GCM Grosvenor Inc. Q1 2023 Earnings Call
Please standby.
Good day and welcome to the D C I'm getting rolled into 2023 P. M. Grosvenor its first quarter 2023.
Welcome to the GCM Grosvenor 2023 first quarter results call. Later, we will conduct a question and answer session. If you're interested in asking a question. Please ensure you dial in using the numbers you had been provided for this call and press star one on your keypad to join the queue. If anyone requires operator assistance. Please press star then.
Zero key on your telephone as a reminder, this call can be recorded I would now like to hand, the call over to Stacy Selinger at HUD Investor head of Investor Relations you may begin.
Thank you good morning, and welcome to GCM Grosvenor, its first quarter 2023 earnings call.
Today I am joined by GCM, Grosvenor is 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.
Statements regarding our current expectations for the business, our financial performance and projections.
These statements are neither promises nor guarantees.
Both known and unknown risks uncertainties and other important factors that may cause our actual results to differ materially from those indicated by the forward looking statements on this call. Please.
Please refer to the factors in the risk factors section of our 10-K, our other filings with the Securities and Exchange Commission and our earnings release, all of which are available on the public shareholders section of our website.
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 shareholder section of our website.
Our goal is to continually improve how we communicate with and engage with our shareholders and in 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 Stacey.
The first quarter of 2023 marked the fourth consecutive year with significant first quarter volatility and market dislocation.
From Covid names stocks.
War in Ukraine, the Silicon Valley Bank and credit Suisse first quarter each of the last four years Theres been talk for investors.
Each of these periods GCM Grosvenor has enjoyed relative stability in our portfolios for clients.
In our business for team members and shareholders.
The strength the alternative asset management strategies generally and the strength of GCM Grosvenor is broad based diversified solutions approach specifically shines during volatile times.
As such our confidence in the value proposition, we bring to clients and in the value of our firms for shareholders remains strong.
In the first quarter, we performed in line with the guidance, we provided on our last earnings call.
We raised just under $1 billion fundraising environment.
Importantly, our private markets verticals continued to grow at double digit top line rates with private markets management fees, excluding catch up fees growing 13% year over year.
Private market strategies now comprise roughly 70% of our total AUR.
Due to the impact of 2022, an absolute return strategy be paying a U M. Overall fee related revenue was roughly flat in Q1 compared to a year ago.
As we expected fee related earnings fee related earnings margins were both slightly lower than a year ago.
A recent <unk> performance, there's been competitive with regard to peers and relevant indices and delivered the best first quarter, we've had in some time.
Capital markets and transaction activity levels continue to be depressed, which we believe is a significant driver of the overall alternative space right now in.
In the first quarter less than 1% of our beginning quarter private markets be paying at U M was distributed declines.
That compares to an average of almost twice that rate for the previous nine quarters.
As a result incentive fees were low which was an important factor in year over year, adjusted EBITDA and adjusted net income levels.
Across the industry the low levels of transaction activity result in less capital being returned to Lp's, that's putting pressure on investor liquidity and slows the timing of new commitments.
We believe the flywheel go improve when transaction levels pick back up.
Looking forward for the second quarter, we anticipate private markets management fees, excluding catch up piece will grow in the high single digits year over year and.
And absolute return strategies management fees will be roughly flat compared to Q1 'twenty three.
The result will be a cure to FRE, that's pretty similar to Q1 'twenty three.
For the full year compared to 2022, we continue to expect double digit fee related earnings growth with expanded FRE margins.
While sales cycles have been stretched somewhat.
Our fundraising pipeline remains strong.
As we saw in 'twenty, two and 'twenty, one we expect that back half fundraising will exceed first half fundraising this year.
Our unrealized carry continues to represent significant upside to recent revenue levels, Although we make no prediction as to the timing of realizations.
We remain set up well for the intermediate and long term.
For 2024, we continue to see solid double digit fee related earnings growth unreasonable fundraising assumptions with some continued FRE margin expansion.
Perhaps more than anything we're excited about deploying our approximately 10 billion of dry powder and what we believe will be a more advantageous investment environment than we have seen in a while.
