Q1 2024 GCM Grosvenor Inc Earnings Call

Operator: Good day, and welcome to the GCM Grosvenor first quarter 2024 results webcast. Later, we will conduct a question and answer session. If you are interested in asking a question, please ensure you dial in using the numbers you have been provided for this call and press star 1 on your keypad to join the queue. If anyone should require operator assistance, please press star then the 0 key on your telephone. As a reminder, this call will be recorded. I would now like to hand the call over to Stacie Selinger, Head of Investor Relations. You may begin. Thank you.

Good day and welcome to the D. C M. Grosvenor first quarter 'twenty 'twenty four results webcast. Later, we will conduct a question and answer session. If you're interested in asking a question. Please ensure you dial and using the numbers you have been provided.

Operator: For this call and press Star one on your keypad to join the queue.

Operator: If anyone should require operator assistance. Please press star then the zero key on your telephone as a reminder, this call will be recorded.

Stacie Driebusch Selinger: I would now like to hand, the call over to Stacy cylinder head of Investor Relations you may begin.

Stacie Driebusch Selinger: Thank you.

Stacie Driebusch Selinger: Good morning, and welcome to GCM Grosvenor's first quarter 2024 earnings call. Today I am joined by GCM Grosvenor's Chairman and Chief Executive Officer Michael Sacks, President John Levin, and Chief Financial Officer Pam Bentley.

Stacie Driebusch Selinger: Good morning, and welcome to GCM Grosvenor, It's first quarter 'twenty 'twenty four earnings call.

Stacie Driebusch Selinger: Today I'm joined by GCM, Grosvenor is chairman and Chief Executive Officer, Michael Saks, President, John Levin, and Chief Financial Officer, Pam badly.

Stacie Driebusch Selinger: 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, our financial performance and projections.

Stacie Driebusch Selinger: Before we discuss this quarter's 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.

Michael Jay Sacks: They involve 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 refer to the factors in the risk factor section of our 10-K or other filings with the Securities and Exchange Commission and our earnings release, all of which are available on the public shareholder sections of our website. We'll also refer to non-gap measures, which we view as important in assessing the performance of our business.

Stacie Driebusch Selinger: These statements are neither promises nor guarantees they involve 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.

Michael Jay Sacks: 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 shareholder sections of our website.

Michael Jay Sacks: Well also refer to non-GAAP measures, which we view as important in assessing the performance of our business.

Michael Jay Sacks: A reconciliation of non-gap metrics to the nearest gap metric can be found in our earnings presentation and earnings supplement, both of which are available on 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.

Michael Jay Sacks: Conciliation 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 our website.

Michael Jay Sacks: 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.

Speaker Change: Thanks Stacy.

Michael Jay Sacks: The first quarter of 24 was strong from the perspective of both our investment performance for clients and our business performance. Our funds performed well on an absolute basis and relative to peers. With regard to business performance, the first quarter of 24 was one of the strongest we have reported with regard to year-over-year increases in fundraising, adjusted net income, and fee-related earnings growth, as well as FRE margins. Year-over-year Q1 fundraising was up 74%, adjusted net income grew 39%, and fee-related earnings grew 26%.

Michael Jay Sacks: The first quarter of 'twenty four was strong from the perspective of both our investment performance for clients and our business performance, our funds performed well on an absolute basis and relative to peers.

Michael Jay Sacks: In regards to business performance the first quarter of 'twenty four was one of the strongest we have reported with regard to year over year increases in fund raising adjusted net income and fee related earnings growth as well as FRE margin.

Michael Jay Sacks: Year over year, Q1 fund raising was up 74% adjusted net income grew 39% and fee related earnings grew 26%, our first quarter fee related earnings margin surpassed 40% for the second consecutive quarter.

Michael Jay Sacks: Our first quarter fee-related earnings margin surpassed 40% for the second consecutive quarter. The quarter was a pleasant change from the first quarters of the last four years, which were marked by COVID, Russia's invasion of Ukraine, the meme stock debacle, and just a year ago, the bank failure, while we are always conscious and prepared for the type of volatility and disruption we have seen recently. And we are focused on the possibility of continued global geopolitical volatility, particularly in an election year in the U.S.

Michael Jay Sacks: The quarter was a pleasant change from the first quarters of the last four years, which were marked by Covid Russia's invasion of Ukraine, the MIM stock debacle, and just a year ago bank failures.

Michael Jay Sacks: While we are always conscious and prepared the type of volatility and disruption. We have seen recently and we are focused on the possibility of continued global geopolitical volatility, particularly in an election year in the U S. It feels great to have gotten off to a good start this year.

Michael Jay Sacks: It feels great to have gotten off to a good start. We are broadly above high water and absolute return strategies and therefore enjoy increased performance fee prospects. However, the first quarter remained depressed in terms of carry revenue.

Michael Jay Sacks: We are broadly above high water and absolute return strategies and therefore enjoy increased performance fee prospects. However, the first quarter remained depressed in terms of carry revenue announced.

Michael Jay Sacks: Announced private transaction volume is up, and we look forward to an increase in closed transactions and attendant carry distributions in the future. Generally, our prospects are good. And we continue to believe in our ability to double 2023 fee-related earnings by the end of 2028. We look forward to moving toward that goal throughout the year. The $1.6 billion of capital raised in the quarter was the second largest quarter of fundraising in the last six and the second highest first quarter total since we started reporting earnings.

Michael Jay Sacks: Announced private transaction volume is up and we look forward to an increase in closed transactions and attendant carry distributions in the future.

Michael Jay Sacks: Generally our prospects are good and.

Michael Jay Sacks: And we continue to believe in our ability to double 2023 fee related earnings by the end of 2028.

Michael Jay Sacks: We look forward to moving toward that goal throughout the year.

Michael Jay Sacks: The $1 6 billion of capital raised in the quarter was the second largest quarter of fund raising in the last six and the second highest first quarter total since we started reporting earnings.

Michael Jay Sacks: During the quarter, Absolute Return Strategies was the highest contributor to fundraising at nearly $500 million, resulting in modestly positive net ARS flows. Recent performance has been solid for absolute return strategies, with the GCM Grosvenor multi-strategy composite achieving gross performance of 4.8% in Q1 and 12.3% over the last 12 months. Despite the good news, we are not changing our general expectation of flat net flows over time, with growth primarily from compounding in the ARS vertical. Consequently, we do expect we will have some negative outflow periods this year while we enjoy revenue growth from performance.

Michael Jay Sacks: During the quarter absolute return strategies was the highest contributor to fundraising at nearly $500 million rich.

Michael Jay Sacks: Resulting in modestly positive net.

Michael Jay Sacks: Flows.

Michael Jay Sacks: Recent performance has been solid and absolute return strategies with the GCM Grosvenor multi strategy composite achieving gross performance of four 8%.

Michael Jay Sacks: In Q1 12.

Michael Jay Sacks: 12.3% over the last 12 months.

