Q3 2022 Hamilton Lane Inc Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the Hamilton Lane incorporated third quarter fiscal year 2022 earnings conference call.

Speaker 1: Ladies and gentlemen, thank you for standing by and welcome to the Hamilton Lane Incorporated third quarter fiscal year 2022 earnings conference call. At this time, all participants' lines are in a listen-only mode.

At this time all participants lines are in a listen only mode.

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After the speaker's presentation, there will be a question and answer session.

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I would now like to hand, the conference over to your Speaker today, John Oh Investor Relations manager. Thank you. Please go ahead Sir.

Speaker 1: I will now hand the conference over to your speaker today, John Oh, Investor Relations Manager. Thank you. Please go ahead.

Thank you Julie good morning, and welcome to the Hamilton Lane Q3 fiscal 2022 earnings call today, I will be joined by Mario Giannini CEO , Erik Hirsch Vice Chairman, Brian Gill day mobile handed investments this will warm a CFO .

Speaker 2: Thank you, Julie. Good morning and welcome to the Hamilton Lane Q3 Fiscal 2022 Earnings Call. Today, I will be joined by Mario Giannini, CEO , Eric Hirsch, Vice Chairman, Brian Gilday, Global Head of Investments, and Atul Varma, 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.

Speaker 2: 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 statements are subject to risks and uncertainties that may cause the actual results to differ materially.

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

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

Speaker 2: For a discussion of these risks, please review the risk factors included in the Hamilton Lane Fiscal 2021-10-K, as amended, and subsequent reports to be filed with the SEC.

Speaker 2: 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 shareholder section of the Hamilton Lane website. Our detailed financial results will be made available when our 10-Q is filed.

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.

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 solicitation to purchase interest in any of Hamilton Lane's products.

Speaker 2: 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.

Starting with the financial highlights year to date, our management and advisory fee revenue grew by 10%, while our fee related earnings grew by over 13% versus the prior year period.

Speaker 2: Starting with the financial highlights, year-to-date, our management and advisory fee revenue grew by 10%, while our fee-related earnings grew by over 13% versus the prior year period. This translated into year-to-date GAAP EPS of $3.59 based on $132 million of GAAP net income and non-GAAP EPS of $3.50 based on $188 million of adjusted net income.

Translated into year to date GAAP EPS of $3.59 based on $132 million of GAAP net income and non-GAAP EPS of $3.50 based on $188 million of adjusted earnings.

We have also declared a dividend of <unk> 35 per share this quarter, which keeps us on track for the 12%, 12% increase over last fiscal year equating to the targeted $1 40 per share for fiscal year 2022 with that I'll now turn the call over to Eric.

Speaker 2: We have also declared a dividend of $0.35 per share this quarter, which keeps us on track for the 12% increase over last fiscal year, equating to the targeted $1.40 per share for fiscal year 2022. With that, I'll now turn the call over to Eric.

Speaker 3: Thank you, John , and good morning everyone. Let me start by announcing an award won recently, and while we have won this nine times prior, it still remains a significant and meaningful accomplishment to our firm.

Thank you John and good morning, everyone. Let me start by announcing an award won recently and while we have one that's nine times prior it still remains a significant and meaningful accomplishment to our firm.

Speaker 3: That is, for the 10th consecutive year, Hamilton Lane was named a best place to work in money management by pensions and invests.

That is for the 10th consecutive year Hamilton Lane was named a best place to work in money management by pensions and investments. We have won this distinction every year since pension <unk> investments first began publishing the ranking in 2012.

Speaker 3: We have won this distinction every year since pension and investments first began publishing the ranking in 2012.

Speaker 3: We are one of only five organizations across the entirety of the money management landscape to a burn the distinction. We are extremely proud of this recognition, and while the firm has experienced meaningful growth across our product lines, geographies and client base during the past 10 years, what has remained consistent throughout is our commitment to fostering a culture of excellence, innovation, and inclusion. And at all times, striving to do the right thing for our clients, employees, and partners. will create a better future.

We are one of only five organizations across the entirety of the money management landscape to a burn of distinction.

We are extremely proud of this recognition and while the firm has experienced meaningful growth across our product lines geographies and client base. During the past 10 years. What has remained consistent throughout is our commitment to fostering a culture of excellence innovation and inclusion and at all times striving to do the right thing for our clients employees.

And partners.

With that I'll turn to some results for the quarter.

Speaker 3: Our total assets footprint, which we define as the sum of our AUM assets under management and AUA assets under advisement stood at $851 billion and represents a 30% increase to our footprint year over years, continuing our long term consistent growth trend.

Our total asset footprint, which we define as the sum of our AUM assets under management and a UA assets under advisement stood at $851 billion and represents a 30% increase to our footprint year over year, continuing our long term consistent growth trend.

AUM growth year over year, which was 22 billion or 29% 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 on growing and winning across both lines of business and we are pleased with the.

Speaker 3: AUM growth year-over-year, which was 22 billion, or 29%, 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 on growing and winning across both lines of business, and we are pleased with the continued success.

<unk> success.

Speaker 3: As for our AUA, similar to that of our AUM growth, was from across client-type NGA graphic region, and came in at $172 billion or 30% year over year. As we have mentioned on prior earnings calls, AUA can fluctuate quarter to quarter for a variety of...

