Q2 2022 Hamilton Lane Inc Earnings Call

Yeah.

Ladies and gentlemen, thank you for standing by and welcome to the Hamilton Lane incorporated second quarter fiscal year 2010 to two earnings conference call. At this time, all that N V Saturday Nielsen only mode.

After the Speakers' remarks, there will be a question and answer session.

To ask a question during the session you will need to press star one on your telephone if you require any further assistance. Please press star zero. Thank you.

Now I would like to welcome Mr. John Oh, Investor Relations manager Sir. Please go ahead.

Thank you well good.

And welcome to the Hamilton Lane Q2 fiscal 2022 earnings call today, I will be joined by Mario Giannini, CEO, Erik Hirsch, Vice Chairman and a toolbar CFO.

Before we discuss the quarter's results we want to remind you that we will be making forward looking statements based on our current expectations for the business. These.

These statements are subject to risks and uncertainties that may cause the actual results to differ materially.

For a discussion of these risks. Please review the risk factors included in Hamilton Lane's fiscal 2021, 10-K as amended and subsequent reports we file with the SEC.

We will also be referring to non-GAAP measures that we view as important in assessing the performance of our business reconciliation of those non-GAAP measures to GAAP can be found in the earnings presentation materials made available on the shareholders section of the Hamilton Lane website or.

Our detailed financial results will be made available when our 10-Q is filed.

Please note that nothing on this call represents an offer to sell or a solicitation to purchase interest in any of Hamilton Lane's products.

Beginning on slide three year to date, our management and advisory fee revenue grew by 12%, while our fee related earnings grew by 24% versus the prior year period.

This translated into year to date GAAP EPS of $2 98.

Based on $80 million of GAAP net income and non-GAAP EPS of $2 23 based on $120 million of adjusted earnings.

We have also declared a dividend of 35 per share this quarter.

Equating to the targeted $1 40 per share for fiscal year 2022.

With that I'll now turn the call over to Martin.

Thanks, John and good morning, It was another strong quarter for the firm and we are pleased with the continued growth and success I am proud of our team members for their hard work and dedication and I'm also pleased to welcome a number of new Hamilton Laners since the beginning of the calendar year, we've increased our employee base by more than 50 supporting our clients in the overall growth of our franchise.

Let me turn to some results for the quarter beginning on slide four.

Here, we highlight our total asset footprint, which we define as the sum of our AUM assets under management.

Assets under advisement total asset footprint for the quarter stood at $805 billion and references.

Our long term consistent growth trend.

AUM growth year over year, which was 23 billion or 32% came from both our specialized funds and customized separate accounts and continues to be diversified across client type size of client and geographic region. Our focus remains growing and winning across both lines of business and we are pleased with our continued success.

As far in a way similar to that of our AUM growth year over year, which came in at 235 billion or 50% was from across client type and geographic region.

We have mentioned on prior earnings calls <unk> can.

Can fluctuate quarter to quarter for a variety of reasons, but the revenue associated with that UA does not necessarily move in lockstep with those changes and while this quarter saw an increase in any way dollars relative to the previous quarter. We will continue to emphasize that no direct correlation exists between the scale of our UA dollars and revenue generation.

Let me now shift gears and talk to the continued success, we're having with our evergreen platform for the benefit of those on the call less familiar with these products are evergreen evergreen platform provides private wealth channels and individual investors with direct and immediate exposure to the private markets through open ended semi liquid structures for us it represents permanent fee, earning AUM.

AUM, where we earn management fees on net asset values that grow as net inflows grow and as the portfolio assets appreciate in value.

Average management fee across this platform is a 140 basis points, we are able to earn carried interest at a rate of 12, 5% over hurdle of either 6% or 8% depending on the deal type and important to note on a deal by deal basis. As these vehicles contained no primary fund exposure in our exclusively transaction oriented.

Every investment dollar is eligible for carried interest.

The additional appealing aspects of these products and their availability to a wide range of investors. We see this broad accessibility is an important pillar to our growth today, our investment minimums are 125000 for our international sleep and 50000 for the U S fleet.

As for the platform.

