of fee-paying credit assets, including through the acquisition of Stone Tower and Gulf Stream Asset Management LLC, a manager of collateralized loan obligations Apollo acquired in October 2011.
Total realized gains from carried interest income -- Apollo's slice of its funds' profits -- were $240 million, a 275 percent increase from a year ago. Sales of stakes in chemical producer LyondellBasell Industries NV and cable operator Charter Communications Inc were major contributors, Apollo said.
In private equity, Apollo's star performer of late has been the $14.7 billion Fund VII, launched in 2008. From inception to the end of September, the fund generated gross and net annual internal return rates of 35 percent and 26 percent respectively.
This was facilitated in the third quarter by a 28 percent rise in the value of LyondellBasell and an 18 percent appreciation across Fund VII's distressed debt positions and other credit investments, Apollo's Chief Financial Officer Martin Kelly told analysts on a conference call.
While Fund VII appreciated by 15 percent in the quarter, its predecessor, Fund VI, has risen just 3 percent in value, trailing the 6 percent gain in the S&P 500 Index, Kelly added.
Fund VI, launched in 2006, raised $10.1 billion. It generated gross and net annual internal rates of return of 9 percent and 8 percent respectively from inception to the end of September.
While the fund is set to get a boost from the $975 million sale of retailer Smart & Final Holdings Corp to Ares Management and was buoyed by its interests in Berry Plastics Group Inc , Realogy Holdings Corp and LyondellBasell, it has suffered from a drop in the value of industrial components manufacturer Rexnord Corp, casino operator Caesars Entertainment Corp and logistics firm CEVA.
Investors will scrutinize Apollo's past performance as the firm starts marketing Fund VIII. Apollo President Marc Spilker told analysts on a conference call that fundraising would start soon.
Apollo had raised $915 million by the end of September for its first natural resources fund and Spilker said he expected fundraising to be completed in the fourth quarter. In September, Apollo also clinched a $200 million managed account for credit investments with a large insurance company, Spilker said.
Apollo's dry powder for buyouts -- its uncalled private equity commitments -- were $7.1 billion as of the end of September. This included about $700 million from Apollo's natural resources fund.
Apollo declared a third-quarter distribution of 40 cents per Class A share. (Reporting by Greg Roumeliotis in New York; Editing by Jeffrey Benkoe and Nick Zieminski)