GCMG - Earnings call transcript Q2 2022 | Grosvenor Capital Management, L.P.

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Operator

Good day, and welcome to today's GCM Grosvenor 2022 Second Quarter Results Call. [Operator Instructions] As a reminder, this call will be recorded. I'd now like to hand the call over to Stacie Selinger, Head of Investor Relations.

You may begin.

Stacie Selinger

Thank you. to Second welcome Call. XXXX and morning, GCM Quarter Grosvenor's Earnings Good Financial I Grosvenor's President, Michael Chief GCM joined Jon Pam and and Today, by Officer, Chairman am Chief Executive Levin; Officer, Bentley. Sacks;

on fact the quarter's regarding nor this our includes and relate reminder statements do discuss we business, considered performance, this of forward-looking results, that historical Before call matters statements for our be that financial current a actual all expectations made should to This not guarantees. statements statements. uncertainties, those promises involve differ These known factors to risks, neither projections. the on statements from unknown They and refer Please that the and are forward-looking materially call. by indicated may results in our factors important this of other we cause our measures which our on section Risk other Exchange website. in Shareholders important refer nearest section our be We'll on and Securities Shareholders which Public non-GAAP of the can available filings reconciliation our are all A and that the of and metric GAAP to business. found Factors our non-GAAP are release, also view our metrics earnings supplement, of of both Commission, as of XX-K, the presentation the the earnings of Public the website. section earnings with our assessing performance in to to

how improve joining we to engage that, and for with to turn with with And communicate you is to forward call look spirit, I'll we your in And over shareholders. goal that continually feedback. Michael. Our us. the again our Thank

Michael Sacks

income, solid growth quarter volatile fee-related market the continued we fee-related in net revenue, with QX and Stacie. another had earnings. in you, Against Thank backdrop,

quarter strong to markets strong In and of fundraising our another growth. perform to client We private portfolios. well value with enjoyed also verticals continue particular, added

to deliver Going growth are and forward, value our ability in confident shareholders. prospects we to our

income adjusted by adjusted we fee-related During by 'XX. to the earnings X% XX%, and the grew quarter, compared XX%, by XX%, second of net fee-related EBITDA all quarter by revenue

growth Importantly, our fee-related revenue growth consisted fee of markets of XX%. management private

to XX% up leverage Private the years total last a up continue comprises two earnings fee-paying enjoy the assets quarter, and of second of of year. under XX% quarter assets from fee-related our and of management approximately XX% We from with markets XX% under ago. operating margin XX% management, now in just

seen to Over Based the XX% mix shift yet not has see AUM two-year contracted and on assets secondaries markets our fee-paying continuing. from business as our fundraising and private with a period, pipeline, trend a XX%. percentage of the markets private our growing of we co-investment meaningful AUM composition this

an rates fundamental Our persistently are indication noting strength high separate the account and worth of are our important XX% re-up business. of of

we raised market was $X.X XX% for billion, quarter, the private of During strategies. which

demand the fundraising the year-to-date or ultimate step-up specialized we far funds change first was in quarter, macro our slowdown couple from quarter to general about quarter million billion growth no in expecting Our $XXX with a trajectory. fundraising so and talked with this a Last of fundraising our ultimate due brings second $X.X total quarter environment raised to for year.

the in Our which fund. market fund only fundraising secondaries in specialized our ends is for 'XX period

may fund, already which predecessor goal. to larger for fund its original XX% cause the our one that it is below fund about While than land timing is us

and year goals. will to with specialized other funds our continue capital regard all track remain of our on raising All into next

first year half said will a fundraising. exceed and ago, a half our as full that Just we pipeline second our have believe fundraising we

worth in relative QX, quarter. management a indices XX% represented fundraising environment, to a In for Return capital infrastructure the quarter, that year from expectations challenging raise, take vertical seeing second row. infrastructure by have fourth the performed of XX% well the our noting It's and down grown the of year ending for the of line largest fees that a in our return quarter During market had public Absolute strategies 'XX. market in X.X% has in investments ago. with absolute light share

markets credit many equity high-profile clients. with indices of our returns to XX% XX, and June primary for suffering higher and the with diversified portfolios, mid-teens, broad our down down XX% hedge far not losses, of were hedge concern multi-strategy fund As than funds area

growth quarter, continue the for As net market to XX% we achieve we believe to fee-related we outflows to said modest and we of XX% XX% fee-related conditions, for Despite earnings current revenue last do of year. X% will growth anticipate 'XX.