As for our EUA similar to that of our AUM growth was from across client type and geographic region and came in at 172 billion or 30% year over year.

As we have mentioned on prior earnings calls.

Can fluctuate quarter to quarter for a variety of reasons, but the revenue associated with <unk> does not necessarily move in lock step with those changes.

Speaker 3: But the revenue associated with AUA does not necessarily move in lockstep with those changes.

Speaker 3: This quarter saw an increase in AUA dollars relative to the prior quarter due primarily to the addition of a large back office mandate.

This quarter saw an increase in a UA dollars relative to the prior quarter due primarily to the addition of a large back office mandate.

Let me shift gears now and provide a brief update on our strategic technology investments. We continue to view investing in technology is critical to our growth strategy and continued leadership in this asset class. Our approach has been simple identify unique technology solution providers that we believe can help make us and the industry better.

Speaker 3: Let me shift gears now and provide a brief update on our strategic technology investment.

Speaker 3: We continue to view investing in technology as critical to our growth strategy and continued leadership in the FASA class. Our approach has been simple. Identify unique technology solution providers that we believe can help make us and the industry better. And we put our balance sheet capital behind that.

And we put our balance sheet capital behind them.

Speaker 3: We not only become a user of the technology, but a strategic partner as well. And given how successful we've been here, companies now seek us out, knowing that a partnership with Hamilton Lane can help speed their development, accelerate their growth, and expand their brand.

We not only become a user of the technology, but a strategic partner as well and given how successful we've been here companies now seek us out knowing that a partnership with Hamilton Lane can help speed their development accelerate their growth and expand their brand the.

Speaker 3: This strategy has served us well so far. Aside from implementing cutting-edge technology for our firm, we've also been instrumental in developing technologies that are widely used across the industry today. In addition, we've generated attractive returns across our exited investments and remain enthused about the current slate of investments that remain on our balance sheet today.

This strategy has served us well so far.

Aside from implementing cutting edge technology for our firm. We've also been instrumental in developing technologies that are widely used across the industry. Today. In addition, we generated attractive returns across our exited investments and remain enthused about the current slate of investments that remain on our balance sheet today.

Speaker 3: Given the continued activities in this area, the firm has decided it appropriate that going forward, we will be carving off up to 15% of the realized gains to be included in our discretionary bonus pool.

Given the continued activities in this area. The firm has decided it's appropriate that going forward, we will be carving off up to 15% of the realized gains to be included in our discretionary bonus pool.

Speaker 3: While this is a much reduced level from what we do in our Carried Interest Program, we see this as a similar way to reward employees and align with shareholders while keeping our fixed compensation costs well controlled. To be clear, this would not be retroactive and would only occur on realized gains.

While this is a much reduced level from what we do on our carried interest program. We see this as a similar way to reward employees and align with shareholders, while keeping our fixed compensation costs well controlled to be clear this would not be retroactive and would only occur on realized gains.

Now let me provide a few specific updates on two strategic investments that have contributed to the quarter's results on the last call. We announced that Factset has agreed to purchase cobalt G. P. As a reminder, Hamilton Lane continues to fully own and operate cobalt LP. The transaction officially closed during this fiscal quarter and we.

Speaker 3: Now, let me provide a few specific updates on two strategic investments that have contributed to the quarter's results. On the last call, we announced that FACTSET had agreed to purchase Cobalt GP. As a reminder, Hamilton Lane continues to fully own and operate Cobalt LP.

Speaker 3: The transaction officially closed during this fiscal quarter, and we recognized a $12 million realized gain from the transaction. That amount is reflected in the non-operating income line on our income statement.

Ignites, a $12 million realized gain from the transaction that amount is reflected in the non operating income line on our income statement.

Speaker 3: Next, an update on iCapital. On December 23rd, iCapital announced its latest financing round, led by WestCap and Apollo. The company raised $50 million at over a $6 billion valuation, and as a result of the transaction, we recognized a $20 million unrealized gain on our investment.

Next an update on our capital on December 23rd Eye capital announced that the latest financing round led by West cap and Apollo The company raised $50 million at over eight 6 billion dollar valuation and as a result of the transaction, we recognized a $20 million unrealized gain on our investment at this <unk>.

Speaker 3: At this new valuation, our position is valued at nearly $60 million. We originally invested $10 million.

New valuation our position is valued at nearly $60 million, we originally invested $10 million.

Speaker 3: I'll move now to our Evergreen platform and provide an update on the continued success we are achieving there. As a quick reminder, and for the benefit of those on the call less familiar with these products, our Evergreen platform provides private wealth channels and individual investors with direct and immediate exposure to the private markets by way of monthly subscriptions and semi-liquidity.

I'll move now to our evergreen platform and provide an update on the continued success. We are achieving there as a quick reminder, and for the benefit of those on the call less familiar with these products. Our evergreen platform provides private wealth channels and individual investors with direct and immediate exposure to the private markets by way of monthly subscriptions and semi liquidity.

For us it represents perpetual fee, earning AUM, where we earn management fees on net asset value. The average management fee across this platform is 140 basis points and we are able to earn carried interest at a rate of 12, 5% over a hurdle of either 6% or 8% depending on the deal.

