AlTi Global Inc

Previous wording

Amounts and percentages presented throughout our discussion and analysis of financial condition and results of operations may reflect rounded results in thousands (unless otherwise indicated) and consequently, totals may not appear to sum.

Current wording

Amounts and percentages presented throughout our discussion and analysis of the financial condition and results of operations may reflect rounded results in thousands (unless otherwise indicated) and consequently, totals may not appear to sum.

Previous wording

We are a multi-disciplinary financial services business, with a diverse array of investment, advisory, and administrative capabilities with which we serve our clients and investors around the globe; and provide value to our shareholders. Our business is organized into two business segments: Wealth Management and Strategic Alternatives (formerly known as Asset Management):

Current wording

We are a global wealth management firm, with a diverse array of investment, advisory, and administrative capabilities with which we serve our clients and investors; and provide value to our shareholders. Our business is currently organized into two business segments: Wealth Management and Strategic Alternatives (formerly known as Asset Management):

Previous wording

•we manage or advise approximately $71.0 billion in combined assets as of March 31, 2024;

Current wording

•we manage or advise approximately $71.9 billion in combined assets as of June 30, 2024;

Previous wording

Our business is global, with approximately 460 professionals operating in 21 cities in 10 countries across three continents as of March 31, 2024. Following the sales of the FOS and LRA businesses, we will have approximately 410 professionals, and the cities and countries in which we operate will be reduced by one, to reflect our exit from Isle of Man. See Note 3 (Business Combinations and Divestitures).

Current wording

Our business is global, with approximately 430 professionals operating in 20 cities in 9 countries across three continents as of June 30, 2024.

Previous wording

The services that we provide form a complementary ecosystem for our target markets of clients, investors, and businesses, many of whom share common interests and goals that we are able to connect and serve. The complementary nature of our services and a differentiated suite of capabilities positions us well for organic growth across our business lines. Our strategy includes a focus on inorganic growth through acquisitions and investments in talented managers in exchange for a share of future revenues or profits. We also believe we are well positioned to capitalize on global market trends and dynamics that we see facing our world as well as the industry, clients, investors, and businesses we serve.

Current wording

The services that we provide form a complementary ecosystem for our target markets of clients, investors, and businesses, many of whom share common interests and goals that we are able to connect and serve. The complementary nature of our services and a differentiated suite of capabilities position us well for organic growth across our business lines. Our strategy includes a focus on inorganic growth through acquisitions and investments in talented managers in exchange for a share of future revenues or profits. We also believe we are well positioned to capitalize on global market trends and dynamics that we see facing our world as well as the industry, clients, investors, and businesses we serve.

Previous wording

•Distributions from investments are generated from the equity interests we have in the three external managers pursuant to which we are entitled to distributions based on the terms of the respective arrangements. Distributions from each investment will be recorded upon receipt of the distribution. We receive distributions from its External Strategic Managers through our profit or revenue sharing arrangements that are generated through their management and incentive fees based on performance of the underlying investments. The management component of the distributions is recurring in nature, while the incentive portion is more susceptible to impact from exogenous factors.

Current wording

•Distributions from investments are generated from the equity interests we have in the three external managers pursuant to which we are entitled to distributions based on the terms of the respective arrangements. Distributions from each investment will be recorded upon receipt of the distribution. We receive distributions from our External Strategic Managers through our profit or revenue sharing arrangements that are generated through their management and incentive fees based on performance of the underlying investments. The management component of the distributions is recurring in nature, while the incentive portion is more susceptible to impact from exogenous factors.

Previous wording

•Other income or fees include transaction fees from our strategic advisory, corporate advisory, brokerage, and placement agency services. Transaction fees are generally non-recurring in nature, are typically commission based, and are payable on the successful completion of a transaction. Transactions are also susceptible to impact from exogenous factors. However, as is the case with performance and incentive fees, transaction fees provide potential upside to our revenues and, in our view, can be highly accretive to our profitability.

