10q10k10q10k.net

What changed in GCM Grosvenor Inc.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of GCM Grosvenor Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+664 added−636 removedSource: 10-K (2024-03-01) vs 10-K (2023-02-23)

Top changes in GCM Grosvenor Inc.'s 2023 10-K

664 paragraphs added · 636 removed · 505 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

170 edited+33 added−32 removed118 unchanged
Biggest changePast performance is not necessarily indicative of future results. 24 All Investments As of September 30, 2022 ($ in millions, unless otherwise mentioned) Strategy Commitments Contributions Distributions Current Value Investment Net TVPI Investment Net IRR PME PME Index Private Equity Primary Fund Investments (1) $ 23,294 $ 21,525 $ 26,331 $ 9,279 1.65 12.9 % 10.4 % S&P 500 Secondary Investments (2) $ 1,628 $ 1,448 $ 795 $ 1,315 1.46 18.4 % 7.7 % S&P 500 Co-Investments/Direct Investments (3) $ 7,406 $ 6,982 $ 5,301 $ 6,409 1.68 19.3 % 12.0 % S&P 500 Infrastructure (4) $ 8,608 $ 6,981 $ 4,431 $ 5,024 1.35 9.8 % 3.9 % MSCI World Infrastructure Real Estate (5) $ 3,619 $ 2,641 $ 1,540 $ 1,691 1.22 11.7 % 3.4 % FNERTR Index Multi-Asset Class Programs $ 2,968 $ 2,922 $ 1,629 $ 2,331 1.36 21.5 % N/A N/A ESG and Impact Strategies Diverse Managers (6) $ 9,858 $ 7,971 $ 4,880 $ 8,100 1.63 20.1 % 9.8 % S&P 500 Labor Impact Investments $ 728 $ 665 $ 21 $ 942 1.45 28.6 % -6.7 % MSCI World Infrastructure Note: Returns for each strategy are presented from the date the firm established a dedicated team focused on such strategy through September 30, 2022.
Biggest changePast performance is not necessarily indicative of future results. 23 All Investments As of September 30, 2023 ($ in millions, unless otherwise mentioned) Strategy Commitments Contributions Distributions Current Value Investment Net TVPI Investment Net IRR PME PME Index Private Equity Primary Fund Investments (1) $ 24,392 $ 22,956 $ 27,370 $ 10,253 1.64 12.7 % 10.6 % S&P 500 Secondary Investments (2) $ 1,970 $ 1,783 $ 958 $ 1,645 1.46 16.9 % 10.5 % S&P 500 Co-Investments/Direct Investments (3) $ 7,932 $ 7,523 $ 5,783 $ 6,966 1.69 18.2 % 13.0 % S&P 500 Infrastructure (4) $ 9,684 $ 8,235 $ 5,140 $ 6,129 1.37 9.9 % 3.8 % MSCI World Infrastructure Real Estate (5) $ 4,431 $ 3,278 $ 1,707 $ 2,152 1.18 9.0 % 1.4 % FNERTR Index Multi-Asset Class Programs $ 3,228 $ 3,217 $ 1,873 $ 2,349 1.31x 15.7 % N/A N/A Sustainable and Impact Investments Diverse Managers (6) $ 11,163 $ 9,192 $ 5,319 $ 9,481 1.61 18.3 % 11.5 % S&P 500 Infrastructure Advantage Strategy $ 891 $ 771 $ 23 $ 997 1.32 14.6 % -2.3 % MSCI World Infrastructure Note: Returns for each strategy are presented from the date the firm established a dedicated team focused on such strategy through September 30, 2023.
We believe proprietary and advantaged deal flow has been a critical factor in our ability to purchase high quality assets at below market prices. Co-investment Opportunities Co-investment opportunities are investments made in partnership with private markets and absolute return asset managers and their funds. We source co-investment opportunities through our extensive origination and sourcing efforts described below.
We believe proprietary and advantaged deal flow has been a critical factor in our ability to purchase high quality assets at below market prices. Co-investments Co-investment opportunities are investments made in partnership with private markets and absolute return asset managers and their funds. We source co-investment opportunities through our extensive origination and sourcing efforts described below.
Direct Investment Opportunities Direct investment opportunities are direct investments made on a standalone basis into operating businesses and operating assets. We source direct investment opportunities through our extensive origination and sourcing efforts described below. Our direct investments typically have a flexible mandate and can invest across asset classes, geographies, sectors and liquidity profiles.
Direct Investments Direct investment opportunities are direct investments made on a standalone basis into operating businesses and operating assets. We source direct investment opportunities through our extensive origination and sourcing efforts described below. Our direct investments typically have a flexible mandate and can invest across asset classes, geographies, sectors and liquidity profiles.
Investment net returns are net of investment-related fees and expenses, including fees paid to underlying managers, but do not reflect management fees, performance fees, or carried interest to GCM Grosvenor or any expenses of any account or vehicle GCM Grosvenor manages.
Investment net returns are net of investment-related fees and expenses, including fees paid to underlying managers, but do not reflect management fees, performance fees, or carried interest to GCM Grosvenor or any expenses of any account or vehicle GCM Grosvenor manages.
Investment net returns are net of investment-related fees and expenses, including fees paid to underlying managers, but do not reflect management fees, performance fees, or carried interest to GCM Grosvenor or any expenses of any account or vehicle GCM Grosvenor manages.
Investment net returns are net of investment-related fees and expenses, including fees paid to underlying managers, but do not reflect management fees, performance fees, or carried interest to GCM Grosvenor or any expenses of any account or vehicle GCM Grosvenor manages.
When considering the data presented below, you should note that the historical results of our discretionary investments are not indicative of the future results you should expect from such investments, from any future investment funds we may raise or from any investment in our Class A common stock or warrants, in part because: • market conditions and investment opportunities during previous periods may have been significantly more favorable for generating positive performance than those we may experience in the future; • the performance of our investment programs is generally calculated on the basis of net asset value of the funds’ investments, including unrealized gains, which may never be realized; • our historical returns derive largely from the performance of our earlier investment programs, whereas future returns will depend increasingly on the performance of our newer investment programs or investment programs not yet formed; • our newly established investment programs may generate lower returns during the period that they take to deploy their capital; 22 • in recent years, there has been increased competition for investment opportunities resulting from the increased amount of capital invested in alternative investment strategies and high liquidity in debt markets, and the increased competition for investments may reduce our returns in the future; • the current sustained inflationary environment and rising interest rates may impact the ability to generate returns for a given investment; and • the performance of particular investment programs also will be affected by risks of the industries and businesses in which they invest.
When considering the data presented below, you should note that the historical results of our discretionary investments are not indicative of the future results you should expect from such investments, from any future investment funds we may raise or from any investment in our Class A common stock or warrants, in part because: • market conditions and investment opportunities during previous periods may have been significantly more favorable for generating positive performance than those we may experience in the future; • the performance of our investment programs is generally calculated on the basis of net asset value of the funds’ investments, including unrealized gains, which may never be realized; • our historical returns derive largely from the performance of our earlier investment programs, whereas future returns will depend increasingly on the performance of our newer investment programs or investment programs not yet formed; • our newly established investment programs may generate lower returns during the period that they take to deploy their capital; • in recent years, there has been increased competition for investment opportunities resulting from the increased amount of capital invested in alternative investment strategies and high liquidity in debt markets, and the increased competition for investments may reduce our returns in the future; • the current sustained inflationary environment and rising interest rates may impact the ability to generate returns for a given investment; and • the performance of particular investment programs also will be affected by risks of the industries and businesses in which they invest.
Investment Net IRR is not reduced for our management fees, allocable expenses and carried interest, but does reflect such reductions, if any, at the underlying investment level; • “Investment Net TVPI” represents the total value paid-in multiple of our portfolios’ investments in the relevant strategy, and is calculated as adjusted value (i.e., Distributions + Net Asset Value) over total Contributions (i.e., investments, expenses, management fees, organization costs).
Investment Net IRR is not reduced for 22 our management fees, allocable expenses and carried interest, but does reflect such reductions, if any, at the underlying investment level; • “Investment Net TVPI” represents the total value paid-in multiple of our portfolios’ investments in the relevant strategy, and is calculated as adjusted value (i.e., Distributions + Net Asset Value) over total Contributions (i.e., investments, expenses, management fees, organization costs).
Our credit investment activities also 18 significantly leverage the firm’s broad alternatives platform, which provides us with differentiated deal flow and the flexibility to execute through primary fund investments, co-investments, secondaries, and direct transactions across the credit landscape. Our robust global platform also provides a wide range of opportunities, including niche opportunities and exclusive access to capacity-constrained investments.
Our credit investment activities also significantly leverage the firm’s broad alternatives platform, which provides us with differentiated deal flow and the flexibility to execute through primary fund investments, co-investments, secondaries, and direct transactions across the credit landscape. Our robust global platform also provides a wide range of opportunities, including niche opportunities and exclusive access to capacity-constrained investments.
Our ability to source, select and access top-tier opportunities reflects the rigorous processes executed by our large, experienced teams. Our sourcing system relies on the following channels: 20 Existing manager relationships. We maintain strong relationships with many of the premier and most difficult-to-access managers across the alternative sector and seek to leverage those relationships to the benefit of our clients.
Our ability to source, select and access top-tier opportunities reflects the rigorous processes executed by our large, experienced teams. Our sourcing system relies on the following channels: Existing manager relationships. We maintain strong relationships with many of the premier and most difficult-to-access managers across the alternative sector and seek to leverage those relationships to the benefit of our clients.
As a result, investors are increasingly seeking to work with firms that not only have a proven track record of investing across multiple investment strategies but are also highly sophisticated in their non-investment functions such as portfolio monitoring, reporting, accounting, legal and compliance, operations and data analysis.
As a result, investors are increasingly seeking to work with firms that not only have a proven track record of investing across multiple investment strategies but are also highly 11 sophisticated in their non-investment functions such as portfolio monitoring, reporting, accounting, legal and compliance, operations and data analysis.
Our business benefits from embedded operating leverage, which in turn drives scalability. Over the last decade, we have made significant investments in our platform infrastructure by building out our investment teams across investment strategies and geographies, which we believe positions us well for continued margin expansion.
Our business benefits from embedded operating leverage, which in turn drives scalability and margin expansion opportunity. Over the last decade, we have made significant investments in our platform infrastructure by building out our investment teams across investment strategies and geographies, which we believe positions us well for continued margin expansion.
We Use our Size, Scale and More Than 50-Year History to Drive a Strong Value Proposition Over 50-years of industry participation and leadership has afforded us with a vast network of relationships across the full spectrum of the alternatives landscape.
We Use our Size, Scale and More Than 50-Year History to Drive a Strong Value Proposition Over 52-years of industry participation and leadership has afforded us with a vast network of relationships across the full spectrum of the alternatives landscape.
Historically, we have competed principally on the basis of the factors listed below: • global access to private markets investment opportunities through our size, scale, reputation and strong relationships with fund managers; • brand recognition and reputation within the investing community; • performance of investment strategies; 29 • quality of service and duration of client relationships; • data and analytics capabilities; • ability to customize product offerings to client specifications; • transparent organizational structure; • ability to provide a cost effective and comprehensive range of services and products; and • clients’ perceptions of our independence and the alignment of our interests with theirs created through our investment in our own products.
Historically, we have competed principally on the basis of the factors listed below: • global access to private markets investment opportunities through our size, scale, reputation and strong relationships with fund managers; • brand recognition and reputation within the investing community; • performance of investment strategies; 28 • quality of service and duration of client relationships; • data and analytics capabilities; • ability to customize product offerings to client specifications; • transparent organizational structure; • ability to provide a cost effective and comprehensive range of services and products; and • clients’ perceptions of our independence and the alignment of our interests with theirs created through our investment in our own products.
All Composite Funds included in the Composite are denominated in 23 U.S. dollars. In general, the Composite Funds seek to achieve superior long-term, risk-adjusted rates of return with low volatility and low levels of correlation to the broad equity and fixed income markets.
All Composite Funds included in the Composite are denominated in U.S. dollars. In general, the Composite Funds seek to achieve superior long-term, risk-adjusted rates of return with low volatility and low levels of correlation to the broad equity and fixed income markets.
With respect to approximately $4.7 billion of the $7.6 billion, management fees will be charged as such capital is invested, which will depend on a number of factors, including the availability of eligible investment opportunities.
With respect to approximately $4.6 billion of the $7.3 billion, management fees will be charged as such capital is invested, which will depend on a number of factors, including the availability of eligible investment opportunities.
An investment must be approved by a majority vote of the investment committee. For operational due diligence, the operational due diligence team prepares an information packet, which details its findings. The team presents the investment to the operations committee for approval. Investments must be approved by a majority vote of the operations committee.
An investment must be approved by a majority vote of the investment committee. For operational due diligence, the operational due diligence team prepares an information packet, which details its findings. The team presents the investment to the operations committee for approval.
Our on-the-ground investment professionals in eight offices globally assist with sourcing, evaluating and monitoring opportunities in their respective regions. Our regional offices also allow us to build relationships with local stakeholders. For example, we rely on our team’s regional expertise to evaluate emerging managers that could be overlooked by other investors and make commitments to high quality investments nationwide.
Our on-the-ground investment professionals in nine offices globally assist with sourcing, evaluating and monitoring opportunities in their respective regions. Our regional offices also allow us to build relationships with local stakeholders. For example, we rely on our team’s regional expertise to evaluate emerging managers that could be overlooked by other investors and make commitments to high quality investments nationwide.
Applicable requirements relate to, among other things, disclosure and reporting obligations, maintaining an effective compliance program and appointing a chief compliance officer, fiduciary duties to clients, engaging in transactions with clients, 30 client solicitation arrangements, disclosing and managing conflicts of interest, using promotional materials, and recordkeeping. The Advisers Act regulates the assignment of advisory contracts by the investment advisor.
Applicable requirements relate to, among other things, disclosure and reporting obligations, maintaining an effective compliance program and appointing a chief compliance officer, fiduciary duties to clients, engaging in transactions with clients, 29 client solicitation arrangements, disclosing and managing conflicts of interest, using promotional materials, and recordkeeping. The Advisers Act regulates the assignment of advisory contracts by the investment advisor.
Despite volatility in the financial markets in 2022, the longer-term trend remains. Growth in Allocations to Alternative Investment Strategies Within the institutional client base, defined benefit pension schemes have found it difficult to achieve targeted returns to meet rising pension fund obligations within a framework of conventional asset allocations to equities and bonds.
Despite volatility in the financial markets in 2022 and 2023, the longer-term trend remains. 10 Growth in Allocations to Alternative Investment Strategies Within the institutional client base, defined benefit pension schemes have found it difficult to achieve targeted returns to meet rising pension fund obligations within a framework of conventional asset allocations to equities and bonds.
The difference between AUM and FPAUM is primarily due to approximately $7.6 billion of contracted capital on which we expect to start charging management fees, under existing contracts, over the course of approximately the next three years as capital is invested or based on an agreed upon fee ramp in schedule.
The difference between AUM and FPAUM is primarily due to approximately $7.3 billion of contracted capital on which we expect to start charging management fees, under existing contracts, over the course of approximately the next three years as capital is invested or based on an agreed upon fee ramp in schedule.
We believe in setting the right tone at the top as it relates to compliance and carrying it throughout the organization. That investment in culture is reflected in the stability and diversity of our team as well as the fact that we do not operate on a star system and therefore are not beholden to any one individual.
We believe in setting the right tone at the top as it relates to compliance and carrying it throughout the organization. That investment in culture is reflected in the stability and inclusivity of our team as well as the fact that we do not operate on a star system and therefore are not beholden to any one individual.
As our assets grew and we strengthened our relationships with managers, we sought to use our scale, experience and industry relationships to tailor investment mandates and negotiate for improved terms for our clients. Over the years, we expanded our global presence through the opening of offices in Europe and Asia to support our growing institutional client base.
As our assets grew and we strengthened our 9 relationships with managers, we sought to use our scale, experience and industry relationships to tailor investment mandates and negotiate for improved terms for our clients. Over the years, we expanded our global presence through the opening of offices in Europe and Asia to support our growing client base.
We believe that we were early adopters of offering clients choice around the integration of ESG and/or Impact factors into their portfolio construction. We have been committed to helping our clients achieve their ESG and/or Impact objectives by designing, at their request, solutions that meet our clients’ varied goals, priorities, and risk tolerances.
We believe that we were early adopters of offering clients choice around the integration of Sustainable and/or Impact factors into their portfolio construction. We have been committed to helping our clients achieve their Sustainable and/or Impact objectives by designing, at their request, solutions that meet our clients’ varied goals, priorities, and risk tolerances.
The management fee rate also depends on the total fee-paying assets of a given client. 28 The management fee base for a given program can be based on committed capital, invested capital or a ramp-in /ramp-down schedule based on a percent of total committed capital. Programs may employ one or more of these methodologies.
The management fee rate also depends on the total fee-paying assets of a given client. 27 The management fee base for a given program can be based on committed capital, invested capital or a ramp-in /ramp-down schedule based on a percent of total committed capital. Programs may employ one or more of these methodologies.
While we believe these relationships will help to ensure that we are able to continue to market certain of our funds in the EU after Brexit, there remains some uncertainty as to the full extent to which our business could be adversely affected by, among other things, the legal status of the U.K. in relation to the EU, the political conditions in the U.K., the trade relations of the U.K. vis-à-vis other countries and the economic outlook in the U.K.
While we believe these relationships have, and will continue to, help to ensure that we are able to continue to market certain of our funds in the EU, there remains some uncertainty as to the full extent to which our business could be adversely affected by, among other things, the legal status of the U.K. in relation to the EU, the political conditions in the U.K., the trade relations of the U.K. vis-à-vis other countries and the economic outlook in the U.K.
Beyond our strong economic value proposition, for many of our large clients we also provide value-add ancillary services, including fund administration, portfolio risk management and research access. Clients also can benefit from the scale of GCM Grosvenor’s data and technology systems.
Beyond our strong economic value proposition, for many of our large clients, we also provide value-add ancillary services, including fund administration, portfolio risk management and research access. Clients also can benefit from the scale of our data and technology systems.
The data for these investments is presented from the date indicated through September 30, 2022 for private markets strategies and through December 31, 2022 for absolute return strategies and have not been adjusted to reflect acquisitions or disposals of investments subsequent to that date.
The data for these investments is presented from the date indicated through September 30, 2023 for private markets strategies and through December 31, 2023 for absolute return strategies and have not been adjusted to reflect acquisitions or disposals of investments subsequent to that date.
To the extent they admit 32 U.S. investors, our offshore funds must apply the same criteria to these investors as our domestic funds apply to their investors in order to be exempt from registration and regulation under the Investment Company Act.
To the extent they admit 31 U.S. investors, our offshore funds must apply the same criteria to these investors as our domestic funds apply to their investors in order to be exempt from registration and regulation under the Investment Company Act.
In addition to strong absolute and relative returns, alternative investments provide diversification, offer an inflation hedge, typically have low correlation to other asset classes and generate relatively stable income. As a result, we expect alternative investment strategies to continue to play an important role in institutional portfolios in the future.
In addition to strong absolute and relative returns, alternative investments provide diversification, offer an inflation hedge, typically have low correlation to other asset classes and generate relatively stable income. As a result, we expect alternative investment strategies to continue to play an important role in institutional and, increasingly, individual investor portfolios in the future.
In addition to our investment performance, we believe clients value our services and support in portfolio monitoring, reporting, accounting, legal and compliance, operations and data analysis functions. 14 Scalable and Predictable Business Model The strength of our business model is derived from the following valuable attributes: • High management fee centricity .
In addition to our investment performance, we believe clients value our services and support in portfolio monitoring, reporting, accounting, legal and compliance, operations and data analysis functions. Strong and Scalable Business Model The strength of our business model is derived from the following valuable attributes: • High management fee centricity .
Relative to institutional investors, non-institutional investors are generally newer to investing in alternatives and consequently the products and structures offered to this group 11 continue to evolve. The flexibility of our platform and breadth of our offerings consequently positions us well to capture a greater share of this significant market.