Michael Jay Sacks: The good news, we are not changing our general expectation of flat net flows over time with growth primarily from compounding in the <unk> vertical.

Michael Jay Sacks: Sequentially, we do expect we will have some negative outflow periods. This year, while we enjoy revenue growth from performance.

Michael Jay Sacks: In addition to absolute return strategies, private equity, and credit were the other significant contributors to first quarter fundraising. In the case of private equity, where we raised almost $500 million, re-ups were a key driver. We've spoken in the past about our high re-up rates, and page 10 of our earnings presentation, which John will cover, makes it clear that this is a powerful feature of our business that will continue to aid growth going forward.

Michael Jay Sacks: In addition to absolute return strategies private equity in credit where the other significant contributors to first quarter fundraising in the case of private equity, where we raised almost $500 million re ups were a key driver.

Michael Jay Sacks: We've spoken in the past about our high re up rates and page 10 of our earnings presentation, which John will cover makes it clear that this is a powerful feature of our business that will continue to aid growth going forward.

Michael Jay Sacks: Last quarter's call, we discussed the general market momentum around private credit and our solution for clients in that vertical. We raised nearly $400 million in credit this quarter across customized separate accounts and specialized funds, including an additional $128 million of commitments to SCF II, our credit co-investment program. During the first quarter, we hired two additional team members to bolster our direct credit investment capability.

Michael Jay Sacks: On last quarter's call, we discussed the general market momentum around private credit and our solution for clients in that vertical.

Michael Jay Sacks: We raised nearly $400 million in credit this quarter across customized separate accounts and specialized funds, including an additional $128 million of commitments to SCE up to our credit co investment fund during.

Michael Jay Sacks: During the first quarter, we hired two additional team members to bolster our direct credit investment capabilities, we believe our value as a solutions provider and our unique origination position enable us to grow private credit meaningfully from these levels.

Michael Jay Sacks: We believe our value as a solutions provider and our unique origination position enable us to grow private credit meaningfully from these levels. We are always looking for both investment opportunities to help us deliver performance and the opportunity to grow our relationships with existing investors while adding new investors. The breadth of our platform has proven to be a real asset in the pursuit of those goals. We have and will continue to identify and pursue growth in adjacent investment strategies, such as our Elevate and Impact strategies, and in broader distribution channels, including individual investor channels.

Michael Jay Sacks: We are always looking for both investment opportunities to help us deliver performance and the opportunity to grow our relationships with existing investors, while adding new investors. The breath of our platform has proven to be a real asset in the pursuit of those goals, we have and will continue to identify and pursue.

Michael Jay Sacks: Growth in adjacent investment strategies, such as our elevate and impacts strategies, and then broader distribution channels, including individual investor channels looking across the platform I'm excited for the numerous ways, we have to add value to clients win and grow the business for shareholders.

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

Michael Jay Sacks: Thanks for joining us today, and with that I'll turn the call over to John.

Jonathan Reisin Levin: Thank you, Michael. In my section of the prepared remarks, each quarter, we drill down on a particular area of our business. Today, we're going to cover our customized separate account capabilities in a bit more detail. Our market-leading customized delivery model has been a cornerstone of our historical success, providing stability and predictability to our financial results, as well as significant opportunities for growth. Customized separate accounts represent 73% of our AUM as of Q1 and a similar amount of our fundraising in any given quarter.

Speaker Change: Thank you Michael each quarter, we drill down on a particular area of our business in my section of the prepared remarks.

Jonathan Reisin Levin: Today, we're going to cover a customized separate account capabilities and a bit more detail.

Jonathan Reisin Levin: Our market, leading customize delivery model has.

Jonathan Reisin Levin: It's been a cornerstone of our historical success provides.

Jonathan Reisin Levin: Provides stability and predictability to our financial results as well as significant opportunities for growth.

Jonathan Reisin Levin: Customized separate accounts represent 73% of our AUM as of Q1, and a similar amount of our fundraising in any given quarter.

Jonathan Reisin Levin: We intentionally focused on building separate account capabilities at our firm almost 30 years ago, long before it was a normal market practice, because we believed that offering a flexible solution was in the best interest of investors. Frankly, we probably didn't realize back then the extent to which offering that solution was also a great foundation for the firm from a business perspective. The initial client acquisition is usually the result of a fairly long, intense, and often competitive process. But the reward and victory are relationships that are often perpetual in their long-term nature. We do not take this privilege for granted.

Jonathan Reisin Levin: We intentionally focused on building the separate account capabilities at our firm almost 30 years ago long before it was a normal market practice, because we believe that offering a flexible solution was in the best interest of investors frankly.

Jonathan Reisin Levin: Frankly, we probably didn't realize back then the extent to which offering that solution was also a great foundation for the firm from a business perspective.

Jonathan Reisin Levin: The initial client acquisition is usually the result of a fairly long intense and often competitive process, but.

Jonathan Reisin Levin: The reward and victory are relationships that are often perpetual like in their long term nature.

Jonathan Reisin Levin: We do not take this privilege for granted we work hard each and everyday to collaborate with our partners to drive value in these relationships.

Jonathan Reisin Levin: We work hard each and every day to collaborate with our partners to drive value in these relationships. We have been rewarded with longstanding and growing partnerships, as evidenced by relationships that are almost 30-years-long and a 15-year average relationship length for our largest customized client. To put some financial metrics around this topic, I point you to page 10 in our earnings presentation.

Jonathan Reisin Levin: We have been rewarded with long standing and growing partnerships.

Jonathan Reisin Levin: As evidenced by relationships that are almost 30 year long and a 15 year average relationship length of our largest customized clients.

Jonathan Reisin Levin: To put some financial metrics around this topic I point, you to page 10 of our earnings presentation.

Jonathan Reisin Levin: This page depicts an illustrative program that starts out with a $100 million commitment over a three-year investment period. Our experience is that at the end of the three-year investment period, 90% of clients will re-up their program at a nearly 30% larger size than the original commitment. That new program is layered onto the first generation program, and that layering continues on a three-year cycle.

Jonathan Reisin Levin: This page depicts an illustrative program that starts out with a $100 million commitment with a three year investment period.

Jonathan Reisin Levin: Our experience is that at the end of the three year investment period, 90% of clients will re up their program.

Jonathan Reisin Levin: Nearly 30% larger size than the original commitment.

Jonathan Reisin Levin: That new program is layered onto the first generation program and that layering continues on a three year cycle.

Jonathan Reisin Levin: Hence, what was initially a $100 million commitment easily becomes $500 million of fee-paying AUM in a dozen years, creating this built-in growth dynamic that we've discussed frequently with our shareholders. We have dozens of these programs across our business in different strategies and sizes, representing $58 billion of capital. Each relationship that underlies a separate account also embeds attractive growth opportunities. For example, over the last two years, 25% of our capital raised has been from existing clients and into new incremental programs.

