Secondaries boost Hamilton Lane’s carry by 144% in a year

Hamilton Lane‘s carried interest increased to $23.2 million in last year after the firm hit the hurdle rate on one of its secondaries funds, triggering a $15.7 million gain, the firm’s IPO registration reveals.

It is not clear which secondaries fund delivered the gain.

Separate accounts for limited partners delivered more than half of its $157 million management fee income in 2016, the statement submitted earlier this month ahead of a planned $200 million NASDAQ listing, shows.

The Bala Cynwyd, Pennsylvania-headquartered firm’s 2012-vintage Secondary Fund III, a $900 million vehicle, is currently recording a gross internal rate of return of 51 percent, the document said.

The firm is raising its fourth secondaries fund, which is seeking $1.25 billion, and held a $573 million close last month.

The 10-year net IRR for the firm’s secondaries performance was 12 percent, according to a presentation given by the firm in 2016.

The filing revealed details of the firm’s carried interest structure, which is equal to a fixed percentage of net profits, usually 10 percent to 12.5 percent. This is after the hurdle rate, which it says is generally 6 percent to 8 percent, has been reached.

While carry at Hamilton Lane increased significantly, the filing shows management fees are the primary driver of income, bringing in $157.6 million in 2016. Of this, $67.8 million came from customised separate accounts, more than the $62.3 million the firm brought in from managing its traditional funds.

The filing says the firm’s performance fees on customised accounts range from 5 percent to 12.5 percent of net profits, with the same hurdle rate as traditional funds.

Founded in 1991, Hamilton Lane had $40 billion in discretionary assets under management as of 30 September. It employs more than 285 staff in 12 global offices.