GCM Grosvenor Inc. (GCMG) Earnings Call Transcript & Summary

All right. Good morning. So welcome to GCM Grosvenor's 2025 Investor Day. I'm Stacie Selinger, Head of Investor Relations. And it is my pleasure to welcome all of you in the room. Thank you very much for joining us as well as everybody who is joining us virtually [ viewing ] the webcast. Thank you very much for being here. We appreciate your continued trust and your support and your engagement. So today, the goal is for you to hear directly from our team about the drivers of our business that have generated strong consistent performance for our clients and then also for our shareholders. We will take you through our growth strategy, our differentiated client value proposition and our investment engine, all of which we believe position us ideally to capture the significant tailwinds that exist in the alternatives industry. So before we get started, a reminder that all statements made that do not relate to matters of historical fact should be considered forward-looking statements. This includes statements on our current expectations for the business, our financial performance and our projections. These statements are neither promises nor guarantees. They involve known and unknown risks, uncertainties and other important factors that may cause our actual results to differ materially from those indicated by the forward-looking statements in this presentation. Please refer to the Risk Factors section of our 10-K, our other filings with the SEC and our earnings materials, all of which are on our website. We will also refer to non-GAAP measures that we view as important in assessing the performance of our business. A reconciliation of those non-GAAP measures to the nearest GAAP metric can be found in the back of this presentation as well as in our earnings materials on our website. Finally, throughout the presentation, we will refer to a variety of terms and terminology and acronyms that are specific to our business and our industry. For convenience, we have included a glossary in the back of the presentation with definitions of those terms. So feel free to reference that as we move throughout. All right. Now turning to today's agenda. So we will kick off the day with our Chairman and CEO, Michael Sacks, who will talk about the firm, our history, our growth strategy and our long-term trajectory. He'll be followed by our President, Jon Levin, who will discuss our client value proposition, why do we win with our clients as well as the areas of white space that we're most excited about. After Jon, you'll hear from Fred Pollock, our Chief Investment Officer, on our investment origination engine, why it's scalable, why it drives significant strong performance. After the 3 of them go, we'll break for a short question-and-answer session, and then we'll dive deeper into each of our investment strategies, starting with David Richter on absolute return strategies, then Steve McMillan on credit, Scott Litman on infrastructure, Bernard Yancovich on private equity, and Peter Braffman on real estate. Then Pam Bentley, our Chief Financial Officer, will focus on our financial drivers and long-term financial trajectory. We'll wrap things up with some closing remarks from Michael as well as another Q&A session. So thank you very much again for being with us today. Our business, as you'll hear throughout the day, is built on our belief that the key is creating long-term value for our clients, and we seek to apply the same approach to creating long-term shareholder value. So now I will turn it over to Michael.

Thank you, Stacie. Good morning, everybody. I'm Michael Sacks, Chairman and CEO of GCM Grosvenor. I want to thank all of you for being here today and all of you who are listening to this on the -- but aren't here with us, thank you. And anybody who pulls this up off the website and watches it in the future, we thank you for doing that, too. We have a great team and a great business, and we truly appreciate it when you take the time to learn more about us. We're looking forward to sharing a deeper dive into GCM Grosvenor today to introducing you to more of our partners than you've met before and hopefully leaving you with a better understanding of who we are as a firm, the quality of our people, how we add value to our clients and our growth and our prospects for the future and the value that we believe our stock represents for investors today. And as Stacie mentioned, we are going to make a little news today. I think we've probably done that a little bit already. I'm going to talk about who we are as a firm, where we've been, what we've accomplished and where we're going. But it's good to give a little history first. Grosvenor was founded in 1971. I've been at the firm since the fall of 1990, and I've led the firm since 1994. When I joined the firm, we were pretty small, $225 million to $250 million of AUM, 6 people. When I was recruiting partners to come in the effort to build Grosvenor at that time, I referred to the firm as a 20-year-old startup. The alternatives industry was barely an industry. We've seen a tremendous, tremendous amount of evolution in that industry and at Grosvenor over that time. And one of the most positive things, I think, that I see today is that 35 years later, despite that massive evolution, hedge funds at a $5 trillion business, despite that massive evolution, our ability to add value to clients and our growth prospects and the opportunities from continued evolution are as great today as they've ever been, and they're actually easier to see today than they've been. One of, I think, our great strengths and an important factor for you all to sort of understand and internalize is our track record of innovation and evolution. I mentioned that GCM Grosvenor has a history that spans more than 5 decades. 35 years ago at Grosvenor, alternatives meant hedge funds and it meant commingled vehicles. That was all we did. Our view was that there was a lot of value in these fundamental strategies, and that's still our view today. But we felt that if we built the right kind of firm, one that prioritized clients, culture, transparency, compliance and gave the clients what was best for them, we would do well. And that's what we tried to do. That led us to embrace separate accounts for clients, which was actually innovative when we did it. We really didn't see a lot of people doing this to the mid-2009 or so. But it was -- we embraced that in the early mid-'90s, and it was -- we did it because it was in the best interest of the client, and it was an innovation that really helped us. We oriented our culture to focus on compliance and on alignment of interest. And as time marched on, we saw the private -- the shift towards private markets. And we saw -- and we pursued private markets capabilities. So that's another innovation or evolution of our firm. Originally, we pursued that inorganically through an acquisition that we searched for, for several years, and that's now the biggest part of GCM Grosvenor. So we saw that while -- continuing going forward, we saw that while our separate account clients in both ARS and Private Markets were a great answer -- our separate accounts were a great answer for many of our large institutional clients. We needed to build out our commingled fund or specialized fund practice. And we focused on that, and we've done that, and we're continuing to grow that out. And that has enjoyed a 35% compound annual growth rate since 2014. So it's just another piece of innovation or evolution, if you will. And in the last example of that, we've shifted heavily towards direct-oriented strategies such as co-investments and secondaries, which provide terrific value to our clients, better economics to us. And so the point of this is that we have evolved continuously. We've innovated, we've executed, we've grown. We've done it through market cycles through tremendous evolution of the alternative space, and we've stayed relevant and stayed a leader in a changing industry over a long period of time. And I think that's relevant for all of you because you can look at that long history and you can, I think -- and you can see that we've built a great business with a great financial profile through different markets, through different evolutionary periods. And I think you can take some comfort, some measure of comfort anyway, that we will continue to do that as the space and the sector evolves going forward. So that's -- those are, I think, important points. Most importantly, you'll see today that we have the team, the vision, we have the industry backdrop with tailwinds to continue to do this going forward and continue to evolve and grow. I think a lot of that starts with our culture. And so I want to dig into that a little bit because in a business with significant human capital element and IP that gets socialized around the industry very quickly, culture is actually an important defensible asset. And we like to say we're a culture-driven firm. So what does that mean? Externally, it means that we have a client-first mindset. You'll hear more about that today. Our success comes only if our clients succeed. We're acutely aware of that. We embrace that. It means that we're focused on excellence across all that we do. And it means that we embrace a strong client service orientation. And with separate accounts, there is a service aspect to what we do. If we do those things, starting with delivering results, our clients win, and we win. And it's pretty much that simple in terms of what do we have to do to keep growing. Internally, that focus on culture means that we create an environment where that values compliance, it values collaboration, it values humility. We do not operate star systems. And our model depends on alignment. It depends on alignment with our clients, and it depends on alignment with teammates and among teammates and, of course, alignment with our shareholders. In a business like ours, especially with separate accounts where we act as an extension of client teams, culture shows up in every interaction. We're not just producing quarterly statements, having an Annual General Meeting. We're building portfolios. We're solving problems. We're working alongside our clients. Jon is going to focus his remarks on client relationships, but it's safe to say that we wouldn't have the business we have today if we didn't have a culture that embraced and lived these ideals. And so we're going to hang on to nurture and strengthen that culture all the time. Before we talk about the future, I want to start with a little -- just a quick snapshot of what we look like today. We're an $86 billion firm across 5 core alternative strategies, absolute return, private equity, infrastructure, credit and real estate. We're headquartered in Chicago. We have 9 global offices and 546 employees. We can implement strategies for clients in a variety of ways through primary investments in another sponsor's fund or through a direct-oriented investment. We define direct-oriented investments as a controlled direct investment, a co-investment, a secondary investment or a seed investment. The common thread for direct-oriented investments is that our team is making the investment decision at the asset level. And as I'll discuss in a few minutes, direct-oriented investing now comprises the majority of the funds we are raising and it's transforming the asset and financial profile of our business. At the program level with separate accounts, we offer our clients significantly more involvement and a higher level of service than they could get in a blind pool fund. More than 70% of our AUM is delivered through customized separate accounts, which are programs where we invest based on clients' unique specifications that we've developed with those clients. That speaks volumes about the level of trust our clients place in us. We are sometimes quite literally an extension of their staff with structures and strategies and governance customized for their objectives. We are often their institutional memory. We're the constant over a 10-, 15-year period of time with regard to a particular asset class for a client. The remaining 30% of our capital is in specialized funds, which provide investors of all sizes with an efficient way to access our investment expertise to access the diversification we provide and the performance we generate. And this is a growing -- as I said earlier, it's a high growth rate over the last 9 years, 10 years, and it's a profitable -- growing and profitable part of our business. Jon is going to go deeper into our clients and our client base. But as you can see here on this slide, we enjoy very high client satisfaction, very significant loyalty from a diversified global client base. We've grown alongside our clients. 56% of our top clients work with us in more than one strategy, 92% of our top clients have added capital since 2020. And so said simply, we have great clients with great tenure, great loyalty and a lot of room to grow with those clients. Jon is going to show you a slide that looks at the progression of separate account relationships, and he's going to give you a number of real-world examples. And what I'm ask -- I want to ask you to think about when you see that is what does that mean for the capital that we've raised from new clients in the last 3 years because what you -- when you process it, what you realize is when you raise $1 billion from a new client, it's not $1 billion that you've raised. It's $7 billion, it's $10 billion, and it pays off over the next decade. And we hope you kind of come away with that when you see when Jon goes through his presentation. We manage our clients' capital with a high degree of flexibility in order to be highly aligned with their needs. That and our separate account orientation, which are sort of one and the same, are what make us a solutions provider in industry parlance. But we actually think that the true meaning and the true value to the firm of being a solutions provider is broader than that kind of commonly viewed definition. Our scale, our reach and our history are actually vital for serving all of our partners in the alternatives ecosystem, clients or investors with us, but also the sponsors that we are working with in one or more of the verticals within alternatives. We are serially a solutions provider for the capital of our clients, but we also provide solutions with that capital to the alternatives marketplace. And that virtuous cycle drives a lot of value and opportunity for our firm. As a provider of capital to funds and companies and assets, often as a cornerstone investor and as a solutions provider for those seeking to deploy capital, our clients, our dual identity is a strategic advantage. It generates broad and diversified flow of opportunity. It generates terrific origination, and it gives us more ways to serve clients, more ways to deliver returns, more ways to win business. One thing that you'll hear repeatedly from Fred and our investment leadership is that our strong ability to originate opportunities enables us to deploy significantly more capital in the future than we manage today while still generating attractive returns and a high standard of service for our clients. It allows a significant growth with significant operating leverage. And we're going to show you a little bit more about that today, dig into that a little deeper. Everything I just talked about and everything we do for the most part, we are doing in the middle market, and that's a core driver of the excellent client outcomes that we seek and have delivered. We believe the proposition of -- the value proposition in the middle market opportunity is very good. We know for sure that our clients need more help in accessing and investing in the middle market. So our value add is greater. So we've got, we think, a superior risk/reward profile and the opportunity to add more value to our clients with that middle market focus. Middle market is more fragmented, less efficient, creates more opportunity for outperformance. And as you can see on the slide here, it has consistently outperformed industry benchmarks across all of the different asset classes. Clients recognize this. They want the return profile. They want to seek it out as a diversifier for their commitments in these verticals and as a premium return generator for their portfolios, and they hire us for the activity specifically because we have the value proposition in this space. Our relationships across hundreds of sponsors are built on decades of credibility as a partner and a capital provider. You're going to hear that -- as you hear the vertical heads throughout, you're going to hear this sort of symbiotic relationship where we are a real partner to the players and to the participants in that vertical. And because of the fragmentation in the middle market, having size and scale is actually critical and very valuable, and we're able to take advantage of that. We're a leader in that market across all of the investment strategies, and it represents the majority of our capital deployed. Let me pivot now a little bit to our financial profile, what we've done and then what we're going to do. And we want to do this because at the end of the day, we're not just a great partner for clients, but we think we're a compelling investment for shareholders. We are a capital-light business with expanding margins and strong cash flow. We've built a scalable platform with significant operating leverage. As our assets and revenue grow, we will not need to proportionately increase expenses. As you can see on this slide, since we've come public, we've delivered growth across the board, fee-paying AUM, fee-related earnings, margin and adjusted net income. We think that we are positioned to drive accelerating growth. So those were decent numbers over the last -- since the end of 2020. We think we're positioned to drive accelerating growth. We see a ton of runway to continue and accelerate the trends of the last 4 years, 5 years. The first is just to simply grow our core business as you know it. As I just discussed, our business has already enjoyed mid-teens earnings growth over the past 5 years, just continuing to convert undeployed capital to fee-paying capital, growing with our existing clients who add capital to their existing programs and adopt -- start to work with us in new programs and raising new capital and doing that every year provides a strong level of future growth for us. We think, as I mentioned, all of our investment strategies can scale and scale significantly. Fred and the investment leadership is going to speak to the specific opportunities inside each of these strategies. But you see here on this slide that we see very good levels of growth in these -- in the various investment strategies over the next 5 years. We also expect that we will have a continued material shift towards direct-oriented strategies, which is good for our financial profile. Last, there is white space for us. So we have a good outcome for the firm, for clients and for shareholders just continuing to do what we've done. And we have a lot of room to do that, a lot of demand, a lot of tailwind to do that. But we also have significant white space that can accelerate -- accelerates opportunity and growth. So you will hear today that there is significant demand for alternatives pretty much everywhere. On the institutional side, in addition to the opportunity to cross-sell our existing client base, the opportunity is very significant internationally. It's significant in the insurance channel. On the individual investor side, it's hard to overstate the demand opportunity, which is really in the early innings. Individual portfolios are starting to look. It's early days but starting to look more like institutional portfolios. I think at a minimum, the people that are delivering the individual investor portfolios are starting to realize the need for those portfolios to look more like institutional portfolios that -- and taking advantage of that, which it's a great opportunity for us, taking advantage of that opportunity as one of our key priorities and building a platform to serve that space with the same diversified exposures that we offer to institutions is an important goal of ours. And as I'll touch on in a minute, investing in these areas of white space is a core pillar of our capital allocation strategy. So let's talk about capital deployment for a second. We've shown that we can grow at solid rates while remaining capital light while paying a reasonable dividend and managing dilution from stock-based compensation. Hopefully, you come away from today convinced of the high likelihood of us continuing to do that on an even faster scale. The investments we've made and we'll continue to make in distribution, Grove Lane, they support that. But I just want to take 1 minute and touch on inorganic growth and how we approach inorganic growth because we entered the private markets through inorganic activity, and we do have an active team. As you know, it was an acquisition that got us into the private markets. That was a strategic decision to go look for that. We successfully integrated that business in a one firm, one culture approach, and we've successfully grown all of the verticals that existed at the time of the acquisition. Jon led our strategy team at the time of that acquisition and ran the integration of that business. And it's been a tremendous outcome. Private markets is the biggest part of the business today. Jon now has broader responsibilities -- leadership responsibilities as President of the firm, but we've maintained the strategy function. It's led by a partner of ours, Kevin Buchheit. You're not hearing from Kevin today. But Kevin works closely with me and Jon leading our work on anything that is inorganic or particularly complicated. And that includes looking at strategic and opportunistic M&A possibilities. As you know, we are large shareholders of the firm. So our interests and our shareholder interests are entirely aligned. And when we look at these opportunities, we are thinking quite literally as if this is our money because a bunch of it is. And that means our bar may be a little bit higher than other management teams who own less of their businesses. But it also means when we do something, it's likely to be pretty good. We have a highly disciplined approach in terms of how we look at inorganic opportunities. We look at them through 3 lenses. Is it good for our clients? Can we tell our clients in the morning why we are a better firm for them? Will it help us grow faster as it can accelerate our growth rate, not just cost synergies, but growth synergies, revenue and growth synergies. And is the risk/reward reasonable? And we think that approach or those lenses keep the firm safe and strong and keep us disciplined. So we do have an active effort there. You don't swing at most pitches, and it's hard to get deals done, but this is something that we work on, and we think it's important that you understand how we process that. Looking forward, we've told you for a while now that we see our 2023 fee-related earnings doubling by the end of '28. We have not really spoken before or kind of quantified for you before how we see that translating into ANI. And we see the ANI growth from the end of '23 more than doubling. We see $1.20 a share in 2028 as a comfortable ANI goal. We think it's $1.20 plus but -- $1.20 in adjusted net income per share by '28. That's built on the FRE growth we've already laid out, plus a significant upside from our incentive fee earnings power, which has expanded tremendously in recent years. Pam is going to dig into that a little bit more. We have said that we are capital light. We're going to return capital to shareholders. We're going to manage dilution. We've done that, and we're going to continue to do that. The combination of management fee growth, expanding margin and high incentive fee earnings power has resulted in a business that is highly cash generative. This is another thing that I think is worth just making sure everybody understands and embraces nearly all of our earnings and cash flow are free cash flow. It enables us to pursue a capital allocation strategy that balances investing in future growth with returning capital to shareholders. And it is our plan to continue to do that. And so I'm pleased this morning to tell you that our Board has approved an increase in our quarterly dividend from $0.11 to $0.12 a share. That change will take effect for shareholders of record on December 1, 2025. At $0.12 a share between now and year-end '28, investors will collect about $1.56 in dividends. That's with no other dividend increases. They would collect kind of a minimum of $1.56 in dividends. So you all have to figure out valuation. That's the hard part for you. But as we see it with a reasonable multiple on $1.20 of ANI and $1.56 of dividends in your pocket by the end of 2028, it's easy to see $23 of value, which would be a double in our stock price in the next 3 years, which is a pretty decent rate of return. I don't think that's aggressive, by the way. As I've said before, while we'd like to see that, what we actually focus on is the business and compounding the free cash flow and our true intrinsic value. That's what we're going to do. We're going to continue to focus on that. You'll all continue to figure out what that's worth. But we're going to focus on that. And you're going to hear more today in depth from all of our people about how we're going to do that. I just want to close by saying because culture is so critical to us, we put together a small little video that has some of the broader people at the firm talking about our culture. So we're going to play that for you now. And then Jon is going to come up here, and you'll hear about some other aspects of the business. Thank you. [Presentation]