Relative to institutional investors, individual investors are generally newer to investing in alternatives and consequently the products and structures offered to this group continue to evolve. The flexibility of our platform and breadth of our offerings consequently positions us well to capture a greater share of this significant market.
We believe that our strong economic value proposition helps create a moat around our strategic partnerships with our clients, which in turn helps foster long-term relationships. Depending on the program, we offer our clients fee savings and preferential terms as well as access to proprietary capacity or deal flow.
We believe that the strong economic value proposition for customized separate accounts helps create a moat around our strategic partnerships with our clients, which in turn helps foster long-term relationships. Depending on the program, we offer our clients fee savings and preferential terms as well as access to proprietary capacity or deal flow.
The team integrates this deal sourcing capability and flexible mandate with a seamless execution process that has allowed it to become one of the leading opportunistic i nvesting platforms in the marketplace. Total AUM for our Strategic Investments Group is $5.0 billion as of December 31, 2022 .
The team integrates this deal sourcing capability and flexible mandate with a seamless execution process that has allowed it to become one of the leading opportunistic i nvesting platforms in the marketplace. Total AUM for our Strategic Investments Group is $5.2 billion as of December 31, 2023 .
Our relationships with a large pool of high-quality managers and management teams serve as a source of investment opportunities including secondaries and co-investments. We have experience and access across the spectrum of market and manager size. As of December 31, 2022, we tracked over 6,500 managers in our database. Proactive sourcing log.
Our relationships with a large pool of high-quality managers and management teams serve as a source of investment opportunities including secondaries and co-investments. We have experience and access across the spectrum of market and manager size. As of December 31, 2023, we tracked over 6,300 managers in our database. Proactive sourcing log.
In addition to pension funds, sovereign wealth funds, corporate pension funds, multiemployer pension funds and financial institutions, which have historically comprised a significant portion of our AUM, in recent periods we have extended our investment strategies and marketing efforts increasingly to insurance companies and to non-institutional investors, which we believe remain under-allocated to alternative assets.
In addition to pension funds, sovereign wealth funds, corporate pension funds, multiemployer pension funds and financial institutions, which have historically comprised a significant portion of our AUM, in 15 recent periods we have extended our investment strategies and marketing efforts increasingly to insurance companies and to individual investors, which we believe remain under-allocated to alternative assets.
Classification as ESG and/or Impact is based on the assessment of each such investment by GCM Grosvenor investment team members. There is subjectivity in placing an investment in a particular category, and conventions and methodologies used by GCM Grosvenor in categorizing investments and calculating the data presented may differ from those used by other investment managers.
Classification as a Sustainable and/or Impact Investment is based on the assessment of each individual investment by GCM Grosvenor investment team members. There is subjectivity in placing an investment in a particular category, and conventions and methodologies used by GCM Grosvenor in categorizing investments and calculating the data presented may differ from those used by other investment managers.
Investments Team As of December 31, 2022 our investments team consisted of 170 employees. Each of our investment strategies is led by its own leadership team of highly accomplished investment professionals. While primarily focused on managing strategies within their own investment group, these senior professionals are integrated within our platform through economic, cultural and structural measures.
Investments Team As of December 31, 2023 our investments team consisted of 177 employees. Each of our investment strategies is led by its own leadership team of highly accomplished investment professionals. While primarily focused on managing strategies within their own investment group, these senior professionals are integrated within our platform through economic, cultural and structural measures.
Given our long history in the market and the resulting depth and scale of our relationships and investments, we believe we have one of the most comprehensive sets of data in the industry. In addition, our information advantage spans the breadth of private markets and absolute return investment strategies, which is essential in sourcing differentiated, high-quality investment opportunities.
Given our long history and the resulting depth and scale of our business, we believe we have one of the most comprehensive sets of data in the industry. In addition, our information advantage spans the breadth of private markets and absolute return investment strategies, which is essential in sourcing differentiated, high-quality investment opportunities.
Our clients include prominent institutional investors globally including in the United States, Europe, the Middle East, Asia, Australia and Latin America. As of December 31, 2022, approximately 38% of our AUM came from clients based outside of the Americas, reflecting the strength and breadth of our relationships within the global investor community.
Our clients include prominent institutional investors globally including in the United States, Europe, the Middle East, Asia, Australia and Latin America. As of December 31, 2023, approximately 40% of our AUM came from clients based outside of the Americas, reflecting the strength and breadth of our relationships within the global investor community.
Contracted Not Yet Fee-Paying AUM Contracted not yet fee-paying AUM (“CNYFPAUM”) represents limited partner commitments which are expected to be invested and begin charging fees over the ensuing five years. As of December 31, 2022, our CNYFPAUM was near an all-time high of $7.6 billion, up from $2.3 billion at the end of 2018.
Contracted Not Yet Fee-Paying AUM Contracted not yet fee-paying AUM (“CNYFPAUM”) represents limited partner commitments which are expected to be invested and begin charging fees over the ensuing five years. As of December 31, 2023, our CNYFPAUM was near an all-time highs of $7.3 billion, up from $2.3 billion at the end of 2018.
Our clients include large, sophisticated, global institutional investors and a growing non-institutional client base. In both cases, our clients rely on our investment expertise and differentiated investment access to navigate the alternatives market.
Our clients include large, sophisticated, global institutional investors and a growing individual investor client base. In both cases, our clients rely on our investment expertise and differentiated investment access to navigate the alternatives market.
The team integrates this deal sourcing capability and flexible mandate with a seamless execution process that has allowed it to become one of the leading opportunistic investing platforms in the marketplace. Since inception in 2015, total AUM for our Strategic Investments Group has grown to $5.0 billion as of December 31, 2022.
The team integrates this deal sourcing capability and flexible mandate with a seamless execution process that has allowed it to become one of the leading opportunistic investing platforms in the marketplace. Since its inception in 2015, total AUM for our Strategic Investments Group has grown to $5.2 billion as of December 31, 2023.
In addition, our investments team members include professionals dedicated to risk management and operational due diligence, two key components of our investment evaluation and portfolio management processes. Client Group As of December 31, 2022, our business development, marketing and client service teams consisted of 66 employees.
In addition, our investments team members include professionals dedicated to risk management and operational due diligence, two key components of our investment evaluation and portfolio management processes. Client Group As of December 31, 2023, our business development, marketing and client service teams consisted of 62 employees.
Notably, capital from existing clients has pertained to both existing programs and new portfolios in different investment strategies, and cross-selling has traditionally been a driver of the firm’s growth.
Notably, capital from existing clients has pertained to both existing programs and new portfolios in different investment strategies, and cross-selling has traditionally been another key driver of the firm’s growth.
As of December 31, 2022, our current, former employees and the firm had approximately $622 million of their own capital (including through leveraged vehicles) invested into our various investment programs, which we believe aligns our interests with those of our clients. 15 We believe that diversity, equity, inclusion and belonging are at the heart of our ethos.
As of December 31, 2023, our current, former employees and the firm had approximately $655 million of their own capital (including through leveraged vehicles) invested into our various investment programs, which we believe aligns our interests with those of our clients. We believe that diversity, equity, inclusion and belonging are at the heart of our ethos.
Of the $7.6 billion, approximately $2.9 billion is subject to an agreed upon fee ramp in schedule that will result in management fees being charged on approximately $1.1 billion of such amount in 2023, approximately $0.6 billion of such amount in 2024, and the remaining approximately $1.2 billion in 2025 and beyond.
Of the $7.3 billion, approximately $2.7 billion is subject to an agreed upon fee ramp in schedule that will result in management fees being charged on approximately $0.9 billion of such amount in 2024, approximately $0.7 billion of such amount in 2025, and the remaining approximately $1.1 billion in 2026 and beyond.
We serve clients from 33 countries and have deployed capital in over 100 countries across a wide range of investment strategies. Note: As of December 31, 2022. Our History Since the launch of our first multi-manager absolute return portfolio more than 50 years ago, we have specialized in creating and managing alternative investment portfolios on behalf of our clients.
We serve clients from 34 countries and have deployed capital in over 100 countries across a wide range of investment strategies. Note: As of December 31, 2023. Our History Since the launch of our first multi-manager absolute return portfolio more than 52 years ago, we have specialized in creating and managing alternative investment portfolios on behalf of our clients.
The following charts illustrate the diversification of our client base: Note: AUM as of December 31, 2022. Management fees for the twelve months ended December 31, 2022. 27 We believe the stability of our client base reflects the strength of the long-term client relationships we have developed.
The following charts illustrate the diversification of our client base: Note: AUM as of December 31, 2023. Management fees for the twelve months ended December 31, 2023. 26 We believe the stability of our client base reflects the strength of the long-term client relationships we have developed.
Mark-to-market changes in AUM for funds that charge on commitments is another key difference between our AUM and our FPAUM. 26 Our overall FPAUM has grown from $48.9 billion at the end of 2018 to $58.9 billion as of December 31, 2022, representing a total CAGR of 5%, including a CAGR of 10% for FPAUM for our private markets strategy during the same period.
Mark-to-market changes in AUM for funds that charge on commitments is another key difference between our AUM and our FPAUM. 25 Our overall FPAUM has grown from $48.9 billion at the end of 2018 to $61.7 billion as of December 31, 2023, representing a total CAGR of 5%, including a CAGR of 10% for FPAUM for our private markets strategy during the same period.
Run rate annual performance fees, which reflect the potential annual performance fees generated by performance fee-eligible AUM at an 8% gross return for both multi-strategy and credit strategies, and a 10% gross return for specialized opportunity strategies, were $29.6 million as of December 31, 2022 . • Embedded operating leverage .
Run rate annual performance fees, which reflect the potential annual performance fees generated by performance fee-eligible AUM at an 8% gross return for both multi-strategy and credit strategies, and a 10% gross return for specialized opportunity strategies, were $28.0 million as of December 31, 2023 . • Embedded operating leverage .
We implement credit strategies for our clients both as part of a customized separate account that includes solely credit investments or investing in credit alongside another investment strategy, and through dedicated credit-focused specialized funds. As of December 31, 2022, we managed $11.9 billion of AUM in alternative credit strategies.
We implement credit strategies for our clients both as part of a customized separate account that includes solely credit investments or investing in credit alongside another investment strategy, and through dedicated credit-focused specialized funds. As of December 31, 2023, we managed $13.2 billion of AUM in alternative credit strategies.
Today, we seek to capture the benefits of these relationships, further amplified by our scale as a $73.7 billion investor as of December 31, 2022, to our clients. Depending on the program, we offer our clients fee savings and preferential terms, access to hard to access managers, and proprietary deal flow.
Today, we seek to capture the benefits of these relationships, further amplified by our scale as a $76.9 billion investor as of December 31, 2023, to our clients. Depending on the program, we offer our clients fee savings and preferential terms, access to hard to access managers, and proprietary deal flow.
We are a leader in seeding new platforms, joint venture investing, and other creative and innovative implementation methods to access attractive real estate returns. A s of December 31, 2022, we managed $5.5 billion of AUM in real estate strategies . Absolute Return Strategies • Absolute Return Strategies. We have been investing in hedge fund strategies for over 50 years.
We are a leader in seeding new platforms, joint venture investing, and other creative and innovative implementation methods to access attractive real estate returns. A s of December 31, 2023, we managed $6.1 billion of AUM in real estate strategies . Absolute Return Strategies • Absolute Return Strategies. We have been investing in hedge fund strategies for over 52 years.
ITEM 1. BUSINESS Our Company Over our 51-year history we have been a leading global alternative asset management solutions provider. We invest across all major alternative investment strategies and are highly flexible in how we structure our solutions to meet each client’s specific needs. As of December 31, 2022, we had $73.7 billion in AUM.
ITEM 1. BUSINESS Our Company Over our 52-year history we have been a leading global alternative asset management solutions provider. We invest across all major alternative investment strategies and are highly flexible in how we structure our solutions to meet each client’s specific needs. As of December 31, 2023, we had $76.9 billion in AUM.
Track record reflects all secondaries investments since the new vertical was formed. (3) GCM Grosvenor established a dedicated Private Equity Co-Investment Sub-Committee and adopted a more targeted, active co-investment strategy in December 2008. Track record reflects co-investments/direct investments made since 2009. (4) Reflects infrastructure investments since 2006. Infrastructure investments exclude labor impact investments. (5) Reflects real estate investments since 2010.
Track record reflects all secondaries investments since the new vertical was formed. (3) GCM Grosvenor established a dedicated Private Equity Co-Investment Sub-Committee and adopted a more targeted, active co-investment strategy in December 2008. Track record reflects co-investments/direct investments made since 2009. (4) Reflects infrastructure investments since 2006.
We are an experienced and scaled platform with a leading capability in providing custo mized solutions. As of December 31, 2022, we managed $23.0 billion of AUM in our absolute return strategies, or 31% of our total AUM . Strategies Across Private Markets and Absolute Return Strategies • Middle Market and Small, Emerging, and Diverse Managers .
We are an experienced and scaled platform with a leading capability in providing custo mized solutions. As of December 31, 2023, we managed $22.4 billion of AUM in our absolute return strategies, or 29% of our total AUM . Strategies Across Private Markets and Absolute Return Strategies • Middle Market and Small, Emerging, and Diverse Managers .
($ in millions, unless otherwise mentioned) Outperformance of PME by PME Index Annualized Returns Since Inception Inception Date Private Equity Primary Fund Investments (1) 3.4 % S&P 500 14.0 % 2000 Secondaries Investments (2) 8.6 % S&P 500 20.5 % 2014 Co-Investments/Direct Investments (3) 5.0 % S&P 500 21.5 % 2009 Infrastructure (4) 6.1 % MSCI World Infrastructure 12.9 % 2006 Real Estate (5) 7.7 % FNERTR Index 20.3 % 2010 ESG and Impact Strategies Diverse Managers (6) 8.2 % S&P 500 23.2 % 2007 Labor Impact Investments N/A MSCI World Infrastructure N/A N/A Note: Returns for each strategy are presented from the date the firm established a dedicated team focused on such strategy through September 30, 2022.
($ in millions, unless otherwise mentioned) Outperformance of PME by PME Index Annualized Returns Since Inception Inception Date Private Equity Primary Fund Investments (1) 3.2 % S&P 500 13.7 % 2000 Secondaries Investments (2) 7.0 % S&P 500 19.1 % 2014 Co-Investments/Direct Investments (3) 5.8 % S&P 500 21.9 % 2009 Infrastructure (4) 5.9 % MSCI World Infrastructure 12.6 % 2006 Real Estate (5) 4.8 % FNERTR Index 16.8 % 2010 Sustainable and Impact Investments Diverse Managers (6) 8.3 % S&P 500 22.9 % 2007 Infrastructure Advantage Strategy (7) N/A MSCI World Infrastructure N/A N/A Note: Returns for each strategy are presented from the date the firm established a dedicated team focused on such strategy through September 30, 2023.
Historical Performance of Absolute Return Strategies Assets Under Management as of December 31, 2022 ($Bn) Annualized Returns Periods Ended December 31, 2022 One Year Three Year Five Year Since Inception Gross Net Gross Net Gross Net Gross Net Absolute Return Strategies (Overall) $ 23.0 (5.8) % (6.4) % 4.7 % 4.0 % 4.1 % 3.4 % 6.7 % 5.7 % GCMLP Diversified Multi-Strategy Composite $ 11.4 (5.7) % (6.4) % 5.3 % 4.5 % 4.3 % 3.6 % 7.7 % 6.4 % Note: Absolute Return Strategies (Overall) is since 1996.
Historical Performance of Absolute Return Strategies Assets Under Management as of December 31, 2023 ($Bn) Annualized Returns Periods Ended December 31, 2023 One Year Three Year Five Year Since Inception Gross Net Gross Net Gross Net Gross Net Absolute Return Strategies (Overall) $ 22.4 8.0 % 7.3 % 2.9 % 2.2 % 5.8 % 5.1 % 6.8 % 5.7 % GCMLP Diversified Multi-Strategy Composite $ 10.8 8.9 % 8.1 % 3.1 % 2.4 % 6.3 % 5.5 % 7.7 % 6.4 % Note: Absolute Return Strategies (Overall) is since 1996.
In January 2014, we further evolved by adding complementary private markets capabilities through our acquisition of the Customized Fund Investment Group from Credit Suisse Group AG, which was established in 1999.
In January 2014, we added complementary private markets capabilities through our acquisition of the Customized Fund Investment Group from Credit Suisse Group AG, which was established in 1999.
Further, these relationships help to explain why clients entrust us with their capital for extended periods of time. Our Team As of December 31, 2022 we had 529 employees, including 170 investment professionals, operating in eight offices throughout the United States and in Toronto, London, Frankfurt, Hong Kong, Seoul and Tokyo.
Further, these relationships help to explain why clients entrust us with their capital for extended periods of time. Our Team As of December 31, 2023 we had 538 employees, including 177 investment professionals, operating in nine offices throughout the United States and in Toronto, London, Frankfurt, Hong Kong, Seoul, Sydney and Tokyo.
The hurdle or preferred return may be a fixed percentage or a spread above a particular benchmark return (e.g., LIBOR or US T-Bills), although in the case of a spread-based structure, it is typical that the hurdle rate or preferred return is capped at a certain amount.
The hurdle or preferred return may be a fixed percentage or a spread above a particular benchmark return, although in the case of a spread-based structure, it is typical that the hurdle rate or preferred return is capped at a certain amount.
Our Competitive Strengths We Offer the Full Breadth of Alternative Investment Strategies We are one of the few solutions providers globally with breadth and flexibility of execution across a broad spectrum of alternative investment strategies (private markets, including private equity, infrastructure, real estate and alternative credit, and absolute return strategies) and implementation methodologies (primary fund investments, secondaries, co-investments and direct investments).
Our Competitive Strengths We Offer the Full Breadth of Alternative Investment Strategies We are one of the few solutions providers globally with capabilities to invest across the full liquidity spectrum of alternative investment strategies (private markets, including private equity, infrastructure, real estate and alternative credit, and absolute return strategies) combined with flexibility of implementation methodologies (primary fund investments, secondaries, co-investments, seeding and direct investments).
Within each investment strategy, we make primary investments in funds managed by third-party managers, which we refer to as primary fund investments; we acquire secondary stakes in such funds, which we refer to as secondaries; we co-invest alongside such primary fund managers, which we refer to as co-investments; and we invest directly into operating businesses and operating assets, which we refer to as direct investing.
Within each investment strategy, we make primary investments in funds managed by third-party managers, which we refer to as primary fund investments, and we pursue ‘direct-oriented’ strategies: we acquire secondary stakes in such funds, which we refer to as secondaries; we co-invest alongside such primary fund managers, which we refer to as co-investments; we make seed investments in small and emerging managers, which we refer to as seeding; and we invest directly into operating businesses and operating assets, which we refer to as direct investing.
A number of our clients utilize multiple strategies and approaches. From a structural standpoint, we offer investment portfolios to clients in two broad categories: • Customized separate accounts . We construct customized portfolios to meet our clients’ specific objectives with regards to asset classes, implementation types, return, risk tolerance, diversification, liquidity and other factors.
From a structural standpoint, we offer investment portfolios to clients in two broad ways: • Customized separate accounts . We construct customized portfolios to meet our clients’ specific objectives with regards to asset classes, implementation types, return, risk tolerance, diversification, liquidity and other factors.
In 2009, we launched our first diversified infrastructure specialized fund. In 2018, we launched the firm’s labor impact strategy, which seeks to originate and execute infrastructure projects that leverage the inclusion of union labor as a contributing factor to enabling attractive risk adjusted returns.
We launched our first infrastructure customized separate account in 2007, and in 2009, we launched our first diversified infrastructure specialized fund. In 2018, we launched the firm’s infrastructure advantage strategy, a direct impact strategy which seeks to originate and execute infrastructure projects that leverage the inclusion of organized labor as a contributing factor to enabling attractive risk adjusted returns.
For each of the years ended December 31, 2022 and 2021, net management fees were $356.4 million and $340.8 million, respectively, compared to $13.9 million and $55.5 million of net incentive fees attributable to GCM Grosvenor, respectively. • Stable management fee base. Our management fee stability is rooted in the long-dated nature of our investment programs.
