All right, great. Before we get started, for important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. The taking of photographs and use of recording devices is also not allowed. If you have any questions, please reach out to your Morgan Stanley sales representative. Good afternoon, and thanks for joining us at the Morgan Stanley Financials Conference. I'm Stephanie Ma, member of the Brokers, Asset Managers, and Exchanges team for Morgan Stanley Research. For our next session, it's my pleasure to welcome Jon Levin, President of GCM Grosvenor. GCM Grosvenor is a global alternative asset manager with about $82 billion in assets under management across private equity, infrastructure, real estate, credit, and absolute return investment strategies. With that, thanks for joining us today, Jon. Thank you for having me. Great. Maybe just as an overview while we get started, as a solutions provider, you're a bit different from the Blackstones and the KKR of the world, the GPs, as they're known, as you allocate capital on behalf of clients managed by the GPs. Could you tell us a little bit more about what this means in practice, and are there different ways your clients can engage with you, either through SMAs or a commingled fund? Great, thank you. Yeah, I think where we sit in the—make sure you can hear me okay—where we sit in the alt ecosystem is often referred to as the solutions provider space, which, as you noted, is distinct from some of the large GPs, as they're referred to. I think one of the interesting parts of that question is oftentimes people might think that those concepts, or at least those allocations, are mutually exclusive. The reality is they, more often than not, in 9 out of 10 cases, coexist. As a solutions provider, what you're typically doing, and the name fits well, is providing some sort of solution, investment portfolio, manufacturing answer that's hard for that particular investor, that institution, that individual investor, whatever it might be, to create on their own. As you pointed out, sometimes that investment answer involves allocating capital to other people's funds. It also involves co-investing in specific assets and securities companies. It involves secondary investing. To some extent, in our case, depending on the vertical, it involves some direct investing as well. That open architecture approach, or that kind of ability to implement alternative investments in multiple different ways, is actually a core competitive advantage of ours. That answer, that solution that you can provide, can be packaged, to your point, in any form. It can often be the case, in our case, about 75% of our assets. It can be delivered through a customized separate account. That also our manufacturing capabilities can be provided to clients through various commingled fund offerings as well. I think the important, probably, point I would leave you with on this general topic is the ability to invest across the alt spectrum, from liquid to private, from credit to equity, from fund investing to co-investing to secondary investing to direct investing. The ability to deliver that capability to investors in different packaging, so to speak, really enables us to kind of sit at any table where an alt conversation is happening and be relevant, and provides us with a kind of a tremendous seat inside of what's obviously a very attractive ecosystem generally. Yeah, that's a great overview. We'll dive into each of those verticals a little bit later. Maybe let's just set the stage with the overall macro environment. Clearly, a lot of concerns around trade policy, interest rates, economic growth, that's weighing on public market volatility. Can you talk about the implications on your business model as a solutions provider, and are there any differences in terms of impact when we contrast you guys versus some of the GPs that we just spoke about? Sure. I suppose it would be irresponsible to admit that I do not read the news anymore, just because it is hard to keep up with. I am obviously joking, but in serious, what I do think is important is to—and we talked about this actually on our last earnings call—as a firm and as leaders of an organization, something we are very focused on, our job is to keep laser-focused on our clients. It is very easy to get distracted because there is a lot going on. There is a lot going on geopolitically in the world. There is a lot going on domestically. We have to stay calm and focused and measured on the goal that we have, which is to deliver for our clients and deliver for our people and deliver for shareholders by focusing on executing the business plan. That is not to say that we are immune to events of the world. Of course, we all understand what it's like to be in uncertain environments. We understand what it's like to have market volatility that we've experienced. I will say that none of what's happened over the past 4 months, 5 months, 6 months, whatever period of time we want to look at, in my opinion, changes anything truly fundamental about our business plan, about the value proposition that we have for clients, about where we're investing in the business for future growth. It does have impact on capital markets activity. Less capital, less deals get done, less capital gets deployed. There's less realizations that are happening in the marketplace generally, and that's an issue that faces certain clients. We have found ourselves in a place where, from a capital formation perspective, from a fundraising perspective, and this is honestly what we predicted would happen, is that 2024 would be better than 2023, 2025 would be better than 2024, and that seems to be