GCM Grosvenor (GCMG) Q2 2026 Earnings Call Transcript

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DATE

Monday, Aug. 10, 2026 at 10:00 a.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer - Michael Jay Sacks
• Head of Investor Relations - Stacie Driebusch Selinger
• Jonathan Reisin Levin
• Pamela Bentley

TAKEAWAYS

• Assets Under Management -- $97 billion as of June 30, 2026, an increase of 13% compared to the prior year.
• Fee-Paying AUM -- $78 billion, representing 13% year-over-year growth across all investment strategies and investor channels.
• Fundraising -- $2.3 billion in the second quarter, bringing first-half fundraising to approximately $3.9 billion.
• Credit Fundraising -- $900 million during the quarter, making credit a $1.4 billion contributor to first-half fundraising.
• Channel Contribution -- The individual investor and insurance channels represented 23% and 18% of year-to-date fundraising, respectively.
• Fee-Related Revenue -- $111 million, an 11% increase year over year reflecting management fee growth in private markets and absolute return strategies.
• Fee-Related Earnings -- $50 million, reflecting 21% growth compared to the second quarter of 2025.
• Adjusted Net Income -- Increased 22% year over year driven by higher management fees and operating leverage.
• GAAP Net Income -- $9.6 million for the second quarter of 2026, according to the company's earnings release.
• SpaceX Investment Value -- Approximately $150 million in initial capital is now valued at $3.5 billion, with an average cost of $6.37 per share.
• Absolute Return Strategies Returns -- Multi-strategy composite gross returns were 14% inclusive of SpaceX and 10% excluding the impact for the quarter.
• ARS Fee-Paying AUM -- $22 billion, a 22% increase year over year driven by investment performance and positive net inflows.
• Credit Platform AUM -- Nearly $18 billion at quarter end, with the vertical being the largest contributor to fundraising during the period.
• Credit Secondaries Fund -- Successfully closed at approximately $1.2 billion across the flagship fund and related vehicles.
• Contracted Not Yet Fee-Paying AUM -- $9.7 billion, an increase of 11% from the prior year, providing a foundation for future organic growth.
• Private Markets Management Fees -- Increased 10% year over year due to fundraising and investment activity.
• ARS Management Fee Guidance -- Expected to increase approximately 10% sequentially in the third quarter of 2026, equating to nearly 20% growth year over year.
• FRE Compensation and Benefits -- $38 million in the second quarter, with an estimated $1 million increase projected for the third quarter.
• General and Administrative Expenses -- $22 million on a non-GAAP basis, with management expecting consistent spending in the third quarter.
• Incentive Fees -- $7 million in annual performance fees earned during the first half of the year.
• Unrealized Performance Fees -- Estimated at $35 million to $40 million based on a $110 per share SpaceX valuation.
• Unrealized Carry -- Gross unrealized carried interest was $965 million, with $493 million attributable to the firm's share.
• Share Repurchases -- 1.6 million shares repurchased for $17 million in the quarter; $55 million remains in the current authorization.
• Dividend -- The Board of Directors approved a quarterly dividend of $0.12 per share payable on Sept. 15, 2026.
• Fee-Related Earnings Margin -- Reported at 45% for the quarter as the firm continues to drive operating leverage.

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RISKS

• Levin stated, "Certain parts of the market, particularly direct lending, have experienced increased scrutiny around valuation, exposure to software categories, leverage levels, and liquidity," noting that the firm's exposure to these more challenged areas is relatively limited.
• Bentley warned that "given the current size of the position, you can expect some variability in our unrealized incentive fees as the price moves," referring to the firm's multi-billion dollar exposure to SpaceX.