Jonathan Reisin Levin: Hence what was initially 100 million dollar commitment easily becomes $500 million of fee paying AUM and a dozen years, creating this built in growth dynamic that we've discussed frequently.

Jonathan Reisin Levin: With our shareholders.

Jonathan Reisin Levin: We have dozens of these programs across our business and different strategies and sizes, representing $58 billion of capital.

Jonathan Reisin Levin: Each relationship that underlies the separate account also embeds attractive growth opportunities over the last two years, 25% of our capital raised has been from existing clients, but into new incremental programs.

Jonathan Reisin Levin: Such relationship extensions are a natural feature of the customized separate account business and the nature of those relationships. More than 50% of our top clients work with us in more than one strategy. Our customized separate accounts have also been a driving factor in our meaningful shift towards direct-oriented investment strategies in recent years. The majority of our clients have made a meaningful shift toward including co-investments, secondaries, and direct investments into their programs.

Jonathan Reisin Levin: Such relationship extensions are a natural feature of the customized separate account business and the nature of those relationships.

Jonathan Reisin Levin: More than 50% of our top clients work with us in more than one strategy.

Jonathan Reisin Levin: Our customized separate accounts have also been a driving factor in our meaningful shifts towards direct oriented investment strategies over recent years. The majority of our clients have made a meaningful shift towards including co investments secondaries and direct investments into their programs.

Jonathan Reisin Levin: We need to earn every re-up and every new client win by delivering strong investment performance and exceptional client service. But assuming we continue to deliver, our customized separate accounts will provide both stability and a meaningful tailwind to our growth. Looking forward to the remainder of 2024, we have more than $4 billion of separate account re-ups in our pipeline, providing key support for what we expect will be a stronger fundraising and outcome in 2024 as compared to 2023. We're truly proud of the culture and platform built over many years that enables us to offer these highly value-added specific solutions to our clients. With that, I'll turn the call over to Pam.

Jonathan Reisin Levin: We need to earn every re up and every new client win by delivering strong investment performance and exceptional client service.

Pam: Assuming we continue to deliver our customized separate accounts will provide both stability and a meaningful tailwind to our growth.

Pam: Looking forward to the remainder of 2024, we have more than $4 billion of separate account re ups in our pipeline providing key support for what we expect will be a stronger fundraising and outcome in 2024 as compared to 2023.

Pam: We're truly proud of the culture and platform built over many years that enables us to offer these highly value added specific solutions to our clients.

Jonathan Reisin Levin: With that I'll turn the call over to Pam.

Pamela Lyn Bentley: Thanks, John. Our results for the quarter were consistent with our expectations and reflect a strong start to the year. Assets under management were $79 billion as of quarter end, a 5% increase from a year ago, and the fee-paying AUM increased 6% year over year. Private markets continue to be a key growth driver, with private markets' fee-paying AUM growing 7% year over year. As of quarter end, our private markets business represents 70% of total AUM and 65% of our fee-paying AUM. Private markets management fees, excluding catch-up fees in the quarter, grew 7% year-over-year, in line with our guidance of mid-to-high single-digit growth.

Pam: Thanks, John our results for the quarter were consistent with our expectations and reflect the strong start to the year.

Pamela Lyn Bentley: Assets under management were 79 billion as of quarter end, a 5% increase from a year ago and the fee paying AUM increased 6% year over year.

Pamela Lyn Bentley: Private markets continues to be a key growth driver with private markets fee paying AUM growing 7% year over year as of quarter end, our private markets business represent 70% of total AUM and 65% of our people in a lab.

Pamela Lyn Bentley: Private markets management fees, excluding catch up fees in the quarter grew 7% year over year in line with our guidance of mid to high single digit growth.

Pamela Lyn Bentley: We expect a similar year-over-year growth rate in private markets management fees, excluding catch-up fees, in the second quarter. For the full year 2024, we reaffirm our expectation of double-digit private markets management fee growth, excluding catch-up fees. Absolute return strategies management fees were stable in Q1 as compared to last quarter, and we expect second quarter ARS management fees to rise slightly on a sequential basis. Most importantly, we are pleased with our ARS investment performance for the quarter, which builds on our strong performance last year. Administration fees and other operating income were $2.9 million in the quarter.

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

Pamela Lyn Bentley: For the full year 2024, we reaffirm our expectation of double digit private markets management fee growth, excluding catch up piece.

Pamela Lyn Bentley: Absolute return strategies management fees were stable in Q1 as compared to last quarter, and we expect second quarter asset management fees to rise slightly on a sequential basis.

Pamela Lyn Bentley: Most importantly, we are pleased with our <unk> investment performance for the quarter, which builds on our strong performance last year.

Pamela Lyn Bentley: Administration fees and other operating income was $2 $9 million in the quarter the.

Pamela Lyn Bentley: The increase from the prior quarter was due to a $1.8 million contractual fee related to the end of a particular client program. We expect administration and other operating income in the second quarter to return to the 2023 quarterly level. We realized $10 million of incentive fees in the quarter, including $6 million of ARS performance fees, the majority of which are from programs that crystallize fees annually on March 31st. We believe our incentive fees provide significant embedded earnings potential, which we look forward to being unlocked as the capital markets and M&A environment improves. While it's difficult to predict the timing of carry realizations, the high diversification of our carry makes it especially valuable, given its limited single asset exposure.

Pamela Lyn Bentley: The increase from the prior quarter was due to a $1 8 million contractual fee related to an end of a particular client program.

Pamela Lyn Bentley: We expect administration and other operating income in the second quarter to return to 2023 quarterly level.

Pamela Lyn Bentley: We realized $10 million of incentive fees in the quarter, including $6 million of ARAS performance fees. The majority of which are from programs that crystallized fees annually on March 31st.

Pamela Lyn Bentley: We believe our incentive fees provide significant embedded earnings potential, which we look forward to being unlocked as the capital markets and M&A environment improve.

Pamela Lyn Bentley: While it's difficult to predict the timing of carry realizations are high diversification of our carry makes it especially valuable given its limited single asset exposure.

Pamela Lyn Bentley: As of quarter end, we have $779 million in growth unrealized carried interest diversified across 140 programs. On top of that, our run rate annual performance fees, which are tied to ARS investment returns and typically crystallize in the fourth quarter each year, are $29 million, assuming normalized annual returns of 8% for multi-strategy and 10% for opportunistic investments. Turning to our expenses, our compensation strategy is rooted in fostering alignment between our employees, clients, and shareholders. As expected, Q1 FRE compensation of $37 million was consistent with our 23-quarterly average.

Pamela Lyn Bentley: As of quarter end, we had 779 million and gross unrealized carried interest diversified across 140 program.

Pamela Lyn Bentley: On top of that our run rate annual performance fees, which are tied to ari's investment return and typically crystallize in the fourth quarter. Each year are $29 million, assuming normalized annual returns of 8% for multi strategy and 10% for opportunistic investments.

