Q3 2021 GCM Grosvenor Inc Earnings Call
Please standby.
Good day, everyone and welcome to the GCM Grosvenor November webcast today's call is being recorded as a reminder, if you would like to ask a question today. Please dial in using the phone numbers you have been provided.
At this time I would like to turn the call over to Stacey Selinger. Please go ahead.
Thank you good morning, and welcome to GCM Grosvenor third quarter 2021 earnings call.
I am joined by GCM, Grosvenor, Chairman, and Chief Executive Officer, and Michael Saks, President, John <unk>, 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. This includes statements regarding our current expectations for the business, our financial performance and projections.
These statements are neither promises nor guarantees.
They involve known and unknown risks uncertainties and other important factors that may cause our actual results performance or achievements.
They are really different from any of our expectations of future results.
Please refer to the factors discussed in the risk factors section of our 10-K for the fiscal year.
<unk> ended December 31, 2020, our other filings with the Securities and Exchange Commission and our earnings release available on the public shareholders section of our website. These factors 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 in assessing the performance of our business a reconciliation of non-GAAP metrics to the nearest GAAP metric can be found in our earnings presentation and earnings supplement both of which are available on the public shareholders section of our website.
Our goal is to continually improve how we communicate with and engage with our shareholders and that spirit. We look forward to your feedback. Thank you again for joining us and with that I'll turn the call over to Michael.
Thank you Stacy and thank you all of you listening for your time and interest.
The third quarter of 2021 was a strong one for GCM Grosvenor.
We enjoyed good investment results fund raising and business performance.
As a result, our outlook with regards to the remainder of 2021 and 2022 is constructive and our board has increased our quarterly dividend, 11% from nine cents per share to <unk> 10 per share. The dividend is payable on December 15, 2021 to shareholders.
A record on December one 2021.
Our assets under management fee paying assets under management and contracted not yet fee paying assets under management increased 20%.
13% and 19%, respectively as compared to the third quarter of 2020.
Our fee related revenue and fee related earnings grew by 11% and 21%, respectively as compared to the third quarter of 2020, and 10% and 22% in comparison to the nine month period ended September 32020.
Our fee related earnings margin for the third quarter of 2021 was 36% compared to 33% in the same quarter a year ago.
For the fourth quarter of 2021, we anticipate the growth in our fee related revenue will approximate 5% compared to the third quarter of 2021, with resulting 2021 full year fee related earnings coming in moderately above the high.
And of our 15% to 20% expected range.
With regard to 2022, and our fee related revenue and fee related earnings we expect growth in fee related revenue of 12% to 15% as compared to 2021 and growth in fee related earnings of 20% to 25% as compared to 2021.
To achieve that result, we need to close 2021 in accordance with our current plan.
Experienced flat net flows were absolute return strategies in 2022 with 2022 absolute return strategies performance in line with our normal run rate performance assumptions.
In addition, we are assuming private market fund raising in 2022, which is consistent with the fundraising levels of 2021.
It is worth noting that 2022, new related earnings growth of 20% to 25% would exceed that of our original merger presentation.
Obviously, if we do not achieve our projected investment performance or fund raising goals our numbers will vary.
As we have said before due to the nature of the crystallization and realization of performance fees. It makes the most sense to focus on our fourth quarter and full year results with regard to adjusted EBITDA and adjusted net income.
That said, we are pleased that adjusted EBITDA and adjusted net income increased by 12% and 16% respectively compared to the same quarter last year with increases of 24% and 38% for the nine month year to date period.
Importantly, as of September 32021, we enjoyed $44 million of unrealized annual performance fees eligible to be realized in 2021.
This means that we would have received $44 million of annual performance fees. In addition to the $9 million. We have already collected this year at September 30 than the end of the year.
In the third quarter, we saw continued strong investment performance across private market strategies.
Firm's share of investments in unrealized carry at NAV.
$410 million as of September 32021, an increase of 17% from June 30 of this year and an increase of 125% from September 32020.