For each of the years ended December 31, 2023 and 2022, net management fees were $360.9 million and $356.4 million, respectively, compared to $15.6 million and $13.9 million of net incentive fees attributable to GCM Grosvenor, respectively. • Stable management fee base. Our management fee stability is rooted in the long-dated nature of our investment programs.
Over the last three years 88% of our top 25 clients have expanded their investment relationship with us, and during 2022, over 85% of our gross capital inflows were derived from existing clients.
Over the last three years 72% of our top 25 clients have expanded their investment relationship with us, and during 2023, over 82% of our gross capital inflows were derived from existing clients.
Strong Long-Term Performance Across Breadth of Alternative Investment Strategies As shown below, for our realized and partially realized investments, we have outperformed the respective market benchmarks across all of our private markets strategies on an inception-to-date basis as of September 30, 2022. Past performance is not indicative of future results.
Strong Long-Term Performance Across Breadth of Alternative Investment Strategies Generating competitive risk-adjusted returns is one of our core objectives. As shown below, for our realized and partially realized investments, we have outperformed the respective market benchmarks across all of our private markets strategies on an inception-to-date basis as of September 30, 2023. Past performance is not indicative of future results.
In addition, we have dedicated efforts in a number of ESG- and Impact-related themes, including infrastructure investments where we believe partnering with union labor enhances risk-adjusted returns, investing with firms owned by women or minority professionals, and other impact-related themes like regionally targeted and clean energy.
In addition, we have dedicated efforts in a number of Impact-related themes, including infrastructure investments where we believe partnering with organized labor enhances risk-adjusted returns, investing with firms owned by women or minority professionals, and other themes such as energy transition and regionally targeted programs.
For example, our subsidiaries that are authorized and regulated by the U.K. Financial Conduct Authority have lost “passporting” privileges under certain EU directives, such as the AIFMD and the Markets in Financial Instruments Directive II (“MiFID II”), which certain of our specialized funds and customized separate accounts have relied upon for access to markets throughout the EU.
Financial Conduct Authority have lost “passporting” privileges under certain EU directives, such as the AIFMD and the Markets in Financial Instruments Directive II (“MiFID II”), which certain of our specialized funds and customized separate accounts have relied upon for access to markets throughout the EU.
As of December 31, 2022, 50% of our top 50 clients by AUM worked with us in multiple investment strategies (i.e., private equity, infrastructure, real estate, alternative credit and absolute return strategies), compared to 48% as of the beginning of 2022.
As of December 31, 2023, 52% of our top 50 clients by AUM worked with us in multiple investment strategies (i.e., private equity, infrastructure, real estate, alternative credit and absolute return strategies), compared to 46% as of the end of 2020.
As of December 31, 2022, 62% of our employees based in the U.S. were women or ethnically diverse, and of our U.S. senior professionals, 54% were women or ethnically diverse employees. We aim to work hard to maintain our focus and continuously improve our efforts in this area.
As of December 31, 2023, 62% of our employees based in the U.S. self-identified as women or ethnically diverse, and of our U.S. senior professionals, 52% self-identified as women or ethnically diverse employees. We aim to work hard to maintain our focus and continuously improve our recruiting efforts in this area.
Over our history we have continued to expand our global footprint, which we believe provides us with the opportunity to in turn continue to benefit from the ongoing global growth of the alternative asset management industry. We operate in eight primary offices in seven countries.
Over our history we have continued to expand our global footprint, which we believe provides us with the opportunity to in turn continue to benefit from the ongoing global growth of the alternative asset management industry. We operate in nine primary offices in eight countries, including our newest office in Sydney, Australia, which we opened in 2023.
As of December 31, 2022, more than $31.3 billion of our AUM is in evergreen programs - $23.0 billion in absolute return strategies and $8.3 billion in private markets evergreen programs, defined as those with an open-ended structure or NAV target.
As of December 31, 2023, more than $31.2 billion of our AUM is in evergreen programs - $22.4 billion in absolute return strategies and $8.8 billion in private markets evergreen programs, defined as those with an open-ended structure or NAV target.
Our Strategic Investments Group combines our unparalleled deal sourcing platform with the flexibility to capture an evolving opportunity set across asset classes, liquidity profiles, capital structures and geographies.
One example is the firm’s Strategic Investments Group, which combines our broad deal sourcing platform with the flexibility to capture an evolving opportunity set across asset classes, liquidity profiles, capital structures and geographies.
In preparation for this outcome, we have established relationships with third-party European-domiciled alternative investment fund managers (“AIFMs”) necessary for them to serve as AIFM for certain of our funds and certain customized separate accounts.
We have mitigated the impact of this by establishing relationships with third-party European-domiciled alternative investment fund managers (“AIFMs”) necessary for them to serve as AIFM for certain of our funds and certain customized separate accounts.
According to a 2022 report from PricewaterhouseCoopers (“PwC”), total global assets under management for the asset and wealth management market is expected to increase from $127.5 trillion in 2021 to approximately $157.2 trillion in 2026. Continued growth in the investable capital base of these investors is expected to continue to support growth in the alternative investment strategies.
According to a 2023 report from PricewaterhouseCoopers (“PwC”), total global assets under management for the asset and wealth management market is expected to increase from $115.1 trillion in 2022 to approximately $147.3 trillion in 2027. Continued growth in the investable capital base of these investors is expected to continue to support growth in the alternative investment strategies.
We collaborate with our more than 500 clients as of December 31, 2022 to invest on their behalf across the private and public markets, either through portfolios customized to meet a client’s specific objectives or through specialized funds that are developed to meet broad market demands for strategies and risk-return objectives.
We partner with our institutional and individual clients to invest on their behalf across the private and public markets, either through portfolios customized to meet a client’s specific objectives or through specialized funds that are developed to meet broad market demands for strategies and risk-return objectives.
In 2021, we opened new offices in Toronto, Canada and Frankfurt, Germany, and launched GCM Grosvenor Insurance Solutions in an effort to more effectively deliver our alternative investment solutions to the multi-trillion dollar insurance market. In the fourth quarter of 2022, we launched Elevate with a $500 million anchor investment.
In 2021, we opened new offices in Toronto, Canada and Frankfurt, Germany, and launched GCM Grosvenor Insurance Solutions in an effort to more effectively deliver our alternative investment solutions to the multi-trillion dollar insurance market.
Though subject to more variability, including on account of factors out of our control, we believe our incentive fees from both private markets and absolute return strategies have the opportunity to increase significantly in the future due to the amount of assets able to earn incentive fees and recent fundraising success.
Though subject to more variability, including on account of factors out of our control, we believe our incentive fees have the opportunity to increase significantly in the future due to the amount of assets able to earn incentive fees and recent fundraising success. The incentive fees have greater variability between time periods.

… 155 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

209 edited+104 added−76 removed407 unchanged
Biggest changeA number of factors serve to increase our competitive risks: • a number of our competitors have greater financial, technical, marketing and other resources and more personnel than we do; 35 • some of our competitors have recently raised, or are expected to raise, significant amounts of capital, and many of them have investment objectives similar to ours, which may create additional competition for investment opportunities that our funds seek to exploit; • some of our funds may not perform as well as competitors’ funds or other available investment products; • several of our competitors have significant amounts of capital, and many of them have similar investment objectives to ours, which may create additional competition for investment opportunities and may reduce the size and duration of pricing inefficiencies that many alternative investment strategies seek to exploit; • some of our competitors may have a lower cost of capital or access to funding sources that are not available to us, which may create competitive disadvantages for us with respect to investment opportunities; • some of our competitors may be subject to less regulation and accordingly may have more flexibility to undertake and execute certain businesses or investments than we can and/or bear less compliance expense than we do; • some of our competitors may have more flexibility than us in raising certain types of investment funds under the investment management contracts they have negotiated with their investors; • some of our competitors may have better expertise or be regarded by investors as having better expertise in a specific asset class or geographic region than we do; and • other industry participants may, from time to time, seek to recruit our investment professionals and other employees away from us.
Biggest changeA number of factors serve to increase our competitive risks: 34 • a number of our competitors have greater financial, technical, marketing and other resources and more personnel than we do; • some of our competitors have recently raised, or are expected to raise, significant amounts of capital, and many of them have investment objectives similar to ours, which may create additional competition for investment opportunities that our funds seek to exploit; • some of our funds may not perform as well as competitors’ funds or other available investment products; • several of our competitors have significant amounts of capital, and many of them have similar investment objectives to ours, which may create additional competition for investment opportunities and may reduce the size and duration of pricing inefficiencies that many alternative investment strategies seek to exploit; • some of our competitors may have a lower cost of capital or access to funding sources that are not available to us, which may create competitive disadvantages for us with respect to investment opportunities; • some of our competitors may be more successful than us in deployment of new products to address investor demand for new or different investment strategies and/or regulatory changes; • developments in financial technology (or fintech), such as distributed ledger technology (or blockchain) have the potential to disrupt the financial industry and change the way financial institutions, as well as investment managers, do business and could exacerbate these competitive pressures; • some of our competitors may be more successful than us in the development and implementation of new technology to address investor demand for product and strategy innovation; • some of our competitors may have instituted, or may institute, low cost, high speed financial applications and services based on artificial intelligence, and new competitors may enter the investment management space using new investment platforms based on artificial intelligence; • some of our competitors may be subject to less regulation and accordingly may have more flexibility to undertake and execute certain businesses or investments than we can and/or bear less compliance expense than we do; • some of our competitors may have more flexibility than us in raising certain types of investment funds under the investment management contracts they have negotiated with their investors; • some of our competitors may have better expertise or be regarded by investors as having better expertise in a specific asset class or geographic region than we do; and • other industry participants may, from time to time, seek to recruit our investment professionals and other employees away from us.
In addition, the occurrence of such an event would likely have a negative reputational impact on us.
In addition, the occurrence of such an event would likely have a negative reputational impact on us.
These provisions, which may delay, prevent or deter a merger, acquisition, tender offer, proxy contest or other transaction that stockholders may consider favorable, include the following: • the fact that the Class C common stock may be entitled to multiple votes per share until (i) such share of Class C common stock is canceled/redeemed for no consideration upon, subject to certain exceptions, (ii) the disposition of (a) the Grosvenor common units and (b) the shares of Class A common stock (as a result of a redemption of Grosvenor common units) paired with such Class C common stock, as applicable, and (iii) with respect to all shares of Class C common stock, the Sunset Date; • the sole ability of directors to fill a vacancy on the board of directors; • advance notice requirements for stockholder proposals and director nominations; • after we no longer qualify as a “controlled company” under Nasdaq Listing Rule 5605(c)(1), provisions limiting stockholders’ ability to call special meetings of stockholders, to require special meetings of stockholders to be called and to take action by written consent; and • the ability of our governing body to designate the terms of and issue new series of preferred stock without stockholder approval, which could be used, among other things, to institute a rights plan that would have the effect 67 of significantly diluting the stock ownership of a potential hostile acquiror, likely preventing acquisitions that have not been approved by our governing body.
These provisions, which may delay, prevent or deter a merger, acquisition, tender offer, proxy contest or other transaction that stockholders may consider favorable, include the following: • the fact that the Class C common stock may be entitled to multiple votes per share until (i) such share of Class C common stock is canceled/redeemed for no consideration upon, subject to certain exceptions, (ii) the disposition of (a) the Grosvenor common units and (b) the shares of Class A common stock (as a result of a redemption of Grosvenor common units) paired with such Class C common stock, as applicable, and (iii) with respect to all shares of Class C common stock, the Sunset Date; • the sole ability of directors to fill a vacancy on the board of directors; • advance notice requirements for stockholder proposals and director nominations; • after we no longer qualify as a “controlled company” under Nasdaq Listing Rule 5605(c)(1), provisions limiting stockholders’ ability to call special meetings of stockholders, to require special meetings of stockholders to be called and to take action by written consent; and • the ability of our governing body to designate the terms of and issue new series of preferred stock without stockholder approval, which could be used, among other things, to institute a rights plan that would have the effect of significantly diluting the stock ownership of a potential hostile acquiror, likely preventing acquisitions that have not been approved by our governing body.
For example: • Ownership of infrastructure assets may present risk of liability for personal and property injury or impose significant operating challenges and costs with respect to, for example, compliance with zoning, environmental, worker, public health and safety or other applicable laws or government actions, which may have a material adverse effect on the operations, financial condition and liquidity of particular assets and ultimately affect investment returns. • Infrastructure asset investments may face construction and development risks including, without limitation: shortages of suitable labor and equipment, adverse construction conditions, challenges in coordinating with public utilities, political or local opposition, failure to obtain regulatory approvals or permits, and catastrophic events such as explosions, fires, war, terrorist activities, natural disasters and other similar events.
For example: • Ownership of infrastructure assets may present risk of liability for personal and property injury or impose significant operating challenges and costs with respect to, for example, compliance with zoning, environmental, worker, public health and safety or other applicable laws or government actions, which may have a material adverse effect on the operations, financial condition and liquidity of particular assets and ultimately affect investment returns. 63 • Infrastructure asset investments may face construction and development risks including, without limitation: shortages of suitable labor and equipment, adverse construction conditions, challenges in coordinating with public utilities, political or local opposition, failure to obtain regulatory approvals or permits, and catastrophic events such as explosions, fires, war, terrorist activities, natural disasters and other similar events.
An issuer will generally be deemed to be an “investment company” for purposes of the Investment Company Act if: • it is an “orthodox” investment company because it is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities; or • it is an inadvertent investment company because, absent an applicable exemption, it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.
An issuer will generally be deemed to be an “investment company” for purposes of the Investment Company Act if: • it is an “orthodox” investment company because it is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities; or 67 • it is an inadvertent investment company because, absent an applicable exemption, it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.
The historical performance of our funds should not be considered indicative of the future performance of these funds or of any future funds we may raise, in part because: • market conditions and investment opportunities during previous periods may have been significantly more favorable for generating positive performance than those we may experience in the future; • the performance of our funds that distribute carried interest is generally calculated on the basis of the net asset value of the funds’ investments, including unrealized gains, which may never be realized and therefore never generate carried interest; 53 • our historical returns derive largely from the performance of our earlier funds, whereas future fund returns will depend increasingly on the performance of our newer funds or funds not yet formed; • our newly established closed-ended funds may generate lower returns during the period that they initially deploy their capital; • competition continues to increase for investment opportunities, which may reduce our returns in the future; • the performance of particular funds also will be affected by risks of the industries and businesses in which they invest; and • we may create new funds that reflect a different asset mix and new investment strategies, as well as a varied geographic and industry exposure, compared to our historical funds, and any such new funds could have different returns from our previous funds.
The historical performance of our funds should not be considered indicative of the future performance of these funds or of any future funds we may raise, in part because: • market conditions and investment opportunities during previous periods may have been significantly more favorable for generating positive performance than those we may experience in the future; 54 • the performance of our funds that distribute carried interest is generally calculated on the basis of the net asset value of the funds’ investments, including unrealized gains, which may never be realized and therefore never generate carried interest; • our historical returns derive largely from the performance of our earlier funds, whereas future fund returns will depend increasingly on the performance of our newer funds or funds not yet formed; • our newly established closed-ended funds may generate lower returns during the period that they initially deploy their capital; • competition continues to increase for investment opportunities, which may reduce our returns in the future; • the performance of particular funds also will be affected by risks of the industries and businesses in which they invest; and • we may create new funds that reflect a different asset mix and new investment strategies, as well as a varied geographic and industry exposure, compared to our historical funds, and any such new funds could have different returns from our previous funds.
The protective actions that we 51 take, however, may not be sufficient, in some jurisdictions, to secure our trademark and service mark rights for some of the goods and services that we offer or to prevent imitation by others, which could adversely affect the value of our trademarks and service marks or cause us to incur litigation costs, or pay damages or licensing fees to a prior user or registrant of similar intellectual property.
The protective actions that we take, however, may not be sufficient, in some jurisdictions, to secure our trademark and service mark rights for some of the goods and services that we offer or to prevent imitation by others, which could adversely affect the value of our trademarks and service marks or cause us to incur litigation costs, or pay damages or licensing fees to a prior user or registrant of similar intellectual property.
To the extent periods of volatility are coupled with lack of realizations from clients’ existing private markets portfolios, such clients may be left with disproportionately outsized remaining commitments, which significantly limits their ability to make new commitments. Our business could generate lower revenues in a general economic downturn or a tightening of global credit markets.
To the extent periods of volatility are coupled with lack of realizations from clients’ existing private markets portfolios, such clients may be left with disproportionately outsized remaining commitments, which significantly limits their ability to make new commitments. 53 Our business could generate lower revenues in a general economic downturn or a tightening of global credit markets.
In addition, we could be required to make payments under the Tax Receivable Agreement that are substantial, significantly in advance of any potential actual realization of such tax benefits, and in excess of our, or a potential 64 acquiror’s, actual tax savings, and in some cases involving a change of control we could be required to make payments even in the absence of any actual increases in tax basis or benefit from existing tax basis.
In addition, we could be required to make payments under the Tax Receivable Agreement that are substantial, significantly in advance of any potential actual realization of such tax benefits, and in excess of our, or a potential acquiror’s, actual tax savings, and in some cases involving a change of control we could be required to make payments even in the absence of any actual increases in tax basis or benefit from existing tax basis.
The termination of such relationships or the imposition of restrictions on our ability to use the investment-related information we obtain in connection with our investing, monitoring and reporting services could adversely affect our business, financial condition and results of operations. Operational risks may disrupt our business, damage our reputation, result in financial losses or limit our growth.
The termination of such relationships or the imposition of restrictions on our ability to use the investment-related information we 42 obtain in connection with our investing, monitoring and reporting services could adversely affect our business, financial condition and results of operations. Operational risks may disrupt our business, damage our reputation, result in financial losses or limit our growth.
Notwithstanding the foregoing, our Charter provides that the exclusive forum provisions do not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. These provisions may have the effect of discouraging lawsuits against our directors and officers.
Notwithstanding the foregoing, our Charter provides that the exclusive forum provisions do not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. 69 These provisions may have the effect of discouraging lawsuits against our directors and officers.
Our financial condition and future results of operations could be materially different from amounts reflected in 62 GCM Grosvenor’s historical financial statements included elsewhere in this Annual Report on Form 10-K, so it may be difficult for investors to compare our future results to historical results or to evaluate our relative performance or trends in our business.
Our financial condition and future results of operations could be materially different from amounts reflected in GCM Grosvenor’s historical financial statements included elsewhere in this Annual Report on Form 10-K, so it may be difficult for investors to compare our future results to historical results or to evaluate our relative performance or trends in our business.
We will have no obligation to distribute such cash balances to our stockholders, and no adjustments will be made to the consideration provided to an exchanging holder in connection with a direct exchange or redemption of Grosvenor common units under the A&R LLLPA as a result of any retention of cash by us.
We will have no obligation to distribute such cash balances to our stockholders, 66 and no adjustments will be made to the consideration provided to an exchanging holder in connection with a direct exchange or redemption of Grosvenor common units under the A&R LLLPA as a result of any retention of cash by us.
The terms of any such existing and future co-investment vehicles may differ materially, and in some instances may be more favorable to us, than the terms of certain of our funds or prior co-investment vehicles, and such different terms could create an incentive for us to allocate a greater or lesser percentage of an 39 investment opportunity to such funds or such co-investment vehicles, as the case may be.
The terms of any such existing and future co-investment vehicles may differ materially, and in some instances may be more favorable to us, than the terms of certain of our funds or prior co-investment vehicles, and such different terms could create an incentive for us to allocate a greater or lesser percentage of an investment opportunity to such funds or such co-investment vehicles, as the case may be.
In addition, the structuring of future transactions and investments may take into consideration the members’ tax considerations even where no similar benefit would accrue to us. Provisions in our organizational documents and certain rules imposed by regulatory authorities may delay or prevent our acquisition by a third-party.
In addition, the structuring of future transactions and investments may take into consideration the members’ tax considerations even where no similar benefit would accrue to us. 68 Provisions in our organizational documents and certain rules imposed by regulatory authorities may delay or prevent our acquisition by a third-party.
