Q2 2021 GCM Grosvenor Inc Earnings Call
[music].
Good day and welcome to the GCM Grosvenor second quarter 'twenty 'twenty..1 result webcast. Today's conference is being recorded as a reminder, if you'd like to ask a question today. Please dial in and using the phone numbers you have been provided.
At this time I would like to turn the conference over to Stacey Sellinger head of Investor Relations. Please go ahead ma'am.
Thank you good morning, and welcome to GCM Grosvenor second quarter 2021 earnings call today, I'm joined by GCM, Grosvenor, Chairman and Chief Executive Officer, Michael Saks, President, John Levin, and Chief Financial Officer.
Pam badly.
Before we discuss this quarters 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 include statements regarding our current expectations for the business and our financial performance fees.
These statements are neither promises or guarantees and involve known and unknown risks uncertainties and other important factors that may cause our actual results performance or achievements to be materially different from any future results.
And as discussed and the risk factors section of our 10-K for the fiscal year ended December 31, 2020, and our other filings with the Securities and Exchange Commission could cause actual results to differ materially from those indicated by the forward looking statements on this call.
Well also refer to non-GAAP measures that we view as important and assessing the performance of our big bets.
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 the public shareholders section of our website.
Our goal is to continually improve how we communicate with our shareholders.
And that spirit, we look forward to your feedback and we'll endeavor to continually improve in this regard. Thank you again for joining us and with that I'll turn the call over to Michael.
Thank you Stacy and thank you to all of you for participating.
The second quarter March 50 years of operations for GCM Grosvenor, a rarity and the alternative investment arena and we are proud to celebrate that milestone what is particularly nice is that we are as encouraged today by our ability to drive value for clients and shareholders. As we have been at any time over the last 30 years.
And I have been at the firm.
The second quarter of 2021 was another strong quarter for GCM broker with solid investment results and growth and assets revenue profitability and earnings power.
Quarter's results left us solidly on track with regard to our 12% to 15% fee related revenue and 15% to 20% fee related earnings growth targets.
We are often cited strong free cash flow generation and the ability to return capital to shareholders as attractive features of our business in light of our results and future prospects. Our board has approved a dividend increase of 12, 5% to 9 cents per share from <unk> <unk> per share.
That <unk> <unk> per share dividend is payable on September 15th to shareholders of record on September 1.
Our board also authorized a $25 million stock repurchase plan of which $6 million will be used to reduce the number of class a shares being delivered in August that are associated with prior equity awards.
Turning to slide 4 of our earnings presentation.
From the end of the second quarter of 2020, we have seen growth and assets under management, which increased 18% to 67 billion and.
And fee paying assets under management, which increased 11% to $55 billion and and contracted not yet fee paying assets under management, which increased 26% to $7 billion or asset growth has been the product of solid fund raising investment performance and.
The conversion of contracted not yet fee paying assets under management.
Our pipeline, including contracts and process, our commingled funds and market or private market separate account re ups and new separate account opportunities remains robust and we are optimistic with regard to fundraising for the remainder of the year.
As John will discuss further we've invested and our business development efforts, including the establishment of GCM broker insurance solutions, which we believe holds real promise for the firm.
During the quarter, 72% of our $1.5 billion of funds raised came from existing clients and 28% came from new clients a continuation of the expected return to a more normal share following the initial COVID-19 shock.
Year to date, we've raised capital and all of our verticals with infrastructure seeing the largest increase among our private market strategies are.
Our fee related earnings increased 9% over the second quarter of 2020, and 23% for the first half of 2021 as compared to the first half of 2020.
Our second quarter FRE margin was 32% and our year to date FRE margin of 31% compares favorably to the 28% margin we experienced in the first half of 2020, we.
We continue to believe we have operating leverage with regard to FRE margin.
For the quarter, our adjusted EBITDA increased 17% over the second quarter of 2020, and 34% for the first half of 2021 as compared to the first half of 2020 are.
Our adjusted net income increased 30% over the second quarter of 2020, and 56% for the first half of 2021 as compared to the first half of 2020.
Turning to slide 5 of the presentation the value of the firm's share of investments and unrealized carry at net asset value more than doubled to $349 million from $158 million a year ago.