Speaker 3: For us, it represents perpetual fee-earning AUM, where we earn management fees on net asset value. The average management fee across this platform is 140 basis points, and we are able to earn carried interest at a rate of 12.5% over a hurdle of either 6% or 8%, depending on the deal type and on a deal-by-deal basis.

Tight and on a deal by deal basis.

Speaker 3: As these vehicles contain no primary fund exposure and are exclusively transaction-oriented, every invested dollar is eligible for carried entry.

As these vehicles contain no primary fund exposure in our exclusively transaction oriented every investment dollar is eligible for carried interest.

During the quarter I'm proud to say that the platform surpassed the $2 billion. Mark. We are now one of a very small number of managers, who have a platform of the size and scale and we continue to be very encouraged that our future growth prospects for fiscal year 2022, we are averaging nearly $100 million of monthly net inflows.

Speaker 3: During the quarter, I'm proud to say that the platforms surpassed the $2 billion AUM mark. We are now one of a very small number of managers who have a platform of the size of the scale, and we continue to be very encouraged at our future growth prospect.

Speaker 3: For fiscal year 2022, we are averaging nearly $100 million of monthly net inflows.

Speaker 3: Also noteworthy, flows for the month of January were directly in line with these levels despite increased public market turbulence.

Also noteworthy flows for the month of January we're directly in line with these levels. Despite increased public market turbulence, we believe.

Speaker 3: We believe, and our results show, that our vehicles are seen as attractive to this retail market segment, and we are well positioned to benefit from this growing demand and general tailwind.

And our results show that our vehicles are seen as attractive to this retail market segment, and we are well positioned to benefit from this growing demand and general tailwind.

Let me now turn to 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 over 80% of our management and advisory fees.

Speaker 3: Let me now turn to 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.

Speaker 3: We will continue to emphasize that this is the most significant driver of our business as it makes up over 80% of our management and advisory.

Relative to the prior year period total fee, earning AUM grew five $9 billion or 15% stemming from positive fund flows across both our specialized funds and our customized separate accounts taken separately three $3 billion of net fee, earning AUM came from our customized separate accounts.

Speaker 3: Relative to the prior year period, total fee-earning AUM grew $5.9 billion, or 15%, stemming from positive fund flows across both our specialized funds and our customized separate accounts. Taken separately, $3.3 billion of net fee-earning AUM came from our customized separate accounts, and over the same time period, $2.5 billion came from our specialized funds.

And over the same time period $2 $5 billion came from our specialized funds.

Speaker 3: Growth in these two areas 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. Overall, our blended current fee rate remains steady.

Growth in these two areas 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.

Overall, our blended current fee rate remained steady.

Speaker 3: Last fiscal year, we benefited from the large amount of retro fees coming primarily from our fifth secondary fund, and it resulted in an elevated blended fee rate for fiscal 2021. Given the limited amount of retro fees this fiscal year today, our fee rates have trended back to more normalized levels.

Last fiscal year, we benefited from the large amount of retro fees coming primarily from our fifth secondary fund and that resulted in an elevated blended fee rate for fiscal 2021, given the limited amount of retro fees. This fiscal year to date, our fee rates have trended back to more normalized levels.

Let's now move to the two parts that are that make up our fee, earning AUM and I'll start with our customized separate accounts.

Speaker 3: Let's now move to the two parts that make up our fee-earning AUM, and I'll start with our customized separate account.

Fee, earning AUM for the period stood at $28 $4 billion growing 13% over the past 12 months, we continue to see the growth coming across institution type.

Speaker 3: Fee earning AUM for the period stood at $28.4 billion, growing 13% over the past 12 months.

Speaker 3: We continue to see the growth coming across institution type, size, and geography.

<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 those groups.

Speaker 3: 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. Re-ups from our existing client base remain a key component of this growth. 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.

Yes from our existing client base remains a key component of this growth. 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.

Moving to our specialized funds.

Speaker 3: 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 the past 12 months, we achieved positive net inflows of $2.5 billion, resulting in a 17% increase in fee-earning AUF.

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 the past 12 months, we achieved positive net inflows of $2 $5 billion, resulting in a 17% increase in fee, earning AUM.

And with that I'll now turn it over to Brian Bill Day, our global head of investments, who will provide an update on some of our current funds and market as well as some detail on our overall AUM base.

Speaker 3: And with that, I'll now turn it over to Brian Gilday, our Global Head of Investments, who will provide an update on some of our current funds in market, as well as some detail on our overall AUM.

Thank you Eric and good morning, everyone for those on the call I have not had the pleasure of meeting my name is Bryan Gill day, and I've been with the firm for more than 12 years and in the industry for over 22 years in my role I oversee all aspects of our investment activities direct investing secondary and primary fund selection.

Speaker 2: Thank you, Eric, and good morning, everyone. For those on the call who I've not had the pleasure of meeting, my name is Brian Gilday, and I've been with the firm for more than 12 years and in the industry for over 22 years. In my role, I oversee all aspects of our investment activities, direct investing, secondaries, and primary fund selection.