Current wording

•Other income or fees included transaction fees from businesses we have exited, or are in the process of exiting such as strategic advisory, corporate advisory, brokerage, and placement agency services. Transaction fees are generally non-recurring in nature, are typically commission based, and are payable on the successful completion of a transaction. Transactions are also susceptible to impact from exogenous factors.

Previous wording

The fees vary depending upon the level and complexity of client assets and the services being provided. The fee typically covers the investment advisory services and basic estate and wealth planning services. The more complex estate and wealth planning services, as well as our Trustee service, and certain extended family office services, are typically billed separately, as a fixed or time-based amount.

Current wording

The fees vary depending upon the level and complexity of client assets and the services being provided. The fee typically covers investment advisory services and basic estate and wealth planning services. The more complex estate and wealth planning services, as well as our Trustee service, and certain extended family office services, are typically billed separately, as a fixed or time-based amount.

Previous wording

We generate income from managing and advising a private real estate investment fund. Our fees from managing and advising this vehicle are contained in management and advisory contracts relating to the relevant fund and are typically calculated on a sliding scale of percentages of the asset value, market capitalization or the investor capital of the relevant fund as applicable.

Current wording

We earn management fees in our Strategic Alternatives segment through our alternatives platform (compensation for internal fund management and advisory services), private real estate fund management and private real estate recurring fees. The management fees for the alternatives platform are approximately 0.75% to 1.5% of the net asset value of the funds’ underlying investments. In addition, we generate income from managing and advising a private real estate investment fund. Our fees from managing and advising this vehicle are contained in management and advisory contracts relating to the relevant fund and are typically calculated on a sliding scale of percentages of the asset value, market capitalization or the investor capital of the relevant fund as applicable.

Previous wording

As sponsor of private market direct and co-investment transactions, we generate income from debt and equity structures relating to specified real estate investments or investments in other alternative asset classes. Private market fees include arrangement, retainer, management, advisory, performance, acquisition, promote and other associated fees as well as interest arbitrage for debt structures. Arrangement fees are typically 50 to 100 basis points of equity value contributed into a transaction. Acquisition fees are typically payable where there are no agency fees or where there is an off-market transaction sourced by the team. Such acquisition fees are usually in the range of 50 to 100 basis points of the purchase price of the relevant acquisition. The equity structures are typically medium to long-term (three to ten years) closed-ended structures with fees normally ranging between 50 and 175 basis points of the equity value committed or drawn. The debt structure terms are generally between 12 and 36 months. The investment adviser, general partner or other entity entitled to fees in respect of each of our co-investments receives such fees either monthly, quarterly, or annually.

Current wording

As sponsors of private market direct and co-investment transactions, we generate income from debt and equity structures relating to specified real estate investments or investments in other alternative asset classes. Private market fees include arrangement, retainer, management, advisory, performance, acquisition, promote and other associated fees as well as interest arbitrage for debt structures. Arrangement fees are typically 50 to 100 basis points of equity value contributed into a transaction. Acquisition fees are typically payable where there are no agency fees or where there is an off-market transaction sourced by the team. Such acquisition fees are usually in the range of 50 to 100 basis points of the purchase price of the relevant acquisition. The equity structures are typically medium to long-term (three to ten years) closed-ended structures with fees normally ranging between 50 and 175 basis points of the equity value committed or drawn. The debt structure terms are generally between 12 and 36 months. The investment adviser, general partner or other entity entitled to fees in respect of each of our co-investments receives such fees either monthly, quarterly, or annually.

Previous wording

After significant market gains in 2023, Q1 2024 continued the pattern of strong equity market performance. The S&P 500 and the MSCI All Country World Index increased by 10.6% and 8.3% total return, respectively, over the quarter, after rising by 26.3% and 22.8% total return, respectively, for the year 2023. Government fixed income markets in Q1, however, came under modest pressure as yields rose and bond prices fell. The Bloomberg U.S. Aggregate Bond Index declined by 0.8% in Q1 2024, while the Barclays Global Aggregate Index rose a modest 0.1% over the same time frame. While Government bond prices had a more volatile start to the year, it is noteworthy that credit conditions in the US continued to improve with credit spreads — the extra yield over Treasuries that corporate bonds must pay to compensate for extra risk — continued to narrow, resulting in the US High Yield index (iShares IBoxx $HY) index rising by 1.5% over the quarter.

