Good morning, everyone. Thank you for joining us. We've got a really, really, what I call a cool company, Grosvenor. First, Adam Klaber, obviously with William Blair. Real quick compliance, please see our disclosures for any compliance or that sort of stuff. Grosvenor is clearly an industry leader and a really differentiated model with showing a great track record of really nice compounding growth over time. We think the future, as they really build out the different segments, looks really, really good. We're pleased to have Michael Sacks, CEO. Michael, do you want to come up? Thank you.
Thank you. Thank you. Thanks to everybody at William Blair for having us out. It's a great day for us, and it's very close to home, so it's nice and easy. I got to brighten the mood here on a very gloomy morning outside, so we'll see if we can make it lively. Let me see if I can figure out how this works. Tell me what I'm doing here. This is not exactly the way I'm going to make it lively. Do we want you want me just to give you a cue to do it, or? I'm pushing the forward arrow. Is that right? Okay, there we go. All right. GCM Grosvenor, our ticker is GCMG. We are a 54-year-old firm headquartered here in Chicago. Offices in New York and London and Hong Kong, Tokyo, Seoul.
I think one of the most important aspects of our story, and I think it's a really relevant aspect. We manage $82 billion across the broad range of alternative investment strategies, largely overwhelmingly institutional client base. We'll talk all about how we're built. One of the most important points I think I can make and that I would like for all of you to keep in the back of your minds is that the amount of evolution and change that we've seen in the alternative investment universe, that business, it's pretty much incomprehensible. You go back, I started in the late 1980s, got to Grosvenor in 1990. We were $225 million. We had six people. It was unsettled law whether institutions and foundations and endowments were allowed to invest in distressed bonds, were allowed to invest in hedged strategies where there was short selling.
It was truly not an industry. It was not a category. It was not an asset class. Nothing was on the efficient frontier. The evolution from that time, I tell the story that I went to work for an older man who had founded the firm in the 1970s. He was a real visionary. He did have a real vision of the future of alternatives, and particularly absolute return strategies, liquid markets alternatives. He was not a real business guy. I described it when I got there. It was a 20-year-old startup. We thought we could see these strategies end up on the efficient frontier. We were $225 million. People would ask in a meeting, "How big do you think you can be?" Track record was great.
How big do you think you can be?" He'd say, "Oh, I think we can manage $500 million or a billion." And I would say, "Dick, you can't say that because you literally sound nutty if you say you think we can be that big. And we lose credibility when you say that. Say, I don't know, maybe we could be 50% bigger or something. Just don't scare people away." I think nobody saw. Dick saw. Dick had vision. I don't think anybody saw where the alts would go, that we'd be managing 20-plus % of endowments, and every one of the strategies would be on the efficient frontier and multiple implementation methods. Our business has evolved with that. One of the things we've been able to do since 1990 is evolve as the strategy set, as the marketplace, as the investor universe has evolved.
I lead with that. I start with that because 10 years from now, the world in our space is going to be different than it is today. We have a proven track record of evolving with that universe. We were one of seven firms back then. There was nobody doing what we were doing. We have a proven track record of being able to grow with this space, grow with the industry, evolve with the space, evolve with the industry, and we will continue to do that. I think that's important. I just want to lead with that. We are a solutions provider. That means that for 71% of our AUM, we sit down with clients. We structure portfolio objectives and constraints with clients, and we enter into a high-touch relationship with clients.
It's not like we're giving them a fund document and receiving a wire transfer, quarterly letter, and one annual general meeting. It's a real relationship. It ends up making for very sticky, very long-term client relationships. I think we talk a little bit later about the average tenure of our top clients and things like that. It is an approach we adopted in the 90s. We did it simply because we were trying to build the business, and we thought it was in the best interest of clients to do that. We thought that was the best deal for the clients. The best structural relationship was to have this separate account, let us lead by example on that separate account, let them leverage our resources on their own direct investing activities in the space.
It turned out that we thought, initially, you could get this intermediary or something. It turned out as sort of super sticky, super high-value add in terms of the moat and the client relationship and the depth of the client relationship. I think that is a distinguishing factor. We have grown our specialized fund business significantly. It is 30% of AUM today, and it is growing fast. It has a high growth rate. That is good business. It is probably higher average fee business, and it is probably a bit higher margin business because there is less sort of support work associated with the specialized funds, and it is growing nicely. We have been fortunate that our successor specialized funds in the different verticals that we have have been bigger than the prior fund. That is all growing.
