Q4 2024 GCM Grosvenor Inc Earnings Call
Good day and welcome to the GCM-Grosvenor 2024 4th Quarter and Full Year Results Call.
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.
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As a reminder, this call will be recorded.
I would now like to hand the call over to Stacie Selinger, Head of Investors Relations. You may begin.
Speaker Change: Thank you. Good morning and welcome to GCM Grosvenor's fourth quarter and full year 2024 earnings call.
Speaker Change: Today I am joined by GCM Grosvenor's Chairman and Chief Executive Officer Michael Sacks, President Jon Levin, and Chief Financial Officer Pam Bentley.
Before we discuss this quarter's results,
Speaker Change: A reminder that all statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements.
Speaker Change: This includes statements regarding our current expectations for the business, our financial performance, and projections.
Speaker Change: 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.
Speaker Change: Please refer to the factors in the risk factor 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 section of our website.
Speaker Change: We'll 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 our website.
Michael Sacks: Thank you again for joining us. And with that, I'll turn the call over to Michael to discuss our results.
Thanks, Stacie. Good morning, everyone.
Michael Sacks: We are pleased to report a very strong fourth quarter and full year 2024.
Michael Sacks: Importantly, we report not only good financial results that exceed expectations.
Michael Sacks: but progress with regard to a number of our key strategic priorities that will contribute to our growth over the coming years.
Michael Sacks: With regard to our financial performance, we had a strong finish to a good year that sought solid results for our clients and significant growth in both fundraising and profit.
Michael Sacks: In the fourth quarter, our fee-related earnings increased 22% and our adjusted net income increased 63% as compared to the fourth quarter of 2023.
Michael Sacks: For the full year 2024, fee-related earnings increased 19% and adjusted net income increased 36% over the prior year.
Michael Sacks: These results represent a good start toward our goal of doubling 2023 fee-related earnings by 2028.
Michael Sacks: In 2024, we also continue to realize the operating leverage we have long seen in our business.
Michael Sacks: Our fee-related earnings margin was 42% for the year, compared to 38% in 2023 and 31% at the end of 2020.
Michael Sacks: We believe we continue to have operating leverage in our business and see opportunity for continued FRE margin expansion going forward.
during 2024.
Michael Sacks: We achieved $7.1 billion of total fundraising, a 40% increase compared to 2023.
Michael Sacks: We are pleased with that growth and pleased that, as expected, our fundraising in the second half of the year exceeded that of the first half.
Michael Sacks: Our fourth quarter fundraising of $2.3 billion was our highest fundraising quarter in more than two years, and importantly, our late-stage pipeline remains robust.
Looking at that pipeline today, our REopts
Michael Sacks: and based upon a bottoms-up build created with our investment and business development teams.
Michael Sacks: We were particularly successful last year with regard to fundraising for our specialized funds, closing on 1.9 billion of commitments to private market specialized funds.
Michael Sacks: That is our second highest year on record. The fourth quarter saw the final close of our Elevate Fund, a first-time fund for a private equity seeding strategy.
Elevate closed at nearly 800 million dollars which is respectable
Michael Sacks: in a difficult market for a first-time fund, particularly for a strategy that is not yet mainstream.
Michael Sacks: We've made some investments from the Elevate Fund that we're excited about, and we expect that strategy to grow over the next five years.
Michael Sacks: This quarter, we'll see the final close of our third Private Equity Co-Invest Fund, GCF-3, and the final close of our second Infrastructure Advantage Fund, IAF-2.
Michael Sacks: We expect both of those funds will be larger than their predecessor funds, and we look forward to reporting on those results next quarter.
Michael Sacks: Later in 2025, we plan to hold first closings for the next vintage of our private equity secondaries fund, GSF-4, and our direct oriented infrastructure fund, CIS-4.
Michael Sacks: Beyond our financial and fundraising success, we made meaningful progress in 2024 with regard to a number of key business priorities.
Michael Sacks: During the year we deepened our credit investment talent with a number of important hires who brought complimentary expertise to our team.