And those numbers are inclusive of the Mosaiq assets, which were $290 million as of June 32021.
It is worth noting that the value of the Mosaiq acquisition and improved considerably from the March 31 values that were the best information available when we communicated via press release on June 23rd.
As noted in that release, we were able to secure a discount to the original option price, which incentivize us to exercise the option early.
The significant increase and the firm's share of carry at net asset value over the last year increases our earnings power considerably.
Using an assumption of an average of 6.5 years to realize carry at net asset value. The forward looking earnings power of the firm's share of carry translates into $38 million of estimated average annual revenue, which is considerably higher than trailing 12 month carry realizations and it's more.
And double the earnings power of the firm share of carry and net asset value a year ago.
Combined with $42 million of run rate and annual performance fees. This results and $80 million of run rate firmed share of incentive fees, but for cash based incentive fee bonus.
And of the and the second quarter, we had collected approximately $9 million of performance fees. So far this year at June 30, we enjoyed $32 million of unrealized performance fees eligible to be realized in 2021, which are not reflected in our revenue with positive absolute return strategies.
Performance in the back half of the year that number grows.
For the second quarter of 2021, our absolute return strategies management fees were up 11% compared to the second quarter of 2020.
For the year, our absolute return strategies fundraising has been more than $1.1 billion.
Approximately $540 million of which was and the second quarter.
We had net absolute return strategies outflows for the second quarter of approximately $280 million, resulting and a modest net outflows of approximately $76 million for.
For the year and.
Importantly, the fee rates on absolute return strategies funds raised have exceeded the fee rates on outflows, resulting in an increase and our absolute return strategies management fees for the second quarter, Despite the modest outflows and for the year.
That is all before giving effect to the increase and absolute return strategies fee paying assets under management associated with our investment results.
While we continue to maintain our base case expectation of flat flows for our absolute return strategies vertical and we are unlikely to change that assumption without clear evidence of a significant change and the macro environment. We continue to believe and the strong value proposition and the vertical provides and the value.
And that our breadth of strategies provides to both clients and shareholders. There are few alternatives and solutions providers with the ability to serve clients at scale in both private markets and the absolute return strategies as we have said before when we look at the way the other solutions providers.
Similar growth rates and private market strategies are valued and we look at our own valuation and breadth of strategies, we think the value of our platform is underappreciated.
During the quarter, we were added to the Russell 2000, and the S&P total market indices.
Also during the quarter.
Chris Index, which had previously utilized and inaccurate free flow share count corrected the share count, resulting in a share sale of approximately 10 million shares from 1 passive index shareholder upon rebalancing and June.
In closing and leave the quarter with great confidence and our ability to deliver value for clients and shareholders over the remainder of 2021 in 2022 and beyond and with that I'll turn the call over to GCM Grosvenor President John Levin John.
Thank you Michael I'll begin my remarks on slide 6 Michael hit on the continued growth and the earnings power and scalability of the business and we're excited to continue to invest behind this momentum and.
Fortunately, while always investing for the future we remain laser focused on delivering exceptional performance and client service to our existing clients.
But we also believe there is a large world of potential clients that would benefit from our solutions.
And in that vein last quarter, we mentioned our recently established office in Toronto and in recent weeks you likely saw additional hires and initiatives, we've announced and our business development area.
1 area in particular that I want to address is the creation of GCM Grosvenor insurance solutions.
We believe our investment capabilities and combination with our flexibility and creativity and structuring and executing those strategies makes us an ideal partner for insurance companies.
Historical under allocation to alternatives combined with the current interest rate environment.
We will drive growing interest and alternatives from insurance company balance sheets.
The global insurance market is a multi trillion dollar opportunity and.
Insurance capital represents less than 5% of our AUM today and.
And we believe this segment could become a low to mid double digits percentage of our AUM over time.
Which makes it a multibillion dollar opportunity for us.
And you should expect to continue to see us invest and our business development function.
This past quarter, we raised $1.5 billion, bringing year to date fundraising to $4 billion.
Our fund raising continues to be notable and its high level of diversification across asset class investment type and client type.
Based on our current fund raising pipeline, we're very optimistic for the back half of the year.
Which consistent with our plan is likely to see asset raising that exceeded the first half of the year.