private in in market We growth 'XX, strategies. led see continue by earnings double-digit strength to fee-related

X, As see QX regard. and be for in stronger QX will believe conservatively we specialized that planning are Slide on you can fund closings in

catch-up fees As management expecting QX. we a are in not result,

XX%. excluding growth For expect catch-up impact QX drive with of an we compared of QX to to management around FRE 'XX, X% X% fee-related revenue of of 'XX management fee markets XX% private growth margin the overall fees, to XX% will

markdown the continue up of firm from substantial $XXX will discussed of carry strategies a of share private modest our share eliminate realizations enjoy Despite performance for 'XX returns QX, unrealized of reduced return portfolio XX% firm in In June and pace largely year. million, slowed have at to revenue. we a before, we year unrealized transactions carry the XX absolute carry, ago. in As investment the markets fees

normalize from even to and environment, our deck. the the of of expect of earnings attention becoming part markets control XX we we Private to realizations of and of trajectory realizations, very I XX global Despite feel an growth story. growing the business. call about point, your good tough larger material time. the Pages pace quickly carry-over our is to will see fast some want and in timing don't at we the While revenue

for fee time. our at dividend growth unrealized at quarter value stock well dividend our front working and investors growth today's payout trailing is and work. higher their to XX% our shares very solid our growing of repurchase private in my million million during just management remaining we bought well X% over at growth comfortable X.X of POM warrants XXx X.X enjoy comments I'll continue trade private are driving AUM. to us value good growth yield, levels. share and with enterprise that, and to excess fees rates over ratio shift providing Jon. Adjusting which We versus us. fee-related and that back market our we carry, mix to earnings for at plan, have sheet for we room balance the our it $XX and turn to last activities million markets put Our in over is represents With percentage channels in XX%, new current believe We of our to Similar an approximately quarter, of our

Jonathan Levin

Michael. you, Thank

Grosvenor's proposition Our strong quarter, the specifically. the backdrop, market to capital generally despite value strength formation of tailwinds this the testament is industry and GCM alternative a

Michael As of management. driver private under has and a markets our growth represents now been assets fee-paying noted, XX% our key of

want our quarter digging AUM area shift. billion equity largest the that mix of meaningful deeper our Within end. capabilities, and Private within generally, spend representing vertical to I business private time as $XX represents by a into equity been has some driven growth business. the of private of So private markets our markets

so, the has investor considerably. for grown decade Over secondaries or past co-investments and appetite

Slide direct clients. first a areas, direct XX% drive billion rate. value To revenue Our in to $XX two and our a point, towards that years fundraising. capabilities fees continued these secondaries, co-investments, XX% provide of CAGR paying the investment the of certain strategies help for grew on by well the billion types clients an AUM XX% shift private around private to strong margins These CAGR. compound these compared XX, of a our past also represent AUM XX% developed by lift markets management investing will The private illustrated over proposition years, and to they strategies grown are now and represented XX% just annual markets' as want. two while growth In or and markets ago, associated XXXX, whereas our investments half $XX our fee delivering or has and what XX% expand

Importantly, considerable yet co-investment yet fee-paying there's contracted secondary deployed. where be in our AUM, not this also is and trajectory capital to embedded

this year business, scaling Part now of our infrastructure has contributor up significant assets billion which one growth been under $XX.X to the just has ago. market's of its management, implement XX% from long-dated sustainability Another inflation yield for our objectives. attributable of cash generation, to ability the in impressive and due infrastructure opportunities, protection, appetite growth is to the to appreciation capital increasing strategy

significant broad in our and the experience is factor contributing space. Another

infrastructure making an practice solutions in and us asset Our XXXX, began a in class the pioneer early amongst the providers. mover

solve enables decades, increasingly the infrastructure offerings a core our offering two cycle-tested and In infrastructure capabilities deep serve allocation. consistently diversified past our fronts. to infrastructure our the through We as allocation on record clients global we've still for to with work also the a have clients expanded infrastructure of within us discrete We track need with depth relationships. their all

