GCM Grosvenor Q1 2025 Earnings Report

GCM Grosvenor EPS Results

• Actual EPS: N/A
• Consensus EPS: $0.20
• Beat/Miss: N/A
• One Year Ago EPS: N/A

GCM Grosvenor Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $125.67 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

GCM Grosvenor Announcement Details

• Quarter: Q1 2025
• Date: 5/7/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, May 7, 2025
• Conference Call Time: 10:00AM ET

GCM Grosvenor (NASDAQ:GCMG) is global alternative asset management solutions provider. The firm primarily provides its services to pooled investment vehicles. It also provides its services to investment companies, high net worth individuals, pension and profit sharing plans and state or municipal government entities. The firm invests in equity and alternative investment markets of the United States and internationally. The firm invests in multi-strategy, credit-focused, equity-focused, macro-focused, commodity-focused, and other specialty portfolios. It focuses in hedge fund asset classes, private equity, real estate, and/or infrastructure, credit and absolute return strategies. It also focuses in primary fund investments, secondary fund investments, and co-investments with a focus on buyout, distressed debt, mezzanine, venture capital/growth equity investments. The firm seeks to do seed investments in small, emerging, and diverse private equity firms. The firm seeks to make regionally-focused investments in middle-market buyout. It prefers to invest in aerospace and defense, advanced electronics, information technology, biosciences, and advanced materials. It focuses on Ohio and the Midwest region. The firm employs fundamental and quantitative analysis. GCM Grosvenor Inc. was founded in 1971 and is based in Chicago, Illinois with additional offices in North America, Asia, Australia and Europe.

GCM Grosvenor Q1 2025 Earnings Call Transcript

Key Takeaways

• The firm achieved its highest quarterly fundraising in over two years, raising $2.9 billion in Q1, driven by a 50% allocation to infrastructure and record closes for its IAF and private equity co‐invest funds.
• First-quarter financial results beat expectations, with fee-related revenue up 12% year-over-year, fee-related earnings up 22%, adjusted EBITDA up 26%, and adjusted net income up 30%.
• GCM Grosvenor announced two new strategic initiatives—a joint venture called Grove Lane targeting the RIA channel in the U.S. and a nonexclusive distribution partnership in Japan—to expand its alternative distribution capabilities.
• The company warned that ongoing trade and tax policy uncertainty could depress private markets deployment and limit incentive fee growth, potentially keeping ARS management fees flat year-over-year.
• Carried interest balances grew to $865 million as of quarter-end, an 11% increase from a year ago, underpinning significant long-term earnings potential.

Presentation

[Operator]

Good day, and welcome to the GCM Grosvenor First Quarter twenty twenty five Results Webcast. Later, we will conduct a question and answer session. If you're interested in asking a question, please ensure you dial in using the numbers you've been provided for this call and press star one on your keypad to join the queue. As a reminder, this call will be recorded. I would now like to hand the call over to Stacy Selinger, Head of Investor Relations. You may begin.

[Stacie Selinger, MD, Head - IR & Office of the Chairman at GCM Grosvenor]

Thank you. Good morning, and welcome to GCM Grosvenor's First Quarter twenty twenty five Earnings Call. Today, I'm joined by GCM Grosvenor's Chairman and Chief Executive Officer, Michael Sachs President, John Levin and Chief Financial Officer, Pam Bentley. Before we discuss this quarter's results, a reminder that all statements made on this call that do not relate to matters of historical fact should be considered forward looking statements. This includes statements regarding our current expectations for the business, our financial performance and projections.

[Stacie Selinger, MD, Head - IR & Office of the Chairman at GCM Grosvenor]

These statements are neither promises nor guarantees. They involve known and unknown risks, uncertainties and other important factors that may cause our actual results to differ materially from those indicated by the forward looking statements on this call. Please refer to the factors in the Risk Factors section of our 10 ks, our other filings with the Securities and Exchange Commission and our earnings release, all of which are available on the public shareholders section of our website. We'll also refer to non GAAP measures that we view as important in assessing the performance of our business. A reconciliation of non GAAP metrics to the nearest GAAP metric can be found in our earnings presentation and earnings supplement, both of which are available on our website.