Hello. Good morning. First, I want to thank our communications team. I watched that video for the first time yesterday, and they were able to tell me something my loved ones weren't. So I worked out last night, and I had a salad for dinner. Clearly, I've been traveling too much, and I appreciate them letting me know in a very subtle way. Good morning. Jon Levin, President of GCM Grosvenor. I joined the firm in 2011 after having spent the prior decade or so in the alternatives space. Michael tells people that I joined GCM Grosvenor because I wanted to move back to Chicago. It's actually not really true. I like New York. I really joined because of the opportunity. I knew Michael and the firm before I joined, long admired the people and the culture. But equally important, if not more important, I had conviction on the opportunity set to join the team and help drive value in the business. I believe in the alts sector and in the important role of a diversified solutions provider. We've created a ton of value over the past 1.5 decades for our clients and in the business. And as Michael said, and you'll hear more about today, we believe the prospects for the next 15 years are even brighter. My goal with my time today is simple, illustrate our strong value proposition for clients and how that sets us up for success as a business. Let me say that again, how driving value for our clients drives our success. That order of operations is really important. Clients come first. If they win, we win. We built a platform that meets clients' critical needs and delivers outcomes that are both durable and differentiated. Before we talk about us specifically, let us spend a minute on the industry. This is something you all hear all the time, I'm sure, from our peers and spending time on the industry, but it's a good one. Alternatives continue to capture a growing share of global assets. Every single alternative asset is a vertical -- vertical is growing, even the ones that may not be catching the best headline on any particular day. Alternatives AUM is projected to grow at double-digit rates over the next 5 years, driven by the compounding of returns and greater share of investors' wallet. It also continues to be the case, and we get this question a lot, that investors are seeking to build and grow deeper relationships with fewer, larger, more strategic partners. We're a beneficiary of that trend. We're seeing that real time in discussions around the world with our clients across all geographies and type. Our platform is purpose-built. We made 2 critical decisions as a business. One, we wanted to be able to help investors with any alternative discussion they wanted to have. We wanted to be relevant to them regardless of cycles and trends. And two, we wanted a business model that was able to work with clients with flexibility and scalability. This strategic direction enables us to walk in the room with clients and prospects and do what we do best, listen, understand the problems they're trying to solve, the goals for their alternative programs. Clients have very specific portfolio goals in terms of verticals, geographies, implementation styles, the ways they want to conduct the business. And the investment solutions must be delivered in the specific structure to suit their unique needs. Our platform covers the key alternative [indiscernible] groups, absolute return strategies, private equity, credit, infrastructure and real estate. And the relevant investment styles, primary investments, co-investments, secondaries, directs and seeds. And as you'll learn throughout the day today, we're able to package those manufacturing capabilities in the optimal wrapper, whether it be a customized separate account, a white label solution, a specialized fund, those structures can be closed-end, evergreen, registered. Decades of investment, purposeful decision-making, culture and practice have created a platform that's both flexible and scalable. The one thing that makes us pretty unique is the level of capital we have from customized separate accounts. And you've heard a little bit about that from Michael. So let's dive a little bit deeper into that and understand it in more detail. Customized separate accounts represent 71% of our assets under management. That figure has been north of 2/3 for 30 years, and we played a strong role in pioneering this approach for clients. Interestingly, in the mid-1990s, and I can take no credit for this, I was in high school at the time, the company won a major piece of business. It was a separate account. That client said they wanted to work with us or their partner for 3 years, learn everything they could from their partner and then fire us. There were 3 people competing for that piece of business. I think 2 dropped out on that great news, 2 still competed, we won. They're still a client today. They have almost $1 billion of capital with us, and that's after having returned hundreds of millions of dollars in profits. We need to provide a value proposition that evolves as the clients' needs evolve. Regardless of structure, everything starts with investment returns. Fred is going to go into that in more detail, and you'll hear about it from the verticals. But our success is also heavily attributable to the partnership and services we provide beyond the investment returns. And the list of these services is vast, tailored reporting, portfolio analytics, risk aggregation, knowledge transfer, training programs, helping clients with their own conferences, helping clients book travel. You could come up with things I guarantee you we've done it for our clients. We provide administrative services for assets beyond the assets we're managing from an investment perspective. In fact, we don't talk about it much because it's just one of the many services we offer. We actually administer hundreds of billions of dollars of alternative assets on behalf of certain of our clients. I would note that people sometimes assume that solutions providers such as ourselves are only relevant to smaller investors with fewer staff or less investment experience. The reality is that our value proposition is coveted across all investor types. Most of our clients in customized separate accounts, in fact, are some of the largest, most sophisticated clients in the world. We're going to look at a couple of case studies. Remember the key tenets as we go through these. The solution starts with listening to what the client is trying to accomplish. The solution must drive investment returns. The structure of the relationship must be economically efficient, and the solution often incorporates key value-added services. In the ARS business, we typically serve as the entirety or a core allocation of our clients' programs. In this particular case, the client, a sovereign wealth fund from outside the U.S., was looking to launch an Absolute Return Strategies program from scratch. While focused on returns, of course, they wanted to scale quickly into a diversified portfolio. And this client had their own team but also understood the value of leveraging a partner with more resources. So the first thing we did is we launched a portfolio managed by our team. Alongside that launch, we supported the clients' initiative to build a portfolio managed by their team. They leaned heavily on our team investment insights, knowledge transfer, training and operational lift. So from the clients' perspective, they're getting a lift from a 550-person organization with 55 years of history in the ARS space, and that lift is essential to their overall ARS program. The 2 portfolios that are managed, 1 by us and 1 by them, they complement each other so that the overall program makes sense. And importantly, this resulting solution is economically efficient. As you can see on the slide, we're earning our normal management fee on a $250 million account, but the client can properly look at our fee as a constructive cost of 13 basis points to them. That's because we pass along the fee savings that are the result of our $25 billion ARS business and deep relationships and provide services to that client managed portfolio as part of the overall relationship. The significant investment and operational value we deliver across their entire program creates a durable moat around the relationship. In our ARS business, the average length of relationship of our top customized separate account clients is 13 years. That's longer than a contractual private markets fund life. For a business that's considered to have less duration and causes people some concerns due to the underlying contractual terms and the underlying liquidity of securities, that's likely surprising to folks. Here's another case study. This one is in private markets. This particular case study relates to a co-investment program for a U.S.-based public pension system. This client had a high-quality private equity program with high-quality sponsor relationships skewed towards the larger end of the market, but they lack a co-investment program, and they also lacked exposures to the middle market. Resource, governance and operational issues hampered their ability to take advantage of their deal flow from their relationships such that this very valuable origination asset, the co-investment deal flow is ending up on the cutting room floor. So we created a program using a dual-sourcing approach to take advantage of both the clients' large-cap deal flow alongside our middle market and small cap deal flow, thus monetizing the clients' otherwise wasted asset and introducing complementary exposures to their PE portfolio. We lead origination, underwriting, execution and portfolio construction and work alongside the clients' internal team on a daily basis. Again, and importantly, the program is also economically efficient, comparing what a client would pay for a private equity program devoid of co-investments and compare that to our fees for a typical co-investment program, and you've cut the program costs in half. Allocating a significant portion of our private equity allocation to co-investments materially decreases the private markets programs' cost and drives returns. Many investors around the world are similarly constrained from a resource standpoint and need a partner like us to help them implement an institutional quality co-investment program. Customized separate account wins like the ones I just described are the result of long sales cycles, involving a lot of listening, information sharing and planning. Our clients appropriately spend significant time evaluating their prospective partners. These relationships last longer than the average marriage. The resulting victory is worth the effort. The value proposition and the extent to which we are ingrained in our clients' programs create highly sticky relationships that grow. This is what Michael was referencing earlier. Our experience is that the relationships grow to multiples of their initial size. This concept is illustrated here in the context of one of our real estate customized separate account relationships. After the initial series was invested, the client added more capital in a second series. This is what we call a re-up. The client has continued to add capital over the last decade in the third series, a fourth series and so on. These re-ups were made at larger amounts because of the trust we built and the clients' balance sheet grew. The result of this is that a decade after the first series after the sale -- the initial sale, the AUM from this client is nearly 10x their initial commitment. We see this dynamic throughout our business where we enjoy a 90%-plus re-up success rate with a typical average upsize of roughly 25%. Importantly, this case study actually just stays within one vertical, but this next case study illustrates a client relationship built across multiple verticals. We always have to focus on the business we have today as opposed to the business we have tomorrow. That's really, really important. If we start thinking about the re-up or we start thinking about the cross-sell, we've lost our way. What we have to do is focus on driving value today. But the good news is that when we will maintain this mindset, good things follow. As we build trust with our clients and create value for them, we often get the privilege of managing capital for them and strategies beyond where the relationship started. This particular client is one of the largest alternative investors globally with one of the largest staffs and most sophisticated teams you'll find. But they determined many years ago, they wanted a partner to help them build exposures to the smaller end of the private equity market, utilizing both funds and co-investments. These exposures would be complementary to what they were -- internal team was doing while delivering strong returns and developing a farm team concept for the clients' direct allocations down the road. Over time, as we provided value, they went on to partner with us in real estate, then infrastructure and most recently, I think the first quarter of this year, maybe second quarter in Absolute Return Strategies. Here, you can see that story play out across 6 different relationships. If we do our job, the separate account model is the best lead generator any sales organization could create. I'm proud to say that we've done our job so far, and expansion with our existing clients has been and will remain a major source of our growth. Let's turn to specialized funds. Turnkey targeted exposures that leverage the exact same manufacturing infrastructure as our customized separate accounts. These products are used sometimes as part of certain customized separate account programs and also provide stand-alone solutions. Given that we come from a custom account origin, we're pleased with how these funds have been received in the market. We've had a good track record of successfully scaling our different franchises and they've grown at a -- as Michael said, a low mid-30s CAGR over the past decade. That's a lot of growth for a decade. We believe we have considerable room to scale these fund franchises further, and you'll hear more about that from each of the vertical leaders as they go through. We've talked about our track record of evolution, growth and scaling alongside our existing clients in both customized separate accounts as well as specialized funds and providing exceptional value to our existing clients is obviously essential to everything we do. That said, we're constantly investing in expanded distribution, both in terms of the time spent by our existing resources and investments in new resources. Our approach is to invest strategically in geographies and channels where we're underpenetrated. And I want to emphasize that we continue to see plenty of growth opportunities in the institutional channels. Don't worry, we'll get to the individual investor in a second but still see tons of growth in the institutional channels. While it's never easy, our playbook of listening to client needs and leveraging our platform to tailor our offering accordingly positions us very well to win. Since 2020, we've partnered with more than 150 new institutional clients across geographies and client types. Using the prior case studies as our guide, all of these new clients have the potential to be multiples of their current size over the next decade. That represents tens of billions of dollars of opportunity. Turning to the individual investor channel. Not surprisingly, like many of our peers, we're investing a significant amount of time and resources to capture our share of this very exciting opportunity. Individual investors hold roughly half of global wealth but are massively underallocated to alternatives. This means that we're still, we believe, in the very early innings of a multi-decade tailwind from individual investors building appropriate allocations to alternative investments in their portfolios. We believe that individual investors portfolio should be institutional quality over time, and it will take time. The offerings available to individuals today are concentrated in a narrow segment of the market of alternatives from a narrower set of providers. Most individual investors' alternative allocations are concentrated in a handful of large mega cap providers. 7 firms accounted for over half of the fundraising from the individual investor channel over the past few years. By the way, there's nothing wrong with those investments as a place to start. But over the past 50 years, institutions, along with their consultants, advisers, partners and various academic studies have all determined that an optimally built alternatives portfolio is going to be diversified across more than 2 or 3 funds. You're going to have exposures to all segments of the market. Resilient individual investor portfolios will ultimately evolve to [ what ] we think and we hope if we do our job as an industry to encompass the same attributes as institutional portfolios, diversified by strategy, sub-strategy, geography, market cap, implementation type and vintage. As a solutions provider, we're delivering institutional quality diversification to individuals in efficient holistic solutions. From spending an increasing amount of time on this market personally, it's clear to me that individuals want this value proposition. They need that in their portfolios and the people that are building portfolios need that for differentiation in the marketplace. Individual investors need a partner like us who can provide access to the missing areas of the market as well as operational infrastructure and diversification. We brought our solutions mindset to this channel, meaning that our broad and deep platform as well as our flexible implementation model are just as relevant in the individual investor channel as they are in the institutional channel. We have almost $4 billion of AUM today from individual investors, the majority of which was raised in the past 5 years. Our strategy is multifaceted. We started with distribution via the wirehouses with a dedicated internal team. Earlier this year, as you know, we launched Grove Lane Partners, a distribution joint venture focused on RIAs and independent broker-dealer market. And we've also entered into third-party distribution partnerships where that makes sense, including, by the way, leveraging our global footprint to have some of these partnerships to -- for individuals outside the United States. As we move forward, we're going to continue to deploy this multifaceted approach. Importantly, the capital that we've raised today is highly diversified. We've raised $2.7 billion of capital from the individual investor channel for customized separate accounts. I'm sure that is not something that people thought was particularly relevant in that channel, $2.7 billion from individual investors for customized separate accounts. $600 million from nonregistered specialized funds and $600 million of AUM across registered funds all in the past 3, 4 years. We work with 9 wirehouses and [indiscernible]. And we're in the early days with Grove Lane, as you know, but we already work with 40 RIAs that invest with us. Each of our verticals has raised capital from the individual investor channel. And we suspect, as you look 4 or 5 years down the road, this channel could easily account for 20% to 25% of our annual fundraising. We're excited about this opportunity. Let me conclude with a quick update on fundraising. We're pleased to announce that we saw continued strong capital formation in the third quarter, raising $1.9 billion of capital. That brings year-to-date fundraising through the end of September to $7.2 billion, which is greater than our capital raising for the entire year of 2024. You will recall we talked about in '23 that we expected '24 to be better than '23, '25 to be better than '24, and we've seen that. The last 12 months has been $9.5 billion of capital formation, the highest 12-month period in our history. And importantly, we see a ton of pipeline and momentum behind that. Expect to finish the year strong with Q4 capital formation and feel very good about the years ahead. Clients and shareholders and other people ask a lot when we meet with them as a senior leadership team, what keeps you up at night? For me, the answer is either my kids or jet lag. I don't really worry about the business. At work, we're focused on controlling what we can control. If we wake up every day thinking about our clients, it will be just fine, and the results will be compounding equity value for the business. And with that, I'll turn it over to my partner, Fred. Thank you.

