Q1 2023 Hamilton Lane Inc Earnings Call
Good morning, My name is Chris and I'll be your conference operator today at.
At this time I'd like to welcome everyone to the Hamilton Lane first quarter fiscal 2023 earnings conference call.
All lines have been placed on mute to prevent any background noise.
A supplemental slide presentation to accompany the prepared remarks can be found on the company's website.
After the Speakers' remarks, there'll be a question and answer session.
If he would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
If you would like to withdraw your question. Please press star one again.
Also as a reminder, please limit yourself to one question and one follow up.
Thank you at this time I'd like to turn the call over to you Johnno Investor Relations manager. Mr. Hill, you may begin.
Thank you Chris Good morning, and welcome to the Hamilton Lane Q1 fiscal 2023 earnings call today, I will be joined by Erik Hirsch Vice Chairman, Brian Gill day head of investment solutions and are told by my CFO before.
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.
For a discussion of these risks. Please review the risk factors included in Hamilton Lane's fiscal 2022, 10-K, 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 reconciliations 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 a solicitation to purchase interest in any of Hamilton Lane's products.
Beginning with the financial highlights for the quarter management and advisory fee revenue grew by 16%, while our fee related earnings grew by 10% versus the prior year period.
This translated into GAAP EPS of <unk> 91.
Just on $33 $5 million of GAAP net income and non-GAAP EPS of <unk> 90, <unk> based on $49 6 million of adjusted net income.
We have also declared a dividend of <unk> 40 per share this quarter, which keeps us on track for the 40% increase over last fiscal year equating to the targeted $1 60 per share for fiscal year 2023.
Are we going to dividend marks the fifth consecutive annual increase since going public in 2017, each over 10% and with an average increase of over 18%.
With that I'll now turn the call over to Eric.
Thank you John and good morning, everyone.
We had another extremely strong quarter, reflecting the strength and diversity of our platform as well as the resiliency and attractiveness of the overall asset classes in which we operate.
The markets clearly remain challenged shrinking asset basis rising rates increase overall volatility fundraise.
Fundraising is harder and our teams are working diligently to identify sources of capital.
The results however, speak clearly to the strength of the business that offers a diversified solutions suite with globally strong and then our separate account advisory back office and technology offerings is in the vast majority of cases.
He sold service provider for the client.
In order for the clients to remain active in the asset class and to continue to grow their exposure, which they want to do their relationships with us continues.
We also look to lean on our various strategic technology investments and partnerships that are clear differentiators and are further advancing our brand and market position.
We are proud of the results this quarter and our continued growth and we remain optimistic and encouraged by what we see in the pipeline.
Let me now turn to the results for the quarter.
Our total asset footprint, which we define as to some of our.
Assets under management and assets under advisement stood at approximately $832 billion and represents a 10% increase to our footprint year over year continue.
Continuing our long term growth trend.
AUM growth year over year, which was $16 billion or 18% came from both our specialized funds and customized separate accounts.
As for our similar.
Similar to that of our AUM growth was from across client type and geographic region and came in at $59 billion or 9%.
Total fee, earning AUM stood at $51 1 billion and grew $8 4 billion or 20% relative to the prior year stemming from positive fund flows across both our specialized funds and our customized separate accounts.
Taken separately $5 $4 billion of net fee, earning AUM came from our customized separate accounts and over the same time period $3 billion came from our specialized funds.
Our blended fee rate across both customized separate accounts and specialized funds remained steady.
Moving to the two components that make up our fee, earning AUM I'll start with our customized separate accounts.
Fee, earning AUM from our customized separate accounts stood at $31 7 billion growing 20% over the past 12 months, we continued to see the growth coming across type.
<unk> and geographic location of the clients over.
Over the last 12 months more than 80% of the gross inflows into customized separate accounts came from our existing client base and continues to be a steady source of growth for our separate account business with that I'll turn this over to Brian to cover the specialized funds update.
Thank you, Eric and good morning, moving to our specialized funds growth here continues to be strong.
Earnings from.
Our specialized funds stood at $19 4 billion at quarter end over the past 12 months, we achieved positive net inflows of $3 billion.
Representing growth of 18% relative to the prior year period.
This growth stems from additional closes for funds currently in market.
Investment activity and continued growth of our evergreen platform let's.
Let's now go into some detail around recent drivers of this growth.
