Hamilton Lane beats target, eyes final close on secondaries fund

Secondaries has been a key driver of fee growth among Hamilton Lane's commingled funds and separately managed accounts, vice-chairman Erik Hirsch said on an earnings call.

Hamilton Lane is approaching the finish line for fundraising on its latest secondaries fund.

Hamilton Lane Secondary Fund V had raised $3.7 billion as of 31 January, making it the largest specialised fund ever raised by the Bala Cynwyd-headquartered asset manager, vice-chairman Erik Hirsch said on its third-quarter 2021 earnings call yesterday.

The fund is set to close in the coming weeks, having already had its close date pushed back from October to January. This is to “facilitate additional time for a very small number of final investors”, Hirsch said.

Hamilton Lane defines “specialised funds” as commingled vehicles, excluding separate accounts.

Fund V collected $575 million of commitments in the third fiscal quarter (ending 31 December), resulting in retroactive fees of $7.2 million. The fund has been the “primary driver” of growth in fee-earning assets under management for Hamilton Lane’s specialised funds, Hirsch said.

Total fee earning AUM, encompassing specialised funds and separate accounts, was up $3.4 billion or 9 percent compared with the same period a year earlier.

Growing interest in secondaries is also helping drive fee growth in the firm’s separate accounts business, Hirsch said.

“I think the interest of LPs in having access and exposure to things like secondary and co-investments is rising. And so that just translates into more and more of your separate accounts actually having transactional components and thus a carried interest component.”

Secondaries Investor reported in 2018 that Hamilton Lane was targeting $3 billion for Fund V, more than twice the amount sought for its 2017-vintage predecessor.

Investors include Cathay Life Insurance, which committed $200 million, Fubon Life Insurance, Public Employee Retirement System of Idaho and City of Fort Lauderdale General Employees’ Retirement System, according to Secondaries Investor data.

Predecessor Secondary Fund IV raised $1.9 billion by final close in 2017. The fund had delivered a net internal rate of return of 14.59 percent and total value to paid-in multiple of 1.25x as of 30 September, according to performance data from PERSI.

Among the deals the fund backed in 2020 are a GP-led process on Audax Private Equity Fund IV, alongside AlpInvest Partners and Lexington Partners, and the restructuring of Legend Capital’s fourth fund.