Michael Sacks: Clients are recognizing the value of our credit platform where we raised 1.8 billion dollars or over 25% of total funds raised last year.
Michael Sacks: As investors grow and evolve their private credit allocations, we believe we are well positioned to be a value-added partner, serving as a single point of entry for a diversified portfolio of credit primary fund investments, co-investments, and credit secondaries.
Michael Sacks: We also saw improvement in our Absolute Return Strategies platform with 2024 ARS management fees stabilizing year over year.
The flows picture is improving in ARS.
Michael Sacks: The business performance last year was enabled by excellent investment performance.
Michael Sacks: Our multi-strategy composite generated a 4.5% gross return in the fourth quarter and a 14.3% gross return for the full year outperforming indices and peers.
Michael Sacks: Those returns generated $55 million in annual performance fee revenue, marking the third time in the last five years ARS performance fees exceeded $50 million.
as we have discussed previously.
Michael Sacks: $1 million in firm share of unrealized carry at net asset value and significant carry at work that is not yet in the money.
Michael Sacks: Our Incentive Fee Earnings Power remains strong and should support growth in adjusted net income over time.
Michael Sacks: Finally, as we discussed at length last quarter, one of our priorities for 2024 was to expand our product offerings and distribution in the individual investor channel.
Michael Sacks: Just two weeks ago we announced that our Infrastructure Interval Fund is open for investment with a seeded portfolio of $240 million across 43 infrastructure assets and $82 million of dry powder.
Michael Sacks: While it will take some time for sales from this product to build, and we are not assuming significant 2025 revenue from the fund, we do believe its potential over time is meaningful.
Michael Sacks: We anticipate investing further in our individual investor capabilities and look forward to sharing news of that.
in the future.
Michael Sacks: The tailwinds created by our financial and strategic success in 2024 give us confidence looking out.
Speaker Change: Our growth targets remain achievable and as we've always said and as John will discuss next
Michael Sacks: Our diversified platform gives us a number of ways to win. And with that, I'll turn it over to Jon.
Jon Levin: Thank you, Michael. The hallmarks of our platform are our breadth, depth, and flexibility.
Michael Sacks: across asset classes, the ways in which we can implement investments, and most importantly, how we work with our clients. The diversification of our platform is a key strategic advantage in positioning us to win with clients of all sizes and types.
Michael Sacks: Our capabilities and positioning in this attractive alternative investment industry provide a unique combination of stability, embedded growth, and optionality for the platform in the future.
Michael Sacks: I spend a significant amount of time with our clients around the world, regardless of where in the world I find myself, or whether the client is big or small, a public pension, a sovereign wealth fund, or a firm representing individual investors.
We hear two common themes.
Michael Sacks: Alts continue to grow as a percentage of investor portfolios and clients are generally under-resourced to attack the opportunity set. They need trusted partners to assist and to help build out alternative programs.
Michael Sacks: Now, where they need help varies by client. It could be a very specific area like credit secondaries, as Michael mentioned, or an exposure to a certain geography, or incorporating co-investments into their portfolio across the different alternative asset classes.
Michael Sacks: The good news is that we can help clients with any variation of their alternative needs given the positioning of our platform.
Michael Sacks: This flexibility means that we can compete for nearly all mandates, of all sizes, and with all client types. Our breadth across asset classes, which uniquely includes both private and public markets, also means that we can win in nearly every environment as clients shift their allocations between various alternative strategies.
Michael Sacks: This flexibility and breadth of coverage in combination with the deep involved nature of our partnerships with our clients provide us with this distinct privilege of being able to evolve with our clients as they evolve their portfolios and expand into new areas.
Michael Sacks: For example, as we've discussed on past calls, many investors have been prioritizing their allocations to infrastructure and private credit in recent years.
Michael Sacks: We've been a beneficiary of this focus and trend in the market. Infrastructure has been our fastest growing asset class since we went public, and credit was a massive contributor to our 2024 fundraising.
Michael Sacks: We see persistence behind the significant investor demand for both of these strategies.
Michael Sacks: In particular, we believe our full coverage of credit strategies, combined with our significant unlocked origination ability across credit strategies, positions us ideally to capture greater market share as investors grow and diversify their credit exposures.