So a very small number of managers, who have a platform that exceeds 1 billion in size with a solid and established track record and the ability to continue to grow and scale efficiently and effectively monthly flows have remained very soon.

It was over $192 million of monthly net inflows, we look forward to capitalizing on this momentum as we head into the end of 2021 now.

The opportunity in the private wealth market continues to be remain very robust.

Strong demand for access to the private markets from this group of investors, who have historically had limited access and exposure, we believe and the market reaction to date appears to confirm that our vehicles are being seen as attractive to this market segment and are well positioned to benefit from this growing demand in general tailwind.

Let me now turn it over to Eric.

Thank you Mario and good morning moving.

Moving onto slide five we highlight our fee, earning AUM as a reminder fee, earning AUM is the combination of our customized separate accounts and our specialized funds with basis point driven management fees. We will continue to emphasize that this is the most significant driver of our business as it makes up 80% of our management and advisory fees relative.

To the prior year period total fee, earning AUM grew $5.4 billion or 14% stemming from positive fund flows across both our specialized funds and our customized separate accounts.

Taken separately $2.8 billion of net fee, earning AUM came from our customized separate accounts and over the same time period to $6 billion came from our specialized funds growth. In these two segments continues to be driven by four key components, one re ups from our existing clients, two winning and adding new clients.

Three growing our existing fund platforms and four raising new specialized funds. Additionally, our combined fee rate remained steady.

Moving to slide six fee, earning AUM from our customized separate accounts stood at $27.4 billion growing 11% over the past 12 months, we continue to see the growth coming across institution type.

<unk> and geography.

As it relates to our existing client base over the last 12 months more than 80% of the gross inflows into customized separate accounts came from this group.

Ups from our existing client base remains a key component of the growth. We've achieved in this segment are fee, earning AUM and.

In addition to re ups, we continue to expand our client base by winning and adding brand new relationships, which in turn provide a growing base for future re up opportunities from a geographic standpoint, we continue to expand our global footprint and seek out investors who have yet to invest in this asset class I'm proud to say that this past quarter, we welcomed our first client for Mexico.

Moving to our specialized funds growth here continues to be strong we are executing well across our product suite and demand remains robust coming like the rest of our business from a diversified set of investors around the globe over.

Over the past 12 months, we achieved positive inflows of $2 $6 billion, resulting in an 18% increase in fee, earning AUM.

During this fiscal quarter, we held a fourth close for our direct equity fund, formerly known as our co investment fund the closed totaled a little over $100 million of L. P commitments and brings the total raised for this fund to approximately $1.1 billion. We are pleased with the success to date and the strong demand being shown around the globe.

For this product we have 24 months from the first closing to complete the raise for this product and so we expect to be in market through October of 2022.

As many of you are aware, we have a number of specialized funds. In addition to our direct equity funds that are currently in market. Our direct credit serious closed its most recent vintage in March of 'twenty, 'twenty, one and given that product essentially raises capital every year. We are already in the process of collecting capital for the next series. We are also in process of.

Raising our second impact fund and demand. There also continues to be high and lastly, we had announced last quarter. The newest addition to our specialized fund lineup. Our infrastructure fund that is also attracting solid investor interest. We look forward to providing you with additional updates across the product line as future closings occur in subsequent quarters.

I'll end this section by announcing that we have just launched our sixth secondary fund.

Our fifth fund was a strong testament to the strength of our platform and the overall interest in the secondary space. It was the largest single specialized fund we've ever raised at almost $4 billion growing from a previous fund size of $1.9 billion investors continue to show a great amount of interest in deal volume continues to grow.

A secondary transactions continue to morph and evolve in Hamilton Lane is well positioned to be a strategic solutions provider in this space.

We're excited about the prospects for the sixth fund and we anticipate holding a first close in the first quarter of 'twenty 'twenty. Two we will have 24 months from the date of that first close to finished raising the fund and we look forward to providing you with future updates.

Let me now take this opportunity to provide an update on a number of technology related investments on our balance sheet as well as announced two new exciting strategic partnerships.

I'll begin with a reminder, about an announcement, we had made last quarter, but where the financial impact flowed through this quarter's results.

