Q3 2025 GCM Grosvenor Inc Earnings Call

Please stand by the conference. Will begin shortly.

Good day and welcome to the GCM Groner. Third quarter 2025 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 zero on your telephone. As a reminder, this call will be recorded. I would now like to hand the call or to Stacy Selinger head of investor relations, you may begin

Thank you. Good morning and welcome to GCM Grovers third quarter 2025 earnings call today. I'm joined by GCM Grover's chairman and chief executive officer. Michael facts, President John Lavin and Chief Financial Officer. Pam Bentley

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. 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 10K, our other filings with the Securities and Exchange Commission and our earnings release. All of, which can be found on the public shareholder section of our website.

Well also refer to now measures that we view as important in assessing the performance of our business. A Reconciliation of non-gaap measures to the nearest Gap metric. Can be found in our earnings presentation and earning supplement, both of which are on our website.

Thank you again for joining us. And with that, I'll turn the call over to Michael to discuss our results.

Thank you, Stacy.

We are pleased to report another strong quarter for GCM Grover led by strong investment performance, strong fundraising, and financial results that exceeded expectations

For the quarter, our fee related, earnings adjusted Evita and adjusted net income. We're up 18% 16% and 18% respectively as compared to the third quarter of 2024 and the results are similarly, favorable on a year-to-date comparison.

We're also seeing strong momentum sequentially with third quarter fee related earnings and adjusted net income, growth of 13% and 16% over the second quarter of 2025.

Our fee related, earnings margin for the quarter was 45%, which is approximately 350 basis points, higher than it was in the third quarter of last year.

We ended the quarter with the record. 87 billion of assets under management and 9% increase compared to the end of the third quarter of 2024.

Investment performance remains solid across each of our business verticals. Absolute return. Strategies has delivered, particularly strong performance to clients with our multi strategy, composite generating a 14.2%. Gross rate of return over the last 12 months,

In addition to the strong ARS performance, we also enjoyed year-over-year portfolio appreciation across each of our private Market strategies.

Looking at head, our teams remain focused on investing client, capital, and deploying our 12 billion of dry powder.

On the capital formation side are positive fundraising momentum continues.

Year to date, we raised 7.2 billion dollars higher than our total fundraising for the full year of 2024.

Over the last 12 months, we've raised 9.5 billion dollars the highest trailing 12-month fundraising period on record for grovener.

Infrastructure and credit LED our growth during that period?

John will cover fundraising drivers and pipeline shortly, but I do want to note that in the quarter. We closed on a 490 million collateralized fund obligation that will be invested in private credit, secondaries beyond the management fees that we will receive from this vehicle going forward, we generated $2 million of transaction fees that were recognized in the third quarter.

Our gross unrealized carried interest balance stands at an all-time high of 941, million up 32 million or 4%. From the end of the second quarter with approximately, 50% of that belonging to the firm.

During the quarter, we realized more than $24 million in carried interest, which is the highest level of quarterly realized carried interest we've seen over the last 2 years.

While carrier realizations are clearly trending in the right direction and we're optimistic about 2026. It's worth noting that typically the third quarter carry realizations are seasonably. The highest of Any Given calendar quarter.

A few weeks ago, we hosted our 2025 investor day and we were thrilled to welcome investors and analysts to hear directly from the leaders who drive our business every day.

The goal of the day was to provide a comprehensive look at GCM grower.

Who we are, how we've evolved where we're going.

Our team led by Stacy Selinger in August, clatt did a great job, putting that date together, the deck and video are available on our website and I think they're helpful in understanding the company.

That said, I do want to highlight a few of the key themes, we covered.

first we made clear that GCM Groner is Central to the Alternatives ecosystem, bringing more than 5 Decades of innovation execution growth and relationships to Bear across private Equity infrastructure, credit, real estate and absolute return strategies

Second, we showed that our investment platform is Broad built for performance and importantly, highly scalable.

Across the firm. We have the capacity to deploy multiples of our current capital base using our existing investment engine.

That scalability combined with a rigorous and repeatable investment process as produced attractive risk. Adjusted returns for clients in each of our verticals.

Third, our growth Outlook is compelling across each of our investment strategies.

Each of our verticals from credit to infrastructure to real estate to private equity and absolute return has a path to substantial AUM growth over the next 5 years.

We highlighted the fact that our teams execution over the last 5 years has translated into earnings growth with fee related earnings having grown more than 90% since 2020.

Importantly, we spoke about our path to double 2023 fee, related, earnings to more than 280 million by 2028 and to drive 2028 adjusted net income per share to more than a dollar 20 per share.