Turning to fund raising we saw strong fund raising momentum across the business in the third quarter, we raised $3 billion of new capital, bringing our year to date fundraising to $7 billion.
As a reminder, we said last quarter that we thought fund raising in the second half of the year would exceed the $4 billion raised in the first half of the year.
Clearly the third quarter was a strong step in the right direction.
It is worth noting that as of the end of the third quarter. Our pipeline stood at a similar size to our July one 2021 pipeline, despite having successfully closed on $3 billion.
Our fund raising.
Through yesterday, we have raised approximately $1 billion in the fourth quarter and we continue to see opportunity for the remainder of the year and into the future.
While John will delve a bit deeper on fund raising investing activity and investment performance in a moment I do want to mention two fundraising related items.
The first is that as of today, we have raised approximately $2 $2 billion since launching the for private market specialized funds that are in market.
That is up from approximately $1 7 billion at the end of the third quarter.
Second relates to the $500 million structured alternative investment solution that just closed this week.
This effort was led by GCM broker insurance solutions in close collaboration with our strategy and investment teams.
Ill begin a number of new insurance company relationships and it supports our confidence in GCM broker insurance solutions going forward.
I would like to quickly call your attention to slide eight which is new and provides an overview of our absolute return strategies vertical.
As you can see this vertical has performed well over the last year with solid investment performance stable fee rates and 12% growth year over year in fee paying assets under management and management fees.
We saw $476 million of contributions so absolute return strategies fee paying assets under management in the third quarter against $391 million of redemptions and $110 million of distributions for a very modest net outflow of $25 million importantly.
As we saw in prior periods. This year fee rates were higher on inflows than on outflows, which means run rate revenue increased modestly from flows before the positive impact of compounding.
Slide eight highlights the ability of the absolute return strategies vertical to grow in a flat flow environment and I think is likely a better result than the market expected one year ago.
I want to mention that we recently published our 2021 impact report in conjunction with our 15th annual <unk> Conference. The report is available on our website and reflects the ways in which we embraced our core values for the benefit of all of our constituencies.
<unk> is important to us it broker whether a culture of compliance a culture of excellence are a strong culture of service to our clients and our impact report is a good way to get a sense of that.
In closing we need the quarter pleased that we continue to meet or exceed the metrics, we have communicated to shareholders and remain optimistic with regard to our prospects for the remainder of the year and for 2022 and with that I'll turn the call over to John.
Thank you Michael I'll begin my remarks on slide six.
We've experienced persistent and strong growth in our assets under management fee paying assets under management and contracted but not yet paying AUM as.
As you know these are the metrics that in combination with stable fee rates and expanding margins fuel our earnings power growth.
Our total AUM has grown at a 10% compounded annual growth rate since 2018, and the combination of RF and <unk> pump.
Has compounded at a similar figure.
As you are all well aware, it's been a healthy environment for private market alternatives over the past few years and our business has benefited from that backdrop.
We've had a 16% compound annual growth rate in private markets AUM since 2018 with growth occurring in each of our private market sub strategies.
From a composition standpoint, it's worth noting that private market represents 62% of our firm assets under management as of the end of the quarter.
As compared to 54% at the end of 2018.
Michael already spent talking about absolute return strategies, where the earnings power has likewise increase from growth in both fee paying AUM, which drives the management fees and AUM eligible for annual performance fees.
We continue to believe that having expertise across the full alternatives landscape.
<unk> positions us to serve our clients and win mandates.
Reflective of this value proposition the new capital raised this quarter and this year has been highly diversified across channel geography.
<unk> vertical investment implementation style and fee rate.
Notably more than 50% of our assets raised this quarter came from clients outside of the United States.
And as we've discussed our recent hires in Canada and Europe.
Along with our already strong presence across Asia set us up well for continued future success internationally.
As you will see on slide 12, private markets drove more than three quarters of fundraising this quarter benefiting from the strong tailwind as I mentioned.
Within that infrastructure was the most significant contributor and we believe we have a meaningful addressable market in that strategy.
Finally, we continue to see support from both existing clients, which is always job number one as well as new clients.
