Q2 2023 Hamilton Lane Inc Earnings Call
Good morning, My name is Dennis and I will be your conference operator today.
At this time I would like to welcome everyone to the Hamilton Lane second quarter fiscal 'twenty 'twenty three 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 will be a question and answer session.
If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If he would like to withdraw your question Press Star one again. Thank you.
At this time I would like to turn the call over to John <unk> Investor Relations manager. Mr. <unk> you may begin your conference.
Thank you Dennis.
Late in Q2 fiscal 2023 earnings call today, I will be joined by Mario Giannini CEO , Erik Hirsch, Vice Chairman, Brian Gill day, managing director of investments and a tool environment CFO .
Before we discuss the quarter's results we want to remind you that we will be making forward looking statements based on our current expectations for the business.
These 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 the Hamilton Lane's fiscal 2000, 2000, 22022, 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. A portion of our presentation will mentioned in offering up new share classes of our private assets fund that is subject that is the subject of a registration statement filed with the securities.
And Exchange Commission.
The registration statement has not yet effective we may not sell these securities until the registration statement is effective.
Patient is not an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction, where the offer for sale is not permitted.
Beginning with the financial highlights year to date, our management and advisory fee revenue grew by 19%, while our fee related earnings grew by 10% versus the prior year period.
This translated into year to date GAAP EPS of $1 88.
Based on $68 4 million of GAAP net income and non-GAAP EPS of $1 95.
Based on $104 7 million of adjusted net income.
We have also declared a dividend of <unk> 40 per share this quarter, which keeps us on track with a 14% increase over last fiscal year equating to the targeted $1 60 per share for fiscal year 2023 with that I'll now turn the call over to Mario Thanks.
Thanks, John and good morning, everyone I'll start with some commentary on the current state of the private markets and provide context on how we are navigating this environment and where we are deploying resources.
Backdrop has remained the same throughout much of 2022 inflation is high and interest rates continue to rise.
The results, a weakened and volatile public equity market.
<unk> is being disproportionately impacted by large technology cross companies that market weighting is simply not the reality from the private markets and is certainly not the reality for the Hamilton Lane portfolios, while not impacted to the same magnitude picture is directionally similar and we don't believe this is likely to change in the near term central banks around the world.
Signal that in order to fight rising inflation rates will need to go higher and the reality is economic growth is slowing.
What does this mean for private markets public market volatility is a mixed bag for us.
A positive note and increases attractive investing opportunities and creates return uncertainty for investors, which causes them to pivot towards the private markets for higher returns on the negative side capital basis are shrinking around the globe as well as being eroded market uncertainty can also cause paralysis or delay for some investors as they ought to wait to <unk>.
See how things sort out.
At a portfolio level. The story is also mixed.
<unk> spending in certain areas remains strong as does manufacturing distribution along with other sectors technology valuations are down based on public market Comparables from rising rates are generally avian credit portfolios overall unrealized marks are down but nowhere in line with what we are seeing in the public sector exits. However.
Slowly as these new deal doing.
Over our 30 plus year history, we've experienced multiple cycles, we rely on those past experiences and stay focused on the fact that private markets are a long term asset class. Our investment teams remain active co cautious we continue to lean in with clients to make sure they remain comfortable and confident on the fundraising front, we are expanding sales rates.
Sources, and leveraging strategic partnerships to make sure. Our story is being broadly told we continue to invest in all facets of our business and expand our global footprint with new offices in strategic areas throughout Europe , such as Milan, Stockholm and soon.
Brought in key senior people to bolster our local presence, which helps in our distribution capabilities client service and proximity to investment opportunities.
Take comfort from our scale brand and culture and are determined to maintain our growth story.
Piece of that continued growth story centers around our people and in effort to both retain key talent and to maintain alignment with shareholders across our broader employee base, we have instituted a new equity program.
Is it a made to employees across level and department, who will be playing an important role in driving the company forward for years to come and importantly, No awards were given to the three largest inside Hamilton Lane shareholders.
In order for the recipient to receive value from the award they need to remain with the company over a multiyear time period and the stock has to cross certain thresholds over the next seven years.
Three stock performance tiers are $150 per share or $190 per share and a final one struck at $230 per share. We have set the bar high for ourselves final price thresholds, representing an 18% compounded annual growth rate from the grant date price. We believe these thresholds keeps us focused on.
