Q3 2024 Hamilton Lane Inc Earnings Call

Unnamed Speaker: or performance and are subject to risks and uncertainties that may cause our actual results to differ materially from those projected. For a discussion of these risks, please review the cautionary statements and risk factors included in the Hamilton Lane Fiscal 2023 10-K and subsequent reports we file with the SEC.

Risks and uncertainties that may cause our actual results to differ materially from those projected.

For a discussion of these risks. Please review the cautionary statements and risk factors included in the Hamilton Lane's fiscal 2023, 10-K, and subsequent reports we file with the SEC. These.

Unnamed Speaker: These forward-looking statements are made only as of today, and, except as required, we undertake no obligation to update or revise any. 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.

These forward looking statements are made only as of today and except as required we undertake no obligation to update or revise any of them.

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.

Unnamed Speaker: Our detailed financial results will be made available when our 10-Q is filed. Please note, nothing on this call represents an offer to sell or a solicitation of an offer to purchase an interest in any of Hamilton Lane's projects. Beginning with the financial highlights, year to date, our management and advisory fee revenue grew by 19%, while our fee-related earnings grew by 16% versus the prior year period. This translated into GAP EPS of $2.43 based on $92 million of GAP net income and non-GAAP EPS of $2.54 based on $137 million of adjusted capital.

Our detailed financial results will be made available when our 10-Q as filed please note nothing on this call represents an offer to sell or a solicitation of an offer to purchase interest in any of Hamilton Lane's products.

Beginning with the financial highlights year to date, our management and advisory fee revenue grew by 19%, while our fee related earnings grew by 16% versus the prior year period.

This translated into GAAP EPS of $2 43.

Based on $92 million of GAAP net income and non-GAAP EPS of $2 54.

Based on $137 million of adjusted net income.

Unnamed Speaker: We have also declared a dividend of 44.5 cents per share this quarter, which keeps us on track for the 11% increase over the last fiscal year, equating to the targeted $1.78 per share for fiscal year 2020. With that, I'll now turn the call over to Erik.

We have also declared a dividend of $44 five per share this quarter, which keeps us on track for the 11% increase over last fiscal year equating to the targeted $1 78 per share for fiscal year 2024.

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

Erik R. Hirsch: Hello, everyone, and thank you, John. This is officially our first earnings call post-management transition on January 1st. It now sees me and my partner Juan Delgado as co-CEOs of this firm. It has been a strong start to the year, as you will hear shortly, but we wanted to begin by providing you an opportunity to hear directly from Juan on his background and prior roles at Hamilton Lane. With Juan living in Hong Kong, he will not be joining these calls regularly, but as we begin, we thought it was important to provide an introduction, and so with that, I turn it over to Juan. Thank you, Erik, and hello, everyone.

Eric: Hello, everyone and thank you John This is officially our first earnings call post the management transition on January one that analyses me and my partner one Delgado as co Ceos of this firm it.

Eric: It has been a strong start to the year as you'll hear shortly but we wanted to begin by providing you an opportunity to hear directly from one on his background in prior roles at Hamilton Lane.

Eric: With one living in Hong Kong, he will not be joining these calls with regularity, but as we begin we thought it important to broaden introduction and so with that I'll turn it over to Juan.

Juan: Thank you, Eric and Hello, everyone.

Juan M. Delgado: I'd like to simply begin by saying that I'm extremely excited about this next chapter. Erik and I have been friends and partners for 19 years, and I really look forward to continuing that partnership and continuing the growth and expansion of this. As a bit of background, I joined Hamilton Lane in 2005 to help build out our presence in London. Prior to that, I was an investment manager at Bering Private Equity Partners, where I focused on mid-market investing throughout Europe. I have my BA and PhD from the Universidad Complutense de Madrid in Spain, and I was a lecturer and Fulbright Scholar at Stanford University.

Juan: I can simply begin by saying that I'm extremely excited about this next chapter.

