Please stand by. Good day and welcome to the GCM Grosvenor Fourth Quarter 2021 Earnings Call. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this call will be recorded. I would now like to hand the call over to Stacie Selinger, Head of Investor Relations. You may begin.

Thank you. Good morning and welcome to GCM Grosvenor's fourth quarter and full year 2021 earnings call. Today I am joined by GCM Grosvenor's Chairman and Chief Executive Officer, Michael Sacks; President, Jon Levin; and Chief Financial Officer Pam Bentley. Before we discuss this quarter's 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 or performance to be materially different from any of our expectations of future results. Please refer to the factors discussed in the Risk Factors section of our 10-K for the fiscal year ended December 31st, 2020, our other filings with the Securities and Exchange Commission, and our earnings release available on the Public Shareholder section of our website. These factors could cause actual results to differ materially from those indicated by the forward-looking statements on this call. We'll also refer to non-GAAP measures that we view as important in assessing the performance of our business. A reconciliation of non-GAAP metrics to the nearest GAAP metric can be found in our earnings presentation and earnings supplement, both of which are available on the Public Shareholder section of our website. Our goal is to continually improve how we communicate with and engage with our shareholders. In that spirit, we look forward to your feedback. Thank you again for joining us. And with that, I'll turn the call over to Michael.

Thank you, Stacie. Our business performed really well in the fourth quarter and for the full year of 2021. As you can see on slide three, we met or exceeded consensus and our own guidance for fundraising revenue growth and profitability. Importantly, we added value to client portfolios enjoying good investment results across our various verticals. For the fourth quarter and full year of 2021 as compared to the fourth quarter and full year of 2020, we grew fee related revenue by 17% and 12%, fee related earnings by 37% and 27%, adjusted EBITDA by 19% and 22%, and adjusted net income by 23% and 31%. Based on the strength of these results, our Board has increased our stock and warrant buyback program by an additional $20 million. Strength of 2021 has set us up well for 2022. And we reiterate our 2022 guidance for fee related revenue growth of 12% to 15% and fee related earnings growth of 20% to 25%. Last year's success was led by $9.4 billion of fundraising across the firm. Our fundraising was highly diversified across vertical, geography, client channel, and account structure as you can see on slides four and five. On slide five, we provided more information on specialized fundraising that we hope you find helpful. In 2021, we raised $1.5 billion for diverse managers. That total was comprised of $1 billion for our private equity vertical and $500 million for our real estate vertical. The $1 billion of diverse manager capital raised for our private equity vertical includes a successful first fundraise of $770 million for our advanced fund. We look forward to delivering good results for advanced fund investors, bringing successor advanced funds to market and growing that fund series over time. Infrastructure captured the largest share of our overall fundraising…

Thank you, Michael. As Michael said in his remarks, it was a strong year for the firm in which we successfully drove returns for clients and harness the platform's flexibility to deliver solutions to clients across the full spectrum of alternatives. Our first job is to deliver strong risk adjusted returns for our clients on an absolute and relative basis. We were pleased to deliver on that front, and what was admittedly a positive environment for risk assets. Gross performance for Absolute Return Strategies was 7.2% for the year and 9.3% annualized over the last three years, which means we exceeded client objectives and also generated significant alpha. We think the environment of heightened volatility and increasing interest rates sets us up well for Absolute Return Strategies generally. Even though January was negative for performance, it was in line with their expectations, given the broader market sell off. Moving to our Strategic Investments Group, puts simply it's just a really exciting story. We have a unique origination engine and we are leveraging it well to deliver for our clients. As a reminder, the SIG group pursues opportunistic direct and co-investments sourced in some way, shape or form from the full breadth of the firm's open architecture, multi alternatives platform. We primarily run three strategies out of this group, a more liquid strategy we call the special opportunities fund; a longer duration, private equity like strategy, which we refer to as the Mac franchise; and a credit only capability, which we call strategic credit. Returns across each strategy last year and since inception are fantastic. More broadly across private markets, we saw strong performance in every strategy, which in addition to delivering value to our clients caused total unrealized carry to double during the year. Private equity had exceptional returns last…