Current wording

After significant market gains in 2023, the first half of 2024 continued the pattern of strong equity market performance. The S&P 500 and the MSCI All Country World Index increased by 15.3% and 11.6 % total return, respectively, over the first half, after rising by 26.3% and 22.8% total return, respectively, for the year 2023. Government fixed income markets over the same time frame, the first half to the end of June, came under modest pressure as generally yields rose and bond prices fell. The U.S. Municipal Bond and U.S. Treasury Indices both declined by 0.5%, while the Barclays Global Aggregate Index rose a modest 0.1% over the same time frame. While government bond prices had a more volatile start to the year, it is noteworthy that credit conditions in the U.S. continued to improve with credit spreads — the extra yield over Treasuries that corporate bonds must pay to compensate for extra risk — continued to narrow, resulting in the U.S. High Yield index (iShares iBoxx $ High Yield Corporate Bond ETF) rising by 2.3% year to date to the end of June 2024.

Previous wording

The catalysts for recent market stock market strength have been a combination of factors, including: the US economy continuing to show solid economic growth, which bodes well for earnings growth as the year progresses. The US stock market also benefits from the trend of generative AI, as close to 30% of its shares are represented by leading technology companies, that are both investing in and likely to continue to benefit from monetization of this innovation over time. There are also signs that other parts of the global economy are recovering, with economic growth improving in China, with Q1 GDP up 5.3% annualized on the quarter. The euro zone economy also grew by more than expected in the first quarter of 2024, buoyed by a return to growth for Germany and strong expansion in Spain. Gross domestic product increased by 0.3% quarter-on-quarter for a 0.5% year-on-year rise, compared with market expectations that both would expand by 0.2%.

Current wording

The catalysts for recent market stock market strength have been a combination of factors, including: the U.S. economy continuing to show solid economic growth, which bodes well for earnings growth as the year progresses. The U.S. stock market as measured by the S&P 500 also benefits from the trend of generative AI, as close to 37% of its shares are represented by leading technology companies, that are both investing in and likely to continue to benefit from monetization of this innovation over time. The largest of these companies, including Nvidia, Microsoft, Alphabet, Meta, Amazon and Apple, also known as the Super Six, accounted for 60% of the gain in the U.S. stock market in the first half. As the year progresses, earnings estimates (as measured by Bloomberg consensus estimates) expect that other parts of the U.S. economy should deliver both positive and accelerating earnings leading to a broadening in market gains.

Previous wording

Our fee-based revenue streams are driven by the value of clients’ portfolio holdings, in the case of our Wealth Management segment or the performance of our varied funds and direct investments in our Strategic Alternatives segment. The overall level of revenues in these businesses, however, does not correlate completely with changes in global equity and fixed income markets.

Current wording

Our fee-based revenue streams are driven by the value of our clients’ portfolio holdings, in the case of our Wealth Management segment or the performance of our varied funds and direct investments in our Strategic Alternatives segment. The overall level of revenues in these businesses, however, does not correlate completely with changes in global equity and fixed income markets.

Previous wording

In our Wealth Management segment, while our client portfolios are well diversified across a range of asset classes and thus are not solely impacted by changes in equities or government bonds, they benefited in the year from the strong performance in the equity and fixed income markets. Client portfolios also include holdings such as gold, credit and hedge funds that also delivered positive returns in the year. Portfolio fluctuations also depend on multiple additional factors that include, but are not limited to, the level and duration of fixed income holdings with short-term money market funds showing limited volatility over the quarter, the level of alternative and private market holdings and the geographic and industry mix of client’s equity assets. We also note that our UHNW client base generally does not need to draw down from their portfolios to support day-to-day living needs and, accordingly, is able to approach portfolio investing with a long-term time horizon. Hence, in terms of behavior, they are less sensitive to short-term changes in market conditions.