On July 27th I capital, a leading global financial technology platform Democratizing access to alternative investments for individual investors raised $440 million from new and existing investors to continue on with their growth strategy.

The round valued I capital at approximately $4 billion and with that our original $10 million investment in our capital is now valued at $40 million generating a return of Forex in less than 18 months since our initial investment in.

The unrealized gain that we recorded for this quarter is approximately $23 million.

Next back in February of 'twenty, 'twenty, we announced that we had participated in the series a financing round four canoe as.

As a refresher canoe with a cloud based machine learning technology that streamlines, the complexities around document collection and data extraction and in access in an asset class, we're reporting mediums and standards can vary widely.

Hamilton Lane.

Along with PMC, our data collection joint venture with S&P are both canoe customers.

Our early investment has helped canoe develop their technology and grow their platform and on September 9th their mission was further validated with the completion of an oversubscribed series a extension round that was led by Blackstone and Carlyle, who like Hamilton Lane are also key clients of canoe.

Shifting now to our recent exit of one of our oldest investments in February 2016, Hamilton Lane set out to partner with a technology company to address what we believe to be the systematic under investment in data and analytics in the private markets. Ultimately our goal was to find better ways to capture and analyze private market data for both limit.

And general partners.

We partnered with bison to create a solution called cobalt aimed at providing both Lps and GPS with a SaaS based technology offering cobalt L. P performs portfolio analytics fun diligence and cash flow forecasting.

Cobalt G P performance benchmarking helps them managing the fundraising process.

And then provides monitoring our portfolio companies' kpis.

At the beginning of 'twenty 'twenty, we announced at Hamilton Lane had purchased cobalt LP from bison, which provided us the ability to fully control that service offering we continue to both offer cobalt L. P. As a standalone service as well as increasingly bundling it as part of a broader relationship with clients.

Cobalt L. P is growing nicely and is supported internally by a fully dedicated dedicated team that now includes technology sales and customer support resources.

Today Cobalt LP has millions of dollars of contracted revenue and is growing at a double digit rate.

We are pleased with the success, we've achieved with cobalt LP, thus far and are excited for what the future holds there.

Now after the cobalt L. P transaction closed we remained the key shareholder and partner of Bison, who continued on with growing and selling the cobalt G. P software I'm pleased to now announcing on October 13th Factset purchased cobalt L. P. This transaction represents a full exit of our bison investment and while terms of the transaction or not.

Being disclosed it does result in a $12 million gain which will flow through our financials next quarter.

Having a world class data and analytics firms such as Factset.

The value in cobalt G. P. Further validates our original thesis around the need for analytically driven software in the private markets. Hamilton Lane continues to have exclusive rights to the L. P market and we will continue our data services arrangement with cobalt G P and factset.

I'll now move to two new initiatives that you may have seen recently announced I'll begin with the launch of a newly formed public benefit Corporation called Nevada on October 7th.

And consortium consisting of Hamilton Lane.

Ford Foundation S.

That's N P and AUM and yard network announced the creation of an innovative technology platform built to provide private companies with intuitive and secure E. S. G data collection and benchmarking.

Across the private markets ESG reporting and standards, while an extremely important component of successful investing still remain a complex problem.

Nevada is a solution that allows private companies to store collect and measure their data based on the metrics that are most meaningful for them and entities important to them, including their investors customers lenders and supply chain partners.

Nevada is creating an independent unbiased and flexible open architecture platform for the private markets to more consistently report on ESG data.

Hamilton Lane is the founding shareholder of Nevada, and will be joining their board of directors.

We are excited about this new investment and partnership and believes it serves as another example that we remain the partner of choice in the private markets around building successful data and technology offerings.

Lastly, let me touch on our newest strategic investment in a company called Tiffany T.

<unk> is a platform that operate several fintech companies focused on meeting the evolving and technological needs of wealth managers.

Our I as an individual investors.

<unk> portfolio of companies are shaping the future for the individual investor experienced by arming both advisers and investors with intelligent products and solutions that recognize the distinctiveness of each investor.

There are companies, including magnify.

Financial answers and told them utilize the power of artificial intelligence and smart learning technology to provide tools data and analytics to support the advisor or individual on their unique financial journey.