Pamela Lyn Bentley: Turning to our expenses our compensation strategy is rooted in fostering alignment between our employees clients and shareholders.

Pamela Lyn Bentley: As expected Q1 F. R. A compensation of $37 million was consistent with our 23 quarterly average.

Pamela Lyn Bentley: We do expect a modest uptick in FRE compensation expense in the second quarter. In Q1, we had a 40% margin on the firm's share of incentive fees, and we expect that to increase over time as our total incentive fee revenue and the firm's share of that revenue increase. Separately, our stock-based compensation was higher in the first quarter, consistent with the same period of last year. We expect stock compensation expense to decrease significantly in the second quarter to levels just above Q2 of last year. We remain disciplined in managing expenses, and non-GAAP general and administrative and other expenses were $19.7 million in the quarter.

Pamela Lyn Bentley: We do expect a modest uptick in FRE compensation expense in the second quarter.

Pamela Lyn Bentley: In Q1, we had a 40% margin on the firm's share of incentive fees and we expect that to increase over time as our total incentive fee revenue and the firm's share of that revenue increases.

Pamela Lyn Bentley: Separately, our stock based compensation was higher in the first quarter consistent with the same period of last year.

Pamela Lyn Bentley: We expect stock compensation expense to decrease significantly in the second quarter to levels, just above Q2 of last year.

Pamela Lyn Bentley: We remain disciplined in managing expenses, and non-GAAP general and administrative and other expenses were $19 $7 million in the quarter.

Pamela Lyn Bentley: We expect similar levels next quarter, with the potential for a slight uptick from increased travel. Pulling together these factors on a year-over-year basis, fee-related earnings grew a healthy 26% in the quarter, and adjusted net income grew 39% in the quarter. Our fee-related earnings margin grew from 34% in the first quarter of 23 to 40% in the first quarter of 24. We expect our Q2 FRE margin level to be closer to that of the full year.

Pamela Lyn Bentley: We expect similar levels next quarter with the potential for a slight uptick from increased travel.

Pamela Lyn Bentley: Pulling together these factors on a year over year basis fee related earnings grew a healthy 26% in the quarter and adjusted net income grew 39% in the quarter.

Pamela Lyn Bentley: Our fee related earnings margin grew from 34% in the first quarter of 23% to 40% in the first quarter of 'twenty four.

Pamela Lyn Bentley: We expect our Q2 FRE margin level to be closer to that of the full year of 'twenty three.

Pamela Lyn Bentley: That said, we enjoy significant operating leverage, and our overall FRE margin trajectory for the full year is expected to move upward despite any quarterly fluctuation. Our balance sheet is strong, and we are very comfortable with our capital structure. We launched a transaction this morning to extend the tenor of our term loan by two years from 2028 to 2030.

Pamela Lyn Bentley: That said, we enjoy significant operating leverage and our overall FRE margin trajectory for the full year is expected to move upward despite any quarterly fluctuations.

Pamela Lyn Bentley: Our balance sheet is strong and we are very comfortable with our capital structure.

Pamela Lyn Bentley: We launched a transaction this morning to extend the tenor of our term loan in two years from 2028 to 2034.

Pamela Lyn Bentley: For almost 20 years, we have run our business with a modest amount of leverage to enjoy the attractive cost of capital, and we have always been vigilant about managing duration. The current market provides an attractive maturity extension opportunity. If completed, subject to market conditions, the transaction will result in a modest $50 million upsize to our term loan. The incremental cash will be used for general corporate purposes, continued investments in the business, and opportunistic stock repurchases.

Pamela Lyn Bentley: Almost 20 years, we've run our business with a modest amount of leverage to enjoy the attractive cost of capital and we have always been vigilant about managing duration.

Pamela Lyn Bentley: The current market provides an attractive maturity extension opportunity.

Pamela Lyn Bentley: If completed subject to market conditions. The transaction will result in a modest $50 million upsize to our term loan.

Pamela Lyn Bentley: The incremental cash will be used for general corporate purposes.

Pamela Lyn Bentley: <unk> investments in the business and opportunistic stock repurchases.

Pamela Lyn Bentley: We are maintaining a healthy quarterly dividend of $0.11 per share, or an annual yield of 4.6%, as of last Friday. There is room for future dividend growth as we enjoy positive momentum in our fee-related earnings. We also continue to repurchase shares under our repurchase authorization plan. Year-to-date through April, we have repurchased $28 million of stock through cash settlements of stock-based compensation issued to employees, leaving $37 million in our share repurchase program as of the end of April.

Pamela Lyn Bentley: We are maintaining a healthy quarterly dividend of 11 cents per share or an annual yield of four 6% as of last Friday.

Pamela Lyn Bentley: There is room for future dividend growth as we enjoy positive momentum in our fee related earnings.

Pamela Lyn Bentley: We also continued to repurchase shares under our repurchase authorization plan year to date through April we have repurchased $28 million of stock through cash settlement of stock based compensation issue to employees, leaving.

Pamela Lyn Bentley: Leaving $37 million and our share repurchase program as of the end of April.

Pamela Lyn Bentley: We continue to have confidence in our 24 financial objectives, including double-digit growth in private markets management fees, excluding catch-up fees, stabilization of ARS management fees, expanded FRE margins, and significant growth potential in our incentive fee revenues. Looking further into the future, we are focused on doubling our fee-related earnings in the next five years with further fee-related earnings margin expansion. We look forward to the opportunities ahead to deliver value to our clients and shareholders. Thank you again for joining us, and we're now happy to take your questions.

Pamela Lyn Bentley: We continue to have confidence in our 24 financial objectives, including double digit growth in private REIT gets management fees, excluding catch up fees stabilization of asset management fees.

Pamela Lyn Bentley: Banded FRE margin and significant growth potential in our incentive fee revenues.

Pamela Lyn Bentley: Looking further into the future we are focused on doubling our fee related earnings in the next five years with further fee related earnings margin expansion.

Pamela Lyn Bentley: We look forward to the opportunities ahead to deliver value to our clients and shareholders.

Pamela Lyn Bentley: Thank you again for joining us and we're now happy to take your questions.

Operator: Thank you. If you would like to ask a question at this time, please press star one on your telephone keypad. If you are using a speakerphone, please ensure your mute function is turned off. Again, that function is star 1.

Speaker Change: Thank you now if you would like to ask a question at this time. Please press star one on your telephone keypad. If you are using a speaker phone. Please ensure your mute function is turned off.

Operator: Again that function is star one.

Operator: Our first question comes from Bill Katz with TD Callen.

Operator: Our first question comes from Bill Katz with TD Cowen.

William Raymond Katz: Okay, thank you very much, and good morning everybody. Maybe two questions. First one, Michael, for you, you mentioned that your origination capabilities continue to expand. I was just wondering if you could maybe go into that a little bit and talk about some of the areas of expansion and opportunity from here.

William Raymond Katz: Okay. Thank you very much and good morning, everybody.