Our commitment to growth and driving value for our shareholders.
Financial impact of the award this quarter was de Minimis and going forward, we approximately $3 million per year for the next five years.
Let me now turn to the results for the quarter.
Total asset footprint, which we define as the summer market AUM assets under management.
Assets under advisement stood at approximately $824 billion.
And represents a 2% increase to our footprint year over year, continuing our long term growth trend.
AUM growth year over year, which was over $11 billion or 12% came from both our specialized funds and customized separate accounts as far our way similar to that of our AUM growth was across client type and geographic region and came in at over $7 billion or 1% with that I will turn it over to Brian to cover.
Fee, earning AUM.
Thank you Mario and good morning, everyone moving on to our fee, earning AUM at quarter end total fee, earning AUM stood at $52 $7 billion and grew $8 1 billion or 18% relative to the prior year stemming from positive fund flows across both our specialized funds and our customized.
Separate accounts.
Separately $4 9 billion of net fee, earning AUM came from our customized separate accounts and over the same time period $3 $1 billion came from our specialized funds and.
Additionally, our blended fee rate across both customized separate accounts and specialized funds remains.
Moving to customized separate account flows fee, earning AUM from our customized separate accounts stood at $32 $3 billion growing 18% over the past 12 months, we continue to see the growth coming across type size and geographic location of the clients.
Over the last 12 months more than 80% the gross inflows into customized separate accounts came from our existing client base, which continues to be a steady source of growth for our separate account business.
As for our specialized funds growth here continues to be strong.
The earning AUM from our specialized funds stood at $24 billion at quarter end over the past 12 months, we achieved positive net inflows of $3 1 billion.
Presenting a growth of 18% relative to the prior year period. This growth stemmed from additional closes for funded market robust investment activity and continued growth of our evergreen platform.
I'll provide a quick recap of some of the fundraising activity and our specialized funds and where those stand today.
During our last call we highlighted a number of closings that occurred those closings came from our current six secondaries fund.
With direct equity fund and seventh installment of our direct credit series.
Our current Secondaries fund and market, we held the first close of the fund in April of 2022.
Then subsequently held another close in July and anticipate an additional close before year end.
Fund currently stands at nearly $1 $1 billion of LP commitments based on the two closes it will be in market into the fourth quarter of calendar 2023.
Secondary strategies continue to benefit from the strong demand from investors, who continue to seek exposure to this segment of the private markets. We believe our dominant position as one of the largest allocators of capital along with our global investment platform and solid track record will continue to benefit us as we progressed with this current fundraise.
We are certainly pleased with the early success, so far and look forward to providing you updates in the future.
Moving onto our direct equity fund we are in the final stretch of raising our fifth fund and to date have raised over $2 billion in LP commitments. This amount includes our most recent closed on October 28 that totaled over $160 million of LP commitments.
At this level, we have surpassed the total amount raised for our prior vintage <unk>.
Originally we had until October of 2022 to finished raising this fund, but due to a small number of investors who are still wrapping up their processes. We've received approval to extend out the final closing we expect to hold the final close for the fund in the coming months.
Before I move on I'd like to take a moment and acknowledge and award that our direct equity platform has recently won.
Onto Lane co investment fund for the fourth vintage in our direct equity family of funds came out on top in the category of best performance over $1 5 billion co investment.
The equity wires U S Awards ceremony, we are proud to have won this award as it highlights our commitment to delivering results for our investors.
Let's turn now to our annual direct credit series.
During the quarter, we announced the final close for our seventh installment with over $940 million of investor commitments.
And similar to our direct equity fund this seventh installment marks the largest fund ever in this series interest in this sector remains strong and we remain well positioned.
As for this series as many of you know we are constantly raising and deploying capital here and we've already begun work on raising our eighth installment.
That I will turn the call over to Eric.
Thank you, Brian I'll start with a quick update regarding some recent developments around the $3 61 capital acquisition, we closed on in April of 2021 for.
A quick background when we embarked on the launch of the U S sleeve of our evergreen product. We identified 361 capital is a great partner to help us build out our distribution capabilities within the fragmented RIAA channel.
After we close on the acquisition the goal for the 361 team was to sell and grow Hamilton Lane's U S evergreen product, which they have done and continue to do successfully.
The acquisition of $3 61 included two existing long short products, which while not core to our strategy, we're generating revenue to cover the full cost of the 361 team now.