[Stacie Selinger, MD, Head - IR & Office of the Chairman at GCM Grosvenor]

Thank you again for joining us. And with that, I'll turn the call over to Michael to discuss our results.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

Thank you, Stacy. GCM Grosvenor had very strong results in the first quarter. We beat profitability expectations, enjoyed exceptional fundraising. Our portfolio investment performance was solid, and importantly, we made progress on strategic initiatives. With regard to fundraising, our first quarter total of 2,900,000,000.0 took us our highest quarterly fundraising level in over two years and second highest level since we began reporting publicly.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

Approximately half of that total was for infrastructure, including a strong final close of nearly $500,000,000 for a second infrastructure advantage fund. IAF two's final fund size of $1,300,000,000 was nearly 50% larger than its predecessor fund and is an important part of the success of our broad $16,000,000,000 infrastructure strategy. We launched the next vintage of our global diversified infrastructure fund, CIS four, later this year. Following infrastructure, private equity was the second greatest contributor to first quarter fundraising with over $720,000,000 raised for the strategy. That included the final close of our private equity co invest fund, GCF three, bringing the funds total size to approximately $615,000,000, also a material increase over its predecessor fund, which brought PE co invest total AUM to 9,600,000,000.0.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

Within the private equity vertical, the next fund coming to market will be our secondaries fund GSF four, which we expect to launch later this year. While the market volatility through April requires no recap, it's worth noting that demand for alternatives, and in particular private markets, remains strong. At this time, outside of certain idiosyncratic pockets, we have not seen investors backing away at all. We came into the year forecasting that 2025 fundraising would exceed twenty twenty four's total of $7,100,000,000. And despite the volatile conditions, we continue to stand by that view.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

The strong IAF two final close led to meaningful catch up fees in the first quarter of 7,600,000.0. As a result, total private markets management fees for the quarter increased 20% year over year. First quarter fee related revenue grew 12% year over year, and fee related earnings grew 22% year over year. First quarter adjusted EBITDA grew 26%, and adjusted net income grew 30% year over year. It was a very solid quarter in terms of financial performance.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

At the end of the day, our ability to fundraise and grow the business is a function of the value proposition we deliver to clients in large part driven by the risk adjusted returns we deliver over long periods of time and across market cycles. We are pleased with our results in that regard. Our absolute return strategies business, which delivered relatively flat performance in q one, was viewed quite positively by our clients given the drop in equity markets over the same period. Our multi year performance has been strong there, driving increased client interest in strategy. Our multi strategy composite has generated a 10.6% annualized gross return over the last two years, outperforming industry benchmarks and exceeding our run rate performance assumptions.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

Since the start of 2024, we have raised $1,600,000,000 for absolute return strategies, and our late stage pipeline is stronger now as compared to any time over the past few years. Similarly, we enjoyed solid investment performance across private markets, and we saw our carried interest balance grow to $865,000,000, an 11% increase from a year ago, and more than double our 2020 balance. The firm's share of carry grew by 12 and a half percent to $415,000,000 as of quarter end. Importantly, realization activity remains muted amidst the ongoing market uncertainty. But our carry, is particularly diversified in nature, continues to represent strong earnings potential.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

We announced two exciting strategic initiatives this quarter, a joint venture called Grove Lane, which is a distribution platform focused on the individual investor and a strategic partnership in Japan, an important market with exciting growth prospects. John will talk about both in a minute. But through both of these initiatives, we are leveraging our core strengths, open architecture investing across the full range of alternative investments, and a client centric approach to developing tailored investment solutions. We believe over time, after an adequate period to ramp, both of these efforts can be significant contributors to revenue and profit. Before I hand it over to John, it's important to acknowledge that despite the great quarter, the solid fundraising picture, the still strong pipeline, the progress on strategic priorities, we believe that the uncertainty related to trade and tax policy is likely to keep deployment and transaction levels depressed.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

In addition, while it is still early in the year and anything can happen, the challenging equity markets make it harder to see the ARS business achieving the same level of returns this year as it did last year. Consequently, incentive fee levels for the industry as a whole and for GCM Grosvenor are unlikely to reach the levels experienced last year. It's important to reiterate that at this time, we do not see tariff and tax uncertainty affecting fundraising. Therefore, the FRR and FRE impact of policy uncertainty is thus far limited to the loss of compounding on ARS FPOM due to the tougher market environment and somewhat slowed private markets deployment of dry powder. As a result, utilizing our standard budgeting with flat ARS closed assumptions, we would expect 20 20 five ARS management fees to be about the same as twenty twenty four ARS management fees.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