On July six we announced the final close for our inaugural infrastructure opportunities fund and side fund, which totaled nearly $575 million of investor commitments.
While this fund marks our first commingled infrastructure vehicle Hamilton Lane has been a longstanding active investor in the infrastructure space for the past 22 years, managing separate accounts and providing advisory solutions for clients of all sizes.
We began raising this fund just as the pandemic started to take hold and are proud of the fact that we are able to execute well, while having to navigate a remote environment, where we could not physically meet with investors during much of the fundraise.
What's more the last few months of the fund raising period typically a strong period for traditional fund raises also occurred in a challenging market environment, which only adds to our price and getting this kind of first time fund done.
Only half of the investors that came into the fund where new relationships for Hamilton Lane.
That is the success here also speaks to the power of our global platform, where we were able to leverage existing client relationships and a global distribution network.
Next is our annual direct credit series, we're currently raising our seventh installment of this series and the momentum continues to be strong.
During the quarter, we held multiple closes that totaled over $573 million of LTE commitments and now, bringing the total amount raised to over $890 million for this installment.
We will look to hold the final close in the coming months, but as it stands this installment already marks the largest in the series.
As a reminder, this capital reflects a single year investment vehicle with management fees charged on invested capital.
<unk> already begun deploying this capital and will begin fund raising for the next series shortly after holding the final close for this installment.
Moving on to our direct equity fund fund raising continues to progress well during the quarter. We held closes that totaled over $190 million of LP commitments, which generated approximately $600000 in retro fees for the quarter.
Post quarter end, we held an additional close for the fund that totaled nearly $72 million and will result in retro fees that we recognized in Q2 of fiscal 2023.
Stepping back the total amount raised for the fund now stand at nearly $1 8 billion.
A level that surpasses the size of the prior fourth fund and already makes this our largest direct equity fund to date and with which we will still be in market during the fourth quarter of this year.
Let me now turn to an update on our secondaries platform on our prior earnings call, We announced that we had held the first close on April 20.
For our sixth Secondaries fund.
That closed totaled over $611 million.
Subsequently on July 21, we held the second closed on nearly $450 million, which will result in a modest amount of retro fees that will be recognized next quarter.
The combination of the first two closes brings that fund to nearly $1 1 billion and demonstrates the continued demand from investors for this strategy coupled with our strong track record of delivering results. We are pleased with the early days of the fund raise and we are appreciative of the meaningful investor support to date.
We will remain actively in market for 24 months two years from that April 2022 closed date and look forward to providing you with updates on future closures over the coming quarters.
Let me now turn it back to Eric to cover our evergreen platforms.
Thanks, Brian I'll wrap up this section with an update on the evergreen platform in total the platform now stands at nearly $2 8 billion and we had another quarter of strong net inflows.
<unk> of April and May saw net inflows over $100 million each month.
Similar to comments you have heard from other private market managers. This quarter. We also experienced some softness in June and July and expect much of the same for August the outflows, we saw while modest largely came from our Asian Investor base again, similar to what you have heard from other private market managers, we attribute the softness to a combination of summer doldrums across the retail sector and <unk>.
Significant public debt and equity declines that have caused investors to simply pause their investments performance of the product is strong significantly outpacing the public equity markets.
Our focus continues to be on expanding our channel penetration and building relationships across the space.
In addition to flows into our evergreen products. These relationships are also delivering flows into our traditional specialized funds. Our latest secondary fund as an example has already seen commitments totaling more than $145 million from retail investors and represents nearly 14% of the total capital raised in the funds so far.
Yes. This is capital raised from this segment separate and apart from the evergreen flows.
As the public market stabilize a bit and as we push into fall, we expect to see a rebound in flows and reward for the expansion of relationships.
Let me now take a moment and introduce our newest strategic technology oriented investment off our balance sheet on.
On June 28, we announced our participation in the most recent fundraising round for case, where we joined other strategic investors such as Apollo motive partners and Franklin Templeton.
Case operates a technology enabled open marketplace for alternative investments, where financial advisors and asset managers can engage and transact directly cases platform empowers over 5300 unique advisor firms and teams who oversee more than two trillion dollars in network assets.
This provides financial advisers with a broad selection of alternative investment strategies, coupled with a powerful learning system case IQ to help those advisors drive adoption and improve client outcomes. This investment represents the latest example of our strategic technology thesis and commitment to enabling broader access to the private markets by investing in <unk>.