holding true. I think a lot of that is a function of the diversification of our business by asset class. I think it's a function of the diversification of our business by geographic and client type. I think it's a function of the customized separate account business and the programmatic nature of the business that we've been able to, despite some challenges around slower realizations and slower DPI or capital return to investors, continue to see a tremendous amount of growth and opportunity through that environment. It is definitely, when it comes to making investments, right, deploying capital, you have to consider the environment around what is your cost structure going to be because of trade or tariff policy, or what is your cost of capital going to be, depending on what your view of the tenure is based on these different policies. I do think that causes the cycle kind of of deal activity or capital market activity to slow a bit. Do I think it fundamentally changes the long-term value and the NPV value of these businesses in the alt space, or our business in particular, in any material way? Not really. Yeah. Maybe just diving into your fundraising expectations. Despite market headwinds you just mentioned, you expect 2025 fundraising to be better than 2024. Maybe just double-clicking into that, what's driving that level of confidence? You spoke to the diversification of the business, but maybe you can also give us a flavor of the key contributors underpinning this out. Sure. I think for us, one of the benefits of the nature of the business that we have is a tremendous amount of predictability and transparency into the pipeline of activity. When you're in the customized account business, for example, which represents 75% or so of our assets under management, you know when your re-up cycles are occurring, when clients are having board meetings, and when they're expecting to sign documentation. We can have—could it be off by a month or something? Yeah, but within any reasonable period of time, you can have pretty good predictability in that. You also know what you're in market with from a specialized fund perspective. We have been in a fortunate place where every single, except for one instance out of dozens of them, every single subsequent commingled fund we have had has been larger than its predecessor fund. You can think about what that calendar looks like to give you insights into the fundraising picture. I think, though, when you dig into what is driving the activity and where you are seeing the most activity from investors, I would say that infrastructure and private credit continue to be very active areas. I think, not surprisingly, those are both active areas because they are less mature allocations for the typical investor, whereas in private equity, you might be full mature allocation and therefore have to think a little bit more about the realizations coming back in your cash flow planning, your capital planning, and infrastructure and credit tend to still be building allocation. We have seen a lot of activity there. I think from an implementation style standpoint, we are still seeing more of our activity and a growing percentage of our activity be towards what we call direct-oriented strategies. Co-investment, secondary, control investing, as distinct from allocative activity or fund activity. Those are a couple of the trends we are seeing. If I look forward over the next few quarters or a couple of years, even maybe what it will be, I think some of those trends are still going to be the same ones, actually, in terms of where we see the growth and the drivers. You sound pretty confident for your fundraising, but if we take a step back and look at the industry, we've gone on four years now of limited cash distributions back to the LPs. I guess from your seats, what are you hearing from institutional asset owners? How are they navigating? And then more broadly, how mature or saturated are private market allocations today? Yeah. So I think there is no question that the pace of realization or activity over the last few years has been slower than it was in prior periods. I will say, just on that note, what we did see in the late teens, early 2020s, ignoring COVID a little bit, was an acceleration of the cycle that was not sustainable. That was not normal either, meaning private equity firms, for example, going out and raising funds that are 50% bigger and doing it every 3 years and holding assets for three years. That also is not normal. We are on a slow end of it, but we are not going back. The expectation of going back to that type of cycle should not be anyone's expectation. The idea that you raise funds every 4 or 5 years and hold assets for 5, 6, 7 years, that's a very healthy environment to be in. It is an issue that faces clients today with respect specifically to their private equity portfolio. I don't think you see the issue as much in the other asset classes. I also think that the issue is the most important thing is, are the investments adding value, right? If you're not exiting an investment, but you're compounding value, there's nothing really wrong with that, right? That's not a valuation issue. That's not an asset class issue. That's not a performance issue. It's a cash management or it's a liquidity challenge that you have to do. What we've seen, at least in our own portfolios and for our clients, is that the alt portfolios are generally performing fine, performing well. Our clients are satisfied with their alt portfolios. They want to keep their allocations. They want to grow their allocations. You do have to worry that if you're not compounding value while you decay