We also announced an increase in our quarterly dividends at 12 cents per share reflecting continued confidence in our growth trajectory and our strong free cash flow generation.

Finally the day underscored what truly differentiates GCM Grover, our client, first culture that is rooted in teamwork and alignment and is a key, competitive Advantage, delivering High re-up rates and significant growth.

We hope that for anyone who participated or subsequently dove into the materials, it is clear that we are well, positioned, strategically financially.

Culturally with multiple growth engines, a scalable operating model and a clear line of sight. The meaningfully higher earnings and cash flow in the years ahead.

We have a high degree of confidence that we can compound value for shareholders over the long term. And with that, I'll turn the call over to John.

Thank you.

Is Michael noted? I will focus my remarks this quarter on our strong fundraising results and healthy pipeline.

We covered this during the investor day, but the beauty of our business is the many ways we have to win with all types of clients.

Our business diversification. In terms of geography, asset type client type and implementation style is reflected in the diversification of our fundraising results.

Looking at the record, fundraising over the last 12 months, there's a few things I'd call out.

First infrastructure and credit together accounted for nearly 2/3 of our Capital raised.

These strategies are where we're seeing the highest demand in the market.

In infrastructure, we benefit from the market Tailwinds. Generally and our broad platform that offers various strategies and numerous vehicles to meet the unique needs of investors.

Helping investors access the markets that they don't necessarily have the ability to access on their own, which means strategies outside of traditional direct, lending and investment implementation Styles outside of regular waste fund Investments.

Our direct oriented strategies in both infrastructure and credit are driving a significant percentage of our growth.

Second absolute return strategies generated 1.5 billion dollars of fundraising over the last 12 months.

As Michael shared the pipeline here is the best. It's been in years on the heels of very strong investment performance.

While we aren't changing our flat net flows and budgeting assumptions, the backdrop for ARS is increasingly encouraging. We believe we can compound AUM growth through strong performance.

Finally Insurance clients accounted for approximately 14% of capital raised over the last 12 months and 40% of Q3 Capital rates driven by the almost $500 million, collateralized fund obligation that will be invested in private credit, secondaries

Looking ahead to our pipeline, I want to emphasize the strengths and predictability of our separate account business.

We are perpetually in the market raising separate accounts from existing investors through re-ups and from new investors,

If we do our job, well taken care of our existing clients re-ups and cross-selling into new strategies are our best sources of new capital.

As is usually the case, we're also in the market with several specialized funds.

We held our first close of our private Equity. Secondaries fund, GSF 4.

We also held the first close of our inaugural real estate fund Rev.

Which now allows us to offer a real estate investment strategy and specialized fund, expanding our addressable market for that strategy.

1 particular, interesting note on rev, is that 1 of the primary anchor investors in the first. Close is an Raa.

We're also preparing to launch the fourth vintage of our Diversified infrastructure. Fund critical infrastructure strategies for CIS 4.

Which will hold its first close in the coming months.

We're also successfully executing on our growth plans for the individual investor Channel, our distribution joint venture Grove Lane is rapidly ramping up with new hires and has already sourced dozens of new relationships for the firm year to date around 40 of which have already contributed to an investment product.

Flows for the infrastructure interval fund or increasing week over week. In the traction is very encouraging for what we believe is a highly differentiated product in the market. In a significant opportunity for us over the long term.

We're also preparing to launch a fund for private Equity Assets. In the coming months, which will follow a similar model to cjis. And we believe also has differentiated positioning, given its expected high diversification in Middle Market. Focus on co-investments.

So the punchline here is that we have a clear strategic plan and now it's a matter of executing. Well something we talked about a lot as a team is the importance of relentlessly focusing on execution for our clients.

As investors and as business owners and with that, I'll turn it over to Pam.

Thanks John. We are pleased with our third quarter results which Michael highlighted and I will cover in more detail.

Given our strong fundraising and investment performance. This quarter assets under management grew to 87 billion dollars and keep paying AUM through to 70 billion. Dollars a 9% and 10% increase year-over-year. Respectively,

Our contracted not yet, be paying AUM through 17% year-over-year to 9.2 billion dollars. Providing a foundation for continued organic growth as that Capital converts to fee paying AUM over the next few years.

Private markets management, fees year to date. And for the quarter grew 10% and 7% year-over-year, respectively from a combination of solid, fundraising and conversion of contract, did not yet. See paying AUM.

Absolute return, strategies continued, its strong investment and business performance ARS management fees for the quarter grew 6% year-over-year.

