GCM Grosvenor Inc. Q3 FY2025 earnings call

• The firm reported strong quarter with fee-related earnings, adjusted EBITDA, and adjusted net income up YOY. AUM reached a record $87 billion, a 9% increase YOY.
• Absolute Return Strategies performed strongly with a multi-strategy composite generating 14.2% gross rate of return over 12 months. Private market portfolios appreciated year-over-year.
• Fundraising was strong with year-to-date raising $7.2 billion, higher than full-year 2024. Closed a $490 million collateralized fund obligations with $2 million transaction fees in Q3.
• Hosted 2025 Investor Day highlighting the company's position in the alternatives ecosystem, broad investment platform, scalability, growth outlook, and client-first culture.
• ARS pipeline was the best in years. Separate Account business was strong. New funds launched or in preparation in Private Equity, Real Estate, Infrastructure. Grove Lane distribution joint venture ramping up.

For the third quarter of 2025, GCM Grosvenor saw strong financial performance. Fee-related earnings, adjusted EBITDA, and adjusted net income were up 18%, 16%, and 18% respectively compared to Q3 2024. Assets Under Management ended the quarter at a record $87 billion, a 9% increase from Q3 2024. Absolute Return Strategies (ARS) had a multi-strategy composite generating a 14.2% gross rate of return over the last 12 months, with ARS management fees for the quarter growing 6% year-over-year. Private Markets management fees year-to-date and for the quarter grew 10% and 7% year-over-year respectively. The fee-related earnings margin for the quarter was 45%, approximately 350 basis points higher than Q3 2024.

• Goal to double 2023 fee-related earnings to over $280 million by 2028 and double adjusted net income per share by 2028.
• Quarterly dividend increased to $0.12 per share.
• Management fees from the $490 million collateralized fund obligation will be recurring.
• Anticipate launching other fund obligations as market conditions and investor demand align.

• Seasonality in carry realizations with Q3 typically having higher carry realizations.
• Potential impact of market conditions, investor demand, and credit quality on private Credit strategies.
• Dilution from stock-based compensation and effects on share count due to stock-based awards and buyback activities.

Q: On the $2 million upfront fees from the CFO product, are there ongoing fees and will they launch more such products?

A: The CFO has a recurring management fee and they hope to launch other fund obligations as market conditions and investor demand make sense.

Q: On ARS, why isn't strong performance seen in net flows picture despite good results, especially in seasonally weak 4Q?

A: Pipeline interest is higher, but net flows budgeting remains flat for now. Trend and attitude are better due to performance and investor interest, but near-term guidance on flows remains unchanged.

Q: Why is the third quarter seasonally strong for carry realizations and future opportunities?

A: Third quarter carry realizations related to tax carry distributions in the industry. Carry from exits is more random. The carry in 2017-plus buckets is healthy and diversified, with participation expected to continue as realizations pick up.

Q: On stock-based compensation and share count, what's the outlook?

A: Stock-based compensation expected to be similar or slightly higher depending on stock price at grant. Actively managing dilution with buybacks, with $86 million remaining in buyback authorization.

Q: On the retail business, can you provide more on AUM and products?

A: ~$4 billion AUM in individual investor channel. Growing through distribution partnerships, focusing on RIAs, marketing separately managed accounts and traditional closed-end private funds, with Infrastructure interval fund and plans for private equity product in the works.

Q: Concerns on private Credit post bankruptcies?

A: Private Credit is not slowing, asset class is growing with increasing allocations. High-profile Credit issues were not strictly private Credit, and the insurance sector remains productive.