GCM Grosvenor Inc. Class A Common Stock 2026 Q2 Earnings Call

Good morning. 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 filings with the SEC related to these statements. We will also refer to non-GAAP measures that 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 available on our website.

Thank you again for joining us. Now I will turn the call over to Michael Sacks, our Chairman and CEO.

Thanks, Stacy, and thank you to all listening to the second quarter 2026 earnings call. I am pleased to report that GCM Grosvenor had another strong quarter, both generating returns for our clients while growing revenue and profits for the firm and our shareholders. We ended the second quarter with $97 billion of assets under management and $78 billion of fee-paying assets under management, an increase of approximately 13% for each from a year ago. Constructively, all investment strategies and all investor channels contributed to that growth. During the quarter, as expected, we saw an increase in fundraising from the first quarter's $1.5 billion to $2.3 billion in the second quarter, bringing first half fundraising to approximately $3.9 billion. Importantly, those results were again broad-based across the platform.

We continue to expect second half fundraising to exceed the levels experienced in the first half and are pleased to report that our pipeline remains full. Credit was the largest contributor to second quarter fundraising, accounting for more than $900 million of the $2.3 billion raised in Q2, making credit $1.4 billion of the first half's $3.9 billion of fundraising. Jon is going to go into some detail on our credit vertical in his remarks. It's worth mentioning that the individual investor and insurance channels were significant drivers of fundraising, representing 23% and 18% of our year-to-date fundraising against the 5% and 4% of AUM they represented, respectively, at the start of the year. As you know, both channels are areas of focus for us.

From a revenue and profitability perspective, we saw second quarter fee-related revenue grow by 11%, fee-related earnings grow by 21%, and adjusted net income grow by 22% as compared to the second quarter of 2025. On the last couple of earnings calls, we have been asked about the impact of AI disruption generally. We have maintained that we have more upside from AI disruption than risk associated with it and noted that we have some direct exposure to disruptors. We continue to believe that. Last quarter, we were specifically asked about SpaceX, and we said that we thought that in the wake of a successful IPO, it would likely be appropriate to address that exposure. I want to do that now.

GCM Grosvenor, in our ARS and private markets portfolios, through primary fund allocations to managers, direct investments into dedicated vehicles, and secondary market share purchases, invested approximately $150 million in SpaceX, a conservative sum for our capital base. The average cost of our investment is approximately $6.37 per share, and as of last week's market close, those investments had a value of approximately $3.5 billion, split fairly evenly between ARS and private market portfolios. While these gains have not yet been realized and generally remain subject to lock-up, that investment is the largest single-issuer gain in the history of the firm. For the overwhelming majority of our SpaceX exposure, the timing and form of exit is controlled by underlying managers. Should we receive shares in a distribution, we will decide on a course of action in real-time based on facts and circumstances.

The SpaceX investment is a good example of the strength of our origination platform and the breadth and quality of opportunities we can bring to investors, as well as the way our various verticals strengthen and enhance the whole of our firm for our investors. We are of course pleased with this investment thus far. Given the magnitude of the SpaceX success, real time versus one quarter lag timing differences in mark-to-market policy between ARS and private markets, and stock price variability, we feel it is important to highlight for all of our constituents ARS returns both inclusive and exclusive of SpaceX impact. For the quarter, our ARS multi-strategy composite delivered gross returns of approximately 14% inclusive of SpaceX, and 10% excluding SpaceX. Year to date, those numbers are 15% and 11%.

It is worth noting that excluding SpaceX, ARS performance is very strong on both an absolute and relative to peer and benchmark basis. Pam will talk in a bit about how to think about SpaceX with regard to annual ARS performance fees. The combination of strong second quarter investment performance and positive net ARS inflows drove a 22% year-over-year increase in ARS fee-paying AUM as of June 30, and our ARS pipeline remains full. Investment results were also strong across private market strategies without the benefit of the SpaceX IPO marks, where private equity, infrastructure, real estate, and private credit all delivered positive quarter-over-quarter performance. We remain long origination with considerable operating leverage, meaning our sourcing capacity meaningfully exceeds our current investment pace, leaving substantial room to scale activity without sacrificing selectivity.

The middle market, the area of private markets where we primarily operate, has held up better than the broader private equity market. While deal activity and realizations are not yet firing on all cylinders, we see the opportunity for a pickup in activity and acceleration of realizations going forward. The precise timing of that is not predictable. Importantly, as we have discussed in the past, we have a high ratio of firm unrealized carry relative to market cap, meaning that as the realization environment improves, there is significant upside to our earnings. We remain confident in our ability to achieve the profitability targets we laid out at our investor day and think that our durable, highly visible management fee growth, significant upside from embedded incentive fee earnings, full fundraising pipeline across verticals, operating leverage, and dividend provide an attractive value proposition for shareholders today and over the long term.

With that, I'll turn the call over to Jon.

Thank you, Michael. Today I will cover our credit platform, which is one of the fastest-growing areas of our business and an increasingly important differentiator for the firm with clients. As of quarter end, our credit platform managed nearly $18 billion of assets. The credit vertical was the largest contributor to fundraising in the quarter, reflecting strong client demand in what has been frankly an uncertain credit environment. That to me is a great endorsement of our capabilities. We raised over $900 million for credit strategies in Q2, doubling what we raised in Q1. During the quarter, we successfully closed our inaugural credit secondaries fund, which raised approximately $1.2 billion across the flagship fund and related vehicles. We're pleased with that outcome, but believe it is just the beginning of what can be a huge opportunity for us. Secondary markets develop, of course, after the formation of the primary market.

But as the primary market matures, the secondary market growth almost always grows considerably faster than the overall category. When you think about the total addressable market here, it is important to remember that the overall size of the credit markets far exceed that of the private equity markets. So being early and meaningful in a category with such massive growth opportunities is an exciting opportunity for the firm. Providing liquidity to the private credit markets through purchasing other investors' positions in funds or specified assets at a discount to market is a huge opportunity. Not all the headlines surrounding private credit this year have been positive. Certain parts of the market, particularly direct lending, have experienced increased scrutiny around valuation, exposure to software categories, leverage levels, and liquidity, particularly in the evergreen semi-liquid market. Fortunately, our exposure to those more challenged areas is relatively limited.

What continues to resonate with clients is the highly diversified and flexible nature of our credit platform. From an investment perspective, our competitive advantage begins with sourcing and broad coverage of the market. Across our global platform, we review approximately 1,400 investment opportunities annually, spanning virtually every corner of the private credit market. That breadth of sourcing allows us to identify attractive opportunities across primary funds, co-investments, secondaries, and direct transactions, which we then combine into client portfolios diversified across strategy, sub-strategy, geography, vintage year, and industry. The result is portfolios with dozens of underlying investments rather than concentrated exposure to a small number of transactions or a specific part of the credit market. Equally important is the flexibility on how we deliver those investments to clients. Every client enters the credit market from a different starting point.