As you know the foundation of our business continues to be partnering with our clients through customized separate accounts.
Which represent three quarters of our current AUM and.
In our highly tailored to our clients' unique needs and circumstances.
Through customized partnerships, we'd become deeply embedded in our clients' overall investment activities and are viewed as an extension of staff.
We have a track record of successfully expanding our customized programs and cross selling between our verticals.
As of quarter end more than 48% of our top clients work with us across multiple verticals.
Up from 36% a year ago.
Customized separate accounts are key to our ongoing growth, but as we've discussed in the past. We also see a significant opportunity from scaling our specialized funds.
On a year to date basis, approximately one third of our fundraising has been and specialized funds.
Meaning they're growing at a faster rate than their current share of AUM.
We've talked before about our six identified private market specialized funds and to date, we've raised $2 $2 billion across those vehicles.
Notably it won't be until 2024 that all six of those funds are done with fundraising and we also expect expect to launch additional products on top of those six that we've previously identified.
We're excited to see our recent investments in our business development team have a positive impact on our fundraising momentum.
The $500 million structured alternatives investment solution, which will best across multiple of the firm specialized funds.
It is a good example of human capital investments in our business driving growth and opportunity.
We anticipate building on the recent success of this vehicle and expanding similar offerings to investors in the coming year.
What is clear to us from this effort is that there is ample opportunity to add value to.
The insurance industry.
Another area, where we're seeing accelerating growth and significant growth potential.
As in the non institutional capital space.
Today, we offer our products and solutions on six platforms now.
Non institutional capital comprised approximately 5% of our current.
But as represented approximately 10% of capital raising year to date, meaning again that the growth in this channel is outpacing its current share of capital in our firm.
Importantly, despite this growth we still believe we are long origination of investment opportunities.
Do you mean by that is that we have ample manufacturing capacity to continue to scale the business.
Our vast footprint and sourcing network is a cornerstone of our success year to date, we have reviewed more than 2500 opportunities across the platform.
With regards to investment activity I mentioned, the breath of our sourcing network, but the third quarter was a very active one in terms of deployment in.
In the quarter, we invested nearly $3 billion of capital across 117, the investments, bringing year to date capital deployment to nearly $9 billion.
We've also seen strong performance across the verticals.
Trailing 12 months net performance for absolute return strategies was 14% as of September 30.
Annualized net performance over the last three years was approximately 7%.
Which we are very pleased with on both an absolute and relative basis.
As a reminder, in addition to creating a favorable backdrop for ASUR raising strong performance compounds are absolute return strategies fee base and directly increases our management fee earnings power.
Within private market strategies, we saw a 17% increase in gross unrealized carry compared to the second quarter.
Which speaks to the significant appreciation of our clients experienced on their investments during that period.
Now I will turn the call over to Pam to talk about our financial performance in more detail.
Thank you John turning to slide 10, we continue to execute on our plan and deliver a strong value proposition generating asset growth at attractive fee levels and enjoying continued fee related revenue growth.
In addition, our earnings expansion outpaced our revenue growth as we unlock our embedded operating leverage and scale.
Michael and John how big our asset growth in detail. So I wont address that other than to say, we're very pleased with both the pace and trajectory of capital formation.
With regards to our fees our fee rate has continued to be very stable across the business a sign of our value proposition resonating in the market weakened.
We continue to experience a mix shift towards higher fee activities, such as co investments direct investments and secondary.
Consequently, we are seeing an accelerating positive trend in our management fee earnings power.
Our fee related revenue this quarter increased by 11% over the third quarter of 2020.
Part of this was driven by catch up management fees from our private market specialized funds, which were $1 $7 million in the third quarter.
Just on our current pipeline, we expect catch up management fees to be higher in the fourth quarter.
As Michael mentioned, we expect growth in fee related revenue in the fourth quarter inclusive of catch up management fees to be about 5%.
Moving to incentive fees, we realized $29 million in carried interest this quarter and as we noted last quarter. While carried interest is realized throughout the year. We typically are in the majority of our annual performance fees in the fourth quarter.
