Prepared remarks
Good day, and welcome to the GCM Grosvenor First Quarter 2026 Results Webcast. As a reminder, this call will be recorded. I would now like to hand the call over to Stacie Selinger, Head of Investor Relations. You may begin.
Thank you. Good morning, and welcome to GCM Grosvenor's First Quarter 2026 Earnings Call. Today, I am joined by GCM Grosvenor's Chairman and Chief Executive Officer, Michael Sacks; President, Jon Levin; and Chief Financial Officer, Pam Bentley. Before we discuss our results, a reminder that all statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements. This includes statements regarding our current expectations for the business, our financial performance and 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 on this call. Please refer to the factors in the Risk Factors section of our 10-K, our other filings with the Securities and Exchange Commission and our earnings release, all of which can be found on the Public Shareholders section of our website. We'll also refer to non-GAAP measures as we view as important in assessing the performance of our business. A reconciliation of non-GAAP measures to the nearest GAAP metric can be found in our earnings presentation and earnings supplement, both of which are on our website. Thank you again for joining us. And with that, I'll turn the call over to Michael to discuss our results.
Thank you, Stacie, and good morning, everyone. GCM Grosvenor had a good first quarter of 2026, delivering solid investment performance across our strategies, growing our fundraising pipeline and making solid progress on several of our key strategic initiatives, particularly with respect to the individual investor channel. In a period marked by war and energy price shocks, our business has demonstrated consistency, resilience and growth. During the first quarter, our AUM and fee-paying AUM grew by 12% and 11% year-over-year. First quarter 2026 fee-related revenue and fee-related earnings were essentially flat year-over-year. But importantly, when adjusting for the impact of catch-up management fees, which were significant in the first quarter of 2025, fee-related revenue and fee-related earnings grew by 8% and 20% year-over-year. Our unrealized carried interest now exceeds $1 billion, a record high for the firm and a 16% increase over the prior year level. The firm's share of that unrealized carry interest is more than $500 million as of quarter end, which is a 23% increase year-over-year. Despite the heightened volatility that has persisted since our last earnings call, our forward-looking view for the business remains quite positive. During the quarter, we raised $1.5 billion for a total of $9.3 billion over the last year. Fundraising was broadly diversified across the platform. Infrastructure, which has been our fastest-growing strategy over recent years, led with $2.6 billion of fundraising over the last 12 months, followed by $2 billion raised for absolute return strategies. While we're not changing our base position on flat ARS flows, we did enjoy net inflows in the first quarter and today enjoy a larger pipeline than we have seen in many years. Jon will address the ARS opportunity more fully in his remarks. Outside of ARS, our capital formation pipeline also remains strong. Our clients are either growing or maintaining their alternatives allocations with many moving into new strategies where we are ideally situated to serve as their partner. While separate account fundraising can be a bit lumpy quarter-to-quarter, we expect second quarter fundraising to be larger than the first quarter fundraising, and we expect the back half of the year to be larger than the front half of the year. We have made a number of new business development hires to strengthen our platform and support our growth initiatives, including key hires to expand our presence in the Middle East, Europe with a particular focus on the Nordic region and Southeast Asia. We also added a senior leader to our direct infrastructure investment team in light of the continued growth. A bright spot in the quarter was the continued progress of our efforts in the wealth channel, where sales momentum continues to build. It is worth noting that due to the positioning of our products and solutions, we are not exposed to the range of issues, including redemption pressures, marks and fee-related performance fees that are impacting the private credit and secondaries asset classes in that channel. The current picture for us remains one of accelerating growth in the individual investor channel. During the first quarter, we raised approximately $500 million from that channel, which is a higher number than we have historically seen in many full years. Drilling down in the first quarter, we secured an anchor investment to build a private equity co-invest portfolio that is intended to become our private equity registered fund. That fund is currently in registration and consistent with our infrastructure interval fund, we are aiming to go to market with significant capital and a partially seeded portfolio, both of which are valuable accelerants to success. Our infrastructure interval fund is ramping nicely, supported by healthy flows and strong underlying performance. Our Grove Lane distribution joint venture is having early success, and we will continue to invest in that business. As we have said previously, while there's a long-term build, we are very constructive on the role the individual investor will play in our future growth. As you know, credit has been an area of focus for the firm and an area of concern for the market. We raised nearly $500 million for credit in the first quarter, representing approximately one third of our total fundraising. As a reminder, our private credit offerings are diversified with no particular concentration in any private credit subtype and diversified implementation styles. Performance across our credit portfolios remains consistent, and we see attractive opportunities to deploy capital, including in credit secondaries, where we've raised nearly $1 billion over the past year and see significant opportunity for growth. We do not see systemic issues in our credit vertical and remain confident in our ability to deliver for our credit clients. Following Q1, we remain confident that the goals we laid out at our Investor Day for both FRE and ANI growth are achievable. In closing, I want to take a minute to touch on AI. It's an important focus for the firm, and we believe something to touch on regularly with you. As we noted last quarter, we believe we are a net beneficiary from AI disruption, both with regard to our direct exposure to disruptors and with regard to the positive impact on the assets owned in our portfolios. While we do not have a view on how AI will impact people, we believe it is positive for equity. Across our business, we are increasingly utilizing AI within our operations to drive efficiency, enhance operating leverage and support the firm's growth. To be clear, we have always been and will continue to be a people-centric organization. Our team is our greatest asset. Our culture is our greatest asset. At the same time, we already see how AI can enable our team and our culture to be more efficient, more productive and deliver even greater value to our clients, which will, in turn, deliver value to shareholders. And with that, Jon, I'll turn it over to you.
