1 00:00:01,255 --> 00:00:03,525 - Hello and welcome to the Power Your Advice Podcast, 2 00:00:03,755 --> 00:00:05,365 brought to you by advisored. 3 00:00:06,225 --> 00:00:09,245 In this series, we interview innovators from across the 4 00:00:09,245 --> 00:00:12,165 financial services industry to help you understand 5 00:00:12,225 --> 00:00:13,685 who they are, what they do, 6 00:00:13,825 --> 00:00:16,085 and why that matters to you and your clients. 7 00:00:16,905 --> 00:00:19,725 And now please join your host, Doug Henan. 8 00:00:20,495 --> 00:00:21,685 - Hello and welcome to the podcast. 9 00:00:22,645 --> 00:00:23,965 Hamilton Lane is a firm with a mission 10 00:00:23,965 --> 00:00:25,845 to offer superior financial wellbeing 11 00:00:25,845 --> 00:00:28,365 through tailored private market solutions driven 12 00:00:28,425 --> 00:00:31,245 by over 30 years of client focus and innovation. 13 00:00:31,705 --> 00:00:33,845 Jackie Raton sits as the head 14 00:00:33,845 --> 00:00:35,965 of investor solutions within the Evergreen 15 00:00:35,965 --> 00:00:37,205 portfolio management team. 16 00:00:37,665 --> 00:00:39,685 She also serves as a member of the investment, 17 00:00:40,355 --> 00:00:42,725 responsible investment and executive committees. 18 00:00:42,935 --> 00:00:44,885 We've asked Jackie to run us 19 00:00:44,885 --> 00:00:47,085 through Hamilton Lane's global client service, 20 00:00:47,355 --> 00:00:50,525 providing insights on their evolving strategies, as well 21 00:00:50,525 --> 00:00:54,125 as navigating the world's volatile 2024 landscape. 22 00:00:54,315 --> 00:00:55,725 Welcome to the podcast, Jackie. 23 00:00:56,295 --> 00:00:58,165 - Thank you so much. It's great to be with you. 24 00:00:59,365 --> 00:01:02,225 - So please give us a brief overview of Hamilton Lane, 25 00:01:02,765 --> 00:01:05,425 who you serve, where you are around the globe, 26 00:01:05,925 --> 00:01:07,225 and how you help advisors 27 00:01:07,225 --> 00:01:08,985 and investors connect with private markets. 28 00:01:09,895 --> 00:01:10,905 - Yeah, absolutely. 29 00:01:11,065 --> 00:01:12,185 I mean, Hamilton Lane is one 30 00:01:12,185 --> 00:01:15,985 of the largest private markets investment firms globally. 31 00:01:16,725 --> 00:01:21,025 We have been investing in the private markets exclusively 32 00:01:21,565 --> 00:01:22,825 for over three decades. 33 00:01:23,635 --> 00:01:27,625 Today we have over $900 billion in assets under management 34 00:01:27,965 --> 00:01:31,905 and supervision, and we provide innovative solutions 35 00:01:32,005 --> 00:01:33,345 to institutional 36 00:01:33,365 --> 00:01:35,945 and private wealth investors around the world. 37 00:01:36,605 --> 00:01:40,705 We have nearly 700 employees in 23 offices globally, 38 00:01:41,605 --> 00:01:43,145 and our history is one 39 00:01:43,145 --> 00:01:46,505 of successfully providing private market investment 40 00:01:46,575 --> 00:01:50,025 solutions to the institutional audience. 41 00:01:50,485 --> 00:01:54,985 And you know, more recently we have really focused, uh, 42 00:01:55,225 --> 00:01:56,385 a lot of time and energy 43 00:01:56,805 --> 00:02:00,465 and commitment to bringing that success to advisors 44 00:02:00,965 --> 00:02:03,185 and their individual clients. 45 00:02:03,555 --> 00:02:06,825 We're really leveraging more than 32 years of experience, 46 00:02:07,305 --> 00:02:10,665 a deep understanding of the nuances of the private markets. 47 00:02:10,765 --> 00:02:12,745 You know, these are complicated markets 48 00:02:13,285 --> 00:02:15,065 and they're difficult to access. 