The earnings power of our incentive fees continues to increase providing us with significant upside and flexibility, which I will address in a moment.
Taking fee related revenue and incentive fees together the firm's adjusted revenue increased 16% compared to the third quarter of 2020, and 24% on a year to date basis.
Turning to slide 11, we are very pleased to see the investments. We've made in recent years continue to drive growth in our assets under management and financial performance.
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.
Also saw continued improvement in our fee related earnings margin, which was 36% this quarter and we expect modest further expansion in this margin through the rest of the year.
Our positive margin growth is the combined product of the <unk> embedded in our business and our continued discipline in managing expenses.
In the third quarter fee related earnings compensation decreased slightly relative to last quarter at the same time, our discretionary cash based incentive fee related compensation, which relates to both realized carried interest and performance fees increased this quarter as we continue to further align.
Our compensation structure of our senior professionals with our investment performance.
In the third quarter the firm retained approximately 63% of the incentive fees received after contractual carry obligations with the remaining 37% anticipated to be paid out from our discretionary incentive fee related bonus pool.
Typically this quarter the firm shared incentive fees before incentive fee bonus pool was $9 million.
And the incentive fee bonus pool estimate with $3 $4 million.
As I mentioned the majority of our annual performance fees are typically realized in the fourth quarter. So you can anticipate from seasonality in our incentive fees and incentive fee related compensation and next quarter.
As of September 30th share of unrealized carried interest grew to $297 million, an increase of 179% from a year ago.
Importantly, as you can see on slide seven the firm's share of carry varies by vintage ranging from 20% to 40% for older vintages and approximately 50% in recent years.
Consequently, the firm's share of incentive fees before any discretionary incentive fee bonuses will continue to grow as more recent titles, where we retained 50% of any carry realization start to mature.
Over the longer term this bodes well for the firm's margin and earnings.
For 2022 based on potential realization of both Carrie and run rate performance fees, we anticipate retaining 50% to 60% of our share of these incentive fees net of any discretionary incentive fee related bonuses.
Turning to our expenses general and administrative costs decreased slightly from last quarter to $16 5 million in the third quarter coming in lower than we anticipated as the spread of the COVID-19 Delta variant delayed a broad return to travel.
Already we've seen travel start to resume in the fourth quarter. So we anticipate modest increases in G&A relative to the levels, we experienced in the second quarter.
Turning to slide 13, the business continues to generate strong cash flow and our cash balance at quarter end was $120 million.
Our $25 million stock and warrant repurchase program remains in place and we have spent $7 5 million of this amount through the end of October.
We are often cited strong free cash flow generation and the ability to return capital to shareholders as attractive features of our business.
Last quarter, we increased our dividend to <unk> <unk> per share and this quarter. We are again, increasing our dividend to <unk> 10 per share, which will be payable on December 15th to shareholders of record on December crashed.
We continue to be excited by the positive trend of the business and the significant earnings power we are creating.
Thank you again for joining us and we're now happy to take any questions.
Yeah.
Thank you if you would like to ask a question simply press the star key followed by the one on your telephone keypad.
So if you're using a speaker phone. Please make sure. Your mute function is turned off to a layer signal to retire equipment. Once again press star one at this time, we will pause for a moment.
And we'll first hear from Chris Kotowski of Oppenheimer.
Yeah. Good morning, Thanks for taking my question I Wonder if you could start on the.
Flesh out a bit more of the $500 million alternative strategies.
The fund that or a vehicle that you were able to raise is it can you just kind of describe as it kind of normal fee structure and and.
What would should we expect.
The life of that to be when does it get turned on and also I guess just in general is it replacing other vehicles that.
That that used to.
That insurance companies use to invest in with GCM or is this completely new and incremental.
Thanks, Chris It's Michael.
I'll try to take that so first it's not replacing anything it's new it's an effort that was led by a GCM Grosvenor insurance solutions in our strategy and investment teams.
To me it represents a quick start out of the gate.
In terms of the future of GCM Grosvenor insurance solutions in the it's reassuring to me in terms of the prospects for that effort that we announced in and just really began and it's probably a.