This investment Hamilton Lane will joined the strategic Advisory Board that already includes the CEO of asset management for J P. Morgan the CEO of Morningstar and the precedent of Broadridge.

As you heard Mario comment earlier, the opportunity for private markets in the private wealth channel is extremely deep and robust we've had a great deal of early success and continue to seek out ways to fuel that growth with one such example, being our acquisition of 361 capital to bolster our distribution efforts in the U S.

Wealth management and private wealth investing will continue to be a strategic priority for us and we believe Tiffin will further our brand and reach into the space. We are excited about this newest partnership and look forward to sharing more good news a momentum around the company in the future and with that I'll now turn it over to a tool to cover the financials.

Alright, Thank you Eric and good morning, everyone.

Eight of the presentation shows the financial highlights for the first half of fiscal 2022.

We continue to see solid growth in our business with management and advisory fees up 4% versus the prior year period.

Our specialized funds revenue increased $5 $8 million or 9% compared to the prior year period.

Driven by $600 million of inflows into evergreen platform in the current year period, along with almost $1 1 billion raised to date from our latest direct equity fund year.

Year to date rental fees have been limited given that our latest direct equity fund was turned on in the prior quarter.

Relative to the prior year period would be recognized $6 1 million in retro fees from our latest secondary fund.

We expect to generate additional retrofits.

We'd hold subsequent closes of her latest direct equity funds.

And just to reiterate as many of you are likely aware investors that come into later closes on the fundraise for many of our products pay retroactive fees dating back to the Fund's first close.

Therefore, you typically see a spike in management fees related to that fund in the quarter English subsequent closings occur.

Revenue from our customized separate accounts increased $2 $1 million compared to the prior year period due to the addition of several new accounts and REO from existing clients.

Revenues from our reporting and other offerings increased $5 6 million.

In the prior year period, driven by revenue associated with the existing funds managed by the <unk> team.

We acquired in April of 2020 one.

In addition, we saw at $3 $7 million of increased revenue.

The prior year period.

Distribution management business.

The final component of our revenues incentive fee.

Incentive fees year to date were $25 5 million or 15% of total revenue.

Moving to slide nine we provide some additional detail on our unrealized carry balance.

Given the continued positive trend in valuations the balances of 142%.

In the prior year, even as we recognized $57 $1 million of incentive fee during that period.

Unrealized carry balance now stands at $990 million.

And just to remind everyone. We don't control these positions end up.

We don't control the timing.

Our fee related earnings were up 24% versus the prior year period as a result of the revenue growth, we discussed earlier, along with growth in our margin and.

In regard to our expenses total expenses increased $6 million compared with the prior year period.

G&A increased $11 $4 million, which included the rent expense associated with our new headquarters.

Along with expenses from <unk> capital.

And total compensation and benefits decreased $5 $4 million.

Moving to our balance sheet on slide 11, our largest asset on the balance sheet as investment alongside our clients.

Our customized separate accounts and specialized funds.

The long term we view these investments as an important component for our continued growth and will continue to invest our balance sheet capital alongside our clients.

In regard to a liability because we continue to be modestly levered, even with the increase in the debt balance used to fund the rest of the investment.

Men earlier in this year.

And with that we thank you for joining the call and are happy to open up for questions.

At this time I would like to remind everyone in order to ask a question simply press Star then the number one on your telephone keypad.

Our first question is from the line of.

Ken Worthington from Jpmorgan. Your line is still open.

Yeah. Good morning. Thank you for taking my questions, maybe first on FRE margins FRE margins bumped up this quarter is this the new normal as the fund business continues to grow or do we see teeny and other costs start to normalize and weigh on margins just sort of a post COVID-19 environment starts to emerge.

And what should normalize margins look like given the fund in kidney dynamics say over the next one to two years.

Ken It's Eric I'll take that.

We're clearly still operating in a non normalized environment today, and so I think when I look about margin I think about two things I think one as you know it is the expense piece and I think we're clearly experiencing some some non normality there.

And so when or if that returns I think is still to be determined I think the other thing that you're starting to see and you clearly have heard from other players in the market.