49 00:02:15,565 --> 00:02:17,145 And so we're building solutions 50 00:02:17,405 --> 00:02:20,385 for the private wealth investors, um, 51 00:02:20,445 --> 00:02:21,825 and the advisors that serve them. 52 00:02:22,115 --> 00:02:24,465 These solutions are really rooted in the experience 53 00:02:24,465 --> 00:02:25,945 that we have, the learnings that we've gathered, 54 00:02:26,005 --> 00:02:28,225 but really bringing that institutional approach 55 00:02:28,725 --> 00:02:30,225 to this investor base. 56 00:02:30,695 --> 00:02:33,585 - Investing has changed dramatically over the last 10 years. 57 00:02:34,065 --> 00:02:36,065 Alternatives are becoming more mainstream 58 00:02:36,685 --> 00:02:39,025 or even calling them something else besides alternatives. 59 00:02:39,025 --> 00:02:40,945 Now, what's contributed to that 60 00:02:41,005 --> 00:02:44,625 and how has Hamilton Lane evolved with that trend? Yeah, 61 00:02:44,625 --> 00:02:46,785 - I think there's a number of things contributing it. 62 00:02:46,805 --> 00:02:48,705 And I would start with the markets. 63 00:02:49,165 --> 00:02:51,065 You know, the markets have fundamentally changed. 64 00:02:51,205 --> 00:02:53,625 If you look at the public markets, 65 00:02:54,165 --> 00:02:58,825 the opportunity set there is shrinking in the US today we 66 00:02:58,825 --> 00:03:01,645 have about half the number of listed companies 67 00:03:01,745 --> 00:03:03,365 as we did two decades ago. 68 00:03:04,025 --> 00:03:06,845 Uh, you look at what's happening within the public markets, 69 00:03:06,995 --> 00:03:10,525 returns are increasingly driven by a very small number 70 00:03:10,705 --> 00:03:12,005 of very large companies. 71 00:03:12,345 --> 00:03:14,845 In contrast, if you look at the number of private companies, 72 00:03:15,235 --> 00:03:17,565 it's significant and it's growing. 73 00:03:18,445 --> 00:03:20,365 Companies are being held private for longer. 74 00:03:20,875 --> 00:03:22,165 That means value creation 75 00:03:22,165 --> 00:03:24,125 and growth are happening when they're private. 76 00:03:24,785 --> 00:03:29,485 And so it really translates into a real need, we would say, 77 00:03:29,945 --> 00:03:32,965 or certainly a case for having exposure 78 00:03:33,145 --> 00:03:34,765 to private investments. 79 00:03:35,075 --> 00:03:37,965 They provide really important diversification, 80 00:03:38,315 --> 00:03:40,085 then they provide performance 81 00:03:40,425 --> 00:03:42,645 and they have historically really provide 82 00:03:42,645 --> 00:03:44,125 that performance enhancement. 83 00:03:44,225 --> 00:03:47,685 So first it's about the, the markets fundamentally changing. 84 00:03:48,585 --> 00:03:51,205 You look at what's happening within private markets. 85 00:03:51,825 --> 00:03:52,845 One of the reasons 86 00:03:52,915 --> 00:03:56,125 that the private wealth channel is looking at the private 87 00:03:56,125 --> 00:04:00,765 markets is the private wealth industry is comparable to that 88 00:04:00,765 --> 00:04:02,725 of the institutional industry in terms 89 00:04:02,745 --> 00:04:04,405 of assets under management. 90 00:04:04,475 --> 00:04:07,445 Both sides of the equation have about the same amount 91 00:04:07,585 --> 00:04:10,085 of assets, but on the private wealth side, 92 00:04:10,275 --> 00:04:14,725 they only represent about 16% of the a UM 93 00:04:14,905 --> 00:04:16,565 of private market investments. 94 00:04:16,585 --> 00:04:19,165 And so you really see an under kind 95 00:04:19,165 --> 00:04:22,605 of exposure under allocation of the private wealth side 96 00:04:22,825 --> 00:04:23,845 to the private markets. 97 00:04:24,505 --> 00:04:26,685 So then you ask how has Hamilton Lane evolved? 98 00:04:26,755 --> 00:04:29,685 Well, you know, for 32 years we've been focused only 99 00:04:29,705 --> 00:04:30,725 on the private markets. 100 00:04:31,015 --> 00:04:33,405 We've really been focused on 101 00:04:33,955 --> 00:04:36,165 providing access points for investors. 