Although the macro environment remains challenging we feel fortunate that we enjoy great client relationships are adding value to client portfolios are growing generating cash paying a healthy safe dividend and buying back shares. It's a pretty good picture in a tough environment and it is.
Direct result of the efforts our team and our broadly diversified client solutions.
Our solutions approach right.
We have a strong business with significant opportunity and upside and we look forward to generating returns for all of our constituents going forward and with that I'll turn it over to John .
Thank you Michael I will spend a few minutes going into a bit more detail on our capital formation results and strategy.
Breadth depth and flexibility of our platform enables us to credibly compete for nearly any mandate available to an alternative solutions provider.
Which makes for a very large total addressable market.
As Michael noted the environment at this particular moment in time is challenging, but we do not see the secular tailwind behind long term demand for alternatives abating.
Anything the relative outperformance of alternatives compared to other asset classes is only heightened long term investor demand.
In fact mature investors to alternatives are employing creative and flexible strategies around their target asset allocation to ensure that they're able to continue deploying capital in this market.
History has proven that remaining committed to our programmatic approach for alternative investing adds value overtime.
In addition, there continues to be an attractive opportunity set to grow with newer allocators to alternatives such as insurance companies and retail investors.
With that backdrop, we continue to be bullish on the long term demand for alternatives.
Now to our fundraising over the last two years, our fundraising has been characterized by three main themes.
First the double mix shifting our business toward private markets and fee accretive strategies.
Second the success with which we've expanded our existing client relationships into new areas.
And third increasing momentum in new geographies and channels, where we've made investments.
We've talked about the double mixed shift on many of these calls, but it's one of the most important things to understand about our business.
87% of the capital that we've raised over the last two years was for private markets and all of that 60% was raised in fee accretive strategies, which redefined as co investments direct investments in secondaries.
This has had a material impact on our business composition as of the end of the first quarter private market now comprises approximately 70% of our total AUM, which is a significant increase from 59% of our total AUM at the end of 2020.
Within private market infrastructure has been the most significant growth driver over the last few years, we've raised more than $5 billion for infrastructure programs as investors continue to appreciate the strategy Kashi old generation.
Long dated capital appreciation.
And inflation protection protection.
Our significant and broad experience in the infrastructure space positions us well to pick up further market share in this area.
Turning to the second driver of our fundraising we have very successfully expanded our existing client relationships through re ups and extending those relationships into new strategies.
Over the past two years, 21% of our fund raising has been cross selling to our existing clients.
Approximately 50% of our top 50 clients work with us in multiple strategies and approximately one third of our top 50 clients have programs in both absolute return strategies and private markets.
Interestingly, while the majority of our fundraising over the past few years that typically come from our existing clients, 63% of our first quarter fund raising came from new clients.
Which brings me to the third fund raising driver.
You know, we've been investing in new channels and geographies over the past few years, which we believe will drive significant future growth most.
Most recently, we announced the opening of a new office in Sydney, Australia.
While it takes time for any new efforts to scale and reach their full potential. We are encouraged by the early signs of the investments that we've been making.
Similarly over the last few years, the insurance and non institutional or retail channels began to demonstrate their potential are strong contributors to fundraising.
Nearly 20% of our flows over the last two years came from these channels combined and giving each represent very large total addressable markets. We expect these channels three meaningful meaningful contributors to our fund raising going forward.
Our deep and broad manufacturing platform.
Strong existing client relationships and focus on growing channels provide us with ample opportunities to deliver stability and growth as we move forward with that I'll turn the call over to Pam.
Thanks, John we are well positioned as a management team driven balance sheet light business and our strength stability and scalability have continued to serve us well amidst challenging market.
Assets under management increased to $75 billion in the quarter, a 5% increase from a year ago, and a 2% increase from the fourth quarter.
Fee paying AUM increased 3% from a year ago, and 2% from the fourth quarter.
Private markets continue to be the primary driver of fee paying AUM growth, increasing 12% from a year ago from a combination of fundraising and deployment.
Nearly $1 billion of contracted not yet fee paying AUN became fee paying in the quarter.
Although fee related revenue was effectively flat on a year over year basis.
