Great Elm Group (NASDAQ:GEG) executives said fiscal 2026 second-quarter results were heavily influenced by market-driven valuation declines in a difficult environment for business development companies, even as the firm continued to expand its alternative asset management platform and maintained what management described as strong liquidity.
Management cites volatile backdrop and non-cash valuation pressure
CEO Jason Reese said the quarter unfolded amid “heightened volatility,” “meaningful pressure on public valuations,” and concerns about private credit quality deterioration. He noted the company recorded “significant unrealized losses,” particularly tied to its investment in GECC common stock, special-purpose vehicles related to GECC common stock, and a CoreWeave-related investment.
Assets under management grew year over year
As of the end of December, management reported estimated assets under management of $740 million, with estimated fee-paying AUM of approximately $561 million, up 4% from the prior-year period. Reese said the company continued advancing its alternative asset management strategy by expanding both real estate and credit businesses.
Real estate platform highlights: Monomoy execution and new revenue contribution
Reese characterized results at Great Elm Real Estate Ventures as another strong quarter, citing continued execution across the Monomoy platform.
- Monomoy BTS completed its third design-build property in Florida and began marketing the asset for sale, with an expected exit in the second half of fiscal 2026. Reese added the company is engaged with a tenant on a fourth design-build project and is seeing an “expanding pipeline” of development opportunities.
- Monomoy Construction Services (MCS) completed its third full quarter of operations, contributing about $400,000 in revenue. Reese said bringing construction capabilities in-house enables turnkey solutions for tenants, value capture across the property lifecycle, and disciplined execution as the pipeline scales.
- Monomoy CRE saw total investment management and property management fees increase more than 15% from the prior-year period, driven by growth in fee-paying AUM and higher gross rents.
- Monomoy REIT acquired three properties at “attractive cap rates” for about $8.9 million, including development costs, while continuing renovations and design-build initiatives.
Credit business: GECC repositioning efforts and private credit winddown
On the alternative credit side, Reese said the BDC faced a “challenging finish” to calendar 2025. He pointed to several factors, including CoreWeave stock declining nearly 50% during the quarter, CLO equity underperformance versus broader credit markets, and continued dispersion in leveraged credit, including first-lien impacts. Reese said GECC plans to report earnings in early March and would provide additional details at that time.
He also outlined steps taken to reposition the platform entering 2026, including:
- Hiring a new head of research in September with more than 25 years of credit analysis experience.
- Re-underwriting the entire portfolio and working to further diversify investments with a focus on senior secured opportunities.
- Trimming or exiting higher-risk positions to improve overall credit quality.
- Increasing emphasis on private transactions with stronger lender protections and tighter covenants, in part to reduce risk from liability management transactions.
Reese said the BDC maintains significant liquidity and reminded listeners that GECC lowered its cost of capital in the prior quarter through refinancing its highest-cost debt. He said the combination of initiatives left GECC with a healthy balance sheet, deployable cash, and capacity to invest.
Separately, the company’s Great Elm Credit Income Fund, launched in November 2023, began an “orderly winddown” in response to portfolio events and market conditions, with management noting the fund had not yet reached scale. Reese said the fund recorded a net return of over 20% for the 26 months from inception through December 31, 2025.
CoreWeave, GECC marks, and capital return via repurchases
Reese described the company’s CoreWeave-related investment as a “compelling success” despite quarter-to-quarter volatility. He said CoreWeave’s common stock declined nearly 50% from September 30 to December 31, which drove $6.7 million of unrealized losses, partially offset by $2.2 million of realized gains from distributions. Reese said distributions received to date total about 115% of the original $5 million investment, and he added that CoreWeave’s stock price had “rebounded significantly” since December 31.
In addition, Reese said Great Elm recorded net unrealized mark-to-market losses of $4 million in GECC common stock and $3 million in SPV investments tied to GECC common stock, which he said reflected broader market trading levels for BDCs.
The company also continued repurchasing shares. Reese said Great Elm repurchased about 1.1 million shares during the quarter at an average price of $2.47 per share. From the inception of the program through February 3, the company repurchased about 6.4 million shares at an average price of $1.99 per share, deploying $12.7 million in total. Reese said the aggregate repurchases represented nearly 20% of shares outstanding.
CFO Keri Davis reported fiscal second-quarter revenue of $3.0 million, down from $3.5 million a year earlier. She attributed the decrease primarily to $0.6 million in property sales and $0.5 million of incentive fees recognized in the prior-year period but not in the current quarter, partially offset by $0.4 million in new construction management revenue from MCS, acquired in February 2025.
Davis said the company recorded a net loss of $16.5 million, compared with net income of $1.4 million in the prior-year quarter. The loss was driven primarily by $14.4 million of unrealized losses and $2.2 million of realized gains from investments, including investments in consolidated funds. Adjusted EBITDA was a loss of $1.6 million, compared with a gain of $1.0 million a year earlier.
As of December 31, 2025, Davis said Great Elm held about $51.2 million of cash. She also pointed to book value per share of approximately $1.79.
The call concluded without any analyst questions. In closing remarks, Reese said the company remained confident in its strategic direction and focused on advancing its credit and real estate platforms, strengthening the balance sheet, and delivering shareholder value over time.
About Great Elm Group (NASDAQ:GEG)
Great Elm Group (NASDAQ: GEG) is a closed-end investment company specializing in private credit and equity co-investments for U.S. middle-market companies. The firm’s portfolio is composed primarily of senior secured loans, unitranche financing structures and selective equity interests, with an emphasis on providing flexible capital solutions for growth initiatives, refinancings, acquisitions and recapitalizations.
Through a disciplined underwriting process, Great Elm Group evaluates opportunities across a diverse range of industry sectors, including healthcare, business services, manufacturing and consumer products.