Are multi strategy composite returns where a strong 3%. In the third quarter, putting year-to-date growth performance above 9%

Total management fees for the quarter, were 101.4 million and increase of 7% year-over-year.

We expect total management fees for the fourth quarter to be approximately a million dollars higher than the third quarter.

Our year-over-year fee related Revenue in the third quarter, grew 9% driven by strong business performance.

As Michael noted, this quarter's frr included 2 million dollars of transaction fees related to the credit collateralized fund obligation.

This will not be referring next quarter.

That said, we do expect to launch additional structured solutions in the future.

says, our compensation philosophy is centered on attracting and retaining top talent by aligning their interests with those of our clients and shareholders,

we do this through a combination of annual and long-term incentives, including fre, compensation incentive, fee, related, compensation and Equity Awards,

We remain disciplined in managing expenses and third quarter, FR compensation and benefits remain stable at just over 37 million.

We expect slightly lower levels of FR compensation in the fourth quarter.

Non-gaap General administrative and other expenses decline from last quarter to 20 million.

We expect non-gaap General administrative and other expenses in the fourth quarter to return, to the levels. We saw in the first and second quarter this year,

Pulling together. These factors are to be related to earnings for the quarter. Grew 18% year-over-year and our third quarter, F ree margin expanded to 45%,

Turning to incentive fees. Our growth unrealized carried interest balance increased to an all-time high of over 940 million. And this quarter, we realized 25 million dollars of total incentive fees, including 1 million dollars of performance fees and more than 24 million dollars in carried interest.

Given our strong ARS investment performance year to date, we have approximately $33 million in unrealized performance fees at quarter-end. In addition to the $7 million we've already realized this year.

Third quarter carry realizations are generally seasonably higher and the improving realization levels are encouraging as we head into 2026.

Our financial position is strong and our decision to raise our already healthy quarterly dividend to 12 cents per share, reflects our consistent and growing cash flow generation.

In addition, as of quarter end, we had 86 million remaining in our share buyback. Authorization.

That said, our primary focus remains on strategically investing for long-term growth and we remain confident in our goals to double our 23, F by 2028, and more than double our adjusted. Net income per share over the same time period.

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

Thank you, if you would like to signal with questions, please press star 1 on your touchtone telephone. If you're joining us today, using a speaker-phone, please make sure you mute function is turned off to allow your signal to reach our equipment. Again, that is star 1. If you would like to signal with questions,

And our first question will come from Ken Wington with JP Morgan.

Great. Thank you for taking the question. Um, I guess I'll try to first on the CFO raise. Um, you mentioned the 2 million of these up front are there ongoing fees for that product, as well? Or did the, is it the way? It's structured? You know, the fees just coming that, that upfront chunk and then are these CFOs. Something, you might regularly come back to Market with more regularly or, or is what we saw really a 1-off this quarter

Uh, so thanks for the questions Ken. It's Michael. Uh the the the CFO is a absolutely, a regular recurring management fee. Uh recurring management fee with some carry building over time uh you know, pool of capital. So it's uh 490 million raise and we'll earn an annual management fee on that and hopefully we'll earn some carry on that as well. In addition to the normal fees that would accompany, you know, a 500 million dollar raise. Uh, there was a, an upfront fee and we specifically mentioned it so that when you saw it on the financials, you knew what it was. And you and you knew that it, that that was not recurring, but we will start next quarter to enjoy, uh, you know, management fees from that pool of capital.

They will be recurring.

Okay, great. Um, and then, and, and, and the second question is yes, we we do hope to, and if I didn't say that, I meant to, we do hope from time to time to, um, you know, launch.

Other uh, fund obligations. This is our second as uh market conditions, investor demand, you know, line up and make sense to do it.

The seasonally weak for Q and we see you know, bigger, bigger redemptions. Um, so I guess the question is, if things are going going well and things feel good, you know. Why, why isn't this yet being seen, uh, in the, the net flows picture and I guess how is 4 q shaping up? Given it seasonally a weaker quarter, but the environment feels better and you're doing better, like, how do how do we, you know, sort of add those up?

John, maybe, you know, you can talk a bit more about pipeline, but what I would say can and we we talked about this at investor day. Um, there is no question that the interest levels higher and the opportunities, uh, for us to drive flows are higher and, um, that's just, uh, that, that, that, that is a fact. So, I, I don't know, John how much details? Well, you know, we're not going to make news, but go go ahead. Yeah, I would just step back Ken and say, you know, we've we've obviously held to the

Convention from a budgeting, forecasting, and guidance standpoint. We've had, frankly, since we were public five years ago, and we've been wrong about that in both directions, but kind of, not really wrong about that in the aggregate. So, you know, if you look at the earnings presentation, for example, where we go through the flows picture and the supplemental information.