Michael Sacks: While absolute return strategies contributed less significantly to our 22 and 23 fundraising, it was a meaningful contributor to our growth in 2024. We raised 1.3 billion dollars for the strategy in 2024, higher than the prior two years combined.
Michael Sacks: The improvement in vested sentiment has occurred on the heels of strong performance, strong and strong alpha generation.
Michael Sacks: Our ability to meet the demands of clients in a wide range of market environments provide important diversification and business stability, but also numerous paths for growth and upside. Said another way, our confidence in doubling our fee-related earnings by 2028 comes from the fact that we have so many ways to win, and therefore aren't dependent on a single strategy, client, or backdrop.
Michael Sacks: We also continue to expand our offerings and therefore create new ways to win.
Michael Sacks: And as Michael said, last year was an important year in driving those initiatives and we expect more momentum in 2025. With that, I'll turn the call over to Pam.
Pam Bentley: Thanks, John. Our strong results in the fourth quarter and 2024 exemplify the broader momentum that we are enjoying as a business.
Pam Bentley: Assets under management ended the year at $80 billion, and fee-paying AUM ended the year at $65 billion. Our strong fundraising drove a 12% year-over-year increase in our contracted not-yet-fee-paying AUM, ending 2024 at a record level of $8.2 billion.
Pam Bentley: Our contracted not-yet-fee-paying AUM provides a foundation for organic growth, and we expect it to convert to fee-paying AUM over the next few years.
Pam Bentley: Private markets again was a key driver of our 24 growth. We enjoyed very strong fourth quarter private markets management fees which increased 20% over the fourth quarter of 23, inclusive of over 7 million dollars of catch-up fees from IAS 2 and Elevate.
Pam Bentley: We expect lower catch-up fees of $2 to $3 million in the first quarter of 2025, primarily from IAF 2, which will have its final close at the end of Q1.
Pam Bentley: We are expecting private markets management fee growth X catch-up fees of around 10% year-over-year.
Pam Bentley: After IEF 2's final close, our funds in market will be earlier in their fundraising periods, and therefore, we expect minimal catch-up fees in Q2 to Q4 of 2025.
Pam Bentley: At the beginning of the year, we spoke about our expectation that absolute return strategies management fees would stabilize in 24, which they did, increasing 1% year over year.
Pam Bentley: We enter this year with a solid pipeline of activity on the heels of our excellent 24 investment performance.
Pam Bentley: In the first quarter of 2025, we expect ARS management fees to increase by 4% to 5% from the first quarter of 2024.
Pam Bentley: We remain disciplined in managing compensation expenses while also investing in talent and incentivizing our employees.
Fourth quarter fee-related earnings compensation declined sequentially to $35 million.
Pam Bentley: Looking to the first quarter of 25 we expect FRE related compensation and benefits to be in line with or slightly higher than our 24 quarterly average.
Pam Bentley: Non-GAAP General and Administrative and other expenses were 20 million dollars in the fourth quarter, down slightly on a sequential basis, and we expect those levels to remain stable in Q1.
Pam Bentley: Pulling together these factors, our fourth quarter and full year fee-related earnings grew 22% and 19% respectively. As Michael noted, we continue to have confidence in our long-term goal to double our 23 FRE by 2028.
Pam Bentley: Turning to incentive fees, we realized $57 million in the quarter, comprised of $42 million of annual performance fees and $15 million of carried interest.
Pam Bentley: These results brought our annual performance fees to $55 million, the third time we have exceeded $50 million over the last five years.
Pam Bentley: Run rate annual performance fees entering 2025 stand at $30 million.
Pam Bentley: Realizations have been muted, but the environment is starting to improve. Our gross unrealized carried interest stood at $836 million as of quarter end, more than double what it was at the end of 2020, and we believe that provides significant upside.
Pam Bentley: Our balance sheet is strong, and we are maintaining a healthy quarterly dividend of $0.11 per share. As of Friday, we had a 3.2% dividend yield, and there is room for future dividend growth as we enjoy positive momentum in our earnings.