We continue to benefit from a strong fundraising backdrop across private markets in particular, which accounted for 2 thirds of our fundraising and the second quarter.
As we expected we saw specialized funds contributed more significantly to our fundraising this quarter with total fund raising split approximately evenly between specialized funds and customized separate accounts.
Our existing clients continue to be a significant source of fund raising and this quarter, 72% of capital raised was again from existing clients.
Notably since a year ago, we have doubled the number of wealth channels that have at least 1 GCM product approved on their platform.
More than 95% of our top 25 clients have added capital and the past 3 years, a significant endorsement of our value proposition and the strength of our relationships.
We've intentionally structured our business model to evolve and grow with our clients oftentimes relationships and move into new strategies. We currently work with more than 45% of our top clients across multiple investment verticals.
We also see strong interest and ESG and impact investment strategies, which we view as both a differentiator and competitive advantage for the FERC.
With regards to investment activity the second quarter remained quite active.
And the quarter, we invested approximately $3.1 billion of capital across more than 100 investments.
And year to date capital deployments and nearly $6.5 billion.
We also reported solid return generation across all verticals and absolute return strategies that trailing 12 months net performance was 17% as of June 30th.
Within private market strategies, we saw a 27% increase and unrealized carry and the quarter, which speaks to the significant appreciation and our investments during that period.
I will now touch on the significant growth and earnings power from incentive fees, which is best captured on slide 7 and provides a little bit more detail to what Michael already discussed.
As a reminder, we have incentive fees of 2 forums and annual performance fees, which are typically associated with our absolute return strategies vertical and <unk>.
Carried interest typically associated with our private markets activities.
Earnings power from the total incentive fee opportunity represents significant upside and is growing at a nice clip.
The firm's unrealized carried interest and investments and net asset value as of the end of the quarter increased in value by more than 120% and the last year as investment performance has continued to be strong and now stands at $349 million and the total value.
And within that figure with firms unrealized carried interest and net asset value is $247 million as of quarter, and which has grown by more than 170% and the past year.
To help you translate this into annual earnings power figures. If you assume that it takes on average 6.5 years to realize carry $247 million would translate into annual carry realizations of $38 million.
This annual earnings power has more than doubled over the last year and line with the increased value of our unrealized carry.
This figure only represents carry associated with programs that are already appreciate it and value typically older programs and does not yet include the carry associated with billions of dollars of capital raised and the more recent time periods.
As a reminder, our carried interest pool is unique and it's very high level of diversification.
Alleviates potential volatility and carry earnings.
Our unrealized carry spread among 129 programs each with typically dozens of contributing investments.
Beyond carried interest we have $42 million of run rate annual performance fees, a number that has grown by 45% over the past year as we continue to see a mix shift and fee structures within the absolute return strategies vertical.
Taken together, while we continue to be a management fee centric business. We believe this $80 million combined figure, which is before any discretionary incentive fee compensation and.
And important contributor to value that we can deliver to shareholders overtime.
Now I will turn the call over to Pam to address our financial performance in more detail.
Thanks, John I'll begin on slide 9 and.
As our assets have continued to growth and we continue to see and mix shift towards higher fee activities, such as co investments direct investments and secondary we've seen and accelerating positive trend and our earnings power. The parent's adjusted revenue increased 33% compared to the second quarter of 2020 and 29%.
On a year to date basis.
Our fee related revenue this quarter increased by 13% over the second quarter of 2020 and on a year to date basis RFP related revenue was up 10%.
Both absolute return strategies and private market non management fee growth from the first and second quarters and on a year over year basis.
Consistent with our expectations private market specialized more significantly contributed to management fee growth this quarter, increasing 11% over the first quarter and 24% on a year to date basis.
This was driven by catch up management fees from our private markets specialized sites, which were $2.3 million and the second quarter.
We anticipate similar levels of catch up management fees, and the third and fourth quarters.
Our fee rates and each of our verticals were stable and solid fundraising for specialized science and per secondary co invest and direct investment activity provides support for our current fee levels and rate expansion opportunities going forward.
And ministration fees declined this quarter to just under $10 million upon the expiration of a long term contract we had to provide administrative services.
