Hamilton Lane Co-CEO Erik Hirsch on Retail Investors, Evergreen Funds and Private Markets

Core Insights - Hamilton Lane is focusing on opening private capital to retail investors and emphasizes the importance of fund manager experience over thematic investing in the current market environment [1][21][22] Business Model - Hamilton Lane provides solutions for investors wanting access to private markets, with most revenue derived from assets under management where they have full discretion [2][6] - The company has transitioned from a consulting firm to a fund manager, with over 90% of revenue now coming from managing assets [4][6] - The business model includes investing in other funds, co-investing alongside general partners (GPs), and buying secondary interests to provide liquidity [8][9][12] Market Trends - The current investment environment is challenging, with liquidity being hard to come by and private returns lagging behind public returns [21][25] - There is a shift away from thematic specialization towards identifying strong fund managers due to the competitive landscape and high purchase prices [22][23] - The private credit market is attracting significant capital, but there is a divergence in performance among credit managers, making manager selection critical [28][31] Secondary Market Activity - The secondary market is experiencing growth due to maturing asset classes, lack of liquidity, and varying levels of LP stability across the industry [37][40] - Pricing in the secondary market is inconsistent, with distressed opportunities available at low prices and high-quality assets commanding premium prices [41] Public Company Dynamics - Hamilton Lane operates as a public company while investing in private assets, managing its business with a long-term strategic vision rather than focusing on quarterly results [42][46] - The company has seen its stock price increase significantly since going public, reflecting a long-term growth strategy [52] Retail Investor Access - There is a strong belief in democratizing access to private markets for retail investors, who have historically been disadvantaged [54][56] - Hamilton Lane is enhancing financial literacy and providing better access to data through tools like Cobalt, a leading data provider for private market information [63] - The company is developing evergreen funds that offer more liquidity and efficiency for individual investors compared to traditional drawdown funds [65][70] Future Outlook - The retail investor base is expected to grow significantly, as they currently have minimal exposure to private markets [68] - Evergreen funds are anticipated to become the dominant product structure in the future, with a bifurcation in the market where larger managers focus on evergreen products while smaller managers may continue with drawdown funds [71][72]