SUMMARY

Management at GCM Grosvenor Inc. (NASDAQ:GCMG) reported strong financial performance for the second quarter, highlighted by a 13% increase in fee-paying assets under management and significant gains from an early-stage investment in SpaceX. The firm achieved broad-based fundraising growth totaling $2.3 billion in the quarter, with the credit vertical and individual investor channels serving as primary drivers. Management noted that while realization activity in the broader private equity market remains below peak levels, the firm's middle-market focus has provided relative stability. The company continues to prioritize operating leverage, with fee-related earnings growth outstricing revenue growth as it scales its credit and infrastructure platforms.

• CEO Sacks highlighted the SpaceX investment as the "largest single issuer gain in the history of the firm," now valued at $3.5 billion against a $150 million initial cost.
• Levin noted the firm's broad sourcing capabilities, reviewing 1,400 investment opportunities annually across the global private credit market.
• Management expects the second half of 2026 fundraising to exceed first-half levels based on a full pipeline across multiple investment verticals.
• The firm closed its inaugural credit secondaries fund at $1.2 billion, which Levin described as "just the beginning of what can be a huge opportunity" in providing liquidity to private credit markets.
• Bentley stated that every $10 movement in the SpaceX share price represents approximately $4 million in unrealized performance fees for the firm.
• Sacks observed that middle-market deal activity and realizations are not yet "firing on all cylinders," though the firm sees opportunity for acceleration in the coming periods.

INDUSTRY GLOSSARY

• ARS: Absolute Return Strategies, investment strategies intended to produce positive returns regardless of whether markets are rising or falling.
• Catch-up Fees: Fees collected from investors who join a fund in later closings, covering management fees retroactive to the fund's initial close.
• Contracted, Not Yet Fee-Paying AUM: Capital commitments that have been made to the firm but have not yet been deployed into investments to trigger management fees.
• FRE: Fee-Related Earnings, a measure of core operating profitability that excludes performance-based fees and investment income.
• J-Curve: A phenomenon in private equity where a fund experiences negative returns in its early years due to management fees and investment costs before realized gains occur.
• Realized Carry: The portion of profits from an investment that is paid to the fund manager after a successful exit or monetization event.

Full Conference Call Transcript

Operator: Good day, and welcome to the GCM Grosvenor Second Quarter 2026 Results Webcast. Later, we will conduct a question-and-answer session. If you are interested in asking a question, please ensure you dial in using the numbers you have been provided for this call and press *1 on your keypad to join the queue. If anyone should require operator assistance, please press 0 on your telephone. As a reminder, this call will be recorded. I would now like to hand the call over to Stacie Driebusch Selinger, Head of Investor Relations You may begin.

Stacie Driebusch Selinger: Thank you. 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. And now I will turn the call over to Michael Jay Sacks, our Chairman and CEO.

Michael Jay Sacks: Thanks, Stacie. 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. Instructively, 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 $3.9 billion of fundraising. John is going to go into some detail on our credit vertical in his remarks. it is worth mentioning that the individual investor and insurance channels were significant drivers of fundraising.

Representing 23, 18% of our year to date fundraising against the 54% 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 grew 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. And so I want to do that now. GCM Grosvenor in our ARS and private marketss 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 markets portfolios.

While these gains have not yet been realized, and generally remain subject to lockup, 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 1-quarter lag timing difference in mark to market policy between ARS and private marketss 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, 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. And with that, I will turn the call over to John.

Jonathan Reisin Levin: Thank you, Michael. Today, I will cover our credit platform. which is 1 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 and 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 are 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. And 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 of 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 semiliquid 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 1.4 thousand 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 in how we deliver those investments to clients. Every client enters the credit market from a different starting point. Some have mature credit programs and are seeking complementary strategies or specialized exposures.

Others are entering private credit for the first time and need assistance. Designing an allocation from the ground up. Our platform allows us to partner effectively with both types of investors. A couple fundraising examples from this quarter illustrate that flexibility. First, in credit co investments, we expanded our relationship with a long-standing institutional client by developing a strategic partner designed to accelerate deployment into credit co investments. The program combines our sourcing capabilities with the client's own deal flow and includes both discretionary investments as well as client originated opportunities. Enabling the client to pursue attractive opportunities that otherwise would have been difficult to execute on.