Juan: And I have been friends and partners for over 19 years, and I really look forward to continuing our partnership and continuing to growth and the expansion of this business.

Juan: That's a bit of background I joined humbled to lead into that five to help build out our presence in London.

Prior to joining I was an investment manager Baring private equity partners, what I focus on mid market investing throughout Europe.

Juan: And Phd from one you can see our comprehensive in Madrid in Spain.

Speaker Change: And that was it thanks, Sharon Fulbright scholar at Stanford University.

Juan M. Delgado: In joining Hamilton Lane, I've worn many hats. First, I was working to build out our investment and sales presence in Europe and the Middle East. I was responsible for hiring the leadership team in place today in EMEA and opening our Tel Aviv office. I have also managed the opening of our first Asian offices in Hong Kong and Tokyo in 2009. As our Asia business grew, I relocated to Hong Kong with my young family of three in 2011. And since then, I have served as head of AIPAC, head of international, and overseeing the expansion and the opening of several offices, including Seoul, Singapore, Sydney, and Shanghai. In June 2019, I took on the title of vice chairman for Hamilton.

Speaker Change: Joining Hamilton lane of worn many hats.

Speaker Change: First I was working to build out our investment and sales presence in Europe on the middle East.

Speaker Change: I was responsible for hiring the leadership team in place today in EMEA and open our Tel Aviv office.

Speaker Change: We have also managed to the opening of our first Asia and also in Hong Kong and Tokyo in 2009.

Speaker Change: Also our Asia business grew relocated to Hong Kong with my young from <unk> 2011, and since then served as head of APAC head of international and overseeing the expansion and the opening of several offices, including Seoul, Singapore, Sydney and Shanghai.

Speaker Change: In June 2019 to call on that type of a vice chairman for Hamilton Lane.

Juan M. Delgado: Today, I serve on several of our investment committees, and as of January 1st, I joined the board of HL&E. As we highlighted in our initial announcement, I will be overseeing our global client and business development teams from Hong Kong and have joint oversight with Erik of the global investment team at Hamilton Lane. I've had the privilege of witnessing. Our model of having localized teams that embrace the culture and speak the native language has allowed us to deliver best-in-class client service and strong investment results. We utilize a truly global, one-team approach with really close collaboration and access to all the teams and resources Hamilton Lane brings to bear.

Speaker Change: Today I served on several ongoing investment committees.

Speaker Change: As of January 1st I joined the board of HLA need.

Speaker Change: As we highlighted in our initial announcement.

Speaker Change: Overseeing our global client and business development teams from Hong Kong and have joined oversized with Eric over global investment teams.

Speaker Change: During this 19 plus years Hamilton Lane.

Speaker Change: Each of witnessing.

Speaker Change: Growth of our non U S business.

Speaker Change: The model of having localized teams have embraced the culture and speak their native language.

Speaker Change: Allowed us to deliver best in class client service and strong investment results.

Speaker Change: Utilizing truly global one team approach with really close collaboration and access to all the teams and resources Hamilton Lane brings to bear.

Erik R. Hirsch: We've become a global leader in private markets with this strategy, and I look forward to working alongside Erik on our leadership. Before I conclude, I want to mention that I'm currently en route, traveling to see clients and prospects, as I do quite often, and therefore, I will excuse myself from the live Q&A. And with that, I will now pass the question back to Erik. Thank you, Juan, and safe travels.

Speaker Change: We've become a global leader in private markets with your strategy and I look forward to working alongside Eric can further in our leadership.

Speaker Change: Before I conclude I want to mention that I am currently in route to traveling to see clients and prospects.

Speaker Change: I am doing quite often and therefore I will excuse myself from the live Q&A and with that I will now pass it back to Eric.

Eric: Thank you Juan and safe travels coming.