Is is rising pressure on wages and so I think while we've done a good job of managing that I I don't expect that I think our management team views that that pressure is going to continue and so theres going to be some rising costs associated with continuing to hire the best and the brightest out there now.

Now that's sort of what would be potentially weighing on margins on the future. The flip side is.

Is that sort of mix of asset flow as.

As we continue to see real strength in the specialized funds as you know those are coming with both higher fee levels as well as higher margin and so that's helping to kind of pull the business up I'd say overall I think management's doing a strong job here of managing the business running it tightly.

And I think we certainly have some wins at our back but I would not suggest that today, we sort of see 47 is a new normal or a new benchmark for us.

Great.

Thank you for that.

And then as you noted sort of big bigger distributions are in bigger gross sales sort of suggests that clients are re upping given the seasoning of your client base what does the pace of re upping look like say over the next year or two compared to what we've seen and.

Maybe the pre Covid environment.

What do you see in terms of re upping from newer and more mature clients like how did their re ups actually look are they committing more are they committing the same they committing less like is there a sort of a rule of thumb on the different parts of that spectrum and then ultimately what does this mean for fees and margins as these exists.

Clients re up good bad or indifferent. Thanks sure. Thanks, Ken It's Erik I'll stick with that.

Think sort of the short answer is it really is client by client driven so each of our clients is in a different level of maturity around their private markets program. Some are.

It's dramatically below target some of them are at target and so I think you'll see a real mix there around pacing and how people think about re ups, that's very dependent on their program and how their program is developing.

That said I think one of the macro truisms is that.

In a market where kind of plan assets are growing due largely to public market performance being positive you see a growing of the denominator and even in a world where clients want to maintain a steady state allocation to the private markets that means the numerator needs to kind of move in lockstep with that denominator. So generally I think it's fair to say that in market.

That our upwardly moving and rising as we're experiencing now and have for the past few years that tends to have a positive impact on flows and so we are seeing that.

Your question sort of on the backend.

Is that positive from a fee rate margin perspective.

You've heard us say before and will continue to say I mean, rehabs are a very important part of our business the stickiness.

As a powerful part.

And that re up.

It does lend itself to some margin enhancement because again a lot of the costs for the servicing that clients have already been sort of baked in and structured and so to the extent that that that client is providing you additional capital.

That's just providing good benefits of scale.

Great. Thank you very much.

Yeah.

So our next question is from the line of Adam Beatty from UBS. Your line is now open.

Hi, Good morning, Thank you for taking the questions maybe.

Maybe just a follow up actually on the discussion around separate accounts just wanted to get your sense around if you will maybe total addressable market and you know among either among your newer clients or just in the marketplace in general how you're seeing your allocations are there still.

Large chunks of that of that institutional market that are under allocated or do you find more and more of that you know they have achieved a certain level of allocation, but maybe youre, winning business from others or or how does that stack up competitively.

Sure, it's Eric and I don't mean to dominate here, we're having a bit of a microphone issue in our conference room. So I'll I'll do my best to channel Mario on this one because he would be the one taking this I think as you kind of look across the client base I think you see a couple of realities, one as you've heard us say and we just noted on the call. There continues to be a surprising I think to many.

People not surprising to us, but a surprising number of entities that are still not yet entered the asset class.

That's because there are simply newer or whether that's been for regulatory reasons or whatever the driver of that has been I think we continue to be we continued to benefit from frankly, finding entities that are yet to come into the asset class and we're now helping them do that.

I think as you then think about sort of the macro around the addressable market and targets I think one the studies all show and not our studies, but market studies or sort of showing that interest in the asset class continues to rise and is forecast to do that I think the big growth in addressable market is what we're experiencing right now on frankly, the the evergreen product kind of getting into it.

Wealth management channel that as Mario noted is a hugely underpenetrated segment and it's a massive segment of the market.

I don't think it's a situation where everyone's going to have equal access or equals success I think you've got to build the right product and have the right brand and have the right ability to execute and I think the fact that we've achieved the success. We have in the short order I think sort of demonstrates that we're clearly well positioned to do that now and to continue to do that in the future and so there.