The result is a highly tailored solution that leverages the strengths of both organizations. A second example highlights the range of our broader capabilities of which credit is an important piece. We were selected by an institutional investor making its first allocation to private markets. Rather than starting with a single strategy, we designed a customized program providing diversified exposure across both private equity and private credit. The solution incorporated co investments in secondaries alongside fund investments, to accelerate deployment reduce the J-curve, and provide immediate diversification. These examples exhibit that we are not tied to a single part of the credit market or implementation style.

Instead, we begin with the client's objectives and then utilize the full toolset we have as a platform to deliver a solution that best fits the needs. We believe our position in delivering those solutions for clients has never been stronger. And with that, I will turn the call over to Pamela.

Pamela Bentley: Thanks, John. Fee paying AUM grew a healthy 13% year-over-year, ending the quarter at $78 billion. Contracted, not yet fee paying AUM, grew to $9.7 billion, up 11% from a year ago, which provides a strong foundation for continued organic growth as that capital is deployed and converted into fee paying AUM over the coming years. Private markets management fees this quarter continued to benefit from solid fundraising and investment activity, and increased 10% over the second quarter of last year. As we look ahead to the third quarter, we expect private markets management fees to increase in the mid single digits year over year.

As a reminder, based on the timing of our specialized funds in the market, we are not expecting material catch up fees in the back half of the year. Absolute return strategies had another outstanding quarter driven by strong investment performance combined with positive net inflows. ARS management fees in the quarter increased 11% year-over-year. ARS management fees are primarily charged in advance So given the strong second quarter investment performance, we expect third quarter ARS management fees to increase by approximately 10% sequentially which would equate to a nearly 20% growth rate year over year.

Total fee related revenue for the quarter was $111 million, an increase of 11% year over year reflecting solid management fee growth across both private markets and absolute return strategies. Turning to expenses. We remain disciplined in managing our expense base, while investing thoughtfully in the business. FRE compensation and benefits totaled approximately $38 million during the quarter and we estimate FRE compensation to be $1 million higher in the third quarter. Q2 non GAAP general administrative and other expenses were almost $22 million in line with our expectations.

While we continue to invest in technology, including AI initiatives across the firm, we remain focused on driving operating leverage and expect G&A expenses in the third quarter to remain relatively consistent with Q2. Putting these factors together, fee related earnings for the quarter were $50 million, representing growth of 21% year-over-year-over-year and our FRE margin was 45%. We believe there is significant scalability embedded in our business and remain confident in our ability to further expand margins over time. Turning briefly to incentive fees. Investment performance across the platform remains strong. We earned approximately $7 million of annual performance fees in the first half of the year.

And we estimate, based on recent ARS investment performance, we have approximately $35 million to $40 million of unrealized annual performance fees. The majority of our performance fees crystallized in the fourth quarter, so the amount of performance fees ultimately realized will depend on ARS investment performance in the second half of the year, of which SpaceX is an important driver. Specifically, as Michael discussed, SpaceX has been a great investment for the firm and is a terrific example of our origination power. We made investments across many different ARS and private markets portfolios that were appropriately sized for the risk at the time, and we have generated billions of dollars of profits for our clients.

Given the current size of the position, you can expect some variability in our unrealized incentive fees as the price moves. The $35 million to $40 million of unrealized performance fees I mentioned assumed $110 share price for SpaceX. That number would be higher as of the end of last week. Each additional $10 movement in SpaceX's share price is worth about $4 million of performance fees. Ultimately, performance fees will fluctuate based on broader ARF investment performance for the year. As of June 30, gross unrealized carried interest was $965 million, with $493 million attributable to the firm's share. A variety of factors can cause fluctuations to our unrealized carry balance from quarter to quarter.