Erik R. Hirsch: Coming off of a strong calendar 2023, we are excited about 2024. The business has tremendous momentum, and the employee base is excited about what is to come. Part of that excitement stems from our culture, and I am very proud to announce that once again, Hamilton Lane has been named a Best Place to Work in Money Management by Pension and Investments for the 12th consecutive year. Even more impressive is the fact that we are only one of five firms who have been bestowed this distinction every single year since the award's creation. Some firms say culture doesn't matter and that it is all about results. However, both firms tend not to have healthy cultures.

Eric: Coming off of a strong calendar 2023, we are excited about 2020 for the business has tremendous momentum in the employee base is excited about what is to come.

Of that excitement stems from our culture and I am very proud to announce that once again Hamilton Lane has been named a best place to work in money management by pensions <unk> investments for the 12th consecutive year EBIT.

Eric: Even more impressive is the fact that we are only one of five firms who have been bestowed this distinction every single year since the awards creation.

Eric: Some firms say cultural doesn't matter.

Eric: And that is all about results.

Eric: Those firms tend not to have healthy cultures.

Erik R. Hirsch: We think a great culture aids in creating great results. Be good, and do good. Create a strong culture of excellence and collaboration and use that to deliver for your clients and partners. Now, let's move on to the results for the quarter. I'll start with our total asset footprint, which we define as the sum of our AUM and AUA. This stood at $903 billion and represents a 9% increase in our footprint year over year and highlights our continued and steady growth as a firm. AUM stood at $120 billion at quarter end and grew by $12 billion, or 12%. The growth came from both our specialized funds and customized separate accounts. AUA was up $59 billion, or 8% year over year, primarily as a result of the addition of reporting and advisory mandates.

Eric: A great culture, AIDS and creating great results be good and do good create a strong culture of excellence and collaboration and use that to deliver for your clients and partners.

Eric: Let's move on to the results for the quarter.

Speaker Change: I'll start with our total asset footprint, which we define as the sum of our AUM in this.

Speaker Change: <unk> stood at $903 billion and represents a 9% increase to our footprint year over year and highlights our continued and steady growth as a firm.

Speaker Change: AUM stood at $120 billion at quarter end and grew $12 billion or 12% the growth came from both our specialized funds and customized separate accounts.

Speaker Change: <unk> was up 59 billion or 8% year over year, primarily the result of the addition of reporting and advisory mandates as a reminder, can fluctuate for a variety of reasons, but the revenue associated with <unk> does not necessarily move in lockstep with those changes.

Erik R. Hirsch: As a reminder, AUA can fluctuate for a variety of reasons, but the revenue associated with AUA does not necessarily move in lockstep with those changes. Turning now to fee-earning AUM, which continues to be the largest driver of management fees. We continue to generate strong growth in both our customized separate accounts and specialized funds. Our total fee-earning AUM stood at $63.1 billion and grew $8.2 billion, or 15%, relative to the prior year period. Taken separately, $3.8 billion of net fee-earning AUM came from our customized separate accounts, and over the same time period, $4.4 billion came from our specialized funds.

Speaker Change: Turning now to fee, earning AUM, which continues to be the largest driver of management fees. We continue to generate strong growth in both our customized separate accounts and specialized funds. Our total fee, earning AUM stood at $63 1 billion and grew $8 2 billion or 15%.

Speaker Change: Relative to the prior year period.

Speaker Change: Taken separately $3 8 billion of net fee, earning AUM came from our customized separate accounts and over the same time period $4 $4 billion came from our specialized funds.

Erik R. Hirsch: Our blended fee rate across the platform also continues to increase. This stems from the continuing shift in the mix of our fee-earning AUM towards higher fee-rate specialized funds, most notably our Evergreen product, where growth remains strong. [inaudible] The earning AUM here stood at $36.9 billion, growing 12% over the past 12 months. We continue to see growth across type, mandate, size, and geographic location of the client. Over the last 12 months, more than 80% of the gross inflows into customized separate accounts came from our existing client base.

