GCMG - Earnings call transcript Q1 2024 | Grosvenor Capital Management, L.P.

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Operator

Good day, and welcome to the GCM Grosvenor First Quarter 2024 Results Webcast. Later we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this call will be recorded.I would now like to hand the call over to Stacie Selinger, Head of Investor Relations.

You may begin.

Stacie Selinger

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

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

Michael Sacks

Thanks, Stacie.

of the business quarter our first performance. The perspective performance both for 'XX from strong and was investment clients our of

was grew Year-over-year, regard the adjusted and we adjusted Our net to of fee-related performance, and FRE and first well growth, peers.With of fee-related relative XX%. funds grew XX%, regard strongest absolute up net XX%, 'XX business year-over-year well earnings was as fundraising earnings with the increases in QX as income to income, basis reported performed fundraising, to margin. quarter have an on one

first was meme Ukraine, first-quarter from a marked for COVID, just fee-related of last and, X years, quarter which debacle quarter.The bank ago, were second the the year pleasant the quarters XX% Our stock of surpassed change by consecutive invasion a failures. earnings the Russia's margin

the prepared the While of continued we high on good of to feels water disruption in this year U.S., great increased for volatility, global gotten strategies have the conscious enjoy election to it and we we in return and are absolute broadly geopolitical are seen have are fee and possibility focused off therefore recently, prospects. an above in performance a year.We always start volatility and type particularly

private performance.In to return raised of growth equity, negative In we call, driver. for in We've Grosvenor absolute news, revenue positive modestly past vertical. enjoy earnings.During is remained general we solid of Announced we resulting quarter million quarter is around the of credit, of across that rates, XXXX. nearly and highest the toward carry end our time, to our million, raised private private performance capital largest absolute has the II, net almost separate quarter, makes raised total our from with to ARS addition a an about and not high over capabilities. to commitments the of other us the last we XX.X% while We provider first by hired aid re-ups we $XXX absolute up, We ARS contributors credit a the changing additional revenue. the vertical. team expectation customized GCM in believe going we nearly Recent investment value credit second first our discussed will and at the months. XX of attendant continue and continue spoken flows as significant and we solutions re-up in in QX the XXXX our in in goal second an year, million we of closed bolster X, in $X.X ability strategies, volume credit growth believe to X.X% private powerful the return good fundraising to including Composite our depressed growth to these compounding $XXX The our outflow fundraising. of from the credit credit $XXX Consequently, in over been reporting cover, where flat net are expect it private meaningfully quarter SCF accounts XX grow fund.During we our X have members this were do to strategies, Multi-Strategy clients case year. the that in forward We quarter quarter key co-investment in the levels. started last periods earnings from unique primarily will fundraising moving origination million, which achieving were the first terms Despite to we of enable double throughout equity some However, in specialized carry Jon the performance prospects the direct momentum clear $XXX to quarter, fee-related last look feature return our billion of quarter are that and transactions earnings position our to presentation, the that good, distributions forward.On business contributor was and our in the transaction and the first this additional market look funds, was with since flows. Page highest future.Generally, will and quarter's a solution forward strategies general and in increase gross this

distribution and and including help of a looking to adding the in grow while to in growth impact of proving the relationships broader channels, adjacent identify asset investor those both existing investment strategies with our to in breadth will and channels. to have as continue and is real such pursuit We elevate investors, deliver investment opportunity individual opportunities goals.We pursue our strategies are be investors. us platform performance new The always for and our

platform, for And the shareholders.Thanks turn joining across add we win to the that, over I'm today. I'll for Looking the numerous for clients, and to the Jon. business us to have excited ways value call grow with

Jonathan Levin

Thank Michael. remarks. on of particular Today, a business quarter, you, my our drill in customized going our Each of section more detail. we're account cover to the a area in prepared bit down we separate capabilities

quarter.We before normal it building which relationships. We ago, alike process. Our partners market-leading amount the every We with also But a offering take investors. didn't our the the flexible to as a because is separate of not then and market growth. historical solution and competitive the of of we for to long, reward fairly represent XX customized that great often extent long was our years offering a their for our any perpetual relationships on for delivery model believe almost our privilege are cornerstone we solution of this results, do accounts are client given our opportunities was day the financial practice, as a collaborate and that value of these capabilities predictability back hard as Customized at XX% granted. a each provides realize acquisition result the has to in significant been similar work AUM in stability well initial best and and QX, a foundation to our firm intentionally from focused fundraising in separate firm that was interest drive in a usually account intense, of probably nature. long-term Frankly, business perspective.The victory often success,