Now having successfully transitioned the team to be solely focused on the Hamilton Lane's retail products, we've entered into a transaction agreement whereby management of the two funds is expected to be transferred to a third party.
On August 19th we along with all spring global investments announced that the respective boards of those two funds have approved the proposed transaction whereby the 361 funds will merge into new entities managed by all spring.
All spring is the current sub advisor to both funds the transaction is still subject to certain closing conditions, including approval of the shareholders, but we expect that the deal will close sometime before the end of 2022.
We remain very focused on growing our presence across the retail channel and are continuing to add additional resources. We are also focused on broadening out our product offering within the channel. Our newest addition to our evergreen platform is the Hamilton Lane strategic credit opportunities fund or simply scope.
This fund will invest in private credit transactions with a focus on current cash yield and capital preservation.
The credit space is growing is offering increasingly interesting opportunities.
And it's an area, where we bring deep strong and tenured experience.
While it's still early days with scope initial flows have begun and we look forward to providing you with more updates in the coming quarters.
I'll wrap up this section with commentary on our existing evergreen funds and the continued expansion of our retail distribution channels.
On our last call we provided color around what we are experiencing with regards to capital flows against the continued uncertain economic macro backdrop and summer seasonality.
In short, while we have not been immune from some of the short term impacts of the markets and have seen fund flows slow we have experienced net positive inflows in all but one month year to date and despite the market downturn, we are averaging over $80 million of monthly net inflow for 2022.
Given that continued success, our evergreen platform stands at approximately $2 $8 billion.
Our growth here is being fueled by a combination of factors increasing the number of internal sales resources.
Banding distribution channels, and leveraging technology partners and.
In addition to our strategic partnerships with other capital case and Tiffin. We've also been an early adopter of blockchain technology and <unk> I've seen by our partnership in Asia with Asics.
We've now expanded our efforts on both those fronts by bringing on two new partners to bolster our success and help us grow in the U S.
On October 5th we announced a partnership with leading digital asset securities firm Securitize, where.
We will work with them to provide qualified U S investors with Cocainize access to three Hamilton Lane funds.
Direct equity credit and secondaries.
Subsequently on October 26th we announced the partnership with blockchain focused fintech firm figure to launch the first ever private markets focused blockchain native share classes of a registered investment fund the.
The partnership will provide investors access via the blockchain to the U S version of our Evergreen platform. We see token is Asian, and blockchain technology is important steps towards making this asset class easier and more efficient to access we are proud of our market leading early adopter status and we are excited to be partnering with securitize.
Figure both firms, who we believe to be at the forefront of their domains.
Let's now move on to our strategic investment portfolio and I'll start with two new investments that we closed on in the quarter.
On August 23rd we joined fin top capital affirmed with whom we've worked closely in the past and investing and Hazel tree, which is a leading technology platform focused on delivering treasury and liquidity management solutions to alternative asset management firms Hazel.
Hazel trees platform provides critical cash management and Treasury oversight solutions that allow investment managers to increase the speed and reliability of their treasury operations and grain gained greater security over the entire cash management processing cycle.
We have been users of the Hazel treat technology for a number of years prior to making this investment and now look forward to being both client and shareholder.
Next up is our investment in stash away.
Headquartered in Singapore, Stash away as a data driven digital wealth management platform through which retail and accredited investors across Asia can access a variety of financial planning and portfolio management tools.
The way aims to help individual investors build well for their future financial security and they've identified private markets as a key avenue towards achieving this goal.
We share in the vision of providing expanded access to the private markets for the non institutional channel and are proud to have invested in and now begin partnering with dash away to provide their clients with seamless access to private market opportunities.
Let me end here with some additional positive news.
Recall that several years ago, we partnered with than IHS market to create a data solutions business called private market connect or PMC.
At the creation Hamilton Lane contributed both start up capital as well as personnel.
The partnership between Us and IHS Markit resulted in PMC quickly, becoming one of the leaders in the private markets data solution space with Hamilton Lane, serving as one of the company's largest clients.
With the acquisition of IHS Markit now completed by S&P.
PMC and S&P agreed that the next best step for PMC would be a full integration into S&P global market Intelligence Division.
So on August 29th S&P announced that they have acquired our 50% ownership stake in the PMC joint venture.
For Hamilton Lane, the exit along with dividends paid out along the way generated over a 20 times multiple on our initial investment.
