• Fee-Related Earnings (FRE) Growth: 22% increase in Q4 2024; 19% increase for full year 2024.
• Adjusted Net Income Growth: 63% increase in Q4 2024; 36% increase for full year 2024.
• Fee-Related Earnings Margin: 42% for 2024, up from 38% in 2023.
• Total Fundraising: $7.1 billion in 2024, a 40% increase from 2023.
• Q4 Fundraising: $2.3 billion, highest in over two years.
• Assets Under Management (AUM): $80 billion at year-end 2024.
• Fee-Paying AUM: $65 billion at year-end 2024.
• Contracted Not Yet Fee-Paying AUM: $8.2 billion, a 12% year-over-year increase.
• Private Markets Management Fees Growth: 20% increase in Q4 2024 over Q4 2023.
• Absolute Return Strategies Management Fees: Stabilized with a 1% increase year-over-year in 2024.
• Incentive Fees: $57 million realized in Q4 2024, including $42 million in annual performance fees and $15 million in carried interest.
• Dividend: $0.11 per share with a 3.2% yield.
• Share Repurchase Program: $50 million increase approved, with $82 million remaining for managing dilution.

• Warning! GuruFocus has detected 7 Warning Signs with GCMG.

Release Date: February 10, 2025

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 financial performance for the fourth quarter and full year 2024, with fee-related earnings increasing by 22% in Q4 and 19% for the full year.
• The company achieved significant growth in fundraising, raising $7.1 billion in 2024, a 40% increase compared to 2023.
• GCM Grosvenor Inc (NASDAQ:GCMG) successfully closed its Elevate fund at nearly $800 million, marking a strong performance in a challenging market for first-time funds.
• The company's infrastructure interval fund was launched with a seeded portfolio of $240 million, indicating a strategic expansion into the individual investor channel.
• GCM Grosvenor Inc (NASDAQ:GCMG) reported strong investment performance in its absolute return strategies, generating a 14.3% gross return for the full year 2024, outperforming indices and peers.

Negative Points

• Despite strong fundraising, the conversion from pipeline to fee-paying AUM has been slower, raising concerns about the pace of revenue realization.
• The company anticipates lower catch-up fees in the first quarter of 2025, which may impact short-term revenue growth.
• GCM Grosvenor Inc (NASDAQ:GCMG) is not expecting significant revenue contribution from its newly launched infrastructure fund in 2025, indicating a longer timeline for revenue realization.
• The payout ratio for realized carry was lower than historical averages, suggesting potential variability in future earnings from this source.
• The company faces challenges in expanding its distribution capabilities in the individual investor channel, requiring further investment and strategic partnerships.

Q & A Highlights

Q: Can you discuss your margin outlook and whether you believe you can continue driving margins higher to the mid-40% range on an annual basis and beyond? Is there a cap on margins over the long term? A: Michael Sacks, CEO: We've had strong operating leverage and significant FRE margin improvement over the last several years. We believe we have continued operating leverage and FRE margin expansion ahead of us. While there might be a cap eventually, we see room to grow margins over the next several years as we aim to double our FRE from 2023.

Q: Could you talk about the expected cadence of fundraising for 2025? You mentioned some funds closing in the first quarter, but is there anything else worth calling out on a quarter-to-quarter basis? A: Jonathan Levin, President: We expect 2025 to be better than 2024, with a strong pipeline and re-up calendar. While it's challenging to predict exact quarterly outcomes due to potential delays, we feel confident about the overall year being stronger than the previous one.

Q: How should we see the conversion from pipeline to fee-paying AUM look in 2025? Will there be a pick-up given better market conditions? A: Michael Sacks, CEO: The conversion depends on whether funds are ramped, pay on committed, or pay as invested. We've consistently had a mix of these types, and while specifics can vary, we expect continued conversion aligned with historical patterns.

Q: Are you seeing a change in the reception or the nature of the dialogue with customers in the absolute return business? A: Michael Sacks, CEO: Good performance has positively changed the dialogue. The pipeline is solid, and the outlook for the business is strong, with more optimism than in recent years.

Q: Can you provide more color on the retail vehicles launched, particularly regarding distribution channels and marketing efforts? A: Michael Sacks, CEO: We launched our infrastructure fund with significant anchor capital and a specified portfolio. While we don't expect significant revenue in 2025, we see potential for growth by 2028. Initially, the marketing focus is on the RIA space, with plans to expand into wirehouses and other channels over time.

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