Good morning, everyone. My name is Fred Pollock. I'm GCM Grosvenor's Chief Investment Officer. I'm going to try and do a better job than Jon and Michael as a leader today and lower the bar for all the investment verticals you're going to hear from later. So that's going to come afterwards. I'm also going to try not to steal all their thunder in terms of what they're going to go into more detail and cover a few different areas. I've been at Grosvenor for a little over 10 years. Before that, I was a direct investor working principally in the infrastructure space. When I joined Grosvenor, I was part of being able to build on the huge strengths we already had in all of our core verticals, and then we've expanded into a number of logical adjacencies to help enable and just foster growth. My plan for today, I want to talk about the broad investment platform that we have. First, kind of 3 key aspects: one, it's scalable and its flexibility; two, our experienced people and strong repeatable process; and three, I want to talk about our performance. Second, I'm going to provide a few perspectives on our investment verticals. And without, as I said, trying to steal the thunder of the individuals that are going to come after us this afternoon. First, our investment platform. Each year, we source a little over 3,000 high-quality investment opportunities. These are coming from top decile and top quartile alternatives managers across the entire alternatives ecosystem. Obviously, some of what we do every day is build new relationships. Most of what we do every day is direct-oriented deals. So if you looked -- and you came and joined Grosvenor, [ you were ] sitting around, you'd see 80% or 90% of our activity every day is working on deals. Our sourcing capacity is far greater still. We could fund many more investments in the 3,000 we have, and we continue to kind of grow that pipeline and origination capability every day. We're broad and deep in every area of relevance to the alternative investor universe. We've got 177 investment professionals operating across private equity, credit, infrastructure, real estate and absolute return strategies. I think one of the key sources of our performance is selectivity. We only invest in 5% to 10% of the 3,000 opportunities that we see every day. Our long history of compelling investment performance comes from combining, one, broad origination and seeing everything in the market; two, our quality professional team; and three, a disciplined and repeatable process. As I said, most of what we do today are deals. It's trading securities. It's executing on co-investments. It's doing direct deals and control transactions. Our edge, I believe, comes from our relationships with the best investment professionals across the entire alternatives landscape. The market intelligence that comes from that is just uniquely valuable. It's a lot easier to evaluate things on a relative basis in terms of picking through 3 or 4 extremely high-quality opportunities from the best minds in the investment space than to create a new opportunity de novo. I'll give you an example, [ First Brands ]. In the news, topical, you'd see it this morning, people are actively debating it. We were net short First Brands if you looked across our platform. Is that because we were geniuses? No. It's because we work with extremely skilled practitioners in the private credit space. They had identified it as a negative situation potentially. And net looking at our exposure, we had the appropriate positioning. And then that informs our activity in other areas of the firm, and then we're able to benefit from it. We're more than an allocator. Our relationships are long and deep. I wanted to provide a couple of examples here just across each of the verticals to give you a sense of what that really means. So in the absolute return strategies on the left, Woodline, a firm many of you would know, a market-leading multi-manager, multi-strat hedge fund. It was created as a spin-out from Citadel. We invested in Citadel back in 1995, have been one of their largest outside investors. We knew this team very well. We track them. We were early capital, and we essentially helped seed the fund for it to spin out and become a unique and stand-alone platform, much to our own benefit and our clients' benefit. Similar in credit, Kennedy Lewis, 2 practitioners who are existing credit firms, we help seed that firm. We've worked with them in multiple different strategies, and we've done a number of different co-investment deals alongside of them. In infrastructure, we actually anchored KKR's first infrastructure fund, and then we went on to anchor Asterion, which is the Euro-focused KKR spinout and done a number of different transactions with them. I'm not going to cover the private equity TSG example because it's going to steal Bernard's thunder, and I don't want to do that later. But I will tell you, we have the largest small and emerging manager franchise on earth. We plant a lot of seeds in the private equity space with managers when they need capital, and that comes back to our benefit later when those relationships are truly valued. And finally, in real estate, Brasa was a group that we seeded, we helped anchor and expand into a number of new strategies. The real point of this, we're a key driver of the alts ecosystem. We're reliable and creative as a partner. This is going to be the most important thing I say today, especially just for investors and shareholders trying to understand what we're doing. You would have heard from Michael, you would have heard from Jon, they think we have a scalable platform. This is the data that I think that backs that up. So today, if you look at what we do, 3,000 investments, a 5% to 10% average selection rate across those investments, $50 million to $100 million allocations per investment. That would be about $10 billion to $20 billion of annual capacity. We're actually deploying $5 billion to $8 billion, right? What is going on? We have latent ability to scale and originate without changing anything. Just in the existing transactions that we're doing, we could just write bigger tickets. Of course, we could expand the sourcing. Of course, we could even broaden the funnel in terms of selectivity. There's a lot of investments we don't do not because we don't think they're good, but because we don't have the capital to do them. We're long origination and we're short capital, right? I'll say it again, we are long origination and short capital. If you talk to all of our teams and later, the different vertical heads are going to talk, this is what you would hear everyone talk about every day. How can we get more money to run through the pipes? How can we invest in more deals that we want to do and deliver for our clients? Doing that 2 to 3x in terms of volume that we would do, it's not going to require a significant investment in people or significant incremental cost from an investment perspective. Why is that? Because we already invested in the talent, technology and processes to support the scale deployment. So I'm going to repeat this one. I'm going to beat it over the head because I think it's probably the most important point I'm going to make. We can scale efficiently to the benefit of all our stakeholders, our investors, our people as well as our shareholders pretty simply within the investment verticals. It's uniformly true across all of them. What powers this? It's our people. We have great people. I think Michael said this earlier, I think we absolutely do, but everybody has great people, right? Everyone in the alts ecosystem, it's a prerequisite to have success to have great people across your franchise. Our differentiator, I believe, is our culture. It's truly open architecture. There's shared success. Our investments are shared across the different verticals. We have overlapping investment committee membership. I sit on all the investment committees. Jon sits on most of the investment committees. There's true knowledge transfer across all the different areas. And many of our investment professionals have what I call major miners. They work in multiple areas of the firm to make sure that information changes. We have no star system. As a shareholder, I think it's an incredibly important concept, right? When we go and build areas of activity and foster growth, we don't take shortcuts. It would be very, very easy for us to grow a little bit faster in the investment space by doing things that could maybe jeopardize client relationships or would be built a little bit on weak foundations in the sense of being too reliant on individuals. We rely on process, and we rely on teams. Importantly, incentives matter. Our carry pools are shared across all of the programs. I think it's better culture. I think there's more alignment. I think you drive collaboration, and I think it creates diversification for our people. You will not find periods of time where our employees are not in the carry, right? So if you work in a single fund out in a private equity shop, there's 5-year periods where you may not be in carry, maybe because of the macro environment, maybe because of bad performance and a couple of investments you didn't even work on. And it affects your decision-making. It affects your -- the idea that you would stay with the firm. We don't have that. We award carry annually. That annual carry is highly diversified across huge areas of activity. It's more valuable to our employees. It creates less turnover, which is very, very useful for our clients as well as for the firm. I want to give you a little bit of a sense of process. It's disciplined. It's orderly. We check and recheck everything. We don't need any specific deal, right? One of the beauties of the platform, there are so many different transactions coming in every day in each of the verticals. We don't feel pressure to do any single investment. What's really special, how does it work? We see everything, right? We just see everything, better market intelligence, relative value analysis rather than ever to create transactions from scratch and do absolute value analysis. It's just easier. If I take smart people and I put them in our platform, successful investors. They will be more successful in their area of activity inside our platform than a stand-alone enterprise. Here, I want to talk a little bit about AI and data. One of the questions I get very frequently is, how is it affecting what we're doing? How is it affecting what managers are doing? We did a survey actually recently, a number of different managers across the platform. What you saw 1 to 10? Everyone scored about a 4 to 5 saying that they're trying to implement it. It's important and they're working on it. They only scored a 1 to 2 in terms of is it having an effect on investment outcomes, right? So everyone's toying with it. It's not really affecting people in terms of huge investment outcomes and change in investment outcomes. I think we're a little bit different. We've been using the data across the entire firm for a very long time. If you think about what we do, we receive a lot of reporting from a lot of different sources. You have to coalesce that material. You have to mine that data, and we've been doing that for a very long time very successfully. So I think we're a little bit ahead of the curve. We're tracking what everyone else is doing. There's obviously also the efficiency side. We've done a lot of A/B testing in the investment side where you have teams work on a transaction, one with AI, one without AI. And you know what happens. People can do things in hours that used to take days, and we're seeing that across the board. And so I think there'll be some efficiency. It lets our investment people scale, and it lets them focus on things that add more value to clients and do things a little bit faster. Risk management, I think, is absolutely essential. We port the best practices across each of the verticals to all of the verticals, right? So if something is really good in the hedge fund space, and it works really well, and it can be applied to the illiquid space, we've done that. I don't think everyone has done that. One of the key features of what we do, we are able to flexibly size positions. So when you're in the co-investment frame, Jon and Michael both spent a [ bunch ] of time talking about the value of co-investment. One of the values as an investor is that I can size my positions better than the sponsor funds, right? So the sponsor funds typically, 10 to 12 positions, highly concentrated, work for years on each position, put them into a portfolio. That's the level of diversification you're going to get. We see thousands of things. We curate for certain characteristics of those from a risk management frame. And then we're having portfolios of 25 to 35 positions typically across the board. It's more diversified. They're better constructed portfolios, and they compare extremely well to kind of one fund offerings. I actually think this makes it the perfect building block for the individual investor, right? If I wanted to create and start and to build my portfolio in the alternative space, I don't want to do it with rifle shot on niche things. I want to build it with the core. And I want to make sure I get the outcome of the asset class in a high-quality way efficiently implemented, and I think this does that. Our returns. I won't belabor these. Michael talked about it earlier in terms of our returns, both versus benchmarks and peers obviously doing very well. I think ultimately, we're judged by the marketplace. Every single one of these verticals is forming capital. Every one of them is highly attractive and salable in the markets in each of their categories, which I think is the ultimate test. We're proud of the consistency. We're proud of our culture and the process that helped us avoid I think, major pitfalls. I think it's often misunderstood in our space, which is it's not about the upside. It's not about the one deal that everyone likes to talk about that drove return. It's about avoiding pitfalls in each of these categories. And I think we do a good job of that. I think the sharing of information across the verticals helps us do that job. And as I mentioned earlier, it's all about quality growth for us. We -- as I said, we don't take shortcuts, right? There's things we could do that I think would help us raise more capital and deploy capital, but it would be potentially nonaccretive to our relationships with our clients, right? We could do single-asset things. We could do programs around very niche opportunity sets that potentially are faddish. We don't do any of that. Everything is core to their programs. Everything is sticky. Everything is done with a notion that over a 5- or 10-year period, the relationship is going to be stronger, we're going to perform and then we're going to have more opportunities to do more things for those clients. We're going to hear from each of our leaders, so I don't want to steal their thunder, as I said. Across all of them, I think there's a real clear path to materially higher AUM. I think we could do it in a scalable fashion that I addressed because we're long ideas and origination and we're short capital. First, in the Absolute Return Strategies business, $25 billion of AUM. I think the environment is just more conducive than it was 5 years ago for the Absolute Return Strategies business. The 0 rate environment that exists from 2009 to roughly 5 years ago, we produced alpha. If you looked at the numbers, it was a high-quality return stream at that point in time. It was just a 5% or 6% net return stream. It didn't hit a target that was satisfactory for most clients. At the end of the day, they want to make 8% or more. That's what they're targeting typically. And if you looked at an efficient portfolio, hedge funds might have fallen out. And so people disengage to a certain extent from that marketplace. We did pretty well. We held our capital base during that period. Performance was pretty good, but it didn't matter. It just wasn't going to be the area of activity where people wanted to produce and find incremental return. Now we're back to a normal environment. Rates are not 0. The absolute returns are more like 8% or 9% net, and its liquid. That is highly desirable. And you're back to the place that you were in the '90s and the 2000s in terms of the ability to do that. The other thing that happened, obviously, during that period where it was difficult, the barriers to entry went up. There's just less competition. So as people reenter the market, it's difficult for them to form high-quality portfolios, and I think we're in a very good position to help them do that. Credit, $16 billion AUM business. Our unique heritage here, having come from both the liquid side as well as the illiquid side and everything in between is differentiated. Every form of credit, we are a participant in the marketplace, and we can deliver all of that on a relative basis to clients. I think that's a real differentiated offering. I also believe we're early innovators in the co-investment and secondary space, which Steve will talk about later. It's very unique. It's very powerful and it's growing very fast. Infrastructure, almost a $17 billion AUM business. It just passed every test. You could have screwed up in COVID with demand destruction. We could have messed up when there was inflation spike, right, and not provided what people expect from the asset class, which is an ability to pass through inflation. We passed every test. It's a maturing market. There's fewer players. We're obviously one of the clear leaders with fantastic returns. And so I think the future is pretty bright there. Private equity, it's just been a challenging period recently. We have $32 billion of AUM. I think it's slowly improving, but I wouldn't want to call that. I think it's sort of the market is getting better every day. We've had a better realization profile than the industry, and we grew through all of it. I think that's really important. The market determines whether we're successful or not. And the market has helped provide us additional capital even during this different period, difficult period. And I think as the market gets better, hopefully, we will do better alongside it. And then finally, real estate, almost a $7 billion AUM business. It's truly unique and differentiated. It's a unique platform approach, also avoided the major pitfalls that you could have stepped into in the real estate asset class over the last 5 to 7 years. We're supported by the most skeptical and cynical and demanding investors from an institutional perspective on earth, and Peter will tell you a little bit about that. We're just now broadening the aperture from a capital perspective to broaden that to other types of capital providers. And I think it only gets easier at that point in time. What are the key takeaways that I want to leave you with? One, we have scalable origination. It's valuable. It's impossible to replicate that deal flow, and we can grow in multiple scale of our available capital. Second, we've got a proven repeatable investment process. It's selective, it's disciplined. And third, we've got great performance and track records in every vertical. That's what allows us to continue to form capital and grow our asset base. I think if you put all this together, it's why I have confidence we can continue to deliver for all our stakeholders, our clients, our people and our shareholders. Thank you very much. And I know now we're going to take some questions.

Thank you, Fred. We're going to welcome Jon and Michael back to the stage also. If you have a question, raise your hand, and we will run a microphone to you. So just please wait until the microphone arrives so that we can hear the question and the people on the webcast can hear the question. Chris?

While we're waiting a microphone, I got to congratulate Chris. He put out 5 research notes while we were speaking. I just noticed on the e-mail.

Yes, that's the importance of having them seen, right? Michael, you highlighted inorganic opportunities for the first time that I remember, and I was hoping that you could flush that out a bit. And just to put some context around that, I guess, it's -- since you went public in 2021 or 2020...

'21...

Yes, at that time, I would have thought there'd be half a dozen more publicly traded alternative companies, and they just haven't been coming. So I mean a lot of people want to stay private and does that create opportunities? And how do you feel about being a public company after all these years? And nobody else seems to want to structure there...

So let me take the last part of the question first, how do we feel about being public? People think I'm nuts when I say this, but I actually like it. I think it makes us sharper. I think it makes us sort of tighter. I think it makes it easier for us to attract people and easier for us to retain people. And so as far as I'm concerned, despite the fact that I don't love the total return of the stock price since January 1, 2020, I actually like being public. I think it's good and healthy for our business. I think we have -- and it will -- we will have a better business because of it. We have, as I mentioned -- we've talked a couple of times about the -- hang on a second here the screen kicked off, we've talked a couple of times about the lenses for inorganic activity. And we've just talked about it so that people understand how we think about that and how we process that. We have looked -- it's a group that works hard. I did mention that, that group also does anything kind of complex and complicated. So a lot of our structured financings that we've done, our CFOs, that's all coming out of that strategy team out of Kevin's group. So the group has been busy and has been successful and has generated revenue, but we have not had like a successful inorganic M&A effort. We have gone deep on a couple of things. But as you know, it's tough to get deals done and it's tough to win. I mentioned it only because we talk a lot about being capital light, and I don't think -- I don't see anything changing the idea that we're capital light. I think that would be very -- almost like impossible to do. But I don't want to never mention that, and we have done it before. You'll see those lenses in prior presentations or quarterlies or something. And I just felt like in an Investor Day, we're going deep everywhere, it was warranted to kind of reiterate that because if we ever did something, I don't want people to what, you never talked about this before. So we've kind of -- but there's nothing at all that's like that is imminent, but it is a constant effort and we're always looking. I think that there have been -- there's been some private market activity. There have been some private market transactions that have happened. Not many in our space, I think, really since we came public only one that came public. I'm not sure how many there are that have -- that firm is about half our market cap. I don't know how many there are that have that scale to go public. So we'll see. But certainly, there are some big private equity firms, and there's been more of those that have come public and conversations about more coming. There's big secondary firms that have the size and scale to be public companies. It's been a slow period since mid-'22 for that private equity space. So that may not -- realizations haven't been high, and it may not be the best time. I don't -- you probably have a better view, frankly, on pipeline on that sort of -- like IPO activity. But I think there will be further consolidation in the alt space, I think that BlackRock is a heck of a firm and you kind of look at the moves they've made in the last couple -- 1.5 years. And it alts are -- the growth space for the entirety of asset management. So one way or another, I think you're just going to see more people engaging there.

Bill?

Bill Katz, TD Cowen. A couple of questions if I could just lump them together. Just staying on the capital return discussion for a moment. If you're positive that your earnings are going to double over the next several years, you sort of have the dividend sort of steady for the illustrative example there. How should we think about capital return because the share count is somewhat thin, buying back stock is a little more complicated. It doesn't seem like you can do a lot of deals. So what's the -- is it just a yield opportunity? And then as you think about -- and maybe we'll get to it in a later part of the presentation, can you talk a little bit about your plans to get into the retirement market and the 401(k) opportunity as that potentially opens up?

Sure. I think on capital, your -- you point out 2 things that are -- that we think about a lot. And to be clear, we feel sometimes a little stuck in the middle. Absent inorganic activity, there's no significant impetus for share count to increase and certainly not at low prices because we own what's not floating today, and we're not sellers at low prices. And so we use stock comp and we manage dilution from stock comp and we generate free cash flow and we pay a dividend. And there's some balance in there. There's balance in there. We've essentially committed to being capital light for the foreseeable future. You've heard us say that. So that means money is going to get returned to shareholders. It means dilution will be managed, in particular, dilution from stock-based comp will be managed. And it means likely our free cash flow and our balance sheet continues to strengthen. And I think that's how we think about it. Should we find the right inorganic opportunity? That has the potential to increase share count and to change that liquidity profile, which I think is a factor in kind of who owns our stock and how the degree to which our stock is or isn't depreciated and the discount to peers that it trades at.

I would just add one point. I mean, Bill, from a modeling convention to your point, obviously, to what Mike was saying in the absence of an inorganic activity, which may or may not happen in the absence of other ways we can think to drive strategic capital investments to drive FRR, if you didn't increase the dividend or you didn't increase the buyback, that illustrative model would end up with a bunch of cash on the balance sheet. That's why it's illustrative. We're either going to use cash and capital to drive shareholder return. We are going to use cash and capital to drive shareholder return, and that will either happen through returning it or using it. On the retirement market, it's clearly part of obviously the evolution of our investments in the individual investor space. The marginal investment we are making today or the incremental investment we're making in distribution is pretty much almost exclusively in the individual investor channel. We still see plenty of opportunity in institutions, but the individual investor channels where you're seeing that extra distribution resources across all channels. And you're going to -- and I think the point I've made in my remarks regarding the multifaceted approach is important, and you've seen this in some of the news out of our sector. You're going to see situations where it's your own distribution. You're going to see situations where it's Grove Lane, which is our JV. You're going to see situations of third-party distribution. You're going to see situations of strategic partners, whether those be traditional asset managers or business of other kind to access the massive opportunity. And I think we're just in the early innings there. And as I mentioned, it's $4 billion of capital today, which is pretty much all created over the last 5 years, and we expect it to be 20% to 25% of fundraising 4 or 5 years down the road. So if you just looked at the last 12 months of roughly $10 billion of capital formation, assuming no growth in there, you're talking about that being $2 billion to $2.5 billion of capital formation, it's going to be from all those channels. I think the most important point maybe there, Bill, is the one Fred made, which is I think our manufacturing sets us up very well to have success in the individual investor market.

Crispin Love, Piper Sandler. Jon, you've been talking about this, but in the individual investor channel, definitely early days, plenty of run rate. But can you discuss just how you plan to directly compete with the largest alternatives in that channel, the Blackstones, KKRs, they're grabbing all the kind of the headlines there of being large there, but what Grosvenor tends to do and why Grosvenor can win there?

So I would start by saying we don't intend to compete with them, meaning just like we do in the institutional channel. When I talked in my remarks about people going to fewer strategic partners with larger, deeper relationships, we're a net beneficiary of that trend, meaning they have relationships with Blackstone, KKR, Apollo, pick your name, Ares, Blue Owl, and they also have big relationships with solutions providers, including us. And we provide a level -- a differentiated manufacturing profile. And we provide a different wrapper, and we provide a different customized experience, whether that be in an actual custom account or in a different form of vehicle. And so I think the real answer is if we are all, as an industry, acting the way we say we're acting, which is we want the individuals to have the institutional experience, I would hope that as we fast forward 5, 10 years down the road, the individual investor portfolios actually look more like institutional portfolios. And that means they're going to have more than 3 or 4 line items. And so I expect that it's not a competition. It's a rising tide, what is it lifts all ships or things. So -- and that there's going to be many beneficiaries from that trend. And I think we will see those portfolios evolve so that we sit right alongside those and those portfolios are better off for it.