But more importantly, given we remain a key customer we believe this transaction best positions PMC to continuing to deliver best in class service at an attractive economic level and with that I'll now turn the call over to a tool to cover the financials.
Thank you, Eric and good morning, everyone.
Year to date, we achieved strong growth in our business with management and advisory fees up 19% versus the prior year period.
Our specialized funds revenue increased by $21 1 million or 30% compared to the prior year, driven primarily by a $1 2 billion increase in fee, earning AUM in our evergreen platform.
Approximately $450 million raised in our latest secondary fund in the quarter.
At approximately $1 $8 billion raised through September from our latest direct equity fund.
Retrofits for the year were approximately $1 2 million stemming primarily from our direct equity fund.
Minimal amount in the prior year period.
As a reminder, investors that come into later closes during a fundraise paint a retroactive fees dating back to fund first close we expect to generate additional retrofits as being a whole subsequent closes for both of our latest direct equity fund.
It is our latest secondary fund.
Moving onto customized separate accounts revenue increased $8 3 million or 17% compared to the prior year period.
Re ups from existing clients. The addition of several new accounts and continued investment activity.
Revenue from our advisory and reporting and other offerings decreased <unk> 4 million compared to the prior year period, primarily due to an increase in revenue from our destination management business, partially offset by an increase in fund reimbursement revenue.
Lastly, the final component of our revenue is incentive fees.
Incentive fees year to date totaled $110 $1 million.
As we touched on last quarter that relative increase in incentive fees compared to the prior quarters is due primarily to the fact that a number for our specialized funds entered into the GP cash a portion of their respective fund waterfalls.
Typically find GP catch ups in connection or in European style waterfalls.
The most conservative method related to earn carried interest and represents the method.
As majority of our carry eligible fund employee.
This method does delay in the receipt of carried interest it is more favorable to the client and avoids any clawback risk and thus represent stability for our shareholders.
During the GB catch up period, you typically see an outsized amount of value that flows from the GP, which is where we experienced again this quarter.
Let me now turn to some additional detail on our unrealized carry balance the balance is down 1% from the prior year period, even as we recognized $138 $3 million of incentive fees during the last 12 months.
The unrealized carry balance now stands at just under a $1 billion.
Moving to expenses total expenses increased to $63 $5 million compared with the prior year period.
Total compensation and benefits increased by $52 5 million.
Driven primarily by compensation associated with the increased amount of incentive fee in the period.
G&A expenses for the period increased $10 9 million, which included increases in travel and conference costs that were limited during Covid and.
In addition, we saw increases in fund expenses and third party commissions, which are tied to the strong fund raising and revenue growth we saw in the period.
Year to date, our fee related earnings were up 10% relative to the prior year period as a result of that.
That fee.
Revenue was 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 in our balance sheet capital alongside our clients.
In regards to our liability as we continue to be modestly levered.
With that we thank you for joining the call and are happy to open it up for questions.
At this time I would like to remind everyone in order to ask a question simply press Star then the number one on your telephone keypad.
We ask that you please limit yourself to one question and one follow up question. If you have any additional questions. Please re enter the queue.
Well pause for just a moment to compile the Q&A roster.
Your first question is from the line of Ken Worthington with JP Morgan. Please go ahead.
Hi, good morning, Thanks for taking the questions. So first I'd love to dig into and deeper into took innovation in the use of blockchain technology to improve access to the products. So maybe first can you talk a little bit more about how token is Asian improves distribution and access to the product so flushed.
The comments that you made in terms of cost is there a savings element in terms of the back.
<unk> met office to pursuing this sort of <unk> and listing.
And then lastly.
To what extent do you retain either greater control over the client or the client data.
From a relationship when you utilize sort of a blockchain technology I know theres, a little fishing in there, but thought you could comment.
Thanks, Ken it's Erik I will dive in there.
There is a lot so let me my best.
I think the way we look at this is to date our asset class has operated in a very traditional environment lots of documentation.
Lots of manual processes lots of lawyers I.
I think as you look forward there are a number of companies I think especially the ones that we've recently partnered with <unk>.
That are focused on trying to use different kinds of technology to make access easier.
So if you think about a world where to date every investor needs to go through a <unk> process for every every individual investment because there is no tie between in a world where you have a centralized digital wallet that's housed on chain and you're offering fund products via tokens in that world.
