Hamilton Lane's specialized funds drive strong fiscal Q2

Hamilton Lane Inc. had positive capital inflows across its specialized funds and customized separate accounts during the firm's fiscal second quarter, resulting in a 32% year-over-year increase in AUM to $96 billion and a 14% year-over-year gain in fee-earning AUM to $45 billion, executives said during a Nov. 2 earnings call.

Customized separate accounts contributed $2.8 billion to fee-earning AUM during the firm's fiscal second quarter, while $2.6 billion came from specialized funds.

Vice Chairman Erik Hirsch cited "a rising tide environment" in the robust public markets, which is pushing capital into other asset classes, including Hamilton Lane's. Moreover, for the firm specifically, specialized funds such as impact and infrastructure vehicles are attracting inflows of capital, Hirsch said. Re-ups from existing investors contributed more than 80% of the gross inflows into the firm's customized separate accounts.

Demand for the firm's specialized funds was strong during the fiscal second quarter, according to the firm. Its direct equity fund held a fourth close during the period, bringing the total capital raised for the vehicle to roughly $1.1 billion, and is expected to be in the market through October 2022. The firm is also in the process of raising capital for its next direct credit series and its second impact fund, while its infrastructure fund introduced in the previous quarter is drawing solid investor interest, according to Hirsch.

The firm's Evergreen platform, which gives private wealth management channels and individual investors exposure to the private markets through open-ended semiliquid structures, had $600 million of capital inflows during the quarter.

"There was strong demand for access to the private markets from this group of investors who've historically had limited access and exposure," said CEO Mario Giannini.

Hamilton Lane also just launched fundraising for its sixth secondary fund, and management expects to hold a first close in the first quarter of 2022. "The types of secondary transactions continue to morph and evolve, and Hamilton Lane is well positioned to be a strategic solutions provider in this space," Hirsch added.

Existing and new investments

A number of technology-related investments contributed to the firm's balance sheet during its fiscal second quarter.

In October, Hamilton Lane sold Cobalt LP to FactSet Research Systems Inc., representing a full exit from parent company Bison, a software firm. It acquired Cobalt, a limited-partner-focused business intelligence platform, at the start of 2020.

The firm also said it recorded a 4x return on its initial $10 million investment in Institutional Capital Network Inc., or iCapital Network, following a $440 million funding round in July that valued the financial technology company at roughly $4 billion.

Among its most recent investments, Hamilton Lane injected capital and joined the strategic advisory board of fintech platform The Tifin Group LLC, which caters to wealth managers, registered investment advisers and individual investors.

The firm was also part of a consortium that launched Novata, a new public benefit corporation and technology platform designed to provide private companies with environmental, social, and governance data collection and benchmarking, in October.