It's a big space, early days, and you're competing against yourself as much as you're competing against any other provider.

Samir Parikh from GiantLeap Capital. Fred, I think you said something really interesting in your dialogue, which is your long origination and short capital. From my investing experience across the alts, KKR, Apollo, they would say exactly the opposite, which is their short origination and long capital. I don't know if there's a real question here, but how do you think about that as it relates to your strategy as a firm?

You just try to put pressure on the sales team, that's all.

I think, look, when we observe a single sponsor or a single firm, we see the same phenomenon, right, which is they do a certain number of deals. If they scale up those deals, they push themselves out of their comfort zone, right? You get style drift, you get degradation of performance. The reason we don't see that is we're really -- if you think about it, we're assembling a collection of relationships with the best minds in each of these individual verticals. That evolves, right? We move to the opportunity set and it scales because what they're doing typically scales in each of these categories and then we can figure out who's good in each of the categories and scale amongst them. So we just have many, many more tools than they have to be able to deliver that and kind of implement it than they do is the real truth. And so we're harsh judges of those firms. When they scale beyond their means, I think we're just in a much better place than they are in terms of what we're doing. So that speaks to the manufacturing. And then yes, I'd like to pressure everyone in terms of selling. As you saw from the point, all the teams want to talk about is get us more money, right, then we can deploy it successfully.

The other piece to that, though, which is something that Jon and I talk about a lot, and there's nothing happening here. This is not for anybody to get kind of carried away on. But I think that speaks to the strategic value of our firm. And it's not just to the firms you mentioned, but there are whole other sectors of asset management. There are sectors of kind of the consulting industry. There are sovereigns that have -- that are short origination and long capital. And I think we are a potential very valuable strategic partner from a business perspective to some of them. And again, it's not something we're spending time looking for, but it is something that we are aware of. It is something that to a degree, we'd love more capital. We'd love to have less imbalance there. But the -- to a degree, we've purpose-built the firm for equity value for a long time. So we wanted to have a management fee-centric profit center. Like just -- and this is something that we pay attention to, and we're aware of our value to those that have lots of capital in significant form because they generate liabilities every year through insurance operations, and they have a tremendous demand to put capital to work, we're a great answer for a lot of those people that are long capital.

I mean that point that Michael just made, Samir, you and I've been talking about the alt sector for 20 years is a really critical point. Nothing -- those are fantastic businesses, but that conversation around origination and capital fundamentally changed when their liability and their capital base changed.

Sanjeev Math, Baron Capital. You all highlighted today that you've had really tremendous growth in the specialized funds business. And I guess, set against that, the customized separate account is still 71% of AUM. So maybe as you think forward like 5 or 10 years, do you expect that balance to sort of even out? And kind of where could that shake out? And I guess, ultimately, is that an opportunity for you to kind of remix private -- the average sort of private market fees higher with time?

So I think to that last part of your question, for me, that everybody should give their own view. The piece that I think I'm the most certain of is that over the next 5 to 10 years, the individual investor channel will grow faster, likely grow faster than the institutional channel. And that channel has the potential for growth or there is the potential for that growth to be at somewhat significantly accretive fee levels. A little bit to Bill's earlier question, there's a little bit of a different fee structure in different parts of that individual investor channel. And so how you position yourself matters. There are people that are in that channel raising a lot of money today in retirement, for example, at very, very small fees. Then there are people that have relatively smaller amounts of money in a more product sort of oriented approach with very significant fees. Our interval fund in the infrastructure space that we've talked about publicly before is a fee accretive product to our entire infrastructure business. If that grows as fast or faster or almost as fast as our total institutional infrastructure business, it will be fee accretive because it's just a better level of fee.

Yes. I mean some of it just comes down to math. The separate account business is a great business. So as we talked about and gave those examples, when you have clients that you acquire and they become multiples of their size, your pie chart and you have long-duration assets, your pie chart doesn't move that quickly. That being said, if you go back 10 years ago, the private markets business was probably 95% customized separate accounts. So it does move -- now you're talking about the whole firm being at roughly 70%. I don't know exactly private market split, but it's definitely less than 95%. So it does move, but we're a little bit there in terms of how much that moves a victim of your own success in the sense that the separate account business is just a great business.

Embarrassment of riches. It's like that point that Jon made where he showed the growth, if you think about how much money we raised each of the last few years from new clients, and then you think that you're going to do kind of the average X, whatever that average X is 7, 5, 8 in terms of growth, that's a ton of growth in the firm now, not reflected anywhere that we're going to enjoy. So we think that our successor commingled fund products will close, final close at a higher level than the prior series. But you're talking about a lot of growth still in that core institutional business.

Jonathan?

[ Jonathan McKay from Penn Capital ]. I wanted to go back to the sort of imbalance of sourcing versus available capital to deploy. If the pipes today can handle 2 to 3x the current volume, I would envision in 5 to 10 years that they could handle 4 to 5x or 20 or 30 versus the 10 to 20. And if I think about the fees associated with that future fundraising, what are some of the things you would consider to maybe turbocharge the fundraising side of things? I understand there's a lot of maybe ground-up building that the firm is focused on and doing things thoughtfully. There's Grove Lane. There's Japan. There's insurance. But what other avenues are they to sort of really invest heavily today to capture that 10 to 20 that can become 30 or 40 in 5 to 10 years?

Yes. Look, I think if you look at the fundraising horsepower of the business today, it's better than it was the year before and better than it was the year before that. So it's a constant area of investment in your existing channels and your new channels and you spend everyone else. And so we've looked at some -- and so I think the best way to do it is just to keep investing in the business. You just named 3 things, all of which we did in the last 18 months and have already produced a tremendous amount of returns. We had no insurance company clients for the most part to speak of 2, 3 years ago, and we have dozens now. We didn't have barely any RIA relationships in March, and we have 40 now. Japan has been a great market for us for 30 years, but I think there's tremendous growth there. So I do think that ground-up effort is the most -- is the best foundation to continue to build it, but there's a lot of strategic initiatives that you bolt on alongside of it, 3 of which you've mentioned in the last -- that we've done in the last couple of years. And I think you'll find more of those types of opportunities. We've looked at some inorganic -- back to the point Michael was making inorganic opportunities that were, in some ways, had kind of what I would call distribution synergies or distribution avenues. That can't be like the lead reason. You got to make sure that the manufacturing you're buying and all that makes sense first and that it's a good answer for clients, but that will also be part of the lens we always look at for inorganic activity, too.

We'll take one more.

Stephanie Ma, Morgan Stanley. Just going back to your solutions provider mindset and bringing that to the individual investor channel. How do you scale that without having the mega funds? And then how does your portfolio solutions approach differ or complement private market model portfolios that we also see emerging?

Yes. So I think the -- maybe I'll make the point. So scalability without the mega funds, I think is a kind of a nonissue in the sense that all the manufacturing we're doing today is in the middle market. And as we just were talking about on the last conversation, we're long origination short capital. So the ability to build portfolios on our existing manufacturing capacity is a great ability and a great strength of what we have today. I think that the comment I was making to the question earlier from the mega funds in terms of it not being competitive, if you look at an individual investor portfolio today, they have 3 or 4 line items from 3 or 4 mega cap providers. That's not what 50 years of experience has suggested the optimal end-state model portfolio should be. The model portfolio should have diversification on every attribute you should come up with. You don't need 600 line items like some institutional investors found they had after doing this for 30 or 40 years, but you need more than 4. And I think the role that we can play inside of that ecosystem is to help use the manufacturing that's already in place. No new manufacturing needed to build those portfolios. I think on the scalability point, obviously, when you're investing in commingled vehicles, those are easier from a scalability perspective. Customized separate accounts require a little bit more of investment, but we've become very good at it over decades and decades of practice. We have hundreds of them today. So we have figured out how to institutionalize and process orient the separate account delivery model. And for certain minimums, and you're not going to do $1 million separate account, but for certain minimums, you're more than happy to do that. And that's a great segue into model portfolios, which is you can create a white label or custom solution for a model portfolio. So that, that model portfolio doesn't need to just buy 3 or 4 off-the-shelf registered funds, maybe it can do that, too. But next to that, it can have a complementary exposure that's built custom to meet the needs of that particular portfolio. And I think that we can bring that to your point, it's a mindset more than getting into the technical wrapper because the wrappers can be all different depending on the channel. But that mindset of helping make sure those portfolios ultimately look like the portfolios that you find kind of on the efficient frontier is where we think we can play a meaningful role.

All right. We are going to take a 10-minute break for those in the room. So for folks on the webcast, we will rejoin in 10 minutes. So thank you very much.

That's 9:50. Is that or am I doing that wrong? Yes, 9:50, we'll get going. [Break]

Welcome back, everyone. So in the next session and for really most of the remainder of the morning, we're going to pick up on many of the themes that Michael and Jon and Fred spoke about and really carry them through and apply them at the investment strategy by strategy level. So we're going to start with David Richter on Absolute Return Strategies, and then move on to credit, infrastructure, private equity and real estate. So now it's my pleasure to welcome David to the stage.

Thanks, Stacie. Good morning, everyone. I'm David Richter. I lead our Absolute Return Strategies business. I've been at GCM for 31 years, and I feel fortunate to have helped build our ARS platform into one of the largest and most respected investors in the industry globally. We enjoy a strong reputation, both in the client and manager community. Before I begin, I'd like to summarize 2 key takeaways. First, Absolute Return Strategies, often referred to as hedge funds or liquid alternatives, is a thriving industry, whose AUM has been growing and is currently at an all-time high of USD 4.7 trillion. ARS strategies are important diversifiers in today's environment and industry growth is expected to accelerate. And number two, our firm is well positioned for this tailwind. We've already seen increased inflows and client and prospect interest. Fred touched on some key differentiators. Fred, you didn't steal my thunder, I think you created some thunder for me, so I like it. So thank you. When I speak to clients, I distill our value proposition into 3 areas. The first is performance. Ours has been attractive, both in absolute and risk-adjusted terms. And importantly, our portfolios have done their job as diversifiers, having displayed downside protection and market declines. Second, and you can see these here on this slide. Second is the benefit of our industry position and scale. This enables access to top-tier managers and, in many cases, favorable investment terms. Our platform of 190 approved funds includes many of the world's top decile managers, some of which are closed to new clients or capacity constrained. And third, we've talked about this today already, high-touch client partnership. We offer a unique and boutique style of service. It may be we've used the term a bunch today, the extension of client staff, but it is really important and accurate. And this leads to 2-way mutually beneficial long-term relationships. This is why we continue to win new business in ARS and why we have such high client retention. In fact, 100% of our top 25 ARS customized separate account clients in 2020 are still clients with us today. And finally, as shown by Jon's earlier slide, our ARS inflows more than doubled from 2023 to 2024 and over the trailing 12 months through September 30, our ARS fundraising has been the highest it's been since 2021. Okay. Now drilling down to our business growth. Our ARS platform dates back to 1971. And Jon's walking in, though, Jon, even I wasn't here that long ago. But this makes us one of the longest tenured managers in the space. On this slide, you could see that today, we manage $25 billion of assets in ARS, and we serve over 225 institutional clients, many of whom we've partnered with for decades. We also manage $2.5 billion of capital from hundreds of individual investors. This has translated into financial success. ARS has generated over $1 billion in revenue since 2020. We currently have $32 million in run rate performance fees, which represents significant embedded earnings potential. And I'd like to highlight that while not every year results in performance fees at this level, in 3 of the past 5 years, we've well exceeded our run rate, generating more than $50 million of annual performance fees, and we're experiencing an improved opportunity set in ARS. ARS is a cash-generative business, and our returns add to our assets under management and compound over time. It is also a business built on experience, relationships and selectivity. Now this slide shows our performance and our role in clients' portfolios. I showed you the first pillar of our client pitch is excellent performance. And here, you can see it through 2020 -- since 2020 through the end of June, we've produced 53% cumulative gross return, which translates to an 8.9% annualized return. And we've done it with a low correlation. 0.16 beta to the MSCI World Index is low correlation and 3% there that 0.03 means 3% down market capture ratio, I'm particularly proud of that. That's a real sleep at night profile what you're looking at right there. The combination of absolute returns, low correlation of protection in down markets. This is precisely why ARS plays a foundational role in client portfolios. And in today's environment, with elevated macroeconomic risks and liquid assets trading at all-time highs, this return and downside protection profile is an important diversifier. Investors believe now is the time for a hedged approach. Okay. So here, we get into our investment process. And this slide, in my view, is more important than it looks. Why? Because this data drives our process and it is not commercially available data. Of the global universe of over 9,000 ARS funds, the 3,390 that you see here in this chart, it's a peer universe of institutionally credible funds that is curated and maintained by our global ARS team of 53 investment professionals. And this information, it allows us to use our predictive data analytics to screen score and rank managers in all strategies and sub-strategies. These analytics and our other ARS tools are proprietary. We built this IP over decades. And in recent years, we've been able to enhance it significantly because of improved transparency in the industry. I'll give you an example. We have tools that can analyze a manager's track record and distinguish between skill and luck. In other words, we can ascertain whether the performance -- the management performance has been driven by more sustainable alpha drivers like security selection skills versus less sustainable ones like market timing. And this highly selective quant-driven approach ensures that we invest with only high-conviction managers who have demonstrated alpha. We believe this process is a key competitive advantage for us. It would be very difficult for clients or competitors to replicate our relationships, our coverage footprint and our evaluation tools. A quick example here. Our network and manager relationships enable us to monitor spin-offs and new launches before they occur. And we use our tools to focus on the most promising ones. About 5 years ago, we identified a spin-off and developed a strong relationship with the manager prelaunch. We were 1 of the 2 anchor partners, and we secured favorable fees and capacity with the manager. That manager has been an exceptional performer and is now one of the most sought-after firms in the world. However, they're closed to new clients, but we maintain our favorable terms and have built a sizable investment for our portfolios. And on that note, I'd like to highlight that we have a robust emerging manager business as well. This allows us to identify the next-gen managers, who we believe can graduate into world-class status. And this has happened in a number of cases. I mentioned earlier that because of our scale and history, we can provide clients with beneficial terms that many clients or competitors cannot replicate. Shown here on this slide, over 90% of our capital was invested through these preferential structures, meaning these are benefits clients achieve through investing with us that they would not get if they invested in the managers directly themselves. First, closed or capacity-constrained managers. While capacity in the liquid alts industry is plentiful, that is not the case with certain top decile managers. Our advantage, we have deep relationships and access to capacity with these firms in many cases. And this doesn't just apply to the household names, because some of the next-gen managers I just referred to are also persistently in the top decile. The second area is fee savings. Our size and scale and position in the industry enables us to negotiate lower fees in many cases. We pass these savings directly through our clients, which helps them offset our fees and reduces their overall program costs. And third is customized mandates. We have arrangements with many managers where we negotiate a customized vehicle that can capture a sub-strategy or a theme or a sector, and it often enables us to secure favorable terms such as liquidity protections or hurdle rates. Here is the many ways we work with clients in ARS. You heard this from Michael, Jon and Fred, but a key strength of our business model is that we can work with clients either in a customized basis or a turnkey specialized fund. In ARS, you can see on the left that our turnkey portfolios like our flagship fund GIP, $4.7 billion, 25-year track record or Belmont Harbor, our $900 million multi-PM, long-short equity strategy. These offer instant diversification and access and have strong records of performance. And then on the right is our customized separate accounts, our CSAs. Michael spoke about how we pioneered tailored programs for our clients. This is a reliable and stable business with high client retention. You can see on this chart, I'll reiterate the lower left that 100% of our top 25 clients in 2020 are still with us today with an average tenure of 13 years and an average relationship size of $700 million. In either case, whether CSAs or turnkey flagship funds, our ARS programs serve as clients' core allocations. We often manage the majority or the entirety of their ARS exposure and to accomplish this diversification needed for them to manage risk and generate strong returns, we structured our team, our research team to cover all the strategies in the ARS universe. Here are the 6 primary ones. These are the components clients need, especially today, we have strong offerings in each of these. And although many of our programs are multi-strat in nature, they can vary significantly. I'll give you 2 examples from this year. First, we won a mandate earlier this year that is focused on emerging managers in ARS. This is an important area for clients, as I mentioned, but it's very difficult for clients to execute on this, even for large sophisticated investors. Our client, in this case, is a large U.S. institution. They saw high value in our team's knowledge, coverage of the space and our track record of generating alpha in emerging managers. And so we designed a custom program for them. Another -- second example was another recent win with one of the world's largest and most sophisticated sovereign wealth funds. They wanted to expand their exposure within Asia. But with limited resources, they found it difficult to do so. We have people on the ground in the region. We have a strong roster of Asia funds approved on our platform. So we worked with them. We developed a custom portfolio that met their goals and objectives. And now just pivoting a little bit off of just pure investments because we not only serve as a core investment allocation in clients' portfolios, but we provide high-touch operational and service lift. We -- as we mentioned, we really are a crucial extension of their staff. We provide support for their investments, for their operations and importantly, for their risk management as well. So we're not just an investment manager for our clients, we're a comprehensive partner. We communicate with them regularly as if we were members of their team. This creates a high moat for us and said simply, our clients find value in our expertise and service and find it difficult to remove us or replace us as their ARS partner. So now looking ahead, we see compelling reasons that ARS can continue to compound. First, on the left, you could see market drivers. Fred talked about this a little bit. Non-zero interest rates, greater equity and bond market dispersion, meaning winners and losers in the marketplace, elevated uncertainty, periods of heightened volatility, these are the conditions that have historically and currently been a tailwind and create fertile grounds for a hedged approach. And then there's business drivers. We're among the best positioned firms to take advantage of this improved backdrop. We have a core offering with a terrific track record of performance, where our value proposition is market-leading and we're continuing to expand our offerings for clients. So what does it all mean? Well, you can see here on the right. Our growth from compounding performance alone would drive ARS to achieve more than $35 billion in AUM over the next 5 years. And if recent performance continues, given these tailwinds as the leader of this business, I'd be quite surprised if we didn't exceed our net flow assumption and achieve a much higher AUM. So in closing, I'll just add, our ARS platform has delivered for clients for over 5 decades through market booms, busts and everything in between. It is a highly cash-generative business, foundational and properly constructive investment portfolios and well positioned for growth. Now is the time for ARS. So thank you all for your participation and interest in our ARS business and in our firm. And I'll turn it over to Steve.