Thank you, Michael. This quarter, I'm going to focus my remarks on our absolute return strategies business, a core pillar and a key differentiator of our platform. To frame the discussion, as of quarter end, we managed $26 billion of ARS fee-paying assets, 16% larger than a year ago. FPAUM has grown at a 9% CAGR since the recent trough at the end of 2023, supporting the increasing earnings power of that business. We serve hundreds of institutional clients, many of whom we have partnered with for long periods of time, and we also manage approximately $3 billion for individual investors in that segment. The ARS business has always been durable, but now it's also a source of growth. An interesting fact, 100% of our top 25 ARS clients from 2020 are still clients with us today. Our ARS business is built on experience, relationships, scale and high-touch client partnerships. Together with a long-term track record of performance, particularly over recent periods, the value proposition is compelling to our clients and especially in a world with great market uncertainty. Our clients hire us to consistently deliver competitive risk-adjusted returns that are largely uncorrelated with the broader markets, and we've consistently delivered on that value proposition. Our multi-strategy composite has generated an 8% gross return since inception. On a 1- and 3-year basis, the gross return has been 16% and 12%, respectively. Importantly, over this period, our portfolios have consistently done their job as diversifiers, demonstrating low correlation to traditional markets and providing downside protection during periods of market stress and drawdown. That role is especially relevant in today's environment where investors are increasingly focused on capital preservation alongside return generation. The beta of our ARS portfolios is typically less than 0.3. So the returns are impressive on a risk-adjusted basis. In the first quarter of this year, amid elevated market dispersion and generally down equity markets, our ARS portfolios preserved capital and delivered positive returns. And notably, as markets reflated in April, our portfolios participated with early indications of April performance being generally north of 4% across most portfolios. Our industry relationships and scale provide a meaningful competitive advantage investing capital. Our platform includes approximately 190 approved funds, many of which are top performers and sometimes capacity constrained or closed to new investors. We believe as investors seek to add or reenter the ARS market, it would be very difficult to replicate our offerings. As we face clients, our model is high touch. We operate in a very customized solutions-oriented way and often function as an extension of our clients' teams. This includes not just investment management but also support across operations, risk management, portfolio construction. That level of engagement creates durable client relationships and contributes to the stability of the business that I mentioned earlier. From a financial perspective, our ARS business produces high-quality earnings. It's cash generative with recurring management fees that compound alongside positive performance. There's also meaningful upside from performance fees. You've seen that. We currently have approximately $35 million of run rate performance fees. And as a reminder, in multiple recent years, we've generated more than $50 million annually in performance fees. While the timing of those fees can vary and are hard to predict, they represent an important source of earnings and cash flow. We're seeing improving client demand, supported by a market backdrop that's increasingly favorable for hedge fund strategies. Higher interest rates, greater dispersion across markets, elevated volatility and ongoing uncertainty all tend to create a more attractive opportunity set for active hedged investing. We generated positive inflows of approximately $200 million in the quarter coming off a positive net inflow year in 2025. The recent investment performance in combination with a constructive flows environment enabled Q1 ARS management fee growth of 10% year-over-year and supports continued growth from there. With that, I'll turn it over to Pam.