Partnering with those companies, who we believe are on the cutting edge of driving that accessibility.
Keith now joins our other strategic partners in the wealth space high capital in Tifton, and we'll be able to provide their clients with seamless.
Tech enabled access to Hamilton Lane funds, while we leverage the infrastructure and trust that these companies and their platforms have built within the vast private wealth universe.
We are excited to begin this mutually beneficial journey with case and look forward to providing with updates in the future.
And with that I'll now turn the call over to a tool to cover the financials.
Thank you Eric and good morning, everyone for the first quarter of fiscal year 2023, we achieved strong growth in our business with management and advisory fees of 16% versus the prior year period.
Our specialized funds revenue increased by $10 3 million or 31% compared to the prior year driven primarily by a $1 5 billion increased fee, earning AUM later evergreen platform.
More than $600 million raised in our latest secondary fund in the quarter.
At over $1 7 billion raised through June from our latest direct equity fund.
Retrofits for the quarter were approximately $600000.
Stemming primarily from a direct equity fund.
This was a minimal amount of the prior year period.
As a reminder, investors that come into later closes during the fundraise pay retroactive fees dating back to the Fund's first close.
We expect to generate additional retrofits as we hold subsequent closes for both of our latest direct equity fund as well as our latest secondary fund.
Moving onto customized separate account.
Revenue increased $3 9 million or 16% compared to the prior year period due to re ups from existing clients.
The addition of several new accounts and.
And continued investment activity.
Revenue from our advisory and reporting and other offerings decreased $2 1 million.
Compared to the prior year period, due primarily to a decrease in revenue from our distribution management ambitions.
Lastly, the final component of our revenue is incentive fee.
Incentive fees for the quarter totaled $49 6 million.
The relative increase in incentive fees compared to the prior quarters is due primarily to the fact that a number of our specialized funds entered into GP catch a portion of their respective fund waterfalls.
You typically find GP catch ups in connection with the European style waterfalls, which is the <unk>.
Most conservative method related to earning carried interest and represents the method that the vast majority of our carry eligible funds employed.
While this method does philly the receipt of carried interest it is more favorable to the client and avoids any clawback risk.
<unk> represent a stability for our shareholders.
Our performance across our funds remained strong as evidenced by this continued move towards greater performance fees.
For those less familiar with how European style waterfall works.
Investors are first allocated dollars.
The result in all of their invested capital expense.
Expenses, and then a preferred return being satisfied after that Hamilton Lane as the manager and then <unk>.
Allocated our share of value that puts us level with investors and equals our stated carried interest percentage, which is the catch up portion of the waterfall.
While satisfying the remaining value of allocated based on the carried interest percentage.
During the GP catch up period, you typically see an outsized amount of value that flows to the GP, which is what we experienced this quarter.
Let me now turn to some additional color on our unrealized carry balance the balance is up 36% from the prior year period, even as we recognized $98 $1 million of incentive fees during the last 12 months.
The unrealized carry balance now stands at $1 1 billion.
Moving to our expenses total expenses increased $29 7 million compared with the prior year period.
Total compensation and benefits increased $25 5 million.
Driven primarily by compensation associated with the increased amount of incentive fees in the quarter.
G&A expenses increased $4 3 million.
Which included increases in travel costs.
For the quarter, our fee related earnings were up 10% relative to the prior year as a result of the management fee revenue growth we discussed earlier.
I'll wrap up here with some commentary on our balance sheet.
Our largest asset continues to be our investment alongside our clients and our customized separate accounts and specialized funds.
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 clients in.
In regard to our liabilities, we continue to be modestly levered.
And with that we thank you for joining the call and are happy to open it up for questions.
Thank you as a reminder, if you'd like to ask a question. Please press Star then one on your telephone keypad and please limit yourself to one question and one follow up.
Our first question today is from Michael Cyprus with Morgan Stanley . Your line is open.
Oh, Hey, good morning, Thanks for taking the question maybe just first on the performance if I hear you right. It sounds like this is the point the incentive fees in the quarter being so strong relates to catch up period as a fund or account entered.
Into the European waterfall stage points, where the GPS is taking carry if I haven't if I have that right I was hoping you might be able to elaborate on which partner account. This related to and can you recall when you last had this sort of meaningful impact as you kind of look back over the past couple of years and if you were to look forward, which sort of fund or strategy might you see.