this clients.To are relationships growing long-standing been as rewarded have length that some relationship put XX-year average by largest metrics with partnerships, almost customized million and X-year depicts I our period. illustrative evidenced commitment financial and XX with with a We a XX-year-long of in around investment to This program presentation. $XXX point an starts earnings that topic, a out Page you our page

larger have end Hence, than is program the experience X-year the clients that, at in dozen representing nearly growth fee-paying that of that program will that on relationship their Our the embeds of account commitment. underlies XX% billion Each our cycle. $XXX separate business years, a of this million and is shareholders.We sizes, initially at across layering in becomes $XXX creating discussed $XX program strategies generation of million programs also commitment we've continues AUM a a our capital. was dozens layered a XX% different new the investment period, easily X-year original onto of dynamic what frequently size and first That re-up with attractive a opportunities. built-in these growth

incremental key re-ups in outcome compared pipeline, in co-investments, our are both raised customized and strong win but what be us More account we factor over every been accounts X investment a over will clients provide in programs. majority But XX% to proud Such over of the customized of years investment as value-added have more than for Over business remainder work been to separate growth.Looking re-up accounts our support stability also enables expect shift the of service. that a XXXX, to strategy.Our extensions our feature XXXX We client that, every offer will have have earn of XX% top secondaries, assuming more a and clients.With years. last in investments our meaningful the a us We're many clients recent new stronger we and by into of $X solutions to the new our these than deliver, continue fundraising X highly those direct-oriented relationships. programs. the than our forward specific driving account relationship existing call shift a years, delivering Pam. from The truly meaningful customized capital to has and nature and and towards to towards separate of tailwind turn need I'll the billion separate their including with we platform natural to built culture XXXX. our separate performance our in into of meaningful clients, made direct providing exceptional of strategies client to

Pamela Bentley

Jon. Thanks,

to the results and start Our for year. our the a were expectations reflect strong consistent quarter with

X% a a $XX continues a key AUM AUM to driver, were billion X% private increase growing quarter management ago, be of Private X% with year-over-year. markets under markets as year Assets growth fee-paying and fee-paying from end, increased year-over-year.

guidance As of in our growth. markets management high-single of of quarter fees, AUM.Private line business XX% our AUM with end, year-over-year, of mid- X% digit markets catch-up represents fee-paying private in to grew and total XX% the quarter, excluding our fees

expect markets second similar We rate in fees, year-over-year management a private catch-up fees, in excluding the quarter. growth

growth, operating we to year importantly, fee full we XXXX, second strategies reaffirm were stable are our in compared income ARS ARS Most management return double-digit our for $X.X the private strong end markets to slightly pleased quarter, contractual to a on with last prior as builds the was fees expect fee of a last million the expectation performance related other and in our we was from management excluding on fees client increase to investment catch-up quarter program. million quarter rise quarter, which and The QX particular an performance fees.Absolute $X.X basis. For year.Administration quarter. fees sequential management due of a the

expect valuable carry second of the being return fees and exposure. realized administration in incentive of XXst. fees predict makes quarter significant $XX crystallize of the to majority environment carry quarterly unlocked M&A which its realizations, other especially of incentive potential, operating programs high annually We to difficult on we performance forward our XXXX timing our fees including provide level.We from the markets it's as million it income March capital to $X embedded million the We which the limited quarter, improves.While are the that and single-asset diversification to look believe ARS fees, given in of earnings

each $XX diversified top to XXX we for quarter interest X% and returns As investment across in annual expenses. run normalized million, XX% annual million assuming returns gross multi-strategy our opportunistic for fees, in On and rate of are typically fourth end, $XXX are quarter to the tied have performance crystallize programs. investments.Turning unrealized of which that, of ARS carried year, our

our alignment shareholders. Our compensation in is fostering clients, between and employees, strategy rooted

in first fee we last revenue uptick of in incentive and XX% of incentive 'XX of we QX, average. firm's $XX higher in had do compensation total compensation the period the expect consistent was second expense expect a same a FRE to quarter, with fees, increase revenue consistent share of QX on In quarter. the the compensation FRE expected, time modest was the We that our with that over margin million firm's As share our year. and stock-based increases.Separately, as quarterly our

million administrative expense general stock the were and in to to in significantly in the QX and decrease year.We above and non-GAAP We expect remain last second managing levels quarter. expenses, compensation expenses quarter other $XX.X just disciplined of

