GCM Grosvenor Inc. Q2 FY2025 earnings call

• Strong investment performance, fundraising, and financial results in line with expectations. Year-to-date fee-related earnings, adjusted EBITDA, and adjusted net income up 14%, 17%, 19% respectively vs H1 2024.
• Infrastructure platform is a key growth driver, accounting for over 35% of fundraising, with AUM tripling since 2020 to $17 billion (26% CAGR).
• Absolute return strategies had strong quarter with ~6% gross return, $18 million accrued unrealized performance fees, and $1B gross fund flows in ARS H1.
• Progress on individual investor channel: Grove Lane added 4 people, infrastructure interval fund making progress. Launched infrastructure interval fund and partnership with Wilshire Indexes for private markets infrastructure index.
• AI is a strategic focus, with increasing adoption expected to improve efficiency and profitability.
• Unrealized carried interest at NAV surpassed $900 million, firm share ~$450 million. First Investor Day on Oct 15 in New York.

For the second quarter of 2025, fee-related earnings, adjusted EBITDA, and adjusted net income were up 6%, 9%, and 9% respectively compared to Q2 2024. Year-to-date, these metrics were up 14%, 17%, and 19% vs H1 2024. Fee-related earnings margin for the quarter was 42%, 200 basis points higher than Q2 2024. Total assets under management (AUM) ended the quarter at $86 billion, a 5% increase from Q1 2025. Fundraising in Q2 was $2.4 billion, with H1 total at $5.3 billion, a 52% increase from H1 2024. Infrastructure accounted for $1.9 billion of H1 fundraising, over 35% of total capital raised. Private credit was the highest contributor to Q2 fundraising. Absolute return strategies had a ~6% gross return in the quarter, with $18 million of accrued unrealized annual performance fees as of June 30. ARS had $1 billion of gross fund flows in H1, with net inflows of ~$400 million in Q2, and fee-paying AUM in ARS up 7% YTD and 10% over 12 months.

• Q3 private markets management fees expected to increase low single digits QoQ.
• 2025 fundraising likely to exceed 2024, with second half weighted to Q4.
• Goal to double 2023 fee-related earnings (FRE) by 2028.
• Anticipate Q3 private markets management fees to increase in low single digits QoQ.

• Volatility in interest rates, tariffs, and policy.
• Uncertainty around short-term assumptions for the individual investor channel (e.g., infrastructure interval fund).

Q: Chris Kotowski asked about the evergreen retail vehicle and private equity vehicle.

A: Michael Sacks and Jon Levin discussed the infrastructure interval fund's sales progress, noting it's a multiyear build with modest uptake, and on private equity, focusing on developing their own product similar to infrastructure with cross-selling potential.

Q: Ken Worthington inquired about absolute returns being a one-off or a turning point, and fee rate influence.

A: Michael Sacks said internal forecasting remains flat flows, but performance helps build pipeline. Jon Levin noted fee conversations are constructive, with no significant focus on fee.

Q: Jeff Schmitt asked about re-ups in volatile environment and fee pressures in private markets.

A: Michael Sacks stated re-ups are strong, with client tenure and re-ups remaining positive. Jon Levin added re-up cycles normalizing, with 70-80% capital raising from existing clients, half re-upping and half doing new things. No significant fee pressures in private markets.

Q: Bill Katz asked about infrastructure origination capabilities and AI opportunity.

A: Jon Levin discussed infrastructure's open architecture origination model with multiple investment ways. Michael Sacks and Jon Levin talked about AI being a strategic focus everywhere, with adoption increasing efficiency and creativity, though not yet modeling significant earnings impact directly.

Q: Crispin Love asked about fundraising closes and management fee growth.

A: Jonathan Levin said GSF IV had a first close in July, and CIS IV infrastructure product expected to close end of year. Michael Sacks confirmed 5%-8% private markets management fee growth for the year remains unchanged.