Pam Bentley: We also continue to repurchase shares under our repurchase authorization plan and our board recently approved a 50 million dollar increase in our share repurchase program.
Pam Bentley: As a reminder, we intend to use the $82 million dollars now remaining in our program to largely manage dilution.
Pam Bentley: To close, we enjoy significant industry and business tailwinds heading into 25, giving us confidence in our long-term financial objectives.
Pam Bentley: 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.
Speaker Change: If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, you can press Star 1 to ask a question, and if you are in the event via the web interface and would like to ask a question, simply type your question in the Ask a Question box and click Send.
Speaker Change: And our first question is coming from Crispin Love with Piper Sandler.
Crispin Love: Thank you. Good morning. My first question is on FRE margins. You've had several years of steady growth in margins.
Speaker Change: I'm curious if you can discuss your margin outlook. Do you believe you can continue driving margins higher to the mid-40% range on an annual basis and beyond? And as you look out further, is there a cap on margins over the long term? Thank you.
Thank you. Thanks for the question.
Speaker Change: We did note that we've, to your point, we've had, you know, we knew very strong operating leverage and significant FRE margin.
Speaker Change: improvement over the last several years. We also wanted to be clear that we do think we have continued operating leverage. We do think we have continued FRE margin expansion ahead of us.
And I think that as far as a cap goes,
We're just sort of looking out.
Speaker Change: you know, a year, two years time and seeing that our FRE margins can continue to grow.
Speaker Change: I suppose at some point there's a cap, but we think from current levels we have room to grow those margins over the next several years while we're doubling our FRE from 23.
Perfect. I appreciate that. That was helpful.
Secondly on fundraising
Speaker Change: Curious about the cadence for 2025 you had very strong quarter
Speaker Change: in the fourth quarter. And I heard your 2025 guide expect to be higher than 2024. You mentioned some funds closing in the first quarter, but...
Speaker Change: As you look at 2025 as a whole, can you talk about the expected cadence of fundraising, and is there anything else worth calling out on a quarter-to-quarter basis? Thank you.
Sure, John, you want to take that?
I think, Crispin, one thing...
Speaker Change: to just back up and contextualize around our fundraising before answering your specific question is kind of how it works for us, right?
Speaker Change: and some of the historical commentary we made. I think we had felt that, you know, 23 was a tough fundraising environment for the sector. For us, we thought 24 was going to be better than 23, and it was.
Speaker Change: environment we think continues to improve, which gives us some macro commentary that feels like 25 better than 24. But for us, kind of specifically,
Speaker Change: We have a lot of insights into what happens in a given year just because of the separate account business and the re-up profile. So we know going into a particular year which clients are scheduled to have a separate account re-up.
Speaker Change: We know which activities, as you said, of specialized funds are meant to go to market and have their closings, and so we can kind of over a year period of time look at the year and say, yeah, based on all that bottoms-up buildup, there will be some kind of go-get in that number, but we have a pretty good baseline to feel like 25 is going to be better than 24. When it comes to like what specific quarter something will happen, that's where it gets a little bit tougher.
You can literally have situations where someone's meant to...
Speaker Change: you know, sign a contract on a particular day and they get sick and it flips to the next quarter and those can be big, chunky moves. So, I don't know that we'd give you a specific quarter-by-quarter analysis.
Speaker Change: But what we would tell you is that the pipeline is strong, the re-up calendar inside of the year is strong, and therefore kind of feel good about that 25 looking better than 24 type of guidance over the course of the year.
Speaker Change: Great. Thank you, Jon. I appreciate you all taking my questions.
Speaker Change: Our next question is coming from Ken Worthington with J.P. Morgan.
Ken Worthington: Hi, good morning. Maybe first, you've got a nice pipeline building in the private markets business.
Ken Worthington: The pace of the pipeline build was quite a bit faster than the pace of conversion from pipeline to fee-paying AUM.
Speaker Change: How should we see this conversion from pipeline to fee-paying AUM look in 2025? Do we see a nice pickup given the better market conditions and maybe the seasoning of the pipeline? Or is it, you know, should it...