William Raymond Katz: Two questions first one Michael for you you mentioned that your origination capabilities continue to expand and just sort of wondering if you could maybe click into that a little bit and talk about some of the areas of expansion and opportunity from here.

Michael Jay Sacks: Sure, thanks for the question. If you think about, you know, our business... and you think about all of the relationships we have, from our primary fund investment activities, and you look at our co-investment activity in infrastructure and in private equity as two examples, I think the same holds in the real estate space.

Michael: Sure. Thanks for.

Speaker Change: For the question.

Michael Jay Sacks: If you think about you know.

Michael Jay Sacks: Our business and you think about all of the relationships we have.

Michael Jay Sacks: From our primary fund investment activities.

Michael Jay Sacks: You look at like our co investment activity and infrastructure.

Michael Jay Sacks: And in private equity as two examples I think the same holds in real estate space.

Michael Jay Sacks:

Michael Jay Sacks: We are, we've sort of proven that we have great origination capability and great flow with regard to equity co-investing. We think we have that same capability and probably, you know, but probably kind of multiples of volume with regard to debt origination in the infrastructure space, in the private equity space, and in the real estate space. And so we are, in our view, we are long origination, and we have, you know, lots of ability to be a very valuable partner to investors providing unique credit investment opportunities on a co-investment basis, either in a commingled fund or in a separately managed account. And I think there's, you know, a lot of origination upside there that we can provide to investors.

Michael Jay Sacks: We are we're sort of proving that we have great origination capability and great flow with regard to equity co investment.

Michael Jay Sacks: We think we have that same capability and probably but what probably kind of multiples of volume.

Michael Jay Sacks: Yeah, and with regard to debt origination in the infrastructure space in the <unk>.

Michael Jay Sacks: Private equity space and in the real estate space, we're using some of our origination capability now.

Michael Jay Sacks: For our credit funds now, but I think the I think the origination capability that we have outstrips the capital that we have at this time in credit and so we are our view we are long origination and we have.

Michael Jay Sacks: Lots of ability to be a very valuable partner to <unk>.

Michael Jay Sacks: Investors providing unique.

Michael Jay Sacks: Credit investment opportunities on a co investment basis, either in Commingled fund or in separately managed accounts.

Michael Jay Sacks: And I think there's a lot of origination upside there that we can provide to invest.

Michael Jay Sacks: Investors.

Jonathan Reisin Levin: Okay, thank you. And John made one for you.

Speaker Change: Okay. Thank you and John maybe one for you you sort of highlighted.

Speaker Change: The opportunity here in terms of re ups it encumbered.

Jonathan Reisin Levin: You sort of highlighted the opportunity here in terms of re-ups and the encumbered, um, um, opportunity set. The $4 billion they said in terms of the pipeline, can you provide some perspective on that? How big was that maybe a quarter or a year ago? And then how quickly do such pipelines tend to fund through AUM and or feed-paying AUM?

John: Opportunity set the 4 billion that you said in terms of the pipeline can you provide some perspective on that how big was that maybe a quarter or a year ago and then how quickly do such sort of pipelines tend to fund through AUM and fee paying AUM. Thank you.

Jonathan Reisin Levin: Thank you.

Speaker Change: Sure well look I think bill if you think about it.

Jonathan Reisin Levin: Which is implied in the numbers you know we raised $1 6 billion of capital are in.

Jonathan Reisin Levin: Sure, well, look, Bill, if you think about it, which is implied in the numbers, you know, we raised $1.6 billion of capital in the first quarter, and we're saying we have, you know, $4 billion of re-up pipeline that we feel good about for the balance of this year. The combination of those two numbers alone would take us north of total fundraising for last year. And so just to put the environment relative to last year, it's clearly a more productive environment for capital formation. But I don't think we're back at kind of 2021 levels.

Jonathan Reisin Levin: In the first quarter and we're saying we have you know 4 billion of rehab pipeline that we feel good about for the balance of this year. The combination of those two numbers alone would take us north of a total fund raising for last year.

Jonathan Reisin Levin: And so just some perspective on the environment relative to last year, it's clearly a more productive environment for our capital formation I don't think we're back at kind of 2021 levels, but in terms of the ability to have constructive conversations with investors, there's a lot more activity right.

Jonathan Reisin Levin: But in terms of the ability to have constructive conversations with investors, there's a lot more activity right now than you would have seen a year ago. And you see that across all the metrics of the business, whether that's RFPs we're filling out or marketing books we're preparing or, frankly, even travel and things of that nature. And so I think that's definitely indicative of the environment. You know, when you look into that $4 billion of pipeline, you're going to see all the different verticals represented, and you're going to obviously see all the different activities represented too in terms of fund investing, co-investing, secondary investing, direct investing, et cetera. Hopefully, that answers your question. If there's anything else you want to drill down on there, fire away again. That's all good for now.

Jonathan Reisin Levin: That's good for now. Thank you very much.

Jonathan Reisin Levin: Now.

Jonathan Reisin Levin: Then you would've seen kind of a year ago, and you see that across all the metrics of the business, whether that's rfps, we're filling out our marketing books were preparing or frankly, even travel and things of that nature, and so I think thats.

Jonathan Reisin Levin: Definitely indicative of the environment.

Jonathan Reisin Levin: When you.

Jonathan Reisin Levin: Look into that.

Jonathan Reisin Levin: $4 billion of pipeline Youre going to see all the different verticals represented.

Jonathan Reisin Levin: And youre going to obviously see.

Jonathan Reisin Levin: All the different activities represented two in terms of.

Jonathan Reisin Levin: Fund to invest in co investing secondary investing direct investing.

Jonathan Reisin Levin: Et cetera. So.

Jonathan Reisin Levin: Hopefully that answers your question or if theres anything else you want to drill down in there.

Jonathan Reisin Levin: Fire away again.

Jonathan Reisin Levin: That's good for now thank you very much.

Jonathan Reisin Levin: Okay.

Operator: We'll now take our next question from Ken Worthington, with J.P. Morgan.

Jonathan Reisin Levin: Well now take our next question from Ken Worthington with J P. Morgan.

Kenneth Brooks Worthington: Hi, good morning, and thanks for taking the questions. When we look at fundraising in private markets and contributions to fee-paying AUM, less of the quarterly flows today are being generated by current fundraising, and more is coming from CNY FPOM. Can you talk about how fundraising is evolving here and changes to preferences in terms of fund structure that you're seeing from your investors in private markets?

Kenneth Brooks Worthington: Hi, good morning, and thanks for taking the questions.

Kenneth Brooks Worthington: When we look at fund raising in private markets and contributions to fee paying AUM less of the quarterly flows today are being generated by current fund raising and Morris coming from C. N Y F. Palm can you talk about how fundraising is evolving here and changes to preferences in terms of fun.

Kenneth Brooks Worthington: Structure that youre seeing from your investors in private markets.