Thanks, David. Good morning, everybody. Pleasure to be with you all today. My name is Steve McMillan, and I lead the Credit Business here at Grosvenor. I joined the firm just about 5 years ago, and I spent my full 18-year career in credit investing. I'd like to spend our time today expanding on some of the themes that Fred spoke about within credit, trends we're seeing in the market today, what we're hearing from clients, how client allocations are evolving. And ultimately, how we think we're positioned to be a winner or maybe more actually continuing to win and what's still a rapidly growing and evolving market backdrop. Before we get into some of the more substance, 4 key messages that wanted to hit on upfront. Firstly, and I think Fred, Jon and Michael touched on this, we've just been doing credit for a long time and bring more than 35 years of experience across the entire credit landscape. I think as everyone in this room and on the line knows, credit is a very broad asset class covering public and private markets, hedged and directional opportunities and dozens and dozens of sub-strategies. And we've got relationships and experience to curate, originate and underwrite the full breadth of market opportunities. Secondly, we solely focus on areas of high value add for our clients, areas that are typically much more difficult for them to access themselves. Private credit, opportunistic credit, co-investment, secondaries, emerging managers. We want to be at the intersection of what clients want access to and what they're able to do themselves. Thirdly, the market has come and frankly, it continues to come our way as it relates to investors not earning, continuing to increase credit allocations more broadly, but looking to diversify and increase portfolios into these aforementioned areas of higher value add. And lastly, ultimately, what does it mean for our business today, not only are we seeing great top line growth, we're seeing a huge product shift into more direct orientated strategies, very similar to what we've seen in the other asset classes. It's absolutely transformational for our business and our proposition. I think one of the things the firm did excellently like long before I joined is take a decision to build market-leading capabilities and credit card investments and secondaries, I'm really in anticipation that at some point they form meaningful parts of private credit allocations in the same way as we've seen in private equity, real estate and infrastructure. In short, the firm kind of knew the playbook. And that's really now coming to fruition and positions us not only to generate more attractive returns and excess performance for our clients, but clearly, these are high-margin products and allows us to capture more economics. So where do we stand today? We're a team of 18 dedicated credit investment professionals. I'll touch a little bit later about how we lever and collaborate with the rest of the firm, which is important in credit. We're managing $16.1 billion on behalf of more than 100 clients. I think, as you can see on the chart, growth has been strong. I expect that to continue and accelerate, frankly, in the last 12 months through the end of September. This year, we've raised a record $2.3 billion in credit, and that's by far the highest we've raised on a rolling 12-month basis. I think one other point to draw people's attention to is just the shift between public and private credit. I think what you can see on the right-hand side here is we stand today, about 60% of our assets in private credit. If we were to rewind and we don't show this on the slide back to 2018, that was closer to 30%. So whilst it's obviously very pleasing for us that both parts of our business are growing well in our all-time highs, and we are seeing the stronger growth in private credit, which is clearly encouraging. So I'd like to spend a couple of minutes today really discussing where we are in the evolution of private credit, sort of what we're hearing from clients, how those allocations are changing and ultimately, where we're positioned. I think as everyone knows, and it's probably absolutely sick to death of hearing, private credit and direct lending has been a spectacular success story over the last 15 years. This secular trends that we're seeing with lending migrating primarily from banks to private capital continues to provide just a fantastic opportunity and tailwind for institutions and individuals to generate very attractive risk-adjusted returns. So while we will talk about some of the challenges investors are facing today, didn't want to bury the lead. This continues to be a fantastic sort of environment for credit investing and that really driving allocations to increase to credit across the board. But that said, it does feel like we're entering the next phase of the maturation of the private credit markets, where investors are looking to build out and diversify existing portfolios, and that's absolutely excellent for our business as it plays right to our value proposition. What we show on the left-hand side of this chart really is just simply how broad and diverse the addressable private credit market is and how relatively small part direct lending is. Direct lending is undoubtedly one of the biggest success stories, frankly, in the history of sort of financial markets, really is just the tip of an iceberg and what we believe is a multi-decade opportunity for us as a manager for investors to generate good attractive returns. So more specifically, I think investors are looking to build out and diversify sort of portfolios along 3 dimensions. Firstly, exposure to smaller and emerging general partners. Secondly, exposure to strategies outside of corporate direct lending, so namely sort of asset-based lending and specialty finance. And lastly, exposure to different implementation types, co-investments and secondaries. And this is all incredibly natural and follows a very similar pattern that we've seen in other private assets. I think the issue that investors have is each of these is just frankly a lot more challenging to prosecute. And the credit markets, as you all know, is extremely fragmented. And you need significant resources and relationships as well as expertise to appropriately originate and underwrite in these areas. We've built what we believe is market-leading sort of teams and expertise across all of these domains, emerging managers, co-investments, asset-based finance, esoteric strategies, credit secondaries, the list goes on. It's been a huge investment for the firm, frankly -- or by the firm over the last 10 years, but one that's paying massive dividends in today's market. And maybe just as a data point there, more than 40% of the capital we raised since 2020 has been in these small direct orientated high-margin strategies, and the year-to-date number this year is actually above 50%. So what we show in this slide is simply a sort of typical portfolio that we would look to sort of build for clients. And as you can see, it's highly diversified across a high number of parameters, geography, implementation type, asset class, sub-asset class. And if we were to drill a layer deeper, you'd see further diversification along macro risk factors, sponsors, vintage sectors, fund structures, the list goes on. It's clearly sort of a very sort of like compelling and desirable sort of portfolio. And if we were to compare that to a typical sort of existing sort of portfolio that we see the clients have, this is a very attractive sort of destination. Higher expected returns, more diversification, more resilient, more fee efficient and more highly invested through time. And I think the nice thing for us is when we discuss this with investors, this is not like a hard sell or a tough pitch. The conversation is not really about the what, but the how, what can they do themselves, what can't they, where do they have a bunch of existing relationships and ultimately, how can we be accretive to them. So how do we actually do this in practice? I mentioned we have a large dedicated team. But for me, I think the secret source is we originate across the full breadth of GCM's platform. I think Fred alluded to this earlier, but credit is a pretty unique asset class and as far as it's not distinct from the other ones. You have real estate, credit, infrastructure debt, credit financing fee transactions, hedge funds doing opportunistic transactions, private equity funds doing structured capital trades and obviously hundreds and hundreds of classic private credit funds. I think the luxury for me and my team is that we have access to all of this. And frankly, it was one of the reasons why I wanted to join Grosvenor 5 years ago. We just see everything. I think Fred mentioned this, funds, deals, we have full market coverage, and it's a massive competitive advantage as it relates to our ability to deploy capital. I think the implications are threefold. One, Fred touched on this, the bar for investing is just extremely high. We transact on a very small fraction of opportunities that we look at. Secondly, it allows for great relative value through time. We're really just guided by the platform, and we're able to dynamically allocate capital to the best prevailing opportunities, which I'll touch on in the next slide. And lastly, from a business perspective, we've got huge operational leverage. And I think Michael, Jon and Fred will touch on this, but I'll make it sort of 4 for 4. We could significantly increase our deployment of very attractive margins and the platform that we've built and we manage is extremely scalable. So as kind of discussed, we primarily want to do 2 pretty straightforward things for our clients, build diversified value-add portfolios and deploy into the most attractive opportunities at any one time. And what we show on this chart is that second point. And you can just see how dynamic it's been. As everyone knows, each credit had 2 pretty significant drawdowns in 2020 and 2022. We were very active in more dislocated opportunities on the back of that. As a second example, we've actually been more active recently in pockets of the U.S. real estate debt markets after being pretty cautious on that space for the last 10 to 15 years. Performance has been excellent. I won't go through the numbers, but I think what's most pleasing for us sort of in the business is not just the high-level numbers, but really the quality of underlying performance. As mentioned, it's been a relatively volatile 5 years, including 2 pretty big drawdowns. We made money in both 2020 and 2022. Of the 125 clients we manage capital for, we've made money for every one of them, which we're extremely proud of. So before I wrap, I wanted to expand on what Jon spoke about earlier regarding how clients can access us and making that flexibility as straightforward for them. We have customized separate accounts for investors that have unique goals and constraints. One thing that we do find is everyone at a slightly different point on their sort of private credit journey as it were. So whether it be co-investments, secondary emerging managers, direct lending only, everything other than direct lending, as mentioned, we really just want to be at the intersection of what clients want and what clients can't do themselves. One of the big focuses for us over the last couple of years has been curating the right suite of specialized funds. We now have funds that are diversified and we have funds dedicated to each of co-investments and secondaries. And it's been very pleasing that we've raised more than $1 billion to these new specialized funds over the last 18 months. We've also been innovating around structured products. We actually launched a collateralized fund obligation earlier this year, which gives primarily the insurance community a capital-efficient way to access our credit secondaries capabilities. I'm happy to report that we actually did a first close on that a few weeks ago to the tune of $490 million, and we expect to do more in this space shortly. Maybe just to sort of bring it to life with a case study. This is one of our separately managed accounts that launched a couple of years ago, a very large U.S. public pension plan that was looking to make its first dedicated sort of private credit allocation. They had pretty limited resources like much of their peers, very limited sort of ability to evaluate and prosecute co-investments and secondaries and in general, fell a little bit late to the private credit party. The firm had a very long-standing and trusted relationship with this organization across a number of other asset classes. So when they reached out to us, we're obviously more than happy to help collaborate with them in designing and implementing a diversified dynamic program. What that culminated in them doing was making 2 allocations, the firstly to a large direct lending firm, someone coincidentally, we know very well and have our own strategic partnership with and a second allocation to us, where we manage a completion portfolio across primaries, secondaries and co-investments, spanning all asset classes. I think what was -- yes, one of the reasons we wanted to use this sort of case study is really emblematic of what we want to do, meet clients where they are in their journey and help them evolve into sort of top tier private credit allocators. These guys effectively went from 0 to market leading in the space of a couple of years and are currently in the process of considering increasing the size of that program. So what are our goals over the next 5 years? I'm super optimistic. I think it's really sort of in our hands to execute. As discussed, the market tailwinds are extremely strong. Private credit allocations are growing top line and sort of under the hood, investors are looking to evolve and diversify existing portfolios. We've got decades and decades of experience. We've got a differentiated investment engine to allow and help them do that. And we've got a very, very strong track record of making money for our clients. So as mentioned, we stand just north of $16 billion today in the business. We think we can double that over the next 5 years, and triple the direct strategies from $3 billion to $9 billion. I'm British right, so I'm pretty reserved, but I'm actually sort of super optimistic that we can achieve and exceed that. I'm glad they've got a couple left. So with that, thank you very much for your time. And up next is Scott to talk about infrastructure.

Good morning. I'm Scott Litman, I've been with GCM now for 6 years and have spent really the entirety of my career investing in the infrastructure space. Today, I lead GCM's Infrastructure practice alongside what I believe is one of the best teams in the sector. For the next 15 minutes, I hope to demonstrate to you all how we take advantage of being one of the most tenured and experienced practices in the asset class. At its base, our goal is to pair our 20-plus year track record with some of the most flexible capital in the market to generate one of the broadest sourcing engines anywhere. From these opportunities, our skilled team is able to employ a truly unique data set to analyze and select investments that fit the varied mandates of our clients. The results, we believe, speak for themselves. Before I turn to the platform, I want to address the broader opportunity. Everyone has heard the stats about infrastructure. The capital required to support global infrastructure needs is estimated at over $100 trillion between now and 2040. Growing populations require new infrastructure and improvements to aging infrastructure. Innovations like cell phones and AI require the build-out of supporting infrastructure, technological advances and climate change require infrastructure innovation. It's no wonder the capital need is massive. But hasn't much of this always been true, why is infrastructure attracting so much interest now? In addition to the massive capital needs structural change in the approach to funding is driving this opportunity. Specifically reduced availability of public funding has opened the door wide for private capital. As a result, it's not surprising that more than 90% of investors plan to maintain or increase their allocations to infrastructure. What are these investors seeing? What's so appealing about infrastructure as an asset class? Infrastructure assets are essential. Our cities, our country and every country worldwide relies on infrastructure to support day-to-day life. Local and global economies also rely on infrastructure. Imagine a world without power or water or highways or airports or worse yet cell phones. The very definition of infrastructure tells you how immediately important it is. This essential nature of infrastructure drives revenue and ultimately, return characteristics that are truly unique. Consistent usage is highly shielded from inflationary pressures. Predictable growing usage supports predictable growing revenues and high barriers to entries and regulatory moats limit competition. These features drive lower correlations to other parts of the market, lower risk of capital loss, inflation mitigation, reduced volatility and ultimately, at scale, meaningful distributable cash in the form of yield. With that backdrop, let's talk about the business. And to do that, I'd like to start with growth. In the 5 years since the COVID pandemic, we've raised almost $14 billion in our infrastructure vertical and nearly tripled our AUM from $6 billion to $17 billion today, compounding growth at 26%. We now enjoy relationships with over 150 clients in infrastructure and have more than $4 billion in dry powder to deploy today. Why are we growing? We believe that our growth comes from a unique approach to the market. We are, as we like to call it, entry point agnostic. What is entry point agnostic? It means our capital is available for the best opportunities no matter where they come from. We'll look at everything. Core asset, great. Value-add asset, great. Control investment, joint venture, co-investment, secondary, minority investment, pref, all terrific. That's what entry point agnostic means. How does it work? Well, first, we source from everywhere, sponsors, fundless sponsors, management teams, placement agents, investment banks, clients, LPs, everywhere. That drives one of the broadest opportunity sets in the market. So why do all of these partners call? They call because very simply, they need our capital. They need it for bid capital, growth capital, price setting, diversification limits, liquidity, tax planning, regulatory considerations, reducing syndication risk, warehousing, just a few of the reasons that we might get a phone call. And that's additive to all of the deals we see contractually by being in funds. In the last year alone, we invested as little as $9 million in a single opportunity. And as much as $350 million in a single opportunity. The ability to flex our capital up and down and be a partner to all make sure we're a first call. The ability to provide size and scale creates negotiating leverage, driving down costs and fees, a feature that we like to call structural alpha, and also creating unique governance features and exit rights. Our 23-person dedicated team brings asset level expertise and a unique information advantage to every deal we do. Nearly every member of our team has controlled investing experience and the ability to dissect financial models and business plans. This depth of experience is underscored by our team's pedigree and its continued ability to recruit and grow. Our information edge is equally important and it comes from the collection of data on thousands of consummated deals that we've seen over our long tenured history. It allows us to compare entry multiples, capital structures, growth assumptions, refinancing expectations and exit strategies. Very simply, what we're doing is taking all of the information from some of the best managers in the space and using it to compare opportunities. It's important to note none of these sponsors share information with each other. They all share it with us. This information in the hands of a team with our underwriting capability drives what we call selection alpha. Our ability to outperform. We can very quickly, with this information in hand, avoid higher-risk deals focusing on the best relative value, driving down loss ratios in our portfolio and consistently generating outperformance. The results of our unique approach are on this slide, which is one of my favorites that we put in a lot of our material. One of the most highly diversified portfolios anywhere in the market. When you look at our portfolios, you see diversification by every metric. The asset class infrastructure typically sees significant concentration. Our most recent fund has more than 40 positions and very deliberately avoids concentration by any of these metrics. Our portfolios are diversified by geography, sector, sponsor and risk profile. With regard to geography, we have a slight lean towards North America. We see some outperformance from North American assets and a little bit more of an opportunity for bilateral trade. Sectors, we start with 3 legs of a stool, energy, digital and transportation, and we very importantly consider kind of catchalls like infra adjacencies and, of course, supply chain. Sponsors, really important. You heard this earlier in the day as well. Our focus tends to be on lower middle market and middle market sponsors that allows us to be a complement to the mega funds that so many are investing with already. And then with regard to risk profile, we kind of think of the whole sector as a bell curve. We want our focus to be in the core plus and value-add middle of the curve. But obviously, as I mentioned earlier, we'll look at everything. Most manager selection -- so what you're seeing here is something that we'll call the greatest hits of infrastructure. Most manager selection is a bet that a single manager sourcing all of its own deals can consistently outperform the market, all while demanding the highest fees and carry the market will bear in exchange for their expertise. GCM's approach turns that thesis on its head. We believe that working with all of the top managers and being in a position to select from among their top deals creates the best outcome. 1 or 2 deals from 20 to 25 top managers is what drives our greatest hits approach. And as a bonus, it also drives more rapid deployment and J-curve mitigation. So then the obvious question is, does it work? Based on the returns on this page, we believe the answer is a resounding, yes. Across our entire platform, our direct investments have produced 15% -- or excuse me, yes, 15% realized IRRs. And on a realized and unrealized basis, we're looking at about 12.5%. In our flagship diversified fund, returns are similarly strong. We've produced a 15% net IRR over the last 10 years. Given our ability to create compelling diversified portfolios, we've seen our clients shift dollars towards direct-oriented strategies where we believe we can continue to outperform. Fred spoke earlier about this across the business at large, but this shift has been particularly pronounced in the infrastructure vertical where direct-oriented capital has represented almost 2/3 of our fundraising for the last 10 years and an even greater percentage in '24 and '25. So can we continue this trend? We think the answer to that question is also yes. As we could have -- and you've heard this kind of in some of the other presentations as well, we could have comfortably deployed 2x our current annual invested capital without making a single new investment. So the deals that we sourced would have allowed for us to have doubled the capital deployed in each of the last 3 to 4 years. That's a pretty powerful platform. It's a pretty powerful opportunity, and that's where the capital growth comes in. We actually think that the opportunity is as much as 3 to 4x given the size and scale of some of these infrastructure deals. Earlier, we talked about how we have grown. Here, we want to talk about how we work with the clients. Our clients are much more than passive participants in our products. They're often thought leaders and collaborators as we bring new structures and ideas to the market. Recent examples of client-driven products include geography-focused accounts, tax-advantaged accounts, emerging manager accounts. In addition, our clients are supporting our commingled funds, Critical Infrastructure Solutions and IAF each closed their last vintage with over $1 billion in capital commitments. And what's even more exciting is the consistency of our client relationships. Our top 25 clients are now averaging $600 million per account, and every single one of them has added capital since 2018. We're very proud of this statistic because we believe it illustrates the health of our relationships. Our clients value not only our performance, but also our collaborative approach. In that manner, clients have also helped create new products with the most recent example being our registered infrastructure fund, a semi-liquid product built to serve wealth channels launched in January of this year under the ticker CGISX. Clients are also supporting our most recent benchmarking and index fund efforts being built in collaboration with Wilshire Indexes with a targeted launch later this year or very early next. Given the repeated success of these collaborations, we expect that working with our clients will drive the next wave of innovation for GCM Grosvenor's infrastructure platform with many of those concepts already in development. So as we look ahead, we think the outlook is really exciting. The market opportunity is in the early innings, and we expect it to continue to grow. The asset class should continue to deliver compelling returns with lower volatility and lower risk of capital loss. And our approach and our team, we think, can do the rest. We believe that the combination of our flexible critical capital, our unique product creation capabilities, our strong and growing team and our unparalleled information advantage will continue to drive strong performance and a tremendous opportunity to grow AUM. Taking advantage of all these features, we see the practice comfortably scaling another 2.5x in the next 5 years, and we think we can be at $40 billion plus. Hopefully, you enjoyed the deeper dive into the infrastructure platform, and we hope that you're as excited as we are about the trajectory and the tailwinds we're seeing across the business. So thanks for listening. We're going to take a short break now for those attending in person. And for those on the webcast, we expect to come back in about 10 minutes. Thank you. [Break]