And speaking we provide these services to primarily private market clients.
Quarter trillion dollars and assets. This is and the ancillary services, we offer to many of our clients, which has significant benefits and the pharma client retention and data you.
And you can expect our administration fees to level off to less than $1 million per quarter, starting in the third quarter.
Moving to incentive fees, we realized just under $3 million of annual performance fees. This quarter as we noted last quarter, we typically realize the majority of our annual performance fees and the fourth quarter.
So the fees received and the second quarter were not surprising and in line with our expectations.
In addition, we realized more than doubled the level of carried interest this quarter compared to Q1.
And overall investment realizations continue to be strong.
Turning to slide 10.
Please proceed the investments we've made in recent years continue to come to fruition and drive growth and our assets under management and financial performance as.
As Michael noted on a year to date basis, our fee related earnings adjusted EBITDA and adjusted net income all increased illustrating the continued positive momentum of our business.
Our year to date fee related earnings increased by 23% over the same period, a year ago, reflecting the growth and our management fees combined with the business scaling and margin expansion that we've discussed on prior calls.
Our fee related earnings margin grew quarter over quarter and with more than 31 per cent for the first half of 2021 compared to 28% for the first half of 2020, despite the higher costs necessary to operate as a public company.
We expect stable to modest increases in our fee related earnings margin through the rest of the year.
Head count was relatively stable and the second quarter, we expect head count to increase through the balance of the year as we continue to make strategic investments and certain business development professionals as well as public company related personnel.
Our fee related earnings compensation and benefits decreased quarter over quarter to $40 million as we moved past some of the seasonally higher expenses and the first quarter.
That said you can expect stable to modest growth and FRE comp and the third and fourth quarters as we see the full impact of some of our head count additions.
Turning to incentive fee related compensation.
<unk> asset acquisition did not close until early July our incentive fee compensation and the second quarter, primarily relates to our realized performance fees.
Going forward you can expect cash based incentive compensation to be based off the net incentive fees attributable to this firm from both realized carried interest as well as performance fees.
General and administrative expenses increased on a quarter over quarter and year to date basis due to public company operating costs and secondarily as travel activity has started to reserve.
We anticipate stable to modest increases and G&A over the balance of the year dependent on potentially higher travel activity related to our business development effort.
Overall, our expenses are in line with our fee related earnings expectations of 15% to 20% growth year over year. We also remain on track for a fee related revenue growth of 12% to 15% that share.
Turning to slide 12, the business continues to generate strong cash flow and our cash balance at quarter end with $246 million net of cash designated to fund future investments.
This includes the cash generated from our $110 million incremental term loan, which we completed in June to finance the mosaic asset repurchase.
As a result of increasing the size of our camera on our quarterly interest expense is expected to be closer to $5 million per quarter, starting in the third quarter of this year.
We closed on the transaction to repurchase mosaic on July <unk>, which was funded by a $165 million of our cash as John walked through the transaction further enhances the value of our on and off balance sheet assets, mainly investments and unrealized carried interest in addition to the economic value.
We are pleased to eliminate the financial statement and complexity associated with and mosaic related redeemable non controlling interest and hope that it is easier to see the value embedded in our balance sheet and future earnings.
Finally, given our strong profitability and our confidence and our future growth as Michael mentioned, we are increasing our dividend to <unk> by the third quarter and the board authorized a share repurchase plan of up to $25 million.
This $25 million plan will primarily be used to opportunistically repurchase outstanding class a shares and warrants.
And estimated $6 million of this plan.
Will be used to reduce.
Shares to be issued to employees to satisfy associated tax obligations in connection with the delivery of vested equity based awards and August.
In summary, we continue to be excited by the positive trend of the business and the significant earnings power we are creating thank.
And thank you again for joining us and we're now happy to take any questions.
Thank you if you would like to ask a question. Please signal by pressing star 1 on your telephone keypad, if youre using a speakerphone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again that is star 1 to ask a question first.
First question will come from Ken Worthington with JP Morgan.
Hi, good morning.
Thanks for your comments. This morning can you love us level set us in terms of fund raising for the specialized funds that you have and market.
I think you mentioned in your prepared remarks that the outlook for the firm was better for fund raising.