We expect full year private markets fee related revenue, including catch up fees, to grow in the mid single digit five to 8% range compared to 2024. As we mentioned last quarter, we have limited additional catch up fees anticipated between now and year end due to the mix of offerings in market. As always, Pam will speak more specifically to what we see for the second quarter in a few minutes. But I do wanna close by saying that our clients value us most in the midst of market volatility. Importantly, we remain confident in our ability to achieve our goal to double FRE from 2023 levels by the end of twenty twenty eight.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

And with that, I'll turn the call over to John.

[Jonathan Levin, President & Office of the Chairman at GCM Grosvenor]

Thank you. As Michael noted, I will dive deeper into the recently announced strategic initiatives. Although the Grove Lane joint venture targets RIA distribution in The US and the partnership in Japan targets investors in Japan, both initiatives reflect our consistent goal to create distribution capabilities that we can grow and that we can leverage. Through these efforts, we can offer our value proposition to more investors and fully harness the strength of our origination and manufacturing platform. As we've highlighted before, our investment engine scales well, and we are long origination and short capital.

[Jonathan Levin, President & Office of the Chairman at GCM Grosvenor]

Put simply, we are highly confident in our ability to deploy additional capital through our existing pipes. The much talked about individual investor channel represents a massive opportunity. Thus far, our success has been largely in the wirehouse channel, and we've raised $3,500,000,000 from individual investors since 2020. The Grove Lane joint venture marks an exciting next step in our evolution, enhancing and extending our distribution reach into the RIA and IBD markets and complementing our existing individual investor distribution footprint in The U. S.

[Jonathan Levin, President & Office of the Chairman at GCM Grosvenor]

We believe our institutional product, our registered product and our separately managed account capabilities will all be relevant to this market. In particular, we believe our thirty years of experience providing separately managed accounts and related services will be a differentiated offering in this market. And we will continue to launch new products similar to our seeded and almost fully invested registered ticker enabled infrastructure interval fund that we launched earlier this year. We will support Groveland as they build out their team and business and have structured our investment to ramp as the business enjoys success. We also have the option to purchase Groveland Management's interest in the entity at a future point in time and would likely do so when and if it is accretive.

[Jonathan Levin, President & Office of the Chairman at GCM Grosvenor]

Before turning to our strategic partnership in Japan, it's important to understand the strength of our brand and business across Japan and the broader Asia Pacific region. We've built long standing relationships in Japan and across the Asia Pacific market since the nineteen nineties. Nearly a quarter of our AUM is from Asia Pacific based clients and some of our deepest and most involved strategic partnerships are from the region. Case in point, four of our top 10 largest clients are Asia based and our approximately 50 total clients in the region represent nine countries. We've seen consistent strong growth from the region raising over $3,000,000,000 from Asia over the last two years alone.

[Jonathan Levin, President & Office of the Chairman at GCM Grosvenor]

Our nonexclusive partnership in Japan aims to raise at least $1,500,000,000 in additional assets by 02/1930. We expect this growth to come primarily from private market strategies and to utilize our separate account capabilities, our franchise of specialized funds and possibly new products catered to the Japanese market. To underscore their commitment to the partnership, our Japanese partner also purchased approximately $50,000,000 of newly issued shares of GCM Grosvenor Class A common stock at $13.32 per share. As Michael noted, amidst the daily turmoil and ups and downs, we are content to keep our heads down, delivering for our clients while growing the business and investing for the future. And with that, I'll turn it over to Pam.

[Pamela Bentley, MD, CFO & Office of the Chairman at GCM Grosvenor]

Thanks, John. We are pleased with our first quarter results, which highlight the multiple avenues we have to achieve success and drive growth. Given our strong fundraising this quarter, assets under management grew to $82,000,000,000 and fee paying AUM grew to $66,000,000,000 Our contracted not yet fee paying AUM grew 16% year over year to $8,200,000,000 providing a foundation for continued organic growth as that capital converts to fee paying AUM over the next few years. Private markets was the key driver of our results in the quarter with private markets management fees increasing 20% over the first quarter of twenty twenty four, inclusive of $7,600,000 of catch up fees. Given that IAS two reached its final close this quarter, we expect very little in the way of catch up fees for the remainder of the year.

