Michael Sacks: I think that we have always talked, Ken, about raising more money in the second half than in the first half, and we did that, and we also talked about kind of the growth rates of private markets management fees, and we were pleased with the growth there and how that’s gone over the last several years. And so I think we did do what we said we would do in terms of second-half fundraising exceeding first-half fundraising. That said, always your fundraising total comes down to whether a couple of things that you’re trying to get closed by the end of the quarter, get closed or slip. And I do think we came into the first quarter with a few things that could have closed in the fourth quarter. And that’s probably part of where our confidence comes from, that our momentum is going to continue that in our pipeline.
Ken Worthington: Perfect.
Jonathan Levin: Ken, I’ll just add on to what Michael said, and Michael did say this, but we can certainly follow up with you after the call. But if you take the — it’s total fundraising. So if you take the total amount of fundraising in the third quarter and the fourth quarter as compared to the total amount of fundraising in the first quarter and the second quarter, the third and fourth quarter were higher in aggregate.
Ken Worthington: Great.
Michael Sacks: And that was what we had in Q2 and Q3 on our calls. We were confident that would be the case.
Ken Worthington: Okay. Great. And then 2023 was a much better year for the absolute return business. It underperformed equity markets as you would expect, but yields on cash remain elevated. How do you see sort of the yield environment and the strong equity environment sort of impacting demand? So you sort of called out that absolute return performance was good. It seems to me like the risk-free returns are also quite good and the equity markets were substantially better. Is that sort of weighing on how your investors are looking at absolute return and their willingness to sort of contribute new dollars here or the number?
Michael Sacks: Yeah. I think when we talk about good performance, we really talk about two things, and I think I mentioned them both. One is relative to peers, so how are we doing relative to other providers? And we did well last year. And then how are we doing relative to benchmarks, which are really kind of client expectations and things like that? And we did well there also. So we have a — from a performance perspective, with regard to recent 2023 performance, we have a client base that generally is constructive in light of the ’23 returns. I mentioned two other facts that are relevant and that — but set them both against the backdrop, but we’re not changing our sort of base case budgeting. But one is that the currently scheduled redemptions for the rest of the year that we’re aware of is lower today than it has been at this point in time in previous years.
And that’s a good thing. And then our pipeline is significantly larger than it was a year ago. So in general, we’re sitting here today coming off a good year of performance with less scheduled redemptions that we know of today and a much greater pipeline. And we — as compared to a year ago where the performance wasn’t as good, we had more scheduled redemptions and a smaller pipeline. So we’re in a — it’s a better place than it was a year ago on many factors.
Ken Worthington: Great. Thank you very much.
Operator: Our next question is coming from Adam Beatty with UBS.
Adam Beatty: Thank you and good morning. Just another one on fundraising. Appreciate the schedule of the specialized funds out in market with the vintages. Just wondering if you could help us kind of size or get a handle on how far along those fundraises are, either individually or maybe collectively as a group? And also how the size or expected size of those funds compares with the prior vintage? Thanks very much.
Jonathan Levin: Sure, Adam. This is Jon. And you could get most of this information, I think, on Page 17 of the earnings presentation. But when you look at the funds that are currently in market, they’re kind of listed, actually kind of in order of where they are in their — on the bottom half of the page, they’re listed and where they are in their kind of evolution. So as we note on the MAC III fund, the main fund had its final close, although we are in discussions with some investors about that, missed that due to their own kind of timing, budgeting constraints about potentially adding some capital in a parallel vehicle. So that’s kind of more towards the end. Co-invest kind of middle, late innings, elevate middle innings, infrastructure middle innings, credit and advance kind of early innings, and for the most part, kind of across the Board frankly, with the exception of MAC, any fund that’s had its final close has been bigger than its predecessor fund.
And we still feel, as Michael said, that it’s going to be a productive year for fundraising following what was a more difficult year, and that’s inclusive of the various specialized funds in market.
Adam Beatty: Excellent. Appreciate you hitting all those points, Jon. Thanks very much. And then just one more. Just around you talk about the opportunity in private credit, and one of the dynamics that some folks are talking about is the idea of sort of GPs entering that market just because there’s a lot of demand and what have you. So just wondering kind of what you’re seeing out there in terms of GP selection and how you kind of might correct or calibrate for a bit of a gold rush environment if — to the extent that you perceive it in that sector. Thank you.