Thank you, Jon. We are very pleased with our results for the fourth quarter and full year, and enter 2022 in a position of strength with highly attractive tailwinds. Fee related revenue grew 17% for the quarter compared to the fourth quarter of 2020 and 12% year-over-year, both in line with or ahead of our guidance and indicative of the continued momentum in capital formation and investment performance. As Michael mentioned, the growth in fee paying AUM combined with our anticipated activation of contracted, not yet fee paying AUM yields approximately 6% of fee related revenue growth in 2022, nearly half of what we have guided before any incremental fundraising. And as Jon noted, we continue to see a very strong market for capital formation across the full breadth of the platform. A primary driver of this dynamic is our private market specialized fundraising, which we perceive being a meaningful contributor to revenue next year. Catch up management fees associated with these funds compound over time, so typically are higher in the back half of the year. To that point, catch up fees in the fourth quarter of 2021 were $4.3 million, the highest of any quarter during the year. In the first quarter of 2022, we do not anticipate any significant specialized fund closings. So therefore, there will be limited to no catch up fees in Q1. And we expect first quarter fee related revenue to be almost $3 million lower than the fourth quarter. As was the case in 2021, we expect our 12% to 15% revenue growth to be non-leaner and waited heavily toward the back half of 2022. Our fee rates continue to be very stable across the business, a sign of our value proposition resonating in the market. We also continue to experience a mix…

Thank you. [Operator Instructions] And our first question will come from Ken Worthington with JP Morgan.

Hi, good morning. First, I'd love to get an update on the insurance side of the business. If I recall correctly, you closed I think $500 million in insurance solutions in 3Q and sort of the inaugural close. And if I'm backing into numbers correctly, it looks like there may be some additional in 4Q. So, can you talk about any milestones reached during the fourth quarter? And how we should think about the pipeline for that business going forward?

Sure. Thanks Ken. We have, as you know, high hopes for that insurance channel. We've made a couple of additional hires there since our first hire and since launching that. And I think that the third quarter success that you mentioned was in a way was early and larger than anybody should have been expecting. We did have some modest success in the fourth quarter, but not the thing that I would signal or say as a milestone or of the magnitude of the success that you reference. Our pipeline there is full our activity set. There is significant and robust, and we are enjoying there that the type of interaction exchange and opportunity that we thought we saw when we the commitment to the space. So, I would expect for that to grow. It's one of the things that we think will help us make our 2022 numbers. It's one of the reasons we're confident putting out some thoughts on 2023 and I'd expect it to continue to grow pretty consistently throughout 2022 and 2023 and beyond.

Okay. Great. Thank you. And I forgot to thank you when I started for the additional disclosure. Amazing, super helpful. So, thank you there. Just for sort of a follow-up question on the absolute return business. I guess, maybe my opinion was the hedge fund industry had kind of a mediocre year in 2021, and it looks to me like Grosvenor performed pretty much line with that. You did nail your projections on the business, all different parts of your projection. But given the backdrop for market conditions, I guess maybe today and the hedge fund environment, what are you doing to make Grosvenor better than breakeven for sale else for 2022 and beyond? Like, I heard your guidance for breakeven, but I assume you're kind of working behind the scenes to hopefully do better than that. So, what are you doing and what are sort of the opportunities there? And with the equity market and interest rate environment where they are to begin 2022, do those help, or do those hurt the outlook for net sales and interest in absolute return as we sort of move through the year?

Great. So, thanks. I just want to start with, as Jon mentioned in his comments, for one-and-three-year periods, and frankly, even if you go look at the -- at a five-year period, our results are in line with or exceed client expectations. So, it's always important to remember what the investors are looking for when they make commitments, what that risk reward profile is. And then, how are we doing relative to that risk reward profile? And we're doing well in that regard. So, while those returns may look a bit lackluster compared to tremendous returns we've seen from the equity markets, they are needing -- actually exceeding the objectives of the client base, which is obviously, incredibly important. And I want to make sure to point that out generally, as we've said before, markets conditions, where there's a lot of volatility where the markets aren't one way, where there's more uncertainty, those tend to be better environments for alternative strategies, better environments for hedge portfolios. We tend to have less volatility in our returns than traditional portfolios do. And so, I think, that that's a decent backdrop for us and for the strategy set. The last thing I just want to remind everybody of is that within absolute return, we have different strategies. We have different offerings and some of our offerings, in particular, our Strategic Investments Group offering has performed quite well in tough markets and has really added value. And so, we are optimistic that we can see some growth in that offering, and you've all noticed that the fees in that that space has stayed stable for some time now. And obviously, this SIG group, the Strategic Investment Group, offering in the ARS space is a higher fee offering. So, we're not moving off our base case assumptions. We're obviously to your point, Ken, working all the time to drive flows and grow assets there through additions and new hires. But we -- we're staying with that base case assumption and we think we generate good growth with the base case assumption.

Okay. Great. Thank you.

And our next question comes from Chris Kotowski with Oppenheimer and Company.

Yeah. Good morning. Thank you. On this call last year, you mentioned that you spoke about raising $7.5 billion of assets across six funds. And I'm wondering are those -- when you were talking about that is that -- are those the six funds that we see on page five? And when I add the numbers up there, you're at about $2.5 billion so far. And is that kind of on pace to that expectation in the way you were looking at it last year?