Something getting closer to the point of entering the catch up which <unk> strategy might that be.
Yes, Mike, it's Eric I'm happy to take that although I'm going to take that Phi Phi generally not answering it.
We had we haven't as you know that's sort of $1 billion of value is across so many different vehicles. The majority of our specialized funds utilize the European waterfall once we move into our separate account space. It varies some of them are deal by deal somewhere American some are European.
This has occurred we certainly have had this occur in the past as we've had other large vehicles rollover and move into that GP catch up phase.
You can see as we report out kind of where we are on dollars invested dollars distributed on our specialized funds you can just see which of those funds are getting closer to that but this is an event that has occurred in the past. This was an event that.
All willing with strong performance continuing over our history that we will again see in the future.
Understood. Okay. Thanks, and then just maybe a follow up question on fundraising I think Eric you mentioned that you were seeing the broader fundraising environment getting a bit harder I'm, just hoping you might be able to elaborate a bit on that just what are what are you seeing across the industry, how does that sort of impact your outlook in terms of magnitude.
Jude and timing for what Hamilton Lane can be looking to raise in both the institutional marketplace, but maybe you could also comment on the retail side as well. Thank you.
Sure, Mike, It's Eric I'll stick with that.
It's what you have heard generally reported in prior earnings calls from other managers, which is to say you've had a lot of value knocked out of both institutional and retail investors over the last several months.
That just means that there is kind of less capital in the market that's available for people to.
Raised invest et cetera, so we've been talking about kind of the denominator effect it's real.
Said once you see volatility in the public markets. You also see investors begin to reassess their allocation strategy.
I think it's important to remember that they have a goal and that goal tends to be a kind of 6% to 8% plus target rate of return and they need to do that to continue to sort of meet their funding obligations and their investment needs and if they believe that they're not going to achieve that in their current asset allocation model, they're going to redo that model to tilt towards higher return.
Turning strategies.
Which would be the private markets. So today I think you're just seeing a combination of factors I think one it seems like everyone on their cousin, except for all of US that are working hard today is on vacation and so I think you definitely have just seen a summer slowdown not surprising as people are kind of returning to a bit more normality.
But youre also seeing just again capital tight and investors just not they're not in a hurry to make a decision today.
But as you heard me state earlier, our pipeline is big people are back on the road beginning to travel events are returning and so I think we remain.
Very focused on continuing to deliver the same growth rates that we've been delivering over our history. We always talk about the this firm is kind of built for a marathon not a sprint and thats exactly how we are positioned today.
Great. Thank you.
The next question is from Ken Worthington with Jpmorgan. Your line is open.
Hi, good morning, Thanks for taking the question and sort of following up on that so from a macro perspective to what extent does secondary activity Act as a barometer for private market investment sentiment and to the extent. It does what is it telling you about sort of the near term and intermediate intermediate.
Term outlet for private market investing.
And to the extent you can address it.
Are there different messages being sent by asset class or the message is the same for private equity real estate credit or infrastructure or are you starting to see divergence is and the way investors are sort of looking at those asset classes based on sort of the macro market conditions, we're seeing today.
Sure Ken It's Eric I think the secondary market is an interesting data point to look at because in some cases, if you were to see higher or abnormally high sort of LP selling volume.
That might indicate that there is concern about the asset class or that there is a need to rebalance or that there is a need for liquidity.
The data is very clear, which is youre not seeing that we're not seeing at all any abnormal or elevated levels of LP selling and so if we want to use it as a barometer, but I would tell you that the barometer is probably indicating that it's kind of stayed the course business as usual.
So where we've seen a slight uptick or maybe sort of a change in the competitive mix is around kind of the GP led single asset transactions.
I think there.
I think you've got some buyer's remorse from some folks out in the market, who I think we're just very active in that space and maybe got themselves a little bit too concentrated I think you look at our fundraising we're continuing to raise good dollars into that space.
I think it makes us a very very attractive partner in a market where capital is going to get a little bit more scarce and so.
I think we look at that as a net positive.
Okay, great. Thank you and then if you could could you just sort of clarify the retail fund commentary you made earlier.
You mentioned.
It was.
July .
As of June or July that things went from sort of inflows of $100 million.
And you talked about I think more elevated redemptions was that elevated gross redemptions did.
The retail product go into net outflows, if you just sort of.
Clarify your comments on the the change in fund flows there.