[Pamela Bentley, MD, CFO & Office of the Chairman at GCM Grosvenor]

In the second quarter, we expect private markets management fees, excluding catch up fees, to increase slightly over the first quarter. Absolute return strategies performed well against the broader market downturn and are providing a key source of stability in many of our clients' portfolios. That said, with flat ARS investment performance and flows in the first quarter, we anticipate that ARS management fees in the second quarter will remain in line with first quarter levels. Turning to our expenses, our compensation philosophy is to invest in, align and motivate our greatest asset, our talent through a combination of annual and long term awards, including FRE related compensation, incentive fee related compensation and equity awards. We remain disciplined in managing compensation expenses and first quarter FRE compensation was $38,000,000 consistent with our 24 quarterly average.

[Pamela Bentley, MD, CFO & Office of the Chairman at GCM Grosvenor]

We expect FRE compensation to remain at similar levels in the second quarter. Non GAAP general and administrative and other expenses were $21,000,000 in the first quarter and we expect a consistent level in the second quarter. Pulling together these factors, our first quarter fee related earnings grew 22 year over year with a 44% fee related earnings margin. Turning to incentive fees, we realized $15,000,000 in the quarter comprised of $4,000,000 of annual performance fees and $11,000,000 of carried interest. Market conditions are likely to result in muted incentive fee realizations in the near term, but we are well positioned to enjoy significant long term cash flow generation from the embedded value of both our carry and performance fees.

[Pamela Bentley, MD, CFO & Office of the Chairman at GCM Grosvenor]

Our gross unrealized carried interest increased to $865,000,000 as of quarter end, up from $836,000,000 last quarter, which provides significant future earnings potential. Run rate annual performance fees stand at $31,000,000 as of Q1. As a reminder, we typically retain 40% to 50% of the firm's share of incentive fees after cash incentive fee compensation. In the first quarter, the number was 40%, which is the same as the first quarter of twenty twenty four. Our balance sheet is strong and we are maintaining a healthy quarterly dividend of $0.11 per share.

[Pamela Bentley, MD, CFO & Office of the Chairman at GCM Grosvenor]

As of Monday, we had a 3.5% dividend yield and there is room for future dividend growth as we enjoy positive momentum in our earnings. We are also strategically investing in our long term growth such as through our joint venture with Growthlane. We continue to repurchase shares under our repurchase authorization plan and we intend to use the $63,000,000 remaining in our program as of May 1 to largely manage dilution. Our business is built on a strong foundation and is well positioned to capitalize on numerous opportunities for growth and scaling. We are excited to continue creating value for our clients and shareholders.

[Pamela Bentley, MD, CFO & Office of the Chairman at GCM Grosvenor]

Thank you again for joining us, and we're now happy to take your questions.

[Operator]

Thank

[Crispin Love, Director at Piper Sandler Companies]

Thank you, and good morning, everyone. First, just starting on the twenty twenty five markets private markets management fee expectations, I believe it's up 5% to 8%. Can you just discuss some of the puts and takes there? Fundraising has been strong, but but what are the key drivers to get you back to the the 10% plus range over the longer term, which are levels that you've talked about in the past?

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

So you you have a couple of factors that impact that in a in a short term time frame. Longer term, very good strong picture and feel very good about that. How much of your funds raised in a particular quarter go direct to FPAM versus go to CNYFPAM is a factor, and then deployment from CNYFPAM is a factor. So where you have, pay on, as invested capital, how how fast you invest that, is a factor that impacts your your revenue within a year. And so those are the real those are the, you know, factors that affect the timing of revenue realization, the timing of revenue turn on, or those are the factors, I guess, I should say that are we think are have variability to them.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

And we feel like, as we I said at the end of my remarks, you know, our ability to meet our FRE goals, you know, by our '28, you know, target remained very strong. We were actually very pleased with the quarter. The fundraising has been great. The trailing twelve month fundraising has been great. Sort of a very significant increase, from where we were in in '23.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

It's building on the increase in '24. The pipeline is full. We said we, you know, see ourselves, you know, beating beating last year this for the full year. And it's really just, you know, how much of that as it hits is pay on committed verse pay on invested and then how the how the deployment works from the CNYF fund, which is the pay on invested.