Good morning, everyone. I'm Bernard Yancovich. I'm one of the leaders of the private equity business here at GCM Grosvenor, and I'll be talking to you about that part of the business today. So I joined the business in 1999. On my script up there, it says I have to make one reference about John Levin. Apparently, John Levin was in high school at the time. So that's when I joined the business. When I joined the business, we had -- we had literally one private equity client. So hopefully, if nothing else, I can do a good job here of conveying to you how much we've grown and how excited we are for the future with the business. We certainly have come far, but there's a lot more, I think, we can do over the years. Our leadership, as you've heard, I'm going to make it a clean sweep here. Our leadership in the market really is underpinned by our presence in the mid-market and with emerging managers as well. Our advantages are threefold. First of all, we've got decades now of experience in the mid-market and with emerging managers where we've got that leading position. We've got access to differentiated, often oversubscribed investments. This is one area where in my quarter century in the business, we've seen a lot of change. When I started in the early days, it was pretty easy to get access to any manager, any sponsor, any type of investment, whether it was a co-investment or a secondary, that has changed dramatically. We're staffed up. We're prepared to make sure we're seeing as much as we can out there in the market. Again, I'm going to make it a clean sweep. We have significant untapped origination capacity and scalability. We saw a long time ago the trends, and we staffed up accordingly. And we think, as I'll tell you, not only in primaries, but also in co-investments and in secondaries, there's a lot more volume we could be manufacturing and putting through the system. Let's take a look here at some of the metrics around the business. So as I said, we launched in 1999. When we launched the business, we did that in a manner that really was consistent with the GCM Grosvenor ethos, which was to provide superior customized specialized investment solutions for sophisticated institutional clients. We are looking to give them access to differentiated product, and I think we've done a great job of that. As you see here today, we've grown to over 265 institutional clients. We've got just a hair under $32 billion in assets under management, and we've got $5 billion in dry powder. Now, as you would imagine, in a long-term asset class like private equity, our goal is not necessarily to time markets. We like to be tactical at times. But we do feel that this $5 billion of dry powder given current market conditions is a significant asset and a really, really nice way for us to create value for clients over the next little while. You can see here going back to 2020, our CAGR in terms of growth has been 8%. We view this as a floor and are extremely optimistic about what we can do in the years to come beyond that growth rate. So one of the messages I'd really, really like to leave you with today is that we really do play a highly central role in the private equity ecosystem. So what does that mean? What's the ecosystem? Today, there are over 4,000 private equity managers operating. They're executing literally thousands of transactions every year. The majority of the funds raised are actually by dollars at the large end of the market. Contrast that where we've got an environment where 87% of private companies are in the mid-market. Clearly, there is a need for our capital and for that of our clients. That, we think, if nothing else, makes us really, really vital parts or a vital component of the mid-market. What's our approach here? First, to identify strong emerging managers early to provide significant primary capital commitments. In doing that, we're able to lock up our allocation, get access to co-investments, get access to those secondary transactions as well. An important part of the co-investments and secondaries is building trust with sponsors. We want to be responsive. We want to be quick by doing that and executing the way we know we can, they will come back over time and keep giving us more and more deal flow. Finally, we want to anchor and see the next generations of sponsors. In the process, we secure valuable future deal flow and other sorts of economic benefits for our clients. In simplest terms, we are a core capital provider to the private equity ecosystem. Our scale and reputation open doors to investment opportunities that others simply can't access. So our clients range from the most sophisticated institutional investors to newer entrants to the asset class, whether they are institutional or retail in nature. Let me spend a few minutes here on why we're essential to all types of clients. In my mind, really, it comes down to 3 factors. The first one is access. Being early with sponsors and being a scaled player gives us unique access. In today's market, as I said, where it's much more competitive than it used to be, this is a huge, huge advantage for our clients. As a new investor in private equity, whether you're an institutional investor or a retail investor, trying to get access to those best investments from the start -- from a standing start is really, really difficult. So I would pause it that we're absolutely needed in this part of the market or for this reason. Diversification. Well, there was a good Q&A earlier, a good discussion around the mega funds. Do we compete? Do we not compete? John addressed it from the perspective of diversification. We like to have diversification in portfolios along the lines of size, geography, other things. So I buy all that. I would also tell you that there's a second, I believe, really strong, if not stronger argument as to why we belong or the mid-market belongs in a portfolio beside the mega funds. If you look at third-party independently reported data for the last 15, 20, 25 years, you would see unequivocally that over this long period of time, middle market leveraged buyout managers have outperformed mega fund managers. If that doesn't make the argument, I really don't know what would for you. Structural Alpha is our last key advantage here. So Scott talked about this. I would say that private equity was probably one of the first areas to recognize the benefits of Structural Alpha. This middle pie chart, had you looked at this 10 years ago, you probably would have seen 80% in primaries, 20% other strategies. Today, it's more something along the lines of 40% to 50% co-investment secondaries, those direct-oriented strategies. And in a lot of cases, it's actually even higher than that. So really, really significant shift. We saw this shift coming. We started and built our secondaries business starting in 2014. Around that same time, we invested significant resources as well in our co-investment team. So as John mentioned, the shift to direct-oriented strategies has supported our management fees and has provided material upside from carried interest as well. So client offerings. similarly to what you saw with some of the other subsectors, CSAs, this is how we started the business. Once again, our first institutional private equity client was a 1999 client. What makes us particularly proud about this client relationship is that they are still a client today. Over the years, they've added capital several times over, which is nice. It's also particularly nice to be able to tell you they have added capital in a variety of different strategies. I hope that this really speaks to the stickiness, number one, of client relationships; and number two, to the depth of resources that we possess as a partner to our clients. Specialized funds. Another thing here that has changed quite a bit over the last 10 years. We would not have had this column on the page, frankly, 10 years ago. So the franchises that you see here, secondaries, co-investments, the Elevate franchise, Advance, have all been started in the last 10 years, and they are all designed to focus on a specific part of the market. Finally, registered funds. As you heard from John, we see massive opportunity. You've heard from a few people in the individual investor market. We've already seen success raising capital through the wirehouses. Since 2020, we've raised over $1 billion of private equity capital from individual investors. Looking forward now, we're in the midst of developing a registered product that will be focused on private equity co-investments. We're very, very excited to be able to bring that opportunity to the market. So what I'm going to do now in the next few minutes is spend a little bit of time in the sub strategies within private equity. Let's start first with primaries. Primary funds really are foundational to our private equity business. I'm pretty confident in saying that we're regarded as a market leader, not only in the mid-market, but also with emerging managers. Our scale is simply well beyond what most others do. We've committed $28 billion over the course of our history to over 845 primary funds. We average about 65 commitments a year, only ultimately commit to about 5% to 7% of what we see. So we're very, very selective, yet there's a lot of volume. So that selectivity and the volume really speaks to the amount of sourcing we do and the strength of that particular engine. Being an early scale investor also gives us outsized control and influence on funds. About half of our relationships have advisory board participation. Having advisory board participation makes it such that we're close to those managers. So not only again, can we get influence, have a lot of insight on what they're doing, but it allows us to nurture those relationships, hopefully source things like secondaries and potentially co-investments as well. Turning now to co-investments. One of our transformations really over the past decade has been using our position, our position with sponsors to unlock sourcing in new areas, not only secondaries, but co-investments and increasingly, credit, as you heard from Steve not too long ago. Private equity co-investments has become a scaled business. Today, we manage over $9 billion in PE co-investments. Our success in this market, as I alluded to before, hinges to that value that we bring to the sponsor. Our team is really, really nicely developed. We've got an ability to react quickly when needed. Oftentimes, there may be situations where we may need to respond to a sponsor with a yes or a no in as little as 3 weeks. If we didn't have the strength of team, we wouldn't be able to do that. But being able to do that is what keeps them coming to us with opportunities. Performance, as you see here, has been really excellent. We're very, very proud of it. And then like the rest of the private equity business and frankly, the infrastructure business, as you heard as well and others, a lot of what we do, again, is squarely in the mid-market. We do retain the right opportunistically to do things that may be a little bit bigger, a little bit smaller if we see value, but 70% of what we have done on the co-investment side has been in the mid-market. As John took you through earlier, co-investing provides a high degree of Structural Alpha, economic benefits to our clients. The vast, vast majority are no fee, no carry. Those economic benefits flow directly through to clients. Let's turn to secondaries now. So the overall secondaries market from 2018 to 2024 grew at a CAGR of about 18%. We see no reason why that growth rate should not persist in the years to come. From the perspective of our clients, secondaries help mitigate the J-curve, they give them diversification. They accelerate deployment and they help them to access assets at attractive discounts as well. We launched our secondaries business in 2014 through the GSF franchise. We also execute secondaries through a selection of our separate accounts. Importantly here, and I alluded to this earlier, we benefit a lot on the secondary side from our scale in the primaries business. It helps inform our deal flow, it helps get more deal flow, and it also allows us to be smarter when we're pricing transactions. Again, the focus is on the mid-market. It's a segment that the large secondary players don't operate in. We love the dynamics in this area of the market. There's greater entry discounts, more value creation opportunities for the sponsors and the underlying portfolio companies. And therefore, we think attractive returns generation opportunities overall. From a sourcing perspective, excuse me, this is a more fragmented area of the market. So we see a lot of deal flow. Over the last 5 years, our teams reviewed over 1,200 transactions and invested in less than 10% of those. 88% of closed transactions were limited or no competition transactions. We also frequently have an information edge and access edge from our sponsor relationships. For example, in today's market, there are some sponsors who have relatively closed lists. They will not approve a secondary transaction to just anybody. Being on list of approved buyers gives us a unique access point in the market. Let me turn now to our seeding strategy. So our role in both co-investments and secondaries is emblematic of how we play a critical role as a capital provider within the private equity ecosystem. This dynamic results in strong risk-adjusted returns for clients. Similarly, our seeding business serves a critical role by providing capital to the next generation of managers. We leverage our deep relationships throughout the private equity market by identifying excellent PE investors who already have decades of success in some cases. We back them early as key anchor investors and working capital providers as they start new franchises. In the process, we secure capacity rights, co-investment opportunities and potentially other economic benefits for our clients. Through the support we provide sponsors, we're able to generate somewhere between 30% and 45% of our returns from management company participation. Last year, we closed our inaugural Elevate fund with just short of $800 million in commitments. We're very excited that we'll probably start the fundraising for the next fund within the next year or 2. So you've heard a few case studies today. Those case studies were, by and large, focused on client relationships. We thought here we'd take a little bit of a different angle. I want to give you a case study around a sponsor. So the sponsor here is a group called TSG Consumer. As the name implies, they focus on buying and building consumer products companies in the U.S. and to a lesser extent, in Western Europe as well. The fund manager, as you can see, has been around for about 40 years, started in 1986. We started committing capital to them in 2002. And in fact, we are one of the only institutional investors who has stayed with them consistently through that time. Being a consistent partner to a manager like this has been really, really effective for our clients. First, based on their track record and their success, there have been times where the funds were either allocation constrained or in some cases, frankly, impossible for new investors to get in. We haven't had the same degree of difficulty keeping and growing our allocation to this manager over time. Secondly, we have developed into a preferred co-investment partner. We've done 8 co-investments with them, over $350 million invested. And here, the thing that excites me most is that we've done not only equity co-investments, but Steph and team also have some credit exposure through this manager. Again, we're showing them as a partner, the entirety of what we can do and how we can be helpful to them as they help our clients. So pulling this all together, when I think about the opportunities that we have across the private equity platform, one of the greatest is simply opening the spigot on the sourcing we have coming off our primaries platform, similar to what we've done with TSG Consumer and so many other managers over time. Notice again, the way direct-oriented strategies have grown as a share of our private equity AUM. We believe all of our co-investments, secondaries and seeding businesses can be many multiples of their current size. Our private equity platform combines scale, relationships and expertise in middle market PE where inefficiencies create real alpha-generating opportunities for our clients. The result is performance that consistently exceeds benchmarks, sticky client relationships and a clear runway for growth. We've had solid growth despite a less active private equity market over recent years. But as that market reignites and shifts towards direct-oriented activities such as co-investments, secondaries and seeding, we're ideally positioned to benefit. Given that, while today, about 40% of our AUM is direct oriented, in approximately 5 years, we believe that figure can easily surpass $20 billion. Well, I hope I've done a good job of conveying the excitement we've got for the platform over the next several years. There's a lot we can do. And now I'll turn it over to Peter Braffman, my partner to talk about Real Estate. Thank you. [Break]