Thanks, Jon. Our business showed solid momentum to start the year, supported by both investment performance and ongoing fundraising activity. Assets under management for the first quarter of '26 was $91 billion and fee-paying AUM was $74 billion, a 12% and 11% increase year-over-year, respectively, reflecting growth driven by performance as well as capital formation across our strategies. Contracted not yet fee-paying AUM was $9.8 billion, a 20% increase year-over-year, providing a strong foundation for continued organic growth as that capital is deployed and converted into fee-paying AUM over time. Private markets management fees for the quarter were $63 million, down from $67 million at this time last year due to $7.6 million of catch-up fees in our Q1 '25 results. Excluding the impact of these catch-up fees, private market management fees for the quarter grew 7% year-over-year. For the second quarter, we expect private market management fees to increase by approximately 2% on a sequential quarter basis over the first quarter of '26. Absolute return strategies management fees were $42 million in the quarter, a 10% increase over the prior year. As Jon highlighted, this reflects both performance and net inflows, and we continue to benefit from that strong investment results in the strategy. In the second quarter, we expect ARS management fees to again be up approximately 1% on a sequential quarter basis, which equates to an approximately 10% growth rate year-over-year. Total fee-related revenue for the first quarter was $107 million, and we expect fee-related revenue to increase in the second quarter by a high single-digit percentage growth rate year-over-year. Turning to expenses. Our compensation philosophy remains centered on attracting and retaining top talent while aligning interest with our clients and shareholders. FRE compensation and benefits were $37 million in the quarter, which represents a year-over-year decline due to the benefits of operating leverage. We expect this figure to increase by approximately $1 million in the second quarter. Non-GAAP general, administrative and other expenses were $23 million in the quarter, slightly higher than expected and includes costs of faster AI-related technology investments. We continue to manage expenses in a disciplined manner while also investing in the business to support our long-term growth initiatives. We expect G&A and other expenses in the second quarter to be consistent with the first quarter. Pulling this all together, first quarter fee-related earnings were flat year-over-year at $47 million, resulting in an FRE margin of 44%. Excluding the impact of the prior year catch-up fees, our fee-related earnings in the quarter grew by approximately 20% year-over-year, and we continue to enjoy organic growth and operating leverage across the business. Turning briefly to incentive fees. Performance remains solid across the platform. As a reminder, ARS performance fees are primarily realized in the fourth quarter, and we continue to view these fees as a meaningful contributor to our overall earnings power. Our carry fund investment performance remains strong, and this quarter, we surpassed a notable milestone with gross unrealized carry exceeding $1 billion and the firm share exceeding $500 million, up 16% and 23% year-over-year, respectively. Our balance sheet remains strong, and we are maintaining a healthy quarterly dividend yield of $0.12 per share. As of Tuesday, we had a 4% dividend yield, and there is room for future dividend growth as we enjoy positive momentum in our earnings. During the quarter, we repaid $65 million of our term loan and repurchased $18.6 million or 1.6 million shares under our stock repurchase authorization plan. We intend to use the $64 million remaining in our program as of May 1 to largely manage dilution. More broadly, we remain well positioned for growth in '26 and beyond. We benefit from strong fundraising momentum and strong investment performance alongside embedded revenue growth from contracted capital and ongoing operating leverage within the business. Thank you again for joining us, and we're now happy to take your questions.
Questions and answers
Our first question comes from Bill Katz of TD Cowen.
Michael, I'd like to go back to some of your commentary, speaking, maybe you can unpack the confidence in the gross sales. I think you mentioned you expect it to be up sequentially and the second half of the year will be higher than the first half. Can you unpack where you're seeing the growth, break it down between maybe the SMA side, the specialized side? And then just to leverage on some of Jon's comments, how you're sort of seeing that between maybe the private market side versus the absolute return side?
Thanks for the question, Bill. So I think the first thing that I would say is that our first quarter fundraising was in line with our expectations. And I think that's important for everybody to hear. It was obviously a lower number than the first quarter a year ago, but it was what we expected. And all of our statements regarding our confidence with Q2, the back half of the year, the full year are absolutely still intact. We feel very good about that. The pipeline is quite full. We see that growth coming really everywhere. So we see our separate account re-ups and new separate accounts being a source of fundraising and growth for the year. We see our specialized funds being a source of fundraising for the year, and we see the individual investor channel continuing to be a source of growth and fundraising for the remainder of the year. Our specialized fundraising for this year will be weighted towards the back half of the year and likely weighted towards Q4 as certain funds will turn on in terms of fundraising later in the year in the second half. And so I think that's touching on all of the things you asked me to comment on. And if not, you'll let me know. But our pipeline is quite full, and we are making progress monthly in our individual investor efforts, and we are enthusiastic about the way things are looking and which led us to reiterate our guidance for '28 from Investor Day that we've given you before.