102 00:04:36,985 --> 00:04:41,365 And today that means that, you know, are are allowing us to 103 00:04:42,065 --> 00:04:43,205 use that experience, 104 00:04:43,305 --> 00:04:47,165 but to create structures that enable advisors 105 00:04:47,185 --> 00:04:49,325 to offer private markets access 106 00:04:49,325 --> 00:04:51,165 to their clients in a meaningful way. 107 00:04:51,305 --> 00:04:53,645 So private markets have long been the domain 108 00:04:53,665 --> 00:04:55,125 of institutional investors. 109 00:04:55,395 --> 00:04:57,885 They're hard to access, they have high minimums, 110 00:04:57,945 --> 00:05:02,005 and you really need to have the ability to deal with kind 111 00:05:02,005 --> 00:05:03,205 of the capital calls 112 00:05:03,345 --> 00:05:05,525 and the complicated nature of the structures. 113 00:05:05,585 --> 00:05:10,405 And so we've been really focused on creating structures 114 00:05:10,405 --> 00:05:12,245 that have lower minimums, 115 00:05:12,245 --> 00:05:14,445 that simplify the administrative components, 116 00:05:14,925 --> 00:05:16,365 simplify the tax reporting. 117 00:05:16,635 --> 00:05:18,525 They introduce faster deployment 118 00:05:18,665 --> 00:05:23,045 and a more kind of significant agency over liquidity. 119 00:05:23,305 --> 00:05:25,565 Now of course, building these structures is only art 120 00:05:25,585 --> 00:05:26,805 of the equation, 121 00:05:27,345 --> 00:05:29,445 but it's also really understanding 122 00:05:29,595 --> 00:05:32,005 that foundational knowledge is key. 123 00:05:32,185 --> 00:05:34,005 And so providing access 124 00:05:34,145 --> 00:05:37,405 but also providing information, transparency and education. 125 00:05:38,035 --> 00:05:40,445 - Yeah, education is key in this way towards 126 00:05:40,445 --> 00:05:41,685 alternative or private markets. 127 00:05:42,425 --> 00:05:44,325 As investors now have the same access 128 00:05:44,325 --> 00:05:46,485 to the same information as financial advisors. 129 00:05:46,905 --> 00:05:49,205 So how does Hamilton Lane approach this effort 130 00:05:49,225 --> 00:05:52,005 to be at the forefront of not only creating value 131 00:05:52,395 --> 00:05:54,765 through end products, but as educators? 132 00:05:55,385 --> 00:05:57,300 - If you end backwards, you would see that that 133 00:05:57,300 --> 00:05:59,230 that's a big part of what we've always done. 134 00:05:59,230 --> 00:06:03,565 You know, we were helping investors in this asset class long 135 00:06:03,585 --> 00:06:05,045 before it was mainstream. 136 00:06:05,235 --> 00:06:08,245 They too didn't understand the nuance 137 00:06:08,345 --> 00:06:10,005 and they needed educational help. 138 00:06:10,025 --> 00:06:11,645 So it's in our DNA if you will. 139 00:06:12,145 --> 00:06:15,525 And so we've made it a real priority to continue to focus 140 00:06:15,525 --> 00:06:17,525 that orientation towards education, 141 00:06:17,525 --> 00:06:20,285 that orientation towards information sharing 142 00:06:20,795 --> 00:06:24,645 with the advisor universe and really their clients. 143 00:06:24,905 --> 00:06:27,525 And so for us, recognizing 144 00:06:27,555 --> 00:06:31,125 that private wealth investors are sophisticated investors, 145 00:06:31,395 --> 00:06:33,765 they are informed about the markets broadly, 146 00:06:34,225 --> 00:06:37,565 but oftentimes there's a knowledge gap when it comes 147 00:06:37,665 --> 00:06:40,485 to the nuances of investing in the private markets. 148 00:06:41,195 --> 00:06:43,005 It's also true in many cases 149 00:06:43,065 --> 00:06:46,485 of the advisors if they haven't had the opportunity 150 00:06:46,985 --> 00:06:48,885 to spend time with the private markets. 