Private markets management fees experienced healthy growth of 11% year over year, which was offset by 22 market impact on absolute return strategies management fees.
Excluding catch up fees private markets management fees increased 13% from the first quarter of 'twenty, two which was on the high end of our guidance.
In the second quarter, we anticipate modest specialized fund closings and we do not expect any material catch up fees. Therefore.
Therefore, our second quarter private markets management fees absent catch up fees are expected to grow in the high single digits as compared to the same quarter a year ago.
As we foreshadowed on our last call absolute return strategies management fees declined slightly this quarter versus the fourth quarter of 'twenty two.
You have an absolute return strategies fee paying AUM was relatively flat in Q1, we expect second quarter asset management fees to be roughly the same as this quarter.
We realized $5 $8 million of incentive fees in Q1.
The majority of them carried interest.
As Michael mentioned, the realization environment continues to be challenging and until market inflation and interest rates settle out M&A volume is likely to be muted.
That said our carried interest earnings power continues to improve as of quarter end, we had $804 million and gross unrealized carried interest across a 135 programs the firm's share of which is $376 million.
The firm's share of unrealized carry has been steadily increasing and when transaction volumes return, we believe Carrie will contribute meaningfully to our earnings.
Our annual performance fees are tied to absolute return strategies investment returns and typically crystallize in the fourth quarter each year.
The impact of 22 performance on high Watermarks combined with solid performance in Q1, our 23 performance fee earnings potential is approximately $16 million, assuming an annualized 8% gross rate of return for multi strategy and 10% growth rate of return for opportunistic investments further.
<unk> of 23.
This compares to $29 million a performance fee earnings potential if all portfolios were at high watermark.
Turning to our expenses our compensation strategy is rooted in fostering alignment between our employees clients and shareholders.
Latest earnings compensation in the quarter was approximately $40 million down slightly compared to the first quarter of 'twenty two.
As a reminder, FRE compensation is typically elevated in the first quarter. So we do expect it to marginally decline in subsequent quarters.
As we disclosed last quarter and 22, we granted $4 5 million restricted shares to employees of which $3 2 million.
<unk> in the first quarter, resulting in stock compensation expense of $26 million.
Importantly, we have and will continue to buy back shares to minimize dilution from stock based compensation.
This quarter, we repurchased approximately two 9 million shares or $23 million of stock and have approximately $23 million remaining in our stock buyback authorization, which we continue to put to work.
We expect stock compensation expense in the second quarter to return to normalized levels coming in below what we saw in the fourth quarter of last year.
As expected non-GAAP general and administrative and other expenses increased sequentially from the fourth quarter to $19 $7 million. We continue to tightly manage expenses, despite inflationary pressures and expect this figure to remain stable in the second quarter.
From a capitalization standpoint, we continue to be balance sheet light and our cash generation is comfortably in excess of our current dividend as.
As we have said in the past, we anticipate growing our dividend over time as our fee related earnings increase.
To that point I will end by reiterating our confidence in achieving our long term growth objectives. We remain focused on unlocking the full potential embedded in our platform to generate long term value for our clients and shareholders.
Thank you again for joining us and we're now happy to take your questions.
Thank you and as a reminder, ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad, if you're using a speaker phone. Please ensure your mute function is turned off and again that is star one we'll pause for a moment.
And we will now take our first question from Bill Katz from Credit Suisse.
Okay. Thank you very much for the question and the company call out So Michael maybe a question for you with John Thanks for the updated guidance. So if I just sort of look at the guidance a year on year of our fee related earnings growth of sort of teens to say, 15% something in that ballpark it would impute to a pretty.
Difficult second half of the year ramp given what you sort of mentioned about the second quarter. So can you just sort of help walk us through the ins and outs. They just sort of think about the second half of the U F. Our reach directory. Thank you.
Sure. Thanks for the question.
So we said on this call.
Sorry.
For the year double digits I think we had said.
Last quarter mid teens.
<unk> is a bit more conservative the mid teens, reflecting.
The environment, we're in but we when we build you know these numbers and we talked to you about them, we're doing a granular.
Bottom up build with visibility into our pipeline.
