The financial services industry has proven a the growing number of big-name asset managers trying to attract retail investors. GCM Grosvenor, a global alternative asset manager with $80 billion in AUM, is the latest big name to enter the fray. The firm has been offering products to qualified very high net worth investors/buyers for nearly two decades. Now, it has announced launching its first interval fundwhich will allow it to target non-accredited investors.
GCM Grosvenor has partnered with CION Investments, an investment manager with a strong retail distribution channel, to create the CION Grosvenor Infrastructure Fund (CGIF). The fund will invest in assets in the transport, digital, energy, energy transition, supply chain and logistics sectors, as well as infrastructure-adjacent assets.
The two firms are using approximately $300 million in seed capital from a major institutional investor to launch the vehicle, along with an additional cash commitment of approximately $80 million. Prior to the launch of the distribution, the fund will join a portfolio containing $200 million in infrastructure assets currently owned by GCM Grosvenor.
As of 2020, the asset manager has raised $3.1 billion from individual investors globally, with 58% of these funds coming from investors in North America. The figure represents approximately 10% of the firm's total fundraising during that period. Today, according to Jon Levin, the company's president, 5% of GSM Grosvenor's total AUM comes from the private wealth channel through structures such as pooled funds and separate accounts. Until now, however, the money has come mostly from qualified buyers or RIAs investing on behalf of multiple clients.
“Now, obviously, through this infrastructure fund, we're going to have the ability to reach all kinds of investors,” Levin said. “So this is a further step and a further evolution, but it is building on a body of experience and history that has been in place for a long time and a significant part of our business for a long time. We expect it to become more meaningful over time, which will mean continued investment in new product development and continued investment in further distribution resources to help us adequately cover the market, such as through partnerships like we have with CION as well as through our internal capabilities.
As Levin revealed during the firm's third-quarter earnings call, the next phase of the firm's growth plan for the private wealth channel will focus on launching private market range funds that will be accessible to both investors of accredited as well as for non-accredited ones. Products will be sold through RIAs, independent brokers/dealers and wire.
Kevin Buchheit, managing director of GCM Grosvenor, noted this interval funds hold a strong appeal to individual investors below the level of qualified buyers due to features such as 1099 tax reporting, quarterly liquidity of up to 5%, no accreditation requirements and the ability to subscribe daily.
At the same time, the firm felt that infrastructure was one of the best asset classes to pursue in this new venture because of the cash yield component, attractive overall returns, an inflation hedge component and limited correlation with broader markets, Levin added.
“And we think there's a lot of room because it's a less mature area of asset management for more products to be available to investors,” he said. “GCM Grosvenor, with 20 years of experience in infrastructure, is one of the most experienced global players in the space. So we felt the combination of the investment's own characteristics, as well as GCM Grosvenor's experience in infrastructure and the partnership with CION, we're able to offer that in a product in a wrapper that doesn't exist on a large scale in the market. and it creates an interesting opportunity all around.”
In addition to CGIF, Grosvenor's debut in the interval fund space includes serving as investment partner and lead independent manager for Axxes Private Markets Fund (Axxes), a registered interval fund launched by private markets investment firm Axxes Capital Inc. in September. Axxes will focus on the private equity space with a portfolio of direct and secondary access co-investments.