151 00:06:49,145 --> 00:06:54,085 And so for us it's really about providing information about 152 00:06:54,115 --> 00:06:56,925 what we're doing, but it's much, much bigger than that. 153 00:06:57,265 --> 00:07:00,485 You know, we have a significant database 154 00:07:00,945 --> 00:07:05,685 of private companies, the data behind them, significant 155 00:07:06,395 --> 00:07:08,765 perspective on the behavior of the markets. 156 00:07:09,015 --> 00:07:12,245 We've invested heavily in the technologies that allow us 157 00:07:12,345 --> 00:07:15,685 to gather that data, analyze that data, and use that data. 158 00:07:15,945 --> 00:07:19,445 And so we share it and so we share it with our advisors, 159 00:07:19,465 --> 00:07:21,365 we share it with them to be able to, 160 00:07:21,505 --> 00:07:23,485 to provide much more information 161 00:07:24,025 --> 00:07:26,205 to the investors that they're working with. 162 00:07:27,285 --> 00:07:29,165 - Educated advisors are a great thing, 163 00:07:29,785 --> 00:07:32,325 and now they need to educate their clients about using 164 00:07:32,325 --> 00:07:33,325 private holdings. 165 00:07:33,585 --> 00:07:35,245 How should they begin those discussions? 166 00:07:35,245 --> 00:07:36,485 Because it's new to them. 167 00:07:37,145 --> 00:07:40,725 - It, it's, and I think that it really opening up the, 168 00:07:40,905 --> 00:07:43,365 the understanding we've created 169 00:07:43,585 --> 00:07:47,445 and designed a specific purpose built knowledge center 170 00:07:48,395 --> 00:07:51,925 that is meant to provide a spectrum 171 00:07:52,545 --> 00:07:57,125 of education pieces from definitional, you know, kind 172 00:07:57,125 --> 00:07:59,845 of baseline information about the private markets to 173 00:08:00,035 --> 00:08:01,565 what you're talking about, which is 174 00:08:01,745 --> 00:08:05,125 how do advisors think about incorporating private markets 175 00:08:05,725 --> 00:08:07,725 exposures into portfolios. 176 00:08:07,745 --> 00:08:10,565 And so really thinking about the spectrum 177 00:08:10,815 --> 00:08:12,085 where advisors might be 178 00:08:12,105 --> 00:08:14,765 and how they move from their knowledge base 179 00:08:14,765 --> 00:08:16,605 and maybe their client knowledge base as kind 180 00:08:16,605 --> 00:08:18,685 of a starting point and then much more detailed. 181 00:08:18,985 --> 00:08:20,365 So we spent a lot of time on that 182 00:08:20,465 --> 00:08:23,725 and we'll continue to provide information 183 00:08:24,265 --> 00:08:26,885 for the advisors so that they can 184 00:08:27,435 --> 00:08:29,485 take a long journey in the, in this asset class, 185 00:08:29,485 --> 00:08:30,525 if you will, with their clients. 186 00:08:31,745 --> 00:08:33,625 - Hamilton Lane's market overview is great 187 00:08:33,845 --> 00:08:35,705 and listeners can find a link 188 00:08:35,705 --> 00:08:37,505 to this in the podcast description. 189 00:08:38,145 --> 00:08:39,915 It's a comprehensive data-driven review 190 00:08:40,335 --> 00:08:41,875 and analysis of the private markets 191 00:08:42,055 --> 00:08:44,635 and investment activity over the prior year, 192 00:08:44,775 --> 00:08:46,075 in this case 2023. 193 00:08:46,785 --> 00:08:48,555 What are some of your key findings 194 00:08:48,575 --> 00:08:50,435 and how can advisors learn from them? 195 00:08:51,335 --> 00:08:53,485 - Thank you for that kind of endorsement 196 00:08:53,625 --> 00:08:54,925 of our market overview. 197 00:08:55,585 --> 00:08:58,605 It is a really important perspective piece. 198 00:08:58,785 --> 00:09:03,005 It is where you'll see how our data shines in terms 199 00:09:03,145 --> 00:09:05,485 of the analytics and the information that we share. 200 00:09:05,705 --> 00:09:06,965 So there are a lot of takeaways. 201 00:09:07,525 --> 00:09:11,485 I think one of the most important elements are our 202 00:09:12,285 --> 00:09:15,405 analysis around performance and valuation. 