strategies partnership The best capital a to specific by strategies provide is strategies returns goals. attractive For skilled, labor. to in we a example our direct where infrastructure strategy ESG example, risk-adjusted with co-investments, we innovation labor and impact and of deploy basis region, specific to can on impact believe and our secondary our specific organized working close

fund infrastructure labor next revenue year. second Our begin will to generate

by momentum our under Finally, management also to with $X.X enjoying business assets XX% strong is growing billion. estate real year-over-year

of excited source deploy we of mention model opportunities strategies. that partnerships spectrum environment seed over call clients growth, a that forward. With to platform's expand their ventures, have focuses meaningfully stages believe and our be the the We Our approach command time wide in premium to in and on in differentiated managers This our over given I'll to supporting real scale joint co-investments. that an to ability strategic We're akin practice cost-effective highly about to flow fee real $X.X and remiss exciting while approach in platform attractive unique on create platform would a capital. provides investing These covering a deal market has opportunity on estate earlier operators execute open today's our estate us the it our to allows dry going basis. billion of and through secondaries. investments, our turn investment Pam. alternative the We activities primarily for to that, powder co-investments architecture not

Pamela Bentley

Thanks, Jon.

Our of were million revenue fees increase year. an from Private second basis. growing and the a fees markets results on $XX management by Based X% next of XX% management under second assets AUM quarter degree for of markets year-to-date anticipate increased now are since management is high AUM quarter closings. of duration, our pipeline, or Fee-related key million XX% fees amount charged capital, our we inclusive of of our the Private business. last fee-paying of demonstrate catch-up expect driver X% on investment fee-paying quarter visibility quarter specialized invested quarter, is of higher our second This with This XX% commitments changes is markets end. of quarter stability material the comprise a in the as catch-up generally from by management a and 'XX. our in growth the impacted 'XX management fee-paying capital Private over long providing over on fees $X.X instead are in do fund not business QX. valuations. which not of

increase end, remaining of As program around were Private have investments, a more life including return from markets on of over fee of stable last market a XX% had management and private QX experiencing fees AUM time million shift we year-to-date of years. also year, been quarter higher towards periods, basis. in rate our and are X% fee decline X a the quarter, recent rates secondaries. a X% strategies mix direct than co-investments, but activities, Absolute a $XX

$XX.X as from Our as quarter, quarter end charged each ARS of relative the of on drive the of first quarter generally fee meaning fee-paying the of fees. under management primarily ARS in Incentive quarter interest. in will private the carried were third day management fees AUM markets quarterly are a ARS decrease fees management paying second assets million,

were As control the we don't realizations market conditions. Michael given and and noted, of generally exits investment lower timing realizations current capital

the to gross carried programs, power in unrealized of across $XXX is million interest earnings with However, we almost million significant have XXX firm. which carry $XXX net long-term

of as carry over carry most the share recent more accrued of expect funds into retains carried also accrued firm the will gross higher positions. We term interest firm a the where longer share moved increase

near our may In $XXX and In our of balances end sheet carry, balance sheet marked at our on the investments investments these lag, carry conditions that are to one at third our quarter given market the funds quarter. a stable balance addition accrued million. accrued remained term, in the impact

and expenses. the quarter to quarter compensation Turning 'XX. the year effectively earnings to million, was second Fee-related flat of in $XX.X the quarter the of compared first

call, to expect consistent and sustainably the while first last quarter, other of third long in the administrative the similar investments our will necessary fee-related over relatively we quarters As the grow term. anticipate in and expenses This the $XX.X fourth the earnings in make be continue million noted stable quarters, business relatively general to quarter. on compensation we with to we coming is be this were it and year. and Non-GAAP

embedded leverage and growth is operating Our driving margin earnings expansion.