Ken Worthington: for some reason continue to sort of lag the strong sales growth that you're generating.
Ken Worthington: Thanks, Ken. This is something we've actually talked about before, so obviously the most important thing is that the...
Ken Worthington: The macro environment and the attractiveness of the strategies remain very strong. The pipeline, to your point, is building and there's a lot of demand. And then, specifically, how that pipeline converts to fee-paying AUM.
Whether they are
Ken Worthington: Pay on committed funds, which start fees right away. Pay on committed funds with catch-up fees, start fees.
Ken Worthington: paying fees right away, and there's a catch-up from prior periods, or their payout as invested funds, where you make an assumption about how...
Ken Worthington: you know turn on as invested. Every year we raise capital where the fees turn on immediately upon closing.
and...
You know, it's that, uh...
Speaker Change: It's very hard to give specifics there, just as Jon talked about, sort of pace of fundraising. Every year, every quarter, it's sort of all of the above. We're winning new business that is every type of fee that I described.
And so I don't think much has changed.
Speaker Change: different types or structures of fee result in similar levels of actual fee to us and similar you know cash collections and margins over time but I don't I don't know that there's been a change there.
Speaker Change: And maybe, Jon, I would just add one thing. I'm not sure exactly which metric you're looking at, but
Speaker Change: You know if you look at contracted not yet fee paying AUM at the beginning of the year was 7.3 billion
Speaker Change: We ended the year at $8.2 billion, so that was up 12%. But if you look at the contributions in the fee-paying AUM walk from CNYF POM,
Speaker Change: is about $2.8 billion, you know, which is not, you know, about a third or so of the capital that we started the year with on a CMYF fund basis, which is not
Speaker Change: which makes sense to us. You know, if you think about an investment period of a program being about three years, the way that would work, whether it's time-based or invested-based, being about a third of that beginning year number is kind of a number that's generally in line.
Great, thank you.
Speaker Change: As we think about the absolute return business had a you know, one of his better years
Speaker Change: Are you seeing a change in the reception or the nature of the dialogue you're having with your customers? Like are we starting to see the alpha generation, I don't know, maybe market valuation levels?
Again, I guess just change the dialogue that you're having.
Speaker Change: Yeah, their performance was good, and so whenever performance is good,
Speaker Change: there is a, you know, change in the dialogue. It may be, you know,
Speaker Change: You know, it may vary in terms of how significant a change, but whenever you have good performance, which we've had for a while now, the dialogue changes. And I think in general, the pipeline is solid there. The outlook for that business is as good at this time of the year.
Speaker Change: as it has been in quite a long time. And so while our sort of base case...
Speaker Change: You know, budgeting hasn't changed, and we certainly are more optimistic with regard to the prospects for ARS than we have been in a while, and the pipeline and the fundraising profile is decent.
Okay, great, thank you very much.
Our next question is coming from Chris Katofsky with Oppenheimer.
Yeah.
Speaker Change: Good morning and thank you. First, I just wanted to make sure we got Pam's guidance on the private markets fee outlook correct.
Speaker Change: You mentioned 7.1 million catch-up fees in the quarter, and first quarter though would be two or three, so all things being equal, first quarter would be down.
Speaker Change: But then you gave the guidance of private markets' X fees up, I think you said, 10% to 12%. But there, we're only looking at the prior year catch-up fees, which is $6.8 million, or less than there was in the fourth quarter.
Speaker Change: Do I have that right? Are those the baselines? Let me just, Chris and Michael, thank you for joining and for the question. Let me just kind of reiterate what Pam said, just to make sure it's clear.
Speaker Change: We wanted to make sure we were providing, you know, apples to apples.
Speaker Change: numbers. And so in the past, we had talked about private market management fee growth, ex-catch-up, with catch-up, and we wanted to just lay it all out. So specifically what Pam said.
Speaker Change: was for the first quarter. We expect catch-up fees of $2-$3 million, which is lower than Q4.
Speaker Change: okay lower than first quarter of 25 and we expect X catch-up fees so excluding that two to three million
Private markets, management fee growth, 10% year over year.