Finally, we cannot assure you that we will be able to replace returned capital with investment commitments that generate the same revenues as the returned capital. 36 We could suffer losses if our reputation or the reputation of our industry is harmed. Our business is highly competitive and we benefit from being highly regarded in our industry.
Finally, we cannot assure you that we will be able to replace returned capital with investment commitments that generate the same revenues as the returned capital. We could suffer losses if our reputation or the reputation of our industry is harmed. Our business is highly competitive and we benefit from being highly regarded in our industry.
A general market downturn, or a specific market 52 dislocation, may result in lower investment returns for our funds, which would adversely affect our revenues. Furthermore, such conditions could also increase the risk of default with respect to investments held by our funds that have significant debt investments.
A general market downturn, or a specific market dislocation, may result in lower investment returns for our funds, which would adversely affect our revenues. Furthermore, such conditions could also increase the risk of default with respect to investments held by our funds that have significant debt investments.
In connection with any such investments — including as they relate to acquisition, owning, and disposition of such investments — our funds could have conflicting interests and investment objectives, and any difference in the terms of the securities or other instruments held by such parties could raise additional 38 conflicts of interest for our funds and us.
In connection with any such investments — including as they relate to acquisition, owning, and disposition of such investments — our funds could have conflicting interests and investment objectives, and any difference in the terms of the securities or other instruments held by such parties could raise additional conflicts of interest for our funds and us.
Nevertheless, when conducting due diligence and making an assessment regarding an investment, we rely on the resources available to us, including information provided by the target of the investment and, in some circumstances, third-party investigations, and such an investigation will not necessarily result in the investment ultimately being successful.
Nevertheless, when conducting due diligence and making an assessment regarding an investment, we rely on the information available to us, including information provided by the target of the investment and, in some circumstances, third-party investigations, and such an investigation will not necessarily result in the investment ultimately being successful.
As a result of these legislative initiatives, we are required to provide additional disclosure to investors in our EU funds and funds marketed in the EU with respect to ESG matters, depending on the extent to which the fund promotes environmental and / or social characteristics, or adopts as an objective, sustainability.
As a result of these legislative initiatives, we are required to provide additional disclosure to investors in our EU funds and funds marketed in the EU with respect to sustainability matters, depending on the extent to which the fund promotes environmental and / or social characteristics, or adopts as an objective, sustainability.
As part of our day-to-day operations outside the United States, we are required to create compensation programs, employment policies, compliance policies and procedures and other administrative programs that comply with the laws of multiple countries. We also must communicate and monitor standards and directives across our global operations.
As part of our day-to-day operations outside the United States, we are required to create compensation programs, employment policies, privacy policies, compliance policies and procedures and other administrative programs that comply with the laws of multiple countries. We also must communicate and monitor standards and directives across our global operations.
Any material reduction in the amount of carried interest generated by a fund will adversely affect our revenues. 55 Any investor that did not fund a capital call would be subject to several possible penalties, including having a meaningful amount of its existing investment forfeited in that fund.
Any material reduction in the amount of carried interest generated by a fund will adversely affect our revenues. Any investor that did not fund a capital call would be subject to several possible penalties, including having a meaningful amount of its existing investment forfeited in that fund.
Securities litigation against us could result in substantial costs and damages, and divert management’s attention from other business concerns, which could seriously harm our business, financial condition and results of operations. 73 We may also be called on to defend ourselves against lawsuits relating to our business operations.
Securities litigation against us could result in substantial costs and damages, and divert management’s attention from other business concerns, which could seriously harm our business, financial condition and results of operations. We may also be called on to defend ourselves against lawsuits relating to our business operations.
Additionally, the terms of confidentiality or other agreements with or related to companies in which we have entered, either on 40 our own behalf or on behalf of any of our clients, sometimes restrict or otherwise limit the ability of our funds to make investments or otherwise engage in businesses or activities competitive with such companies.
Additionally, the terms of confidentiality or other agreements with or related to companies in which we have entered, either on our own behalf or on behalf of any of our clients, sometimes restrict or otherwise limit the ability of our funds to make investments or otherwise engage in businesses or activities competitive with such companies.
The loss of the services of one or more members of our senior team could have a material adverse effect on our business, financial condition and results of operations, including on the performance of our funds, our ability to retain and attract clients and highly qualified employees and our ability to raise new funds.
The loss of the services of one or more members of our senior team could have a material adverse effect on our business, financial 41 condition and results of operations, including on the performance of our funds, our ability to retain and attract clients and highly qualified employees and our ability to raise new funds.
In addition, if we are unable to deploy capital at a pace that is sufficient to offset the pace of realizations that we return to our clients, our fee revenues could decrease. The nature of closed-ended funds involves the perpetual return of capital to investors. This return of capital to investors in our funds reduces our FPAUM.
In addition, if we are unable to deploy capital at a pace that is sufficient to offset the pace of realizations that we return to our clients, our fee revenues could decrease. 35 The nature of closed-ended funds involves the perpetual return of capital to investors. This return of capital to investors in our funds reduces our FPAUM.
Further, we often engage third-party valuation agents to assist us with the valuations. It is possible that a material fact related to the target of the valuation might be inadvertently omitted from our communications with them, resulting in an inaccurate valuation.
Further, we often engage 57 third-party valuation agents to assist us with the valuations. It is possible that a material fact related to the target of the valuation might be inadvertently omitted from our communications with them, resulting in an inaccurate valuation.
The change in fair value of warrant liabilities represents the mark-to-market fair value adjustments to the outstanding warrants issued in connection with the Transaction. Significant changes in our stock price or number of warrants outstanding may adversely affect our net income (loss) in our consolidated statements of income and consolidated statements of comprehensive income.
The change in fair value of warrant liabilities represents the mark-to-market fair value adjustments to the outstanding warrants issued in connection with the Transaction. Significant changes in our stock price or number of warrants outstanding 72 may adversely affect our net income (loss) in our consolidated statements of income and consolidated statements of comprehensive income.
If, for any reason, these exemptions were to be revoked or challenged or otherwise become unavailable to us, we could be subject to regulatory action or third-party claims, and our business, financial condition and results of operations could 47 be materially and adversely affected.
If, for any reason, these exemptions were to be revoked or challenged or otherwise become unavailable to us, we could be subject to regulatory action or third-party claims, and our business, financial condition and results of operations could be materially and adversely affected.
New climate change-related regulations or interpretations of existing laws may result in enhanced disclosure obligations, which could negatively affect us, our funds and portfolio companies in which they invest and materially increase the regulatory burden and cost of compliance.
New climate change-related rules and regulations or interpretations of existing laws may result in enhanced disclosure obligations, which could negatively affect us, our funds and portfolio companies in which they invest and materially increase the regulatory burden and cost of compliance.
However, for purposes of 49 calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S.
However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S.
In addition, we believe we are not an investment company under section 3(b)(1) of the Investment Company Act because we are primarily engaged in a non-investment company business. 66 The Investment Company Act and the rules thereunder contain detailed parameters for the organization and operations of investment companies.
In addition, we believe we are not an investment company under section 3(b)(1) of the Investment Company Act because we are primarily engaged in a non-investment company business. The Investment Company Act and the rules thereunder contain detailed parameters for the organization and operations of investment companies.
These statistical methods may not accurately quantify our risk exposure if circumstances arise that were not observed in our historical data. In particular, as we enter new lines of business or offer new products, our historical data may be incomplete.
These statistical methods may not accurately quantify our risk exposure if circumstances arise that were not observed in our historical data. In particular, as we enter new lines of business or offer new 59 products, our historical data may be incomplete.
In addition, we regularly rely on exemptions from various requirements of these and other applicable laws. These exemptions are sometimes highly complex and may in certain circumstances depend on compliance by third parties whom we do not control.
We regularly rely on exemptions from various requirements of these and other applicable laws. These exemptions are sometimes highly complex and may in certain circumstances depend on compliance by third parties whom we do not control.
Also, if investors in our funds default on their obligations to fund commitments, there may be adverse consequences on the investment process, and we could incur losses and be unable to meet underlying capital calls.
Also, if investors in 56 our funds default on their obligations to fund commitments, there may be adverse consequences on the investment process, and we could incur losses and be unable to meet underlying capital calls.
To the extent such warrants are exercised, additional shares of our Class A common stock will be issued, which will result in dilution to the holders of our Class A common stock and increase the number of shares eligible for resale in the public market.
To the extent such warrants are exercised, additional shares of our Class A common stock will be issued, which will result in dilution to the holders of our Class A common stock and increase the 71 number of shares eligible for resale in the public market.
In addition, we may be subject to successor liability for FCPA violations or other acts of bribery, or violations of applicable sanctions or other export control laws committed by companies in which we or our funds invest or which we or our funds acquire.
In addition, we may be subject to successor 49 liability for FCPA violations or other acts of bribery, or violations of applicable sanctions or other export control laws committed by companies in which we or our funds invest or which we or our funds acquire.
These sales, or the possibility that these sales may 70 occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
We have little or no control over their due diligence process, and any shortcomings in their due diligence could be reflected in the performance of the investment we make with them on behalf of our clients.
We have little or no control over their due diligence process, and any shortcomings in their due diligence could be reflected in the performance of the investment we make 55 with them on behalf of our clients.
These restrictions include restrictions on the payment of distributions whenever the payment of such distributions would cause GCMH to no longer be in compliance with any of its financial covenants under the Term Loan 42 Facility.
These restrictions include restrictions on the payment of distributions whenever the payment of such distributions would cause GCMH to no longer be in compliance with any of its financial covenants under the Term Loan Facility.
For example, in 2008 many hedge funds, including some of our funds, experienced significant declines in value. In many cases, these declines in value were 61 both provoked and exacerbated by margin calls and forced selling of assets.
For example, in 2008 many hedge funds, including some of our funds, experienced significant declines in value. In many cases, these declines in value were both provoked and exacerbated by margin calls and forced selling of assets.
To the extent we enter into new lines of business, we will face numerous risks and uncertainties, including risks associated with the possibility that we have insufficient expertise to engage in such activities profitably or without incurring inappropriate amounts of risk, the required investment of capital and other resources and the loss of clients due to the perception that we are no longer focusing on our core business.
To the extent we enter into new lines of business and new geographic markets, we will face numerous risks and uncertainties, including risks associated with the possibility that we have insufficient expertise to engage in such activities profitably or without incurring inappropriate amounts of risk, the required investment of capital and other resources and the loss of clients due to the perception that we are no longer focusing on our core business.
We may incur significant expense in order to comply with such reform measures and may incur significant liabilities if regulatory authorities determine that we are not in compliance. 46 We could also be adversely affected by changes in applicable tax laws, regulations, or administrative interpretations thereof and new tax laws in both U.S. and non-U.S. jurisdictions may be passed with little advance notice.
We may incur significant expense in order to comply with such reform measures and may incur significant liabilities if regulatory authorities determine that we are not in compliance. 45 We could also be adversely affected by changes in applicable tax laws, regulations, or administrative interpretations thereof and new tax laws in both U.S. and non-U.S. jurisdictions may be passed with little advance notice.
Attacks could range from those common to businesses generally to those that are more advanced and persistent, which may target us because members of our senior management team may have public profiles or because, as an alternative asset management firm, we hold a significant amount of confidential and sensitive information about our clients and potential investments.
Attacks could range from those common to businesses generally to those that are more advanced and persistent, which may target us because members of our senior management team may have public profiles or because, as an alternative asset management firm, we hold a significant amount of confidential, personal and sensitive information about our clients and investments.
Any of these events could cause our earnings to decline and have a material adverse effect on our business, financial condition and results of operations. Valuation methodologies for certain assets in our funds can be significantly subjective, and the values of assets established pursuant to such methodologies may never be realized, which could result in significant losses for our funds.
Any of these events could cause our earnings to decline and have a material adverse effect on our business, financial condition and results of operations. Valuation methodologies for certain assets in our funds can be highly subjective, and the values of assets established pursuant to such methodologies may never be realized, which could result in significant losses for our funds.
The governing agreements of most of our closed-ended, specialized funds provide that, subject to certain conditions, investors comprising a certain percentage of commitments to these funds, which may be as low as 75%, have the right to suspend or terminate the commitment periods of these funds or cause our removal as general partner and investment manager of 34 these funds without cause.
The governing agreements of most of our closed-ended, specialized funds provide that, subject to certain conditions, investors comprising a certain percentage of commitments to these funds, which may be as low as 75%, have the right to suspend or terminate the commitment periods of these funds or cause our removal as general partner and investment manager of 33 these funds without cause.
We cannot assure you that the market price of our Class A common stock and warrants will not fluctuate widely or decline significantly in the future in response to a number of factors, including, among others, the following: • t he realization of any of the risk factors presented in this Annual Report on Form 10-K; • reductions or lack of growth in our assets under management, whether due to poor investment performance by our funds or redemptions by investors in our funds; • difficult global market and economic conditions; • loss of investor confidence in the global financial markets and investing in general and in alternative asset managers in particular; • competitively adverse actions taken by other fund managers with respect to pricing, fund structure, redemptions, employee recruiting and compensation; • inability to attract, retain or motivate our active executive managing directors, investment professionals, managing directors or other key personnel; • inability to refinance or replace our senior secured term loan facility and revolving credit facility either on acceptable terms or at all; • adverse market reaction to indebtedness we may incur, securities we may grant under our 2020 Incentive Award Plan or otherwise, or any other securities we may issue in the future, including shares of Class A common stock; • unanticipated variations in our quarterly operating results or dividends; • failure to meet securities analysts’ earnings estimates; • publication of negative or inaccurate research reports about us or the asset management industry or the failure of securities analysts to provide adequate coverage of Class A common stock in the future; • changes in market valuations of similar companies; • speculation in the press or investment community about our business; • additional or unexpected changes or proposed changes in laws or regulations or differing interpretations thereof affecting our business or enforcement of these laws and regulations, or announcements relating to these matters; • increases in compliance or enforcement inquiries and investigations by regulatory authorities, including as a result of regulations mandated by the Dodd-Frank Act and other initiatives of various regulators that have jurisdiction over us related to the alternative asset management industry; and • adverse publicity about the alternative asset management industry.
The market price of our Class A common stock and warrants could fluctuate widely or decline significantly in the future in response to a number of factors, including, among others, the following: • t he realization of any of the risk factors presented in this Annual Report on Form 10-K; • reductions or lack of growth in our assets under management, whether due to poor investment performance by our funds or redemptions by investors in our funds; • difficult global market and economic conditions; • loss of investor confidence in the global financial markets and investing in general and in alternative asset managers in particular; 73 • competitively adverse actions taken by other fund managers with respect to pricing, fund structure, redemptions, employee recruiting and compensation; • inability to attract, retain or motivate our active executive managing directors, investment professionals, managing directors or other key personnel; • inability to refinance or replace our senior secured term loan facility and revolving credit facility either on acceptable terms or at all; • adverse market reaction to indebtedness we may incur, securities we may grant under our Amended and Restated 2020 Incentive Award Plan or otherwise, or any other securities we may issue in the future, including shares of Class A common stock; • unanticipated variations in our quarterly operating results or dividends; • failure to meet securities analysts’ earnings estimates; • publication of negative or inaccurate research reports about us or the asset management industry or the failure of securities analysts to provide adequate coverage of Class A common stock in the future; • changes in market valuations of similar companies; • speculation in the press or investment community about our business; • additional or unexpected changes or proposed changes in laws or regulations or differing interpretations thereof affecting our business or enforcement of these laws and regulations, or announcements relating to these matters; • increases in compliance or enforcement inquiries and investigations by regulatory authorities, including as a result of regulations mandated by the Dodd-Frank Act and other initiatives of various regulators that have jurisdiction over us related to the alternative asset management industry; and • adverse publicity about the alternative asset management industry.
Absent an event of default under the Credit Agreement governing the terms of the Term Loan Facility, GCMH may make unlimited distributions when the Total Leverage Ratio (as defined in the Credit Agreement) is below 2.75x. As of December 31, 2022, the Total Leverage Ratio was below 2.75x and the Company was in compliance with all financial covenants.
Absent an event of default under the Credit Agreement governing the terms of the Term Loan Facility, GCMH may make unlimited distributions when the Total Leverage Ratio (as defined in the Credit Agreement) is below 2.75x. As of December 31, 2023, the Total Leverage Ratio was below 2.75x and the Company was in compliance with all financial covenants.
While we have developed and implemented policies and procedures designed to ensure strict compliance by us and our personnel with the FCPA and other anti-corruption, sanctions and export control laws in jurisdictions in which we operate, such policies and procedures may not be effective in all instances to prevent violations.
While we have developed and implemented policies and procedures designed to ensure strict compliance by us and our personnel with the FCPA and other anti-corruption, sanctions and export control laws in jurisdictions in which we operate, such policies and procedures may not be effective to prevent violations.
The loss of one or more members of our senior team could harm our business and jeopardize our relationships with our clients and members of the investing community, and we may not be able to attract, retain, and develop a sufficient number of qualified personnel in future periods.
The loss or prolonged absence of one or more members of our senior team could harm our business and jeopardize our relationships with our clients and members of the investing community, and we may not be able to attract, retain, and develop a sufficient number of qualified personnel in future periods.
The value of the co/direct-equity and credit investments of our funds is determined periodically by us based on reporting provided by the relevant co/direct-equity sponsor and/or using independent third-party valuation firms to aid us in determining the fair value of these investments using generally accepted valuation methodologies.
The value of the equity and credit investments of our funds is determined periodically by us based on reporting provided by the relevant equity sponsor and/or using independent third-party valuation firms to aid us in determining the fair value of these investments using generally accepted valuation methodologies.
We rely on certain of these exemptions. As a result, we do not have a compensation committee consisting entirely of independent directors and our directors were not nominated or selected solely by independent directors. We may also rely on the other exemptions so long as we qualify as a controlled company.
As a result, we do not have a compensation committee consisting entirely of independent directors and our directors were not nominated or selected solely by independent directors. We may also rely on the other exemptions so long as we qualify as a controlled company.
In addition, if any of our personnel were to join or form a competitor, following any required restrictive period set forth in their employment agreements, some of our clients could 43 choose to invest with that competitor rather than in our funds.
If any of our personnel were to join or form a competitor, following any required restrictive period set forth in their employment agreements, some of our clients could choose to invest with that competitor rather than in our funds.
Certain investors have also demonstrated increased activism with respect to existing investments, including by urging asset managers to take certain actions that could adversely affect the value of an investment, or refrain from taking certain actions that could improve the value of an investment.
Certain investors have also demonstrated increased concern with respect to existing investments, including by urging asset managers to take certain actions that could adversely affect the value of an investment, or refrain from taking certain actions that could improve the value of an investment.
Further, significant physical effects of climate change including extreme and more frequent weather events such as hurricanes or floods, can also have an adverse impact on certain portfolio companies and investments, especially those that rely on physical factories, plants or stores located in the affected areas, or that 60 focus on tourism or recreational travel.
Further, significant chronic or acute physical effects of climate change, including extreme and more frequent weather events such as hurricanes or floods, can also have an adverse impact on certain portfolio companies and investments, especially those that rely on physical factories, plants or stores located in the affected areas, or that focus on tourism or recreational travel.
Under these rules, a listed company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirement that (i) a majority of our board of directors consist of independent directors, (ii) we have a compensation committee that is composed entirely of independent directors and (iii) director nominees be selected or recommended to the board by independent directors.
Under these rules, a listed company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirement that (i) a majority of our board of directors consist of independent directors, (ii) we have a compensation committee that is composed entirely of independent directors and (iii) director nominees be selected or recommended to the board by independent directors. 64 We rely on certain of these exemptions.
This may expose us to increased disclosure risks, for example due to a lack of available or credible data, and the potential for conflicting disclosures may also expose us to an increased risk of misstatement litigation or miss-selling allegations. Failure to manage these risks could result in a material adverse effect on our business in a number of ways.
This may expose us to increased disclosure risks, for example due to a lack of available or credible data, and the potential for conflicting disclosures may also expose us to an increased risk of misstatement litigation or misselling allegations. Failure to manage these risks could result in a material adverse effect on our business in a number of ways.