Speaker Change: Our blended fee rate across the platform also continues to increase this stems from the continuing shift in the mix of our fee, earning AUM towards higher fee rates specialized funds, most notably our evergreen product where growth remains strong.

Speaker Change: Moving now to additional detail on our customized separate accounts fee, earning AUM here stood at $36 $9 billion growing 12% over the past 12 months, we continue to see the growth coming across type mandate size and geographic location of the clients over the last 12 months more than 80%.

Speaker Change: Of the gross inflows into customized separate accounts came from our existing client base. While this clearly speaks to the power of the recurring relationship model. It also tells you that with the remainder of flows. Despite a very large installed base coming from new relationships that the market continues to offer a plenty of new opportunities.

Erik R. Hirsch: While this clearly speaks to the power of the recurring relationship model, it also tells you that with the remainder of flows, despite a very large installed base, coming from new relationships, the market continues to offer up plenty of new opportunities. Moving to our specialized funds, momentum here also continues to be strong. Fee-earning AUM here stood at $26.2 billion at quarter end.

Speaker Change: Moving to our specialized funds.

Speaker Change: Mentum here also continues to be strong fee, earning AUM here, so to $26 2 billion at quarter end over.

Erik R. Hirsch: Over the past 12 months, we've achieved positive net inflows of $4.4 billion, representing an increase of 20% relative to the prior year period. This growth stemmed from additional closes from our funds currently in market, robust investment activity, and continued expansion of our Evergreen platform. Going into some detail around the drivers of specialized fund flows during the quarter's growth, I'll begin with our secondary fund that is currently in market. During the quarter, we closed on over $485 million of LP commitments, and that generated $6.1 million of retro fees.

Speaker Change: Over the past 12 months, we've achieved positive net inflows of $4 4 billion, representing an increase of 20% relative to the prior year period.

Speaker Change: This growth stemmed from additional closures from our funds currently in market robust investment activity and continued expansion of our evergreen platform.

Speaker Change: Going into some detail around the drivers of specialized fund flows during the quarters growth I'll begin with our secondary fund that is currently in market during.

Speaker Change: During the quarter, we closed on over $485 million of LP commitments and that generated $6 $1 million of retro fees.

Erik R. Hirsch: This brings the total now raised to over $3.5 billion. As a quick reminder, we raised $3.9 billion for our prior secondary fund, and we are on target to meaningfully surpass the prior fund size with this current fund. We expect to hold the final close for this funds in the coming week. We continue to be encouraged by the momentum heading into the final stages, and historically, our final closes have tended to be our largest, and we expect that pattern to hold true here. Moving on to our Strategic Opportunities Fund, which is our annual direct credit fund targeting institutional investors. As a refresher, this series of funds is effectively always in the market as we raise and deploy the capital with short investment periods and charge management fees on invested capital.

Speaker Change: This brings the total now raised to over $3 $5 billion as a quick reminder, we raised $3 9 billion for our prior secondary fund and we are on target to meaningfully surpass the prior fund size with this current funds, we expect to hold the final close for this funds over the coming weeks.

Speaker Change: We continue to be encouraged with the momentum heading into the final stages and historically our final closes have tended to be our largest and we expect that pattern to hold true here.

Speaker Change: Moving on to our strategic opportunities fund, which is our annual direct credit fund targeting the institutional LP.

Speaker Change: As a refresher the series of funds as effectively always end market as we raise and deploy the capital with short investment periods and charge management fees on invested capital. We are currently in market with our eighth series and since our last update we've closed on an additional $105 million of LP commitments. This brings the <unk>.

Erik R. Hirsch: We are currently in market with our eighth series, and since our last update, we've closed on an additional $105 million of LP commitments. This brings the total raise for this current series to nearly $675 million. Like many of our products, we've been granted an extension on the final close of the series to allow for additional time for investors to close into this fund. We expect to hold the final close in the coming weeks.