in year-over-year the We quarter together increased factors, slight a expect a income with healthy XX% and basis, similar levels the grew potential these Pulling a fee-related net quarter. on earnings next from for grew in quarter, travel. adjusted uptick XX% the

the margin leverage, be Our in the closer 'XX.We 'XX grew of and level the to full our fluctuations.Our this We move X years morning earnings the expect balance despite to fee-related margin the capital expected from from first our XX% of year enjoy we to tenure quarter first our quarterly to said, to comfortable year margin XX% operating launched QX 'XX. full of That is trajectory strong, our are XXXX very transaction for a FRE that significant term sheet XXXX. upward extend in of overall to of with quarter is we loan any FRE structure. and

of our leverage for modest business opportunity. managing as enjoy be last of enjoy vigilant the a fee-related market continued for Incremental will X.X% yield the market have cost stock dividend subject opportunistic a of in There modest the If purposes, investments maintaining an loan. always momentum transaction For or annual current we with $X.XX upsize in our a healthy used repurchases.We are general completed, and to we room Friday. growth extension business, positive share been of as run almost cash per attractive is duration. future million have about dividend attractive to our $XX will earnings. term in provides corporate years, quarterly an to capital, of result XX amount maturity The we and conditions,

stabilization employees, authorization We to our growth continue million management repurchase $XX $XX end in million continue through the in to under ARS leaving double-digit have expanded fee confidence management 'XX to cash also repurchased in through of share stock have fees Year-to-date objectives, shares growth our private settlement potential excluding FRE in margin, of April, our plan. repurchase markets including compensation program incentive of we fees, our April.We significant as fees, of financial catch-up stock-based repurchase of revenues. issued and

ahead our the Looking expansion. your the to in questions. further fee-related you with doubling X look and for future, further to years us, joining earnings now shareholders.Thank opportunities into to earnings forward and We our we again next focused take deliver are to on clients fee-related margin we're the happy value

Operator

from comes Instructions] with Our [Operator Katz TD question Cowen. first Bill

William Katz

questions. X Maybe

First one, Michael, for you.

capabilities of maybe some of click was your sort could wondering expansion a and origination that if continue You I mentioned bit here? you from that to talk little into expand. just and areas about of opportunity the

Michael Sacks

question. the for Thanks Sure.

think space. with of same holds If and think equity have all activities from investment space, you business we sort you think we as about our look think our I private are the co-investment in the in real of But capability in you but X -- private our the the probably great examples, and origination space, in and at of think now capability for capital real the We're debt to probably infrastructure some in we same that our credit space, I volume that origination have we regard now. the have this origination outstrips the in and capability estate kind at have the with capability we time co-investment.We about great relationships that proven flow to equity origination our estate and we that primary regard equity in activity infrastructure of fund credit. and using funds have of multiples

opportunities managed of our commingled we we credit long co-investment basis, that account. origination on or can origination in to there's a of either unique partner upside a -- valuable are in provide And investors are think a there so providing very fund in separately I be lot And to a we lots to view, ability have investors. and we investment

William Katz

X you. maybe Jon, And Okay. for

here opportunity then, quarter such in tend of quickly You year or of pipelines encumbered big in said that? $X set. sort highlighted sort AUM? The can billion of the how a perspective pipeline, fund the provide to you And maybe do a opportunity of and/or AUM that fee-paying terms re-ups How some you ago? through and on was terms that

Jonathan Levin

a the think about feel we're implied fundraising those billion we combination clearly more we the seen of capital have we're year. re-up business, there's that's you And that kind more would you this of the would good than total I about conversations Sure. numbers north marketing for activity year out is productive Well, raised for $X capital investors, the I constructive The that last filling the or take now a in year, And of the frankly to have But kind first environment levels. environment terms metrics and in XXXX in alone so books last preparing, saying you for ability don't even relative to think with of right of balance of see just the ago. X at back which to it, of billion of $X.X quarter. us or year.And of we're of it's lot formation. travel perspective pipeline that all we a RFPs if across whether Bill, things think, look, numbers, we're have nature. on

And of see pipeline, of that $X And verticals look the investing, definitely see investing, going represented. represented et co-investing, the all so environment.When cetera. fund investing, too you're billion obviously going think all of the I in secondary that's terms to different to you direct different activities you're indicative into

question. you fire away there's drill your answers to want else there, in that anything again. hopefully So, If down

