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GCM Grosvenor NASDAQ: GCMG Chairman and CEO Michael Sacks told investors at Bank of America’s 34th Annual Financial Services Conference that the alternative asset manager is coming off what he described as a “very strong year,” highlighted by record fundraising and what he characterized as continued operating leverage in the business.
Sacks’ comments followed the company’s earnings report earlier in the day, which the conference moderator noted was met with a positive stock reaction. Sacks said the firm’s results reflected a strong close to the year and emphasized both fundraising momentum and the outlook for future growth.
Record fundraising and improved margins
Sacks said the firm raised a record $10.5 billion in the year, including a record $3.5 billion in the fourth quarter. He also highlighted “very good performance” in the company’s absolute return strategies (ARS) business, which drove “very strong performance fees” that were realized in the fourth quarter.
He noted that realized carry revenue in the quarter was lighter than expected, but said unrealized carry measured at net asset value increased significantly during the period. Sacks added that carry at NAV is now a meaningful figure relative to the company’s enterprise value, describing it as “a significant asset” not reflected in current earnings.
On profitability, Sacks said GCM Grosvenor achieved operating leverage and expanded its fee-related earnings (FRE) margin by “a couple of hundred basis points,” adding that management sees additional room for operating leverage going forward.
Pipeline growth and demand for alternatives
Addressing the broader fundraising environment, Sacks reiterated management’s view that demand for alternatives has remained strong since the rise in interest rates beginning in 2022, even as sales cycles stretched. He described a progression in annual fundraising from $5.2 billion in 2023, to $7.4 billion in 2024, and then to the record $10.5 billion in the most recent year.
He emphasized that the firm’s fundraising is third-party in nature and said the company’s pipeline is larger than it was a year ago, supporting optimism about continued growth. Sacks also said that during periods of policy volatility—referencing tariff-related volatility in April—fundraising did not slow, though he observed that deal deployment became somewhat more cautious.
Within product demand, he cited infrastructure as the largest contributor, followed by private credit, and said all verticals have grown despite policy uncertainty.
Exposure to SaaS and the role of AI
Sacks said the firm addressed heightened market attention on software-as-a-service (SaaS) exposures, noting GCM Grosvenor’s exposure was “fairly low” at about 4% of AUM. He argued that credit “attachment points” in the firm’s portfolio are “pretty protective of capital” and said the recent period of volatility was a favorable environment for the ARS business.
On AI, Sacks said the firm views AI as a “huge opportunity,” adding that GCM Grosvenor has more long exposure to AI and AI beneficiaries than exposure tied to a potential repricing or business model changes in SaaS. He also said the firm is pushing internally to adopt AI tools and workflows.
Strategic priorities: wealth, re-ups, and higher-value activities
Sacks repeatedly returned to the wealth channel as a major strategic priority and growth opportunity, citing underallocation to alternatives and a lack of diversification within existing allocations compared with institutional portfolios. He also emphasized the durability of the firm’s institutional business, pointing to high client re-up rates—he referenced re-up rates around 90%—and ongoing cross-selling across strategies.
He also discussed “committed, not yet fee-paying AUM,” describing it as more than 10% of total AUM, with fees that turn on over time as capital is deployed or investment periods progress.
In addition, Sacks said the firm is shifting toward “higher value add activities,” including implementing co-investment portfolios, direct investment portfolios, and secondary portfolios for clients—areas he described as higher revenue and higher margin.
Investor day goals and business mix
Reviewing goals laid out at the company’s investor day, Sacks said GCM Grosvenor is targeting:
- Doubling fee-related earnings (FRE) from 2023 to 2028
- Achieving $1.20 per share of adjusted net income in 2028
He said the firm is tracking well against those objectives, noting FRE growth implied a 15% CAGR over the period and that results may vary year to year around that average. He added that infrastructure and private credit have been the two fastest-growing verticals in recent years, while ARS posted a strong year and strong performance over the past three years.
In credit, Sacks said the business has grown to around $17 billion of AUM and highlighted credit secondaries as an area of opportunity, describing it as buying credit portfolios at a discount. He also said the firm has long liked asset-backed credit and has deployed capital across the spectrum.
On infrastructure, Sacks framed the opportunity as driven by fundamental supply-demand imbalances, including power generation needs tied to data centers and AI. He cited examples of investments including cold storage platforms and ports, and said infrastructure requires capital because supply is behind demand.
Sacks also discussed the insurance channel, saying the firm added specialized insurance-focused business development talent in recent years and has seen results. He noted that more than 10% of capital raised last year came from insurers, compared with insurers representing 4% to 5% of AUM, and said the firm expects insurance to become a more important channel.
In the wealth channel, Sacks described Grove Lane Partners as a distribution-focused joint venture designed to scale sales, marketing, and client service, staffed by professionals with prior experience building wealth-channel alternatives businesses. He also outlined wealth product and distribution approaches, including registered vehicles such as interval and tender funds, and said the firm has also pursued private-label products for RIAs and wirehouse teams—stating the company has launched 11 such relationships in the last two years.
About GCM Grosvenor NASDAQ: GCMG
GCM Grosvenor is a global alternative asset management firm that specializes in customized investment solutions across a range of private markets and hedge fund strategies. The firm partners with institutional clients—including pension funds, endowments, insurers and sovereign wealth funds—to design and implement portfolios that span private equity, infrastructure, real estate, credit and multi‐strategy hedge fund products. Through its multi‐manager platforms and direct co‐investment vehicles, GCM Grosvenor provides diversified access to opportunities that can enhance returns and manage risk in client portfolios.
Founded in 1971 as Grosvenor Capital Management, the firm has built a track record of sourcing, structuring and monitoring alternative investments on behalf of its clients.
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