I think we're seeing just a tremendous amount of growth opportunities.

That's excellent. Thank you Mario and Eric and then just around that in terms of the organic growth level at Hamilton Wayne I mean over the last few quarters, we've seen no meaningful and sustained step ups.

On a year over year basis, and just given the success with the evergreen product.

Right around and in new businesses and separate accounts and the schedule of fund launches in additional closings.

Is it reasonable for us to think about the gross level of inflows you know, having really stepped up on a sustainable basis is this closer or somewhere like a new run rate or trajectory.

Sure, It's Eric I'll stick there again, I think Theres a couple of factors one is that macro that I mentioned earlier, which is you're kind of in a rising tide environment here.

Accessible public markets again growing denominator is and that is forcing if you will kind of flows to be expanded across all of the other asset classes hours, including so I think on some level, there's a rising tide element for us specifically.

I think you are seeing a couple of pieces of the puzzle really start to kind of hit on all cylinders.

But most notably I would point to the specialized funds I think there as we said in the past our job is to both add new products, which we're doing with things like impact in infrastructure. It is to expand products that we've already had past success success with as we've done with our secondary franchise as an example, and now back out to try that for.

Our six time.

And then the third is really just defined brand new areas for growth and the biggest one I would point to there is again that sort of effort into the retail side.

So all of those are gaining good traction I think we've done a good job of supporting all of those with this kind of data and technology. We don't view those investments that's kind of separate and apart from the business, they're core to the business there, what's fueling and in helping us get traction across all of these so these different strategic partnerships. These different investments all of those I think are coming together.

Other to help sort of generate the success and propel us forward.

Got it that's great detail much appreciate it thanks.

Your next question is from the line of Michael quickly from Morgan Stanley. Your line is now open.

Great. Thanks, Mike Cyprus mortality I just wanted to ask about the SMA I think you had mentioned about 20% of the flows were coming from new clients on the SMA side I was just hoping you could maybe a little elaborate a bit on what the profile is of these new clients you know what channels geographies are they coming from just any sort of color on the size here.

But to sort of share around these these customers I think in the past you had mentioned that the SMA growth had been impacted by the pandemic weighing on new clients coming in the door and just curious if that has subsided where that stands today and how that pipeline looks for new estimate relationships as you kind of look out from here.

Hey, Mike, It's Lori I'm going to try we aren't having a little technical difficulty in the conference room, So hopefully hopefully.

No sorry that might just cut off again, Mike So I'll I'll I'll pick up that was.

We tried but no no success there Mike I would say, it's Eric and I think the great news is.

There is no common denominator I think the separate accounts are coming from.

Different geographies different institution types and across the institutional type different sizes.

To us I would sort of point to this being emblematic of two very positive parts of the business one.

It's an asset class that is needed and desired by institutions and N T. CS of all different shapes and sizes across geographies too I think that sort of speaks to the distribution network that we've built out internally. We continue to open up new offices today, we're up to 19 around the globe and so that geographic footprint continues to grow and expand we can.

To invest in resources Mario mentioned that we were welcoming a number of Hamilton lane or is new to the firm since the beginning of this calendar year I think all of that is designed to continue the sort of the reach of the firm whether that's distribution reach.

<unk> reach and of course, making sure that we're there to service those customers. So I think all of that points to sort of positives for both the industry as well as for us specifically.

Great just a follow up question, just maybe a little bit more on the P&L too.

Two parter here it looked like the in the SMA fee rate it looks like that ticked down a little bit that if I was looking at that right. Just curious any color you can share on some of the moving pieces and they estimate how the fee rates are evolving on the SMA side and then just on the FRE margin I know Ken had asked about that but I guess my follow up there just around how should we think about the incremental margin.

On revenue today, that's coming into SMA versus funds, how is that trending versus history and he sort of numbers you can help put around the incremental margins sure Mike It's Eric I think on the SMA fee rate I think what you're seeing there is an anomaly for the quarter.

Is it a little bit of re up dynamic with some existing customers.

That caused a little bit of a renegotiation around some tranches I think that is simply a an aberration. It that it's occurring in a particular time I think when you look at that on an annualized basis.

