Hamilton Lane rakes in $1.5 bln for third co-investment fund, beats target

Hamilton Lane hit its hard cap of $1.5 billion for its oversubscribed third co-investment fund, as limited partners’ appetite for co-investing remains strong.

Hamilton Lane Co-Investment Fund III began fundraising in late December 2013, according to an SEC filing, as previously reported by Buyouts.

LP interest in co-investing is especially keen these days, said Erik Hirsch, chief investment officer at Hamilton Lane. But that doesn’t mean that this fundraising came without some challenges.

“LPs view co-investing as a way to get more direct exposure at a potential lower cost,” said Hirsch. “And so we had to convince people that effectively using a professional manager and paying fees for it was going to be well worth that expense.”

The fund’s LPs include public pension funds, sovereign wealth funds, Taft-Hartley pension plans, endowments, foundations, high-net-worth individuals and other financial institutions.

“What was interesting for us with the fund is that we have a large number of LPs who actually are effectively doing it internally as well as finding the right partner to do it with,” said Hirsch. “Yet what they liked about our product was that it has much more global reach than what they have been doing. It has a huge volume of deal flow and they liked the fact that we had a big team of 22 that was exclusively focused on this space.”

The pool focuses on “cash-flow positive businesses that tend to be more small and mid-sized from an enterprise values standpoint,” explained Hirsch. “We think that’s a higher value for the clients where we’re providing more exclusive exposure – meaning the Hamilton Lane co-investment fund is the only co-investor in the deal.”

So far the fund, which did not use a placement agent, is already 20 percent deployed, said Hirsch.

The fund’s predecessor Hamilton Lane Co-Investment Fund II closed at $1.2 billion in 2008. The vehicle generated an average IRR of 21.46 percent and an average multiple of 1.79x, as of Sept. 30, 2014, according to data provider Bison.

Founded in 1991, Hamilton Lane manages over $224 billion in total assets. The firm is based in Bala Cynwyd, Penn., and has 11 offices around the world.