Speaker 4: I'll now provide a few updates on funds currently in market, and I'll start with our Direct Equity Fund, formerly known as our Co-Investment Fund.

I'll now provide a few updates on funds currently in market and I'll start with our direct equity fund, formerly known as our co investment fund during.

Speaker 4: During the fiscal quarter, we held a fifth close on $142 million of LP commitments, bringing the total capital raised to over $1.2 billion. We continue to progress well with the fundraise and are pleased with the strong demand being shown around the globe for this product. We expect to be in market through October of 2022 with additional fund closes anticipated.

During this fiscal quarter, we held our first close on $142 million of LP commitments, bringing the total capital raised over $1 $2 billion, we continue to progress well with the fund raise and are pleased with the strong demand being shown around the globe for this product.

We expect to be in market due October of 2022 with additional fund closures anticipated.

Next is our annual credit focused series during the fiscal quarter. We held the first close for our seventh installment in this series and closed totaled nearly $210 million and is our largest first close in this product's history, our previous installment raised a total of $889 million of LP commitments.

Speaker 4: Next is our annual credit focused series. During the fiscal quarter, we held the first close for our seventh installment in this series. The closed total nearly $210 million, and is our largest first close in this product history. Our previous installment raised a total of $889 million of Elty.

As a reminder, our credit strategy has a relatively unique structure, whereby we are continually raising and deploying dollars simultaneously and earning management fees on invested capital.

Speaker 4: As a reminder, our credit strategy has a relatively unique structure whereby we are continually raising and deploying dollars simultaneously and earning management fees on invested capital.

Therefore, it is less about targeting a set amount of dollars to raise as you traditionally would see across funds with a multi year deployment period and more about ensuring that we size the product in line with the current opportunity set which can lead to some size variability from installment to installment.

Speaker 4: Therefore, it is less about targeting a set amount of dollars to raise, as you traditionally would see across funds with a multi-year deployment period, and more about ensuring that we size the product in line with the current opportunity set, which can lead to some size variability from installment to installment.

We expect to be in the market with this installment until September of 2022.

Speaker 4: We expect to be in the market with this installment till September of 2022.

Lastly, in our second impact funds, which invest directly into companies alongside leading fund partners with a focus on environmental <unk> social impact during the quarter. We held a second close of nearly $50 million, which brings the total raised to approximately $200 million.

Speaker 4: Lastly is our second impact fund which invests directly into companies alongside leading fund partners with a focus on environmental and or social impact. During the quarter we held a second close of nearly 50 million dollars which brings the total raised to approximately 200 million dollars.

Speaker 4: This fund is already double the size of our first impact fund, and we're encouraged by the demand we are seeing in this space. We will continue to raise capital through calendar 2022. Let me turn to some.

This fund is already double the size of our first impact fund and we're encouraged by the demand we're seeing in this space.

We will continue to raise capital through calendar 2022 .

Let me turn to some discussion of our own components. It's been sometime since our initial investor day, where we provided providing some insight into the composition of our discretionary AUM and how that has evolved.

Speaker 4: It's been some time since our initial investor day, where we provided some insights into the composition of our discretionary AUM and how that has evolved.

Speaker 4: For those of you following along in our presentation materials, I'll be referring to page 7 of that presentation.

And those of you following along in our presentation materials I'll be referring to page seven that presentation.

Speaker 4: This is not data that we intend to provide on a regular basis as A, it doesn't change dramatically over a quarter, or in some cases, even a year or more, and B, it isn't necessarily an indicator of the performance or the health of the business.

This is not data that we intend to provide on a regular basis as.

It doesn't change dramatically over a quarter or in some cases, even a year or more and be it isn't necessarily an indicator of the performance or the health of the business.

Speaker 4: Nonetheless, we know that some investors were interested in an update, not only around our position, but more importantly, how we are seeing the overall industry growing and evolving.

Nonetheless, we know that some investors who are interested in an update not only around our position.

More importantly, how we are seeing the overall industry growing and evolving.

So let's start with the latter.

Speaker 4: During the past five years, data shows that overall private market's net asset value has grown considerably. This growth has been largely driven by the private equity segment of the market.

During the past five years data shows that overall private markets net asset value has grown considerably.

This growth has been largely driven by the private equity segment of the market.

Speaker 4: During this same time frame, the mix of total industry net asset value has also shifted more to private equity as well, indicating both better relative performance and that investors are proactively shifting more allocated dollars to this strategy.

During this same timeframe the mix of total industry net asset value has also shifted more to private equity as well indeed.

Indicating both better relative performance and that investors are proactively shifting more allocated dollars to this strategy.

In addition to this fundraising for private equity or traditional buyouts and increasingly venture and growth equity.

Speaker 4: In addition to this, fundraising for private equity, both traditional buyouts and increasingly venture and growth equity has outpaced the other private market strategies.

Outpace the other private market strategies.

Speaker 4: If we then turn to Hamilton Lane AUM, as of this

If we then turn to Hamilton Lane.

As of this fiscal.

Fiscal third quarter, we have a total of $88 3 billion.

Speaker 4: fiscal third quarter, we have a total of $88.3 billion.

This breaks down to $65 4 billion in private equity.

Speaker 4: This brings down the $65.4 billion in private equity, $12.1 billion in private credit, and $10.8 billion in real life.