We're getting re-ups from the existing investors, and we're adding investors. On the strategy side, we are open architecture across the entire breadth of the alternative strategy. So it's real assets, infrastructure, real estate, private equity, private credit, hedge funds. We will invest open architecture outsource where we'll allocate capital externally. We will invest in secondaries. We will invest in large co-invest business, large and fast-growing co-invest approaches in all of those strategies. We have direct investment efforts in all of those strategies. Our theory, again, was be in a position to give the clients what they want to build these portfolios for the clients. It's a very interesting, I think, skill set. It's a little bit of a cultural thing. It's not, "Here's a fund, invest in the fund." It's sort of relationship.
I'm going to touch on the individual investor market and the opportunity there in a bit. I think that core skill set of ours is going to end up providing real return for our firm in terms of how we work with the wirehouses, how we work with the RIAs and the independent broker-dealers, and I think even some of the insurers. I think that that ability to craft solutions and be a partner is going to end up being a big deal in that individual investor space, just as it's been a big deal for us in the institutional space. Let's see if this slide is just a little slide to just how we've performed as a public company. We came public in the fourth quarter of 2020. We did that through a SPAC merger. Don't throw anything at me.
Don't give me a hard time for that. We are pretty much almost officially not a SPAC anymore. I think we hit the five-year mark, and that's behind us. There were reasons, if anybody wants to know later, happy to talk about them that we did that. That's when we came public. We've had very nice and very consistent growth since we've come public as a firm. We've grown our AUM, which is ultimately what drives our earnings power. Our private markets have grown at a very high rate. We've shifted our capital towards what we call direct-oriented strategies. That's secondaries, co-i and direct invest, which are going to be higher fee and higher margin strategies for us. We've been able to grow our margins, and we still think that we have operating leverage in those margins.
We have significantly grown our carried interest asset and our carried interest earnings power. This is something that I think is also worth a specific mention because we have been in a period of time where transaction activity has been muted for a few years, and you have not seen revenue coming off that carry asset to drive adjusted EBITDA and adjusted net income the way that any of you in the room would ever model it. We have had a 400-some, what is it, $415 million carry asset. That is the firm's carry asset. One of the comp pools for the team is carry. The team has some. That is just the firm share. That is a significant chunk of the overall. It is right around half, a little under half of the overall carry asset.
That $400 million-ish asset, which is right around a little over $2 a share on a $12.50 stock price, has only yielded about 5% from a revenue perspective over the last few years. Nobody would model an asset like that as a net asset value in the ground at the last mark. That means liquidation value of all the underlying partnerships, all the underlying positions, $414 million to the firm. Nobody would model that as a 5% yield. Nobody would model that as a 20-year kind of runoff. Your typical sort of runoff on something like that is much faster. Our revenue from that line item has been depressed for the last several years as we have seen limited transaction activity post the rise in rates. That will change at some point. It just will. It is a question of when.
Importantly, we're adding to the value of that asset in terms of what we call dry powder carry or carry at work every year. There is an amount of carry at work behind that. That is in the money liquidation value. We have carry that is working for us, but not yet in the money because the money was raised in the last few years. Maybe half of it has been deployed, and it has not yet been marked up. There is a huge asset behind that. I'll show you a slide in a little bit where you can see what that asset was, $133 million. We collected, I do not know, $85-$90 million of the $133 million. As the $133 million ran down by, call it, $90 million, we screwed that asset to $415 million.
That same thing, I think, will happen where we'll collect on the $415, but it'll still be a bigger asset five years out than it is today. There is a lot of power there that we're not just we're waiting for. We do not control that. Our financial performance has been good. We have it here both on the bottom from when we went public and on the top just the last year. We had a good first quarter of 2025, and we have had good solid growth across the board since we have come public as a company. I should mention probably that we are significant shareholders in our own stock. We own 70-plus % of the economics of the stock. We are completely aligned with investors in our stock. This is the solutions business.
These are some of the statistics I was talking about earlier where our average relationship, and you see down in the middle and the bottom, average relationship with our separate account clients is of our top 25 clients is 15 years. We have clients in that top 25 that we go back to the late 1990s with. We have worked for them. As I mentioned, it becomes very sticky, a very solid moat. We did not necessarily see that in the 90s when we embraced this approach. We thought we could get disintermediated. Knowledge transfer was part of what people were looking for. It turns out you are sort of the institutional memory for these giant institutions. One of the points that I want to make on this solutions page, for some reason, people hear solutions and hear separate accounts.