Our private markets portfolios are marked on a 1-quarter lag, meaning that next quarter's unrealized carry balance will reflect valuations as of June 30. For example, the SpaceX exposure in our Q2 unrealized carried interest was marked at $84 per share So we could see a meaningful increase in our unrealized carry next quarter due to our SpaceX exposure, again, given the 1-quarter lag. Our balance sheet remains strong, providing us with significant financial flexibility. We are maintaining our quarterly dividend of $0.12 per share, while also investing in the long term growth of the business and opportunistically repurchasing shares.

We continue to actively manage dilution through our buyback program, repurchasing 1.6 million shares for approximately $17 million during the quarter. We have $55 million remaining in our buyback authorization. Overall, we are pleased with our results for second quarter and first half of the year. Accelerating fundraising, strong investment performance, expanding management fees, growing embedded incentive fee earnings and ongoing operating leverage position us well for the balance of 2026 We remain confident in both our near term outlook and our long term financial objectives. Thank you again for joining us today. We would now be happy to take your questions.

Operator: Thank you. Once again, *1 for questions. We will take our first question from Chris Kotowski with Oppenheimer.

Chris Kotowski: Yes. Good morning, and thanks for taking the question. Pamela mentioned that the mark on SpaceX was $84 a share, I think, at March 30. I am curious what that was at year end. And then I guess I think how typical is that kind of you know, lift in the marks between, you know, say, 6 months before an IPO or monetization event and the ultimate outcome. And I guess I am curious if you think about some of the other high profile IPOs that are in the pipeline. Is that a typical lift that we might expect if some of these major IPOs come to fruition in the next you know, 3, 6, 9 months?

Michael Jay Sacks: Thanks, Chris, for the questions, Michael. I do not think anything about SpaceX is typical. And I think it would be I think it would be a mistake to look at that and try to project that out onto anything. I think it is but, you know, obviously, a lot of these, companies have they have built tremendous revenue streams and tremendous value a short period of time, and there are a range of views as to how that plays out going forward. But you know, SpaceX is just the, you know, sort of everything about it is a little bit a little bit 101. And I would not look to put that onto anything.

And I think you just got to, you know, see how it all rolls forward.

Chris Kotowski: Okay. Fair enough.

Michael Jay Sacks: And then you saw, you know, you know, from the fourth quarter of last year to the first quarter to the IPO and frankly, since the IPO, you know, you have just seen a tremendous amount of movement in valuation and, for what it is worth, they seem to have done a terrific job. Some of the concerns with regard to the magnitude of expiring lockups seem to have been, you know, a bit overinflated. But I do not think you project anything from that onto anything else. Okay.

Chris Kotowski: And then can you remind us how is ARS billed Is that billed an a value at the beginning of each quarter or at the beginning of each month?

Pamela Bentley: Yeah. For the most part in ARS, it is quarterly fees are quarterly in advance based on the beginning-of-quarter AUM number. So the performance of the second quarter is in the third quarter beginning AUM number. You bill on that number, for the third quarter. You then have your inflows and outflows, and you have your appreciation and hopefully not depreciation, and then you bill for the fourth quarter and so on. Okay. Great. that is it for me. Thank you.

Operator: Thank you. We will take our next question from Bill Katz with TD Cowen.

William Katz: Okay, thank you very much. I want to come back to a couple different things. In your prepared remarks, at least on the press release, I you are sort of quoted saying excited around the momentum on the franchise. Wondering if you can maybe as you look ahead, where you see the greatest lift It sounds like a lot of good things are happening on the ARS side. Maybe just broaden out the pipe of when you what your perspective is on that, quote, unquote, exciting momentum. Thank you.