You can look at 9 months and 20 uh, in in 20, you know, 24, you can look at the 9 months year to date today. You can see how that's been in improving, uh, picture. You know, if you look at year to date, uh, after return, strategies, through the first 9 months, when you look at contributions versus, uh, withdrawals distributions are a little bit of anomaly because those are sometimes self liquidating Vehicles. It's, you know slightly, net positive. Um, I think that the so the trend and the added attitude and the environment because of performance because of investor interest. All of that is uh, better. I don't know that. I would, as Michael said, I don't know that. We're changing our Q4 picture. I don't think that there's much. It might be an accident, um, in history. I don't think there's much seasonally that you should actually look into a ton around the areas business before the vehicles that have liquidity quarterly that could be any quarters activity. Um but I

I would say that you heard it, as Michael said, live at the investor day, David Richter, who runs that business is feeling very good about things and uh, Michael Pam. And I are also feeling good about things, but also waiting to see that picture change. And and before we change how we talk about, uh, the forecasting and the and the guidance around the business

Okay, great. Thank you very much.

And our next question will come from Bill cats with TD Cowen.

Thank you very much for taking the questions this morning. Good morning everybody. Um, just maybe, um, Michael just unpack a couple things on the realization Outlook. Uh if you give me for not knowing this already but why is the third quarter seasonally so strong? And then as you look into next year, where do you see the greatest opportunity for those realizations? If I look at your disclosure which is terrific? So thank you for that.

A lot of it sits in funds 2017 forward. So 1 of the themes we're hearing from some of your peers is like there's still some vintage and aging and seizing that need to go on along the way. So I'm trying to triangulate between the very strong realization commentary and what might actually flow through the p&ls. We look out to next year or so. Thank you.

Yeah, so I think the fact that the...

Um, scary or the you know, average distribution of the carrier, if you will has aged and it's in these uh 2017 plus buckets is somewhat, you know, overwhelmingly a good thing for us and let me let me just uh start with that uh with that. Uh so I think it's a good thing for us. It's a good thing.

For us, because, uh, when you have, you know, more recent, uh, vintages, these are.

Higher percentage of that 17, you know, bucket than we do the earlier buckets, and I think those are both uh, good things for for us. I don't think we have any uh, you know, ability to generalize about when that carry uh, might be realized or when it might, you know, accelerate aggressively. I think our carry Revenue experience is pretty much consistent with what you're seeing and what, you know, we're observing in, you know, from a macro perspective across the industry. And we are so well, Diversified in our carry uh on so many different lines that just when that those realizations pick up and they have picked up. So as they continue to pick up and they continue to uh accelerate we will participate. But it's there's nothing like we can't look at, you know, 1 big deal that's going to generate.

Carry and you know, determine the outcome for a year. It's too Diversified which we think is a benefit uh for the stability and the strength of that carry. But it makes it like harder for us to point to timing. Uh, the last thing is the seasonality of the third quarter is related uh, to when uh, tax carry is paid in the industry in general. So

So, uh, you know, a lot of the, you know, Carrie that you see in the third quarter, for most of the sponsors you follow will include tax carry distributions that they're receiving. That tend to take place in that quarter uh to a greater degree than they do. The rest of the year. The carry from actual exits is much. I I think more random and spread throughout the year and doesn't necessarily have any predictable seasonality.

Okay, it's helpful and maybe 1 for Pam. And thank you again. Take a quick question today, um, just as I think through next year, can you give us a sense of how we should think about ball, stock based compensation issuance as well as maybe the direction for share count. Despite the buyback, it did go up um, pre substantially quote on quarter. Thank you.

Sure. Uh, things built for the question, um, in terms of our uh, stock based compensation, you know, expected to um, be at or, you know, at similar levels, are slightly higher depending on the stock price. At the time, we Grant any awards. Um, generally uh, generally, um, as part of our year end, compensation cycle. Um, but don't expect any unusual anomalies, what I would say on on. Um, both share count and, um, uh, how we manage, uh, dilution there we've, um, from stock based compensation. Um, uh, uh, and from stock based Awards, we've enjoyed less than 3%, dilution over the last 5 years.