[Crispin Love, Director at Piper Sandler Companies]

Perfect, Michael. That that makes a ton of sense there, especially in this this environment. And then just last question for me. Just looking at the the last twelve months fundraising, you've continued to expand more and more internationally. If I look at the last twelve months, I think fundraising in The Americas is at about 58% currently.

[Crispin Love, Director at Piper Sandler Companies]

It's come down from 65% just a couple of quarters ago. As if you look at over the intermediate and long term, where do you where do you expect that to trend? Where are the biggest opportunities? Clearly, you're leaning into to Japan and Asia, but just any additional thoughts would be helpful on your, opportunity internationally. Thank you.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

Yeah. I I the the opportunities are significant in, globally. So they're significant here in The US. They're significant internationally. We we don't really, you know, predict how much is gonna be from outside the North America or inside North America quarter to quarter.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

It's been, as you said, higher. It's been lower. There have been periods of time where we've had higher international fundraising, than we've experienced recently. So that that moves around. I think the important thing is that the demand is very strong globally.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

It's strong in, you know, all the investor channels. And then I would say, you know, when you're talking about biggest opportunity, I I don't think we segment that really domestic versus international. John may wanna add something here, but that individual investor opportunity that John talked about, we think is a tremendous opportunity and we're being very deliberate and purposeful in trying to go after that. And that's a tremendous opportunity here in The US. It's also a tremendous opportunity outside of The US, and that's part of what this joint venture in Japan is about.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

And so we see a lot of you know, that I would argue that could be over a five year period your biggest opportunity.

[Jonathan Levin, President & Office of the Chairman at GCM Grosvenor]

Michael, nothing really to add there. I I agree with your point around hard to look at these trends short term. The business has been about, you know, '60 ish, sixty five percent Americas from an AUM standpoint and the balance outside for a very long period of time. And you're seeing a slightly less percentage than that. I would say on the margin, you probably have some higher growth balance sheets or some healthier balance sheets outside The US in terms of allocator allocators to alts, but then you have a massive individual investor opportunity globally where the biggest part of that market is in The US.

[Jonathan Levin, President & Office of the Chairman at GCM Grosvenor]

So I wouldn't expect, to see major changes in that kind of pie chart, Chris, Chris, in a very short term. I I think you where you'll see us, have success around the areas where we're making investments, where that that it still takes a lot to move the pie chart, but you'll see that individual investor channel obviously continue to grow for us as it is for the industry as a whole.

[Crispin Love, Director at Piper Sandler Companies]

Great. Thank you, and I appreciate all the color.

[Operator]

And the next question will come from Bill Katz with TD Cowen.

[William Katz, Senior Equity Analyst at TD Cowen]

Great. Thank you very much. Good morning, and congrats on the two new initiatives. I want to start with you on the Summa Trust. That seems to be intriguing to me.

[William Katz, Senior Equity Analyst at TD Cowen]

And I guess when I saw the news, I was just surprised that's a relatively nominal level of capital raise over the next, you know, four plus years. I was wondering if you could talk a little bit you know, where you see the greatest opportunity. And then related to that, I'm sort of curious, is there an opportunity for, for the Summa Trust to increase their stake in GCMG? Thank you.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

Thanks, Bill. I I think that, you know, Sumitomo Trust is obviously a big player in that marketplace. And so the potential for this partnership, as John touched on, and the potential opportunity in that in that market with a part you know, with a partner and I should mention it's not an exclusive partnership. We have the ability to enter into partnerships with other distributors there. Potential is is obviously, you know, much greater than the stated number.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

I think that there wasn't any particular magic to that, to that number. I I think that in terms of the, stock issuance and and so, know, Bill, long way of saying, we'd obviously our goal is to exceed that number. The in terms of the stock issuance, there are no conversations about increasing that. There's no there are no plans to do that. And frankly, you know, I I don't know that that that we're we're focused on that at all.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

So, that's not something that was part of conversations, that was part of plans. I think that was just a, an investment to strengthen, you know, what was already a pretty good relationship, and a signal about the, you know, seriousness of the, you know, intent of building this out.