Michael Jay Sacks: Yeah. I think, Bill and I am not being you know, I am not going to go into anything with you. I it is really we are doing well everywhere. And this would have been a good upbeat positive call without the SpaceX conversation. And the reality is that SpaceX, you know, IPO and the increase in value in Q2 did not really impact revenue or, you know, or at all yet. So in Q2. So, you know, we talk-- I, you know, I mentioned our insurance efforts, our individual investor efforts. We highlighted credit, which we think has real momentum. We mentioned our pipeline. We, you know, so we are just you know, we are head down.

We are working. Nobody's taken anything for granted. We have all been around for a long time and get that. You know? But it is we are we are we are enthusiastic about a lot of different areas of the business right now, and, and it feels good to us.

Jonathan Reisin Levin: Bill, I would just add 1 other comment there, which is we mentioned that we thought second quarter fundraising would be larger than first and it was. We mentioned again that we think second half will be fundraising will be larger than first half, and you know, obviously, what we see in our pipeline and in our activity, you know, gives us the confidence to, you know, go out there with that prediction.

William Katz: Great. Thank you. Just as a follow-up, you mentioned, excuse me, that you also, feel good about the realization opportunity So how do how should we be thinking about that on the kind of line of sight you have just given your footprint? And then just from a technical perspective, when we think through the compensation waterfall, how are we thinking about maybe the carry payout ratio and then the overall firm payout ratio once you get to the net level. Thank you.

Pamela Bentley: Let me take the last piece first. Because, and then just get back to the macro market environment. We have maintained, you know, roughly, I think for 50% margin, I think, where the firm holds you know, 50% of the firm share. Of the incentive fees for a long time. We have said a number of times and, you know, it starts out in the year we hold beginning of the year, we hold a little bit less. We see how the year evolves, and we have landed at about 50%, at least, I think, the last 2 years. And we have said at times when we start to see that carry asset, you know, cash flow more.

And or you see extraordinary performance fees out of the ARS business growth and extraordinary performance through the ARS business, we think the firm can hold more of that over time. And so we do think we have margin there over time when we start to see that the sort of real value of that come through. We have never put a number on that. We are not gonna put a number on that. 50% assumption's been a safe base case for the last couple of years.

But we do think we have opportunity We do think we have opportunity, you know, in excess of that over time because as you have noted in the past, it is a very big asset. Relative to our market cap.

Michael Jay Sacks: As far as realizations, you know, it was mentioned on the call, improving But, you know, not yet, I would not say, like, robust. You have got a better IPO market for us in the middle market that is probably a little bit less relevant. But, as we see in our co invest business, transaction activity is up pretty significantly from this time a year ago. And so we have seen the number of transactions that have been done inside our co invest portfolios is up significantly and that is positive sign. And so we but we just cannot-- nobody can predict timing. And frankly, I think the whole industry has been waiting for this for a little while.

So, you know, it has been a volatile it is been a volatile world. So Thank you. You know, the important thing is that the assets there and that the value of the asset is growing and Pamela touched on that a little bit in her remarks. We are gonna see a lift in that asset. Next quarter as Q2 values roll through. for Q2 into, you know, for the Q3 mark. And SpaceX alone is gonna give you a lift there. So you know, that value continues to move in the right direction. Thank you.

Operator: We will take our next question from Jeffrey Schmitt with William Blair.

Jeffrey Schmitt: Hi, good morning. On the ARS business performance was obviously really good. Michael, I think you mentioned the timing of fees earlier. So is that what kind of drove the average fee rate down a bit? The strong AUM growth and the denominator effect versus any sort of fee pressures?

Michael Jay Sacks: Yeah. So no fee pressures Anything that impacts that fee growth is really just about mix of investor size and, you know, the size of money coming in, that type of thing. it is there is no we have not had any kind of rewriting of fees or anything like that, and we are not feeling that, and that is not a that is not in any place we are feeling any pressure. And I and I and I do not believe that the second quarter numbers were impacted by anything that went on with you know, Profitability in the funds or marks or anything like that in Q2. That would not affect the second quarter numbers at all.