And the second half and it has been so far in the first half and I don't remember if you mentioned and this or not but I thought it might have been driven by the specialized funds.
So again to level set us how much has been.
Close so far and I think the 4 funds you were expected to have and market. This year.
And for a secondary is advanced and multi assets that would be number 1 number 2 how much has been raised and these 4 funds so far this year.
And then help us with expectations for the second half of the year and then lastly, you mentioned that catch up fees I think were $2.3 million.
And <unk>, but expected to be about the same in <unk> and <unk> and I guess my question is if the fund raising is expected to be better and the second half of the year and given that theres more time going by and your further away from the inception date of those funds and why wouldnt catch up fees and in fact be bigger and the.
Second half of the year than they were and the first.
Thanks, Ken it's Michael and thank you for the questions.
First.
And I would say that.
And that we are overall very comfortable very confident as you heard me say and as John said in our fund raising and our.
And revision for the second half of the year, we have not.
Released.
Number on specific fund raised a specific commingled fund efforts and we've stated that we won't do that until final close and the only fund that's in market now that has final close.
For the end of the year or at the end of the year is the advanced funds. So we look forward to releasing those numbers.
After the end of the year.
What I can tell you is that we.
We are confident in the performance of those.
<unk> co mingled funds.
We are confident in our separate account re ups and our new separate account activity.
And I think John said.
Expectation is for fundraising larger and the back half of the year then.
Front half of the year and and.
And what I would mention on the catch up management fees is that of the 4 funds in market the.
Only fund that has.
Funds that have appreciable catch up management fees, and Secondaries fund and advance our multi asset class, having just getting started and with a lot of confidence on our part and.
The infrastructure funds structured in a way that the art.
Catch up management fees so.
Obviously, we we have.
And have tried pretty consistently to.
The conservative and what we put out there for you we have been very clear and very strong about our ability to hit our 12% to 15% fee related revenue growth and our 15% to 20 fee related earnings growth and those numbers imply continued growth and the back half of the.
Year, we've talked about the strength of the pipeline pretty directly and John I think you said pretty clearly what our expectations are for fundraising back half and we're feeling very good about that environment in general.
Okay. So if we don't get specific numbers can you give us maybe a sense how far of the way through.
Infrastructure.
And secondaries are you are we and the first half of the game are we and the second half.
Assume advanced is is very much towards the end, but can you give us.
What inning were or if you can't do it individually and collectively.
At advance and.
And the answers.
We will have its final closing towards the end of this year.
And so that's kind of late innings and bone.
<unk> secondaries and infrastructure will raise into next year, which is I guess.
Middle innings.
Maybe mid late I don't know if thats 6 years.
<unk> yeah.
And fifth and sixth and seventh inning, I don't know and and.
Mac is early very early innings and.
And we has a lot of promise so we're we're very.
Ari.
We're comfortable with our fund raising is going and.
And we are confident in the numbers that we've put out.
And feeling that we add.
Good couple of good strong quarters here that we've reported are optimistic about the back half of the year.
Okay great.
And then in terms of the absolute return business.
We were in inflows and <unk> outflows and 2 Q I would say performance and <unk>.
Was not maybe as good and QQ seem fine.
Fine.
But below what we're seeing and blackstone's business and below some of the indices that I think we track.
Sure.
This performance need to be better than what you're delivering for the absolute return business to get to more consistent inflows I think Michael you mentioned and your comments that you think about flows and the context of the macro environment do you see as important.
But how important is delivering rich.
Returns are.
To get back to more consistent inflows.
Well I would say a few things. So 1 is obviously performance generally is important I think it's I think you got to be a little careful about looking quarter to quarter and trying to.
Adjusted your expectations for the business.
Last year, we outperformed most of our peers pretty significantly and our trailing 12 month performance numbers are very strong and frankly, our net flows environment. This year is is seems pretty good relative to.
The space. So I think you of course performance as.
It comes first but looking at it over a reasonable time frame and we've been at this for as you know a.
A long time decades and.
<unk> is really important.
The second thing that I.
Really hope you take away and that everyone takes away from this call is the significant strength strength or strengthening of the basic economics of the business, where while there were net outflows the actual revenue impact of Lowe's.