[William Katz, Senior Equity Analyst at TD Cowen]

Okay. And then just a follow-up. Just coming back to your cautious commentary on deployment so you understand that given the market volatility. However, when I step back, I think about the franchise, one of the strengths of the business is the very strong SMA growth, of the business, which had a sense was much more programmatic in terms of deployment. So what has shifted, from more that structural opportunity to deploy capital versus the more cautious view here, particularly since a number of your peers have been accelerating some deployment given the market volatility both in the equity as well as the credit markets? Thank you.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

Yeah. So so so nothing has shifted substantively. Nothing has shifted, long term. Everything that, you know, took place in the quarter and that's taking place in the business from our perspective is constructive, and we feel very good about that. That's just simply was intended to be a comment and kind of, you know, a bit of realism.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

It it's it's a little you know, there's there's less visibility around the investment committee table today in light of the the the the policy volatility around tariff and tax than there has been. So if you're sitting around the table and you're looking at an investment and it's you know, and you aren't sure of your cost of goods sold because you don't know quite where the tariff's gonna be, and you're not sure of where taxes settle. It's just, you know, a a little harder to have, visibility right now. Our hope is certainly that by the you know, later in the summer, you know, the visibility will clear up a bit, and you'll start to see things moving forward. I think when we started out late last year, early this year, there was quite a bit of enthusiasm with regard to transaction activity levels, and that seems to have dissipated for you know, somewhat quickly for now.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

And so our comments are really reflecting that sort of short term, impact on visibility, and it's not in any way a substantive comment on the structure of the business, on the in in fact, what we've seen is the opposite. We've seen people, we we had tremendous fundraising quarter. We've seen people continuing with their programs, continuing with their re ups. It's just inside of those programs, in terms of, you know, transaction levels. They haven't you know, they're they're down and haven't rebounded, in the way that we thought they would.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

But that is not you know, all of that capital is sitting there with fees waiting to turn on, waiting to be deployed, and and we're work you know, there's no there's no structural change whatsoever, and we did not mean to imply that in any way. It was just a a visibility comment on the two big areas of policy uncertainty now that I think slows deployment for the short term. And I hope it's truly short term, like, you know, the last quarter, this quarter, but we we'll we'll have to all see.

[William Katz, Senior Equity Analyst at TD Cowen]

Okay. Thank you very much.

[Operator]

And once again, if you would like to signal with questions, The next question will come from Ken Worthington with JPMorgan.

[Kenneth Worthington, Financial Analyst at JP Morgan]

Hi, good morning. Maybe following up on Bill's question just here. Do you see the opportunity for Grosvenor in the announcements by number of these endowments, and the potential for them to meaningfully reduce the size of their PE positions? Does this seem like a big enough opportunity for you to capitalize on somewhere in your private markets businesses?

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

Well, there's you know, there have been a couple of large, so first, I should say that we're pretty insulated to an endowment pullback on private markets commitments. It's a small part of our AUM. We and it's just not, you know, that that aspect of what you're raising, Ken, is not a an an issue, or a concern for us. You could argue it's unfortunate. It's not an issue or concern for us, but it's just a small part of our of of our business.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

And in terms of capitalizing on what's happening there, obviously, there have been a couple of large publicly announced secondary sales, and and there likely will be more secondaries activity. And we yeah. We we look at all of that in our secondaries business, and that's that is an opportunity to deploy capital there. I think there's a possibility that the mix shift inside the endowments towards alternatives that have more liquidity is a possibility, and it's that's certainly something that our ARS business can capitalize on. And so, you know, we'll we're gonna try to capitalize on all opportunities we we we see.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

I think short, you know, term, what we've seen already is, you know, is is an increase in LP led secondaries out of that space. And that's probably likely to continue. And there may be a move towards liquidity and more liquid alts, which is something we're good at.

[Kenneth Worthington, Financial Analyst at JP Morgan]

K. Perfect. Yeah. And I was from the opportunity side of the perspective. Maybe second question, just going to slide 26 in your deck, we see the fees from specialized funds experiencing very strong growth, but the separate account fees are essentially flat.

