Erik Hirsch, CEO of Hamilton Lane, on the Explosive Growth of Private Markets
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What does Hamilton Lane do, and why is private-market investing difficult?
Welcome to Live from the Compound. My name is Michael Batnik and I am very excited. I've been looking forward to this for a long time. I'm joined today by Eric Hirsch. Eric is the CEO of Hamilton Lane. Eric, welcome. Happy to be here. All right, so I want to start with uh a chart of Hamilton Lane's AUM. You took over as CEO when?
So about two and a half years ago.
Okay, but you've been with the company for a while.
Long time. Joined there in the late 90s.
Oh wow. Okay. So we have this going back to 2005. We took this from you. Uh six mil six billion dollars in assets under management, to say nothing of assets under advisory, which puts you guys over a trillion dollars. But from 2005, you've grown from six billion dollars in assets to around a hundred and forty-six billion dollars. Twenty years later. Pretty incredible run. Obviously, you guys have done something right. So for the audience who doesn't know Hamilton Lane. A gigantic publicly traded alternative asset manager. Who are you? What are you guys all about?
Who are you and why are you here? Hamilton Lane is what we think of as a private market solutions provider. So we are not a fund manager like a Blackstone or a KKR. We're really a provider of capital into firms like that and many, many, many others. And so our client base is really any investor who's looking to access the private markets. So think of that as lots of institutional investors, pension funds, endowments, sovereign wealth funds, insurance companies, banks, et cetera. And then lots of individual investors. And one of the misnomers around this asset class is that most people assume, well, I can just do it myself. Doing the private markets is really hard. Finding access, identifying managers, building portfolios is frankly not something even very large institutional investors do themselves.
They mostly outsource. And so we are effectively that outsource provider.
I totally agree that this area of the market, you said it's an asset class. Um, yeah, sure, but there's a million different sub asset classes. I mean, even private credit has a million different layers under that hood.
That's another misunderstanding, is that I meet most people and we talk about the private markets, and I say, Name me as many private market fund managers as you can. And the kind of the common names come spilling out very quickly. But once we get past, you know, 10 names or 12 names. they kind of get very quiet. And I say to them, okay, well, we have thousands and thousands and thousands more to go if we're gonna actually name all the players in the market. So the vast majority of our market The ma the players in that space, no one's ever heard of them because they're raising primarily institutional capital. They are managing a billion dollars or two billion dollars, and there's lots of them, and they're all over the globe, and they're all operating in different locales and different geographies, different subsectors, to your point.
So it's a huge industry and navigating that is hard.
Yeah. So I want to lead with this. I am not anti-private markets at all. Um, I think that there are there are some things with the industry and some of the things that I do have issues with, which we can get into. For example, not to harp on this point, but private equity to me is equity. I don't think that it's going to be that returns are going to be divorced from public equity returns. It's not gonna be the same exact thing, but we're investing in the equity of a business. That's what we're doing here.
I agree. I mean, our industry, when people used to say, and some people still say incorrectly, that well, it's not correlated to the public markets. That drives me nuts. It should drive you nuts because it's not true. It's totally correlated to the private to the public markets. The reason why it can look less correlated, or it's even sometimes uncorrelated. Is the reporting time lag, which is also another frustration about our industry? Which is if you're in a private markets fund, a private equity fund, and you're a limited partner in that fund.
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Chapters
8 chapters
1
What does Hamilton Lane do, and why is private-market investing difficult?
0:16–6:12
2
How have private equity returns changed, and why does manager selection matter?
6:12–13:12
3
Are private markets facing a fundraising slowdown, and can individual investors fill the gap?
13:12–19:16
4
Why has private credit grown so quickly, and what risks should investors watch?
19:16–25:24
5
Why are private credit investors seeking redemptions, and how serious are default concerns?
25:24–31:40
6
How do private-market secondaries work, and are day-one markups justified?
31:40–38:46
7
How should investors build private-market portfolios and evaluate investment opportunities?
38:46–40:31
8
Why does Hirsch believe private markets will keep growing alongside public markets?
40:31–44:52
Speakers
1 identifiedMore from The Compound and Friends
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