- Hello and welcome to the Power Your Advice Podcast,
brought to you by advisored.
In this series, we interview innovators from across the
financial services industry to help you understand
who they are, what they do,
and why that matters to you and your clients.
And now please join your host, Doug Henan.
- Hello and welcome to the podcast.
Hamilton Lane is a firm with a mission
to offer superior financial wellbeing
through tailored private market solutions driven
by over 30 years of client focus and innovation.
Jackie Raton sits as the head
of investor solutions within the Evergreen
portfolio management team.
She also serves as a member of the investment,
responsible investment and executive committees.
We've asked Jackie to run us
through Hamilton Lane's global client service,
providing insights on their evolving strategies, as well
as navigating the world's volatile 2024 landscape.
Welcome to the podcast, Jackie.
- Thank you so much. It's great to be with you.
- So please give us a brief overview of Hamilton Lane,
who you serve, where you are around the globe,
and how you help advisors
and investors connect with private markets.
- Yeah, absolutely.
I mean, Hamilton Lane is one
of the largest private markets investment firms globally.
We have been investing in the private markets exclusively
for over three decades.
Today we have over $900 billion in assets under management
and supervision, and we provide innovative solutions
to institutional
and private wealth investors around the world.
We have nearly 700 employees in 23 offices globally,
and our history is one
of successfully providing private market investment
solutions to the institutional audience.
And you know, more recently we have really focused, uh,
a lot of time and energy
and commitment to bringing that success to advisors
and their individual clients.
We're really leveraging more than 32 years of experience,
a deep understanding of the nuances of the private markets.
You know, these are complicated markets
and they're difficult to access.
And so we're building solutions
for the private wealth investors, um,
and the advisors that serve them.
These solutions are really rooted in the experience
that we have, the learnings that we've gathered,
but really bringing that institutional approach
to this investor base.
- Investing has changed dramatically over the last 10 years.
Alternatives are becoming more mainstream
or even calling them something else besides alternatives.
Now, what's contributed to that
and how has Hamilton Lane evolved with that trend? Yeah,
- I think there's a number of things contributing it.
And I would start with the markets.
You know, the markets have fundamentally changed.
If you look at the public markets,
the opportunity set there is shrinking in the US today we
have about half the number of listed companies
as we did two decades ago.
Uh, you look at what's happening within the public markets,
returns are increasingly driven by a very small number
of very large companies.
In contrast, if you look at the number of private companies,
it's significant and it's growing.
Companies are being held private for longer.
That means value creation
and growth are happening when they're private.
And so it really translates into a real need, we would say,
or certainly a case for having exposure
to private investments.
They provide really important diversification,
then they provide performance
and they have historically really provide
that performance enhancement.
So first it's about the, the markets fundamentally changing.
You look at what's happening within private markets.
One of the reasons
that the private wealth channel is looking at the private
markets is the private wealth industry is comparable to that
of the institutional industry in terms
of assets under management.
Both sides of the equation have about the same amount
of assets, but on the private wealth side,
they only represent about 16% of the a UM
of private market investments.
And so you really see an under kind
of exposure under allocation of the private wealth side
to the private markets.
So then you ask how has Hamilton Lane evolved?
Well, you know, for 32 years we've been focused only
on the private markets.
We've really been focused on
providing access points for investors.
And today that means that, you know, are are allowing us to
use that experience,
but to create structures that enable advisors
to offer private markets access
to their clients in a meaningful way.
So private markets have long been the domain
of institutional investors.
They're hard to access, they have high minimums,
and you really need to have the ability to deal with kind
of the capital calls
and the complicated nature of the structures.
And so we've been really focused on creating structures
that have lower minimums,
that simplify the administrative components,
simplify the tax reporting.
They introduce faster deployment
and a more kind of significant agency over liquidity.
Now of course, building these structures is only art
of the equation,
but it's also really understanding
that foundational knowledge is key.
And so providing access
but also providing information, transparency and education.
- Yeah, education is key in this way towards
alternative or private markets.
As investors now have the same access
to the same information as financial advisors.
So how does Hamilton Lane approach this effort
to be at the forefront of not only creating value
through end products, but as educators?
- If you end backwards, you would see that that
that's a big part of what we've always done.
You know, we were helping investors in this asset class long
before it was mainstream.
They too didn't understand the nuance
and they needed educational help.
So it's in our DNA if you will.
And so we've made it a real priority to continue to focus
that orientation towards education,
that orientation towards information sharing
with the advisor universe and really their clients.
And so for us, recognizing
that private wealth investors are sophisticated investors,
they are informed about the markets broadly,
but oftentimes there's a knowledge gap when it comes
to the nuances of investing in the private markets.
It's also true in many cases
of the advisors if they haven't had the opportunity
to spend time with the private markets.