Speaker Change: Total raised for this current series to nearly $675 million.

Speaker Change: Like many of our products, we've been granted an extension on the final close of the series to allow for additional time for investors to close into this fund.

Speaker Change: We expect to hold the final close in the coming weeks.

Erik R. Hirsch: Again, I'd like to highlight that our direct credit platform has continued to experience strong growth over the past few years, with this annual institutional series now being complemented by other sleeves of credit-focused capital, including various separate accounts and our Evergreen funds. Today, credit represents 15 percent of our total AUM, and we continue to see opportunity to scale. Let's now turn to our Evergreen Fund. As of December 31, 2023, total AUM across our three offerings stood at $5.7 billion, growing 76% since the beginning of the calendar year 2023.

Speaker Change: Again, I'd like to highlight that our direct credit platform has continued to experience strong growth over the past few years with this annual institutional series now being complemented with other sleeves of credit focused capital, including various separate accounts and our evergreen funds today credit represents 15% of our total AUM and we continue to see.

Speaker Change: Opportunity to scale.

Speaker Change: Let's now turn to our evergreen funds.

Speaker Change: As of December 31, 2023, total AUM across our three offerings stood at $5 $7 billion growing 76% since the beginning of the calendar 2023.

Erik R. Hirsch: This growth was driven by solid investment performance, which in turn drove NAV growth along with continued strong net inflows. For calendar 2023, we averaged net inflows of $160 million per month, with our U.S. private market offering making strong progress with our two wire house relationships. In less than a year of being on those platforms, we've received more than $615 million in net inflows. Our evergreen complex continues to thrive despite an increasingly competitive marketplace.

Speaker Change: This growth was driven by solid investment performance, which in turn drove NAV growth along with continued strong net inflows.

Speaker Change: For calendar 2023, we averaged net inflows of $160 million per month with our U S private market offering making up strong progress with our two wire house relationships in.

Speaker Change: In less than a year of being on those platforms. We've received more than $615 million of net inflows are evergreen complex continues to thrive. Despite an increasingly competitive marketplace. We've emerged as a real leader in this channel and we are confident that this is only the beginning of our exciting journey, we are eager to grow.

Erik R. Hirsch: We've emerged as a real leader in this channel, and we are confident that this is only the beginning of our exciting journey. We are eager to grow our footprint in this space through additional product offerings and expansion of our distribution partnerships. Let me move now to some announcements around our most recent technology partnerships. As you'll hear, we continue to seek out partners who share in our vision of driving increased access to the private markets for the non-institutional investor. We firmly believe that managers need to meet the retail investor where they are, and the most efficient way to accomplish that is through technology. With that, let's start with an update on Helix, which we announced on a previous call and is our newest joint venture with one of our strategic partners, Tiffin. As a reminder, Helix is the first-of-its-kind, generative AI-assisted technology solely focused on the private market.

Speaker Change: Our footprint in this space through additional product offerings and expansion of our distribution partnerships.

Speaker Change: Let's move now to some announcements around our most recent technology partnerships.

Speaker Change: As Youll hear we continue to seek out partners, who share our vision of driving increased access to the private markets for the non institutional investor we firmly believe that managers need to meet the retail investor where they are in the most efficient way to accomplish that is through technology.

Speaker Change: With that let's start with an update on helix, which we announced on our prior call and as our newest joint venture with one of our strategic partners Tiffin.

Speaker Change: As a reminder, helix is the first of its kind generative AI assistant technology solely focused on the private markets.

Erik R. Hirsch: It is designed for future integration within wealth platforms and digital marketplaces used by advisors and investors seeking allocation to the private market. Helix combines TIFF and technological expertise with Hamilton Lane's proprietary database and market analysis to provide data-centric information around private markets benchmarking, forecasting, and diligence for financial advisors. On December 7th, Helix announced that it had successfully completed its seed funding round led by Fintop Capital.