Jeffrey Schmitt: Okay. Great. And then in international, fundraising, it is been pretty strong. I think you recently added some senior talent. In a couple of markets there. Just curious how scalable is your international platform today? Will you need to make additional investments as you as you scale that or you know, would you expect to see operating leverage from here?

Michael Jay Sacks: Do you want to take that, John?

Jonathan Reisin Levin: Sure. In general, I would say, Jeffrey, yes and yes. Meaning, the business overall is scalable. So, our ability to continue to raise assets from all of our channels, whether it is the insurance channel, the individual investor channel, the institutional channel in the U.S., outside the U.S., is something we have, you know, proven the ability to do now over the last several years as we continue to raise capital from the investments we are making. And the nice thing is those are, you know, relative modest investments because we have been able to do that with pretty good controls around expenses generally.

That being said, we are always looking to add talent in where we see opportunities to accelerate distribution efforts. And so we continue to think there is just great opportunity out there kind of everywhere, for all businesses and particularly for our business that can meet anyone where they are on their alts journey.

Jeffrey Schmitt: Great. Thank you.

Operator: We will take our next question from Kenneth Worthington with JPMorgan.

Kenneth Worthington: Hi, good morning, and thanks for taking the question. So solid fundraising quarter, you mentioned the $900 million in credit. How much of the $2.3 billion this quarter was in private market funds versus the SMA business?

Jonathan Reisin Levin: John, do you have that number handy or Stacie?

Stacie Driebusch Selinger: Stacie, I do not know if I have that right in front of me. Do you?

Kenneth Worthington: May maybe asked another way. Which of the funds in market had closes this quarter and about how big were those closes?

Michael Jay Sacks: Let me just Well, John's looking, Kenneth, for a specific number. Let me just you know, what is interesting is so we are in market. We are at a place now where, and it is funny because we talked about this a little. We are we are in market all the time. With all kinds of different funds. And we are in different markets. And so we are in traditional institutional markets with traditional closed end you know, specialized funds. And we are in the wealth channel with open-end, you know, with an open-end product.

And we are you know, so there is the most we are we are we are, you know, that which fund had a close and when that fund expire? And those questions are a little bit less you know, impactful today. Than they were, you know, 7 years ago with just maybe the exception of the general comments we give on catch up fees because, as you know, some of these funds are in market. You know, for 18 months and last closed the power of that last close is pretty significant when you have a catch fee involved.

And so we still try to give you a sense of where you know, what kind of catch up fees we are we are we are looking at. But there are, you know, we are always-- there is we always have there is there is always funds in market now, and they are always you know, you know, there is a just a lot more activity than there was originally. I do not know, John, if you found anything specific you wanted to touch on or not.

Jonathan Reisin Levin: I think year to date, Stacie, you can correct me if I am wrong here. About 400 million of it is for private market specialized funds.

Stacie Driebusch Selinger: that is correct. Yeah. But just to add on to Michael's commentary to give you some perspective around it. Kenneth. We probably have at any given time 10 to 12 specialized funds in market. So you are gonna have around half of those be closed end private market funds, You are gonna have the other half be Evergreen, which could either be for ARS or for the individual investor channel. So at any given time, you have obviously got a lot going on there and I think Okay. Right.

So yeah, to that point, like, I think the number John gave is really the traditional closed end institutional specialized or commingled funds, not including the wealth channel where you had other flows in the first half in those channels.

Michael Jay Sacks: So that just to put a point on the number John gave you.

Kenneth Worthington: Perfect. And then you mentioned the pickup expected for second half. You clearly see the pipeline and we see the generalized pipeline. Where do you expect the pickup in second half sales to come from?

Jonathan Reisin Levin: I think it will be pretty broad based, Kenneth. Just like what we have seen so far, you know, this year, meaning all this stuff we just touched on, meaning your specialized funds that are your traditional private market funds, your evergreen specialized funds, which could be either in the ARS space or in the semi liquid or individual investor channel, your separate accounts, I think you will see it across asset classes. You know, credit and infrastructure still tend to be the kind of leading contributors. Right now. I think you will see it from, you know, all the different types of channels and geographies.

