Firm: Hamilton Lane
Key Executives: Mario L. Giannini, chief executive officer; Erik Hirsch, chief investment officer
Assets under advisement and management: $100 billion
Headquarters: Bala Cynwyd, Pa.
Staff worldwide: 153
Other office locations: Singapore, Tokyo, Hong Kong, Tel Aviv, London, New York, Fort Lauderdale, San Diego and San Francisco.
For someone supervising billions of dollars in commitments each year, Erik Hirsch, chief investment officer at advisory shop Hamilton Lane, is more approachable than you might think.
When an industry conference ends, Hirsch and his colleagues at Hamilton Lane don’t dodge general partners, as so many limited partners do. They typically hang around to network. In fact, the employees make a point to talk to as many GPs as possible, always looking for that next great fund to invest in. Partly as a result of this unusually friendly behavior, the firm ended up sifting through almost 500 PPMs in 2010 — a number that would make most LPs cringe. Instead, Hirsch said, he relishes it. Although the work is gruelling and Hamilton Lane will only wind up investing in (or advising clients to invest in) about one percent of the PPMs that it reviews each year, Hirsch couldn’t imagine it any other way.
“We want to see everyone’s PPMs,” said Hirsch. “Simply put, the more we see, the more we can choose from and the more data we compile. I don’t understand how, in this large, global asset class, many service providers can pride themselves on being small or niche. Better information and access is what distinguishes the winners. Big and global is powerful in this business,” said Hirsch, whose firm grew from 117 employees in 2008, to 122 in 2009 to 153 this year.
That Hamilton Lane, with 10 offices around the world, up from five in 2005, is both big and global is beyond dispute. This year, the advisor put a total of $10 billion to work through all its different investing channels. The firm expects to put out at least that much capital in 2011. That may well make it the most prolific LP in the country. And while many think of Hamilton Lane as having a bias toward U.S. mega-funds—how else could it put so much money to work?—the numbers belie that over-simplification.
This year, for example, the firm committed roughly $600 million to venture funds, as well as $3.5 billion to credit-related funds and $3 billion to small and mid-sized buyout shops. By contrast, large and mega-funds took in just half of that amount, at $1.5 billion.
To be among the chosen, firms both large and small face a long, complex process that requires site visits, extensive reference checks and lots of analytics. Hirsch and his team are particularly interested in how a GP achieves its track record, rather than simply looking at IRRs or multiples. “This is key as many GPs simply assume that because they have a good track record we should support them. It isn’t that simple. We ask two primary questions. Are they actually better than the relationship we have in the space? And do we need more exposure in that sector? We are mindful to limit the number of relationships. We are not looking to [create] indices for our clients,” said Hirsch.
For firms that get past the gauntlet, having Hamilton Lane in their corner can make a huge impact. This year, for example, the firm committed $700 million to a single $4 billion energy fund, representing 17.5 percent of the total fund. It committed $600 million to one distressed fund, representing 60 percent of the total fund and it committed $250 million to one small $350 million buyout fund, representing 70 percent of the total fund. Relatively modest-sized buyouts shops that Hamilton Lane has backed over the years including
As an asset manager, Hamilton Lane focuses exclusively on private equity, and works with its clients in three ways, providing customized separate accounts, commingled products and advisory services. With its largest piece of business, customized separate accounts, Hamilton Lane serves as discretionary manager. In the commingled business line, Hamilton Lane offers three primary products — a fund-of-funds, a secondary fund and a co-investment fund. The firm’s oldest area of business is consulting to large institutional investors, assisting them in building out and managing their private equity program. Several clients cut across all three business lines.
Among satisfied clients is
With five of its offices outside of the United States, including ones in Singapore, Tokyo and London, Hamilton Lane spreads its capital around the globe. Based on location of a firm, the firm allocated between 12 percent and 15 percent of its capital to non-U.S. fund managers this year, or about $1.5 billion.
“This largely reflects our view that the U.S. market offered far more value and so we overweighted the U.S. market,” said Hirsch. However, since many U.S. firms invest internationally, Hamilton Lane pegged its total exposure to international markets to be more in the 30 percent to 35 percent range. International buyout firms that Hamilton Lane has backed over the years include
“It’s obvious we are committed to building a truly global footprint,” said Hirsch, a native of Philadelphia. “We feel it’s important to be on the ground in order to both service our clients and to be smart as we put capital to work.” He added: “Today’s emerging markets offer difficult choices for investors. Being local to understand all the dynamics is critical.”
Hirsch feels strongly that a good southern European fund, for example, will not have a need to raise money in the United States. Therefore an investor would miss the opportunity to invest if it didn’t have a local office. At the same time, Hamilton Lane has been mindful of keeping its culture in tact across all its different offices. So while the firm always hires locally, it also integrates Hamilton Lane veterans from the U.S. into its new offices. In opening its Hong Kong office, for example, the firm relocated Director Josh Kahn from Philadelphia. One of his first hires was investor Mei-ni Yang, a Hong Kong National.
“Keeping our culture is important, but having someone with a native tongue and understanding of local business is also important,” explained Hirsch. “We make sure we have the right mix on the ground. It’s a tried and true approach.”
There’s little doubt that Hamilton Lane is trusted globally. The firm touts institutional investors like
Still, while it seems that most investors are racing to China, Hirsch has yet to fall head over heals for it, although he sees the country as important. He believes investing in emerging markets is the most complex issue facing institutional investors today. “What did you do during this time period? Did you go? Did you do it well or poorly? [Those} will be important [questions] in years to come,” said Hirsch.
Hamilton Lane understands emerging markets is an important piece of the investing puzzle. “We are approaching the opportunity with enthusiasm and a cynical eye,” said Hirsch. “If you take a step back and look at the reward from investing in private equity emerging markets, there hasn’t been much to date. The U.S. and European PE markets took years to develop. By the time shops reached fund four they had been in the business for over a decade. In Asia, you can be around for five years and already be on fund four. The business is maturing at an unbelievable speed and that brings both opportunity and tremendous risk.”
Select U.S. Clients
– Mass Prim
– State of Washington
– United Brotherhood of Carpenters
– Bank Guttmann
– Royal Mail Pension
– Australia Super
– New Zealand Super
– Norinchukin Bank