$XX.X XX% XX% XX% margin from million, fee-related and year fee-related expanded Our increased earnings ago. to to earnings a our

scalability embedded operational we long-term expansion. the margin Given our anticipate FRE in business, continued

one of Finally, of our attractive generation. consistent visible the features is business cash

and is end for the that our by we're Jon delivering that our of work. a $X.XX and not us, debt. buybacks, of is fee-related dividends the to our highlighted, you your We of returning current earnings Michael prioritize million of immune our of spending value XX% share we excited now team's market earnings future clients shareholders per themes to Thank we the strength than the $XX Our diversification to focused cost our annualized quarter, joining combination breadth, put again fueling to take of last less while this and and through happy are our authorization and Reiterating and dividend our impact focus XX-month $XX performance. million our to of platform, questions. on the to capital through continue our We of alongside are business remain power. environment, less buyback

Operator

Oppenheimer. of [Operator the Instructions] line with comes from Kotowski Your Chris first question

Christoph Kotowski

guess, I the rebounded. market that absolute through performance if the return has has I flowed in quarter, halfway wondering, through all, third wonder we're the of and to strategies. First And the

Michael Sacks

to rest goes not how quarter profitable was, that forward. the was move degree profitable we as was the make did month in see July we'll the a money market return and for July, It absolute strategies. some of the we but

Christoph Kotowski

of bit not yet square and my doing markets, we AUM AUM billion, private were a million, I'm to the math million, fee-paying circle see up then if we around fundraising see contracted, the trying around and right. I'm that fundraising little in -- the in of $XXX up fee-paying $XXX $X was

-- outflows look either seems and big And didn't or billion like kind so that means AUM roughly forward that $X table. distributions it on in like roll it the of

Michael Sacks

we Those the we'll of tie component billion of to give get fundraising we them we've you and numbers -- a number tight to and don't to Why you are in those that when numbers distributions the one-on-one get it. AUM the them what sort and given just performance out. that $X obviously the that's speak of was, change the to deployment as and it

us and you. let break of for kind a out build So that bridge

Jonathan Levin

when down calling when not your there's And you yet be to function a as -- more you're don't Chris, you're pulling AUM your forget, yet be than because of bridge cite contracted, paying contracted, fee from when factors part capital. will paying you're change of not

there. factors of number a there's So

Christoph Kotowski

weeds. I'll then the you're if And saying I guess, go. not… I And apologize. you All mean right. I'll let

Jonathan Levin

would the bit of a the the speaking, one feel raising general, little and enter half about talk which second say, But a picture $X capital the what about even observation, the as the Michael the market billion the and of mentioned, quarter. in have pretty from were environment, slower. we seeing being an into quarter, second the just in your We third Pam good in light looking we perspective you $X year. capital-raising second of of year. raised. half both in starting improved in We of thing that We're on billion those more realization just first stronger did half the we mentioned did than terms and But maybe, saw -- year generally Chris, you capital of having

Operator

with Next come the Worthington JPMorgan. question from will Ken line of

Kenneth Worthington

That question. segues into well first my

port to about in the be talked of seems fundraising secondaries You We've some a secondaries falling expectations. storm. but broadly extent, seen to environment, the short challenging market

of have given you in any a challenging too. on think of that secondary I it's happening and side, 'XX, and the confident markets? so the you you funds targets if have hit first here, confidence sort us closes what's with MAC, half why like maybe of are So Help you get so there the do final color, CIS couple

Michael Sacks

a of So things. a of couple And couple comments. just

now we're end year. -- of the market First, in money secondaries it's continue with fund the than is that and like XX% through we're larger for already going last that raise fund, to the the to

success we a to good environment the and closes to market to mentioned this creates of that the closes have because the the pace about is a as capital the is I now 'XX the reason getting denominator deploying in fund calendar that in going that catch that fund et end up year and -- the that. delay is effect, we're with that extent created market doesn't of extent its growing, that the that prior we So a very it and that it only to to franchise to The after fund, successful are expect fund is feel people cetera, will. year be at time relative that this only the delay, they calendar only and market that's back that,

is that's crisp going And want but mentioned fund. there that, that, the I to prior be larger than why that's to successful fund we that so be a fund significantly

market -- will we're roll those as other we into those with optimistic to far in year, we're that next funds. funds with funds, those still in regard market As the and that with

up into is raise They due helpful. pipelines. of and have that and demand market a of period And little there. full make that good we volatility in 'XX we market a environment lost is We next time time think to year records, to track for bit have to have that

Kenneth Worthington

And Fair. I cop. Okay. Insurance. good now guess,

So at in I you insurance broke charts, of believe least tables. that one in of one out explicitly fundraising the the

update insurance could progressing? initiative, the great. how it's outlook on on if the us So update any you could, there would you And be