Was flat to marginally positive for the quarter positive for the year or for getting any benefit from the positive compounding in the market and Thats management fee only when we've also had a significant amount of incremental capital that now has a performance fee associated with it and <unk>.
<unk> seen a very significant increase and the run rate performance fees over the last year, which we mentioned so in general while we don't want to change or predict a macro change and the flow environment. We've.
<unk> always maintained.
It's a very valuable vertical is 1 that distinguishes us and a good way with clients. It's 1 that gives us more tools to provide solutions answers support for clients, it's generated tremendous cash.
Cash.
Flow over decades, and is going to continue and we just think that when you looked at the relative valuation differences of our firm where our private markets business is growing in line with others.
And you.
And that vertical is not being.
And our view.
Afforded.
And the ease of being under Underappreciated is I think what I said.
Okay, great. Thank you very much John and I would just add 1 comment Michael said this but just to reiterate I think that from a performance standpoint across the board.
Or are you kind of think about we have generally speaking and clients that would work with us and the IRS vertical either in a multi strategy way and.
And maybe more credit oriented way.
And a opportunistic way those are kind of 3 big buckets across the board the feedback from the marketplace from from clients is that when you look at our performance over longer periods of time as Michael pointed out I think is a more important metric whether you're talking about the last 12 months over the last 18 months kind of almost universally feedback on our performance is that it is.
<unk> strong meeting their goals and generally strong from a competitive standpoint as well.
Great. Thank you.
Our next question comes from Jeff Schmitt with William Blair.
Hi, good morning.
Could you discuss the creation of the insurance solutions Division and kind of your strategy there.
<unk> seen some insurers pull back on alternative investments I think and recent youre just trying to reduce volatility but are you seeing that demand really shift there I guess with this low interest rate environment.
Yeah, John why don't you take that 1 and.
You touched on it obviously in your remarks, but you can do it.
Sure I think in general our view is that the demand for alternatives.
As a large and growing certainly you will find specific instances where people have to be wary of the overall composition of their balance sheet and and regulatory capital treatment, but to the point you made.
Overall as a matter of it.
And a place where there's historical under allocation to alternatives strategies and and specific to the point you made.
The interest rate environment, only drives the need to find return.
From other areas. Besides fixed income, which makeup obviously a significant portion of insurance company balance sheets I think.
Specific to us.
The idea that we are and open architecture firm with a lot of different ways to implement alternative investing primary funds co investments secondary investments direct investments.
<unk> all the asset classes from the liquid to the illiquid and.
And the ability to work with clients and a customized manner, which represents about 75% of our assets under management makes us a pretty ideal partner and particularly on that last piece, we have the ability to structure and alternative solutions that meet insurance company balance sheet needs with respect to volatility with respect to <unk>.
Liquidity with respect to.
Return generation, and we think Theres, a very large opportunity there and from a competitive standpoint.
Our focus is on providing those solutions to the insurance companies and asset management business and.
As opposed to being in the insurance business ourselves, which is obviously the trends you've seen.
From others and the marketplace and so we're pretty excited about what the future holds for us.
Alright, okay.
And then looking at the carried interest and you provided some great dita.
Detailed there on that kind of earnings power and how that's increasing.
And then your retention of fat has been.
Going up in terms of how much is going towards.
2 employees or what have you your retention that is going up and.
I think maybe slow 60% go out the door to employees now and you had mentioned.
And were funds.
And <unk> goes up so do you see that going to.
Kind of 50% over time to bring you more and in line with peers and how should we think about that timeline like how long would that take.
Well. So if you if you the time timelines, it's a little bit hard. So the cash that's received from carry now is related to carry that dates back anywhere from a couple of years too.
A very long to a decade and.
And and if you look at that it's about 65, 35, now and maybe it's a little bit a little bit more in favor than 35 and favor the firm, but that relates to long ago allocations for the last several years, we've been as we've said before we've been allocating.
To that team.
On a basis, where it vests over time about path.
And so.
As we move forward in time and the.
Cary plans that are generating the carry revenue.
You'll start to.
The percentage that comes from the.
Terry we've allocated and the last 5.6 years starts to increase that number will shift and.
And and.
And it should grow and and maybe the most important point. So I think that we have is.