time, right, that that's a challenge. I'm sure that's happening in some people's portfolios. For us, I think what we have to focus on is driving that risk-return value proposition for our clients, providing the programmatic exposures that they're kind of looking for us to do. I think that whether it's the large GPs that you started out with your first question with, or the solutions providers, tend to be much more immune to some of those more cyclical challenges than maybe the marginal allocation that an institutional investor and individual investor may have been making. Maybe broadly on private market allocations, are there pockets of LPs where they're overallocating? I think that I can't think of—of course, there are some. I've been doing a lot of traveling over the past five months around the world. I can't think of any really significant or material overallocation stories. I really can't. I think people are at allocation. And when I say that, maybe they're a little above, they're at the top end of their range, but they're okay with that. They don't want to come down necessarily because the alts are performing for them. There is much more stories out there around not even being anywhere close to where they want to be in allocation, whether that is a new institutional balance sheet that comes online that still might be building to where they want to go from an alt standpoint, whether it is places where you are generating excess capital from whatever is going on inside of your ecosystem, whether it is the individual investor, which I am sure we are going to talk about shortly, that is nowhere near where they want to be. There is just so much growth opportunity, I think, from the alt space. I think one other point I would just make is, even for someone that is fully allocated to private markets, that is someone who is growing their private market allocation by whatever your capital markets assumption is. Your fully allocated client is growing by six, seven, eight, whatever you think equity markets or markets are going to be. Your kind of base case, no growth, no taking further share growth being 3 times GDP is not like the worst place to be. It is a pretty good market. Sure. Maybe shifting gears a bit, one of the interesting aspects of your story is a double mix shift story. This is growth in private markets and also more direct-oriented strategies. What is driving this mix shift, and what are the benefits to both top-line growth and also margin? Sure. Maybe I'll start with the private markets growth. It's just, so we, as we talked about at the outset, have covered all the alt strategies, which make us pretty unique in the marketplace in terms of being able to provide both liquid alt solutions as well as private market alt solutions. It's a fact that the private markets area of the alt ecosystem has been going faster than the liquid side. Our private markets business has been becoming a bigger composition of our overall AUM, revenue, FPOM, etc. Interestingly, I know this wasn't your question. I'll come back to the direct-oriented. The part of our business that's driven by absolute return strategies or liquid alt investments, which tends to have been less in favor over the past number of years, is actually an area where we're seeing a lot of activity today. Not surprising to us. It's an area where the absolute returns, relative returns have been very good over many recent quarters. It's been an interesting period of time to see how, in some of the big drawdowns we've seen intra-month or intra-quarter, the absolute return strategies have protected capital in a really significant way, which has been helpful to investors. There are certain investors that would rather not get more illiquid right now. The idea that you can get some active management, alpha generation, return generation through a more liquid part of the alt portfolio is interesting. I'm not calling for the liquid alt to grow faster than the private markets. I still think private markets will grow, so you'll still see half of that double mix shift occurring. It has been an interesting space over the recent period of time. When it comes to the direct-oriented strategies, that is picking up co-investing, secondary investing, direct investing as distinct from allocative investing or primary fund investing, where we are giving capital to other managers. That is really, honestly, where all things start with us, driven by the client. Meaning, of course, we have to feel good about our manufacturing capabilities. We have to be ready ahead of the clients in terms of making sure that the origination is there, that the execution, that the returns are there, which is. When the clients are ready, you are able to help them evolve their portfolios. As clients add more of that co-investing strategy, of the secondary investing strategies, we are obviously a beneficiary of that and are able to evolve with them and grow those pieces to be a larger percentage of our pie. Those strategies tend to be higher fee, our higher fee strategies for the firm. It also has the benefit of providing some growth, excess growth from that and operating leverage and margin enhancement from that as well. Got it. Another stool of your business is your focus on customized separate accounts, which represents 70% of your AUM. You frequently highlight the stickiness of these client relationships and also the perpetual nature of these re-ups. Maybe you can talk about what differentiates your approach to customized separate account model that's led to the successful, I think, 90% re-up rate. Yeah. I think the first thing I would say is we have certain manufacturing capabilities, right? We