Current wording

In our Wealth Management segment, while our client portfolios are well diversified across a range of asset classes and thus are not solely impacted by changes in equities or government bonds, they benefited in the year from the strong performance of our various equity exposures. Client portfolios also include holdings such as gold, credit, infrastructure, and hedge funds that also delivered positive returns in the year. Portfolio fluctuations also depend on multiple additional factors that include, but are not limited to, the level of alternative and private market holdings and the geographic and industry mix of client’s equity assets. We also note that our UHNW client base generally does not need to draw down from their portfolios to support day-to-day living needs and, accordingly, are able to approach portfolio investing with a long-term time horizon. Hence, in terms of behavior, they are less sensitive to short-term changes in market conditions.

Previous wording

In our Strategic Alternatives segment, the majority of our fees are derived from alternative funds which are structured to have low correlation to equity and fixed income markets and in some cases benefit in times of market stress. In particular, our European long-short equity and Asian Credit manager continue to perform well in the first quarter. With respect to incentive fees earned by our event-driven strategy, US GAAP only permits recognition of such fees when they are fully crystallized, which typically occurs in the fourth quarter of each year.

Current wording

In our Strategic Alternatives segment, the majority of our fees are derived from alternative funds which are structured to have low correlation to equity and fixed income markets and in some cases benefit in times of market stress. Our European long-short equity and Asian Credit manager continue to perform well in the first half of the year. With respect to incentive fees earned by our event-driven strategy, US GAAP only permits recognition of such fees when they are fully crystallized, which typically occurs in the fourth quarter of each year.

Previous wording

Still high interest rates continue to have an impact on our public and private real estate assets. The higher cost of capital environment, ongoing increases in costs of construction and generally stagnating real estate prices are negatively impacting some of the real estate segments in which we operate. These declines impact the level of management fees that we earn. In addition, following completion of the sale of LXi REIT Advisors during the first quarter, the level of management fees we earn from public real estate will decline in future periods. On the private real estate side, the more difficult market and interest rate conditions may reduce the ultimate return expected from some of these investments. It is important to note that these assets are utilized in conjunction with longer-term investment strategies and are not subject to daily market pricing. Given the uncertainty in outlook, and the potential for diminution in value at realization, we modified our billing methodology for certain of our private real estate holdings, which will result in lower fees earned, until monetization.

Current wording

The higher cost of capital environment, ongoing increases in construction costs and generally stagnating real estate prices are negatively impacting some of the real estate segments in which we operate. These declines impact the level of management fees that we earn. In addition, following completion of the sale of LXi REIT Advisors during the first quarter, the level of management fees we earn from public real estate will decline in future periods. On the private real estate side, the more difficult market and interest rate conditions may reduce the ultimate return expected from some of these investments. It is important to note that these assets are utilized in conjunction with longer-term investment strategies and are not subject to daily market pricing. Given the uncertainty in outlook, and the potential for diminution in value at realization, we modified our billing methodology for certain of our private real estate holdings, which will result in lower fees earned, until monetization.

Previous wording

We currently do not hedge corporate currency risk associated with client portfolio and investor holdings across global markets. Hence, as we report our revenues in U.S. dollars, the translation impact from changes in the value of currencies outside the U.S. dollar can impact our results in any given financial reporting period.

Current wording

We generally do not hedge investment currency risk associated with client portfolios and investor holdings across global markets. Hence, as we report our revenues in U.S. dollars, the translation impact from changes in the value of currencies outside the U.S. dollar can impact our results in any given financial reporting period.

Previous wording

We believe that the combination of our Wealth Management and Strategic Alternatives segments differentiates us from pure-play firms in both sectors and provides a growing base of recurring and diversified revenues. Since the Business Combination, total AUM/AUA increased approximately 9%, and within our Wealth Management segment, these have grown 26% since the Business Combination.