We'll go next to Ken Worthington of JPMorgan.
I want to dig a little bit into wealth. I apologize if I misheard this. I think you said that you raised $500 million this quarter in the wealth business. You've got the infra product in market. Where does the money go if I heard it correctly, and it was $500 million? And did the $500 million include some of the seed capital that you raised for the registered private equity fund?
So Jon, I'm going to let you sort of take that. The one thing I do want to mention is that in our last quarter call Jon talked a lot about our private label wealth growth. While we have the infrastructure interval fund in market raising money every day and we are bringing the private equity co-invest fund into registration, we continue to raise money in the wealth channel outside of the registered vehicles. I think that's important to remember. Jon spent a bunch of time on that last quarter, quoted the number of private label relationships we started over the last year or two, and it was a significant number, and we're going to continue to grow in that part of the wealth channel as well. Jon, anything else you want to add?
Yes. I'll expand on that point, Michael. Our ability to raise capital is a major strength. We're very excited about the infrastructure product and the private equity product that will come in registered form. That $500 million does not include the seed capital, which, as Ken noted, came from an institutional investor. More broadly, registered funds are very important but will probably never make up the majority of the capital we raise from the wealth channel, at least not in the near term. We raise capital across all our verticals — private equity, infrastructure, real estate and absolute return strategies — and we can do so in separate account form. Those separate accounts might be for a single high-net-worth individual, for an advisory firm or adviser serving multiple clients, as a 3(c)(7) private closed-end fund, or as registered funds. It is a broad-based approach, and we believe that flexibility, both in our diversified open architecture solution and in the choice of wrapper, is one of our real competitive advantages in the wealth channel.
We'll go next to Crispin Love with Piper Sandler.
This is Ben Graham in for Crispin Love. I'm just wondering if you could discuss what you're seeing in Grove Lane recently and more specifically, just if the current climate and sentiment in alts has changed your near-term views for Grove Lane at all?
Yes. Our near-term view is that Grove Lane is doing well. We're adding to the Grove Lane team, and as we said, we will continue to invest in Grove Lane. We're very happy with what we're seeing there and with how Grove Lane and the Grove Lane team, which we have expanded over the last year, are performing. We mentioned that some of the issues that have captured a lot of conversation and attention in the wealth channel regarding alternatives are, for the most part, an issue set that we are quite insulated against and perhaps even a beneficiary of because our products are not at the center of that conversation. I outlined the specific places where we are not impacted, which is where much of that conversation is focused. We're seeing growth and opportunity there. We're investing in Grove Lane. I'm not saying we are definitely a beneficiary of the stresses associated with redemptions or fee-related performance fees or marks, but we do not have those issues in our portfolios and offerings in the wealth channel. We are growing, admittedly off a low base, and we feel very good about that.
We'll go next to Bill Katz with TD Cowen.
I got myself disconnected just as you answered my prior call, so I apologize for that, but I think I got the notice of my team. Just think about realizations for a moment. And you mentioned that you're now north of $500 million in terms of your share of that. It looks like your ratio of that is going up over time. So maybe a 2-part question. How do you sort of see the realization backdrop over the near term? I appreciate that the macro is very choppy from day-to-day. And then one of your peers recently had a very unique way of trying to accelerate the realization possibility and capital raising by creating new entities to sort of transfer some of that value. Just wondering as you've looked at that, and is there an opportunity here to somehow accelerate the late earnings power? Because if I do the math, it looks like the net accrued carries about 20-some-odd percent of your market cap. It just seems like a lot of untapped earnings.