So, Q1-24 vs. Q1-25.
Speaker Change: 25 is up 10 excluding catch-up fees add 2 to 3 million to that and that was our
our walk on private market management fees for Q1.
Okay, great. Thank you.
And then...
Speaker Change: I wonder if you could talk a little bit, give a bit more color on the retail vehicles that you've
launched.
and I guess...
Speaker Change: specifically I'm wondering is is there a potential on the private equity side also to have an anchor tenant like you did on on the
Speaker Change: on the infrastructure side, and then also if you can give any color on what should the marketing effort look like and what would success look like in 2024 and 2025.
Speaker Change: Is the goal to get listed on wire houses, or is there a different distribution channel? What's important to you in the next 12 to 24 months?
Speaker Change: So you got a bunch of really good stuff in there. So first,
Speaker Change: I would say that we were clear, and we tried to be very clear in our...
Speaker Change: in our comments prepared remarks that we are not expecting significant revenue contribution from that infrastructure fund in 2025.
Speaker Change: And because we launched it, and frankly launched it in such a terrific way, which is with around $300 million of anchor, as you called it, capital, a bunch of, you know, currently invested.
Speaker Change: specified portfolio that people can look at, some dry powder. We feel very good about the way we launched it, and to your private equity question, I think you'd always want to launch with real anchor capital like that if you can. It just is a leg up. That said, we were clear, don't bake in a ton of revenue.
Speaker Change: don't, you know, at all for 25, this is going to build, it'll build over time.
Speaker Change: vehicle for us as a firm, obviously for the investors, but for us as a firm. There's, you know, that infrastructure space is not crowded in the individual investor channel.
Speaker Change: and having a high-quality option is a terrific thing and we are optimistic that over time this can build.
Speaker Change: to be a real significant product and real significant revenue generator for us. But it's not going to be in 25, and it's probably not going to be, you know, not going to be a ton of it in 26.
Speaker Change: We would hope that this will find a home eventually, eventually in the wirehouse world, in the RIA world, and maybe the independent.
Speaker Change: The IBD world, but initially the focus of the marketing effort here is in the RIA space, and that is where the initial focus is. As you know, historically, our relationship set for the portion of our AUM that is represented by, comes from individual investors, has been wirehouse.
Speaker Change: One of the nice things about this is we are going into the RIA space with our capabilities and our brand and our name.
Speaker Change: We do hope, over time, that we'll have more to talk about in the terms of the institution.
individual investor space, both how we're pursuing marketing there and
Speaker Change: eventually ultimately you know more more choice for investors there and we just we look forward to talking about that over time and continuing to update people as there are substantive things to update you on.
Okay, great. Thank you. That's it for me.
Thank you.
Our next question is coming from...
from Bill Katz with T.D. Cowan.
Thank you.
Okay, thank you very much taking the questions this morning
Speaker Change: Maybe just focusing on the opportunity in the realized carry opportunity for the carry portfolio. Just sort of wondering, it looks like the comp ratio to GCMG after, so the contractual payments.
Speaker Change: was rather low this quarter, both quarter-on-quarter and year-on-year. How do we think about, to the extent that the revenue backdrop and the monetization activity were to pick up the payout ratio associated with those realizations? Thank you.
Speaker Change: when when you're you're talking about the of gross carry revenue the percentage of that that belong that is owned by the firm that would that was owned by the firm last year
Speaker Change: Right, so if I look at, if I strip out the, sorry for such a complex question, so if I look at the carry.
Speaker Change: and I back out the contractual payment that you have, the NCI, etc.
Speaker Change: and then the payment that you have for performance fees and I look at the rest which you then pay out to the GCMG employees. I think, if I did that math correctly from your disclosure, that ratio is around 45% this quarter.
Speaker Change: and I think it's been sort of averaging sort of 55 plus. So I was wondering, is it just a quantum opportunity here or how to think about that payout ratio? So I guess the broader question is how should we think about variable payout on realizations?
Speaker Change: I think that it's a great question to ask. I think the main way that you should think about it is that we have a ton of upside there.
