There was another headline in The New York Times yesterday about l’affaire Epstein-Black. Beneath it was a story that identified the key problem faced by Leon Black’s private equity firm, Apollo Global Management, which is headlines about Black’s lucrative relationship with the late pedophile.

William Katz, an analyst who covers Apollo shares at Citigroup Global Markets, said the issue was so-called headline risk: the chance that Mr. Black shows up again and again in negative news reports.

“It will come down to the nature of those headlines,” Mr. Katz said.

The Times' meta-analysis of headlines about headlines doesn’t seem to offer much hope that the nature of those future headlines will be much different from those already leading all of those column inches and online stories about why Black paid Epstein at least $50 million long after Epstein’s illicit sexual proclivities became a matter of public record or why Black would visit Epstein on his private sex-trafficking island or why Black would continue to have any relationship with a disgraced man whose primary business seemed simply to be having relationships at all. In fact, they may be getting worse, insofar as investors and potential investors have been moved by said headlines from shrugging their shoulders to covering their asses, generating new, unfavorable headlines.

“Investors are concerned about reputational risk,” Kenneth Worthington, an analyst at JPMorgan Chase who covers the company’s shares, wrote in a client note….

Most clients who have given money to Apollo to invest appear to be taking a wait-and-see attitude…. But in the world of private equity investing, even that can have an impact if it means a client chooses not to commit any new money.

One pension fund that invests with Apollo, the $63 billion Pennsylvania Public School Employees’ Retirement System, said on Wednesday that it had told Apollo it would not invest additional money with the firm until the review was complete…. Other pension funds — in Texas, California, Illinois and Ontario — did not go as far, but acknowledged that they were watching the investigation closely.

Unfortunately for Black and Apollo, however, this is guaranteed not to be the last unwanted headline of the week.

Apollo will report its quarterly earnings on Thursday, and an analyst note from investment firm Keefe, Bruyette & Woods said the effect of Mr. Black’s dealings with Mr. Epstein on client relations will be a “focal point” of the private equity firm’s earnings call.

Apollo Clients Await Inquiry’s Findings on Chief and Jeffrey Epstein [NYT]

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