203 00:09:16,485 --> 00:09:20,445 I think that the skepticism often 204 00:09:20,705 --> 00:09:24,485 around these two points need to be addressed 205 00:09:24,585 --> 00:09:26,285 and addressed with data. 206 00:09:26,665 --> 00:09:29,525 So on the performance side, we share a number 207 00:09:29,525 --> 00:09:30,525 of different charts 208 00:09:30,905 --> 00:09:35,005 and data points that show the persistency of outperformance 209 00:09:35,025 --> 00:09:37,165 of private markets versus public markets. 210 00:09:37,515 --> 00:09:38,885 It's really compelling. 211 00:09:39,355 --> 00:09:40,605 Both private equity 212 00:09:40,625 --> 00:09:42,885 and private credit have outperformed for each 213 00:09:42,905 --> 00:09:45,565 and every one of the last 22 vintage years. 214 00:09:46,065 --> 00:09:48,925 And then we look at different time periods. 215 00:09:49,105 --> 00:09:52,125 And I think the most important takeaway is 216 00:09:52,515 --> 00:09:56,045 that persistent consistent outperformance so 217 00:09:56,045 --> 00:09:59,485 that investors can have the kind 218 00:09:59,485 --> 00:10:02,285 of baseline understanding of the performance numbers. 219 00:10:02,945 --> 00:10:04,005 You dig a little deeper 220 00:10:04,265 --> 00:10:07,325 and people will say, what, what about now is now different? 221 00:10:07,595 --> 00:10:09,205 What about the valuations today? 222 00:10:09,575 --> 00:10:12,765 We've certainly gone through a bit of a disruptive market. 223 00:10:13,875 --> 00:10:15,615 Are they real? Can they be real? 224 00:10:15,795 --> 00:10:17,415 And so it's not the first time 225 00:10:17,415 --> 00:10:20,455 that private market valuations have been criticized, 226 00:10:20,555 --> 00:10:21,735 but the skepticism 227 00:10:22,035 --> 00:10:25,215 of late is certainly worth spending some time on. 228 00:10:25,355 --> 00:10:27,935 So again, if you look at the data 229 00:10:28,235 --> 00:10:32,415 and we have, we show a really compelling number of charts 230 00:10:32,925 --> 00:10:37,295 that really look at the most recent kind of peak to trial 231 00:10:37,475 --> 00:10:38,575 of the valuation. 232 00:10:38,755 --> 00:10:42,815 So think Q2, 2021 to Q2, 20, 23, 233 00:10:42,885 --> 00:10:44,095 difficult time in the market. 234 00:10:44,525 --> 00:10:47,975 What you would see is that one year 235 00:10:48,395 --> 00:10:49,815 before an exit, 236 00:10:50,455 --> 00:10:53,535 companies are typically held at a 27% discount 237 00:10:53,755 --> 00:10:54,895 to the ultimate exit. 238 00:10:55,315 --> 00:10:58,095 Now that trails down it's about 17%, three quarters 239 00:10:58,095 --> 00:11:00,295 before, 6%, two quarters before. 240 00:11:00,595 --> 00:11:05,215 But what that says is the valuations by and large are fair. 241 00:11:05,795 --> 00:11:09,255 And this is one time period we dove into a very specific 242 00:11:09,255 --> 00:11:12,775 time period, but it's true if you look back over the data 243 00:11:13,155 --> 00:11:16,135 for years and years, I think important is then 244 00:11:16,475 --> 00:11:18,095 why, why is that the case? 245 00:11:18,555 --> 00:11:21,935 And so we dig deeper to really show that it's based on 246 00:11:22,475 --> 00:11:24,535 th wrong operational performance. 247 00:11:25,035 --> 00:11:29,255 You see that there's significant paths to revenue growth 248 00:11:29,315 --> 00:11:32,015 and EBITDA growth that really show themselves in the 249 00:11:32,025 --> 00:11:34,815 underlying performance of the private market companies. 250 00:11:34,995 --> 00:11:36,815 And that's where that valuation comes from. 251 00:11:37,315 --> 00:11:39,095 So they're just a couple of the takeaways, 252 00:11:39,155 --> 00:11:40,815 but they're really important ones today. 