We're going to see that it's business as usual and there's been really no change there.

I think on the margin I mean, we've said before clearly the margins are better than higher than our specialized fund business and that's particularly true with this evergreen retail product and.

So those tend to be a higher driver of positive margin contribution than the separate accounts, but theres nothing new happening to that I think what you are simply seeing as as that specialized fund business continues to grow at a very significant rate that is helping to sort of pull some of the margin benefit across the firm.

Great, Thanks, and if I'm able to sneak a another question here if I if I could just on the secondaries firm's broader marketplace. We've seen a number of firms acquire secondary these platforms. Just curious as you look at the landscape today, what sort of impact do you think this can have on competition in the marketplace, particularly as other firms are perhaps looking to bring secondary.

He is into the the retail channel and these are more funds focused firms I don't think they have S. Amaze just curious your views broadly on sort of the shift from funds into estimates across the landscape. How you see that playing out well I think what that speaks to is the fact that secondaries are becoming an increasingly more and more important part of the overall asset class so the growth in that.

Space overall has been significant but I would note and you just you just said it. They are acquiring this is not new entrants coming into the market. These are acquiring franchises that are already there and in some cases, we've already had been competing with so I think the success that we've achieved to date.

Has already been in a landscape where all of those franchises exist and have continued to exist. So I think what that tells you is it's a really big pool of capital. That's out there we have sort of our share of that we believe that that both that pool of capital will continue to grow and we're hopeful that our share continues to grow but we don't really see the acquisitions has been.

Being all that noteworthy or impactful to the business.

Great. Thank you.

Your next question is from the line of Alexander Blaspheme phone from Goldman Sachs. Your line is now open.

Hey, everybody. Good morning, Thanks for the question.

I was hoping you could expand a little bit more on retail and the wealth management channel. Obviously, it's been a topic for a couple of quarters in the space for for this earning season in the prior one maybe as well.

Specifically, if you guys can join in on the U S opportunity set and give us some details in terms of the number of distribution platforms. You're on what are you. What are you guys seeing on the independent broker dealer side on the wire house side, just to kind of help us frame.

The opportunity set you see that for yourself as you get on more platforms.

If we could start there thanks sure.

Sure, it's Eric and I'm happy to start.

I mean as we've noted we've been basically at this for two years total lessen.

Less than the U S and as you know we acquired the 361 team as an effort to kind of bolster our direct kind of to market capabilities, and we and we added that.

The resources that we already have.

I think what I would note is.

That flow of funds is coming from a large number of entities, but what it is not coming from today as it's not coming from the big wire houses and so the fact that we've already had this level of success in the scale.

And we have yet to sort of tap into that I think is real testimony to the resources that we've built and the brand that were building. Our view here is that this is really a ground game.

And so we have started with sort of that you know with that sort of big ground effort and we'll continue to kind of work our way up into that food chain and I think if you look at those that have come before us I think you'd sort of see some very similar you know some similarities to how they sort of built out.

And they're there now operating at a very different scale and so that's sort of the model that we're following and we feel like we're on a good path for that.

Got it great.

And then maybe a follow up to Mike's question earlier, you know you just talked about the secondaries business a similar line of question from just maybe the co invest as we've seen some of the kind of for lack of a better term traditional also I guess some of the larger players focus more on some of the core products that do have a lot of sort of longer dated and some co investment opportunities.

How does that position you guys where is the competitive advantage that you see for yourself and end market pay that marketplaces. As you think about the co investment fund lineup for Hamilton Lane over time.

Sure I mean, I think look co investments are kind of a precious commodity that fund managers control the flow of.

And I think when you think if you think as a fund manager of what Youre looking for in a good partner.

You're looking for someone who is a co investor who can bring resources.

An approach that is sort of going to mirror your own team so as to not sort of bogged them down or to get in the way and so we've got a tremendous direct equity team in house.

But if you look at the backgrounds and bio's, a large portion of them actually come from the fund manager business. So been there done that very experienced professionals, and we think that sort of stacks up well in the market and makes us kind of a customer of choice partner of choice, but the other piece I think you know candidly is obviously.

Obviously fund managers, one access to primary fund capital.