talked about those: private equity, infrastructure, real estate, credit, absolute return strategies, and within that, co-investing, secondaries, direct funds. You have the ability to deliver those manufacturing capabilities to clients with all different wrappers. You have the ability, and I will go into this in more detail, customized separate account that makes sense for certain clients. By the way, that makes sense for institutional clients. It makes sense for certain parts of the individual investor market, which I am sure we will come and talk about. You can offer commingled funds that are not registered. You can offer commingled funds that are registered, again, an individual investor. That flexibility of how you deliver your capabilities is super important. Within the customized separate accounts, I think the thing that honestly really differentiates us more than anything else is the fact that it's been a huge part of our business for 30 years. I don't think that you can wake up in the morning and say, "I want to be in the customized separate account business." I'm not saying it's rocket science. You can learn how to do it. You can have it become part of your process. You can have it be part of your culture. It does need to be part of your culture. People have to want to interact with clients on a regular basis to deliver that customized service and customized solution. You have to have it built into your processes so that you can have a bunch of different custom accounts but still scale your business: operational processes, investment processes, portfolio management, and allocation processes. I think the biggest thing that differentiates us is the experience of having done it for 30 years. A lot of people do not know this story. Our first custom account was actually with a Japanese financial institution in the early, mid-1990s. This was an institution that wanted to create an alt portfolio. They told us, "We are going to create this alt portfolio with you. You are going to, obviously, first and foremost, focus on generating the risk return that we are all setting out to do, but you are going to also service the heck out of us. You are going to train our team. You are going to have radical transparency on everything you are doing. You're going to host internships. We're going to have knowledge transfer. People come to your office. You're going to come to our office. After 3 years, we're going to fire you." They're still a client today. That kind of mentality of constantly evolving with the client, constantly making sure that you're driving the value proposition with the client, that you're listening to the client and working with them, allows you to sustain those relationships, re-up those relationships, and create that stickiness and that perpetual nature that you refer to. Right. Maybe let's turn to the individual investor, which we've been breadcrumbing our audience for 20 minutes now. You've made significant progress in the individual investor channel over the last 12 months. You've launched your Infrastructure Interval Fund and also formed the joint venture with Grove Lane. Can you talk a little bit more about the progress you've made so far and your aspirations in private wealth over the next 3 to 5 years? Yeah. Maybe I'll start with, if it's okay with you, just kind of our thesis on entering the market, meaning our confidence level and our commitment to invest significant amounts of time and resources and capital and all those things that are necessary to be good at anything comes from a place of starting with the client, as I've said a few times in this session, which is if it's not right for the client and you're not providing a value proposition for the client, it's not going to be a persistent value-creating strategy for the business. It is our strong view that when you look at the alt portfolio of an individual investor several years from now, whether that individual investor is accessing those alts through a wire house relationship or through an RIA or on their own somehow through an independent broker-dealer or through eventually maybe more 401(k) or a target date fund, whatever the mechanism is or however they are reached, that that portfolio is going to look not completely necessarily exactly like, but more like what an institutional portfolio looks like in terms of their alt implementation today versus how the individual investor portfolio currently looks. Meaning there is a lot of discussion right now around there are five firms or six firms that are getting 90% of the activity. If you look at the individual investor's portfolio, they might own 2 BDCs or a REIT or one interval fund from, I'm sure, many firms that are at this conference, and they might have four positions. If you look at some of the most sophisticated, well-staffed, analytical institutions in the world that have been investing in alts for 30 years, 40 years, 50 years, and have dozens of consultants and risk managers and all different types of talent that have come through the organization, none of them have decided after 30 or 40 or 50 years that they should own three products for their alt implementation. None. Not 1 or 2. None. My view over time is that we're in the very early innings of this, that the solutions providers, just like they play, if we're really all kind of acting in the way that we speak, which is we really want to give the individual investor the same experience that the institutions have, over time, they're going to have more diversified portfolios with different types of portfolio construction. They're going to have large cap and mid-cap and small cap, and they're going to have