$1 billion in private credit and $10 8 billion and real assets includes.

Including our invested a UA dollars exposure to equity would be over 530 billion.

Speaker 4: Including our invested AUA dollars, exposure to equity would be over 530 billion, credit would be over 56 billion, and real assets would be over 163 billion.

Credit would be over 56 billion and real assets would be over a 163 billion.

Speaker 4: These figures make us very significant players in each of these market segments.

These figures make us very significant players in each of these market segments. Our business. Today. However, does have a modest overweight relative to the overall market towards private equity.

Speaker 4: Our business today, however, does have a modest overweight relative to the overall market towards private equity. Why is that?

Why is that.

A few factors one among our clients interest is highest around the private equity strategy as it has offered the most compelling performance.

Speaker 4: One, among our clients, interest is highest around the private equity strategy as it has offered the most compelling performance.

Speaker 4: Two, it is, as shown in the fundraising chart, the absolute largest market segment.

It is as shown in the fund raising chart the absolute largest market segment.

Speaker 4: Three, because it is the largest market segment, it offers the deepest opportunity set for secondaries and co-investors.

Three because it is the largest market segment. It offers the deepest opportunity set for secondaries and co investments.

And finally because of its return characteristics are fees. In this segment are generally higher than they are in either credit or real assets.

Speaker 4: And finally, because of its return characteristics, our fees in this segment are generally higher than they are in either credit or real assets.

Speaker 4: That said, we see all three segments as strategically important for our business. We remain focused, as we have been, across all three segments and continuing to grow them all, and the fact that we currently have dedicated products in market across all three areas speaks directly to that. With that, I'll now turn it over to Atul.

That said, we see all three segments as strategically important for our business. We remain focused as we have been across all three segments and continuing to grow them all and the fact that we currently have dedicated product and market across all three areas speaks directly to that.

With that I'll now turn it over to a tool to cover the financials.

Speaker 5: Great. Thank you, Brian . And good morning, everyone. For the first three quarters of fiscal 2022, we achieved solid growth in our business with management and advisory fees of 10% versus the prior year period.

Great. Thank you, Brian and good morning, everyone for.

For the first three quarters of fiscal 2022.

We achieved solid growth in our business with management and advisory fees up 10% versus the prior year period.

Speaker 5: Our specialized funds revenue increased $5.8 million or 6% compared to the prior year period, driven by over $850 million of inflows into our Evergreen platform in the current year period, along with over $1.2 billion raised to date from our latest direct equity fund.

Specialized funds revenue increased $5 8 million or 6% compared to the prior year period, driven by over $850 million of inflows into our evergreen platform in the current year period.

Along with over $1 2 billion raised to date from our latest direct equity fund.

Year to date retro fees have been limited given that our latest direct equity fund was turned on during this fiscal year relative to the prior year period, when we recognized $10 $8 million in retro fees permanently secondary fund.

Speaker 5: Year to date retro fees have been limited given that our latest direct equity fund was turned on during this fiscal year relative to the prior year period where we recognize $10.8 million in retro fees from our latest secondary fund.

Speaker 5: We expect to generate additional retro fees as we hold subsequent closes for our latest direct equity fund.

We expect to generate additional retrofit as we hold subsequent closes for our latest from equity funds.

Speaker 5: And just to reiterate, as many of you are likely aware, investors that come into later closes of 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 for the quarter in which subsequent closes occur.

And just to reiterate the spend if you are likely aware.

Restaurants that come into later closes of the fundraise for many of our products a retroactive fees dating back to the fund's first close.

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

Speaker 5: Returning from our customer separate account increased $4.8 million compared to the prior year period due to the addition of several new accounts and re-ups from existing clients.

Revenue from our customized separate accounts increased $4 $8 million.

Due to the prior year period due to the addition of several new accounts and re ups from existing clients.

Revenue from our reporting and other offerings increased $8 $9 million compared to the prior year period, driven by the revenue associated with the people who can fund managed by the 361 capital team that we acquired in April of 2021.

Speaker 5: Revenue from our reporting and other offerings increased $8.9 million compared to the prior year period driven by the revenue associated with the pre-existing funds managed by the 361 capital team that we acquired in April of 2021.

Speaker 5: In addition, we saw a $4 million increase to revenue compared to the prior year period in our distribution management business stemming from continued robust activity in the IPO market.

In addition, we sold $4 million increased revenue compared to the prior year period, and our distribution management business stemming from continued robust activity in the IPO market.

The final component of our revenue is incentive fees.

Speaker 5: The final component for revenue is incentive fees. Incentive fees, year-to-date, were $37.4 million, or 14% of total revenue.

<unk> fees.

Year to date were $37 $4 million or 14%.

<unk> revenue.

Let me now turn to some additional detail on our unrealized carry balance.

Speaker 5: Let me now turn to some additional detail on our unrealized carry balance.

Speaker 5: Given the continued positive trend in valuations, the balance is up 114% from the prior year.

The continued positive trend in valuations the balances of 114% from the prior year.

Even as we recognized $59 $7 million of incentive fees during that period.

Speaker 5: even though we recognized $59.7 million of incentive fees during that period.