Hi, everyone. My name is Peter Braffman. I hope you're having a great day. Yes, I head the real estate practice here. You're going to hear from me a lot of similar themes to what you've just heard today, but with a slightly different twist. And that's because when I joined the firm in 2010, we all decided that whatever we created real estate needed to be something unique, something different. And that's in part because of what happened in the real estate market. So my career has spanned -- I'm definitely aging myself from the '80s until today, it's happily. And by 2010, the real estate market had matured greatly. What do I mean by the word mature? A lot of fund managers, a lot of them doing similar strategies, a lot of them producing commoditized returns, a lot of them doing the same things. And during that time, quite frankly, institutional LLPs were getting much more sophisticated. They wanted something different. They were going a little bit more direct. They were trying to claw back some of the value that they've created. So the industry was ripe for something different, probably some consolidation. So we decided to get ahead of that trend. So what do we do? At our core, from a real estate perspective, we are a value-add investor. We focus like Grosvenor does in the middle market, particularly in what we call niche asset classes. These are asset classes that we think have less commoditized returns, generate greater alpha. We do that by accessing operating partners that we establish platform partnerships with. These are scalable businesses. They're local on the ground, they are operators and developers, and we leverage their origination. Now, that all sounds pretty standard, but what's unique is how we work with them. We establish ourselves as a strategic partner to them in their growth of their business. In exchange for that, we secure all their deal flow, but we also secure participation in their upside. Along the lines of what Bernard said, what Scott said, Structural Alpha, this is our Structural Alpha. We are absolutely a private equity real estate business. As a result, our investors get and our clients get returns both at the real estate level, but also at the enterprise level, the GP economics that our sponsors generate. All right. So a little bit more about the platform. Since we started, we've raised $8 billion. Today, we manage about $6.6 billion. We've had great growth over the past -- since 2020, 17% CAGR. A lot of that's over the last 3 years. The beautiful thing about that is that it produced about $2 billion of truly dry powder that we can deploy in a market right now, which I know you all know, has significantly repriced. So it's a great moment for us to be investing in real estate. It's a great moment to have that kind of dry powder. In terms of how we're able to raise that money, we had -- as I said, change our business model, change kind of what we're doing and what honestly, we think the rest of the market will probably one day try to be doing as well. So what did we do? We transitioned from a fund-to-fund business, fund-to-funds co-invest business to something where we had much greater control. We incorporated about a decade ago an open architecture model where we could invest directly in assets alongside our partners as opposed to passively with them. You could see this in the chart. You could see the gray lines, that's more of the fund business and how that moved to today where it's almost exclusively a direct investment business. Very importantly, our clients supported us in that transition. We couldn't have done it without it. And as we prove the business model, more capital came. So let's overlay the capital raise over the transition time period, boom. You can see just how the capital growth occurred as we changed our business model. So it's directly correlated. And quite frankly, this is something that Michael touched on before, that kind of culture of innovation and evolution. We needed to evolve, and we did it and the capital came along with that. Let's talk a little bit more about some of the words that you've heard in other sectors today with a real estate lens. We talk about the middle market. What does that mean in real estate? In real estate, the middle market are assets traditionally $50 million or less in total enterprise value. Just so you know in our portfolio, $30 million or less. So we focus on even lower, the lower middle market. But at $50 million or less, that's 97% of all transaction activity, sometimes it's even more. So it's the vast majority of the market. But from a capital perspective, only 60% of capital goes to the middle market. Why is that? A lot of the things we talked about before, Michael brought this up, the middle market in all asset classes tend to be more fragmented, harder to access -- and as capital gets bigger and bigger, and we have had 40 years of capital aggregation in the institutional markets, you know what, capital goes to where it's efficiently deployed, and that's going to be into larger assets. So what does that create a real pricing differential. And you can see that in the chart. If you look, there's a 100 basis point differential in yield going in yield for middle market assets versus larger assets. What does that mean? Your unlevered return at day 1 buying these assets is 100 basis points more. That's tremendous lift. So just by being in that part of the market, you'll get a better return. In addition, though, we focus on what we call the niche subsectors. Real estate is kind of cool. It houses our economy. How we live? Residential. How we work? Office. How we get stuff, industrial, retail, right? Those are the traditional asset classes. But within them, there are all these niches. So you think about industrial, big box industrial, what about cold storage? What about small bay industrial? How about self-storage? How about parking? These are all industrial applications that are nichier, smaller. Sometimes these assets are $2 million or $3 million in size, very different return potential. Same thing in residential, big apartment buildings. Well, how about student housing or senior housing? You could just imagine manufactured housing, single-family rental. We actually have categorized in our own portfolio of 57 different asset types. So there's a lot of these niches out there. But the beautiful thing about them, they draft off to the same fundamentals that the larger asset classes draft off. But if you look at the lower right, you'll see from an NOI growth perspective, an operational performance perspective, 2x the growth. And so by focusing on the middle market, by focusing on niche, we could buy better and we could operate better and deliver better returns before we even get to the Structural Alpha. All right. So now let's talk about how we'll get to the Structural Alpha, and we'll talk particularly about our platform partnerships. So if you're going to scale a real estate business, you think about real estate, it's truly liquid assets, not like a stock. I mean there are REITs, but we're talking about private real estate, buying assets. You need to be on the ground, you need to be local. So to build a scaled business, you're going to need platform partners, operating partners in local markets to find assets, to execute assets to perform with you. By the way, the whole industry is built like this. All the big fund managers do this. They work with local operators, and they partner with them in some way. They either on a single asset basis, on a joint venture programmatic basis. Sometimes they'll just buy them. But whatever it is, you're going to need to leverage these groups. So that's how the industry is organized, and we do it as well. And again, these are operators, these are developers. Our difference, and I think this comes from our emerging manager kind of DNA, is we really focus on entrepreneurial teams. We look at teams that have very seasoned track records. They've been doing this for decades. They spin out, they start their own firms, and we're there early with them. And we launch them, we scale them, we see them, we stake them. And in return, we share in their enterprise value. And the competition is fair enough. It's an industry standard to lock them up for their flow. We want to work with them and we want them to grow their third-party business, and we want to leverage then not just their origination, which is wonderful, but also the broader enterprise lift from their business. We think that will generate up to another 20% of returns to our clients. So let's talk about the -- how we originate origination comes from these platform partnerships, and you'll see the scalability of it. So this is kind of a cool chart. I like it. Platform partners, these are all the different operating partners. We'll form some kind of partnership with them. Typically, it's a joint venture. It's usually a $50 million, $75 million, $100 million to start, and we'll go from there. in exchange for that certainty of capital that we give them, we're going to get from them a piece of their business. We're going to get all the exclusive capacity rights and an economic package that usually lasts in perpetuity. Number two, they're going to show us all their deals, not just their episodic co-investments, all their deal flow. And we get to choose whatever we want. We have full discretion. And then number three, we choose what we want to invest in and where we have major decision rights throughout the value creation. All along the way, we're trying to encourage the scaling of their business. So this -- you can just see, this provides tremendous origination lift for us. We see all their deal flow. If we want to launch new strategies with them, we can. We've done that all the time. If we want to bring on new partners, we can all the time. In fact, let's turn to that. So if you look at the next page, you'll see, all right, today, we have 29 such active partners. We have done just executed over the past 5 years, 1,100 different deals. These are acquisitions, these are loans, more than 50 different asset types that we purchased. And this is something that Fred said is the most important point. We have a tremendous origination pipeline that we've identified with them, over $5 billion of capacity that's undercapitalized. So we don't need to build anything else to execute. What we have to do is continue to raise capital. Other things just to consider from what we actually have done, about 2/3 of our business, a little bit more is we buy assets, but the rest, we're a lender from a geography perspective, mostly in the U.S., but increasingly in Europe. And from a property type perspective, a bit of everything. But you know what, 75% in residential or industrial. There's a reason for that. Those are the most, I think, assets that are most insulated from dislocations in the capital markets. And that's important. We've really minimized our office exposure, and we focus on what we call capital-efficient assets. And that's why the returns are what they are. We're generating really strong returns well beating the benchmarks in a market where interest rates have greatly affected real estate overall. All right. So let's talk a little bit about our clients. Like the rest of Grosvenor and like the way we approach or work with our platform partners, we look at our clients as our strategic partners. And that's been particularly true in real estate. We are highly concentrated with some of the biggest investors in the world. We started with one, literally seeded us. Both Joan and Michael referenced them before. They're probably one of the largest and most sophisticated investors in the world. They don't need us to find real estate. They can find any kind of real estate they want. But there are certain things they couldn't do, and they turn to us to do that. And we started with them and then we've built -- as we prove the business, we brought others in. So now 4 of the top 10 largest institutional investors in the country are our investors. And what we do is they all share through separate accounts, pro rata in what we -- in the business that we have built. So that's a diversified business. One thing that comes from this, as we all know, is you could build a business with a bunch of these investors, but other businesses could come out of that, other ideas. So 2 that just came up, honestly, this year, and now we're already in deployment mode. One is a middle market investing program. fund investing program with one of our investors who's just said, you know what, they're missing this part of the market. They don't have it. And so we developed a program with it. We started deploying it, and we're going to continue to scale it. The other one, the same group that backed us before, this client wanted to take advantage of the consolidation in the industry. So we're out there now acquiring real estate businesses with them. It's a tremendously scalable business. We buy platforms and we can deploy capital in assets. And so we expect this to grow tremendously. But the last thing I think this has done for us is that now that we've built out the strategy, we've built out the -- quite frankly, the pipeline, we are now joining the rest of Grosvenor in launching a commingled product that will sit alongside a diversified business and will capture all the flow or a piece of the flow that we have. So it's being launched and it will -- it's being anchored by one of our existing LPs and importantly, by a wealth management channel as well, an RIA that's also going to anchor this fund. And so we think this product will just open up tremendous channels for us to bring in new capital to our business. When I think we originally conceived at this, I was thinking, oh, it's just going to be open to the smaller institutions that are out there. That's true. They will be. But from a RIA perspective, the wealth management perspective, this gives them something, and I think Bernard mentioned this already as well. This gives them something that they really are looking for. So the reception has been great, and we continue -- we will grow. And as well -- look, we're going to grow as well with other new SMAs. We added 5 since 2020, and we have a tremendous re-up rate. All right. So I will finish on this point. I think it would put us into an excellent position not only to maintain the growth of the last 5 years, but to exceed it. We have a product that's demonstrated with demand with some of the most sophisticated investors in the country. And our strategy captures parts of the market that are not easily accessed. So this led to a huge re-up rate and new partners joining and in the process, we've built a huge and undercapitalized pipeline. So I feel very comfortable that we'll more than double the size of our practice in the next 5 years. Thank you very much. And now our friend, Pam, is going to join, our CFO, to finish it up.

Good morning, everyone. I'm Pam Bentley. As Peter said, the Chief Financial Officer. I'm happy to be here today to translate everything you just heard from everyone into how this translates into our financial performance and our outlook. I joined the firm 5 years ago after 15 years with the Carlyle Group. And really what drew me here and what drew me to take Michael and Jon's phone call was the firm's outstanding reputation. And then as I met the team, it was truly impressive. Hopefully, you've seen some of that today, and it goes deeper than what you saw today. It's a truly impressive collaborative, performance-driven culture. I was able to see and continue to see a distinguished very long-term list of clients, a very long-term proven track record. And from all of us, really a clear vision for expansion, fueled by industry tailwinds, but really fueled by the team itself. Jumping in, we've built a high-quality recurring fee-based business that is compounding over time. It's scalable across market cycles. Our embedded operating leverage enabled us to expand margins and profitability as we deploy and raise additional capital. Our balance sheet is strong. The firm is highly cash generative, providing flexibility to reinvest in the business, return capital to shareholders. Over the past decade, shareholder distributions have exceeded $1 billion, and we continue to build cash, investments and over $900 million of unrealized carry, all while maintaining conservative leverage. So looking ahead, where are we going? As you've heard throughout the day, we are growing across each of our investment businesses with opportunities to extend our reach, both geographically and through the individual investor channels. We'll continue to see margin expansion. Our investment origination platform capabilities provide meaningful upside. We're leveraging our teams and technology to scale while delivering consistent investment performance and providing top quality value-added services to our clients. There's also significant upside from incentive fees with a high level of accrued carry and an increasing amount of AUM eligible for incentive fees, we are well positioned for accelerated earnings growth. With this, we expect higher cash flow generation, enabling us to invest in accretive opportunities while also returning capital to shareholders. Over the last 5 years, we've consistently delivered strong financial performance. Adjusted EBITDA increased more than 55%, FRE almost doubled and adjusted net income is up nearly 70%. But what's important here is not the numbers, it's all of our drivers. We've raised $44 billion of capital since 2020, and our pipeline remains robust. Our private markets business is expanding where long-term management fee arrangements are less exposed to short-term market movements. And within private markets, we are growing in higher fee direct strategies and enjoying positive operating leverage. A few things are at the heart of our financial performance. We're highly management fee-centric. 80% to 90% of our revenues come from management fees, and this creates predictability with revenue streams diverse across many products and clients. We have embedded management fee growth with $8.7 billion of capital raised but not yet generating fees, which represents future revenue already secured. We're just awaiting to deploy the capital and turn on the fees. Our platform is scalable. FRE margin has steadily increased to 44%, and we can deploy more capital without significant additional resources. There's also incentive fee upside. 72% of our AUM is incentive fee eligible with unrealized carryover $900 million, more than double 5 years ago, but this will continue to accelerate. Turning a little bit to our infrastructure and our technology investments. We combine proprietary systems with external data to enable best-in-class investing capabilities as well as client operations. We invest significantly in data management, advanced analytics and proprietary systems that support investment decision-making and risk management. As you heard from David today, an example of our capabilities in ARS and how we generate strong investment performance through mining information from a universe of management -- managers to invest client portfolios. We're also testing and expanding the use of artificial intelligence across the platform. We use it in software development and operations, and we're using it in client relationship management, due diligence, communications, research, document automation and much more. We've given the tools to our teams to innovate, and we are excited for the future. It's one of my favorite things to do every day actually. Technology is also the backbone of our client service. We provide clients with accelerated and customized reporting and data-driven investment insights. It's a big differentiator for us to win business and critical to our continued expansion into the individual investor space, where we recently enabled availability of real-time information for items such as direct private asset valuations, which have historically in the industry have been done quarterly. So you can imagine the lift to do that daily. Every dollar we're investing today allows us to further scale tomorrow and is freeing up capacity to focus on client and product expansion. Turning to the numbers to demonstrate our operating leverage. While management fees have grown steadily over the last 5 years, our FRE margin has expanded by 13 points. Over the next several years, we expect to achieve a 50% FRE margin level, not only given our origination capacity, as Fred liked to mention a few times, but also through those technology investments, but continuing to actively manage our operating expenses. Despite actively managing those operating expenses, we are investing in our #1 thing, our people and our culture. We're attracting and retaining top talent with competitive compensation programs based on investment and firm performance and aligned with delivering strong returns to our clients and shareholders. Another important trend we're enjoying is a shift in our asset mix towards private markets, which gives us a higher percentage of predictable fee revenues through periods of market volatility. Private markets AUM and management fees have increased more than 65% since 2020. For today, private markets accounts for 71% of our AUM and 63% of our management fees, but that share will continue to grow, and we expect that, that could easily represent over 80% of our AUM in the coming years. That dynamic is beneficial as private markets programs are long duration and fees are earned on committed or invested amounts, not on fluctuating asset values. And within private markets, capital is flowing towards direct strategies such as co-investments, secondaries and direct investment portfolios that are commanding higher fees and more incentive fee earning potential. Fundraising is obviously essential, but what matters most from a financial standpoint is how our fundraising translates into fee-paying AUM. To help demonstrate that conversion mechanism, I'm going to walk through this quick example. Over the last 12 months, we raised over $9 billion of new capital, $4 billion of that went into fee-paying AUM, meaning those fees turned on immediately, and the remaining $5 billion went into contracted not yet fee-paying AUM. Fees on this capital is turning on as it's invested or on a schedule that well agreed with our clients. Historically, 35% to 40% of that capital commitment converts into fee-paying AUM each year, driving steady and predictable revenue growth. So several factors give us our confidence in our sustained fee-related revenue growth. First, an average of 75% to 85% of our fundraising is coming from existing clients, and the commitments are effectively perpetual in nature, as Jon explained, and they're increasing at an average of over 25% on renewal or re-up. We are also able to successfully broaden our relationships into multiple investment strategies. We are proud of our over 90% re-up rate, reflecting the deep integration we have with our clients. In addition, we're continuously winning new clients, and we're expanding our investment capabilities, our recent collateralized fund obligation in credit that Steve mentioned and our infrastructure interval fund that Scott mentioned are really good examples of this. Second, our $8.7 billion of already contracted not yet fee-paying AUM actually represents about $45 million of annual run rate revenue upon activation over the next several years. And third, our ARS performance compounds that fee base and each 1% of performance translates into approximately $1.5 million of annual revenue a year. As Michael promised, turning to our incentive fees, we'll dive a little bit deeper. The 72% of our AUM that's incentive fee eligible today is very diversified by investment type, account, vintage year spread across 140 programs. This diversification means our incentive fee potential is not tied to the outcome of one fund or cycle. Our unrealized carry has grown to over $900 million. And after our contractual carry compensation, approximately 50% of this balance or $450 million is retained by the firm. Importantly, this figure is -- excludes over $14 billion of carry eligible AUM that will move into a carry position as those funds are invested and mature. That potential carried interest represents over $1 billion of incremental earnings based on consistent historical investment returns. And that's earnings, meaning that $1 billion is in addition to the $450 million of the firm's share that we already have in an accrued position. In addition to carry our annual performance fees in ARS, have a $32 million annual run rate. We've earned more than $150 million of cumulative performance fees over the last 5 years. And as our ARS AUM compounds, so will these performance fees. Taken all together, as our incentive fees are realized, they will provide earnings upside on top of our already strong FRE base. Looking forward, we see a clear path to doubling our FRE from 2023 to 2028 to $280 million. Our incentive fee earnings power gives us confidence in our plan to more than double adjusted net income per share to $1.20 by 2028. And there's upside behind these -- beyond these objectives from new products, geographic expansion, individual investor solutions, opportunistic M&A and specialized fund scaling and everything you've heard here today. As we grow, we will continue to return capital to shareholders through dividends and buybacks while funding strategic expansion. We have $57 million left in our buyback authorization. And with our quarterly dividend increase announced today, our dividend yield is now over 4%. Our client-first focus alongside innovation, disciplined capital allocation is how we expect to build long-term value. Thank you for your interest today. And with that, I'll turn it over to Michael.

This will work, yes. So I'm going to quickly close, and then we're going to go on to more Q&A. And I again, want to thank you all for being here today. It's a lot of time that you gave us, and it means it's -- we appreciate it. It means a lot to us. Just in closing, to hit on a few of the key points we tried to drive. The client-first piece and the culture piece are real and they're important. They help us win. They protect our downside and they matter. We have tremendous ability to grow and to do it with margin. The backdrop for the industry is great. Our teams are great, and you got to meet our -- different people today and hear from people you haven't heard from before. Our core business has built-in growth. That core existing business has built-in growth. We have white space, especially in the individual investor channel. Importantly, as you heard Fred spend time on and then the vertical heads spend time on, our investment engine is incredibly scalable and our vertical heads are dialed in and they see the opportunity. The value proposition for our clients is strong. And just as we sit here today with 25- and 30-year-old relationships, we think we'll be sitting here in a decade with 35- and 40-year-old client relationships that will be bigger than they are today. We're going to continue to keep deepening our partnerships with existing clients, bringing more ideas, more co-investment flow and more operational lift to the firm. We will continue to scale, continue to invest in people and technology and continue to stay disciplined and aligned with shareholders as we go forward in the future. I want to just give a few thank yous before we open up to Q&A. To our clients, thank you for your trust and for pushing us to be better partners every year. Our colleagues, thank you for the work that doesn't always show up on a slide, but always shows up in the outcomes. To our Board and shareholders, thank you for your guidance and support. We're proud of what we've built. We're more excited about what's ahead, and we're committed to delivering the same way we always have by listening carefully, executing rigorously and staying aligned with clients and shareholders. So thank you all again for being here today, and now we're going to open it up for questions.

[ Bill ].

Thank you again. I appreciate you taking the time out today. A great update. Maybe big picture down, I certainly appreciate the opportunity set in front of you. So maybe a 2 disparate part of the question. First, can you talk a little bit about maybe from the product heads, what you're hearing from institutional allocations? It does seem like there's a lot of flux in the marketplace, whether it be U.S., non-U.S. back to real estate, where are we in terms of PE, et cetera? And even on the ARS side, you're seeing allocations come back into the liquid side of the business. And then one of the sub themes of the whole day was the ability to put a lot more capital to work. So what's the holdback what's the limitation to driving a little more of that volumes through the platform a little more quickly?

So I think maybe we'll -- you guys are going to have to pass the microphone back and forth. But I think we've been consistent, I think, pretty much every quarter through some volatility, right? So -- and back half of '22, [ ball ] of '23, which is tough for private equity. It was fundraising stretched out, didn't go away -- demand didn't go away, but cycle stretched out. It took longer to get things closed. You had a denominator effect for a period of time. You've had not a great realization environment. It's perking up. Throughout all of that, we have been very consistent in saying that we see no backup in demand. Our pipelines pretty much by vertical are full and strong, and it's something we monitor month-to-month, certainly quarter-to-quarter. And so the backdrop for this whole industry, you saw it on some of the unique vertical presentations is a bigger percentage of clients either adding capital and growing their exposures or maintaining capital than reducing exposures. And you have -- we think you have growth, and that's before you get to that sort of crazy white space in the individual investor channel. So I think that's the backdrop. We've been consistent there. I don't know if any of the specific guys want to...

The only other thing and Bernard -- is this working? Yes. Bernard made this point. We're all going to experience the secular trends, right? So infrastructure has been growing faster than private equity or in credit -- private credit has been a great growth area. We're all going to experience the individual investor. We are reasonably, given the role we play in clients' portfolios, we will have a dampened effect on our business from the cyclical factors. I don't know how much people paid attention to it before they came today or what they took away from today, but our private equity business grew, what was it, 8% -- an 8% CAGR through a difficult time for private equity. I'd be really happy to own a business that grows at 8% during a difficult time. And so I think the role that we play as the core provider, as a central cog in the ecosystem of our clients' portfolios and in the marketplace generally doesn't mean we're immune from all cyclical factors, but it does dampen the impact of some of that and enables us to kind of have pretty good stability and visibility and growth through markets. We'll still see some -- again, those secular factors, but the cyclical matters a little less.