I think they think they are smaller clients, maybe clients who don't have the staffing or the capability to put these programs in place themselves. That's actually not the case at all. Our clients in the solutions space, these are huge clients. These are the state of Texas and CalPERS and Texas Teachers and CalPERS and the state of New York and Pennsylvania and sovereign wealth funds around the world. They are huge clients who find value in that separate account relationship where they have a stable partner as almost, I think, like the base of a pyramid for a particular approach within a strategy.
I like to point that out because I think sometimes we think people are surprised when they realize these are fancy, sophisticated clients that have their own full staff, pursue direct investment activities on their own, for sure have fund allocation efforts on their own, and they see real value in working with a firm like ours. We're not the only one, Hamilton Lane, StepStone. That place where we have much better valuation metrics than those other guys. We're not the only ones. That space is a space that delivers a lot of value in different ways for the clients, and they like it, and it's growing. It's going to still grow in the institutional world. Important to the lower on the right, over half of our clients are invested with us in more than one strategy.
I mentioned earlier all the different strategies we have and all the different methods of implementation that we have. Over 50% of our clients are working with us in more than one strategy. That means we still have 50% to go where we can grow in a different strategy. That number has grown a tremendous amount over the last decade. I think it will continue to grow. I do not know the number specifically, but it would be higher of clients who are multiple approaches within a strategy. They are a primary client, meaning we allocate on their behalf. They are a secondary client, and they are a co-invest client, all within private equity. If you look at how we are being utilized by our client base and how we are being embraced and adopted by our client base, there is really a lot of stickiness. There is a lot of penetration there.
The clients find a lot of ways to add value. One of the things that is happening in the institutional world for alternatives is kind of a, you can see a desire for kind of a smaller number of large trusted relationships. We think we benefit from that to the extent people want to chunk down their relationships a little bit and do more with a smaller number of people. We think that's good for us, and we probably have benefited from that already, and we think we continue to. This whole space, this whole institutional space is projected to grow. I do not remember the numbers in the latest survey, but it is like 70% or more of the institutional investors that are in alts that say they are increasing their alts exposure.
This is this core business that we have that we've done well with, that we've grown over the last five years as a public company that we think there is a great value proposition for the clients. That core business is growing. We'll talk about some of the other avenues for growth in a minute. This chart, I don't know if you have these presentations. You can take them home and out or can get them online. This just shows the value of an initial sale because you get we have like a, I think it's slightly north of 90% re-up rates. When we make a sale, there's an investment period when the money's fully invested, the initial capital fully invested. We go back and say, "Okay, you're out of capital. It's time to re-up for the next set of vintage," essentially.
90% of the clients that we make an initial sale to re-up. 85% of the 90 that re-up, re-up again. When you lay it on top of each other, and by the way, they re-up at a higher rate. Their portfolios have grown in the three, four-year period of time. Our performance hopefully has accreted during that three, four-year period of time. When they re-up, they re-up at a higher rate. They start at 100, they re-up at 130, and you get 90% of them. When you lay it out, this is what it looks like. Your initial sale ends up being a relationship that grows over a decade and generates fees for a decade and a half or longer. It is very valuable when you think about it in that context.
Sometimes you just look at what happened this year, but when you think about the actual implication of this year going out for the next 12-15 years, it's a pretty powerful model. It's a good business, essentially. That is, I should mention, a frame of mind, which is I just look at our space, and I look at our company, and I think we're growing faster than the indices. I think we've got a fundamentally just better business, cash flow generation, margin, lack of need for a ton of capital, EBITDA to free cash flow conversion, all those things. It's a good business. I think we got a valuation that's lower than the general market with above average business. This is the specialized funds franchises I've talked about.
You see the growth there, and you can see it here both in terms of how we've grown the entire co-mingled fund, private markets co-mingled fund business, which we built from a pretty low level back in 2018, and then how each of the funds have kind of grown over time. That's a decent check on the viability of the franchise, if you will, for the particular verticals. One of the things, we have a business development team that calls on clients. We cover clients at the firm. Business development, investment, senior management touches all the major clients of the firm. We try to have essentially like a distributed management of our top clients. They know the whole firm. They, of course, know the investment people on their account. There's a business development group that services them and stays connected very regularly.
They all know me or our President, Jon Levin, or our CIO, Fred Pollock, our CFO, Pam Bentley. Like everybody kind of gets involved. We try to distribute that relationship. We've worked on culture from the 90s. Nobody owns clients at Grosvenor. We work real hard to not have sandboxes at Grosvenor. It is kind of one firm, and we're all working for that firm and for that common goal. You think about that setup and you think about the cross-selling opportunities, I think it makes a ton of sense. You think about the long-term value of a relationship. We have second and third generation Grosvenor partners working for the same client. I'm one of the only ones left from 1996 when we added a few of these big clients.
