GCM Grosvenor Inc. Q4 FY2025 earnings call

• 2025 was the best fundraising year in the firm's history, raising $10.7 billion of total capital, with $3.5 billion in the fourth quarter. Fundraising was broad-based across verticals, investor channels, and geographies.
• Investment results were strong: absolute return strategy had 15% gross return, infrastructure had ~11% return, and other verticals were positive. Had ~$12 billion of dry powder.
• 2025 financial results were strong: fee-related earnings, adjusted EBITDA, and adjusted net income up 11%, 15%, and 18% respectively compared to 2024; fee-related earnings margin was 44%, 200 basis points higher than 2024.
• Ended 2025 with $91 billion of assets under management, a new high; fee-paying AUM and contracted not-yet-fee-paying AUM grew.
• Made progress on strategic objectives: AUM in individual investor channel increased 18% year over year; launched Grove Lane Partners, infrastructure interval fund, and filed registration documents for a registered private equity fund.
• Addressed recent market stress: emphasized diversification, low SaaS exposure, and belief in opportunities in volatile environments; increased stock buyback authorization by $35 million and repaid $65 million of term loan.

Absolute Return Strategy's multi-strategy composite generated a 15% gross rate of return in 2025. Infrastructure strategy returned approximately 11% for the year. All other verticals in aggregate were positive. In 2025, the firm ended with $91 billion of assets under management, a 14% increase compared to 2024. Fee-paying AUM increased 12% year over year to $72 billion, and contracted not-yet-fee-paying AUM increased 27% year over year to $10 billion.

• For 2026, private markets management fees are expected to be relatively consistent with the fourth quarter.
• Absolute return strategies management fees are expected to increase by approximately 5% from the fourth quarter.
• Non-GAAP general, administrative, and other expenses in 2026 are expected to be in line with or just slightly above 2025.
• Pipeline of activity is very strong entering 2026, boding well for fundraising.
• Aim to more than double 2023 FRE to over $280 million and grow adjusted net income per share to more than $1.20 by 2028.

• Market stress driven by concerns of AI disruption and impact on equity and credit valuations with regard to SaaS businesses.
• Uncertainty regarding carried interest realizations.

Q: Could you discuss your capital allocation plans just with balance sheet cash up on the warrant exercise? And Pam had mentioned you paid down some debt over the last week or two. In up share buybacks. But what are your plans from here? Should we expect additional debt pay downs?

A: Thanks, Jeff. So it's Michael, and then Pam jump in if I leave anything out here. But, you know, we've always talked about the fact that we're a capital-light business. We've paid a healthy dividend and increased that dividend a number of times since going public. And we've said, you know, numerous times, and we intend to sort of stay a capital-light business. So we did, you'll you saw in the Q4, we bought back shares post-warrant exercise. And we are gonna pay some debt down now. And I think, you know, that with the current authorized exercise and the current and the debt pay down we announced this morning, that that kinda puts us back in a pretty, you know, comfortable range. Obviously, we have a quite healthy dividend yield, not getting a ton of appreciation for that. So while we probably, you know, do have cash flow to be able to increase that dividend, it doesn't seem to get me rewarded particularly, by shareholders sort of focused on increasing that buyback.

Q: The absolute return business had a great quarter, had a really solid year. You've been highlighting for some time the expectation of flat flows. How are you feeling about the business, and how do you feel about that business returning to organic growth as we look to the future? Given sort of the successes you've had in the past couple of years?

A: Well, Ken, we're gonna flash back to our Investor Day conversation, you know, when we were out in the hall. We're not changing our budgeting. And we're not changing and making any proclamations on a call like this. And as you know, anybody who was at the Investor Day or watched that Investor Day recording knows we definitely have people in the firm in that vertical that are more bullish on the vertical than we are budgeting. But we're not changing that budgeting at this time. And I could point out, Ken, that budgeting relates to flows, which obviously translates directly into management fees. But it also does, you know, relate to performance expectations and kinda what we sort of talk about as run rate performance fees at budget. And I did highlight that for the last six years, we've beaten the run rate at budget on the performance fee side as well.

Q: Great. Thank you very much for taking the questions. So John, you spent a lot of time about the depth and breadth of the gross sale dynamic for 2025. And I think between you and Michael sort of hinted at a pretty good '26. Was wondering if you could maybe unpack the drivers for 2026 and maybe break that down between, specialized versus maybe the SMA side of the equation, retail or global wealth versus institutional, any other metric you think sort of sailing for us as we sort of work through our math. Thank you.

A: Sure. You know, I don't know, Bill. If I broke it down, I would break it down much differently from what the flows formation and the makeup of that formation has been over the past couple years with the relevant embedded trends in it. So when you think about it being broad-based globally, when you think about being broad-based across the channels, and when you think about it being highly diverse or broad across many of our verticals, The mix between separate accounts and specialized funds being roughly the same mix as that's represented in our AUM at seventy thirty. You know, with the underlying trends still being relevant to that. Infrastructure is strong, and we're in a market with a bunch of infrastructure stuff. And the individual investor market's growing faster than the We had individual investor AUM up close to 20%, which is larger than our what our overall AUM growth was. Continued growth from the capital from the insurance channel as compared to what it represents in AUM. So I don't think that I would call for something kinda markedly different in any period of you know, reasonably long period of time that you would capture capital formation over, I would say that our expectation would be a continuation of the trends we're seeing, which is a very healthy environment capital formation. And us benefiting from the diversification and breadth of the business and where we're making investments in particular to get behind the tailwinds that we're all collectively seeing in the market.

Q: Thank you for taking all the questions.

A: Okay.

Q: Thank you. Good morning, everyone. First, on the fundraising outlook broadly, very strong in 2025. Just curious on how you're thinking about 2026 just given the momentum you have built up, least it compares to 2025. You said pipeline is stronger than a year ago. Does that mean that we should assume that you expect fundraising in '26 to exceed 2025? Or am I going a little bit too far there?

A: Our bottom-up granular build coming in from the business development team and the investment teams lands at a number that would exceed last year. Given how good last year's fundraising was, given it was a firm record, given the sort of massive increase over 2024, we're not budgeting any, you know, we're not standing on the call today saying, you know, that '26 fundraising will exceed '25. But, you know, we've certainly got the pipeline, you know, to give, you know, to have them give '25 a serious run for its money. And as I said, our teams, you know, think we should have a bigger year. But our base budget is, you know, is in line with last year, and we'll keep, you know, updating that as we get through the, you know, go through the year. And when we're confident that we're gonna exceed it, we'll announce that.