Yeah. We, generally -- Chris, we feel really good about our overall fundraising. We feel good about our specialized fundraising. We feel good about our separate account fundraising. I mentioned, our pipeline is bigger than it was a year ago. We have significantly more boots on the ground than we did a year ago. So, we're -- we feel pretty good there and we are -- and these are -- that is the fund set. And we just wanted to provide a little bit more detailed information after having been asked for it. So, you could kind of piece that together better, but these are the funds and from our perspective, things are going quite well.

Okay. Great. And then, last year you were saying, expect the fundraising to be backend loaded. And if I understood your comments right, you kind of thought this year is going to be more rateable across the quarters. Did I get that correctly?

Well, I think that -- I want to make sure we focus on this well. I think the fundraising itself is -- it is highly dependent on when you have specialized fund closes. We said on the call, we don't anticipate significant closes if any in Q1. So, you'd expect to see more fundraising in Q2 obviously. But it's really the -- when we talk about the backend loaded, it's more the revenue build than it is necessarily the fundraising. So, even if you were raising your funds radically throughout the year, the way that the map works on revenue, you're going to have a revenue build that favors the back half of the year and the third and the fourth quarter. So, even with a rateable fundraise. So -- and we do -- therefore, we will have a revenue build just like last year that is tilted towards the back of the year as Pam said.

Okay. And then, I guess, last thing on the fundraising. Looking at slide five, which is really interesting, and just from all the companies we look at generally, private equity is bigger than infrastructure. Is this what you would've guessed at the beginning of last year, that infrastructure would be significantly larger than private equity, or it strike you? Was that surprising to you?

Go -- Jon, go ahead.

Yeah. I was just going to say -- Chris, this is Jon. We feel -- we entering the year, we felt pretty good about all the fundraising pictures and Michael pointed out, and obviously the year bore that out, infrastructure in particular for us over the last couple years has actually just been a very active strategy. And we came into 2021 with a strong -- 2021, sorry, with a strong pipeline. In that regard, we come into 2022 with a strong pipeline in that regard. So, I wouldn't say that it was surprising to us to see the interest in the space. And I think that you've seen that for us as well as for some others. I do think our platform in particular is a great platform, given its longevity, which I mentioned in my comments and the track record over a long period of time in the multiple ways to implement. And so, I suspect that we'll continue to see a pretty significant amount of activity in the infrastructure space.

And for you infrastructure here, it it's in particular, I should think U.S., or I should think power and transmission pipelines, that kind of thing.

I think from a sector standpoint, you should think about multiple parts of the infrastructure space, Sub-sector standpoint, so transportation, social, renewable, et cetera. From a geography standpoint, you should think about it being roughly, equally balanced between the U.S. and Europe. But we've also actually seen a small pickup in Asia infrastructure activity in recent periods of time.

Okay. Great. All right. That's it for me. Thank you.

Thank you. [Operator Instructions] And our next question will come from Adam Beatty with UBS.

Good morning. Thank you for taking the question. Wanted to dig into -- and really appreciate all the disclosure, especially on slide five. Turning toward the separate account kind of channel, looks like the cadence of fundraising -- I appreciate the full year disclosure there. Looks like the cadence has been pretty steady. Just wanted to give your -- get your sense from, what you can see in terms of the reup outlook and level of client demand and what have you? Whether that cadence will be maintained, or maybe accelerate through this year? Thank you.

Thanks Adam. So, as we've said, our pipeline is bigger today than it was a year ago. Our reup rates have been terrific and we see no -- we see them continuing to be terrific. And so, I don't think there's any reason to see a different cadence at all in that space as we go forward.

Excellent. Thank you. And then, just on the retail distribution, just wanted to get maybe a little more detail around your strategy there. What channels, and maybe either third-party facilitators or intermediaries that might be important for your success there? Thanks.

Thank you. To date, it's been predominantly high network and working with wealth management platforms. We think we've got a lot of room to drive that and so, we are super happy to see north of 10% of our fundraising coming from that channel as compared to 5% or so of our AUM with frankly in our opinion, a lot of ability still in front of us to continue to drive that channel. And we -- as we said, we think for 2022 and for 2023 and beyond, we think there's a lot of promise there.

Great. So, it's basically gaining share within Grosvenor. That's great. Appreciate that Michael. Thank you.

And that does conclude the question-and-answer session. Ms. Selinger, I now turn the conference back over to you.

Thank you. And thank you again to everybody for joining us today. We appreciate the continued interest. If you have follow-up questions or feedback, please do not hesitate to reach out. Thank you again.

Thank you. And that does conclude today's conference. We do thank you for your participation. Have an excellent day.