Unrealized carry balance now stands at $1 1 billion.

Speaker 5: Unrealized carry balance now stands at 1.1 billion dollars.

And just to remind everyone. We don't control these positions and we don't control the timing of Thanksgiving.

Speaker 5: And just to remind everyone, we don't control these positions and thus we don't control the timing of exit. I'll move now to some.

I'll move now to some color on our earnings are.

Speaker 5: Our fee-related earnings were up 13% versus the prior year period as a result of the revenue growth we discussed earlier along with growth in our margin.

Our fee related earnings were up 13% versus the prior year period as a result of the revenue growth we discussed earlier along with her with growth in our margin.

In regard to our expenses total expenses increased $14 $8 million.

Speaker 5: In regard to our expenses, total expenses increased $14.8 million compared with the prior year period. Total compensation benefits were essentially flat, while G&A increased $14.7 million, which included the rent expense associated with our new headquarters, along with expenses from 361 Capital.

Compared with the prior year period, Tony compensation benefits were essentially flat, while G&A increased $14 $7 million, which included the rent expense associated with our new headquarters along with assessment from Keybanc capital.

I'll now wrap up here with some commentary on our balance sheet.

Speaker 5: I'll now wrap up here with some commentary on our balance sheet. Our largest asset continues to be our investment alongside our clients in our customized separate account and specialized funds.

Our largest asset continues to be our investments alongside clients and our customized separate accounts and specialized funds.

Speaker 5: Over the long term, we view these investments as an important component of our continued growth and will continue to invest our balance sheet capital alongside our client.

Over the long term we view these investments.

A component of our continued growth and will continue to invest our balance sheet capital alongside our clients.

In regard to our liabilities, we continue to be modest 11, and with that we thank you for joining the call and we're happy to open it up for questions.

Speaker 5: In regard to our liability, if we continue to be modestly levered, and with that, we thank you for joining the call and we're happy to open it up for questions.

Okay.

Yeah.

As a reminder to ask a question you will need to press star one on your telephone.

Speaker 1: As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the

To withdraw your question press the pound key.

Please standby, while we compile the Q&A roster.

Yes.

Okay.

Yeah.

Okay.

Yeah.

Julia are there any questions in the queue.

Yes. Your first question comes from the line of Peter <unk> with Morgan Stanley .

Speaker 1: Yes, your first question comes from the line of Peter Colustian with Morgan Sins.

Hey, good morning, Thanks for taking my question just following the success of your retail evergreen product.

Speaker 6: Thank you, Maureen, thanks for taking my question. Just following the success of your retail Evergreen product.

Yeah.

Peter is still there.

Yeah.

Hey, I'm still here can you hear me.

Yes.

Yeah, I was just saying following the success of your evergreen product now at 2 billion of AUR and what are your thoughts on adding additional products with more targeted exposure either by asset class geography or sector. Thank you.

Speaker 6: Yeah, I was just saying, following the success of your Evergreen product now at $2 billion of AUM, what are your thoughts on adding additional products with more targeted exposure, either by asset class, geography, or sector? Thank you.

Peter It's Eric I'll take that thanks for the question I think purposely we set up our platform on the retail side to be incredibly flexible.

Speaker 3: Peter, it's Eric. I'll take that. Thanks for the question. I think purposely we set up our platform on the retail side to be incredibly flexible. That product today includes and allows the ability for us to do not only secondaries, but also equity and credit co-investment.

That product today.

<unk> allows the ability for us to do not only secondaries, but also equity and credit co investments so while our aspiration and the retail side are significant and we're really pleased with our growth to date, but feel like we are in very very early innings of that success that product is built to scale for a very very long ways.

To go I think over time, certainly we have aspirations I think undoubtedly will launch other products, but given the flexibility of the mandate of that current vehicle, we'll be able to continue to grow that aggressively for a long time and deal with changing market conditions.

Thank you if I just may add one follow on question just in terms of secondary market activity year to date in a more volatile backdrop I'm. Just wondering what you guys are seeing in terms of volumes and then just on GP led I know that was a big trend in 'twenty, one how does that trend continuing to play out. Thank you.

Speaker 2: Thank you. If I just may add one follow-on question just in terms of secondary market activity year-to-date in a more volatile backdrop, just wondering what you guys are seeing in terms of volumes and then just on GP-led. I know that was a big trend in 2021. Is that trend continuing to play out? Thank you.

Sure Peter it's Eric I'll stick with that and I think what you've seen is the secondary market has just been providing record amounts of deal flow.

Speaker 3: Sure, Peter. It's Eric. I'll stick with that. I mean, I think what you've seen is the secondary market has just been providing record amounts of deal flow, not only traditional deal flow, but as you mentioned, GP-led deal flow.

Not only traditional deal flow, but as you mentioned GP led deal flow.

Speaker 3: We would just believe that part of this is just the maturing of the industry segment that people are finding more ways to generate liquidity, more ways to transact. And the result of that is simply that the sector, that sector in particular, is growing significantly. Periods of market volatility also provide different opportunity sets. And so to the extent that you see that, you could see additional growth. But the growth already has been significant, and all signs are pointing to that continuing.