And we remain one of the absolute largest allocators of primary fund capital in the World.

Think that position of sort of wielding that capital base and having that capital base. As it is it is continuing to grow just makes us more and more important to the market and more important to those fund managers and theyre looking to sort of further their relationship and to deepen their relationship with us.

Awesome. Thanks, so much.

Once again, if you wish to ask a question simply press Star then the number one and then your telephone keypad.

First question is from the lineup Robert E. Lee from <unk> your.

Your line is now open.

Good morning, Thanks for taking my question most of them were asked but maybe.

Following up on the competitive environment. So.

You know talked about comp.

Comp pressures, you mean things that I think everyone's seeing them, but some of your competitors have or had been.

Specifically skewing, you know changing that comp structures skewing towards retaining a comp you know a larger and larger proportions of carry going down the road. So do you see.

Any need to evolve or alter your current comp structure, partly as retention, partly as some large competitors are.

Or maybe paying out larger proportions of carry in compensation, if that's having any impact.

Yeah, Thanks, Rob its Eric.

Look I think.

Like every smart player in the market, we're kind of keeping a very close eye on kind of market dynamics around what is attractive to employees to making sure that we can both attract and retain that.

That said I think we run a different model than a number of other firms out there.

I think what you're sort of seeing is increasingly a model where.

It is a what do you own.

And where a lot of the businesses are fragmented and you sort of see partial ownership across their employee basis, that's not our model. Our model is a one firm one compensation pool shared economics across the organization. We think that's a very powerful advantage for us because it really aligns not only the employees with our clients, but it more importantly equally.

It really aligns the employees with each other.

And so today, we don't see a dramatic need to kind of change our comp philosophy I think the point, we would simply make is that we do see a where we are in and we are continuing to see a rising wage environment and.

And so we will need to be responsive to that but I don't think that sorta necessitates a wholesale change to compensation philosophy.

Great. Thank you that was my question I appreciate it.

Your next question is from the line of Michael <unk> from Morgan Stanley. Your line is now open.

Thanks for taking the follow up more of a big picture question as we look at the private markets today.

Growth equity and venture have been some of the fastest growing parts of the private markets and so I guess the question is as we look out over the next three to five years, which sub sectors and strategies within the private markets. Do you think are going to be amongst the fastest growing and which ones do you think might be relatively slower growing.

But still within a very fast growing part of the industry and how does that inform your view on strategic actions and resource allocation and Hamilton Lane.

Sure, Mike, It's Eric I'll stick with that.

I think it's hard to look out and predict where you're going to see growth because I think that growth I mean take the venture and growth equity space today.

That's fueled by very favorable economic environments that are occurring that are allowing those spaces to operate successfully if you'd tell me that 12 months from now we have a significant market correction and downturn.

Tell you that things like distressed debt, which are basically nonexistent today all of a sudden become a much more interesting space and they will become one of the faster growing areas.

If you told me that you're going to see a massive slowdown in Europe and a big explosion of growth in Asia, then youre going to see a slowdown for European G. P's in a pickup for Asian G. P. So I think part of that is simply based on sort of economics and.

And what's happening with the economy, and so I think that makes that difficult to predict from our perspective. However, we've got deep domain expertise across all of those categories in all of those channels. So if you tell us that I mean right now our credit team, who is adept at doing both performing and nonperforming credit.

If we go into a nonperforming credit world that resource group just starts to toggle and spend their time elsewhere. Similarly on the equity side or the geographic side. If this is for us of why you spend the time and the resources, making your investment team as big as we have it and why you have investment resources across all of the different underlying areas as we do in <unk>.

Why you continue to open up offices and make sure you've got resources across those geographic regions. Because you just do not know what is going to become kind of the sector does your tomorrow versus five years from now.

Great. Thanks, Eric.

Yeah.

There are no further questions presenters. Please continue.

Okay again, thanks, everyone for the time, a very strong quarter from our perspective, we appreciate the support and we'll speak to you soon have a nice day.

And with that this concludes today's conference call. Thank you for attending you may now disconnect.

Goodbye.

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Yeah.

Okay.

Yes.

Uh huh.

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Great.

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