Michael Jay Sacks: Sure. It's Michael.

Michael: Sure it's Michael Thanks.

Michael: So I think that what you're you're highlighting is really a.

Michael: More of a.

Michael Jay Sacks: Thanks. So I think that what you're highlighting is really more of a function of, you know, like what happened last quarter as opposed to a, you know, a trend or anything. John just, you know, talked about $4 billion in re-ups. We think it'll be done by the end of the year, and, you know, and obviously, that doesn't include any of the specialized fund fundraising, and that doesn't include any new client activity or new programs for existing clients. So it is a generally robust environment there.

Michael: A function.

Michael Jay Sacks: Of.

Michael Jay Sacks: Like what happened last quarter as opposed to a <unk>.

Michael Jay Sacks: Trend or anything John just talked.

Michael Jay Sacks: <unk> talked about 4 billion of re ups, we think gets done by the end of the year.

Michael Jay Sacks: Yeah Yeah.

Michael Jay Sacks: And obviously that doesn't include any of the specialized fund fundraising and that doesn't include any new client.

Michael Jay Sacks: Activity.

Michael Jay Sacks: New programs for existing clients. So generally robust environment. There. We've said before on these calls that there has been a shift in the industry I think we talked about this early like literally as we were coming to market.

Michael Jay Sacks: We've said before on these calls that there has been a shift in the industry. I think we talked about this early, like literally as we were coming to market back in 2020 and that there, and it's why we published and continue to publish CNYF POM because in the When we price our funds, we're always looking at effective fee and trying to price, I think John once talked about this on a quarterly call, we're trying to price to neutrality on effective fee, you know, as opposed to, you know, because the way these structures work are different, but I don't think there's any change that has occurred, frankly.

Michael Jay Sacks: Back in 2020 and that there is.

Michael Jay Sacks: Why we published and will continue to publish C N way up.

Michael Jay Sacks: Because in the separate account space or some co mingled funds in the industry certain strategies capital comes in on either a fee on time ramping basis or a fee on an as invested basis as opposed to a fee on a on committed.

Michael Jay Sacks: Capital bases and we have accounts we have.

Michael Jay Sacks: Commingled funds that have both when we price our funds, we're always looking at effective fee.

Michael Jay Sacks: Turning to price I think John wants to talk about this on a quarterly call, we're trying to price to neutrality on effective fee.

Michael Jay Sacks: You know as opposed to.

Michael Jay Sacks: Because that was the way these structures work are different but I don't think there's any change that has occurred frankly.

Michael Jay Sacks: I think by the time, you know, we were coming public in 2020 and we were talking about it, and CMYF was part of our initial offering, there had been a significant change in the industry and certainly nothing reversing that trend over the last four years. And obviously, the individual investor market offers an opportunity for improved fees to some extent. And so I think the fee, the effective fee rates are good.

Michael Jay Sacks: I think by the time, we were coming public in 2020, and we were talking about it.

Michael Jay Sacks: C N way up on this part of our initial offering there had been there had been a significant change in the industry and certainly you know nothing.

Michael Jay Sacks: Reversing that trend over the last four years.

Michael Jay Sacks: Effective fee rates on fee paying AUM have stayed stable.

Michael Jay Sacks: And.

Michael Jay Sacks: And obviously the individual investor market offers opportunity for improved you know feet to some extent and so I think the fee the effective fee rates are good but the structure of <unk>.

Michael Jay Sacks: But the structure of, you know, That changed a while ago, and that's continuing, but it's nothing short-term. It's something that is a part of the industry today. It's something we've talked about, we talked about literally years ago, and I think we may have dug into it a little bit deeper on one of the calls.

Michael Jay Sacks: Okay, great. Thank you.

Michael Jay Sacks: That changed a while ago and that is continuing but it is nothing short term, it's something that is part of the industry today, it's something we've talked about.

Michael Jay Sacks: We talked about literally years ago, and I think go into perhaps I think we made the dug into it a little bit deeply in one of the calls.

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

Michael Jay Sacks: Okay, great. Thank you.

Michael Jay Sacks: Then can you just give us an update on your insurance build out you sort of announced a program how how is that progressing and how is it building.

Michael Jay Sacks: It is progressing well, and we have continued to raise funds there. We have continued, you know, a strong pipeline there, and we continue to try to tailor our investment manufacturing capability to make the most sense for that market and really unlock that market. So we remain, you know, we believe that was a very good investment for us. We're seeing, you know, others target the space. And we believe that channel has a lot of promise for us over, you know, the next five years as we seek to double our FRE, you know, double our FRE.

Michael Jay Sacks: It is progressing well.

Michael Jay Sacks: Yeah.

Michael Jay Sacks: We have continued.

Michael Jay Sacks: Fundraising there we have.

Michael Jay Sacks: Continued strong pipeline.

Michael Jay Sacks: There and we continue to try to tailor our.

Michael Jay Sacks: Oh, our investment manufacturing capability to make the most sense for that market and really unlock a unlock that market and so we remain we believe that was a very good investment for us.

Michael Jay Sacks: Others target.

Michael Jay Sacks: And we believe that channel has a lot of promise for us over the next five years as we seek to.

Michael Jay Sacks: Double R F R E double our FRE.

Speaker Change: Okay, great. Thank you.

Michael Jay Sacks: Okay.

Operator: Again, if you have a question, please press star and then 1 on your telephone keypad. We'll now take a question from Adam Betty with UBS.

Michael Jay Sacks: Again, if you have a question. Please press star and then one on your telephone keypad.

Adam Quincy Beatty: Well now take a question from Adam <unk> with UBS.

Adam Quincy Beatty: Thank you and good morning. I just wanted to touch on the outlook for ARS. Obviously, a bit of a milestone here with net flows turning positive. And, you know, it still seems, you know, you're guiding sort of stable fees, a little bit cautious, which is fair given, you know, 1Q was still down from prior periods. But just want to give you a sense of the level of interest, the level of dialogue with clients, you know, and how you're seeing flows possibly improving either this year or over the long term in ARS. Thanks very much.

Adam Quincy Beatty: Alright, Thank you and good morning, just wanted to touch on the outlook for a R. S. Obviously a bit of a milestone here with net flows turning positive and you know it still seems you know you're guiding sort of stable fees, a little bit cautious which is fair. Given you know once you were still down from from prior periods.

Adam Quincy Beatty: But just wanted to get a sense of the level of interest the level of dialogue with clients you know.

Adam Quincy Beatty: And how you're seeing flows, possibly improving either this year or over the long term in a R. S. Thanks very much.

Michael Jay Sacks: Yeah, thank you, Adam. We've heard from us in our prepared remarks, and you're correct with regard to what you heard, but it's not so much, you know; it's just like our realistic view. So we're not changing our budgeting convention. If you then, you know, extrapolate that, you know, based on what happened in the first quarter, you'd expect some outflows, you know, between now and the end of the year.