Just in general, when we look across our pipeline right now, the strength is pretty broad based. Great. Thank you very much.

Operator: We will take our next question from Crispin Love with Piper Sandler.

Crispin Love: Thank you. Good morning. I am looking Slide 9 focusing on the 20% plus real assets CAGR. Definitely a step function higher looking at 2025 relative to 2024 and then solid momentum recently. Just with all of the anxiety year to date around direct lending and credits uncertainty as you referenced, have you seen investors lean more into real assets? And then can you just share what you have been seeing as it relates to demand and infrastructure versus real estate?

Michael Jay Sacks: So, John, you should address it. The 1 thing I would say is that I do not I think that the demand-- you know, we just talked about growth in credit. John just talked about growth in credit in a tough environment for credit with lots of headlines swirling around and all kinds of stuff. And, you know, so I sort of think of it the demand is pretty significant everywhere. And I think in real assets, it is not like demand has increased necessarily. it is been strong for a while. And it is been, as you point out, growing at a terrific rate for a while.

Maybe it is just has a it is, you know, got a little bit less headwinds and a little bit less noise. Fair bit less headwinds and noise than the you know, than credit has had. But we have experienced growth in credit. So I think we are seeing this, you know, growth everywhere. And, it is, you know, John, I do not know what you want to add to that, but I Look.

Jonathan Reisin Levin: Look, infrastructure has been on at least a I would call it, a 10- to 12-year run so far, and I do not see the run stopping anytime soon. I think that it is a fantastic asset class for what investors look for generally in the terms of a stable return profile, a yield based profile to it, an inflation protection profile to it, a long duration asset that is a nice matching for liabilities, So in general, I just see the infrastructure market continuing to grow. it is been 25% of our it was 25% of our quarter fundraising. it is been the highest contributor over the last 12 months.

Our platform there is very experienced and has excellent flexibility with respect to how to deliver solutions. And that is obviously before you get into what all the, you know, consultants around the world would be talking about in terms of the trillions and trillions of dollars that are needed over the next you know, several decades to improve infrastructure globally. So I think it has a lot going for it. I do not think that it necessarily has been all of a sudden a good thing because of what is going on in credit by any stretch.

Although, I do think that it also does show that the ability for the role it can play in a portfolio that you thought you know, private credit played, that it competes well with that, not a zero sum game, but that it is also a nice asset class to have part of your, you know, well-constructed portfolio generally.

Crispin Love: Great. Thank you. And then can you just discuss what you are seeing in Grove Lane recently, the wealth channel distribution? Just any update there would be helpful.

Jonathan Reisin Levin: Sure. We mentioned in the prepared remarks that the individual investor and we mentioned insurance being much more meaningful contributors to our, capital formation than they are of our AUM. Just means they are obviously growing quickly. So our efforts there, in terms of the investments we have made to expand our distribution are paying off, but it is still early. And still feel like there is just a, you know, a tremendous amount of growth opportunity, but also a tremendous amount of product creation opportunity there. We have got infrastructure product. We have got absolute return registered product.

We talked on the last quarter about coming to market with a private equity registered product that we think will be differentiated in the marketplace. And as Michael has always cautioned, it will be some time before all of that momentum and excitement is hugely meaningful to the financial results of the business. But it is absolutely, you know, going well and will be a great growth driver for the business for years to come. Thank you.

Operator: With no questions in queue at this time, I would like to turn the call back over to our speakers for any other closing remarks.

Michael Jay Sacks: Thank you. I appreciate everyone joining this morning, and thank you for your questions and engagement. We, look forward to speaking with you again next quarter. Have a great day.

Operator: That will conclude today's call.

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