Michael Sacks

pleased the seeing thought we even anything, XX% AUM. X% flows We had of come versus invested there from XX-month better our we last team. just the there. of than probably We're the we're And We've results if maybe faster very further would. channel in

a you're in lot very I of on we that and a probably a opportunity, there. referring with large what to. slide activity that's and We of think market a the have deck, lot included it's

that's to prove grow investment So to to to very and going a be us. continue continue we good for think

Operator

line your the comes Stanley. And Cyprys Morgan next from question of Michael with

Michael Cyprys

I you like circle to you back raised want investing it's to that was also capital where infrastructure. have It hoping approach could a alluded bit managers seems earlier. amounts mix of to you maybe elaborate infrastructure, third-party direct. with and to your substantial a on of I

approach So on to managers, investments? can side your I source, more investing can the how investing to guess, the for direct in, specifically, funnel talk like? then with looks approach sourcing you third-party with talk managers you about to you your and funds to money that infrastructure, identify about best be infrastructure And respect what

Michael Sacks

Jon, want you Sure. to take that one?

Jonathan Levin

Sure.

at as actually would an strategies still of asset but or world, And the management asset and private class I scheme Michael, market in and of infrastructure So space are old new. infrastructure things. that the but interesting different is some the mentioned relatively prepared a this couple grand relatively looking the of say as infrastructure the is assets we remarks, small

it and infrastructure. market within light we're I business that there predominantly years what to in the talent. that drives, focused funds relationships or predominantly that allocate time XX the speak a with I capital space. and in us of think us is And a to and to cover specific in that the on that We're funds manager our think, enables funds, creates infrastructure in larger ability space. deep people's are is the our When source globally. doing other makes but successful global in because smaller doing been experienced to it we've some experience successful managers that allocating quite so universe what's been spending middle And experience that I in we're funds, of niche And

assets sourcing say, partnering -- where infrastructure pointed you're of in involved we've a And also us those direct attract from to perspective. by business bit we've my little infrastructure skilled invested as in well That's you constituents and attractive on the that making is front direct business assets As co-investing obviously which sure a what that active a our back those of we in build believe business. constituents generate, remarks, the operate That's alongside a of lot noted investing. a active in you both out, assets business in I the labor solid being business, project is co-investments your returns that closely a doing unique. then terms help the from are going partnership that North a a through related a project. that's risk-adjusted of standpoint And partners by and relationship our ownership impact with The or all fund are we with as able in to on it's with the primary are to fund should and that bit America-focused closely co-investing labor infrastructure been predominantly organized execution out fund. of got helped I the that's unlocking those infrastructure the

a year. infrastructure noted, so that space like source that direct this we the team we any our next sourcing professionals as see commencing second that we will turning investments fundraise of is firm. you focused revenue on end have in And And would year those direct with be on of with towards with

Michael Cyprys

-- like to is well. smaller your Great. just today, as though just looks starting on follow-up some flows of And generate then a question retail, AUM a portion it

where are could build-out to new the sales and maybe retail on of Where in the us your distribution about space talk relative like the update some be? to just you'd journey So of organization. initiatives you product along you that and that

Jonathan Levin

that AUM net more fundraising historically products terms there have we're through in again, our in AUM. look then be in the similar broadly is of -- and there, growing forward, appropriate a we is The able to represented platforms the on, bulk future. I We're and with largely platform. and is raised the at succeed But than we're we insurance that distribution we we affluent seeing we're to for as it's mass of for where think support something of on the we or product represented that faster -- per worth essentially RIA to more success the time there brokerage platforms, that to us with that's a distributed to products that within the high and faster funds our opportunity see our channel continue than the hope and of various and effort, brokerages, grow banks more enjoying percentage on find bank have is at that and platforms working platforms to more right rate being, enabling at we're and more

Operator

additional closing I'd back turn call Stacie to any as showing And the or to like not questions, further for Instructions] over remarks. any [Operator Selinger I'm

Stacie Selinger

you. you We Thank forward nice quarter. connecting call, Thank and quarter. and We the joining again, questions them. appreciate this next day. look to Have Thank a really you engagement. for after all the again for

Operator

conference. and day. gentlemen, has for that a thank Ladies does hope And you participating. everyone today's conclude We great

may You all disconnect.

Grosvenor Capital Management (GCMG) 13 Aug 222022 Q2 Earnings call transcript