We would just believe that part of this is just the maturing of the industry segment that people are finding more ways to generate liquidity more ways to transact and the result of that is simply that the sector that sector. In particular is growing significantly periods of market volatility also provide different opportunity sets and so to the extent that you see that you could see additional.

Growth, but the growth the growth already has been significant and all signs are pointing to that continuing.

Yes.

Great Operator next question.

Yeah.

Speaker 1: Your next question comes from Ken Worthington with JP Morgan.

Your next question comes from Ken Worthington with JP Morgan.

Speaker 7: Hi, good morning. Maybe first to fall up on the evergreen question, it seems like we're seeing all the publicly traded alternative asset managers launching products focused on either retail or the high net worth.

Hi, good morning.

Maybe first to follow up on the Evergreen question. It seems like we're seeing all of the publicly traded alternative asset managers launching products focused on either retail or the high net worth so maybe first to what extent is Hamilton lane running into competition.

Speaker 7: So maybe first, to what extent is Hamilton Lane running into competition amongst your distributors today? And then second, as you think about the evolution of bringing alternative products to the high net worth in retail, what are the factors that are the...

Amongst your distributors today, and then second as you think about the evolution of bringing alternative products to the high net worth and retail what are the factors that are the tape.

The key to successfully offering these products like how much of success here is gonna be brand versus structure versus asset class or something else and ultimately how are these products going to distinguish themselves from each other over time.

Hey, Ken it's Mario.

A couple of things there there is certainly competition.

Across the distributor platforms.

And it's from all sorts of areas.

But I think one of the things that you have to distinguish is.

A lot of that competition today as you noted from the public company <unk> is a single manager structure.

And I think that if you look at what people want they want some single manager structures and they want some multi manager structures, which is what we offer so from that perspective. It is it is a distinguished product that is not competing if you will head on with with some managers do sighted.

And there is robust demand for that as you might imagine people want diversified portfolios and so they will put together different kinds of products in those portfolios.

And so we look at that and say there is there is competition for shelf space, but if you have both a brand and a product that has some distinguishing features youre doing youre doing well.

In terms of how that market develops it's unlikely that it will develop any differently from how other markets have developed when when you think about what matters in any investment area brand certainly matters.

Scale matters.

Performance matters and as you look at these products over some period of time. It will begin to distinguish among those features just as high as it has in public equity and public debt.

We don't think that it will be something unique in the private markets that something different will occur that has occurred and what we've seen in the development of other markets. So again you have to develop that brand has to develop that performance.

And you have to develop a structure that allows you to service that client base and so thats, both technology and people.

Issue of bringing that to bear on that market.

Great. Thank you.

And just maybe quickly on incentive fees Hamilton lane generated about $60 million of incentive fees over the last four quarters in calendar 'twenty. One as we think about the next four quarters I know I think it was Eric who said in his prepared remarks, you guys have no control over the timing and size.

But you'll have a better view than we do so how should we think about incentive income.

And what might be a more volatile 2022.

You know how should we how should we approach this.

Sure Ken it's Eric I'll take that.

I think if you look historically at the data.

Public markets are more volatile, particularly if they are volatile in the downward direction you tend to see exits across the private market slowing and obviously is that good flow carried interest also slows.

So I think there's no reason to expect that going forward it'll be different than what history has shown us I think for us.

We'll be not unique to that but I think I would point back to the sort of massive diversification set of where our carry comes from.

So it's coming across different geographies, it's coming across tons of different industries. It's also coming across very different sizes of business and it's coming across different parts of the capital structure that makes us a little bit more.

Sort of muted to the market volatility just because youre able to pick up exits in different market segments, depending on what's happening, but again I wouldn't expect the future to be different from what we've seen historically.

Thank you very much.

Yeah.

Your next question comes from Ryan Bailey with Goldman Sachs.

Good morning.

I really appreciate the information on slide seven and I'll the call your planet.

Just wondering.

Against what Youre hearing in terms of demand for private equity and sort of the relative excess returns that has the recent public market volatility had any impact on conversations with.

Investors is.

Just the denominator effect coming up at all in conversations.

Ryan as far I am thanks.

Yeah, I mean, it's obviously very early but the.

Volatility has only been four weeks, so I would say the conversations have.

Not people ask about it.

But it has not affected behavior in terms of people's willingness or ability to commit in the denominator effect has not been a factor.

At this point.

People are clearly focused on what does it mean.

Potentially higher interest rate environment potentially inflationary environment.

And I would say I mean, it's interesting I think it was either today or yesterday future fund or Australia. You may have seen this sovereign wealth fund of Australia has said that they are reducing their commitments to public equity.

And our increasing as they phrased it commitments to less liquid.

Skilled based investments, which is essentially private markets.

And so I think as people look at a public market environment. If it happens where the returns are not I'll call them as easy I'm, not suggesting it's easier to make money in public markets, but easy in a sense that they are moving up people do tend to focus, particularly people with experience in private markets on that that part of the market. So.

No behavior isn't changing over this last three or four weeks, but when you hear something like that and you think about how people look at what might happen over the next couple of years.

Private markets become a little more interesting for many investors.

Got it okay, and maybe if we can kind of continue on that the discussion point, but sort of roll forward.