Current wording

We believe that the combination of our Wealth Management and Strategic Alternatives segments differentiates us from pure-play firms in both sectors and provides a growing base of recurring and diversified revenues. Since the Business Combination, total AUM/AUA increased by approximately 9%, and within our Wealth Management segment, these have grown 26% since the Business Combination.

Previous wording

In the first quarter of 2024, we generated revenues of $50.8 million. We believe these results, generated through a combination of strong market performance and organic client wins, are starting to reflect the power of our franchise, which we believe will continue to flow to an improved bottom line as we look forward to the remainder of 2024. Adjusted earnings before interest, taxes, depreciation, and amortization (“EBITDA”) was $6.8 million for the period ended March 31, 2024.

Current wording

In the first half of 2024, we generated revenues of $100.3 million. We believe these results, generated through a combination of strong market performance and organic client wins, are starting to reflect the power of our franchise, which we believe will continue to flow to an improved bottom line as we look forward to the remainder of 2024. Net income was $12.8 million and adjusted earnings before interest, taxes, depreciation, and amortization (“EBITDA”) was approximately $12.3 million for the six months ended June 30, 2024, respectively.

Previous wording

Our core businesses continue to perform well. Based on the new initiatives undertaken this year and those that we embarked on during 2023, we expect operating expenses to continue to trend downward in 2024. As these cost savings and other growth initiatives take hold next year, we would expect to see the impact of operating leverage drive improvements and greater consistency in our US GAAP results and Adjusted EBITDA. In addition, we believe that we will be able to deploy the capital raised from the investments from Allianz and Constellation to make accretive investments that will benefit our GAAP results and Adjusted EBITDA in 2024, and beyond.

Current wording

Our core businesses continue to perform well. Based on the new initiatives undertaken this year and those that we embarked on during 2023, we expect operating expenses to continue to trend downward in 2024. As these cost savings and other growth initiatives take hold next year, we hope to see the impact of operating leverage-driven improvements and greater consistency in our US GAAP results and Adjusted EBITDA. In addition, we believe that we will be able to deploy the capital raised from the investments from Allianz and Constellation to make accretive investments that will benefit our GAAP results and Adjusted EBITDA in 2024, and beyond.

Previous wording

The following table presents the non-US GAAP financial measures for the periods indicated:

Current wording

The following tables present the non-US GAAP financial measures for the periods indicated:

Previous wording

(a)Add-back of non-cash expense related to awards of Class A Common stock (approved post-transaction).

Current wording

(a)Add-back of non-cash expense related to awards of Class A Common stock (approved post-Business Combination).

Previous wording

(b)Add-back of non-cash expense related to awards of Class A Common stock (approved pre-transaction).

Current wording

(b)Add-back of non-cash expense related to awards of Class A Common stock (approved pre-Business Combination).

Previous wording

(e)Represents the change in unrealized gains/losses related primarily to Investments held at fair value and and the TRA liability.

Current wording

(g)Represents the change in unrealized gains/losses related primarily to the TRA liability.

Previous wording

(g)Represents cost to implement organization change to derive cost synergy.

Current wording

(h)Represents cost to implement organization change to derive cost synergy.

Previous wording

(h)Represents impairment of carried interest/equity method investments.

Current wording

(i)Represents impairment of carried interest/equity method investments.

Previous wording

(i)Represents the amortization of the step-up in equity method investments.

Current wording

(j)Represents the amortization of the step-up in equity method investments.

Previous wording

(j)Represents reported interest, depreciation, amortization, and tax adjustments of the Company's equity method investments.

Current wording

(k)Represents reported interest, depreciation, amortization, and tax adjustments of the Company's equity method investments.

Previous wording

(a)Add-back of non-cash expense related to awards of Class A Common stock (approved post-transaction).

Current wording

(a)Add-back of non-cash expense related to awards of Class A Common stock (approved post-Business Combination).

Previous wording

(b)Add-back of non-cash expense related to awards of Class A Common stock (approved pre-transaction).

Current wording

(b)Add-back of non-cash expense related to awards of Class A Common stock (approved pre-Business Combination).