Faster.
Art than I would've thought.
Is a full fee capital largely private markets. It is long term.
And.
It is long term and it's probably.
He has to think about it as a.
Hi.
Any type of a structured.
Yeah approach.
Collateralized fund obligation or something just to kind of what does it look like in terms of duration.
And.
But that is a full capital its new and frankly from my perspective the the.
Most constructive.
Constructive thing about diesel start to turn on.
As early as early as this quarter.
And the meaning the fourth quarter, but what is what I really like about it is it's got us.
Working with.
A good significant number of new insurance company partners clients.
Already so.
And then that doesn't mentioned those who kind of looked at it but couldnt get themselves together is enough time to beat this one but are interested in working together in the future. So we feel really good about it and our.
And view it as just a positive development.
Okay, Great and then maybe you said it and I just missed it but where their catch up fees. This quarter and I think Pam said, we expected. Some you expected some in the fourth quarter and I was wondering.
Is that what is the primary driver of the expected roughly 5%.
Fee revenue growth in the fourth quarter is primarily the catch up fees are.
Kind of underlying fees.
Pam can you can take that yeah.
But I would say that.
Fourth quarter growth is obvious its a combination of a fund.
Fund, raising and and and.
<unk> is a specialized fund closes in Q4 that do a catch up fees, but it's also just.
Solid compounding on higher fee paying AUM at the beginning of the quarter realm.
Relative to the beginning of the prior quarter.
Positive performance in the U S as well, but Pam I don't know if you want to go back to the script comments.
Hi, Chris Thanks for the question as <unk> catch up fees in the third quarter were one 7 million and as I indicated there'll be slightly higher in the fourth quarter.
And are part of that 5% expected growth number that we mentioned.
Okay, Great. That's it for me thank you.
Thank you Chris.
And next we'll hear from Jeff Smith of William Blair.
Hi, good morning, just.
Touching on the 500 million structured alternative solution.
Obviously, a great start for this newer unit what what type of additional demand are you seeing out there from insurance companies do you have some initial thoughts on sort of where that.
Unit might go from a fund raising perspective, I mean, it's early but just curious if you have kind of initial thoughts, but knowing that yes. It could.
It's early I think John address are.
Our aspiration for this unit.
Last quarter when he said he thought it could be a very significant part of our business going forward.
And so I think everything we've seen so far.
It reinforces our decision to invest in this space and you saw earlier.
As we announced another higher inside of GCM Grosvenor insurance solutions senior hire and we're thrilled about that and we intend to continue to invest in that in that effort.
We think there's real opportunity there.
And as I said I'm not sure we thought we'd get out.
Wed always talked about seeing this contribute next year.
And its obviously starting to contribute faster than that and we.
We're engaging with that channel in ways that we never have before.
We are seeing various types of opportunity.
Frankly, well beyond structured solutions, so just normal custom separate account solutions opportunities and where we are enthusiastic.
Okay.
And then the.
Just looking at the private market fee paying.
So I think it stands at around 31 billion.
Could you discuss how much of that is specialized funds now I think you'd mentioned $2 2 billion has been raising these this sort of newer tranche of funds. So does that bring the total to around seven or $8 billion and I'm just thinking how does how does that compare from the beginning of the year.
And how much of a higher fee rate is that come come in.
Just in terms of the mix there.
Sure Stacy or Pam if you have the.
M.
Or are they yet palm number four.
Our specialized funds obviously the number that we saw.
Cited was the fund raising number this year.
Effort to it's the first time, we've done that we've heard the requests.
To do that.
Wanted to stay away from specific fund.
Our reporting until the funds are close, but we did want to be responsive to the question set on how fund raising for the end market funds are going and I don't know Stacy or Pam if you have that.
The F palm number for private market specialized funds compared to private markets.
Hi, its pan.
We do not publicly disclose that breakout.
Our private markets could hang ao and between the specialized funds or the separate account that's something we are considering for the future but at this point, we have not done that to date, but the $2 2 billion dollar number that Michael referenced in his comments is the fundraising for this year.