Operator

Ken Worthington JPMorgan. We'll with now take question next our from

Kenneth Worthington

your about of markets? how from fund less fee-paying current the more private private are and by preferences you CNYFPAUM. fundraising we coming you're that investors here today talk and seeing in is fundraising quarterly at structure evolving fundraising to in changes in markets being terms is flows generated to When look and of Can contributions AUM, from

Michael Sacks

Ken. Michael, It's Sure.

you're that a done what happened re-ups, a programs like of think is think anything. to quarter just for as about that existing doesn't trend include billion talked the doesn't $X last new any the more really I new of what So, clients. end function And or of client of or include any and opposed highlighting of by it's obviously that specialized we fundraising the year. activity Jon

that on industry. been there.We've in a before robust there calls environment generally shift the these So said has

to we early, it's talked on strategies, separate fee coming in back -- were market we're on think price. funds comes industry, and a like committed the or and either I as have published trying basis about continue space to always and commingled literally as opposed this why because capital there on fee effective basis.And at accounts, price on to CNYFPAUM as our timed in When some XXXX basis in the funds an we account that we in that funds, a capital fee and publish we rampant we have commingled or both. we a fee have looking to invested certain a

I fee change obviously and AUM CNYFPAUM -- call. have nothing But on time that there's these think on fee-paying the And the different. on about to individual has a there way in the trend of effective the were by because for we structures work was change quarterly think fee We're rates to improved and about are certainly had public think some to Jon extent. investor were price don't occurred. any industry, a our once stayed this as neutrality initial stable. over market fee significant coming talked last we opposed offers talking offering, opportunity I that it, XXXX part reversing trying in to years.Effective I X Frankly, the been

about we -- the into industry years that's bit the that rates talked calls. we dug so, ago, -- we've I the today. talked little It's is think X on of good, that I nothing ago, continuing. something something fee may fee it -- while think it's -- about literally And of changed a but and short-term, a But -- a deeply it's of effective are structure part the I delve think into and the

Kenneth Worthington

How building? you then, And announced of on just us progressing can build-out? sort give Okay. a insurance and update program. how is it You that is your an Great.

Michael Sacks

progressing is there. well. fundraising continued have some And It we

continued tailor try unlock and we manufacturing for most capability really that that sense pipeline have market. strong investment, We to continue there, make market and to our to the

a We're so, we And a others for channel seeing lot seek us X we that FRE. we promise for was double -- the years of and target good investment as us. to very over believe remain space, the next believe we that has our

Operator

from [Operator Instructions] a now We'll Adam take UBS. question Beatty with

Adam Beatty

touch a from of on is fees, little a turning the ARS. here was bit guiding to fair, flows prior seems positive. milestone it which a Just net And you're cautious, Obviously, with still down stable periods. for wanted outlook given XQ still bit

possibly either get to the level of how in a improving ARS? with want the the long or year sense level interest, term seeing clients, Just dialogue over of this and of you're flows

Michael Sacks

Yes, Adam.

You But and with so much in correct prepared our heard regard to not it's like view. our heard. what remarks, realistic us you're you just it's --

So budgeting convention. we're not our changing

afraid your The of It we're believe of rest up. The light change, not not, say call see just We're and see real the a -- you we've is rates budgeted We on it. going And a that we is have are think but revenues pipeline pipeline in we'll between the our only performance. are We recent -- definitely we think is year. to we the not compounding. is to it's say little a the that good did for extrapolate very what a stabilized, stable. based are of the ARS when But forward think -- The now how fee then early. sort we of it. not me, up. one. interest take what some in revenues pipeline through going question good We If level that year.And you first on think up. grow surprise stable, end outflows really is quarter, in happened the expect but is

that is certainly we're of And win up, pipeline. so we're maintaining try pipeline's that our piece in going to the and business every to single convention, but

Adam Beatty

with And on it. the pipeline, Appreciate attention there. for our got the billion figure Jon $X definitely maybe out then,

kind that? increased -- rates other historical what sort how re-up into more with pre-commitments how qualitatively drill a of the specific or right environment to dialogue it wanted to that or Just based similar have you? the about you of bit certain And go less now rates much thinking maybe Is are contribution of on averages, about clients? is and given the

Jonathan Levin

Yes.

