Report highlights findings around valuations,
fundraising, GP-leds and sustainable investment returns
CONSHOHOCKEN, Pa., March 7,
2024 /PRNewswire/ -- Hamilton Lane (Nasdaq: HLNE), a
leading global private markets investment management firm,
published its 2024 Market Overview today. This year's report offers
a data-backed counter narrative to several commonly held
misconceptions about the private markets asset class.
The firm's annual Market Overview is a comprehensive,
data-driven review and analysis of private markets investment
activity over the prior year, featuring predictions for the year
ahead, underscored by Hamilton Lane's industry-leading database
encompassing $18.9 trillion in assets
and 52 vintage years.
The 2024 Market Overview addressed the following
myths:
- MYTH: Private market valuations are
inaccurate: It's not the first time private market
valuations have been criticized, but this past year's skepticism
toward how private markets value their holdings has been notable.
There are a few reasons why we believe both the valuations are
realistic and there is unlikely to be a downturn driven solely by
inflated valuations today.
- MYTH: The fundraising market is bleak: To be clear,
private markets fundraising indeed remains challenged,
however, the overall picture is more nuanced, with 2023
shaping up to be the seventh-largest fundraising year in
history. Also, Hamilton Lane's Private Wealth Survey showed
that nearly 75% of respondents plan to increase their allocation
from the prior year.
- MYTH: GP-led secondaries are terrible, and/or are just
like co-investments (especially single-asset deals): Using a
buyout index as a proxy for co-investments (CI), the data shows
that while returns between single-asset GP-leds and co-investments
are similar (with a slight advantage to CI), the risk profile is
quite different. Single-asset GP-led secondaries historically have
a tighter return band, and much lower loss ratios than
co-investments.
(See chart: "Co-Investment" vs. Single Asset Continuation
Vehicles)
- MYTH: A focus on sustainability will ruin future
returns: One of the most hotly-debated myths is that
sustainable investments sacrifice performance, which at one point
in time might have been a justified stance. As illustrated below,
sustainable investment trailed behind non-sustainable investment
for much of the aughts and early teens, but the last five or six
years have seen that trend change meaningfully.
(See chart: Rolling Fund Performance)
Mario Giannini, Executive
Co-Chairman and author of the Market Overview, commented: "As new
investors enter the asset class and we continue to navigate a
broadly challenging economic climate in 2024, the need for
data-oriented analysis becomes even more important. This year's
Market Overview finds that overall, private markets remain
resilient, despite skepticism and nerves driven by slow
fundraising. In our view, investors must get comfortable making
hard decisions, and must be able to separate fact from fiction.
That matters today more than ever."
To access the full 2024 Hamilton Lane Market Overview, click
here.
Definitions
- Internal Rate of Return (IRR) – IRR is the annual rate of
growth that an investment is expected to generate. Mathematically,
the interest rate that sets the net present value of all cash flows
to zero.
- Time-weighted Return (TWR) – Time-weighted return is a measure
of compound rate of growth in a portfolio
- TVPI – Multiple to measure cumulative returns, both realized
and unrealized. TVPI is the ratio of current value of remaining
investments of the fund plus total value of all distributions to
date, relative to total amount of capital paid to date.
- MOIC (Multiple on Invested Capital) – The same mathematical
definition as TVPI, except is typically a multiple of the
investment commitment itself rather than what was paid in by the
investor.
About Hamilton Lane
Hamilton Lane (Nasdaq: HLNE) is one of the largest private
markets investment firms globally, providing innovative solutions
to institutional and private wealth investors around the world.
Dedicated exclusively to private markets investing for more than 30
years, the firm currently employs nearly 700 professionals
operating in offices throughout North
America, Europe,
Asia Pacific and the Middle East. Hamilton Lane has approximately
$903 billion in assets under
management and supervision, composed of $120
billion in discretionary assets and nearly $783 billion in non-discretionary assets, as of
December 31, 2023. Hamilton Lane
specializes in building flexible investment programs that provide
clients access to the full spectrum of private markets strategies,
sectors and geographies. For more information, please visit
http://www.hamiltonlane.com/ or follow Hamilton Lane on LinkedIn:
https://www.linkedin.com/company/hamilton-lane.
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SOURCE Hamilton Lane