GCM Grosvenor Inc. Q4 FY2024 earnings call

• Financial performance: Strong Q4 and full year results with fee-related earnings and adjusted net income growth. Fundraising in 2024 was $7.1B, a 40% increase, with Q4 at $2.3B being the highest in over two years.
• Strategic priorities: Deepened credit investment talent, saw improvement in Absolute Return Strategies with stabilized fees and strong investment returns. Expanded product offerings in individual investor channel with launch of infrastructure interval fund.
• Operating leverage: Fee-related earnings margin was 42% in 2024, up from 38% in 2023 and 31% in 2020, with confidence in continued margin expansion.
• Fund closings: Final close of Elevate fund at nearly $800M, final closings of GCF Three and IAF Two expected to be larger than predecessors, with first closings planned for GSF Four and CIS Four in 2025.

In the fourth quarter, fee-related earnings increased 22% and adjusted net income increased 63% compared to Q4 2023. For the full year 2024, fee-related earnings rose 19% and adjusted net income increased 36% over 2023. Total fundraising in 2024 was $7.1 billion, a 40% increase from 2023. Fourth quarter fundraising was $2.3 billion, the highest in over two years. Private markets saw Q4 management fees up 20%, with credit raising $1.8 billion (over 25% of total funds raised in 2024). Absolute Return Strategies management fees stabilized in 2024, and the multi-strategy composite had a 4.5% gross return in Q4 and 14.3% for the full year.

• 2025 fundraising expected to exceed 2024's $7.1B. Confidence in doubling 2023 fee-related earnings by 2028.
• Private markets management fees ex-catch-up fees expected to grow ~10% year over year. ARS management fees expected to increase 4%-5% in Q1 2025.
• Board approved $50M increase in share repurchase program, with $82M remaining to manage dilution.

Forward-looking statements involve known and unknown risks, uncertainties, and factors that may cause actual results to differ. Risks include market conditions affecting fundraising, execution of strategic priorities, and performance of investment strategies.

Q: On FRE margins, can you discuss margin outlook and if there's a cap?

A: We think there's continued operating leverage and margin expansion ahead, with room to grow margins from current levels though a cap may exist in the long term.

Q: On 2025 fundraising cadence, can you talk about expected pace?

A: Pipeline is strong with re-up calendar and specialized fund closings, but specific quarter-to-quarter pace is hard to pinpoint as it depends on fund structures.

Q: On conversion of pipeline to fee-paying AUM, how to see this in 2025?

A: Conversion depends on fund types (ramp in funds, pay on committed funds, etc.), with contracted not yet fee-paying AUM at $8.2B ending 2024, and mix of fee structures leading to expected conversion over time.

Q: On absolute return business reception, any change in dialogue?

A: Good performance leads to changed dialogue, with solid pipeline and optimistic prospects for ARS.

Q: On carry payout ratio, how to think about variable payout on realizations?

A: Carry payout ratio can vary by quarter, with full year 2024 at the high end of 40-50% range, influenced by timing of hedge fund performance fee crystallizations.

Q: On retail vehicle growth, any headcount or distribution roadmap?

A: Historically successful in wire house channels, using partnerships like Scion for distribution, with investment in internal distribution capabilities and plans to share news on progress.