Erik Hirsch, CEO of Hamilton Lane, on the Explosive Growth of Private Markets

Michael Batnick (0:17)

Welcome to Live From the Compound. My name is Michael Batnick and I am very excited. I've been looking forward to this for a long time. I'm joined today by Erik Hirsch. Erik is the CEO of Hamilton Lane. Erik, welcome.

Erik Hirsch (0:26)

Happy to be here.

Michael Batnick (0:28)

All right, so I want to start with a chart of Hamilton Lane's AUM. You took over as CEO when?

Erik Hirsch (0:34)

So about two and a half years ago.

Michael Batnick (0:36)

Okay, but you've been with the company for a while.

Erik Hirsch (0:38)

Long time, joined there in the late 90s.

Michael Batnick (0:40)

Oh wow, okay. So we have this going back to 2005 We took this from you.

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 146 billion dollars 20 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?

Erik Hirsch (1:12)

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 are 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.

Michael Batnick (2:06)

I totally agree that this area of the market, you said it's an asset class. Yeah, sure, but there's a million different sub-asset classes. I mean, even private credit has a million different layers under that hood.

Erik Hirsch (2:18)

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 common names come spilling out very quickly. But once we get past 10 names or 12 names, they get very quiet. And I say to them, OK, well, we have thousands and thousands and thousands more to go if we're going to actually name all the players in the market. So the vast majority of our market, 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.

Michael Batnick (3:10)

Yeah. So I want to lead with this. I am not anti-private markets at all.

I think that 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 returns are going to be divorced from public equity returns. It's not going to be the same exact thing. But we're investing in the equity of a business. That's what we're doing here.

Erik Hirsch (3:37)

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 market.

Michael Batnick (3:44)

That drives me nuts.

Erik Hirsch (3:46)

It should drive you nuts because it's not true. It's totally correlated 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, you're getting your statements at least a quarter lag after the prior quarter end. Well, that time lag, that's what, again, on a piece of paper creates the notion of, well, this doesn't look super correlated. Yeah, because you just time lagged it out.

But when you kind of erase that and mathematically you can, they're correlated.