Taken together, (i), (ii) and (iii) will likely result in divergence between the UK and EU regulatory frameworks. In addition, across the EU, we are subject to the AIFMD, under which we are subject to regulatory requirements regarding, among other things, registration for marketing activities, the structure of remuneration for certain of our personnel and reporting obligations.
Taken together, (i), (ii) and (iii) will likely result in divergence between the U.K. and EU regulatory frameworks. In addition, across the EU and U.K., we are subject to the AIFMD, under which we are subject to regulatory requirements regarding, among other things, registration for marketing activities, the structure of remuneration for certain of our personnel and reporting obligations.
Further, the SEC has highlighted valuation practices as one of its areas of focus in investment advisor examinations and has instituted enforcement actions against advisors for misleading investors about valuation.
Further, the SEC has highlighted valuation practices as one of its areas of focus in investment adviser examinations and has instituted enforcement actions against advisors for misleading investors about valuation.
In addition, our reputation may be harmed if certain stakeholders, such as our clients, believe that we are not adequately or appropriately responding to climate change, including through the way in which we operate our business, the composition of our funds’ and accounts’ existing portfolios, the new investments made by them, or the decisions we make to continue to conduct or change our activities in response to climate change considerations.
In addition, our reputation may be harmed if certain stakeholders, such as our clients, stockholders or other third parties, believe that we are not adequately or appropriately responding to climate change, including through the way in which we operate our business, the composition of our funds’ and accounts’ existing portfolios, the new investments made by them, or the decisions we make to continue to conduct or change our activities in response to climate change considerations.
Certain requirements of the AIFMD and the interpretation thereof remain uncertain and may be subject to change as a result of further legislation amending the AIFMD, the issuance of any further national and/or EU guidelines with respect to the AIFMD and the interpretation thereof, and changes to national implementing legislation in relevant European Economic Area (“EEA”) countries or in the UK.
Certain requirements of the AIFMD and the interpretation thereof remain uncertain and may be subject to change as a result of further legislation amending the AIFMD, the issuance of any further national and/or EU guidelines with respect to the AIFMD and the interpretation thereof, and changes to national implementing legislation in relevant European Economic Area (“EEA”) countries or in the U.K.
Outside the EEA, the regulations to which we are subject relate primarily to registration and reporting obligations. As described above, Brexit and the potential resulting divergence between the UK and EU regulatory frameworks may result in additional complexity and costs in complying with AIFMD across both the UK and EU.
Outside the EEA, the regulations to which we are subject relate primarily to registration and reporting obligations. As described above, Brexit and the potential resulting divergence between the U.K. and EU regulatory frameworks may result in additional complexity and costs in complying with AIFMD across both the U.K. and EU.
It is not always possible to detect or deter misconduct, and the extensive precautions we take that seek to detect and prevent undesirable activity may not be effective in all cases. In addition, allowing employees to work remotely may require us to develop and implement additional precautions in order to detect and prevent employee misconduct.
It is not always possible to detect or deter misconduct, and the precautions we take that seek to detect and prevent undesirable activity may not be effective. In addition, allowing employees to work remotely may require us to develop and implement additional precautions in order to detect and prevent employee misconduct.
A failure of investors to honor a significant amount of capital calls could have a material adverse effect on our business, financial condition and results of operations.
A failure of clients or investors to honor a significant amount of capital calls could have a material adverse effect on our business, financial condition and results of operations.
In addition, if regulators, which are increasingly focused on ESG matters, disagree with the procedures or standards we use for ESG and Impact investing, or new regulation or legislation requires a methodology of measuring or disclosing ESG impact that is different from our current practice, our business and reputation could be adversely affected.
In addition, if regulators, which are 61 increasingly focused on sustainable investment matters, disagree with the procedures or standards we use for Sustainable and Impact investing, or new regulation or legislation requires a methodology of measuring or disclosing the impact that is different from our current practice, our business and reputation could be adversely affected.
Warrants are exercisable for our Class A common stock, which may increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders. As of February 21, 2023, there were 17,684,970 outstanding warrants to purchase 17,684,970 shares of our Class A common stock at an exercise price of $11.50 per share.
Warrants are exercisable for our Class A common stock, which may increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders. As of February 27, 2024, there were 17,684,970 outstanding warrants to purchase 17,684,970 shares of our Class A common stock at an exercise price of $11.50 per share.
On November 22, 2022, the DOL released a final rule related to fiduciary requirements for ERISA plan fiduciaries when considering ESG factors in selecting investments, clarifying that fiduciaries may consider climate change and ESG factors when they make investment decisions. Main portions of this rule took effect on February 1, 2023.
In November 2022, the DOL released a final rule related to fiduciary requirements for ERISA plan fiduciaries when considering sustainability factors in selecting investments, clarifying that fiduciaries may consider climate change and other factors when they make investment decisions. Main portions of this rule took effect on February 1, 2023.
We may not be able to obtain or maintain sufficient insurance on commercially reasonable terms or with adequate coverage levels against potential liabilities we may face, which could have a material adverse effect on our business.
We may not be able to obtain or maintain sufficient insurance on commercially reasonable terms or with adequate coverage levels against potential liabilities we may face in connection with potential claims, which could have a material adverse effect on our business.
We intend to expand our business and may enter into new lines of business or geographic markets, which may result in additional risks and uncertainties in our business. We currently generate substantially all of our revenues from management fees and incentive fees.
We intend to expand our business and may formulate new business strategies or enter into new geographic markets, which may result in additional risks and uncertainties in our business. We currently generate substantially all of our revenues from management fees and incentive fees.
We rely heavily on our and our third-party service providers’ financial, accounting, compliance, monitoring, administration, reporting and other data processing systems.
We rely heavily on our and our third-party service providers’ financial, accounting, compliance, monitoring, administration, reporting and other data processing systems and technology platforms.
In addition, failure to comply with applicable legal and regulatory changes in relation to ESG matters may attract increased regulatory scrutiny of our business, and could result in fines and/or other sanctions being levied against us.
In addition, failure to comply with applicable legal and regulatory changes in relation to sustainable investing matters may attract increased regulatory scrutiny of our business, and could result in fines and/or other sanctions being levied against us.
A lack of harmonization globally and within jurisdictions in relation to ESG legal and regulatory reform leads to a risk of fragmentation in group level priorities as a result of the different pace of sustainability transition across global jurisdictions.
A lack of harmonization globally and within jurisdictions in relation to sustainable investing legal and regulatory reform leads to a risk of fragmentation in group level priorities as a result of the different pace of sustainability transition across global jurisdictions.
Further, conflicting ESG policies within jurisdictions, such as between federal and some state policies in the U.S., is leading to a complex and fragmented regulatory environment, which may be difficult to navigate.
Further, conflicting sustainable investing policies within jurisdictions, such as between federal and some state policies in the U.S., is leading to a complex and fragmented regulatory environment, which may be difficult to navigate.
If any of these systems, or the systems of third-party service providers we utilize, do not operate properly or are disabled or fail, including the loss of data, whether caused by fire, other 44 natural disaster, power or telecommunications failure, computer viruses, malicious actors, acts of terrorism or war or otherwise, we could suffer a disruption of our business, financial loss, liability to clients, regulatory intervention or reputational damage, which could have a material and adverse effect on our business, financial condition and results of operations.
If any of these systems, or the systems of third-party service providers we utilize, do not operate properly or are disabled or fail, including the loss of or unauthorized access to data, whether caused by fire, other natural disaster, power or telecommunications failure, computer viruses, malicious actors, negligence, acts of terrorism or war or otherwise, or if our third-party service providers fail to perform as expected, we could suffer a disruption of our business, financial loss, liability to clients, regulatory intervention or reputational damage, which could have a material and adverse effect on our business, financial condition and results of operations.
The UK Financial Conduct Authority is introducing new rules and guidance for asset managers to make mandatory disclosures at both the manager and product levels, which aim to address potential greenwashing risks through the introduction of sustainable investment labels, disclosure requirements and restrictions on the use of sustainability-related terms in product naming and marketing, as well as through the introduction of disclosures consistent with the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (“TCFD”).
Financial Conduct Authority published final rules on its Sustainable Disclosure Requirements (“SDR”), introducing new rules and guidance for asset managers to make mandatory disclosures at both the manager and product levels, which aim to address potential greenwashing risks through the introduction of sustainable investment labels, disclosure requirements and restrictions on the use of sustainability-related terms in product naming and marketing, as well as through the introduction of disclosures consistent with the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (“TCFD”).
Because members of our senior management team hold most or all of their economic interest in GCMH directly through holding companies rather than through ownership of shares of our Class A common stock, they could have interests that will not align with, or conflict with, those of the holders of our Class A common stock or with us.
Because members of our senior management team hold most or all of their economic interest in GCMH directly through holding companies and other vehicles rather than through ownership of shares of our Class A common stock, they could have interests that do not align with, or conflict with, those of the holders of our Class A common stock or with us.
It is expected that additional laws and regulations will come into force in the EEA, the EU, the UK and other countries in which we operate over the coming years.
It is expected that additional laws and regulations will come into force in the EEA, the EU, the U.K. and other countries in which we operate over the coming years.
While the rule is designed in part to address fiduciary duty-related uncertainties for U.S. pension plans subject to ERISA when investing in funds that have an ESG component, it is unclear whether the rule will provide sufficient certainty for U.S. pension plans in connection with investment decision-making associated with funds that have an ESG component.
While the rule is designed in 60 part to address fiduciary duty-related uncertainties for U.S. pension plans subject to ERISA when investing in funds that have a sustainability component, it is unclear whether the rule will provide sufficient certainty for U.S. pension plans in connection with investment decision-making associated with funds that have a sustainability component.
ESG factors are not universally agreed upon or accepted by investors, and our consideration of ESG factors or construction of specific ESG or Impact funds could attract opposition from certain segments of our existing and potential investor base.
Sustainable and Impact investing factors are not universally agreed upon or accepted by investors, and our consideration of these factors or construction of specific Sustainable Investing or Impact funds could attract opposition from certain segments of our existing and potential investor base.
Any actual opposition to our consideration of ESG factors could impact our ability to maintain or raise capital for our funds, which may adversely impact our revenues.
Any actual opposition to our consideration of Sustainable Investing or Impact factors could impact our ability to maintain or raise capital for our funds, which may adversely impact our revenues.

… 309 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed2 unchanged
Biggest changeITEM 2. PROPERTIES We do not own any real estate or other physical properties materially important to our operation. The Company has entered into operating lease agreements for office space. We lease office space in various countries around the world and maintain our headquarters in Chicago, Illinois. We lease (the “Lease”) our principal headquarters at 900 N.
Biggest changeITEM 2. PROPERTIES We do not own any real estate or other physical properties materially important to our operations. The Company has entered into operating lease agreements for office space. We lease office space in various countries around the world and maintain our headquarters in Chicago, Illinois. We lease (the “Lease”) our principal headquarters at 900 N.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed2 unchanged
Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, we are a defendant in various lawsuits related to our business. We do not believe that the outcome of any current litigation will have a material effect on our consolidated statements of financial condition or statements of income.
Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, we may be a defendant in various lawsuits related to our business. We do not believe that the outcome of any current litigation will have a material effect on our consolidated statements of financial condition or statements of income.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+1 added−3 removed3 unchanged
Biggest changeHowever, the payment of cash dividends on shares of our Class A common stock in the future, in this amount or otherwise, will be within the discretion of our Board of Directors at such time, and will depend on numerous factors, including: • general economic and business conditions; • our strategic plans and prospects; • our business and investment opportunities; • our financial condition and operating results, including its cash position, its net income and its realizations on investments made by its investment funds; • our working capital requirements and anticipated cash needs; • contractual restrictions and obligations, including payment obligations pursuant to the Tax Receivable Agreement and restrictions pursuant to any credit facility; and • legal, tax and regulatory restrictions. 75 Issuer Purchases of Equity Securities The following table represents our purchases of Class A common stock and warrants during the three months ended December 31, 2022 for the periods indicated: Total Number of Warrants/Shares Purchased Average Price Paid Per Warrant Average Price Paid Per Share Total Number of Warrants Purchased as Part of Publicly Announced Plans or Programs (1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (3) Warrants (1) Common Stock October 1-31, 2022 — 295,645 $ — $ 7.56 3,494,564 2,924,403 $ 24,170,931 November 1-30, 2022 — 130,824 $ — $ 8.79 3,494,564 3,055,227 $ 48,020,789 December 1-31, 2022 — 301,840 $ — $ 8.34 3,494,564 3,357,067 $ 45,503,058 Total — 728,309 3,494,564 3,357,067 (1) Represents warrants to purchase shares of Class A common stock purchased pursuant to a stock repurchase plan, as described in note (3) below.
Biggest changeHowever, the payment of cash dividends on shares of our Class A common stock in the future, in this amount or otherwise, will be within the discretion of our Board of Directors at such time, and will depend on numerous factors, including: • general economic and business conditions; • our strategic plans and prospects; • our business and investment opportunities; • our financial condition and operating results, including its cash position, its net income and its realizations on investments made by its investment funds; • our working capital requirements and anticipated cash needs; • contractual restrictions and obligations, including payment obligations pursuant to the Tax Receivable Agreement and restrictions pursuant to any credit facility; and • legal, tax and regulatory restrictions. 77 Issuer Purchases of Equity Securities On August 6, 2021, GCMG’s Board of Directors authorized a stock repurchase plan which may be used to repurchase shares of our outstanding Class A common stock and warrants to purchase shares of Class A common stock, as well as to retire (by cash settlement or the payment of tax withholding amounts upon net settlement) equity-based awards granted under our 2020 Incentive Award Plan (and any successor plan thereto).
The number of record holders does not include persons who held shares of our Class A common stock in nominee or “street name” accounts through brokers. Dividend Policy On February 9, 2023, the Company declared a quarterly dividend of $0.11 per share of Class A common stock to record holders as of the close of business on March 1, 2023.
The number of record holders does not include persons who held shares of our Class A common stock in nominee or “street name” accounts through brokers. Dividend Policy On February 8, 2024, the Company declared a quarterly dividend of $0.11 per share of Class A common stock to record holders as of the close of business on March 1, 2024.
The payment date will be March 15, 2023. We expect we will continue to pay a comparable cash dividend on a quarterly basis.
The payment date will be March 15, 2024. We expect we will continue to pay a comparable cash dividend on a quarterly basis.
Holders of Record As of February 21, 2023, there were approximately 41,611,742 shares of our Class A common stock outstanding and 17,684,970 warrants to purchase our Class A common stock outstanding, with 1 and 2 holders of record of our Class A common stock and warrants, respectively.
Holders of Record As of February 27, 2024, there were approximately 42,996,776 shares of our Class A common stock outstanding and 17,684,970 warrants to purchase our Class A common stock outstanding, with 1 and 2 holders of record of our Class A common stock and warrants, respectively.
The dollar value of shares that may yet be repurchased includes the deemed repurchases of common stock equivalents discussed in note (2) above. 76 Stock Performance Graph The following graph depicts the total return to stockholders from the closing price on November 18, 2020 (the date our Class A common stock began trading on Nasdaq) through December 31, 2022, relative to the performance of S&P 500 and S&P Composite 1500 Financials.
See Note 8 of our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K Stock Performance Graph The following graph depicts the total return to stockholders from the closing price on November 18, 2020 (the date our Class A common stock began trading on Nasdaq) through December 31, 2023, relative to the performance of S&P 500 and S&P Composite 1500 Financials.
On February 10, May 10, and November 7, 2022, GCMG’s Board of Directors made increases to its stock repurchase authorization for shares and warrants.
GCMG’s Board of Directors has made subsequent increases to its stock repurchase authorization for shares and warrants. As of December 31, 2022, the total authorization was $90.0 million, excluding fees and expenses. On August 8, 2023, GCM Grosvenor’s Board of Directors increased the firm’s existing repurchase authorization by $25 million, from $90 million to $115 million.
Removed
(2) Excludes shares of Class A common stock equivalents deemed to have been repurchased in conjunction with the payment of tax liabilities in respect of stock delivered to our employees in settlement of vested RSUs in 2021 and 2022. There were no such deemed repurchases in the three months ended December 31, 2022 .
Added
On February 8, 2024, GCM Grosvenor’s Board of Directors further increased the firm’s existing repurchase authorization by $25 million , from $115 million to $140 million. During the three months ended December 31, 2023 , we did not purchase any shares of Class A common stock or warrants to purchase shares of Class A Common stock.
Removed
(3) On August 6, 2021, GCM G’s Board of Directors authorized a stock repurchase plan (the “Repurchase Plan”) of up to an aggregate of $25.0 million, excluding fees and expenses, which may be used to repurchase shares of our outstanding Class A common stock and warrants to purchase shares of our Class A common stock, as well as to retire (by cash settlement or the payment of tax withholding amounts upon net settlement) equity-based awards granted under our 2020 Incentive Award Plan (and any successor equity plan thereto).
Removed
The increases of $20.0 million on February 10, 2022 and May 5, 2022 and of $25.0 million on November 7, 2022 increased the total authorization to $45.0 million, $65.0 million and $90.0 million as of February 10, May 5, and November 7, 2022, respectively.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

111 edited+20 added−19 removed111 unchanged
Biggest changeThese financing cash flows were primarily driven by: • capital contributions received from noncontrolling interest holders of $1.8 million and $3.5 million during the years ended December 31, 2022 and 2021 , respectively; • capital distributions paid to partners and member of $(118.3) million and $(77.9) million during the years ended December 31, 2022 and 2021 , respectively; • capital distributions paid to noncontrolling interest holders of $(37.4) million and $(81.2) million during the years ended December 31, 2022 and 2021 , respectively; • the exercise of the Mosaic call option for $(150.1) million during the year ended December 31, 2021; • proceeds from the Term Loan Facility issuance of $110.0 million during the year ended December 31, 2021; • principal payments on the Term Loan Facility of $(4.0) million and $(53.3) million during the years ended December 31, 2022 and 2021, respectively; • debt issuance costs of $(3.1) million during the year ended December 31, 2021; • payments to repurchase Class A common stock of $(26.4) million and $(0.9) million during the years ended December 31, 2022 and 2021, respectively; • proceeds from the exercise of warrants of $24.5 million during the year ended December 31, 2021; • payments to repurchase warrants of $(2.6) million and $(1.3) million during the years ended December 31, 2022 and 2021, respectively; • the settlement of equity-based compensation in satisfaction of withholding tax requirements of $(6.4) million and $(6.9) million during the years ended December 31, 2022 and 2021, respectively; • dividends paid of $(18.4) million and $(14.5) million during the years ended December 31, 2022 and 2021, respectively; and 94 • payments to related parties, pursuant to tax receivable agreement of $(3.3) million during the years ended December 31, 2022 Indebtedness On January 2, 2014, GCMH entered into a credit agreement (as amended, amended and restated, supplemented or otherwise modified, the “Credit Agreement”) that provides GCMH with a senior secured term loan facility (the “Term Loan Facility”) and a $50.0 million revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Secured Credit Facilities”).
Biggest changeThese financing cash flows were driven by: • capital contributions received from noncontrolling interest holders of $2.3 million and $1.8 million during the years ended December 31, 2023 and 2022 , respectively; • capital distributions paid to partners and member of $(58.3) million and $(118.3) million during the years ended December 31, 2023 and 2022 , respectively; • capital distributions paid to noncontrolling interest holders of $(15.4) million and $(37.4) million during the years ended December 31, 2023 and 2022 respectively; 95 • principal payments on the Term Loan Facility of $(4.0) million during each of the years ended December 31, 2023 and 2022; • payments to repurchase Class A common stock of $(4.5) million and $(26.4) million during the years ended December 31, 2023 and 2022, respectively; • payments to repurchase warrants of $(2.6) million during the year ended December 31, 2022 ; • the settlement of equity-based compensation to satisfy withholding tax requirements of $(10.2) million and $(6.4) million during the years ended December 31, 2023 and 2022, respectively; • dividends paid of $(20.3) million and $(18.4) million during the years ended December 31, 2023 and 2022, respectively; and • payments to related parties, pursuant to tax receivable agreement of $(3.2) million and $(3.3) million during the years ended December 31, 2023 and 2022.