Okay.
And then just one last one on G&A I think you had said it was.
A little bit on this quarter due to low travel activity that should sort of move back up in Q4.
What type of magnitude should we expect there.
I mean with the Delta in going on I mean travel seems to be still down. So is that just kind of a modest increase and any guidance you can give on 2022 for G&A as well would be helpful.
Sure Yeah, just a modest increase we would expect in the fourth quarter given continued.
Lack of travel.
But that is baked into our guidance that Michael mentioned that we expect to end the year slightly above our 15% to 20% FRE growth range. So our expense growth is kind of baked into that number. Similarly for next year, certainly expecting some return to travel and higher.
Travel in 'twenty two.
Absent any any further issues with the pandemic. So certainly affect that next year and that's also kind of baked into our guidance for next year at that 20% to 25%.
Got it okay. That's helpful. Thank you.
Thank you.
And next we'll hear from Ken Worthington of JP Morgan.
Hi, good morning, Thanks for taking my questions.
So appreciate the additional information on the private market side I'm going to keep pressing here.
You're in market I think with four funds I think the $2 2 billion with just the funds raised this year on the four I know John mentioned six as we look out over the next couple of years.
Where are those funds right now in terms of assets relative to their collective targets are we getting to the point, where those funds are pretty much done is there a lot of runway left in terms of fund raising those funds, but I don't know if we're.
40% of the way to target, 99% of the way to target.
If you could just help us there in terms of those products and how close we are and I know you don't like to do it individually, but maybe you would do it collect yodlee. So and then you go.
Go ahead, sorry, you can go ahead, yes, and then.
The pie in the Sky is the fundraising environment is fabulous. So if you had targets you know.
Is it possible that the fund raising environment is so good and you've got some really neat she kind of nice.
<unk> and the set up for that you know the.
Targets.
The state of targets are conservative and maybe we should think of things being closer to the hard cap. So any any color on on that element, but the first part I think is the more important what I'd love to get.
Sure. So what I was going to say was you push us on on this and we appreciate it truly and you can tell we're responsive and I.
Wish we would've connected prior because I think we could probably figure out a way to talk about.
The first question that you asked so of the funds in market now the four in market now.
Only one of them will have a final close this year the rest of the remaining three will be in market for a while longer.
Our.
And have room to go in terms of achieving.
Fundraising and then there are additional funds that come on into market next year.
Yeah.
Throughout the year next year even.
I think yeah.
Of the six that we've shown.
They're either all turned on by next year or very early in it.
'twenty three the.
And I think we probably can try to work out some metric. So that you can understand you know how.
How much time is left and things like that.
We don't we don't have a date.
A good math way to tell you that now other than to say that we are you know.
Three of the four will stay in market.
We will report out on the one that has a final close in Q4 at our next call three of the four will stay at market.
The funds in market. It is in general a time, where there is a tailwind and their strong pipeline the funds and market in particular.
Multi asset class fund are enjoying.
Assessor funds are extremely good results and so we're optimistic there.
I think that the the.
The best way to think about what we've said today I think really relates to our fee related revenue in our fee related earnings.
Hughes with regard to next year.
And in India.
As we said we achieve those.
Rates of growth without a increase in fundraising relative to this year. So I know this is not as precise as you would like but we did say that with similar levels of fundraising for this year.
That's kind of a couple of some other assumptions, but similar levels of fundraising we get the growth and we are as you correctly point out you know good fund raising environment with a strong <unk>.
Third quarter.
We certainly will do everything we can to continue to roll forward.
Okay, Great and then I'm trying to kind of do the postmortem on mosaic and Pamela I'm not sure. If this is related to your comments incentive fee related compensation was up this quarter, assuming I plugged the models in our numbers in the model correctly.
It looks like $3 4 million incentive fees themselves were just 300000 again, assuming a plugged in correctly is this related to how Grosvenor is treating the incremental earnings that are resulting from the repurchase of mosaic and was there a compensation payout this quarter on that.
Earning stream that was previously directed to mosaic.
