Adds estimates in paragraph 6, details in paragraphs 2, 3 and 4, updates shares

By Isla Binnie and Prakhar Srivastava

May 6 (Reuters) - Apollo Global Management APO.N crossed $1 trillion in assets under management and beat Wall Street expectations for first-quarter profit on Wednesday after posting record quarterly fee-related earnings.

CEO Marc Rowan had set the lofty five-year target to double Apollo's AUM to $1 trillion in 2021 as it tried to play catch-up with rival Blackstone BX.N by expanding its businesses across insurance, credit and private equity. The company is now aiming to hit $1.5 trillion in AUM by 2029.

Apollo, however, said its asset-backed finance portfolio booked a 1% loss due to a lower contribution from its Atlas SP unit, which had financed UK-based mortgage lender Market Financial Solutions.

MFS collapsed in February, fuelling concerns about lending standards at banks and credit funds. HSBC reported an unexpected loss on Tuesday , which sources familiar with the matter told Reuters was linked to its lending to Atlas and its financing of MFS.

Apollo's adjusted net income rose 8% to $1.21 billion, or $1.94 per share, from the same period a year earlier, boosted by a 30% increase in earnings derived from managing assets and arranging debt and equity transactions.

Analysts were expecting a profit of $1.93 per share, according to estimates compiled by LSEG.

Apollo shares have rebounded from lows hit in March but are still down about 10% YTD. They were last up 2.8% in choppy premarket trading.

However, Apollo and its fellow managers of alternative assets - which include private equity, private credit and real estate - have been facing rising investor pressure for months over fears about slower future growth and AI's threat to some of their focus sectors including software.

Inflows totalled $115 billion in the quarter, partly driven by the acquisition of UK insurer Pensions Insurance Corporation (PIC) through Athora, a European group Apollo created. Wealthy retail investors pitched in $4 billion.

On an unadjusted basis, Apollo booked a net loss of $1.9 billion, compared with net income of $418 million a year earlier. This was due to a $2.1 billion unrealized loss it had booked on investments in its insurance unit.

Returns from its direct lending funds, a part of private credit that has come under intense scrutiny in recent months, were up by a modest 0.5% in the first quarter, compared with 8.5% over the last 12 months.

Smaller peers Blue Owl OWL.N and KKR KKR.N have also reported negative performances in that business over that period.

Apollo's flagship PE fund posted a loss of 0.3%. Hybrid value, which CEO Rowan has singled out as a growth driver, returned 4%.