Agreements generally include a clawback provision that, if triggered, would require us to return up to the cumulative amount of carried interest distributed, typically net of tax, upon liquidation of those funds, if the aggregate amount paid as carried interest exceeds the amount actually due based upon the aggregate performance of each fund.
Agreements generally include a clawback provision that, if triggered, would require us to return up to the cumulative amount of carried interest distributed, typically net of tax, upon liquidation of those funds, if the aggregate amount paid as carried interest exceeds the amount actually due based upon the aggregate performance of each fund.
Fees paid to a decision maker or service provider are not deemed variable interests in an entity if (i) the fees are compensation for services provided and are commensurate with the level of effort required to provide those services; (ii) the service arrangement includes only terms, conditions, or amounts that are customarily present in arrangements for similar services negotiated at arm’s length; and (iii) the decision maker does not hold other interests in the entity that individually, or in the aggregate, would absorb more than an insignificant amount of the entity’s expected losses or receive more than an insignificant amount of the entity’s expected residual returns.
Fees paid to a decision maker or service provider are not deemed variable interests in an entity if (i) the fees are compensation for services provided and are commensurate with the level of effort required to provide those services; (ii) the service arrangement includes only terms, conditions, or amounts that are customarily present in arrangements for similar services negotiated at arm’s length; and (iii) the decision maker does not 98 hold other interests in the entity that individually, or in the aggregate, would absorb more than an insignificant amount of the entity’s expected losses or receive more than an insignificant amount of the entity’s expected residual returns.
A decline in the pace or the size of our fundraising efforts or investments as a result of 78 increased competition in the private markets investing environment or a shift toward public markets may impact our revenues, which are generated from management fees and incentive fees. Our ability to expand our business through new lines of business and geographic markets.
A decline in the pace or the size of our fundraising efforts or investments as a result of increased competition in the private markets investing environment or a shift toward public markets may impact our revenues, which are generated from management fees and incentive fees. Our ability to expand our business through new lines of business and geographic markets.
Bonus and incentive fee related compensation is generally determined by our management and is discretionary taking into consideration, among other things, our financial results and the employee’s performance. In addition, various individuals, including certain senior professionals have been awarded partnership interests and restricted stock units (“RSUs”).
Bonus and incentive fee related compensation is generally determined by our management and is discretionary taking into consideration, among other things, our financial results and the employee’s performance. In addition, various individuals, including certain senior professionals have been awarded partnership interests and/or restricted stock units (“RSUs”).
Awards that are in substance a profit-sharing arrangement in which rights to distributions of profits are based fully on the discretion of the managing member of Holdings, Holdings II and Management LLC, are recorded as partnership interest-based compensation expense in the Consolidated Statements of Income when Holdings, Holdings II and Management LLC makes distributions to the recipients.
Awards that are in substance a profit-sharing arrangement in which rights to distributions of profits are based fully on the discretion of the managing member of Holdings, Holdings II and Management LLC, are recorded as partnership interest-based compensation expense in the Consolidated Statements of Income (Loss) when Holdings, Holdings II and Management LLC makes distributions to the recipients.
The table above does not include any payments that we are obligated to make under the Tax Receivable Agreement, as the actual timing and amount of any payments that may be made under the Tax Receivable Agreement are 96 unknown at this time and will vary based on a number of factors.
The table above does not include payments that we are obligated to make under the Tax Receivable Agreement, as the actual timing and amount of any payments that may be made under the Tax Receivable Agreement are unknown at this time and will vary based on a number of factors.
At each reporting date, we assess whether we are the primary beneficiary and will consolidate or deconsolidate accordingly. 97 Entities that do not qualify as VIEs are assessed for consolidation as voting interest entities. Under the voting interest entity model, we consolidate those entities that we control through a majority voting interest.
At each reporting date, we assess whether we are the primary beneficiary and will consolidate or deconsolidate accordingly. Entities that do not qualify as VIEs are assessed for consolidation as voting interest entities. Under the voting interest entity model, we consolidate those entities that we control through a majority voting interest.
Carried interest is ultimately realized when underlying 98 investments distribute proceeds or are sold and therefore carried interest is highly susceptible to market factors, judgments and actions of third parties that are outside of our control.
Carried interest is ultimately realized when underlying investments distribute proceeds or are sold and therefore carried interest is highly susceptible to market factors, judgments and actions of third parties that are outside of our control.
Our Class A common stock and warrants may be repurchased from time 95 to time in open market transactions, in privately negotiated transactions, including with employees or otherwise, pursuant to the requirements of Rule 10b5-1 and Rule 10b-18 of the Exchange Act, as well as to retire (by cash settlement or the payment of tax withholding amounts upon net settlement) equity-based awards granted under our 2020 Incentive Award Plan (and any successor plan thereto), with the terms and conditions of these repurchases depending on legal requirements, price, market and economic conditions and other factors.
Our Class A common stock and warrants may be repurchased from time to time in open market transactions, in privately negotiated transactions, including with employees or otherwise, pursuant to the requirements of Rule 10b5-1 and Rule 10b-18 of the Exchange Act, as well as to retire (by cash settlement or the payment of tax withholding amounts upon net settlement) equity-based awards granted under our 2020 Incentive Award Plan, as amended and restated (and any successor plan thereto), with the terms and conditions of these repurchases depending on legal requirements, price, market and economic conditions and other factors.
During periods of adverse economic conditions, such as current geopolitical turmoil abroad and increasing inflation and interest rates, our funds may have difficulty accessing financial markets, which could make it more difficult to obtain funding for additional investments and impact our ability to successfully exit positions in a timely manner.
During periods of adverse economic conditions, such as current geopolitical turmoil abroad and elevated inflation and interest rates, our funds may have difficulty accessing financial markets, which could make it more difficult to obtain funding for additional investments and impact our ability to successfully exit positions in a timely manner.
We have defined the portion to be deferred as the amount of carried interest, typically net of tax, that we would be required to return if all remaining investments had no value as of the end of each reporting period. As of December 31, 2022, deferred revenue relating to constrained realized carried interest was approximately $6.5 million.
We have defined the portion to be deferred as the amount of carried interest, typically net of tax, that we would be required to return if all remaining investments had no value as of the end of each reporting period. As of December 31, 2023, deferred revenue relating to constrained realized carried interest was approximately $5.6 million.
Operating Segments We have determined that we operate in a single operating and reportable segment, consistent with how our chief operating decision maker allocates resources and assesses performance. 79 Organizational Structure The diagram below depicts our current organizational structure: Note: The diagram depicts a simplified version of our structure and does not include all legal entities in our structure.
Operating Segments We have determined that we operate in a single operating and reportable segment, consistent with how our chief operating decision maker allocates resources and assesses performance. 80 Organizational Structure The diagram below depicts our current organizational structure: Note: The diagram depicts a simplified version of our structure and does not include all legal entities in our structure.
Absent an event of default under the Credit Agreement governing the terms of the Term Loan Facility, GCMH may make unlimited distributions when the Total Leverage Ratio (as defined in the Credit Agreement) is below 2.75x. As of December 31, 2022, the Total Leverage Ratio was below 2.75x and the Company was in compliance with all financial covenants.
Absent an event of default under the Credit Agreement governing the terms of the Term Loan Facility, GCMH may make unlimited distributions when the Total Leverage Ratio (as defined in the Credit Agreement) is below 2.75x. As of December 31, 2023, the Total Leverage Ratio was below 2.75x and the Company was in compliance with all financial covenants.
There was no remaining redeemable noncontrolling interest following the exercise of the Mosaic call right on July 2, 2021, as further described in Note 4 of our Consolidated Financial Statements included elsewhere in Part II, Item 8 of this Annual Report on Form 10-K.
There was no remaining redeemable noncontrolling interest following the exercise of the Mosaic call right on July 2, 2021, as further described in Note 3 of our Consolidated Financial Statements included elsewhere in Part II, Item 8 of this Annual Report on Form 10-K.
Carried interest can vary materially period to period based on the judgments, market factors and actions of third parties discussed above. Provision for Income Taxes Following the Transaction, the Company is taxed as a corporation for U.S. federal and state income tax purposes. GCMH is treated as a partnership for U.S. federal income tax purposes.
Carried interest can vary materially period to period based on the judgments, market factors and actions of third parties discussed above. Provision for Income Taxes The Company is taxed as a corporation for U.S. federal and state income tax purposes. GCMH is treated as a partnership for U.S. federal income tax purposes.
Performance fees 81 may or may not be subject to a hurdle or a preferred return, which requires that clients earn a specified minimum return before a performance fee can be assessed. These performance fees are determined based upon investment performance at the end of a specified measurement period, generally the end of the calendar year.
Performance fees 82 may or may not be subject to a hurdle or a preferred return, which requires that clients earn a specified minimum return before a performance fee can be assessed. These performance fees are determined based upon investment performance at the end of a specified measurement period, generally the end of the calendar year.
Fund expense reimbursement revenue We incur certain costs, primarily related to accounting, client reporting, investment-decision making and treasury-related expenditures, for which we receive reimbursement from the GCM Funds in connection with its performance obligations to provide investment management services.
Fund expense reimbursement revenue We incur certain costs, primarily related to accounting, client reporting, investment-decision making and treasury-related expenditures, for which we receive reimbursement from the GCM Funds in connection with our performance obligations to provide investment management services.
We expect that our cash flow from operations, current cash and cash equivalents and available borrowing capacity under our Revolving Credit Facility will be sufficient to fund our operations and planned capital expenditures and to service our debt obligations for the next twelve months.
We expect that our cash flow from operations, current cash and cash equivalents and available borrowing capacity under our Revolving Credit Facility will be sufficient to fund our operations and planned capital expenditures and to service our debt obligations for the next twelve months and the foreseeable future.
The following table shows a reconciliation of diluted weighted-average shares of Class A common stock outstanding to adjusted shares outstanding used in the computation of adjusted net income per share for the years ended December 31, 2022, 2021 and 2020, respectively.
The following table shows a reconciliation of diluted weighted-average shares of Class A common stock outstanding to adjusted shares outstanding used in the computation of adjusted net income per share for the years ended December 31, 2023, 2022 and 2021, respectively.
Also effective on November 1, 2022 , the Company entered into a new swap agreement to hedge interest rate risk related the outstanding indebtedness that has a notional amount of $300 million and a fixed rate of 4.37%.
Also effective on November 1, 2022 , the Company entered into a swap agreement to 96 hedge interest rate risk related the outstanding indebtedness that has a notional amount of $300 million and a fixed rate of 4.37%.
See Note 16 of our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for a summary of our interest rate derivatives to hedge interest rate risk related to the Company’s outstanding indebtedness.
See Note 15 of our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for a summary of our interest rate derivatives to hedge interest rate risk related to the Company’s outstanding indebtedness.
Adjusted Pre-Tax Income represents net income attributable to GCM Grosvenor Inc. including (a) net income (loss) attributable to GCMH, excluding (b) provision for income taxes, (c) changes in fair value of derivatives and warrant liabilities, (d) amortization expense, (e) partnership interest-based and non-cash compensation, (f) equity-based compensation, including cash-settled equity awards (as we view the cash settlement as a separate capital transaction), (g) unrealized investment income, (h) changes in TRA liability and (i) certain other items that we believe are not indicative of our core performance, including charges related to corporate transactions and employee severance.
Adjusted Pre-Tax Income represents net income attributable to GCM Grosvenor Inc. including (a) net income (loss) attributable to GCMH, excluding (b) provision for income taxes, (c) changes in fair value of derivatives and warrant liabilities, (d) amortization expense, (e) partnership interest-based and non-cash compensation, (f) equity-based compensation, including cash-settled equity awards (as we view the cash settlement as a separate capital transaction), (g) unrealized investment income, (h) changes in TRA liability and (i) certain other items that we believe are not indicative of our core performance, including charges related to corporate transactions, employee severance, and New York office relocation costs.
Customized separate account clients may be structured using an affiliate-managed entity or may involve an investment management 80 agreement between us and a single client.
Customized separate account clients may be structured using an affiliate-managed entity or may involve an investment management 81 agreement between us and a single client.
Provision (Benefit) for Income Taxes We are a corporation for U.S. federal income tax purposes and therefore are subject to U.S. federal and state income taxes on our share of taxable income generated by the Company. GCMH is treated as a pass-through entity for U.S. federal and state income tax purposes.
Provision for Income Taxes We are a corporation for U.S. federal income tax purposes and therefore are subject to U.S. federal and state income taxes on our share of taxable income generated by the Company and its subsidiaries. GCMH is treated as a pass-through entity for U.S. federal and state income tax purposes.
We expect that the payments we are required to make under the Tax Receivable Agreement could be substantial. Based on current projections, we anticipate having sufficient taxable income to utilize these tax attributes and receive corresponding tax deductions in future periods. As of December 31, 2022, the Tax Receivable Agreement results in a liability of $55 million.
We expect that the payments we are required to make under the Tax Receivable Agreement could be substantial. Based on current projections, we anticipate having sufficient taxable income to utilize these tax attributes and receive corresponding tax deductions in future periods. As of December 31, 2023, the Tax Receivable Agreement results in a liability of $54 million.
In the event that a client redeems from one of the GCM Funds prior to the end of a measurement period, any accrued performance fee is ordinarily due and payable by such redeeming client as of the date of the redemption. For the year ended December 31, 2022, the Company recorded $3 million of performance fees.
In the event that a client redeems from one of the GCM Funds prior to the end of a measurement period, any accrued performance fee is ordinarily due and payable by such redeeming client as of the redemption date. For the year ended December 31, 2023, the Company recorded $15 million of performance fees.
Profits and losses, other than partnership interest-based compensation, are allocated to the noncontrolling interests in GCMH in proportion to their relative ownership interests regardless of their basis. 83 Results of Operations The following is a discussion of our consolidated results of operations for the year ended December 31, 2022 as compared to the year ended December 31, 2021 .
Profits and losses, other than partnership interest-based compensation, are allocated to the noncontrolling interests in GCMH in proportion to their relative ownership interests regardless of their basis. 84 Results of Operations The following is a discussion of our consolidated results of operations for the year ended December 31, 2023 as compared to the year ended December 31, 2022 .
Assets under management that are subject to performance fees, excluding investments of the firm and our professionals from which we generally do not earn incentive fees, were approximately $12.4 billion as of December 31, 2022.
Assets under management that are subject to performance fees, excluding investments of the firm and our professionals from which we generally do not earn incentive fees, were approximately $12.8 billion as of December 31, 2023.
Any such expense previously recorded is reversed if the target amount is canceled or forfeited or if the required service period is not provided. For the year ended December 31, 2022, the Company recorded approximately $32 million of partnership interest-based compensation.
Any such expense previously recorded is reversed if the target amount is canceled or forfeited or if the required service period is not provided. For the year ended December 31, 2023, the Company recorded approximately $104 million of partnership interest-based compensation.
Accordingly, carried interest is considered variable consideration and is therefore constrained and not recognized as revenue until (a) it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur or (b) the uncertainty associated with the variable consideration is subsequently resolved.
Accordingly, carried interest is considered variable consideration and is therefore constrained and not recognized as revenue until (a) it is probable that a significant reversal will not occur or (b) the uncertainty associated with the variable consideration is subsequently resolved.
Items considered in this analysis include the ability to carry back losses, the reversal of temporary differences, tax planning strategies and expectations of future earnings. As of December 31, 2022, the Company has $60 million of deferred tax assets.
Items considered in this analysis include the ability to carry back losses, the reversal of temporary differences, tax planning strategies and expectations of future earnings. As of December 31, 2023, the Company has $58 million of deferred tax assets.
Assets under management that are subject to carried interest, excluding investments of the firm and our professionals from which we generally do not earn incentive fees, were approximately $39.8 billion as of December 31, 2022. Performance Fees We may receive performance fees from certain GCM Funds, more commonly in funds associated with absolute return strategies.
Assets under management that are subject to carried interest, excluding investments of the firm and our professionals from which we generally do not earn incentive fees, were approximately $43.3 billion as of December 31, 2023. Performance Fees We may receive performance fees from certain GCM Funds, more commonly in funds associated with absolute return strategies.
(2) Represents interest to be paid on our debt obligations. The interest payments are calculated using the interest rate of 6.6% on our Term Loan Facility in effect as of December 31, 2022 and exclude the impact of interest rate hedges. (3) Represents general partner capital funding commitments to several of the GCM Funds.
(2) Represents interest to be paid on our debt obligations. The interest payments are calculated using the interest rate of 8.0% on our Term Loan Facility in effect as of December 31, 2023 and exclude the impact of interest rate hedges. (3) Represents general partner capital funding commitments to several of the GCM Funds.
The 24.2%, 24.5% and 25.0% are based on a federal statutory rate of 21.0% and a combined state, local and foreign rate net of federal benefits of 3.2%, 3.5% and 4.0%, respectively. 91 Adjusted Net Income Per Share Adjusted net income per share is a non-GAAP measure that is calculated by dividing Adjusted Net Income by adjusted shares outstanding.
The 24.7%, 24.2% and 24.5% are based on a federal statutory rate of 21.0% and a combined state, local and foreign rate net of federal benefits of 3.7%, 3.2% and 3.5%, respectively. 92 Adjusted Net Income Per Share Adjusted net income per share is a non-GAAP measure that is calculated by dividing Adjusted Net Income by adjusted shares outstanding.
On February 9, 2023, we declared a quarterly dividend of $0.11 per share of Class A common stock to record holders as of the close of business on March 1, 2023. The payment date will be March 15, 2023.
On February 8, 2024, we declared a quarterly dividend of $0.11 per share of Class A common stock to record holders as of the close of business on March 1, 2024. The payment date will be March 15, 2024.
We offer the following investment strategies: • Private Equity • Infrastructure • Real Estate • Absolute Return Strategies • Alternative Credit • ESG and Impact Strategies Our clients include large, sophisticated, global institutional investors who rely on our investment expertise and differentiated investment access to navigate the alternatives market, but also include a growing non-institutional client base.
We offer the following investment strategies: • Private Equity • Infrastructure • Real Estate • Absolute Return Strategies • Alternative Credit • Sustainable and Impact Investing Our clients include large, sophisticated, global institutional investors who rely on our investment expertise and differentiated investment access to navigate the alternatives market, but also include a growing individual investor client base.
Our ability to comply with increasing and evolving regulatory requirements. The complex and evolving regulatory and tax environment may have an adverse effect on our business and subject us to additional expenses or capital requirements, as well as restrictions on our business operations.
The complex and evolving regulatory and tax environment may have an adverse effect on our business and subject us to additional expenses or capital requirements, as well as restrictions on our business operations.
Approximate ownership percentages are as of February 21, 2023. 1 Mr. Sacks, the chairman of our board of directors and our chief executive officer, ultimately owns and controls GCM V. The address for Mr.
Approximate ownership percentages are as of February 27, 2024. 1 Mr. Sacks, the chairman of our board of directors and our chief executive officer, ultimately owns and controls GCM V. The address for Mr.
We provided investment management / advisory services on assets of $73.7 billion, $72.1 billion, and $61.9 billion as of December 31, 2022, 2021 and 2020, respectively.
We provided investment management / advisory services on assets of $76.9 billion, $73.7 billion and $72.1 billion as of December 31, 2023, 2022 and 2021, respectively.
(2) For the year ended December 31, 2021, includes $1.3 million that was recognized as other income related to the disgorgement of statutory short-swing “profits” from a holder of our Class A common stock.
(2) For the year ended December 31, 2021, includes $1.3 million that was recognized as other income related to the disgorgement of statutory short-swing “profits” from a holder of our Class A common stock. For the year ended December 31, 2023 includes $1.2 million related to New York office relocation costs.
We are required to maintain minimum net capital balances for regulatory purposes for our Japan, Hong Kong and United Kingdom subsidiaries as well as our U.S. broker-dealer subsidiary. These net capital requirements are met by retaining cash. As a result, we may be restricted in our ability to transfer cash between different operating entities and jurisdictions.