So, just to the Michael account we when billion be but of an this, important the The think clarified of our and -- -- about point. re-up mentioned clear prepared billion on separate I $X it's in pipeline $X the remarks just is re-up.

it fundraising our It doesn't for up include ARS. So acquisition. client It fundraising pick new funds. activity include activity doesn't doesn't for specialized

so, separate from just are means to section, is, directly in year that much actually that are working very, ties pretty or the when good investors have close trying nature at And fundraising re-ups them week, internally, comments talking which on it think to of various these was them the talking to was you're how investment re-up.You it's visibility about but every they to in very the those the to also is And we day, calendar relationships And terms the understand are predominantly collaborative, about every to nature of time as processes a, their I the And you committees talking that's date partners are to them those drilling review, important powder to balance it period remaining is. dry perspective, the go end account sign of their program. down you're weeks, document that in you are that's every my we legal of of That own these what in understand be how institutional through important relationships.And happening. or month. of in what about the a to into when you're means of within terms whether whatever scheduled those nature understand that look that. because

just a right? calendar, kind exceptional calendar transparency have And that So it's it's of a you into.

at are than XX% times program. about remain often the The occurring previous that rates re-up strong front. plus. close on fact being XX% re-ups that average to level a the very higher Our We at of the talked

Sure. your highly sometimes to that, it And later? part strong happens highly, on And happen clients. of But feel do confident that occur. calendar where that you going weeks proposition something the delivering have the you very so, might obviously, feel but that's X you time it's X re-up highly, a of in.Now, beyond a to couple pipeline confident you reasons, day, value of thought is

One of the business the reasons the and we the the love predictability that that and of is growth transparency offers. stability for because opportunities it and

Operator

now question William from Mulier Blair. with We'll next our take Tyler

Tyler Mulier

Jeff. Tyler know some flow [indiscernible] the pretty ARS I you the on there? for it strong covered and Adam a for net key particularly key drivers on It's just quarter outlook but of well, was color

Michael Sacks

Yes.

volatility. the There absolute in constructive. are rates past, over dispersion than general, more been has in ample that, think for quarters better environment return the I strategies. There we've quarters, higher last the has environment been X seen or whatever, X has been a

all credit constructive rebate, have investments, yield short equity so, macro credit returns that. dispersion on among set and things in And are better to return of from like of particular, better for factors sort ARS those ability returns, the a

just good approach a a it's hedged for and environment been So for ARS strategies.

Operator

Bill with TD take Katz follow-up now We'll Cowen. a from

William Katz

Just a clean-up couple ones.

Just how maybe given in issuance versus terms much buyback, actual stock-based of actually the elevated stock share the offsetting comp? QX that the reduces count

Michael Sacks

not managing as a ours. which, substantially, from buyback, Most goal if of comp, is know, the was of it -- that you was all, stock-based dilution the

William Katz

And another one just comp. Okay. on then

a pretty your incentive quarter-on-quarter, think quarter, year-on-year, incentive, this math I And little my think to get of this thoughts. I variable I comp cash share right, is component that about the substantially. did the of want your So fees, I ratio up, talked think, you quarter I if on bit was just last updated which XX%,

that incentive As FRE incentive goes little to that that the rises to the over and a share you And to so, opportunity start the by comp give more revenues of the -- does to and monetize an doing there control is that? of up, underneath pool more ratio? the extent your you that continue lift

Michael Sacks

very power that I'm question. And believe as earnings that lot glad have great a actually asked know, that a you of line. we That's in we Yes. that. you

comments, will didn't bright we've transactions I the first need to to forward think like the firm's revenue was, up. XXXX carry need continue them for presentation. our see quarter it my see see gross much see the the revenue can carry wasn't come, in a we're -- and I prior that said got is grows, we XXXX good ownership to carry and waiting -- distributions. spot of thing in as in And that it.As we than grow. percentage because it and know announced higher We was we we the need percentage you we grows close, And the only revenue carry see will of the

we revenue, As margin sort we we think margin real that have do we get Obviously, line. when normal very there. And in lower that levels as have have we of low of opportunity levels grows, to some be to more there have get will the that. of the not we in that smart and future margin and we of growth the is would if, revenue about believe ability hope when, higher of to we have a question a

clear. effect that question, think correct are the So hope and I answer and in suspicions appreciate was your I

Operator

presenters this appears it time. for at to questions comments. or there And like the further our are additional to conference turn back I'd any no closing

Stacie Selinger

quarter, joining day. Have great beforehand. you for we look and to next forward you interest, Thank us speaking not appreciate with the if a We today.

Operator

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

disconnect. all You may

Grosvenor Capital Management (GCMG) 7 May 242024 Q1 Earnings call transcript