As you think about private credit and real assets in terms of mix, maybe three years or five years from now.

Do you think that that sort of mix would increase relative to where it is today. Just given you also mentioned that the private equity industry, maybe maturing more as a benefit to the secondary market.

Yeah, I mean again, you're just making guesses, but I would think that private credit.

And in real assets, we will continue to grow will they outpace as we've seen over the last few years the growth in private equity hard to say I mean private credit even with horizon rates remains very attractive and so I think you will continue to see a migration from public credit into private credit.

So that movement will continue and real assets driven by things that people have talked about I think it will continue to grow but again in an environment, where the public equity market is not doing as well as it has over the last few years the interest in private equity and illiquid equity will continue.

To increase so I would say there is a pretty favorable trend behind all three of those areas.

Got it thank you for taking my questions.

Your next question comes from Robert Lee with K B W.

Good morning, everyone. This is Alex Murray for Rob. Thank you for taking my question switching gears, a little would you be able to provide any updated guidance on expenses as hopefully the post COVID-19 environment starts to emerge or how we could think about expenses going forward.

Sure Alex It's Eric I'm happy to take that I think as you sort of hurt in the tools section I think we've done a very good job of managing compensation I think frankly part of that is sort of tied to what I mentioned at the beginning of the script, which is we have built an incredible culture.

I don't think it's it's not a random thing to kind of win a best places to work for sort of 10 straight years, and so I think we've built a great culture with a great team.

I think that has certainly helped us not to have to sort of chase employees simply based on economics being the only thing that causes them to want to be part of this firm.

The rent is now all flowing through.

But I think the return to normal is still occurring slowly here I mean, you're sort of still seeing <unk> at.

At reduced levels I suspect that's going to stay that way for some time I think there is some parts that are simply not coming back in person as quickly travel has also been adapted so significantly in different parts of the world. So while we have teams on the road and we're traveling I think after two years of this there are also a lot of clients who have adopted to our world.

They are happy to do things remotely. So I think we're still in a muted expense environment around that.

And I wouldn't expect that to sort of change in the near term.

Great. Thanks, and if I can one more in your customized separate accounts business when you're you're seeing clients re up claims upsizing amounts are you seeing mainly.

Net flows from new clients.

Alex It's Mario.

The combination.

<unk>.

So much of it depends on the particular clients.

Where they are in their allocation charges, where they are overall, so I don't know.

Not really any trend that we can point to that says Oh. This is happening either more or less than it has in the past couple of years.

Great. Thank you for taking my questions.

Your next question comes from Chris Kotowski with Oppenheimer.

Yeah, good morning, and thanks.

I wanted to go back to the evergreen funds.

Funds you were you were going a little quickly when you were going over how much of months youre, raising and you kind of want to get a better sense of.

The trajectory there and then I Wonder can you also give us a sense of either.

By geography or by bi platform.

Where are the bulk of the funds coming from and what's the white space you know yet to be opened up to kind of get into the flow.

Sure, Chris It's Eric I'm happy to take that I think what what you would have heard us say in the script here is that we have been on a very very steady pace that has been averaging over the last call. It year about $100 million of net inflows per month.

And I think we made the point that even in January this past month calendar past month.

Those flows stayed incredibly they they were the same so the average kind of remained the same.

I think what we would say is the platform has two legs to it so you've got sort of the U S and the non U S. Non U S has a big head start because it was in market over a year before the U S.

So today.

The split is still tilted to non U S flows, but we view that not as a market sizing issue, but simply as a maturity of the market that the product that simply just had a big head start on its U S counterpart.

Beyond that the flows are coming across geographies. So we're not disproportionately weighted we're seeing flows coming in Australasia throughout Europe . So we're getting flows across investor type and across Investor geography, I think the white space. We would say is is vast.

We are not tied to one or two channels, where we're going directly to a variety of wealth platforms and a variety of our eyes.

We're achieving these flow levels today without being on the wire houses. So what our expectation is that the product needs to continue to scale in order to attract significant wire house attention and we think that's exactly the trend that we are on so we're achieving these flow levels with our own distribution team in house.

Targeting a variety of different underlying wealth channels across geographies.

We would see that as incredibly good news and also again to your point massive white space ahead of us.

Okay great.

Great very helpful. Thank you that's it for me.

Yes.

The next question comes from Finian O'shea with Wells Fargo Securities.

Hi, everyone. Good morning are you able to provide color on the progress for for the Secondaries Fund six.

And then on a higher level and GP led secondaries is that product line starting to.

Stratify into subcategories like core opportunistic and so forth.

Yes, finian, it's Eric Thanks for the questions. So I would say the first part of that is.

We've just launched the product that's been publicly announced but.

But we intentionally just because again it just hit the market Theres sort of no no updates for us to share with investors at this point.

On the GP led component of that.

We're not seeing a lot of stratification, I mean, youre seeing G. P. Let across size of fund size of the transactions youre seeing it across different industries different geographies, but I think to date, it's still largely opportunistic and fund managers like us are kind of handling it that way.

Okay. Thank you so much.

Yeah.

And there are no more questions at this time.

Great well once again, thank you for your participation. We appreciate the attention and we appreciate the questions and we wish everyone well.

Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

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