Yes.
What you see in the quarter. The majority of our incentive fees are related to carried interest that was that resolved.
Unwinding that mosaic structure.
And we are.
Including in that $3 4 million a portion of that relates to the carried interest realized in the quarter.
In the fourth quarter as I mentioned, we expect that to predominantly be incentive fees related to the <unk>.
Performance fees that are expected to be realized.
And we'll see that related incentive comp in the fourth quarter, primarily relate to those performance fees.
So you should see expect a similar level in the fourth quarter.
Okay, and so just one follow up here how should we think about this payout on what was formally going to mosaic.
What is the rationale of paying employees rather than letting all of that.
Incremental earnings on what was essentially a financing it fall to the bottom line.
And then in <unk>, 21% of the slide on the value of the purchase of mosaic.
The carry relative to the purchase purchase price so like a valuation of six times did.
Did that slide incorporates a payout on these mosaic earnings.
Again, I'm trying to reconcile everything and I sort of assume that this would fall to the bottom line in it and it appears to not be so I'm trying to to do this postmortem. Thank you.
So I am sure and I think that I think that.
We've always accrued.
A discretionary cash bonus pool.
Relative to firm share.
Relative to firm share of incentive fees, both Terry some of which was at mosaic and is not now and.
<unk> and we accrue that as we go through the year and we.
Pay it out when we pay bonuses.
After the end of the year.
And we have so to the extent that we didn't.
We probably eight margin rather than.
<unk> people.
When we did mosaic.
And we are.
We are.
Able to get those mosaic revenues back.
But also get some of the FRE margin back.
And you know our realigned comp.
Through that and we're we're encouraged is that the firm's share of carrier. So not only are the performance fees in the HRS business growing.
<unk> share of Kerry <unk>.
Grows over you know as we look out over the next several years were still kind of burning off low firm share of carry so.
That picture in general with a with a bonus pool there.
Will it always a good positive picture as we look look forward and if you want some help on your modeling we will we will.
Happily do that with you, but in general I think we've got.
Growing firm share.
Growing therefore.
<unk> EBITDA on top of growing F. R E.
And we've got a.
Greater alignment of interest with our.
People and actual performance and receipts of the firm.
Okay, great. Thank you very much.
Okay.
And as a reminder, if you'd like to ask a question or make a comment press star one at this time.
We'll hear from Peter close yet of Morgan Stanley.
Hey, Thanks for taking my question, you mentioned, 10% of capital raised year to date is from institutional clients what products are driving those inflows and what new products can make sense for that customer set and also just a quick follow up I think you mentioned youre on six platforms. How do you think about building out distribution teams to support that growth in our non institutional.
Thank you.
So John.
Go ahead, John you take it.
Sure.
So I think that the in general the way you are when you ask about what's the type of interest that youre seeing in the non institutional channel.
I would say that it's similar thematic lead or what youre seeing in the institutional channel I think part of the whole thesis of trying to drive alternative solutions to non institutions is to allow those investors to have the same set of experiences and allow them to build portfolios that are similar to what institutions can access. So clearly you are.
We're seeing the.
Interest being largely in favor of private market type strategies.
But I would say, it's a similar mix private market to more liquid alternatives to what youre seeing for the broader business I.
I think in terms of building out.
The.
Distribution and the coverage there.
Definitely it's an area, we're making some incremental investment we think would have a positive return on capital we have people that cover those channels. Both in terms of what we would call an external sales perspective, as well as an internal sales perspective, and as we continue to see the assets.
Assets that we raised there.
They take up a greater share of AUM. So we talked about 5% of video on the 10% of flows will continue to make smart smart investment from a distribution standpoint.
Okay.
And was there anything further Mr. Lucia.
No that's it thank you.
And once again star one to ask a question or make a comment well pause for a moment.
It appears there are no further questions at this time.
Great. Thank you all for joining our call. We appreciate the questions and the interest and we'll talk to you again soon.
Thank you very much.
That does conclude today's conference. Thank you all for your participation you may now disconnect.
[music].
Okay.
[music].