Sure I think all we were saying is again I think similar to what you've heard from other other folks which is <unk>.
He came out of.
At the beginning of the year very strong January February March April May you hit the summer and I think you sort of saw the combination in June and July August again.
Second here, so we'll see what the rest of the month looks like but I think you came into the summer and I think you had the effect of two things one again I go back to my vacation comment, which I think is real and sort of the combination of people just not feeling pressured or needing to make decisions at this moment in time, you add that to just again.
Volatility and sort of geopolitical uncertainty that's sort of that's looming out there in the market as gyrating and I think the combo of that just has people taking a pause. So I think you've heard from US you've now heard from a number of other public managers, who are also raising product in that retail space that we all have just seen a slowdown.
I think we're all I think also signaling that fall looks to be better. We expect again sort of the summer doldrum piece to kind of resolve itself and people need to start making portfolio decisions. So we saw softness across the board. We have not really seen outflows that were even worth mentioning before we saw them as I said, we saw them in Asia.
And so that's that.
Kind of where we sit today, but.
I sort of take a step back and forget the month to month basis, I think the big picture takeaway is you've got a product that is still relatively young in its infancy sitting at $2 $8 billion of capital raised in continuing to drive forward.
<unk> to position us as a real differentiator among certainly our peer group.
In this space with what we've done so far.
Great. Thank you very much.
The next question is from Alexander <unk> with Goldman Sachs. Your line is open.
Hey, guys. Thanks, good morning.
So just to make it clear or not.
Not net outflows in the retail products right, where you guys are seeing net outflows and then because.
As we think about the distribution of those products.
I know to your point, Eric Asia is something we've heard from others as well any way to help frame how much of the $2 8 billion and that kind of combined retailer.
Retail AUM sits with the Asia based customer base.
Yeah, It's Eric So I think I, probably don't want to disclose kind of exactly the breakout of the geographic mix Asia is certainly not the biggest driver of our asset flow.
A look at kind of the non U S. A lot of flows throughout Europe , a lot of flows in Australia in particular, and so it's been geographically.
Diversified across that.
The numbers are still kind of getting again August is unknowable right now June was a.
Net positive.
And August I think was probably pretty close to sort of.
Our net zero.
Gotcha, Alright, that's helpful. Thanks, and then.
My follow up question just around that the appetite for capital deployment, both in the kind of directly control strategies as well as what you guys are seeing on the GP partners that you have in the business I.
I guess, one can you help us maybe frame the amount of capital you guys have currently that has been raised and will turn on fees. Upon deployed there is a couple of products, obviously that youre raising today's told that we will bill and deployed as you mentioned earlier just help size that would be helpful. And then in what areas you expect to be most active on the deployment side over the next call. It 12.
<unk>.
Sure why don't I start at the beginning and then I'll ask my partner, Brian to sort of just talk about what we're seeing on deal flow and generally in kind of activity.
As you know so for us the vast majority of our assets are uncommitted capital.
The credit vehicles that Brian highlighted is that annual series is on invested capital, but again I would just echo what he had said earlier, that's a one year investment period. So it's a relatively modest delay because of that capital is basically raised and then deployed within kind of that rolling 12 months.
So I think about that product is basically always raising an OE spending because thats sort of the rhythm of having that annual series and the benefit of that is that it allows the investor base to be very tactical about how they want to be sizing commitments each year as they can kind of just look at what their sort of needing from.
Yield based portfolio.
In addition to that as we've said before we have billions and billions of dollars of kind of dry powder that will turn on eventually I think it's just the nature of the of the industry.
We've not sort of gone out of our way as I've said in past calls to go break that out our view as it comes online it's normal it's sort of how the industry works in a lot of cases.
There's nothing special or unique about that and again I think we're not trying to give the investors a sense that like we can't wait to deploy the capital. We can get paid we're here to make good thoughtful long term decisions to sort of deploy that.
The investment activity continues to be robust in the deal flow continues to be significant and I will turn to Brian to give a little bit of commentary around that.
Sure. Thank you.
And as Eric talked about that.
One of the real benefits of course is that we're being able to be diversified and flexible by strategy by geography et cetera. So the opportunity set continues to be really robust I know, we talked about a little bit of slower transaction volumes, but.
Thank you we were to look at our fund investing opportunity. This year are on pace to see over 1000, new funds. So that will be down slightly from last year, but that would be our second largest year of fund activity ever likewise in the credit space, where overall industry volumes might be down we're seeing our opportunity set down by about 10% on a year to date.