We have been able to kind of pass that down. From a business development perspective, on the co-mingled fund page, specialized fund page, we have tried to get our investment vertical leaders, particularly in the specialized funds where it is much less primary allocation and more of the direct-oriented strategies. We have tried to get them focused on actually raising capital. Do not just rely on the BD team. Do not rely on senior management. You all take responsibility for growing your franchises. You get pieces of the carry. You get bonus pool growth when revenues in the vertical grow. We want you all to be thinking like business owners trying to drive and grow your vertical. I think part of what I think happened in the alternative investment space is it started out everybody was a generalist. I was a generalist.
You had to be a generalist. You look at the big New York firms. We did everything. There was no industry. Then you came to a point in time where someone could be just an investor, just a business development person, just this. We have been trying to push a little bit of that back. I think that by doing that, the probability that this chart here continues to go up and to the right is high because these teams are now the fund four close ends, and they start on fund five the next day. That is the culture we are trying to build. I mentioned the long-term tailwinds already. It was 78% that are saying they are going to grow their alts allocation over time. You can see the AUM is just growing at a terrific clip industry-wide.
That's not going to change the value proposition I have talked about. This particular slide is a value proposition in our absolute return strategies. We're in a period of time now where there may be more of a premium on liquidity. We've always viewed absolute return as kind of a stable business that can compound over time, but we don't see huge net flows there, net inflows. It is conceivable. You've probably read about the big secondaries deals that are getting done. People are finding themselves a bit less liquid. There's not been transaction activity to pay returns. We always like having this absolute return strategies business. It's a great cash flow. It's got a terrific DCF value. It intellectually adds a lot of value and strategic value for our direct investment activities for the whole of the firm. At some point, it'll grow pretty good.
With the liquidity premiums, this could be one of those times. Private markets have been going gangbusters, as I think you all know. Real assets within private markets, the real estate, infrastructure, particularly infrastructure, very fast growth right now. Also, private credit, very fast growth right now. I think the way they are growing, it plays to kind of our strengths of being able to give a comprehensive approach, a diversified comprehensive approach. You can get some funds. You can get some direct investing. You can get some co-investing and some secondaries. It makes a lot of sense. We have, as I mentioned, a depressed incentive fee revenue line. We look at what our fee-related earnings are from the management fees. Essentially, what do we think we have turning lights on before you get to performance?
Our performance fee line, our incentive fee line, which is both ARS and carry, and it has, as I mentioned earlier, a lot of upside. This is the big upside story for us. We are not baking this into our numbers for 2025. We are encouraging people to be restrained in how they see this build. The individual investor with huge, huge wealth is massively underallocated to private markets. Where they are allocated to private markets, they are massively under-diversified. The portfolios of high-net-worth clients inside the RIA channel, kind of even inside the wirehouse channel and the IBD channel, they do not look like institutional portfolios today. They are 5% allocated to alternatives instead of 25% plus, maybe 25%-35%.
They have one private equity fund or maybe two instead of a diversified private equity portfolio consciously and intentionally spread across vintages with primary, secondary, and co-invest in it to manage fee. There is just not that level of evolution there. There will be. There is just no question there will be. It will grind forward for a decade. The amount of growth here, I get asked sometimes, "Well, there is Blackstone's been there. Is it too late?" It is so not too late. It is not too late for anyone. I said this in a meeting the other day. I predict that five years from now, there will be some today that is bigger than Grosvenor is today just in this channel. There is going to be a ton of opportunity for anybody.
Mark Rowan at Apollo was talking about how much opportunity there is in this space and how it's not too late for anybody, and it's going to provide tremendous growth and backdrop of growth for the industry. We believe that. We've made some pretty specific steps to do that. We launched a $300 million fund that we're now in market, and we can see it's going to be slow, but it will build. It's grinding every week. It's a little bit going a little more, and you can track who's requesting all your documents. We are building an internal team. We partnered with an external wholesaling team. We are very focused here, and we think this has great upside. We do not want people to get ahead of us on this in terms of their models and things like that.
It is all about, as I said, delivering the institutional experience to individuals. We are public with a goal of doubling our 2023 fee-related earnings by 2028. And we said last quarter on our call, we remain confident in our ability to deliver on that goal. We were a little bit ahead of ourselves last year, so we got off to a good start with regard to that goal. With that, I do not know. We will turn it over to you to close, and we are going to be in a room taking questions after this.
Thank you, Michael. That was fantastic. We will do Q&A at the breakout in the second floor up there.
Thank you.
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