[Kenneth Worthington, Financial Analyst at JP Morgan]

Can you talk about the dynamics maybe weighing on the separate account, fee growth that we've seen over the last twelve months? And then talk about the outlook that you see maybe for the next twelve months on the separate account side.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

Yeah. I I would say well, the John, you go ahead. I what I was gonna say the first point I was gonna say was I think that, you know, we do raise money, constantly, and we raise money that is pay on committed, and we raise money that goes into CNYFPAM. And you've seen a pretty good, healthy growth in CNYFPAM looking back, you know, over the last four or five quarters. And and and so you're as you see that go up, you've got that growth built in, but the fees haven't haven't started to pay yet, and that comes as we roll forward.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

And that's clearly part of it. John, you wanna add to that?

[Jonathan Levin, President & Office of the Chairman at GCM Grosvenor]

Yeah. I was just gonna say, Ken, this is actually exactly what we'd expect it to look like. So one of the things we've talked about in the past is the, some of the mix shift in our business towards more direct oriented strategies and that coming at a higher fee. When you look at the types of investment strategies that dominate the specialized funds, it tends to be the more direct oriented strategies. Whereas inside of the separate accounts, you'll have a broader mix of allocative strategies and direct oriented strategies.

[Jonathan Levin, President & Office of the Chairman at GCM Grosvenor]

So the idea that you see, the specialized fund, you know, rate, a, be higher, but also bounce around a little bit higher as you have more and more direct oriented strategies makes sense to us. The other thing that we always talk about is that you have, fee discounts for clients that work with you at scale, volume discounts. We've always had that in our business going back in time. As you have more cross selling and growth with your existing separate account clients, which we view as a great thing, you get more capital, you get more dollars of revenue, but you also recognize that in terms of the fee rate. And then as you look forward, I would expect stability there.

[Jonathan Levin, President & Office of the Chairman at GCM Grosvenor]

I mean, I in in both lines. Meaning, I wouldn't expect you to see much change with the average fee rate in those two categories. What I do think you'll see is is what you've seen in the past is more of the management fees coming from specialized funds over time in private markets just because we're growing off a still lower base there, given the strength in the history of the customized separate account business.

[Kenneth Worthington, Financial Analyst at JP Morgan]

K. Great. Thank you very much.

[Operator]

And moving on to Tyler Mueller with William Blair.

[Tyler Mulier, Equity Research Associate at William Blair]

Hi. Good morning. I was just curious on the Grove Lane opportunity. What was the rationale behind the JV structure? And then where are the initial efforts going to be focused, understanding it may not be the best environment for individual investors given the equity market sell off and increased uncertainty?

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

Yeah. So, let me take the back part of that question first because I think one of the I I think that that while the market uncertainty, you know, is is is real for now, it's a lot of volatility, a lot you know, some of policy conversations, that are, you know, that have been have led to volatility. That that investor universe is significantly under allocated to alternatives as we know. And while you may have, you know, different growth rates depending on different market conditions, I don't you're that there is no there's no there's no work out there that doesn't see that growing and doesn't see it growing at a very good rate. So that is a very real opportunity that I think is, you know, going to grow, you know, outside of any, you know, real major exogenous shock, that's gonna grow and it's just gonna continue to grow.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

And I think you're gonna see, you know, growth there over time. We've been careful to say it's gonna ramp for us and to not, you know, get we shouldn't be getting ahead of ourselves in terms of building, in, you know, fund sales and fundraising and and into our numbers too quickly. But we're, that's a very real opportunity, and I think it's gonna continue to power through, you know, throughout despite environments kind of ebbing and flowing and being being being being being, you know, more constructive and less constructive. As far as the structure goes, we like the structure a lot. The structure enabled us to attract some pretty and will continue to enable us to attract some very solid talent from real places that wants to be part of building something and can have some ownership in a vehicle and can do their can can do what they're good at in that structure, and we've structured that as there'll be some information on that structure in our queue that you'll see.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

But we've structured it in a way where we have the ability to take that joint venture in in the future when it's more mature, but the team can do well for themselves and be properly incented during the period of time that during a reasonable period of time while that is maturing, which I think increases the quality of the team and therefore the results for us intermediate and long term.

[Stacie Selinger, MD, Head - IR & Office of the Chairman at GCM Grosvenor]

Thank you.