Previous wording

(e)Represents the change in unrealized gains/losses related primarily to Investments held at fair value and the TRA liability.

Current wording

(e)Represents the change in unrealized gains/losses related primarily to the TRA liability.

Previous wording

(g)Represents cost to implement organization change to derive cost synergy.

Current wording

(h)Represents cost to implement organization change to derive cost synergy.

Previous wording

(h)Represents impairment of carried interest/equity method investments.

Current wording

(i)Represents impairment of carried interest/equity method investments.

Previous wording

(i)Represents the amortization of the step-up in equity method investments.

Current wording

(j)Represents the amortization of the step-up in equity method investments.

Previous wording

(j)Represents reported interest, depreciation, amortization, and tax adjustments of the Company's equity method investments.

Current wording

(k)Represents reported interest, depreciation, amortization, and tax adjustments of the Company's equity method investments.

Previous wording

•assets managed by the Alternatives platform, including by TIG Arbitrage $2.3 billion and $2.4 billion, respectively, and the External Strategic Managers (AUA $5.2 billion and $5.3 billion as of March 31, 2024 and December 31, 2023, respectively);

Current wording

•Assets managed by the alternatives platform, including by TIG Arbitrage (AUM $2.1 billion and $2.4 billion as of June 30, 2024 and December 31, 2023, respectively), and the External Strategic Managers (AUA $5.2 billion and $5.3 billion as of June 30, 2024 and December 31, 2023, respectively);

Previous wording

•Co-investment real estate advisory services, where we include the value of our private market direct and co-investment real estate investments (AUA $9.6 billion and $10.1 billion as of March 31, 2024 and December 31, 2023, respectively); and

Current wording

•Co-investment real estate advisory services, where we include the value of our private market direct and co-investment real estate investments (AUA $8.3 billion and $10.1 billion as of June 30, 2024 and December 31, 2023, respectively); and

Previous wording

The table below presents the change in our total AUM/AUA by strategy and product for our alternatives platform for the periods indicated:

Current wording

The tables below present the change in our total AUM/AUA by strategy and product for our alternatives platform for the three and six months ended June 30, 2024 and June 30, 2023:

Previous wording

Income Tax Expense: Income tax expense consists of taxes paid or payable by our consolidated operating subsidiaries. Certain of our subsidiaries are treated as flow-through entities for federal income tax purposes and, accordingly, are not subject to federal and state income taxes, as such taxes are the responsibility of certain direct and indirect owners of the flow-through entities. However, the flow-through entities are subjected to UBT and other state taxes. A portion of our operations is conducted through domestic and foreign corporations that are subject to corporate level taxes and for which we record current and deferred income taxes at the prevailing rates in the various jurisdictions in which these entities operate.

Current wording

Income Tax Expense: Income tax expense consists of taxes paid or payable by our consolidated operating subsidiaries. Certain of our subsidiaries are treated as flow-through entities for federal income tax purposes and, accordingly, are not subject to federal and state income taxes, as such taxes are the responsibility of certain direct and indirect owners of the flow-through entities. However, the flow-through entities are subjected to UBT and certain other state taxes. A portion of our operations is conducted through domestic and foreign corporations that are subject to corporate level taxes and for which we record current and deferred income taxes at the prevailing rates in the various jurisdictions in which these entities operate.

Previous wording

Management/Advisory fees. The decrease in management and advisory fees of $(0.2) million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was driven primarily by lower management fees in our Strategic Alternatives, reflecting lower AUM in that segment, offset by higher management fees in Wealth Management, in line with higher year over year AUM.

Current wording

Management/Advisory fees. Management and advisory fees were essentially flat compared to the prior period. Lower management fees in Strategic Alternatives, reflecting lower AUM in that segment due to the disposal of LRA on March 6, 2024 and the deconsolidation of AHRA on June 30, 2023, were offset by higher management fees in Wealth Management, primarily due to the acquisition of EEA at the beginning of the quarter and organic growth over the past year, resulting in higher year over year AUM.