Speaker Change: Yeah. Thank you Adam.

Michael Jay Sacks:

Michael Jay Sacks: Uh Huh, we hurt us in our prepared remarks.

Michael Jay Sacks: And you're you're you're correct with regards to what you heard but it's not so much just like our realistic view. So we're not changing our budgeting convention. If you then extrapolate that you know based on what happened in the first quarter. You expect some outflows are you know between now and the end of the year we.

Michael Jay Sacks: We did take you know say that are we think not only fee rates have stabilized but are stable, but we think revenues are stable and we think revenues are going to going to grow.

Michael Jay Sacks: Going forward through compounding.

Michael Jay Sacks: And that is sort of what are you know how how we budgeted for.

Michael Jay Sacks: For the rest of the year end.

Michael Jay Sacks: And your question on pipeline is a good one the pipe the pipeline is up the pipeline in the U S is definitely up the interest level is up it is not really a surprise in light of the very good recent performance.

Michael Jay Sacks: But we're not, you know, believe me, when we see a real change, we'll call it. We're not, you know, afraid to say we see it. We just think it's a little early. And, you know, it's and so we're maintaining our convention, but we're, you know, the pipeline's up, and we're certainly, you know, going to try to win every single piece of business that is in that pipeline.

Michael Jay Sacks: But we're not you know believe me when we see a real change we'll call. It we're not.

Michael Jay Sacks: Afraid to say, we see it we just think it's a little early.

Michael Jay Sacks: And you know, it's a yeah and so were maintaining our convention but were.

Michael Jay Sacks: Pipelines up and we're certainly going to try to win every single piece of business that is in that pipeline.

Adam Quincy Beatty: I appreciate it. Thanks, Michael. And then maybe for John on the pipeline, definitely got our attention with the $4 billion figure out there.

Speaker Change: I appreciate it thanks Michael.

Michael Jay Sacks: And then maybe for John on the pipeline definitely got our attention with the 4 billion.

John: Figure out there just wanted more qualitatively to drill into kind of how you go about thinking about that is that you know are the are the re up rates and the increased contribution rates similar to historical averages maybe a bit less right now given the environment or what have you and how much of.

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

John: That is based on sort of specific pre commitments or other dialogue with certain clients. Thank you.

Jonathan Reisin Levin: Thank you.

Speaker Change: Yeah, So just to be clear on the wonder of $4 billion of.

Jonathan Reisin Levin: In micro clarified this but I think it's an important point to $4 billion of rehab pipeline. We mentioned in the prepared remarks is just about our separate account rehab. So it doesn't include.

Jonathan Reisin Levin: Yeah, so just to be clear on that, when the $4 billion of REopt pipeline we mentioned in the prepared remarks is just about our separate account, REopt, so it doesn't include... Fundraising activity for ARS. It doesn't include fundraising activity for new client acquisition. It doesn't pick up our specialized funds.

Jonathan Reisin Levin: Fund raising activity for a R. S. It doesn't include fund raising activity for new client acquisition that doesn't pick up.

Jonathan Reisin Levin: Our specialized funds.

Jonathan Reisin Levin: And so A, that's just important to understand in terms of how we think about the balance of the year from a fundraising perspective, but it's also important to understand because it ties in pretty directly to the comments that I was drilling down on in my section, which were the nature of these separate account relationships, and the nature of them is that these are predominantly institutional investors that we are talking to every day, every week, every month. And that means you're talking to them about how much dry powder is remaining in the program.

Jonathan Reisin Levin: And so that's just important to understand in terms of.

Jonathan Reisin Levin: How do we think about the the balance of the year from a fundraising perspective, but it's also important to understand because it ties in pretty directly.

Jonathan Reisin Levin: To the comments that I was drilling down in my section, which was the nature of these.

Jonathan Reisin Levin: Separate account relationships and the nature of them is these are.

Jonathan Reisin Levin: Predominantly institutional investors that we are talking to every day every week every month.

Jonathan Reisin Levin: And that means you're talking to them about how much dry powder is remaining in the program.

Jonathan Reisin Levin: That means you're talking to them about their own calendar in terms of when they are scheduled to go through various processes on their end internally, whether those be investment committees or legal document review, whatever it is. And you actually are working as partners to look at what date or weeks, you know, within what period of time you're trying to sign the re-up. You have very, very good visibility into that. And that's the nature of those collaborative, you know, close relationships that you understand when those re-ups are happening.

Jonathan Reisin Levin: That means you're talking to them about their own calendar in terms of when they are scheduled to go through various processes on their end internally, whether those be investment committees or legal document review whatever it is and you actually are working as partners to look at what date or weeks you know within what period of time, you are trying to sign the rehab.

Jonathan Reisin Levin: We are very very good visibility into that.

Jonathan Reisin Levin: And it's that that's the nature of those collaborative you know close relationships that.

Jonathan Reisin Levin: You understand when those re ups are happening. So it was kind of just the calendar right and it's a calendar that you have exceptional transparency.

Jonathan Reisin Levin: So it's kind of just a calendar, right? And it's a calendar that you have exceptional transparency into. Our re-up rates remain very strong at 90% plus, and the fact that oftentimes the re-up is occurring at a higher level than the previous program. We talked about the average being close to 30% on that front. And so it's a part of your pipeline that you feel highly, highly, highly confident in. Now do you have times sometimes where you think something might happen on one day, but it happens a couple weeks later?

Jonathan Reisin Levin: Into our re up roommate rates remained very strong at 90% plus.

Jonathan Reisin Levin: The fact that oftentimes the re up.

Jonathan Reisin Levin: <unk> occurring at a higher level than the previous program, we talked about the average of being close to 30% on that front and so it's a it's a part of your pipeline that.

Jonathan Reisin Levin: That you feel highly highly highly confident in now do you have time, sometimes where you thought something might happen on one day, but it happens a couple of weeks later sure, but you feel very confident that that re up calendar is going to occur and that's one of the reasons.

Jonathan Reisin Levin: Sure, but you feel very confident that that re-up calendar is going to occur, and that's one. Obviously, beyond delivering the strong value proposition to clients, one of the reasons we love that business is because of the predictability, the stability, the transparency, and the opportunities for growth that it offers.

Jonathan Reisin Levin: Obviously beyond delivering a strong value proposition to clients one of the reasons, we love that business is because of the predictability and stability in the transparency and the opportunity opportunities for growth.

Jonathan Reisin Levin: That it offers.

Jonathan Reisin Levin: Super. Thanks again for the extra detail on the slide. I appreciate it. We'll now take our next question from Tyler Mueller with William Blair.

Super: Super Thanks, again for the extra detail on the slide I appreciate it.

Tyler Mueller: We will now take our next question from Tyler Miller with William Blair.

Operator: Hi, good morning. It's Tyler. I'm here for Adam and Jeff.

Tyler Mueller: Hi, Good morning, Tyler on for Adam and Jeff.