Sales cycles, a little longer now, which we've talked about but we continue to believe second half fundraise.
Fund raising will exceed first half fund raising and we think that the timing of specialized fund closes and some catch up fees and such.
Will get us to that double digit up our re growth.
This year.
Okay. Thank you and just maybe a quick follow up for me John you mentioned sort of the three different areas of opportunity to grow I was wondering if you could maybe double click into the insurance and the retail.
Just sort of talk a little about what you might be doing incrementally to accelerate opportunity to either insurance or the retail. Thank you.
Sure Bill Nice to talk to you. This morning, Yeah, I think what it comes down to fundamentally as I noted on the call. As you have investors that are more mature allocators to alternatives and they are likely at or near or slightly exceeding their asset allocation and therefore they are employing.
Yes.
<unk> strategies.
Who are slowing down a little bit whatever it might be but to make sure that they can remain committed to.
They're all programs because.
Maintaining their programmatic approach as opposed to taking years offer taking vintages off is never kind of proven to be a good idea of historically and then you have a different category of investors where insurance companies might be an example, where retail investors might be an example, where particular idiosyncratic balance sheets around the world might be an example that are still below.
Oh asset allocation in terms of where they want to be from a gold's perspective further alternatives program and this is a great time to be building in alternatives program them in light of what I think is going to be an interesting investing environment.
And so what we've done.
Just made sure that we have the resources necessary to.
Cover those channels you know we've made the investment in a number of people as well as I would call. Some technical expertise a few years ago to cover the.
Insurance segment, where people tend to be below where they'd like to be long term from an alternatives perspective.
Similarly, we have made sure that our coverage of the wire house channel in particular.
Is is up to speed with what we think the opportunity set there will be over time, and so really it's about people at the end of the day and just making sure that you have the focus and the product design and the technical expertise to cover the different channels are.
Were there you know under allocated golf and want to be building it secondarily overtime.
Yeah, Bill it's Michael just.
Echoing John's comments I don't think we see a channel and I don't think we see a.
The odd Rafi.
Where people are moving away from malls at all so we think given where those channels are in our total a U M. We're gonna have growth.
That is going to see that those channels grow those investors that you ask about grow as a percent of our total but all the channels are remain committed to all.
They remain pretty appreciative of all over the last you know.
A year and a half or so in terms of.
How things have have shook out.
And we we don't see any change to kind of the intermediate term or long term demand really anywhere and I think that's an important point to.
Make sure everybody hears.
Thank you both.
Thank you and we'll take our next question from Chris Kotowski from Oppenheimer. Please go ahead.
Yes, excuse me.
I was wondering if you can comment a bit on the trends, we see an equity based comp and then it looks like you know outside stepped up in the first quarter and I'm kind of wondering what's your expectation for the full year is and what the dynamic underlying that was.
Thanks, Chris Pam touched on that in her comments, we expect that will come back in line for the remainder of the year.
And and in General you know, we when we came public we had an outfit was one of the the ability to have a stock based comp pool to align the interests of our team and R. R.
Our investors our shareholders was something that we were.
Enthusiastic about and we want to use that L tip.
And frankly, I think that our net use of those <unk> shares has probably been.
You know below what we would have thought it would be at the time of coming public. If you you know in the sense that I think.
We still have quite a large number of shares and net <unk>. So I think we will continue to use those and we'll continue to focus on managing dilution.
From that <unk> and <unk>.
So far we're doing a pretty good I think we're doing quite good job of that.
And we're able to use the L tip.
But to minimize dilution for shareholders, which is what we like we do have some capital left in our.
In our share buyback in it but at some point, we'll probably need to increase our authorization there in.
In the future. So we can continue to buy in shares and minimize dilution.
Yeah, I guess related to that I was kind of wondering.
I mean, I realize it's only a penny but the dividend was a penny above your adjusted net income for the quarter end.
It just seems like the dividend speaks for an awful lot of your kind of you know.
Kind of a base level of cash flow and that it would some of that be better allocated to incremental share buybacks or is the dividend kind of sacrosanct.