Cumulatively. Um, so we're very actively managing dilution uh, through both BuyBacks, um, and and settlement options to make sure that we're, you know, very uh uh, you know, diligent and careful around, uh, the share count, um, the other, uh, item. As you may recall earlier this year, um, in the summer, we had issued about 2 vent. We uh, raised million dollars in proceeds from with the Strategic partner that invested in the business, uh, from a primary offering. So that was the other uh, um, just less than 2% of the dilution that you see in our numbers. So we're going to continue to, you know, again actively we have 86 million dollars remaining in our buyback. We're going to continue to actively manage delusion through the buyback programs. Um and and uh um really don't see any significant changes in the near term.

Okay, thank you.

And once again, if you would like to signal with questions, please press star 1 on your touchtone, telephone, again, uh, star 1, if you would like to ask questions,

and we'll go back to Bill cats, with TD Cowen.

Okay. Well, I hit star 1 again. Um, so uh, just John made 1 for you. Uh, you ticked off a fair amount of data on or just details on the retail business and I was trying to keep up with you. Um, could you maybe unpack a little bit of your disclosure? You mentioned that you're getting onto a number of additional, um, distribution Partnerships? I think and that you're seeing really nice growth, uh, week on week. Can you provide maybe just level set of where you are in terms of AUM and what product specifically in the market for just trying to make sure we have a full accounting of the opportunity set in front of us?

A couple weeks ago uh, when we had our investor day and had a few slides on this, just in case you want to go back to it after the call. But it's about 4 billion of AUM today just in general from the individual investor Channel.

Uh a pretty significant percentage of that has been Capital that's been raised over the past several years.

Um that Capital that's been raised over the past several years. Uh, most of the past several years has been for uh separately managed accounts for uh uh institutional 3, C7 kind of private closed end funds, largely across the warehouses.

I think what we've highlighted at the investor day and what I tried to highlight on the call is if you look and while it's not material yet to our economic profile. Um and as Michael has has has kind of gone to pains to mention and and many calls in the past like this is the type of thing that we're super excited about is growing, but it will take time for it to really move our needle. But if you look over the more recent period of time, what's been exciting for us?

Is uh, the the partnership with Grove Lane.

Um, which is meant to focus on raas, and that partnership is less than a year old. And we have picked up another probably 3 4 dozen Ria relationships.

over the past uh uh several couple quarters which in a long sales cycle business is is tremendous momentum to us even if it's not huge dollars yet,

We are still marketing separately, managed accounts, which we think will be a Competitive Edge For Us in the individual investor Channel. We're still, uh, marketing. You know, kind of traditional closed end, you know, private funds in that, uh, Channel. And as you know, we also launched our infrastructure, uh, interval fund, which goes alongside, uh, interval fund product, or I should say, registered product that we have in the absolute return strategy space. That's very early days, but it's raising money every day.

Um, in raising money, uh, through the ra channels, uh, both from our partnership, with our distribution Partners, as well as through Grove Lane and then the other points that I think we mentioned investor day or certainly mentioned on the call or mentioned right now is that we've expect to uh uh also follow on our infrastructure product with something similar in the private Equity space. And so, I just think it's all good. It's all investing more of our time and resources and all just building towards uh kind of momentum and platforms such that we can take advantage of what we see as our role in that.

Ecosystem and the opportunity setting that ecosystem which is to help individual investors build Diversified portfolios across different market. Cap size across different implementation styles to compliment uh what they're already doing and and kind of the mega cap space.

Okay, thank you for taking the extra question.

and the next question will,

Tyler Mueller, with William Blair.

Out the collateralized fund obligation raised from the private credit raise. It's a non Insurance, phrase would have been a little lighter and there have been uh

a uh notable bankruptcies in the credit space. Just curious if you've seen any uh concerns of clients or changes in the landscape there on private credit. Thank you.

I didn't. Totally, did you hear that? Did you have it Michael? Exactly.

yeah, that I think that the the first couple of words, Tyler that you said didn't come through, but I think you were saying

Were you saying excluding the the exclusive the the yeah. Yeah. So um I guess it's a couple of things 1 is we're not seeing uh, private credit slowing down uh and

In your, you know, kind of a major, I think up up Trend upswing in the allocations to private credit. Uh, there was a significant amount of, uh, Capital that came from insurers inside that uh, structured product. And so we are still seeing a productive Insurance sector and we believe that the insurance sector will also will continue to be productive. Uh you know, as we go as we go forward.

That, that helpful.

Yeah, thank you.

Okay.

Thank you. And that does conclude the question and answer session. I'll now turn the conference back over to you for any additional remarks.

Thank you. Thank you for joining us again today. We appreciate all of the time and interest. If you have follow-up questions, please feel free to reach out to our team. If not, we look forward to speaking with you again next quarter. Thank you. Have a good day.

Thank you that does conclude today's conference. We do thank you for your participation, have an excellent day.

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