Speaker Change: and the way that we look at it is there's a gross amount of carry. We separate the carry from the performance fees on the ARS side. We had a lot of performance fees on the ARS side this past year, $50 million, it's the third time in five years it's been at $50 million. We've shown that the run rate on base case kind of budgeting is about $30 million.
We've generated over 50 for the last few years,
Speaker Change: When you look at how much of the carry comes to the firm, that number has been significantly below.
Speaker Change: the percentage of the carry in the ground that we own.
Speaker Change: So, we own over half of the carry in the ground, the firm owns right around half, 401 million of the carry in the ground is owned by the firm.
and yet the firm's share of revenues.
Speaker Change: Gross coming in from the Cary has been well below that and that's because older Cary comes in first and the firm owned a lot less of the Cary Historically that it's owned over the last you know ten years
Speaker Change: So, we think the percentage of carry dollars over the next 10 years that the firm owns is much higher than it was over the last 10 years, including last year, and the amount of carry in the ground is higher.
Speaker Change: than it's ever been. So the picture there is very good because you've got more carry in the ground to be realized.
You've got the firm owning more of that.
and, frankly, you've got a ton of...
Bride Powder Carrier, whatever you want to call it.
Speaker Change: Kerry that's not yet at asset value but is behind the, you know, the Carriot and NAV. So that Carriot and NAV should, you know, replenish over time as we're enjoying the higher percentage of it.
Speaker Change: we think that's a very you know we got a lot of a lot of earnings power looking out from that line
Speaker Change: I agree with everything Michael said there, Bill, and I think there's one further element which you might have been also inquiring about, which is the cash-based incentive fee related compensation, which was being paid out at a higher ratio in the earlier quarters of the year and then was a lower percentage in the fourth quarter, which brought the full year to the 50% that you're referring to. Is that part of what your question was as well? Exactly, Jon.
Speaker Change: And so, yeah, that is true. So we had always guided, I think, historically, that that number would be 40 to 50%.
Speaker Change: And so the quarters, you know, can bounce around a little bit, but the full year came in at the high end of that range. Part of that is because, you know, as I think you know, not the carry, but the hedge fund performance fees get crystallized for the most part in the fourth quarter.
Speaker Change: So, that happening in the fourth quarter allowed the margin effectively in the fourth quarter to be higher to bring the full year in line with the top end of that range that we've given historically.
Speaker Change: Douglas Goldstein, financial planner & investment advisor, interviewed Sacks on Arutz Sheva Radio.
Speaker Change: and how many distribution channels you might be on and sort of what the roadmap might be in terms of headcount additions and maybe geographically or by subsection of the distribution of where you see the greatest sort of opportunity over the next couple years just to drive that more meaningful growth. Thank you.
Thank you so much.
Speaker Change: Happy to address that one, and Michael can add on too, Bill.
Speaker Change: As Michael just noted in response to the question from Chris, a lot of our success historically has been in the wire house channels where we have a handful of people who are so focused on that channel.
Speaker Change: and we've got kind of a two-pronged approach we're going to...
Speaker Change: and they're not mutually exclusive. And I think you've seen this model work successfully for many others in our space where there are some areas where you have partners that help leverage your distribution while you're building your own distribution capabilities internally. And those things can coexist together nicely. I think you've seen a lot of partnerships raise a lot of capital and have a lot of success using that type of model.
But I think it is absolutely the case that...
Speaker Change: We're always investing in the business. We're always investing in distribution. The marginal dollar of investment today is going into distribution, within distribution. It's going into the individual investor distribution, and I think you'll see us invest more in that space and have news to share in that space over the coming weeks, months, quarters.
Great. Thank you very much.
Speaker Change: And again, if anyone would like to ask a question, please press star 1 on your telephone keypad.
Speaker Change: And it appears there are no further questions at this time. I will now turn the call back to Stacie for any closing remarks.
Stacie Selinger: Thank you, everyone, for joining us today. We appreciate the engagement and the questions. If there are follow-ups, feel free to reach out. If not, we look forward to speaking with you again next quarter. Have a good day.
Stacie Selinger: 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.