Jonathan Levin: Look, there’s certainly a lot of discussion and a lot of demand for private credit right now. I think some of that is secular, and it’s been going on for a long time, frankly, since the great financial crisis, where more of the credit capital formation generally in all markets is coming in the form of private credit, as opposed to kind of bank-led or traded credit. I think some of it is a little bit cyclical in the sense that when absolute interest rates are higher, obviously the absolute returns you can generate from credit instruments becomes more attractive relative to liability or other types of assumptions that you’re making. But the secular trend is real. And sure, anytime you have strong secular trends for an industry, you have a lot of new business formation, a lot of new capital formation.
I don’t view that honestly, for a firm like ours to be a huge risk, right? We have the opportunity to look at hundreds of investment opportunities and select the investment opportunities that kind of make their way through our very rigorous funnel. And does that mean you’ll have some mistakes here and there? Sure, like anyone. But I don’t view it as us being very susceptible to the kind of the risk that you note. I think the most important thing for our platform is the kind of open architecture one-stop shop to providing a very interesting and complementary credit solution. And that could be offered to some of the most sophisticated investors in the world who have great programs they’re building on their own, and they still may find a need for us to provide something that’s complementary or for people that are trying to just kind of build their credit allocation in one place where we can offer that from a diversification standpoint and implementation standpoint in a way that’s kind of super attractive relative to building that program on your own.
When you step back and think about it which kind of comes back a little bit back to your question is what’s the real value and what’s the real asset that we have? It’s origination, right? You see all of the new funds that come to market and that is very helpful to obviously building the fund portion of any solution. But you also see a tremendous amount of direct credit deal flow, whether that’s a co-investment or a real direct deal or a secondary opportunity, because we operate in all the alternative markets and those are the users of private credit, real estate firms, infrastructure firms, private equity firms. And so our ability to kind of harness that origination network, harness that funnel and create thoughtful solutions depending on what the particular client needs is a pretty — we think a pretty powerful mousetrap to help people in this area as that market evolves.
Adam Beatty: Yeah. That makes sense. You highlighted the direct capability in the past. Cool. Thanks very much, Jon. Appreciate it.
Jonathan Levin: Sure.
Operator: And our next question is coming from Michael Cyprys with Morgan Stanley.
Michael Cyprys: Hi. Good morning. Thanks for taking the question. Just wanted to ask about new clients. You guys continue to have high re-up rates with existing, but just on the new clients, maybe you could talk a little bit about the environment for bringing new clients to GCMG today versus six months or 12 months ago? And how you expect that to trend in ’24? Hear you on the fundraising backdrop to be better, but just on new customers, maybe talk about some of the steps you’re taking to broaden out the client footprint as well. Thank you.
Michael Sacks: Jon, do you want me to take a first crack at that?
Jonathan Levin: Sure. Go ahead.
Michael Sacks: So, hey, Michael, first I would say that we are adding new clients, both kind of large separate account new clients and new clients that are writing tickets for the first time for commingled funds. And we’re doing that. Most of the commingled fund new client growth is coming from North America, not all of it, but most of it. And the separate accounts are coming from all over the world globally. And we are seeing growth with regard to new clients from — in both of those arenas. And it’s across strategies, obviously with real assets gathering the most capital. That’s where we’ve seen the most growth and a bunch of that has been separate account, although our infrastructure — specialized infrastructure fund has brought in new clients and will continue to throughout this year, throughout this year as well.
So the backdrop for us, and if you look at our pipeline across all the categories, it’s good, and it’s strong and it’s full and it’s got the re-ups that we mentioned, but it also very clearly has new client growth. The other thing that isn’t quite an apple or an orange in terms of your question is we did have a pretty good chunk of capital last year that we raised, that was existing clients but wasn’t a re-up. They were working with us in a new strategy. And that might have been a fifth of the capital we raised last year was existing clients moving into a different part of Grosvenor with us. And that’s obviously a very good thing as well, and it’s something we want to continue to drive.
