So we think we’re definitely taking more than our fair share of the market.
Operator: Our next question comes from Jade Rahmani with KBW.
Jade Rahmani: From your vantage point today, and I understand the lumpiness of fundraising and that these things have long cycle times given the complexity, is there anything today that would give you a read through to 2024 as to whether fundraising is on pace or even could potentially accelerate? The second question would be, if we get past some of the macro uncertainties that are weighing on so many sectors, will that accelerate and provide more tailwinds to your fundraising efforts?
Marc Ganzi: Well, look, let’s first start with the quarter, right? I mean, we raised — we formed $2 billion in new capital in the quarter. Really delighted with the $2.3 billion first close for our third fund. I think as you peer set that against other alternative asset managers, we definitely believe we’ve outkicked our coverage. We’re having a very strong fourth quarter in fundraising. Historically, we’ve always performed well in the fourth quarter. I think one of the dynamics that’s happened here, Jade, is that a lot of LPs have sat on their hands in Q2 and Q3. We got investors motivated and into our new flagship series and that’s why we’re pretty happy to have the first closing yesterday. And we do have optimism around the fourth quarter and we have even further optimism for next year.
Asset allocators have already given us a sense of where they’re allocating capital for next year. I just finished a 3-week tour where I saw 80 of our LPs. Someone told me that they thought I went around the world twice. So, I don’t think that was exactly true, but definitely within Asia and the Gulf and North America and pulsing all of our key accounts. And look, I think there’s 3 takeaways from that trip Jade over last 3 weeks. One, investors want to be with the best of the best. They’re generally shrinking their GP list, they want to be with less GPs and they want to be with the best GP in credit, they want to be with the best GPs in private equity and infrastructure. And then most importantly, they want to be allocated to the best manager in digital and renewables.
So, we think we sit in a pretty protected place there as we are the largest alternative asset manager in digital infrastructure. And that’s why we had a good print in Q3 and while we’ll have a very strong print in Q4 and I reaffirmed our guidance for 2023 this year. I think next year will be very constructive. We have over 200 investors still working in our flagship fund. We’ve had — today, we’ve had 23 investors come into the first close. We believe this fund will attract anywhere from the low side of 80 investors to the high side of over 120 investors given our market intelligence and we’ve had so far a 100% re-up from Fund II to Fund III. There hasn’t been a Fund II investor that’s told us they’re not committing to Fund III. And many of those investors haven’t closed with us yet.
So our calculus maybe a little different than other folks. We have a lot of precision. I study the data every week coming out of Salesforce and as most of you know, I’m somebody who really likes data and I study the data and we’re hitting on our points. And that’s the key. But I am optimistic, Jade, about next year. And I think our guidance for next year will demonstrate that. But we’re very pleased with the performance inside this quarter. And look, the key here is, we just activated $25 million in fees. We literally started billing those fees as of yesterday. And all of those fees will get caught up in the fourth quarter and there’ll be more catch up in Q1 and Q2 next year. And so there’ll be a profound impact to our earnings in fourth quarter as now that the closing has occurred, we finally get to start billing on Fund III.
That is absolutely important as investors think about what to look at these numbers and how to think about DigitalBridge. The expenses always come in front of the revenues unfortunately when you’re fundraising. So that’s a little bit about what’s happening today.
Jade Rahmani: And the follow-up would just be, as it relates to macro, do you believe that that is one of the reasons why fundraising cycle times are a little extended?
Marc Ganzi: Yes, no doubt. I think the macro has forced investors to move with a little more, what I would call, patience and I think investors are being incredibly thoughtful about how to deploy capital. And certainly, certain pension systems want to cover their liabilities. So, it’s easier for them not to commit to funds and to make sure that they can cover their liabilities as pensioners take money out of the pension. So these are called outflows and inflows. And so in a market like this where investors get nervous, pensioners get nervous, they may elect to take money out of their pension, Jade. And so on that, you get more outflows than you get inflows, which is taxes and the percentage that gets taken from someone’s paycheck that gets put into a pension system, like in places like Canada or places like Europe, and even here in the U.S. where certain U.S. state pensions are definitely watching very carefully and taking a risk-off mentality.
That being said, there’s pockets of great optimism. We’ve done incredibly well, in Asia, that’s been a really good market for us. We had a brand new fundraising team we put in place last year. We’re seeing terrific results out of that region. We’ve seen very good results out of the GCC region. And Europe has been a little slow, the U.S. has coming on right now, Canada is coming back on. So as I said, the macro certainly makes people slow down a little bit and have some pause. But one thing we are seeing is the pension systems are being very cautious, Jade, just given that outflow, inflow dynamic, and that should stabilize next year is what our belief is. That’s what we see and that’s what fundraising consultants are telling us as well.
Operator: Our next question comes from Ric Prentiss with Raymond James.
Ric Prentiss: A couple of questions. First, timing in life is everything. Obviously you’re working on the Vantage to consolidation. Help us understand what are you trying to achieve? How much are you trying to sell down to, how many people are involved in discussions? What’s kind of the process as you think about either by next time you report earnings if not soon? I think you said that we could get this one done. So just help us understand the process to get to this next final deconsolidation simplification story?
Marc Ganzi: Yes, thanks, Ric. So look, we’re having good conversations with some of our biggest investors. I can’t give you the exact color of who it is for confidentiality reasons, but rest assured, they’re long-term core type investors. They are pension systems generally that value these U.S. assets that are 97% investment grade, close to 6% yield and offers investors incredible safety. Even in light of today’s interest rate conditions, these are some of the best data centers in the world. I think our process is obviously, we want to sell down $60 million of our position. We’ve made that perfectly clear to the investors we’re talking to. We do have interest and we do have ongoing negotiations with a couple of investors. And the key is also not just to sell down the $60 million, but to also to continue, Ric, to introduce new capital into Vantage SDC, new third-party capital, as Vantage North America now has other data centers that they want to push into this long-term REIT that we own.