253 00:11:41,985 --> 00:11:44,575 - Let's end with getting your sense on 254 00:11:45,125 --> 00:11:46,415 what everybody asks you. 255 00:11:47,005 --> 00:11:48,095 It's a turbulent world. 256 00:11:48,355 --> 00:11:50,295 We have a very heated election coming up. 257 00:11:50,755 --> 00:11:52,335 AI is changing almost anything. 258 00:11:53,065 --> 00:11:54,165 So what does this all mean for 259 00:11:54,165 --> 00:11:55,285 the markets and the private markets? 260 00:11:56,095 --> 00:11:58,505 - Yeah, it is a really important question. 261 00:11:58,635 --> 00:12:01,625 There are a lot of, I mean you you say elections. 262 00:12:01,745 --> 00:12:04,705 I heard a a quote the other day that 50% 263 00:12:04,725 --> 00:12:07,025 of the world's population will vote in a 264 00:12:07,025 --> 00:12:08,265 major election in 2024. 265 00:12:08,265 --> 00:12:10,705 That is certainly significant. 266 00:12:11,465 --> 00:12:13,905 I mean ai, it's hard to have a conversation 267 00:12:14,515 --> 00:12:17,865 today without discussing AI 268 00:12:18,045 --> 00:12:19,625 and understanding, you know, 269 00:12:19,845 --> 00:12:22,025 how technology will be an important part 270 00:12:22,205 --> 00:12:23,705 of everything that we're doing. 271 00:12:23,725 --> 00:12:26,825 But certainly the investing landscape, I think 272 00:12:27,365 --> 00:12:30,505 the most important thing that we would say is 273 00:12:30,505 --> 00:12:31,865 that we recognize it. 274 00:12:32,295 --> 00:12:36,225 This is a broadly challenging economic environment 275 00:12:36,225 --> 00:12:38,025 that we're facing in 2024. 276 00:12:38,685 --> 00:12:42,585 We think the need for data oriented analysis becomes 277 00:12:43,175 --> 00:12:44,385 even more important. 278 00:12:44,965 --> 00:12:46,945 And so when you look at the data 279 00:12:47,325 --> 00:12:49,865 and you look at the analysis that we provided and, 280 00:12:49,865 --> 00:12:51,905 and there's certainly other data out there, 281 00:12:52,365 --> 00:12:54,185 but our big takeaway is 282 00:12:54,185 --> 00:12:56,745 that private markets remain resilient. 283 00:12:56,805 --> 00:12:58,625 So despite skepticism 284 00:12:58,725 --> 00:13:00,545 and nerves that are, that are driven 285 00:13:00,725 --> 00:13:03,225 by things like slow fundraising and and, 286 00:13:03,245 --> 00:13:06,065 and the other dynamics that we've talked about in our view, 287 00:13:06,365 --> 00:13:08,425 we think that investors should get comfortable 288 00:13:08,425 --> 00:13:09,905 with making the hard decisions 289 00:13:10,285 --> 00:13:13,305 and really be able to separate some of the kind 290 00:13:13,305 --> 00:13:16,225 of anecdote about the private markets from the facts 291 00:13:16,285 --> 00:13:18,225 and the data and the analysis 292 00:13:18,245 --> 00:13:20,545 and say this is more important today than ever. 293 00:13:20,895 --> 00:13:24,585 Some consistent exposure to the private markets has proven 294 00:13:24,685 --> 00:13:27,945 to be really important enhancement to portfolios. 295 00:13:28,125 --> 00:13:30,305 We don't think the market up today is any different. 296 00:13:30,785 --> 00:13:33,485 - Jackie, that was fantastic. Thanks so much for joining us. 297 00:13:34,175 --> 00:13:35,685 - Thank you. Really enjoyed it. 298 00:13:36,405 --> 00:13:37,985 - To learn more about Hamilton Lane, 299 00:13:38,005 --> 00:13:39,945 please visit hamilton lane.com. 300 00:13:40,245 --> 00:13:42,185 Please follow us for timely updates on 301 00:13:42,345 --> 00:13:43,785 X, LinkedIn and Facebook. 302 00:13:43,965 --> 00:13:45,585 All at advisor Pia. 303 00:13:45,925 --> 00:13:48,625 For everyone at Advisor Pedia, our producer Julia Small 304 00:13:48,625 --> 00:13:49,865 and our engineer Tori Miller 305 00:13:49,965 --> 00:13:52,865 and the Power Your Advice podcast team, this is Doug Heman.