So still a massive opportunity set across all of those strategies and we're able to be highly selective in choosing the things that we think are the best fit for the current market environment.
Great. Thanks again.
The next question is from Adam Beatty with UBS. Your line is open.
Thank you and good morning.
Wanted to ask about the partnership with case and I know you have other similar partnerships could you just remind us about the kind of product rollout strategy that you would expect with that whether that involves existing products or or developing some new products around around particular needs in the channel.
And what the outlook is there thank you.
Sure, It's Eric I'll take that the strategy is really leveraging what they've built which is impressive platforms. I think this was we chose our partners carefully.
And coming away with an ownership stake in strategic alignment with <unk> capital case in Tiffin.
I think is noteworthy.
Clearly a differentiator there's nobody else that has stakes across across that like we do and the strategy is simple which is to largely take the products that we currently have I mentioned secondaries receiving flows from that channel.
Getting the evergreen products up and running on those channels and to also just help them as a good partner around customer education.
Part of the Big gating item is continuing to educate.
The end customer and equally important their decision, making body with the FARA et cetera around the asset class I think there is still too much that's not really understood and that lack of understanding can cause a real hesitation from participation and so one of the things that makes us an attractive partner is being able to provide data.
And insights and hard facts around what's happening in the asset class to try to kind of Peel back and provide a little more transparency to those folks to get them to be more comfortable to not only participate but the prepaid at higher levels. So early days here, but we like what we see so far and we're very encouraged.
Makes sense. Thank you for the comments around the process and then turning to the institutional side you mentioned some good success on the infrastructure front half of the investors being new relationships. So just wanted to maybe flesh that out a little bit where are you seeing.
The demand.
Sort of new new relationships or new potential relationships.
Certain client types or or maybe geographies.
Is the pause if you will and sort of the level of demand similar to among your existing clients or maybe maybe not so much. Thank you.
Sure, Eric I'll stick with that.
I would say to you that I think this is largely.
The result of an expanding platform, we continue to hire more sales resources. We continue to open up offices around the globe. We continue to do things to invest directly in our brand we continue to get better smarter on marketing and communication around all of that and so.
I think that's that's what's leading to as Brian said in start that fund the beginning of the pandemic and the fact that Youre able to go out there introduce yourself have half of the customers that you have not had a prior business relationship and come in and support that I think is just a testament to the power of the platform the <unk>.
The brand and the frankly the high caliber people that we have on our team who are out there telling the story. So we're not seeing wildly different sort of divergent paths across geography or type.
And again the past quarter showed you that theres really not been a slowing I think it's just normal that when everyone wakes up and looks at the headlines that we're all kind of barraged with everyday.
That People's decision, making is going to be purposeful and deliberate and theyre not going to get raced into making a quick decisions simply for the sake of doing that but.
But that's the nature of the asset class being as long dated as it is and you've got to be there you've got to be seeing the customers talking to them and being patient and waiting to be their long term partner and that's exactly what we're doing.
Excellent. Thank you Eric I appreciate it.
The next question is from Robert Lee with <unk>. Your line is open.
Great. Thanks, Good morning, Thanks for taking my questions.
Maybe the first one Eric.
And the <unk>.
Separate account business you highlighted that.
So 80% from re ups, but maybe drill into that a little bit when you're getting those re up for you.
Generally seeing.
Lps upsize their commitments or.
Any kind of change in the level of capital that they are re upping and their commitment size and then this could have one follow up.
Sure Rob Eric.
No nothing to draw into that any part of it is you've got such a large installed base there that youre going to have everything youre going to have some investors that are very mature and so simply need to keep re upping at levels that maintains the allocation level that theyre already at which is kind of target level you have investors that are.
Our brand new to the asset class and so they're starting in their building and so the tranches become subsequently larger as they are building into that you've got really a broad array of scenarios. So that I would say is normal again. The result of a large diversified customer base and we're just not seeing anything that's abnormal.
<unk> or indicative of some sort of a change in behavior or some sort of change in heart.
As I said in my comments.
They are sticking.
Sticking with the separate account either creating one or re upping with one is a fundamental choice of do you want to stay in the asset class or not it's a very different decision than deciding to back a particular manager or not.