[Operator]

And the next question will come from Bill Katz with TD Cowen.

[William Katz, Senior Equity Analyst at TD Cowen]

Okay. Thanks for taking the next questions. Just coming back to ARS, that seems like a great opportunity. Could you talk a little bit, maybe quantify, like, how big the pipeline is? I I think you mentioned it's up rather strongly.

[William Katz, Senior Equity Analyst at TD Cowen]

And then within that, how quickly does it normally translate into fee paying AUM? And if you have any color on where those allocations are coming from? And then believe it not, I actually have a follow-up. Thank you.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

Sure. Because I'll put that one the line Go ahead. Go ahead, John.

[Jonathan Levin, President & Office of the Chairman at GCM Grosvenor]

I was just gonna say, Bill, we've already seen it a little bit. So recall last year, we raised about a billion 2 for ARS, which was more than a couple years prior combined. I think that when you look at we actually think we're gonna have modest net inflows as we sit here right now in the second quarter. Anything can change and and show some nice wins and contributions there. From my travels around the world, which have been numerous over the past several weeks for both me and and my partners, One of the things we're hearing a lot is, yes, we love our private markets investments.

[Jonathan Levin, President & Office of the Chairman at GCM Grosvenor]

Yes. We're going to continue to allocate. But as Michael noted a little bit earlier in response to one of the questions, it's also nice to be able to generate some alpha and return out of a more liquid part of the portfolio in periods of time when when distributions from privates are not as strong. And that's just been a constant theme, especially when that's been in a category that's generated a nice amount of return and alpha in recent periods of time. And in light of the fact that you might be looking at a more volatile market going forward where the ability to protect capital in down markets and make money throughout market cycles is interesting.

[Jonathan Levin, President & Office of the Chairman at GCM Grosvenor]

So I just think we've seen it already in the numbers. We'll we think we'll see some more activity again in the second quarter, and it's just kind of activity levels generally.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

Yeah. And and to your question on the on the fees, that's largely, like, overwhelmingly a pay on committed business. So the fee related revenues turn on, you know, when you start when you execute the the the SMA or the make you know, the the the fund sale. So it's you get the the fees reps ramp effectively immediately.

[Jonathan Levin, President & Office of the Chairman at GCM Grosvenor]

Yeah. I mean, to I agree with Michael said. I mean, basically, Bill, to think about it this way, it's there is no distinction between committed and invested because it happens simultaneously effectively.

[Michael Sacks, Chairman, CEO & Office of the Chairman at GCM Grosvenor]

Yeah. And and also, as you know, Bill, you get the compounding there.

[William Katz, Senior Equity Analyst at TD Cowen]

Of course. And then one quick one for Pam, and I'll let you guys go. Thank you. The share count, maybe pro form a for Sumo, Trust, as well as the buyback core date, where where is that number now? And does that look like a sort of flash number from here based on your comments around, offsetting stock based comp? Thank you.

[Pamela Bentley, MD, CFO & Office of the Chairman at GCM Grosvenor]

Hi, Bill. Thanks for the question. Yes. The Sumo transaction was Sumo transaction was just around 2% dilution. And sitting here as of, you know, May 1, you know, relatively modest to little dilution as a result of both the RSU vesting and the Sumitomo issuance.

[Operator]

Conclude the question and answer session. I'll now turn the conference back over to you for any additional or closing remarks.

[Stacie Selinger, MD, Head - IR & Office of the Chairman at GCM Grosvenor]

Thank you. Thank you, everyone, for joining us today. We look forward to any follow-up questions. And otherwise, I look forward to seeing you next quarter.

[Operator]

Thank you. Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. We hope everyone has a great day, and you may all disconnect.

Participants

Executives

• Stacie Selinger, MD, Head - IR & Office of the Chairman
• Michael Sacks, Chairman, CEO & Office of the Chairman
• Jonathan Levin, President & Office of the Chairman
• Pamela Bentley, MD, CFO & Office of the Chairman

Analysts

• Crispin Love, Director at Piper Sandler Companies
• William Katz, Senior Equity Analyst at TD Cowen
• Kenneth Worthington, Financial Analyst at JP Morgan
• Tyler Mulier, Equity Research Associate at William Blair