So thank you, Bill, for the question and for recognizing the value of our net accrued carry. Behind that net accrued carry at net asset value is a tremendous amount of carry at work that is not yet in the money. We're not currently working on a transaction like that, though we understand what you're referencing. There may be opportunities for us to pursue that and accelerate realization of some of the carry, but it is not easy and would require a longer, broader conversation. Carry is a huge asset class across the industry and, at this point, largely unfinanced. I do think financing markets could unlock some of that value, but it is hard to value and unlock because so much carry is not yet in the money and it is harder to find agreement on value. The carried NAV itself is straightforward — it’s NAV; if everything were liquidated today, that’s what you would get. But behind that is a giant asset that is not yet reflected in carried NAV, and that piece is difficult to value and reach agreement on. As you know, we are significant owners of the firm and therefore of the firm’s share of both carry at NAV and carry at work, and we are not going to do anything that we don’t think fairly and fully reflects value just to accelerate timing. We view this as a when, not an if, and we believe its fundamental value is growing while we hold it. This is something we spend a lot of time discussing internally because there are opportunities to try to finance the carry asset across the industry, but the carry-at-work piece is hard to get to a place where you are happy with the value you’re getting; it’s necessarily tied to carry at NAV, and we won’t make a deal that shortchanges long-term value for short-term realization when we believe the value is increasing — the carried NAV is rising as portfolio holdings grow and the carry at work comes into the money and boosts carried NAV as well. Does that make sense to you?
Right. It does. I was just wondering, just given the backdrop, how you are thinking about the opportunity to maybe tap into that $500 million as you look over the next several quarters just in terms of realization potential.
I'll jump in. Maybe I would just say Michael talked about people financing different assets on the balance sheet that the corporation owns. There's also a huge amount of activity around continuation funds. The transaction from one of our peers you might be referring to could have been a recent deal where leverage was put on a prior fund so the proceeds from that leverage could be committed to the new fund and potentially unlock some carry in the prior. Any time you have a massive amount of capital invested in the private markets, various tools and innovations are developed to finance that and be creative in terms of liquidity provision, as Michael pointed out. I wouldn't say we're looking at anything like that right now. As Michael pointed out, I won't say we would never look at something like that. The broader point from our perspective is you have an asset that is compounding, as Michael noted, at very nice growth rates, which means it is working for you, the shareholders, even while it has not yet necessarily been turned into cash. It's made up of well over 100, if not 150, waterfalls, which is unique, and it's diversified across all asset classes and implementation styles. Our clients are patient with respect to the realization of capital, and we're patient with respect to the realization of that asset, especially when it continues to build value and work for you.
We'll go next to Tyler Mulier with William Blair.
It looks like you're in the market with 2 new specialized funds. I think one of them is the next multi-asset class fund. The predecessor funds there last year raised about $1 billion each and pretty strong performance. How are those initial conversations going? And any color you would offer on those?
Jon, do you want to take that? I think we're kind of in premarket, but do you want to take that, Jon?
Sure. I mean, I think that's our MAC IV franchise you're talking about. You're correct that the prior fund is roughly that size, and you're correct that the performance has been very good, as you've heard us mention on the last call. It's one of the areas, though not the only one, where we were able to leverage the platform's broad origination and the information we get from our privileged position in the ecosystem to identify market themes, which allowed us to participate in AI, data, energy and technology themes that are powering the market now. So it's been a very good story for investors. It's a product that doesn't neatly fit into a single bucket, but for investors who appreciate the value of our origination and the delivery of an attractive risk-adjusted return profile, we're excited to begin premarketing and to start talking to clients about the next fund toward the back half of this year.
The only thing I'd add is I believe MAC III simply did not hit the market at a good time. Had it been in the market six to nine months earlier, it would likely have been a much larger raise than it ended up being. The timing for MAC IV, which will be in the market later this year and which we are currently premarketing, is much better. We're enthusiastic about driving MAC IV for the reasons Jon mentioned and because of the improved timing. Unfortunately, MAC III's timing resulted in a smaller raise than it could have been, but we now have advantageous timing with MAC IV.
Got it. And then I got to ask on SpaceX since it held up pretty well last week. Is there any color you're willing to share about your exposure in the current market?
All we would say, and all I think we're prepared to say at this time, is that we do have exposure to SpaceX. It has been a very, very successful investment for the firm. And with the public information available about SpaceX, their planned offering possibly as early as next month, and their frequent progress announcements, including yesterday and their deal with Anthropic, we are enthusiastic about the upside potential our SpaceX exposure provides over the remainder of the year. Let me just add to that last answer just to say that I think if SpaceX does become public, at that time, we'll probably talk about it in a bit more detail, and it probably will be more volatile than it has been in terms of valuation and marks sort of week-to-week, month-to-month. And so we'll want to provide more detail on that if that does happen later in the quarter or in the third quarter.
And I'm not showing any further questions.
Thank you, everyone.
This does conclude today's conference. We thank you for your participation.