Ham Lane’s Hirsch: Secondaries consolidation won’t change competitive dynamic

There have been six meaningful M&A deals for secondaries firms this year, with a seventh rumoured to be in the works.

The consolidation of the secondaries business through M&A over the past two years won’t materially change the way the market trades, according to Hamilton Lane vice-chairman Erik Hirsch.

Overall growth in secondaries has been significant, Hirsch noted on the firm’s latest earnings call in early November. Last year saw a record $100 billion raised for 63 dedicated secondaries funds, up from $33.6 billion in 2019, according to Secondaries Investor data. So far this year, 73 funds – the most ever – have raised $62 billion.

Speaking to recent M&A activity, they are acquisitions, not new entrants coming into the market, according to Hirsch. “We don’t really see the acquisitions as being all that noteworthy or impactful to the business,” he said, adding that “in some cases, we’ve already been competing with” the firms involved.

“I think what that tells you is it’s a really big pool of capital that’s out there,” Hirsch said. “And we have our share of that. We believe that pool of capital will continue to grow, and we’re hopeful that our share continues to grow.”

Earlier this month, Franklin Templeton burst into the secondaries market when the $1.5 trillion asset manager revealed it would pay $1.75 billion to acquire Lexington Partners, one of the last remaining independent secondaries shops.

In September, CVC Capital Partners confirmed that it will acquire Glendower Capital. That same month, Secondaries Investor reported that London-headquartered Coller Capital has approached at least two private equity firms with the intention of selling the business.

In July, StepStone Group agreed to acquire Baltimore-based Greenspring Associates, and Paris-based Tikehau Capital said it had acquired Asia-focused Foundation Private Equity. Private credit behemoth Ares Management made waves in May when it said it would acquire Landmark Partners. And Fort Worth, Texas-based TPG expanded its ownership in Asian secondaries firm NewQuest Capital Partners to a majority stake in February, up from an initial minority investment in 2018.

Hamilton Lane recently launched its sixth secondaries programme, less than a year after closing its $3.9 billion fifth fund. The size of the new fund has not been disclosed.