We are required to maintain minimum net capital balances for regulatory purposes for certain of our foreign subsidiaries as well as our U.S. broker-dealer subsidiary. These net capital requirements are met by retaining cash. As a result, we may be restricted in our ability to transfer cash between different operating entities and jurisdictions.
Net income attributable to noncontrolling interests in subsidiaries was $6.8 million and $36.9 million for the years ended December 31, 2022 and 2021, respectively. The decrease was primarily attributable to a decrease in income generated by our consolidated subsidiaries not wholly owned by the Company.
Net Income (Loss) Attributable to Noncontrolling Interests Net income attributable to noncontrolling interests in subsidiaries was $5.0 million and $6.8 million for the years ended December 31, 2023 and 2022, respectively. The decrease was primarily attributable to a decrease in income generated by our consolidated subsidiaries not wholly owned by the Company.
Net Cash Used in Investing Activities Net cash used in investing activities was $(10.1) million and $(28.1) million for the years ended December 31, 2022 and 2021 , respectively.
Net Cash Used in Investing Activities Net cash used in investing activities was $(18.8) million and $(10.1) million for the years ended December 31, 2023 and 2022 , respectively.
These investing cash flows were primarily driven by: • purchases of premises and equipment of $(0.8) million and $(0.6) million during the years ended December 31, 2022 and 2021 , respectively; and • contributions/subscriptions to investments of $(29.4) million and $(40.3) million during the years ended December 31, 2022 and 2021 , respectively; partially offset by • proceeds received from investments of $20.1 million and $11.5 million during the years ended December 31, 2022 and 2021 , respectively.
These investing cash flows were driven by: • purchases of premises and equipment of $(3.8) million and $(0.8) million during the years ended December 31, 2023 and 2022 , respectively; and • contributions/subscriptions to investments of $(27.6) million and $(29.4) million during the years ended December 31, 2023 and 2022 , respectively; partially offset by • distributions received from investments of $12.6 million and $20.1 million during the years ended December 31, 2023 and 2022 , respectively.
Change in fair value of warrant liabilities of $20.6 million for the year ended December 31, 2022 was due to a decrease in the fair value of the warrants from December 31, 2021 to December 31, 2022 .
Change in fair value of warrant liabilities of $1.4 million for the year ended December 31, 2023 was due to a decrease in the fair value of the warrants from December 31, 2022 to December 31, 2023 .
We have defined the portion to be deferred as the amount of carried interest, typically net of tax, that we would be required to return if all remaining investments had no value as of the end of each reporting period. For the year ended December 31, 2022, the Company recorded $73 million of carried interest.
Accordingly, the amount of carried interest, typically net of tax, that we would be required to return if all remaining investments had no value as of the end of each reporting period is deferred at each reporting period. For the year ended December 31, 2023, the Company recorded $50 million of carried interest.
These partnership interests grant the recipient the right to certain cash distributions from GCMH Equityholders’ profits to the extent such distributions are authorized, resulting in non-cash profits interest compensation expense.
These partnership interests grant the recipient the right to certain cash distributions from GCMH Equityholders’ profits (to the extent such distributions are authorized) and/or to certain net sale proceeds after threshold distributions, resulting in non-cash profits interest compensation expense.
(2) Excludes severance expense of $1.6 million, $3.1 million and $7.6 million for the years ended December 31, 2022, 2021 and 2020, respectively. 88 (3) Excludes amortization of intangibles of $2.3 million, $2.3 million and $7.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.
(2) Excludes severance expense of $6.8 million, $1.6 million and $3.1 million for the years ended December 31, 2023, 2022 and 2021, respectively. (3) Excludes amortization of intangibles of $1.3 million, $2.3 million and $2.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Also excludes corporate transaction-related costs of $2.1 million, $7.8 million and $11.6 million for the years ended December 31, 2022, 2021 and 2020, respectively, and non-core expenses of $0.6 million, $0.6 million and $0.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Also excludes completed and contemplated corporate transaction-related costs of $6.4 million, $2.1 million and $7.8 million for the years ended December 31, 2023, 2022 and 2021, respectively, and non-core expenses of $2.2 million, $0.6 million 89 and $0.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.
The following table shows reconciliations of incentive fees to net incentive fees attributable to GCM Grosvenor for the years ended December 31, 2022, 2021 and 2020, respectively: Year Ended December 31, 2022 2021 2020 (in thousands) Incentive fees: Performance fees $ 2,623 $ 51,947 $ 52,726 Carried interest 72,544 121,906 58,924 Less incentive fees contractually owed to others: Cash carried interest compensation (41,920) (67,773) (34,259) Non-cash carried interest compensation 52 (1,306) (711) Carried interest attributable to redeemable noncontrolling interest holder — (8,059) (7,751) Carried interest attributable to other noncontrolling interest holders (8,411) (13,245) (8,338) Firm share of incentive fees (1) 24,888 83,470 60,591 Less: Cash-based incentive fee related compensation (11,001) (28,002) (11,454) Net Incentive Fees Attributable to GCM Grosvenor $ 13,887 $ 55,468 $ 49,137 ____________ (1) Firm share represents incentive fees net of contractual obligations but before discretionary cash based incentive compensation.
The following table shows reconciliations of incentive fees to net incentive fees attributable to GCM Grosvenor for the years ended December 31, 2023, 2022 and 2021, respectively: Year Ended December 31, 2023 2022 2021 (in thousands) Incentive fees: Performance fees $ 15,313 $ 2,623 $ 51,947 Carried interest 49,590 72,544 121,906 Less incentive fees contractually owed to others: Cash carried interest compensation (28,505) (41,920) (67,773) Non-cash carried interest compensation (48) 52 (1,306) Carried interest attributable to redeemable noncontrolling interest holder — — (8,059) Carried interest attributable to other noncontrolling interest holders (5,095) (8,411) (13,245) Firm share of incentive fees (1) 31,255 24,888 83,470 Less: Cash-based incentive fee related compensation (15,628) (11,001) (28,002) Net Incentive Fees Attributable to GCM Grosvenor $ 15,627 $ 13,887 $ 55,468 ____________ (1) Firm share represents incentive fees net of contractual obligations but before discretionary cash based incentive compensation.
Net cash provided by operating activities was $216.5 million and $178.8 million for the years ended December 31, 2022 and 2021, respectively.
Net cash provided by operating activities was $92.1 million and $216.5 million for the years ended December 31, 2023 and 2022 , respectively.
Year Ended December 31, $000, except per share amounts 2022 2021 2020 (in thousands, except share and per share amounts) Adjusted Net Income Per Share Adjusted Net Income $ 94,366 $ 118,806 $ 90,963 Weighted-average shares of Class A common stock outstanding - basic 43,872,300 43,765,651 39,984,515 Exercise of private warrants - incremental shares under the treasury stock method — 90,062 — Exercise of public warrants - incremental shares under the treasury stock method — 691,396 — Exchange of partnership units 144,235,246 144,235,246 144,235,246 Assumed vesting of RSUs - incremental shares under the treasury stock method 460,446 277,019 — Weighted-average shares of Class A common stock outstanding - diluted 188,567,992 189,059,374 184,219,761 Effective dilutive warrants, if antidilutive for GAAP — — 897,152 Adjusted shares - diluted 188,567,992 189,059,374 185,116,913 Adjusted Net Income Per Share - Diluted $ 0.50 $ 0.63 $ 0.49 Fee-Related Revenue and Fee-Related Earnings Fee-Related Revenue (“FRR”) is a non-GAAP measure used to highlight revenues from recurring management fees and administrative fees.
Year Ended December 31, $000, except per share amounts 2023 2022 2021 (in thousands, except share and per share amounts) Adjusted Net Income Per Share Adjusted Net Income $ 103,204 $ 94,366 $ 118,806 Weighted-average shares of Class A common stock outstanding - basic 43,198,517 43,872,300 43,765,651 Exercise of private warrants - incremental shares under the treasury stock method — — 90,062 Exercise of public warrants - incremental shares under the treasury stock method — — 691,396 Exchange of partnership units 144,235,246 144,235,246 144,235,246 Assumed vesting of RSUs - incremental shares under the treasury stock method — 460,446 277,019 Weighted-average shares of Class A common stock outstanding - diluted 187,433,763 188,567,992 189,059,374 Effect of RSU’s, if antidilutive for GAAP 808,716 — — Adjusted shares - diluted 188,242,479 188,567,992 189,059,374 Adjusted Net Income Per Share - Diluted $ 0.55 $ 0.50 $ 0.63 Fee-Related Revenue and Fee-Related Earnings Fee-Related Revenue (“FRR”) is a non-GAAP measure used to highlight revenues from recurring management fees and administrative fees.
Net income attributable to noncontrolling interests in GCMH was $52.8 million and $63.8 million for the years ended December 31, 2022 and 2021, respectively. The decrease was primarily attributable to the underlying performance of GCMH, offset by an increase in partnership-interest based compensation, which is fully allocated to noncontrolling interests in GCMH.
Net income (loss) attributable to noncontrolling interests in GCMH was $(47.0) million and $52.8 million for the years ended December 31, 2023 and 2022, respectively. The decrease was primarily attributable to an increase in partnership-interest based compensation as described above, which was fully allocated to noncontrolling interests in GCMH, and underlying performance of GCMH.
We review our tax positions quarterly and adjust our tax balances as new legislation is enacted or new information becomes available. Tax Receivable Agreement In connection with the Transaction, we entered into the Tax Receivable Agreement with the GCMH Equityholders.
Significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties under GAAP. We review our tax positions quarterly and adjust our tax balances as new legislation is enacted or new information becomes available. Tax Receivable Agreement In connection with the Transaction, we entered into the Tax Receivable Agreement with the GCMH Equityholders.
Stock Repurchase Plan On August 6, 2021, GCMG’s Board of Directors authorized a stock repurchase plan of up to an aggregate of $25.0 million, excluding fees and expenses, which may be used to repurchase the Company’s outstanding Class A common stock and warrants to purchase Class A common stock.
Stock Repurchase Plan On August 6, 2021, GCMG’s Board of Directors authorized a stock repurchase plan which may be used to repurchase the Company’s outstanding Class A common stock and warrants to purchase Class A common stock.
These non-GAAP measures should not be considered a substitute for the most directly comparable GAAP measures, which are reconciled below. Further, these measures have limitations as analytical tools, and when assessing our operating performance, you should not consider these measurements in isolation or as a substitute for GAAP measures including revenues and net income (loss).
Further, these measures have limitations as analytical tools, and when assessing our operating performance, you should not consider these measurements in isolation or as a substitute for GAAP measures including revenues and net income (loss).
These amounts are generally due on demand and are therefore presented in the less than one-year category, however, based on historical precedent, are likely to be due over a substantially longer period of time. Following the consummation of the Transaction, we are obligated to make payments under the Tax Receivable Agreement.
These amounts are generally due on demand and are therefore presented in the less than one-year category, however, based on historical precedent, are likely to be due over a substantially longer period of time.
Net incentive fees are used by management in making compensation and capital allocation decisions and we believe that they provide investors useful information regarding the amount that such fees contribute to the Company’s earnings.
Net incentive fees represent incentive fees excluding (a) incentive fees contractually owed to others and (b) cash-based incentive fee related compensation. Net incentive fees are used by management in making compensation and capital allocation decisions and we believe that they provide investors useful information regarding the amount that such fees contribute to the Company’s earnings.
Performance Fees We may receive performance fees from certain GCM Funds investing in public market investments. Performance fees are typically a fixed percentage of investment gains, subject to loss carryforward provisions that require the recapture of any previous losses before any performance fees can be earned in the current period.
Performance fees are typically a fixed percentage of investment gains, subject to loss carryforward provisions that require the recapture of any previous losses before any performance fees can be earned in the current period.
Our ability to identify attractive investments and execute on those investments is dependent on a number of factors, including the general macroeconomic environment, valuation, transaction size, and expected duration of such investment opportunity. Our ability to generate strong returns. The ability to attract and retain clients is partially dependent on returns we are able to deliver versus our peers.
Our ability to identify attractive investments and execute on those investments is dependent on a number of factors, including the general macroeconomic environment, valuation, transaction size, and expected duration of such investment opportunity. Our ability to generate competitive returns.
We recognize interest and penalties related to unrecognized tax benefits, if any, within provision for income taxes in the Consolidated Statements of Income. Accrued interest and penalties, if any, would be included within accrued expenses and other liabilities in the Consolidated Statements of Financial Condition. As of December 31, 2022, the Company has no liability related to uncertain tax positions.
We recognize interest and penalties related to 100 unrecognized tax benefits, if any, within provision for income taxes in the Consolidated Statements of Income (Loss). Accrued interest and penalties, if any, would be included within accrued expenses and other liabilities in the Consolidated Statements of Financial Condition.
The following table shows reconciliations of net income attributable to GCM Grosvenor Inc. and Adjusted Pre-Tax Income, Adjusted Net Income and Adjusted EBITDA for the years ended December 31, 2022, 2021 and 2020, respectively: 90 Year Ended December 31, 2022 2021 2020 (in thousands) Adjusted Pre-Tax Income & Adjusted Net Income Net income attributable to GCM Grosvenor Inc. $ 19,820 $ 21,482 $ 4,049 Plus: Net income (loss) attributable to noncontrolling interests in GCMH 52,839 63,848 (112,937) Provision for income taxes 9,611 10,993 4,506 Change in fair value of derivatives — (1,934) 8,572 Change in fair value of warrants (20,551) (7,853) 13,315 Amortization expense 2,316 2,332 7,504 Severance 1,647 3,110 7,636 Transaction expenses (1) 2,051 7,827 11,603 Loss on extinguishment of debt — 675 1,514 Changes in TRA liability and other (2) (241) (1,372) 380 Partnership interest-based compensation 31,811 27,671 172,358 Equity-based compensation 30,721 44,190 — Other non-cash compensation 1,336 3,300 4,564 Less: Unrealized investment income, net of noncontrolling interests (6,919) (15,604) (1,069) Non-cash carried interest compensation 52 (1,306) (711) Adjusted Pre-Tax Income 124,493 157,359 121,284 Less: Adjusted income taxes (3) (30,127) (38,553) (30,321) Adjusted Net Income $ 94,366 $ 118,806 $ 90,963 Adjusted EBITDA Adjusted Net Income $ 94,366 $ 118,806 $ 90,963 Plus: Adjusted income taxes (3) 30,127 38,553 30,321 Depreciation expense 1,540 1,688 2,314 Interest expense 23,314 20,084 23,446 Adjusted EBITDA $ 149,347 $ 179,131 $ 147,044 ____________ (1) Represents 2022 expenses related to contemplated corporate transactions, 2021 expenses related to a debt offering, other contemplated corporate transactions, and other public company transition expenses, and 2020 expenses related to the Mosaic transaction and the Transaction.
The following table shows reconciliations of net income attributable to GCM Grosvenor Inc. and Adjusted Pre-Tax Income, Adjusted Net Income and Adjusted EBITDA for the years ended December 31, 2023, 2022 and 2021, respectively: 91 Year Ended December 31, 2023 2022 2021 (in thousands) Adjusted Pre-Tax Income & Adjusted Net Income Net income attributable to GCM Grosvenor Inc. $ 12,774 $ 19,820 $ 21,482 Plus: Net income (loss) attributable to noncontrolling interests in GCMH (47,013) 52,839 63,848 Provision for income taxes 7,692 9,611 10,993 Change in fair value of derivatives — — (1,934) Change in fair value of warrants (1,429) (20,551) (7,853) Amortization expense 1,313 2,316 2,332 Severance 6,826 1,647 3,110 Transaction expenses (1) 6,445 2,051 7,827 Loss on extinguishment of debt — — 675 Changes in TRA liability and other (2) 3,048 (241) (1,372) Partnership interest-based compensation 103,934 31,811 27,671 Equity-based compensation 50,667 30,721 44,190 Other non-cash compensation 1,157 1,336 3,300 Less: Unrealized investment income, net of noncontrolling interests (8,309) (6,919) (15,604) Non-cash carried interest compensation (48) 52 (1,306) Adjusted Pre-Tax Income 137,057 124,493 157,359 Less: Adjusted income taxes (3) (33,853) (30,127) (38,553) Adjusted Net Income $ 103,204 $ 94,366 $ 118,806 Adjusted EBITDA Adjusted Net Income $ 103,204 $ 94,366 $ 118,806 Plus: Adjusted income taxes (3) 33,853 30,127 38,553 Depreciation expense 1,383 1,540 1,688 Interest expense 23,745 23,314 20,084 Adjusted EBITDA $ 162,185 $ 149,347 $ 179,131 ____________ (1) Represents 2023 and 2022 expenses related to contemplated corporate transactions and 2021 expenses related to a debt offering, other contemplated corporate transactions and other public company transition expenses.
However, the ability of GCMH to make such distributions is subject to its operating results, cash requirements and financial condition, restrictive covenants in our debt instruments and applicable Delaware law.
As a holding company, we are dependent upon the ability of GCMH to make distributions to its members, including us. However, the ability of GCMH to make such distributions is subject to its operating results, cash requirements and financial condition, restrictive covenants in our debt instruments and applicable Delaware law.
The Tax Receivable Agreement requires us to pay 85% of the amount of these and certain other tax benefits, if any, that we realize (or are deemed to realize in certain circumstances) to the TRA Parties. As of December 31, 2022, the amount payable to related parties pursuant to the Tax Receivable Agreement was $55.4 million.
The Tax Receivable Agreement requires us to pay 85% of the amount of these and certain other tax benefits, if any, that we realize (or are deemed to realize in certain circumstances) to the TRA Parties.
As of December 31, 2022, $45.5 million remained available under our stock repurchase plan. We review our capital return plan on an on-going basis, considering our financial performance and liquidity position, investments required to execute our strategic plans and initiatives, acquisition opportunities, the economic outlook, regulatory changes and other relevant factors.
We review our capital return plan on an on-going basis, considering our financial performance and liquidity position, investments required to execute our strategic plans and initiatives, acquisition opportunities, the economic outlook, regulatory changes and other relevant factors.
Net Cash Provided by (Used in) Financing Activities Net cash provided by (used in) financing activities was $(215.1) million and $(251.3) million for the years ended December 31, 2022 and 2021 , respectively.
Net Cash Used in Financing Activities Net cash used in financing activities was $(113.7) million and $(215.1) million, for the years ended December 31, 2023 and 2022, respectively.