To the last part of your question, which -- what's the -- what is the issue with -- why don't you just soak up all that capacity, all that excess origination now? That would be -- to truly do that would be an exponential move in fundraising. So we're on a $9 billion, $9.2 billion trailing 12 months. We're hoping for a good solid fourth quarter, and we're looking to keep growing that annual fundraising into next year. To eliminate that gap in origination versus capital, you'd be talking about doubling -- more than doubling that. So we hope to get there and hope to get there over time, but it would -- it's really a very significant amount of capital. There's a balance between doing anything you can do to soak that up and maintaining the integrity and the fee level and the opportunity in your business. So to go cut a deal with a massive capital source at a super low fee just to soak that up is not necessarily the smartest thing for us to do. And so you have to be disciplined and kind of grow and compound over time as opposed to think you're solving that in the morning.

Yes, Ken.

Hi, Ken Worthington from JPMorgan. So the guidance on the absolute return business has been for net neutral flows, I think, since your -- the IPO and the [ SPACing ]. During the presentation, you mentioned that clients are engaging. We're in an attractive interest rate environment. You're seeing dispersion of equity returns. So it seems like I don't know, does it get much better for the absolute return market? At what point do you start to feel comfortable about that business generating positive net new flows or even more consistent net new flows?

So I'll start, David, and you jump in. I think what you heard is that David, who leads the business would take the over, okay? And that Jon and Pam and I, who budget and who have to report out quarterly and provide guidance have a -- we believe, a conservatively -- a properly conservative budget convention. I think that the answer to your question from our perspective is we're going to -- we're not changing that convention easily. If we've been wrong for a while and we're clearly in a net inflow environment, we will come around and make an adjustment in our budgeting at some point in time. But we're not going to -- I want to see that -- I want to see some consistency in the market on a net inflow environment, not a good quarter than a flat quarter, then a little down quarter or whatever, I want to see a consistent thing. Everything David said is right and his gut is right just because of where performance has been, where the markets are, where liquidity premiums are just all of the above gives him -- he's been in business a long time, reason to feel essentially what I heard him say is I would take the over, but we're not changing our budgeting convention so fast.

I think that's well said, Michael. We've seen -- the resurgence we've seen is really from the U.S., Asia and Europe in our ARS business. Clients really want the diversifier, attractive returns with downside protection, but it's difficult. It's difficult for them to do it themselves. Like other areas, the dispersion between the top quartile hedge fund manager and the median is very large. With 9,000 funds out there, it's hard to pick the best ones. We have a great platform. So they really want our help and our access to the best funds in the world and our partnership in helping them achieve that and building the program with us. So we've seen great -- much greater interest. And so I do take the over, yes.

Do you think it's inflected -- do you personally think this is...

I do think it's inflected. I think that the normalization of the markets, meaning rates -- largely rates, dispersion, periods of volatility, overall uncertainty, high quality -- a bit of consolidation in the industry because you had a lot of funds out there and now you've got -- you still have a lot of funds out there, but we have really concentrated into the top quartile on our platform. And I think a lot of the institutions that had gone direct in prior years realized their returns underperformed the high-quality firms like ours because manager selection matters more in ARS than strategy allocation, it always has. And so I think that's where we really add a lot of value.

I don't want to add one thing to that. I think the market inflected 5 years ago in the way that David is talking about it, right? So alpha dispersion, value to the clients, net returns, we have an 8.9% net CAGR for 5 years in the absolute return strategies business. So that part inflected 5 years ago. I think the question, when does the client response function happen? There was a lot of fatigue from a decade of generating 5% and 6% high quality, but 5% and 6% returns. And you really have to have that fatigue come off to see the client demand come back. And I think what Michael said, well, you'd want to see it, like prove it before you declare victory on that front. I think the value has inflected. I think we need to see the client response function at this point.

Chris?

Yes. A question for Steve McMillan, I guess. And that's that -- obviously, we had a big correction in the whole group, your own stock included in recent weeks. And the only approximate cause I could find for it is concern about private credit. And so -- and I guess the question is, is there, in your mind, any evidence that private credit has outgrown the broadly syndicated and high-yield markets in recent years by weakening its standards and is thus more prone to credit losses? Is I guess that's part number one of the question. And then part number two, for the credit managers, other than having customers not re-up for their funds, which would, of course, not be good, are there any other direct and immediate consequences for the credit managers?

Well, easy question, right? I mean I think if you would look at the -- and you know better than me, the sort of stock prices are really only where they were 3 or 4 months ago. So there has been a bit of short-term volatility, but in the context of very positive long-term trend for the large direct lenders. I think our view is that it's never been a no loss asset class. Never should have been, never has been and never will be. So what we have seen, obviously, a couple of high-profile sort of like defaults in recent weeks. It's just kind of natural and it's always going to be part of a functioning market. And really, it's the 10-year period of effectively artificially like sort of low and suppressed sort of defaults, which is more abnormal. And this is now just a return to a more sort of functioning market. It's a $3 trillion market. I think in leveraged finance, you'll know -- people used to use a 1% rule of thumb of sort of losses, $30 billion in that sort of $3 trillion is not anywhere sort of close to what we've been seeing, even inclusive of some recent headlines. So yes, I think I don't see a lot of evidence that we're going to see a huge wave of sort of correlated defaults to akin to a bubble. But yes, I think what it has reminded everyone, if they needed reminding is diversification matters and underwriting matters. And that's very sort of, I think, advantageous for us. And I mentioned earlier in the presentation, people are pretty concentrated in the direct lending sort of within the private credit portfolios and are looking to do more, do more with smaller managers, do more with other asset classes and do more on sort of secondaries and co-investments.

So that's a great answer, Steve. And today, Chris, the question is credit -- private credit because that's where the headlines have been and we have Blue Owl and Jamie -- and JPMorgan kind of squaring off on the front pages of Bloomberg this morning. And -- but I just -- for some perspective to step back, 35, 40 years in alternatives, there's always some aspect of that space that's kind of under attack. There is a level of cynicism. There's a level of questioning that is -- and I don't know if it's because of the success of the people in the space, the traditional syndicated loan business and these private credit businesses seemingly grow very, very fast and they have high fees and the people are doing well. But there's always hedge -- you can find -- hedge funds are going away articles from the early 1970s. You can find -- it's the end of PE. PE is going to be growing under the weight of no exits. Private credit is -- cockroaches are going to be -- watch out for the cockroaches. There's a lot there. There's always something there. And the reality is none of these strategies on a stand-alone basis are particularly risky when practiced well with good security analysis and good capital structure portfolio management. And inside a business like Grosvenor, where we have all of them, they're complementary towards each other. So opportunistic real estate has been in the center of the bull's eye at some point in time. Every one of these strategies has been questioned, none of them are going away. We think they're all growing over the next 5 to 10 years. And -- but they'll have a little different periods of time where the flows to infrastructure have been bigger than the flows any place else and credit after that. And one day, we'll have a period of time where the ARS flows will be huge or the private equity flows will be huge. And I just think that's the reality of the space.

Crispin?

Crispin Love, Piper Sandler. Just looking at your $1.20 plus target in adjusted earnings by 2028, can you share what you're assuming on the FRE side versus performance fees breakout? Unrealized carry is a meaningful opportunity for you. But just are you taking a stance on different years in the near term, just given the environment, a potential pickup in deal activity and there?

So we're not breaking that out publicly by year. We had given you a '28 FRE number. And I think that the $1.20 a share, if you've got about $50-ish million net from the incentive fee line on top of the FRE with a little bit of friction in there for some -- and then taxes gets you that $1.20 plus. And you can look at our historical incentive fee net firm share generation in the past and figure out what kind of stretch you think that is with $450 million of carried NAV, $1 billion behind it and growing incentive fee pool that's done $50 million on average over the last 5 years, but it's not a big stretch.

You got -- that's good, yes.

Stephanie?

Stephanie Ma from Morgan Stanley. I wanted to ask about your index partnership with Wilshire. You've also seen a number of players move similarly, whether it's BlackRock, Preqin, also this morning with S&P acquisition. So just curious your thoughts on product evolution. What's the path to launch investable products with these indices? And then second, on the competitive landscape, how do you see that evolving as these large-scale like public index providers move into private markets?

I'll make maybe one high-level point and then Scott, who's been close to that project can comment specific to infrastructure. I think, in general, one of the evolutions you've seen in the private markets as people continue to build out those portfolios and those portfolios mature is looking for proper benchmarks. And there's usually more than one. But there really hasn't been a great one that has existed in the infrastructure space. And so -- and Scott can talk about that in more detail. I think that from the standpoint of who's in the best position or what types of firms are in the best position to be part of the solution to those problems are the people that have the most open architecture, broadest global portfolios with the most information. And as Scott mentioned in his presentation, people don't share with each other, but they all share with us. And so our ability to provide that kind of manufacturing investment acumen in combination with a Wilshire, who's obviously good on the index side, leveraging all of that data and technology and years of experience we have, I think, is something that's not just unique to infrastructure, but a concept in general as a solutions provider and the value of the data and the place we have in the market.

Yes. I think that's exactly right. Maybe I'll pick up first on the benchmark, right? So as with everything we do, the starting point is, is there a need? Is there a client need? And this was a product that was basically built out of a discussion with a particular client. And that was what made it particularly interesting for us. What we see when we look to benchmark our own products in the infrastructure space is, there is no single benchmark, as Jon said. So you've got some people using MSCI world. You've got some people using a Burgiss benchmark. You have a number of people that are using CPI plus 3, plus 4 and plus 5. It's different for everybody. And then others even using a Bloomberg benchmark. So there's a real challenge. And one of the things we hear all the time in the space is there is nothing in infrastructure that really reflects the market. So what's interesting, I think, is as you've seen the proliferation of the open-ended funds in the space, you are starting to see some more consistent, some more homogenized return in the market. And with diversification, with the application that we typically have here, that creates the ability to again reduce volatility and create something that's more kind of systematic as a benchmark. And so -- that was the starting point. The benchmark was first. And then to your point, how do you make it investable? Well, there's a map in the market for that, right? I mean I think real estate has been doing this for a very long time, right? And so NCREIF produces the ODCE benchmark, and there's a fund that tracks that benchmark. So we're not necessarily creating anything that's never been created. We're just doing it in a part of the market where it hasn't existed previously. Really importantly, what's, I think, most exciting about the product side of this and what again kind of goes back to where we're seeing information, where we're seeing sourcing, all of the constituent funds have agreed to participate, right? So there are a lot of products coming to market. To my knowledge, there's none other than ours with Wilshire that can say that all of the constituent funds have contractually agreed to provide information. And I think that puts us in a really strong position as we get ready to launch.

Yes, Michael just reminded me something, I should clarify. So the thing that launched on 6/30 was the index itself. Scott put in his presentation, the investable product expected to launch either late this year or early next year. That is -- the index itself is good for branding, good for our role. The product itself is the thing that would be revenue generating where we have lined up seed capital from one of our institutional investors. And we just happen to think from a pure investment manufacturing perspective that if you're going to be in the core open-end part of the infrastructure market, you're better off doing that in an index that's more liquid and more diversified than picking the funds yourself.

Jeff?

Jeff Schmitt with William Blair. On the individual investor business, what's your sort of time line, I think, to ramp that? And I know earlier, you talked about maybe over the longer term, that can become 20% to 25% of total fundraising. But what should we expect maybe over the medium term, 3 to 5 years? Or is it going to take longer than that even to become more meaningful?

Yes, it is ramping. So the short answer is, it's ramping now, and it's ramping on 2 levels. One is fundraising, the amount of money that's coming from that channel on a regular basis now. And the second is resources dedicated to driving that distribution and making that distribution successful. And I guess I'd throw in a third place that it's ramping, which you heard today, which is product -- offerings in that space. You heard, they've bought a real estate product, you've bought a private equity product. And all of those require seed capital and getting that seed capital in place takes time. So it is ramping. It's a very real focus. The only thing that we've been careful about is putting out dollar targets just because we believe it actually takes time to ramp. So we think like a real ramp to a very consistent level of impressive monthly flows is kind of a 3-year build. And so when we looked at Grove Lane -- and when we looked at this Grove Lane joint venture, our view was this was a 3- to 5-year investment to build this profitable distribution arm that we see 3 to 5 years out. I said on the last quarter's call, and I'll say it again today, there will be a time when we think it makes sense to start breaking out -- we already -- we tell you now how much capital comes from the individual investor channel. And so we've always broken that out, how much versus what's in our NAV, if you will, our total AUM, how much is from individuals and how much over the last period of time. We told you that today. And as this continues to build and continues to ramp, we will, like everything we've done in the last 5 years, provide more information in more detail. But it's early now, and my concern has been that nobody gets carried away with thinking that it ramps the minute you drop a product. It does take time to build.

[ Bill ].

I got one more. So thank you for the added guidance both for 2028 and then sort of the outlook to 5 years. So if we were to fast forward to 5 years, how should we think about the FRE margin in 2030 relative to the 50% post you think you can get to in '28?

It clearly has the ability to keep growing and to keep growing at a strong rate. I don't see anything for taking away our operating leverage. I just don't. And I'm not being cavalier in saying that I can't -- it's hard for me to imagine that 5 years from now, we won't feel like we have operating leverage. And some of that, not all of it, by the way, but some of that is, is productivity and technology and the support that we get from those gains, which accelerate over time. But it's just very hard to imagine -- to not have operating leverage, the level of growth would need to be much, much higher than what we're showing you than what we're talking about. So the times when I've seen a firm like not have operating leverage goes through a massive -- not a double in 5 years, but a lot more than that, you could grow so fast that then you have to backfill invest because it was so nuts. But the level of growth that we're talking about, I -- my view is we have operating leverage 5 years from now. And -- and I think that, that 5-year period -- and I think that the next 5-year period because of what we've done in this last 5-year period and the new investors that are going to be -- start to be increasing the relationships, just like all the ones Jon showed you, it feels very good for us. You have a question?

First off, thank you for this. It's really, really helpful. Next time, 160 pages would be great, not 157. But no, congrats. I think one thing that's obvious hearing from David and others is that you guys have created products and businesses that are real alpha generators in this market, which is sometimes rare and increasingly rare where we live in a world of beta basically. So congrats to all of you for that. So related to that, there's always this kind of narrative of pricing pressure and extending out duration. Is that a narrative that you guys are seeing within your business? Like do you -- I mean, obviously, there's pricing pressure across financial services, but is maintaining price kind of a win? Or do you see pricing leverage relative to your client base and the ability to extend duration? So that's question number one. And then going to the question on retail, I think one of -- well, Jon's predecessor firm made a big splash a couple of years ago with a partnership with a big retail company or firm. Is there something along those lines that accelerates on top of [ Grove Lane ], kind of some of the strategy thinking as it relates to retail?

Yes. So let me take pricing. The bottom line is our pricing feels very solid to us. It is not a -- like -- there have been periods of time where you felt pricing pressure after '08, after the crash, you felt pricing pressure. I go back a long way in the industry, prices were too high in the late '80s and early '90s. At a point in time, you sort of felt pricing pressure when you became really institutional, you felt a different conversation than you felt from ultra-high net worth investors that made up the bulk of the capital in 1990, the late '80s. We are not seeing that pricing pressure today. We -- and I do think we have -- our shift to direct has supported -- so where there's been pricing pressure is only really in primaries. What if someone going to pay you to allocate capital to other people? We talked about being middle market. It's harder. You're not going to get paid a lot to allocate to KKR, to Hellman & Friedman. But you say you have better value add in the middle market, and that's the place where there's been pressure and the shift to direct has supported our pricing thus far. I can't remember who said that in their remarks, but it's supported our pricing. There is absolutely a possibility that the continued shift to direct and the growth of individual investors increases your pricing over time. Our infrastructure interval fund has better management fee pricing than our institutional business. So that grows and that starts to get bigger. And there is a very real possibility that you cross over from supporting consistent and solid and don't worry pricing levels to actually growing the pricing levels. The one thing that I will tell you that is hard is to go to an existing client with an existing strategy set and an existing kind of agreed level of pricing and say, we really think you need to pay more. We've had to do that a few times, either pay more or solve it on volume, but that's a -- that's -- I don't think that's going to happen. But we do -- we're solid on price, and we probably have upside on the pricing.

I think on the second part of your question, [ Samir ], I tend to think that the individual investor opportunity set generally and how you approach it is more similar to the institutional market evolution than maybe others, meaning when you think about institutional distribution, you sell direct to them, sometimes they have their own staff. Sometimes you sell to a consultant who has relationships. Sometimes you sell to -- there's institutional outsourced CIOs who buy on behalf of many institutes and it's multifaceted. Sometimes you work with placement agents, sometimes you have your own team. I think those same dynamics are true in the individual investor channel. We have our own team that leverages wirehouse distribution. We now have a JV for broker-dealers and RIAs. We have a partner on the infrastructure interval fund. We have a partner -- 2 different partners, frankly, in Australia that sell product. We have a different partner in Europe that sells. I think that your distribution will always be a combination of "your own resources and partners." And I look at the partnership that you referenced and others like that as a little bit manufacturing partnerships to solve liquidity, needs of certain registered products, but I view them as much as manufacturing plus distribution partnerships to help people that have certain kinds of manufacturing and reach different times of distribution. And as you fast forward for us, we've employed all these tools, ramping -- and Michael was acknowledged it that ramping is a tough work. So on one hand, you're saying it's not there yet. We've already had over the last 5 years, a business that basically didn't exist before $1 billion of capital and dozens of investors from a new channel. And I think that as you look forward, you'll continue to see many different avenues to that, including the types of partnerships that you referenced.

One thing specifically to your question, I think we are open-minded, and we fully respect the heft and the power of some of the large traditional asset managers that have distribution and just thousands and thousands of -- tens of thousands of relationships. We respect that. If you look at like the GSAMs and MSAMs and JPMorgan Asset Management, those firms coming out of kind of the wirehouses have been good at distributing alts product. They have penetrated alts product. If you look at the traditional long-only kind of mutual fund and retirement firms, they've had a harder time getting their sales force to become kind of crack machines on selling [indiscernible]. And so we would -- if there's a conversation we had, we are open to it. We want to have it. We want to figure it out. But I think we have a little -- we view the capability sets a little differently, and it hasn't yet totally proven out that a traditional firm that's like a long-only equity firm, famous for that or whatever, can kind of crush it on alts distribution. It just -- it should be able to work theoretically, but it hasn't really played out yet.

All right. Sorry, go ahead.

Yes. Thank you, everyone. For those who have joined us virtually, thank you very much, and we will now drop the webcast.

Thank you all very much for being here. We really appreciate that.