We have acceleration looking forward a few years in that and then John's point that he touched on and.
His remarks.
And that there is a lot of cash.
Sorry that is not yet.
And.
And that has been related assets.
Assets raised and funds invested over the last several years that we certainly hope will come.
Online and.
Going forward as well so we think we've got these sort of 2 strong tailwind that will accelerate that Terry.
From share of carry line as we move forward.
Got it okay. That's helpful. Thank you.
Our next question comes from Peter <unk> with Morgan Stanley.
Hey, Thanks for taking my question.
And strategic hires and the client group to extend and high growth geographies and channels, just kind of hoping to get a little bit more color on how youre approaching distribution today.
Typically and high net worth channels, we're seeing increasing demand for alternatives.
Sure. So thanks, Peter for joining and for asking the question John.
On this and his comments we had.
And we've we've been.
Clear that we think are best opportunity in high net worth in the.
Intermediate term is to have a greater representation on the very successful powerful wealth channels and over the last year, we doubled the number of channels that we have product on and we look forward to further increasing the number of channels and also.
Increasing the breadth of product.
With regard to the different channels and so we think that we have.
And some real opportunity there and.
People, who have been following us from the beginning no that we think that's a place where we can.
And we could have we could.
And do a better job and we're I think we're starting to show.
And some fruits of the effort there.
In light of the identified opportunity.
And once again as a reminder, that is star 1 to ask a question.
We'll take a follow up question from Ken Worthington with JP Morgan.
Hi, Thanks, Ken in terms of capital management.
How aggressive do you plan to be and deploying the <unk>.
$25 million of the $25 million less the 6 and then how do you approach warrants versus the common and I think you said you plan on being opportunistic.
But given where the stock price is.
And again, how how how attractive do you think the shares are here.
We think that there are.
Very attractive and I think you know.
Our views and and.
And we think they are.
Attractive here and so we've authorized that at the board we have got a identify used for a significant chunk of it we are open to looking at warrants.
Compared to stock.
And I think we will.
<unk>.
We will be opportunistic we will we will.
Be opportunistic we will take our time relative to our kind of normal course volume, it's not and it.
Insignificant.
Out of.
Capital S.
And we also think that.
It.
We're a little we don't love shrinking the float on the other and we've always talked about the quality of the business is our ability to return capital to shareholders and there are 2 ways to do it the dividend and buybacks and we wanted to authorize this plan and have that.
Ready if the stock continues to exhibit weakness.
We think it's good to have.
Okay, and then warrants versus carbon.
I think we'll look at accretion dilution.
There.
It's a little bit hard for us too.
Ascertain the degree to which the warrant overhang is having an impact.
On on shareholders or institutional shareholders.
But.
And that we would look at warrants as well.
Okay.
And then on contracted but not yet fee paying AUM declined.
<unk> declined slightly from.
Pretty high levels, and and <unk> and solar high levels now is the composition of net sales sort of changing again are we seeing more net sales being funded immediately I think and part the pipeline was building so much because the pipeline or the sorry, the net sales were coming in a bit.
And then maybe they had and the past so maybe more pipeline building then.
And <unk> funding. So are you seeing that composition sort of switch back again to what the net sales look like in years past.
No I don't think you can take away any.
And any meaningful.
Change and the business from kind of the 1 the 1 quarter, we expect that number to grow over the back half of the year and to be higher at year end and it is today or it was at 630.
As you know.
Contracting on separate account agreements doesn't always line up perfectly with calendar quarter and if you look last year I think we had a similar fund raising level in Q3 of last year and and then.
And you've seen a big growth and.
<unk> com and.
And in Q2 and again in Q1 and this year. So we don't see any fundamental shift there and.
I always say, we like to grow RF mom and we'd like to grow our C. N way up and we expect to do that over the back half of the year.
Great. Okay. Thank you very much.
Thank you.
And it appears there are no further questions at this time I would like to turn the conference back to Stacy selinger for any additional or closing remarks.
Thanks, Lauren. Thank you all for joining US today, if you have any feedback or follow up questions. Please feel free to reach out otherwise we look forward to speaking with you again next quarter. Thank you again.
And that does conclude today's conference. We thank you for your participation you may now disconnect.
Yeah.
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