Summary of Non-GAAP Financial Measures Year Ended December 31, 2022 2021 2020 (in thousands) Revenues Private markets strategies $ 197,267 $ 175,447 $ 149,990 Absolute return strategies 159,134 165,397 152,349 Management fees, net (1) 356,401 340,844 302,339 Administrative fees and other operating income 4,121 6,523 7,586 Fee-Related Revenue 360,522 347,367 309,925 Less: Cash-based employee compensation and benefits, net (2) (158,875) (159,791) (158,194) General, administrative and other, net (1,3) (73,134) (67,175) (56,662) Fee-Related Earnings 128,513 120,401 95,069 Incentive fees: Performance fees 2,623 51,947 52,726 Carried interest 72,544 121,906 58,924 Incentive fee related compensation and NCI: Cash-based incentive fee related compensation (11,001) (28,002) (11,454) Carried interest compensation, net (4) (41,868) (69,079) (34,970) Carried interest attributable to noncontrolling interests (8,411) (21,304) (16,089) Realized investment income, net of amount attributable to noncontrolling interests in subsidiaries (5) 4,699 1,496 — Interest income 787 18 377 Other (income) expense (79) 60 147 Depreciation 1,540 1,688 2,314 Adjusted EBITDA 149,347 179,131 147,044 Depreciation (1,540) (1,688) (2,314) Interest expense (23,314) (20,084) (23,446) Adjusted Pre-Tax Income 124,493 157,359 121,284 Adjusted income taxes (6) (30,127) (38,553) (30,321) Adjusted Net Income $ 94,366 $ 118,806 $ 90,963 ____________ (1) Excludes fund reimbursement revenue of $10.8 million, $10.4 million and $8.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Summary of Non-GAAP Financial Measures Year Ended December 31, 2023 2022 2021 (in thousands) Revenues Private markets strategies $ 214,338 $ 197,267 $ 175,447 Absolute return strategies 146,550 159,134 165,397 Management fees, net (1) 360,888 356,401 340,844 Administrative fees and other operating income 4,652 4,121 6,523 Fee-Related Revenue 365,540 360,522 347,367 Less: Cash-based employee compensation and benefits, net (2) (149,327) (158,875) (159,791) General, administrative and other, net (1,3) (76,271) (73,134) (67,175) Fee-Related Earnings 139,942 128,513 120,401 Incentive fees: Performance fees 15,313 2,623 51,947 Carried interest 49,590 72,544 121,906 Incentive fee related compensation and NCI: Cash-based incentive fee related compensation (15,628) (11,001) (28,002) Carried interest compensation, net (4) (28,553) (41,868) (69,079) Carried interest attributable to noncontrolling interests (5,095) (8,411) (21,304) Realized investment income, net of amount attributable to noncontrolling interests in subsidiaries (5) 3,103 4,699 1,496 Interest income 2,021 787 18 Other (income) expense 109 (79) 60 Depreciation 1,383 1,540 1,688 Adjusted EBITDA 162,185 149,347 179,131 Depreciation (1,383) (1,540) (1,688) Interest expense (23,745) (23,314) (20,084) Adjusted Pre-Tax Income 137,057 124,493 157,359 Adjusted income taxes (6) (33,853) (30,127) (38,553) Adjusted Net Income $ 103,204 $ 94,366 $ 118,806 ____________ (1) Excludes fund reimbursement revenue of $14.6 million, $10.8 million and $10.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Year Ended December 31, 2022 2021 2020 (in thousands) Revenues Management fees $ 367,242 $ 351,216 $ 310,745 Incentive fees 75,167 173,853 111,650 Other operating income 4,121 6,523 7,586 Total operating revenues 446,530 531,592 429,981 Expenses Employee compensation and benefits 277,311 333,837 388,465 General, administrative and other 88,907 88,351 84,631 Total operating expenses 366,218 422,188 473,096 Operating income (loss) 80,312 109,404 (43,115) Investment income 10,108 52,495 10,742 Interest expense (23,314) (20,084) (23,446) Other income (expense) 1,436 3,394 (9,562) Change in fair value of warrant liabilities 20,551 7,853 (13,315) Net other income (expense) 8,781 43,658 (35,581) Income (loss) before income taxes 89,093 153,062 (78,696) Provision for income taxes 9,611 10,993 4,506 Net income (loss) 79,482 142,069 (83,202) Less: Net income attributable to redeemable noncontrolling interest — 19,827 14,069 Less: Net income attributable to noncontrolling interests in subsidiaries 6,823 36,912 11,617 Less: Net income (loss) attributable to noncontrolling interests in GCMH 52,839 63,848 (112,937) Net income attributable to GCM Grosvenor Inc. $ 19,820 $ 21,482 $ 4,049 Revenues Year Ended December 31, 2022 2021 2020 (in thousands) Private markets strategies $ 197,267 $ 175,447 $ 149,990 Absolute return strategies 159,134 165,397 152,349 Fund expense reimbursement revenue 10,841 10,372 8,406 Total management fees 367,242 351,216 310,745 Incentive fees 75,167 173,853 111,650 Administrative fees 3,184 5,111 6,775 Other 937 1,412 811 Total other operating income 4,121 6,523 7,586 Total operating revenues $ 446,530 $ 531,592 $ 429,981 84 Management fees increased $16.0 million, or 5%, to $367.2 million, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Year Ended December 31, 2023 2022 2021 (in thousands) Revenues Management fees $ 375,444 $ 367,242 $ 351,216 Incentive fees 64,903 75,167 173,853 Other operating income 4,652 4,121 6,523 Total operating revenues 444,999 446,530 531,592 Expenses Employee compensation and benefits 356,044 277,311 333,837 General, administrative and other 100,801 88,907 88,351 Total operating expenses 456,845 366,218 422,188 Operating income (loss) (11,846) 80,312 109,404 Investment income 11,640 10,108 52,495 Interest expense (23,745) (23,314) (20,084) Other income 1,008 1,436 3,394 Change in fair value of warrant liabilities 1,429 20,551 7,853 Net other income (expense) (9,668) 8,781 43,658 Income (loss) before income taxes (21,514) 89,093 153,062 Provision for income taxes 7,692 9,611 10,993 Net income (loss) (29,206) 79,482 142,069 Less: Net income attributable to redeemable noncontrolling interest — — 19,827 Less: Net income attributable to noncontrolling interests in subsidiaries 5,033 6,823 36,912 Less: Net income (loss) attributable to noncontrolling interests in GCMH (47,013) 52,839 63,848 Net income attributable to GCM Grosvenor Inc. $ 12,774 $ 19,820 $ 21,482 Revenues Year Ended December 31, 2023 2022 2021 (in thousands) Private markets strategies $ 214,338 $ 197,267 $ 175,447 Absolute return strategies 146,550 159,134 165,397 Fund expense reimbursement revenue 14,556 10,841 10,372 Total management fees 375,444 367,242 351,216 Incentive fees 64,903 75,167 173,853 Administrative fees 3,570 3,184 5,111 Other 1,082 937 1,412 Total other operating income 4,652 4,121 6,523 Total operating revenues $ 444,999 $ 446,530 $ 531,592 Management fees increased $8.2 million, or 2%, to $375.4 million, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Interest expense also includes (1) the impact of qualifying effective cash flow hedges and (2) the amortization of unrealized gains or losses on interest rate swaps that initially qualified for hedge accounting and were subsequently terminated. The unrealized gains or losses are reclassified from accumulated other comprehensive income into interest expense over the original life of the swap.
Interest expense also includes (1) the impact of qualifying effective cash flow hedges and (2) the amortization of realized gains or losses on interest rate swaps that initially qualified for hedge accounting and were subsequently terminated.
Our definition of FPAUM is not based on any definition that is set forth in the agreements governing the customized separate accounts or specialized funds that we manage. 86 Year Ended December 31, 2022 (in millions) Private Markets Strategies Absolute Return Strategies Total Fee-paying AUM Balance, beginning of period $ 33,080 $ 25,575 $ 58,655 Contributions 5,859 571 6,430 Withdrawals (167) (2,464) (2,631) Distributions (1,436) (31) (1,467) Change in market value (85) (1,562) (1,647) Foreign exchange and other (375) (109) (484) Balance, end of period $ 36,876 $ 21,980 $ 58,856 Year Ended December 31, 2021 (in millions) Private Markets Strategies Absolute Return Strategies Total Fee-paying AUM Balance, beginning of period $ 27,839 $ 24,130 $ 51,969 Contributions 7,015 2,316 9,331 Withdrawals (28) (2,137) (2,165) Distributions (2,663) (319) (2,982) Change in market value 596 1,646 2,242 Foreign exchange and other 321 (61) 260 Balance, end of period $ 33,080 $ 25,575 $ 58,655 Contracted, not yet fee-paying AUM represents limited partner commitments which are expected to be invested and begin charging fees over the ensuing five years.
Our definition of FPAUM is not based on any definition that is set forth in the agreements governing the customized separate accounts or specialized funds that we manage. 87 Private Markets Strategies Absolute Return Strategies Total Fee-paying AUM (in millions) Balance as of December 31, 2021 $ 33,080 $ 25,575 $ 58,655 Contributions 5,859 571 6,430 Withdrawals (167) (2,464) (2,631) Distributions (1,436) (31) (1,467) Change in market value (85) (1,562) (1,647) Foreign exchange and other (375) (109) (484) Balance as of December 31, 2022 $ 36,876 $ 21,980 $ 58,856 Contributions 4,485 497 4,982 Withdrawals (205) (2,365) (2,570) Distributions (1,006) (167) (1,173) Change in market value 239 1,583 1,822 Foreign exchange and other (120) (114) (234) Balance as of December 31, 2023 $ 40,269 $ 21,414 $ 61,683 Contracted, not yet fee-paying AUM (“CNYFPAUM”) represents limited partner commitments which are expected to be invested and begin charging fees over the ensuing five years.
As of December 31, 2022, we had $85.2 million of cash and cash equivalents and available borrowing capacity of $48.2 million under our Revolving Credit Facility.
As of December 31, 2023, we had $44.4 million of cash and cash equivalents and available borrowing capacity of $50.0 million under our Revolving Credit Facility.
For the years ended December 31, 2022 and December 31, 2021, we spent $6.4 million and $6.9 million, respectively, to reduce Class A shares to be issued to employees in satisfaction of associated tax obligations in connection with the settlement of RSUs; $2.6 million and $1.3 million, respectively, to repurchase the Company’s outstanding warrants to purchase Class A common stock; and $26.4 million and $0.9 million, respectively, to repurchase shares of Class A common stock.
For the years ended December 31, 2023 and 2022 , we spent $25.8 million and $6.4 million, respectively, to reduce Class A shares to be issued to employees to satisfy tax obligations in connection with the settlement of RSUs; and $4.5 million and $26.4 million, respectively, to repurchase shares of Class A common stock.
The following table shows reconciliations of Adjusted EBITDA to Fee-Related Earnings for the years ended December 31, 2022, 2021 and 2020, respectively: 92 Year Ended December 31, 2022 2021 2020 (in thousands) Adjusted EBITDA $ 149,347 $ 179,131 $ 147,044 Less: Incentive fees (75,167) (173,853) (111,650) Depreciation expense (1,540) (1,688) (2,314) Other non-operating expense (708) (78) (524) Realized investment income, net of amount attributable to noncontrolling interests in subsidiaries (1) (4,699) (1,496) — Plus: Incentive fee-related compensation 52,869 97,081 46,424 Carried interest attributable to redeemable noncontrolling interest holder — 8,059 7,751 Carried interest attributable to other noncontrolling interest holders, net 8,411 13,245 8,338 Fee-Related Earnings $ 128,513 $ 120,401 $ 95,069 ____________ (1) Investment income or loss is generally realized when the Company redeems all or a portion of its investment or when the Company receives or is due cash, such as a from dividends or distributions.
The following table shows reconciliations of Total Operating Revenues to Fee-Related Revenue for the years ended December 31, 2023, 2022 and 2021, respectively: 93 Year Ended December 31, 2023 2022 2021 (in thousands) Fee-Related Revenue Total Operating Revenues $ 444,999 $ 446,530 $ 531,592 Less: Incentive fees (64,903) (75,167) (173,853) Fund reimbursement revenue (14,556) (10,841) (10,372) Fee-Related Revenue $ 365,540 $ 360,522 $ 347,367 The following table shows reconciliations of Adjusted EBITDA to Fee-Related Earnings for the years ended December 31, 2023, 2022 and 2021, respectively: Year Ended December 31, 2023 2022 2021 (in thousands) Adjusted EBITDA $ 162,185 $ 149,347 $ 179,131 Less: Incentive fees (64,903) (75,167) (173,853) Depreciation expense (1,383) (1,540) (1,688) Other non-operating expense (2,130) (708) (78) Realized investment income, net of amount attributable to noncontrolling interests in subsidiaries (1) (3,103) (4,699) (1,496) Plus: Incentive fee-related compensation 44,181 52,869 97,081 Carried interest attributable to redeemable noncontrolling interest holder — — 8,059 Carried interest attributable to other noncontrolling interest holders, net 5,095 8,411 13,245 Fee-Related Earnings $ 139,942 $ 128,513 $ 120,401 ____________ (1) Investment income or loss is generally realized when the Company redeems all or a portion of its investment or when the Company receives or is due cash, such as a from dividends or distributions.
In addition to the trends discussed above, we believe the following factors, among others, will influence our future performance and results of operations: Our ability to retain existing investors and attract new investors in our funds.
Finally, the opportunities in private markets continue to expand as firms raise new funds and launch new vehicles and products to access private markets across the globe. 79 In addition to the trends discussed above, we believe the following factors, among others, will influence our future performance and results of operations: Our ability to retain existing investors and attract new investors in our funds.
Expenses Employee Compensation and Benefits Year Ended December 31, 2022 2021 2020 (in thousands) Cash-based employee compensation and benefits $ 160,522 $ 162,901 $ 165,830 Equity-based compensation 30,721 44,190 — Partnership interest-based compensation 31,811 27,671 172,358 Carried interest compensation 41,920 67,773 34,259 Cash-based incentive fee related compensation 11,001 28,002 11,454 Other non-cash compensation 1,336 3,300 4,564 Total employee compensation and benefits $ 277,311 $ 333,837 $ 388,465 Employee compensation and benefits decreased $56.5 million, or 17%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Expenses Employee Compensation and Benefits Year Ended December 31, 2023 2022 2021 (in thousands) Cash-based employee compensation and benefits $ 156,153 $ 160,522 $ 162,901 Equity-based compensation 50,667 30,721 44,190 Partnership interest-based compensation 103,934 31,811 27,671 Carried interest compensation 28,505 41,920 67,773 Cash-based incentive fee related compensation 15,628 11,001 28,002 Other non-cash compensation 1,157 1,336 3,300 Total employee compensation and benefits $ 356,044 $ 277,311 $ 333,837 Employee compensation and benefits increased $78.7 million, or 28%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
The Tax Receivable Agreement makes certain simplifying assumptions regarding the determination of the tax savings that we realize or are deemed to realize from applicable tax attributes (including use of an assumed state and local income tax rate), which may result in payments pursuant to the Tax Receivable Agreement in excess of those that would result if such assumptions were not made and therefore in excess of 85% of our actual tax savings. 99 The actual increases in tax basis arising from our acquisition of interests in GCMH, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending on a number of factors, including, but not limited to, the price of our Class A common stock at the time of the purchase or exchange, the timing of any future exchanges, the extent to which exchanges are taxable, and the amount and timing of our income and the tax rates then applicable.
The actual increases in tax basis arising from our acquisition of interests in GCMH, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending on a number of factors, including, but not limited to, the price of our Class A common stock at the time of the purchase or exchange, the timing of any future exchanges, the extent to which exchanges are taxable, and the amount and timing of our income and the tax rates then applicable.
(6) Reflects a corporate and blended statutory effective tax rate of 24.2% applied to Adjusted Pre-Tax Income for the year ended December 31, 2022, of 24.5% for the year ended December 31, 2021 and of 25.0% for the year ended December 31, 2020.
(6) Represents corporate income taxes at a blended statutory effective tax rates of 24.7%, 24.2% and 24.5% applied to Adjusted Pre-Tax Income for the years ended December 31, 2023, 2022 and 2021, respectively.
(3) Reflects a corporate and blended statutory effective tax rate of 24.2% applied to Adjusted Pre-Tax Income for the year ended December 31, 2022, of 24.5% for the year ended December 31, 2021 and of 25.0% for the year ended December 31, 2020.
(3) Represents corporate income taxes at a blended statutory effective tax rates of 24.7%, 24.2% and 24.5% applied to Adjusted Pre-Tax Income for the years ended December 31, 2023, 2022 and 2021, respectively.
Certain employees and former employees are also entitled to a portion of the carried interest and performance fees realized from certain GCM Funds, which is payable upon a realization of the carried interest or performance fees.
The Company recognizes compensation expense attributable to the RSUs on a straight-line basis over the requisite service period, which is generally the vesting period. Certain employees and former employees are also entitled to a portion of the carried interest and performance fees realized from certain GCM Funds, which is payable upon a realization of the carried interest or performance fees.

… 70 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+1 added−1 removed11 unchanged
Biggest changeThe Term Loan Facility accrues interest at 2.50% over the LIBOR, subject to a 0.50% LIBOR floor. For the year ended December 31, 2022, the weighted average interest rate for our Term Loan Facility was 4.27%. Some tenors of LIBOR were discontinued on December 31, 2021.
Biggest changeFor the year ended December 31, 2023, the weighted average interest rate for our Term Loan Facility was 7.59%.
Our management fees from our specialized funds and customized separate accounts attributable to our private markets strategies are not significantly affected by changes in fair value as the management fees are not generally based on the value of the specialized funds or 100 customized separate accounts, but rather on the amount of capital committed or invested in the specialized funds or customized separate accounts, as applicable. • Incentive fees from our specialized funds and customized separate accounts are not materially affected by changes in the fair value of unrealized investments because they are based on realized gains and subject to achievement of performance criteria rather than on the fair value of the specialized fund’s or customized separate account’s assets prior to realization.
Our management fees from our specialized funds and customized separate accounts attributable to our private markets strategies are not significantly affected by changes in fair value as the management fees are not generally based on the value of the specialized funds or customized separate accounts, but rather on the amount of capital committed or invested in the specialized funds or customized separate accounts, as applicable. • Incentive fees from our specialized funds and customized separate accounts are not materially affected by changes in the fair value of unrealized investments because they are based on realized gains and subject to achievement of performance criteria rather than on the fair value of the specialized fund’s or customized separate account’s assets prior to realization.
Our general partner investments include unique underlying portfolio investments with no significant concentration in any industry or country outside of the United States. • Our management fees from our absolute return strategies are typically based on the NAV of those funds, and therefore the amount of fees that we may charge will increase or decrease in direct proportion to the effect of changes in the fair value of the fund’s investments.
Our general partner investments include unique underlying portfolio investments with no significant concentration in any industry or country outside of the United States. 101 • Our management fees from our absolute return strategies are typically based on the NAV of those funds, and therefore the amount of fees that we may charge will increase or decrease in direct proportion to the effect of changes in the fair value of the fund’s investments.
Based on the floating rate component of our Term Loan Facility and excluding any impact of interest rate hedges as of December 31, 2022, we estimate that a 100 basis point increase in interest rates would result in increased interest expense of $3.9 million over the next 12 months.
Based on the floating rate component of our Term Loan Facility and excluding any impact of interest rate hedges as of December 31, 2023, we estimate that a 100 basis point increase in interest rates would result in increased interest expense of $3.9 million over the next 12 months.
We had $6.5 million of deferred incentive fee revenue on our Consolidated Statements of Financial Condition as of December 31, 2022 . Minor decreases in underlying fair value would not affect the amount of deferred incentive fee revenue subject to clawback.
We had $5.6 million of deferred incentive fee revenue on our Consolidated Statements of Financial Condition as of December 31, 2023 . Minor decreases in underlying fair value would not affect the amount of deferred incentive fee revenue subject to clawback.
The ERMC aims to identify, assess, monitor and mitigate such key enterprise risks at the corporate, business unit and fund level. Senior management reports to the audit committee of the Board of Directors on the agenda of risk topics evaluated by the ERMC. 101
The ERMC aims to identify, assess, monitor and mitigate such key enterprise risks at the corporate, business unit and fund level. Senior management reports to the audit committee of the Board of Directors on the agenda of risk topics evaluated by the ERMC. 102
We do not possess significant assets in foreign countries in which we operate or engage in material transactions in currencies other than the U.S. dollar. Therefore, changes in exchange rates are not expected to materially impact our consolidated financial statements. Interest Rate Risk As of December 31, 2022, we had $393.0 million of borrowings outstanding under our Term Loan Facility.
We do not possess significant assets in foreign countries in which we operate or engage in material transactions in currencies other than the U.S. dollar. Therefore, changes in exchange rates are not expected to materially impact our consolidated financial statements. Interest Rate Risk As of December 31, 2023, we had $389.0 million of borrowings outstanding under our Term Loan Facility.
Removed
Although we expect that the capital and debt markets will cease to use LIBOR as a benchmark in the near future and the administrator of LIBOR has announced its intention to extend the publication of most tenors of LIBOR for U.S. dollars through June 30, 2023, we cannot predict whether or when LIBOR will actually cease to be available.
Added
The Term Loan Facility accrued interest at 2.50% over the LIBOR, subject to a 0.50% LIBOR floor through June 30, 2023 and defaulted to Term SOFR plus a Benchmark Replacement Adjustment of 0.11% on July 1, 2023 at the Benchmark Transition Event as discussed in Note 14 in the Notes Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K.

Other GCMG 10-K year-over-year comparisons