Great Elm Group (GEG) Q1 2026: Fee-Paying AUM Climbs 9% as Platform Expansion Accelerates
Great Elm Group’s first quarter saw a decisive shift toward scaling its asset management platform, with fee-paying assets under management (AUM) up 9% and a series of capital raises and strategic partnerships fueling growth across credit and real estate. Despite a net loss driven by investment volatility, operational momentum and balance sheet strength position GEG to capitalize on pipeline opportunities in fiscal 2026.
Summary
- Real Estate Platform Buildout: Monomoy REIT capital infusion and development activity signal a step-change in platform scale.
- Balance Sheet Flexibility: Expanded cash and repurchase program support opportunistic capital deployment.
- Operating Leverage in Focus: Management points to fixed cost base and margin upside as AUM grows.
Performance Analysis
Great Elm Group delivered a first quarter marked by rapid platform expansion, as fee-paying AUM rose to $594 million, up 9% year over year, and pro forma AUM reached $601 million. Revenue more than doubled to $10.8 million, primarily due to the sale of a Monomoy BTS (built-to-suit) property, which contributed $7.4 million. The quarter’s net loss of $7.9 million, versus net income a year ago, was largely the result of unrealized losses on GECC and CoreWeave-related investments, not core operating weakness.
GECC, the alternative credit business, demonstrated robust capital formation and improved its balance sheet through equity raises, revolver expansion, and refinancing of high-cost debt. However, exposure to First Brands, which filed for bankruptcy, weighed on net asset value and contributed to non-accruals. Monomoy REIT advanced its development pipeline, with property sales and acquisitions supporting both fee growth and recurring rental income. The group ended the quarter with $53.5 million in cash, reinforcing its ability to fund future initiatives.
- Fee-Paying AUM Growth: 9% year-over-year increase, with real estate and credit platforms both contributing.
- Revenue Driven by Real Estate Transaction: Monomoy BTS sale provided a one-time boost, but recurring fee growth continued.
- Net Loss from Investment Volatility: Unrealized losses in GECC and CoreWeave masked underlying operational progress.
Despite headline losses, the underlying business model is gaining scale, with fixed costs largely set and management emphasizing future operating leverage as AUM expands.
Executive Commentary
"We have spent a lot of time and effort building all the back office infrastructure. As you know, as you stated, this business is high fixed costs and then low marginal costs going forward. I think we have the bulk of our fixed costs in place, and now the strategy is all about growing."
Jason Reese, CEO
"Fiscal first quarter revenue was $10.8 million compared to $4 million for the prior year period. The increase was primarily driven by $7.4 million in revenue recognized from the sale of our second Monomoy BTS build-to-suit property. ... As of September 30th, 2025, we held approximately $53.5 million cash on our balance sheet to deploy across our growing alternative asset management platform."
Kerry Davis, CFO
Strategic Positioning
1. Real Estate Platform Acceleration
Monomoy REIT, GEG’s private industrial real estate platform, received a transformative boost from the Kennedy Lewis partnership, which committed up to $150 million in leverageable capital. This not only accelerates property acquisition and development but also brings institutional expertise to scale the platform. The built-to-suit development business is ramping, with property sales and construction services now vertically integrated, enabling GEG to capture value through the full property lifecycle.
2. Credit Platform Optimization
GECC, Great Elm’s alternative credit arm, executed on multiple fronts: raising $28 million in equity, doubling revolver capacity, and refinancing high-cost debt to reduce interest expense and extend maturities. While First Brands’ bankruptcy created a drag on results, GECC’s capital position and reduced funding costs set the stage for future income-generating investments. Management highlighted ongoing discipline in portfolio construction and a focus on diversification.
3. Operating Leverage and Fixed Cost Discipline
Management made clear that the heavy lifting on infrastructure is complete, with the cost base now positioned to support significant AUM growth without proportional expense increases. As assets scale, incremental revenue should increasingly drop to the bottom line, unlocking margin expansion and greater earnings visibility over time.
4. Capital Allocation and Shareholder Alignment
GEG’s expanded stock repurchase program and ongoing share buybacks reflect confidence in intrinsic value and a commitment to capital discipline. Strategic equity raises from partners like Woodside Value Fund, with attached warrants, further align long-term interests and provide dry powder for future platform investments.
Key Considerations
GEG’s first quarter marks a pivotal phase in its evolution as a scaled alternative asset manager, with real estate and credit platforms both demonstrating momentum and management signaling a focus on operating leverage and disciplined growth.
Key Considerations:
- Fee-Based Revenue Mix: Ongoing shift toward recurring fee income from property management and investment management, reducing reliance on episodic transaction gains.
- Private REIT Visibility: Monomoy REIT remains private, limiting disclosure but offering potential future upside if taken public as scale improves.
- Capital Formation Tailwind: Recent capital raises and partnerships provide ammunition for continued platform buildout and opportunistic investment.
- Exposure to Investment Volatility: Unrealized losses in GECC and CoreWeave highlight ongoing mark-to-market risk outside core operations.
Risks
GEG’s exposure to investment volatility—as seen with First Brands bankruptcy and CoreWeave mark-to-market swings—remains a material risk to reported earnings and book value. Private REIT opacity and concentration in industrial equipment rental tenants could pose challenges if sector conditions change. Scaling AUM without corresponding fee compression or credit losses is critical to realizing anticipated operating leverage.
Forward Outlook
For Q2 2026, Great Elm Group guided to:
- Continued growth in fee-paying AUM, with capital deployment focused on both real estate and credit verticals.
- Ongoing property development and potential asset sales within Monomoy REIT.
For full-year 2026, management maintained guidance of:
- Translating platform growth into sustained financial performance, with operating leverage expected to improve as AUM expands.
Management highlighted several factors that will drive results:
- Pipeline of real estate development and acquisition opportunities remains robust.
- Balance sheet flexibility enables opportunistic capital allocation and further share repurchases.
Takeaways
Great Elm Group enters fiscal 2026 with a scaled platform and capital to deploy, but must demonstrate that AUM growth will translate into durable, recurring earnings and margin expansion as promised.
- Fee-Paying AUM Trajectory: Sustained growth in core asset management businesses is the key lever for future profitability and valuation.
- Execution on Operating Leverage: Management’s assertion that fixed costs are in place will be tested as platform scales and new capital is put to work.
- Monitoring Investment Volatility: Investors should watch for further mark-to-market swings in non-core holdings, as well as progress on mitigating credit concentration risk.
Conclusion
Great Elm Group’s first quarter performance underscores a business in transition—scaling its real estate and credit platforms, locking in capital partners, and setting up for operating leverage as assets grow. Delivering on the promise of margin expansion and recurring fee growth will be the critical test going forward.
Industry Read-Through
GEG’s quarter highlights the ongoing institutionalization of alternative asset management, with private real estate and credit platforms attracting capital and seeking scale. The vertical integration of development, construction, and management mirrors trends across the sector, as firms seek to capture more value and de-risk through control of the asset lifecycle. Investment volatility and credit event risk remain sector-wide concerns, with diversification and balance sheet flexibility increasingly emphasized by both management teams and investors. Private REITs focused on industrial and equipment rental real estate may see increased investor interest, but transparency and scale will be key differentiators for those considering public market exits.