different geographic exposures. Within infrastructure, they might have core and core plus and value-add and opportunistic. Do I think they're necessarily going to wake up one day like some really big institution that have like 600 manager relationships? No, because operationally that would be too hard. They're going to have more than three, and they're going to have more than four. I think that the solutions providers, in particular, I'll put ourselves squarely in that bucket, can play a very meaningful role in that very, what I think is positive evolution of that experience for the individual investor, which is most important. The most important outcome is that the actual experience, risk-adjusted returns that are being generated by the alt portfolios for the individual investor look like what has been so successful in the institutional space for decades now. That is the place that we come from as we decide to make commitments into the space. I think our commitments are going to be manifold in the sense that you're going to have resources focused on wires. You're going to have Grove Lane types of partnerships that are going to work on the RIAs. On certain products, you might partner with distributions like we have with our infrastructure fund. All the different things that we're all reading about every day in the news, whether it's a private asset manager partnering with a traditional asset manager or setting up a JV on a product or setting up a JV on a bit, they're all different ways of leveraging and creating distribution to meet different parts of the market. They're not mutually exclusive. We're kind of fully committed to making sure that we're an active participant in that space. Any color you'd like to add on the recent Infrastructure Interval Fund? The recent infrastructure fund is open for sales now. As we've said before, the early receptivity because we launched a product that was seeded with capital and, importantly, seeded with investments has been fantastic. I think it was maybe first open for sales. I'll get this wrong, but it's like weeks, not months. Do I think it'll be meaningful to our financials over the next several quarters? No. Do I think the initial receptivity is excellent? I do. I've been in some of those meetings where how we've created that product, which again, it comes back to the mindset of when we've designed that product, we said, "What has been so successful in the institutional space that's allowed our infrastructure business to go from $2 billion or so 6 or 7 years ago to $15 billion today? Let's do that same thing for the individual investor. That is the way to approach that market. The other thing, which I would not say is necessarily a surprise to us because we thought about it, but maybe a surprise to you or some folks in this room, the other area, as we have kind of spent more and more time in the individual investor market and in particular more and more time in the RIA market in recent period of time, a tremendous amount of openness and receptivity to our separate account capability, which is not intuitive to people because people think, "Well, a retail investor, they have $5,000 or $10,000 or $25,000 or $100,000, whatever it might be, a million dollars. How can you do a separate account?" Think about it as people use the term model portfolios. That can mean certain things to certain people. I would just think about it as white labeling solutions or customizing solutions. You could go to a, let's use an RIA firm as an example, or let's use an advisor at Morgan Stanley for an example. They might have many dozens of clients that could allocate $1 million. The aggregation of those can create a custom solution or white label solution for that particular advisor or that particular RIA firm. I think that we're going to see a tremendous amount of our success in the individual investor channel come from that. Great. Maybe coming back to infrastructure and private credit, both asset classes are in early innings in terms of LP allocations, and they enjoy attractive tailwinds right now. Just remind us of your offerings here and how you view the firm position to participate in this grant. Sure. Our offerings in both places, and I'll kind of differentiate between the two, mirror what our offerings are in all of our asset classes in the sense that, A, we have fund investing capabilities, B, co-investment capabilities, C, secondary capabilities, and then D, direct investing capabilities in those markets. The other way that the other commonality across both verticals is that typically, at least when it comes to the fund investing and the other kind of implementation styles, therefore kind of logically follow, people aren't looking to us to be at the kind of super large end of the market, trying to help with middle market types of exposures. I think when it comes to infrastructure in particular, and I'll come because I think there's some different trends in private credit I'll come to in a minute, what we've been able to do is learn from many, many, many years of private equity experience to create a value proposition that's similar but kind of evolved on a faster curve, so to speak. As in private equity, maybe for the first several decades of that market, it was just a fund investing market, then secondaries, then co-investments. In infrastructure, because it had private equity before it, that whole evolution happened in a much shorter period of time. When you look at, for example, our infrastructure business, it might be 75% direct-oriented versus 25% allocative. The inverse would be the case in private equity, right? It just all happened a lot faster. That kind of