And so for us it's really about providing information about
what we're doing, but it's much, much bigger than that.
You know, we have a significant database
of private companies, the data behind them, significant
perspective on the behavior of the markets.
We've invested heavily in the technologies that allow us
to gather that data, analyze that data, and use that data.
And so we share it and so we share it with our advisors,
we share it with them to be able to,
to provide much more information
to the investors that they're working with.
- Educated advisors are a great thing,
and now they need to educate their clients about using
private holdings.
How should they begin those discussions?
Because it's new to them.
- It, it's, and I think that it really opening up the,
the understanding we've created
and designed a specific purpose built knowledge center
that is meant to provide a spectrum
of education pieces from definitional, you know, kind
of baseline information about the private markets to
what you're talking about, which is
how do advisors think about incorporating private markets
exposures into portfolios.
And so really thinking about the spectrum
where advisors might be
and how they move from their knowledge base
and maybe their client knowledge base as kind
of a starting point and then much more detailed.
So we spent a lot of time on that
and we'll continue to provide information
for the advisors so that they can
take a long journey in the, in this asset class,
if you will, with their clients.
- Hamilton Lane's market overview is great
and listeners can find a link
to this in the podcast description.
It's a comprehensive data-driven review
and analysis of the private markets
and investment activity over the prior year,
in this case 2023.
What are some of your key findings
and how can advisors learn from them?
- Thank you for that kind of endorsement
of our market overview.
It is a really important perspective piece.
It is where you'll see how our data shines in terms
of the analytics and the information that we share.
So there are a lot of takeaways.
I think one of the most important elements are our
analysis around performance and valuation.
I think that the skepticism often
around these two points need to be addressed
and addressed with data.
So on the performance side, we share a number
of different charts
and data points that show the persistency of outperformance
of private markets versus public markets.
It's really compelling.
Both private equity
and private credit have outperformed for each
and every one of the last 22 vintage years.
And then we look at different time periods.
And I think the most important takeaway is
that persistent consistent outperformance so
that investors can have the kind
of baseline understanding of the performance numbers.
You dig a little deeper
and people will say, what, what about now is now different?
What about the valuations today?
We've certainly gone through a bit of a disruptive market.
Are they real? Can they be real?
And so it's not the first time
that private market valuations have been criticized,
but the skepticism
of late is certainly worth spending some time on.
So again, if you look at the data
and we have, we show a really compelling number of charts
that really look at the most recent kind of peak to trial
of the valuation.
So think Q2, 2021 to Q2, 20, 23,
difficult time in the market.
What you would see is that one year
before an exit,
companies are typically held at a 27% discount
to the ultimate exit.
Now that trails down it's about 17%, three quarters
before, 6%, two quarters before.
But what that says is the valuations by and large are fair.
And this is one time period we dove into a very specific
time period, but it's true if you look back over the data
for years and years, I think important is then
why, why is that the case?
And so we dig deeper to really show that it's based on
th wrong operational performance.
You see that there's significant paths to revenue growth
and EBITDA growth that really show themselves in the
underlying performance of the private market companies.
And that's where that valuation comes from.
So they're just a couple of the takeaways,
but they're really important ones today.
- Let's end with getting your sense on
what everybody asks you.
It's a turbulent world.
We have a very heated election coming up.
AI is changing almost anything.
So what does this all mean for
the markets and the private markets?
- Yeah, it is a really important question.
There are a lot of, I mean you you say elections.
I heard a a quote the other day that 50%
of the world's population will vote in a
major election in 2024.
That is certainly significant.
I mean ai, it's hard to have a conversation
today without discussing AI
and understanding, you know,
how technology will be an important part
of everything that we're doing.
But certainly the investing landscape, I think
the most important thing that we would say is
that we recognize it.
This is a broadly challenging economic environment
that we're facing in 2024.
We think the need for data oriented analysis becomes
even more important.
And so when you look at the data
and you look at the analysis that we provided and,
and there's certainly other data out there,
but our big takeaway is
that private markets remain resilient.
So despite skepticism
and nerves that are, that are driven
by things like slow fundraising and and,
and the other dynamics that we've talked about in our view,
we think that investors should get comfortable
with making the hard decisions
and really be able to separate some of the kind
of anecdote about the private markets from the facts
and the data and the analysis
and say this is more important today than ever.
Some consistent exposure to the private markets has proven
to be really important enhancement to portfolios.
We don't think the market up today is any different.
- Jackie, that was fantastic. Thanks so much for joining us.
- Thank you. Really enjoyed it.
- To learn more about Hamilton Lane,
please visit hamilton lane.com.
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For everyone at Advisor Pedia, our producer Julia Small
and our engineer Tori Miller
and the Power Your Advice podcast team, this is Doug Heman.