Tyler Mueller: And then just covered the net flow outlook pretty well, but it was a particularly strong quarter for us.

Operator: Performance.

Tyler Mueller: Some key color.

Tyler Mueller: The key drivers there. Thank you.

Operator: Yeah.

Michael Jay Sacks: Yeah, I think that in general, the environment over the last few Michael Sacks, Jonathan Levin, Stacie Selinger, Craig Siegenthaler, Kenneth Worthington, Adam Beatty, Michael Sacks, Jonathan Levin, Stacie Selinger, Pamela Bentley, Willow Miller, Alexander Bernstein, GCM Grosvenor, Kenneth Worthington, Adam Beatty, Michael Sacks, Jonathan Levin, [inaud So it's just been a good environment, you know, for a hedged approach and four ARS strategies.

Tyler Mueller: Yeah, I think that.

Tyler Mueller: In general the environment.

Michael Jay Sacks: Over the last.

Michael Jay Sacks: Six quarters or whatever five quarters has been a.

Michael Jay Sacks: You know a better environment for absolute return strategies. There has been you know ample volatility there's been more dispersion than we've seen in the past higher rates are constructive.

Michael Jay Sacks: And so.

Michael Jay Sacks: Well you know all of those sort of macro.

Michael Jay Sacks: Factors are are are constructive for.

Michael Jay Sacks: Our S returns in particular dispersion among among equity returns and the ability to have a better return set from credit investments better.

Michael Jay Sacks: Yield on short credit rebate things like that so it's just been a it's been a good environment.

Michael Jay Sacks: You know what for.

Michael Jay Sacks: Four.

Michael Jay Sacks: Hedged approach and for a our strategies.

Speaker Change: Well congrats on the same thank you.

Operator: We'll now take a follow-up from Bill Katz with the TD Calendar.

Michael Jay Sacks: Well now take a follow up from Bill Katz with P. D Cohen.

William Raymond Katz: All right, excellent. Thank you. Just a couple of cleanup ones. Just in terms of the buyback, how much that actually reduces the actual share count versus maybe offsetting the stock issue, which is given the Q1 elevated stock base comp?

William Raymond Katz: All right excellent. Thank you just a couple of clean up ones.

William Raymond Katz: In terms of the buyback how much of that actually reduces the actual share count versus maybe offsetting.

William Raymond Katz: The stock issue was given the Q1 elevated stock based comp.

Michael Jay Sacks: Most of the buyback was substantially, if not all, to manage the dilution from stock-based comp, which, as you know, is a goal of ours.

Speaker Change: And most of that most of the buyback.

Michael Jay Sacks: It was oh.

Michael Jay Sacks: Yeah.

Michael Jay Sacks: Is it substantially if not all of it was.

Michael Jay Sacks: Managing the dilution from stock based comp, which as you know is a is a goal of ours.

William Raymond Katz: Okay, and then just another one on comp. So if I did my math right, the cash comp component of the variable incentive on your share of the incentive fees, I think that ratio this quarter was 60%, which is up, I think, quarter on quarter, year on year, pretty substantially. And I think you talked about this a little bit last quarter. I just want to get your updated thoughts. As the extent that the incentive pool rises and you start to monetize more the incentive revenues, and your share of that goes up, is there an opportunity to continue to lift that ratio? And by doing so, does that give you a little more control over the FRE comp underneath that? Thank you.

Michael Jay Sacks: Okay, and then just another one on comp so if I did my math right the cash comp component of variable incentive on your share of the incentive fees I think that ratio. This quarter was 60%, which is up quarter on quarter year on year pretty substantially.

William Raymond Katz: And I think you talked about just over the last quarter I just wanted to get your updated thoughts as the to the extent that the incentive pool rises and you start to monetize more of the of the incentive revenues and your share of that goes up is there an opportunity to continue to lift that ratio and by doing so is that give you a little more control over the <unk>.

William Raymond Katz: Comp underneath that thank you yeah, so that.

Michael Jay Sacks: So that's actually a great question, and I'm very glad that you asked that. And, as you know, we believe that we have a lot of earnings power in that line. I think I said in my comments that the only thing that wasn't a bright spot in the first quarter was that we didn't see the carry revenue, you know, grow, and we need to see, you know, good, good that we've got announced transactions up; we need to see them closed, and we need to see distributions. And we can; we know it will come when we continue. We're waiting for it.

Speaker Change: That's actually that's actually a great question and very glad that you asked that.

Michael Jay Sacks: And yeah as you know we believe that we have a lot of earnings power in that line are you know I think I said in my comments you know the only thing that wasn't like a bright spot in the first quarter was we didn't see the carry revenue.

Michael Jay Sacks: Grow and we need to see good good that we've got announced transactions up we need to see them close and we need to see distributions.

Michael Jay Sacks: And we can we know it will come we will continue we're waiting for it.

Michael Jay Sacks: As the carry revenue grows, and as our percentage of the gross carry revenue grows, because the firm's ownership percentage of carry revenue for 2014 forward is much higher than it was prior to 2014. And you can see that in the presentation. As that grows, we do think we have real margin opportunity in that line. Obviously, when we have, you know, sort of very low levels of revenue, we'll have a lower margin there.

Michael Jay Sacks: As the carry revenue grows and as our percentage of the gross carry revenue grows because the firm's ownership percentage of carry 2014 forward is much higher than.

Michael Jay Sacks: It was prior to 2014 and you can see that in the presentation.

Michael Jay Sacks: As that grows we do think we have real margin opportunity in that line. Obviously, when we have you know sort of very low levels of revenue, we will have a lower margin there and as we get.

Michael Jay Sacks: And as we get to, you know, more normal levels of revenue, and we get some of the growth that we believe is a question of when, not if, we would hope to have higher margins there in the future and have the ability, you know, to be smart about that. So I appreciate the question, and I think your suspicions are, in effect, correct. And I hope that the answer was

Michael Jay Sacks: To you know a more normal levels of revenue and we get.

Michael Jay Sacks: Some of the growth that we believe is a question of when not if we would hope to have higher margin there in the future and have the ability to be smart about that so.

Michael Jay Sacks: Appreciate the question and.

Michael Jay Sacks: I think your suspicions in effect are.

Michael Jay Sacks: Correct.

Michael Jay Sacks: And hope that answer was clear.

William Raymond Katz: Thanks for taking the extra questions and being very helpful. Thank you.

Speaker Change: Thanks for taking the extra questions and very helpful. Thank you.

William Raymond Katz: Okay.

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

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

Michael Jay Sacks: Thank you for joining us today. We appreciate your interest, and we look forward to speaking with you next quarter, if not before. Have a great day.

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

Operator: 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.

Speaker Change: And ladies and gentlemen, thank you for your participating in today's conference. This concludes today's program. We hope everyone has a great day you may all disconnect.

Operator: Yeah.

Operator: [music].

Operator: Yeah.

Operator: Yeah.

Operator: Okay.