asset-heavy as opposed to fund investing approach is particularly unique to our clients because you're getting the kind of asset approach in the sense of you're talking about not funds, but you're talking about specific infrastructure deals, but you're getting it in a really wildly diversified way. You're getting the net returns that are competitive with any GP or direct fund out there because of the way the better net returns, I should say, because the fee load is different than what you have from a direct fund, and it's more diversification. That kind of mousetrap, whether it's being delivered in a customized account form or in an institutional commingled fund form or in the individual investor registered form like our product with Scion, has really resonated well for investors. In particular, within the infrastructure asset class, because the infrastructure asset class itself has certain characteristics that are true for everyone in this space: yield, total return, inflation protection, long-duration cash flows, sustainability goals if those are issued. You kind of got these macro factors that are helpful to the infrastructure tailwinds, and then the idiosyncratic experience of GCM Grosvenor that has really worked out well. In private credit, I think there's kind of a, we only have a few minutes left. You could have a whole another hour conversation on private credit. I guess I would say very succinctly that the thing that makes us interesting in private credit is we have the ability to help you in a very diversified, cost-effective way access everything in the private credit market that is not sponsored large-cap direct lending. We can help with that too, but not a lot of people need a lot of help with that. There is plenty of that to go around. There is plenty of access on that. It can be a great investment product. I am not knocking it. I am just saying the private credit world is a very big world, and our solutions have the ability to really help people fill other parts of that allocation, which I think is a really interesting place to be. Also, I want to get your view on secondaries. That's increasingly attractive now given limited distributions, exits, you name it. How would you characterize deal activity right now? What sort of discounts are you seeing in the market today? I think it totally depends on the asset class and totally depends on kind of meaning and market cap size. You see bigger discounts at the small end, which is where we participate. I've personally never been a huge believer that the thing to look at in the secondary market is necessarily discounts all the time. I think that the secondary market is a market that is still poised for, across all the asset classes, a tremendous amount of growth. I don't think in the history of capital markets you've ever seen evolution where the secondary market actually doesn't ultimately dwarf the size of the primary market. We're still at a fraction of the size of the primary market. I think there's just tons of growth that we're still going to see there. I think what it really comes down to when it comes to kind of evaluating what you want to do in the secondary space is looking at people who have the relationship advantage and the information advantage, which is legal in the secondary market, to capture the arbitrage that exists because it is a more liquid market. For us, for example, where we focus in the small and mid-cap space, whether you are talking about infrastructure or private equity or private credit at all, where we have active secondary capabilities, the ability to trade in a business where you can have relationship advantage or invest, maybe is a better word, where you can have relationship advantage and information advantage, I think is a really attractive place for clients to drive value, for us to drive value for our clients. Great. Maybe last one here as we wrap up. On your long-term goals, I think you've got a target out there to double FRE in 5 years. Maybe you can just remind us of the trajectory to get there and how we're pacing as we sit here today. Yeah. We are on pace to meet that goal because I think it started coming out of 2023. I think that the confidence that we have in achieving that goal comes honestly mostly from the fact that we do not know exactly the math that will get you there, but we know we have so many ways to win. Anyone that sits here and says they know exactly what their FRE and their AUM and their ANI is going to be in 2028, I would discount that heavily because we do not know. What we know is that we've got a business that's growing its FRE, that the mix shift to private markets and direct-oriented is a very positive mix shift, that we have operating leverage in the business, and that when you look at the addressable market for FRE growth and you look at your existing clients reopening with you larger, you look at your specialized successor funds being larger than their predecessor, you look at the ability to acquire new clients, which we're fortunate to do every day and every year, you look at your ability to talk about new markets like the individual investor. There's just a lot of different ways to win inside of that FRE equation with the operating leverage that gives us the confidence, obviously, on the FRE side. That is obviously before you get into what you did not ask about, but just the huge amount of earnings power that comes from the incentive fees where it is very hard to predict exactly what year those will come in, but they have always come in and they will come in. That's great. Why don't we leave it there? Thank you, Jon, for joining us today. Thanks so much for having me.