You can streamline a lot of the legal processes, and yes that would bring cost savings but.
But I think more importantly, you start to more rapidly enter into a point and click environment, we're simply making acquisitions and investments in our industry begins to look much more similar to what you experienced today in the public markets, where we can all sort of pull out our phone as were walking down the sides.
Work and go into whatever App, we favor and buy stock.
This is really just reflecting that there is a move afoot with some very sophisticated technology with some very interesting firms that are trying to drive more towards that.
And so no different than the evolution you saw in the public markets, where things got easier access became more broad and frankly cost came down for your interfacing costs. We expect the same thing over time here to be the case as this all begins to mature and take hold.
Okay and control of data and the customer anything there or is that farfetched well it's it's.
Different I mean, you're you're again, you're selling digital securities and digital tokens. So your customer base is really the entity that holds the wallet.
But today I mean, that's such a tiny part of our world that's not having there's no positive or negative impact as it relates to that okay.
And then follow up on the Evergreen side I think you said in the prepared remarks inflows this year and all but one months of the year was the one month of outflows in September and if it was September do you see September as sort of a one off or is it sort of a near term inflection point given.
You know the macro environment that we're seeing.
I believe it was go ahead Mario.
Yes.
I believe it was August or September .
Check on that and it was we view it as a one off.
Not something that we have we have seen since then in terms of the outflows. So no. We don't take that as a hard bringer of of what's happened.
Awesome. Thank you very much.
Your next question is from the line of Adam Beatty with UBS. Please go ahead.
Alright, Thank you and good morning.
First of all a quick follow up on a bit of a blockchain discussion and maybe I know the answer from the tone of Eric's remarks, so far but just wondering about product suitability.
For that kind of environment do you see this as something where all private markets products and vehicles would eventually migrate to that or are there certain products or vehicles that you would think even long term would would you stay in kind of a more conventional environment. Thank you.
Sure Adam it's Eric I'll take that.
I mean, let's leave aside the registration and legalities and what type of Investor you are going to because theres different roles across all the different geographies and you can see even in the firms that we're doing business with today, they're all kind of taking a slightly different approach.
But if you just take a more macro perspective.
Accessing private market investments funds.
Is easier.
In this token is blockchain world and.
An easier also means less friction points, which also means less cost and expenses for the customer.
So our belief is that over time and there's no way of knowing what time means today, who will this transition.
Two years 20 years or 200 years.
But over time, you are talking about a customer base, who is going to want to access more things I want to ask with them easier faster cheaper.
And so our view is that it's all.
Appropriately suited for it how that migration occurs how quickly. It occurs is sort of to be determined I think you can see very clearly strategically what we're doing which is.
We've identified a variety of partners, who we think are bring.
Bringing an interesting value add perspective with very interesting technology.
And we're aligning with a variety of them.
Because it's not clear today, which piece is going to ultimately resonate in the market and I suspect just like in the public markets Theres No single platform today that you utilize to access the public markets. There are lots of market, leading platforms and I suspect over time that will be true here as well.
Makes sense. Thank you Eric.
And then just shifting over to the credit opportunities product just wanted to get a little bit more detail around the underlying kind of strategies that you're targeting with that is it something that's fairly opportunity opportunistic more of our core core plus orientation and also kind of maybe some background about what drove those dis.
<unk> as to how and where to focus the fund was it opportunities that youre seeing from your in house research or more around client demand or some mix of that thank you.
Sure. This is Brian I'll take that one so across our private credit where broadly investing in the private credit strategy. So think small to mid sized companies are cash flow positive in a segment of the market has moved away from bank financing and that provides a little bit better return, it's generally a floating.
Rate return part of the market and very attractive risk reward characteristics characteristics compared to the public credit markets.
Excellent any concerns around kind of the potential credit cycle that we might be heading into.
So I think as an investor of course, we're always very much focused on where we are in the market as we're shaping the investments that we're making we've been doing that for a number of years leading into this market recognizing that we are late cycle. So high quality is of course of buckets and the underlying credit statistics have remained strong cross portfolios.
But of course, we're mindful of the environment that we're in.
Excellent. Thank you Brian appreciate it.
Your next question comes from the line of Finian O'shea with Wells Fargo Securities. Please go ahead.
Hi, good morning, Thank you.
A follow on on the scope product.
