• Fee-Related Earnings Growth: Increased 18% year-to-date.
• Adjusted Net Income Growth: Increased 24% year-to-date.
• Fee-Related Earnings Margin: 41% for the quarter.
• New Capital Raised: $1.4 billion in the quarter, $4.8 billion year-to-date.
• Assets Under Management (AUM): Record high of $80 billion, a 5% increase year-over-year.
• Fee-Paying AUM: $64 billion, a 5% increase year-over-year.
• Contracted Not Yet Fee-Paying AUM: $7.9 billion, an 11% increase year-over-year.
• Private Markets Fee-Paying AUM Growth: 7% year-over-year.
• Private Markets Management Fees Growth: 6% for the quarter, 8% year-to-date.
• Incentive Fees Realized: $23 million in the quarter.
• Gross Unrealized Carried Interest: $816 million, a 5% increase year-over-year.
• Quarterly Dividend: $0.11 per share.
• Stock Repurchase: $33 million year-to-date, $32 million remaining in the plan.

• Warning! GuruFocus has detected 8 Warning Signs with GCMG.

Release Date: November 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• GCM Grosvenor Inc (NASDAQ:GCMG) reported a strong quarter with fee-related earnings increasing by 18% and adjusted net income rising by 24% year-to-date compared to 2023.
• The company raised $1.4 billion in new capital during the quarter, bringing the year-to-date total to $4.8 billion, a 34% increase year-over-year.
• GCM Grosvenor Inc (NASDAQ:GCMG) has seen significant growth in late-stage pipeline opportunities, which are up over 70% from a year ago.
• The company has a strong focus on private market strategies, with 71% of AUM in private markets and 40% in direct-oriented strategies, both expected to increase.
• GCM Grosvenor Inc (NASDAQ:GCMG) remains confident in its five-year growth target of doubling 2023 fee-related earnings by 2028, supported by strong fundraising momentum and significant latent earnings power in incentive fees.

Negative Points

• The company faces known and unknown risks and uncertainties that may cause actual results to differ materially from forward-looking statements.
• Real estate valuations have stabilized, but the environment remains challenging with regard to investment opportunities.
• The fundraising environment, while improving, still requires significant effort to meet targets, with the need for over $2 billion in fundraising in the fourth quarter to exceed first-half results.
• There is a reliance on the individual investor channel, which requires a sophisticated and multifaceted approach due to its broad spectrum of individuals and distribution channels.
• The company's compensation expenses are expected to increase in the fourth quarter due to seasonality, which could impact margins.

Q & A Highlights

Q: Michael, you reiterated that fundraising in the second half should be higher than the first. Can you speak to your confidence there and any specific drivers? A: Michael Sacks, CEO: We are confident in our fundraising outlook due to a significantly larger near-term pipeline compared to a year ago. This includes opportunities where we've already won but haven't finished contracting. The improved fundraising environment and increased pipeline visibility across all strategies support our confidence.

Q: Regarding your revenue and FRE makeup over the next few years, do you expect the 80% share of fee-related revenues to decrease? A: Michael Sacks, CEO: We aim for solid management fee growth and margin expansion, targeting to double FRE by 2028. We anticipate adjusted EBITDA and adjusted net income to grow faster than fee-related earnings due to significant earnings power in our carry asset, especially as transaction activity picks up post-election.

Q: Can you unpack the algorithm for driving FRE growth, considering the slight adjustment in guidance for this year? A: Michael Sacks, CEO: We aim for 10% or better private market management fee growth, with margin expansion opportunities. The incentive fee line has significant upside, and we expect adjusted EBITDA and net income to grow faster than FRE, driven by both organic revenue growth and margin improvements.

Q: Can you expand on the retail opportunity set and any incremental expenditures needed for growth? A: Jonathan Levin, President: We've raised over $3 billion from individual investors and plan to launch new registered products. Our growth strategy includes both internal distribution and partnerships, with investments in this area already factored into our financial goals. We aim to expand our suite of products and distribution capabilities.

Q: What are your thoughts on the private credit industry outlook post-election, and how does it affect your positioning? A: Michael Sacks, CEO: The private credit space is experiencing long-term growth driven by demand from various client types and geographies. We expect this trend to continue, with private credit becoming a more significant part of our revenue stream. The election may increase transaction activity, further boosting demand for private credit.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.