Well, there's there's a pretty good room in our dividend relative to our base level of cash flow now and we have been buying back shares and I do think at these levels.
We we we like buying back shares and as I said, though as I said were likely to increase our authorization there and.
Make sure we're directing.
You know significant capital to buying back shares into managing the any dilution from stock based comp.
And from the issuance of those <unk> shares both short term and longer term.
And and but.
But we do we have a room in that dividend and we've emphasized the safety of that dividend and we continue to emphasize the safety of that dividend.
Okay and then last question for me is I'm curious was there just in terms of the fund raising kind of tone of current presentations.
Was there a change after the collapse of Silicon valley or do people kind of hold that offers.
It was something that's separate from these kinds of allocation decisions and in that you know that.
Is something happening over in the banking system and it doesn't really affect us or did that have an impact.
I don't think we've seen an impact thats directly related to Silicon Valley Bank or to credit Suisse. I think in general when we did this obviously intentionally to highlight the levels of volatility that we've seen in the first quarter of each of the last four years and I think you know in general.
When we see that type of volatility.
And we see the change in rates that we saw over the last you know 12 15 months.
And we and importantly importantly, the.
Lower levels of transaction activity, so the lower levels of distributions, which we touched on in our prepared remarks.
No that that's that that just general volatility.
When are rates going to kind of peak out.
Where are we.
On inflation is liquidity, our transaction levels going to return to more normal levels and distribution is going to pick up again, those are definitely having a bigger impact on the.
The sales cycle the timing of the sales cycle. I think then you know any specific.
Volatility event like that SBB.
And and.
But importantly, we don't see any change in investor plans over reasonable time periods.
So I hope that answers your question, but I don't think it's a you know it has to.
Would you be thinking I don't know that.
It doesn't help you know in terms of of people you know just high volatility, but it's not a direct correlation and as we said the transaction levels in the distribution levels are as significant as anything.
Okay, great. Thanks, that's it for me.
Thank you and we'll take our next question from Adam Beatty from UBS.
Alright, Thank you and good morning.
Just wanted to ask about the <unk>.
It worked for deployment, given kind of a challenging backdrop right now and specifically.
Theres, a pretty big chunk of AUM, not yet paying fees you know that it will that will start building on deployment. So just wanted to.
Get your thoughts on the deployment opportunities you're seeing across various asset classes and how maybe that winds up with the <unk>.
Yeah. Thank you.
Sure.
Distribution levels were down deployment was actually pretty healthy.
And as we mentioned you know people are in.
Both our team our investment teams you know, they're they're enthusiastic about the opportunities that we're seeing now and the opportunities that you think are coming.
To deploy capital at good.
Good rates of return deploy capital in the credit space at good rates of return and so they are enthusiastic.
With regard to what's coming there and I do think in terms of these general sort of sales cycle conversations I think there's a fairly you know acute awareness on the part of investors that the opportunity set in terms of putting money to work is.
Better than it was you know a year and a half ago.
And that.
They don't want to Miss these vintages. So yeah. They may come in on the back end of a fund raised or something like that.
But.
In general you know that.
Sales cycle scratched I think for sure but people want these vintages and people are excited about putting money to work and that was our comment on the 10 billion of dry powder.
And Adam I would excellent that's what Michael said.
Don't you know I think one thing to remember about our business. There's a lot of what we do our separate accounts as you know 75% of our assets under management.
And in those separate accounts, often what we're doing is helping.
Helping institutions with a programmatic approach to their alternatives. So that they are diversified by vintage they're so diversified by geography are diversified by company or asset types et cetera, and so one of the great value propositions that we bring is just making sure that we are a consistent deploy or to the alternative space.
And of course, as Michael said on the margin.
The ability to deploy more in an environment where are the opportunities that you can see it.
Even more interesting is certainly something that.
We're seeing right now and you're hearing a lot of folks in the industry talk about.
Makes sense, thanks for adding that John .
And then turning back to retail a little bit.
Think in the past you've talked about how institutional clients.
Really appreciate it.
The distinctive feature of our Grosvenor in having the absolute return in the private market strategies, just wondering how that plays in the retail space in terms of you know gatekeepers and folks deciding what to put on the shelf, whether you know whether you've had positive feedback as to being able to offer those to our differentiated strategies. Thank you.