Given it's more recurring income oriented nature will will that seek to be marketed more broadly to the retail market.
Versus the other evergreen funds.
Sure. This is Brian I'll take that one.
I think there were envisioning a smaller audience to all of our currently marketing our other evergreen funds. So we've seen that there's strong demand in the credit space from net investor type. This portfolio will have slightly different characteristics than the equity oriented portfolio that we have today, but we think that many of the same attributes will really resonate with that market.
Thank you your next question.
Yes.
Sorry go ahead.
Your next question is from the line of Chris Kotowski with Oppenheimer. Please go ahead.
Yeah, just kind of a modeling question.
And I think most of us have been modeling year incentive fees as a percentage of the carried interest receivable and then.
Kind of.
What in this environment would normally mitigate that as you think okay. The markets are down and so you're not going to be a slower harvesting environment. So you know all things being equal you would tend to.
Okay less than that but on the other hand, if you're in the catch up phase on most of these funds and you know there is a disproportionate amount and so I guess I'm kind of it.
Kind of curious what if any guidance you can give us on how many.
Or as you're in this invest in this catch up phase.
Or what what percentage of your carry a receivable in broad terms.
<unk>.
Comes from those kinds of catch up payments any thoughts you could give us just SAR numbers arent all over the place.
Yeah sure it's Eric.
This will be a very unsatisfactory answer I think when youre using a European waterfall, it's very difficult to model as we've seen so we've been public now for over five years.
And I would say if you take a look at the quarterly history.
Despite everyone being intelligent and working hard and trying to get all this right. We have been either light or heavy but rarely have we been right on the Mark I think the European waterfall is kind of akin to you spend years sort of pushing the boulder up the hill and when you finally get to the top it begins to kind of quickly roll down the other side and so here.
<unk>, that's what we've been doing we've been pushing the Boulder for a long time. We've continued to have liquidity. We've continued to have good performance. We've continued to have well diversified portfolios. We finally gotten the boulder to the top of the hill and now its beginning to sort of turn and run the catch up obviously it doesn't last forever. It lasts until we're caught up.
So I think our takeaway would simply be that.
Because of good performance, we've gotten a variety of our flagship specialized funds to the point, where they are in the catch up you've seen that very clearly this quarter you saw that last quarter that won't last forever again, eventually we will be caught up but the other takeaway I would leave you with is that despite a challenging market environment, I think reflecting on kind of the size and diversity of these.
<unk>, we continue to have exit activity, which is obviously, what's driving the fact that we're able to get the dollars and the catch up it only comes because you actually have exits. So all of that is happening what can I tell you for the quarters coming we're going to still be working through the catch up with some of these products. We continue to still see exit activity, although as I noted it certainly lower and slower.
What we've seen in a more normalized market environment, but predicting beyond that I would say I'll be albeit accurate as anyone else, which is to say not very accurate.
Okay.
Alrighty. Thank you that's it for me.
Okay.
Your next question comes from the line of Alex <unk> with Goldman Sachs. Please go ahead.
Hey, guys. This is Michael on for Alex just a quick one for me on <unk>.
Allocation, maybe you can help us think about how things are changing in real time.
<unk> 22 was slow, but maybe is there a risk that 2023, new commitments to pay will be worse and any color you have around there would be helpful. Thanks.
Sure Michael It's Mario hard to predict on 2023, I think youre right on 2022, it's been it's been slower.
Two factors really the denominator effect, everyone is talking about LTE as don't have as much capital.
And by the way performance has been great. It's been their best performing asset classes of private market. So that that has continued to be pretty steady.
The other factor is Theres, just no rush to do anything.
There is a lot of product in market and rush and so everything has slowed down I would expect 2023 will also be a difficult market will it be as challenging as what we're experiencing in 2022 now.
No part of that will depend on the public markets on where inflation and interest rates are going and everyone has different points of view, but I would expect 2023, we'll continue to see Lps with less capital than they'd like to invest in a lot of.
A lot of product coming into market. So it will it will still be a tough environment for some part of 2023.
Great. Thanks, so much.
This concludes the Q&A portion of today's call I will now turn the call back to Eric for any closing remarks.
Great again, we always appreciate the time and the interest and we wish you well thanks again.
This does conclude the Hamilton Lane's second quarter of fiscal 2023 earnings conference call. Thank you all for participating you may now disconnect.
Please wait the conference will begin shortly.
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