Much more tactical sort of single decision. The separate account is their allocation to the private markets and I think thats why youre not seeing sentiment change around wanting to be in the asset class or wanting to participate and so I think that's why the flows there continue to be strong.
Okay, great. Thank you and then maybe kind of a.
Modeling question so.
Obviously inflation comp pressure.
Investing in the business in the wealth channel and elsewhere. So could you kind of update us on how we should think about.
Expense progression from here or is this kind of a good run rate is there anything we should be thinking about as the year progresses that could put it.
Additional upward pressure from what we're seeing just trying to.
Kind of get your thoughts there.
Okay.
Rob it's until let me take that.
And a couple of pieces so.
What you saw this quarter.
Really good revenue growth.
And for the commensurate expense.
Good.
As you think about modeling it forward I would say based on the commentary.
For the pipeline.
And at other other sort of asset growth.
We feel pretty good about where we are from a revenue growth standpoint in.
And <unk> kind of followed that right. So if you look at our G&A expenses.
We are up from a year ago, partly that fee.
Out of the Covid environment travelers.
But we think G&A should be a good run rate.
As you look forward the compensation frankly will will move in line with revenue.
And so.
We continue to be in growth mode.
We're gaining assets, we're gaining new clients, we're hiring employees.
And so I think that.
From that standpoint, we are we are looking good.
Okay, great. Thanks for taking my questions.
Yes.
The next question is from Finian O'shea with Wells Fargo Securities. Your line is open.
Hi, Good morning, mostly asked and answered for me just to.
Follow up on the earlier question on on GP led.
Single asset market being perhaps a bit overheated.
Ours are Morris.
Can you.
Or was that more related to.
Lps being too concentrated.
Or were you suggesting that.
Deals in that part of the market have have struggled.
Yes, Finian, it's Eric I think maybe sort of neither maybe I'll try to be more articulate.
If you think about the sort of the maturation of the secondary space. It traditionally had been one where you as a secondary buyer we're buying funds.
<unk> or big portfolios or funds and so by definition one of the advantages that you had was the advantage of diversification.
When you were buying funds with lots and lots of underlying company positions and you were buying lots and lots of funds you ended up with lots and lots and lots and lots and lots of underlying portfolio companies and so the power of diversification I think sort of kept you out of concentration risk I think what we've seen is that I think some of our.
Some of the secondary buyers, maybe sort of forgot about that benefit.
And you started to see some portfolio concentration occur in ways that you simply had not in the past.
That was driven by single assets again. These werent funds. These were literally single companies.
And so.
We were extremely mindful about watching diversification.
And not sort of straying away from that inherent benefit that exists in this strategy.
Im not sure Thats been consistently true across the entirety of the market.
And so today you are now sort of seeing lots of GPU still anxious to do single asset deals, but the number of buyers or potential buyers for those deals I think you are seeing at least now has shrunk.
And so that creates a supply demand imbalance and I think that history would indicate that supply and demand imbalances favour. The person who was the buyer and with us with having capital is already we feel like that's a real advantage for us and one that we intend to take advantage of.
Very helpful. Thank you.
The next question is from Michael Cyprus with Morgan Stanley . Your line is open hi.
Alright, thanks for taking the follow up just on expenses. So if I'm hearing you around G&A good run rate in comp to grow in line with revenues then would it be fair to conclude then that the fee related revenue growth should outpace expense growth from here and thus we should see upward lift to the FRE margin as we kind of move forward from here from the 40.
3% level in the quarter is that fair.
Hey, Michael It's Tim let me take that.
I think if you look at revenue growth and expense growth, what I would say is that the.
Part that a little bit of unknown here.
As we continue to move more to the normal.
Return to the office return to travel.
While we feel pretty good about where G&A is I think you could you could.
You could potentially see some increase there so the way we look at it right now I don't know if you were getting at.
Sorry would expand overtime I don't know if that happens in the short term.
But I think we feel pretty good about where we are with the growth rates we've seen.
Okay. So it sounds like the current quarter's FRE margin is probably a good sort of level to kind of move forward from here I'm sure maybe if it expands near term, but it sounds like you guys are positive from a longer term is that.
A fair synopsis.
That's a fair statement.
Great. Thank you.
We have no further questions at this time I will turn it over to Mr. Hersh for any closing remarks.
Well again, thank you everyone for taking the time, we appreciate the support we appreciate the interest we appreciate the questions and we are wishing you a successful completion to the summer. Thanks again.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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