We do have some.
All of our verticals, including absolute return there are number of different approaches and a number of different funds and we do have some a R. S funds that we think have appeal in that retail channel.
And.
The appeal to retail investors.
And that we are working.
We're working pretty hard on and we think have some.
You know some opportunity for us.
Going forward I think in general in the absolute return space, you're you're probably.
It's a little bit more of a market.
Of a market.
Share conversation than it is a you know an overall growth conversation.
That said.
There's pretty good penetration and so if you have good product with good track record, which we do we think we have opportunity.
Perfect. Thanks, Michael much appreciate it.
Thank you well next go to Kenneth Worthington from J P. Morgan. Please go ahead.
Hi, This is Alex Bernstein on for Ken. Thanks for taking my question on good morning, maybe just wanted to double click on this fundraising and really the mix. This quarter you spoke about this a bit on the call and it's also in your release and that the numbers are pretty dramatic in terms of the change. If you look at total for example, being 61.
<unk> from the Americas, yet if we look at it from this quarter. It was really only 25% it looks like EMEA was the big driver just going through earnings more broadly in the space, we've definitely seen and heard that it sounds like some other geographies, specifically the middle East and Asia. It looks like from an institutional perspective, there may be more capital to deploy there.
So I just wanted to maybe double click on that topic and get a better understanding of what youre seeing.
And what's the big driver.
Of that number coming on from EMEA, this quarter, which seems different than what we've seen in some other places.
Sure. Thanks for the question.
I think you know as we've said, we really see the demand in the.
Depreciation and interest in alts.
Strong everywhere I think when you have a separate account.
Business like we do that it has a large separate account relationships fundraising can be lumpy and so I would think that the phenomenon that you're asking about for the first quarter is more.
Isn't really related to.
Demand or.
Long term attractiveness or or or opportunity set or pipeline, it's a bit more random relating to just timing and you know.
That said there are certain areas of the world that are yeah, yeah market in Asia markets in the Middle East as you point out that are that are strong and so we would anticipate continuing to raise significant capital globally in all of those markets.
Helpful. Thank you and just as you as you think about continuing to sort of build out the platform you you mentioned in office.
Is there anything we should be thinking about on the expense side of the equation.
As relating to that like have most of those investments are already been made or are those folks already sort of up and running just just trying to think about the potential additions. They can add to the top line relative to when the investment was made and how much more investment we expect maybe required. Thanks again, well, we we can always we can always make.
You know good investments that we think are related to topline and two.
Generating revenues I think when Pam talks about what we see for the rest of the year. We're baking in you know a granular bottom up build.
With regard to where we think we will be or won't be investing for the rest of the year or 24.
You touch on what we see for 24, it's the same thing and you know it.
Terms of baking that in bottoms up granular, including.
No.
Investment spend for people to help us grow and so I feel like we're being smart about that careful about that I think we're managing it.
Our head count and cost well in in in this environment and we expect we spend an awful lot of time talking about that.
In this environment. So you you should.
Assume that that's that.
We're paying close attention there and that's kind of baked into our numbers so to speak.
Understood I appreciate the responses.
Thank you as a reminder, if he would like to ask a question. Please press star and then one key on your telephone keypad.
We'll take our next question from Michael Cyprus from Morgan Stanley .
Okay.
Hey, good morning, Thanks for taking the question.
I wanted to come back to your commentary on the sales cycles, extending maybe you could just elaborate a bit on which types of strategies and customer set so you're seeing that with more now.
Versus last how is that different versus maybe three or six months ago and are there any particular areas, where youre not seeing as much pressure on the sales cycle extending.
I don't think that there is a significant difference from three months ago.
Maybe you know a little bit from six months ago.
And again importantly, we think it says cycle.
Timing dip.
Difference in not a you know absolute demand difference clearly as John touched on infrastructure as you know.
A lot of flows and we think continues to see a lot of you know there's a lot of pipeline there and a lot of opportunity.
In.
A lot of opportunity in the infrastructure space and you know, there's an awful lot of conversation around credit we have $12 billion.
Deployed in the credit space, we have ability to capture credit flows to the extent that credit is a place that people are leaning forward. The issue I think Michael is less about.
Specific strategies, though looking forward, we'd say credit would would see flows and infrastructural see flows, but it's really about just the level of flows and really about the timing of those flows and people kind of you know wanting to as I said commented that at that.
You know at a later close as opposed to an earlier close and that sort of thing.
And I think the conversation will capture the breadth of our platform enables us to.
Raise capital.
Really for whatever the investors are wanting to deploy capital for and I think it's one of the great strengths of Grosvenor. So if it's credit and infrastructure will capture floats, if it's private equity or E. R. S will capture flows if it's secondaries, we'll capture flows and I think it's.
So we feel very good about that we feel like the breadth of the platform you know is.
The value of the breadth of the platform becomes.
It comes clear we feel very good about our ability to capture the flows that are out there and I just think the volatility and the liquidity have kind of stretched the timing writ large.
Great and just a follow up question you mentioned re up customers just to dig in there a little bit as customers are coming back into your funds and renewing their separate accounts what are those re up rates look like today versus the past couple of years, how much your customers increasing the size of their investment how is that trending versus the past couple years.
Thank you that they've they've been they've been strong re ups have have been and always.
Our strong for US re up rates, you know they have not diminished or not changed.
And frankly, the re up levels really haven't diminished your changed maybe there's a little bit of.
A slowdown there as the cycle has gotten stretched a bit but people want to invest they want to re up the important part of our separate account business that we try to hammer, 74% of a U M. Is these these are programs that the investors are committed to their kind of the base or the cornerstone.
None of what they do in a lot of the strategies.
Generally they do other things on top of them are on the side of them and our feeling is that they may they.
They may they're they're they're they're more likely to sort of trim around some of the other stuff that they do as opposed to their base or their core separate account activity. So.
We feel that the re ups are great feature of AR for Us and you know when we look forward and we look at re up timing that feels very good to us.
Nice to know frankly that you've got that you know.
In terms of your ability to grow.
You know looking out 123 more years and so that's a you know a very nice aspect of of our business.
As John mentioned it was nice in the first quarter to see a lot of our fundraising come from an exists from new investors. So in.
In General we were you know we.
We certainly hope you're hearing that we are.
Confident and optimistic and.
I feel good but it has been a volatile period of time with a significant change in just general market and economic activity levels and we do think that transaction level is and distributions are.
The important factor.
<unk> factor driving the market today.
Great. Thank you.
Thank you and we'll take our next question from Jeff Schmitt from William Blair.
Hi, This is Tyler Miller on for Jeff I wanted to circle back to credit you were just talking about given the move in interest rates over the past year fed funds rates at the highest level since 2007 could you give us some comments maybe on how we should think about the impact on client portfolios.
Or was it sort of the benefit would be offset by higher hurdle rates pursuing any increase in demand maybe for.
Specific strategies that distressed.
So we feel that the improvement in the opportunity set has compensated more than compensated for higher rates and and and for the ability to provide good opportunity for clients going forward and and so you know.
We don't.
See any issues there at all as I said, you know people don't want to Miss These vintages. They understand that this is a good time to be investing and are excited about it. It may be that credit gets more focus and more attention and that is in part.
A function of some of the things that have taken place in the in the in the banking sector and the need for alternative credit private credit.
Going forward as the banking system adjust to what's going on what went on in the first quarter.
He has continued a little bit here into the second quarter as well.
And so.
That's all actually pretty positive for us.
And really the question is just the speed of commitments.
The overall level of commitments as opposed to a b S.
And again I know I'm hammering. This but you know it is a we think that liquidity more than denominator effect, which is a little bit what you're getting at.
Liquidity is probably a bigger issue than denominator effect.
Yeah in the timing of commitments.
Okay.
Great. Thank you.
Thank you and I am not showing any further questions.
Well, thank you again for joining us today.
We welcome your follow up questions and we look forward to speaking with you again next quarter.
Thank you.
Thank you and ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. We hope everyone has a great day you may all disconnect.
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