Speaker Change: It is designed for future integration within wealth platforms, and digital marketplaces used by advisors and investors seeking allocation to the private markets.

Helix combines tiffin technological expertise with Hamilton Lane's proprietary database and market analysis to provide data centric information around private market benchmarking forecasting and diligence for financial advisors.

Speaker Change: On December 7th Helix announced that it has successfully completed its seed funding round led by <unk> capital Hamilton Lane and fin top have developed a successful track record of partnering and investing in leading private markets focused companies, including deal cloud Hazel tree and cobalt.

Erik R. Hirsch: Hamilton Lane and Fintop have developed a successful track record of partnering and investing in leading private markets-focused companies, including DealCloud, Hazeltree, and Cobalt. We are thrilled to partner with Fintop Capital once again, who shares our common goal of driving technological innovation and broadening access within the private market. Next, on January 10th, we announced our newest strategic partnership alongside Brevin Howard with Libra. Libra is a platform that connects high-net-worth investors with alternative asset managers and wealth advisors, offering them access to the global alternative market. Libra will leverage tokenization and smart contracts that will provide asset managers with seamless, direct connectivity to the growing high-net-worth channel. Libra also makes access for distributors simple through API connectivity. This provides integration into Libra's comprehensive suite of wealth management services, data, and infrastructure. Libra is scheduled to go live during the first quarter of 2024 and has already partnered with several global distributors.

Speaker Change: We are thrilled to partner with Fintech capital once again, who shares our common goal of driving technological innovation and broadening access within the private markets.

Speaker Change: Next on January 10th we announced our newest strategic partnership alongside Brevan Howard with Libra Libra is the platform that connects high net worth investors with alternative asset managers and wealth advisors offering them access to the global alternatives market Libra will leverage <unk> organization and smart contracts that will provide asset managers with <unk>.

Speaker Change: Direct connectivity to the growing high net worth channel.

Speaker Change: Lieber makes access for distributors simple through API connectivity.

Speaker Change: And this provides integration into leavers comprehensive suite of wealth management services data and infrastructure Libre.

Speaker Change: <unk> is scheduled to go live during the first quarter of 2024 and has already partnered with several global distributors. We are excited to be a strategic partner to Libre and one of the first to go live with them and we look forward to providing you with future updates on this exciting journey and with that I'll now turn the call over to Jeff to cover the financials.

Erik R. Hirsch: We are excited to be a strategic partner to Libra and one of the first to go live with them, and we look forward to providing you with future updates on this exciting journey. And with that, I'll now turn the call over to Jeff to cover the financials. Thank you, Erik. And good morning, everyone.

Jeff: Thank you Eric and good morning, everyone fiscal year to date, we achieved strong growth in our business with management and advisory fees up 19% versus the prior year period or.

Jeffrey B. Armbrister: Fiscal year to date, we achieved strong growth in our business with management and advisory fees up 19% versus the prior year period. [inaudible] Retro fees for the fiscal year to date included $12.8 million from our secondary funded market versus $2.4 million from our direct equity fund in the prior year period. As a reminder, investors that come into later closes during a fundraise pay retroactive fees dating back to the fund's first close. We expect to generate additional retro fees as we hold the final closes for secondary funds. Moving on to customized separate accounts, revenue increased $9 million, or 11% compared to the prior year period due to the addition of several new accounts, re-ups from existing clients, and continued investment activity.

Jeff: Our specialized funds revenue increased by $41 million or 28% compared to the prior year period. This was driven primarily by a $2 $2 billion increase to fee, earning AUM and our evergreen platform in the last 12 months and over $3 5 billion raised since inception in our latest secondary fund.

Jeff: Trophies for the fiscal year to date included $12 8 million for from our secondary funded market versus $2 $4 million from our direct equity fund in the prior year period.

Jeff: As a reminder, investors that come into later closes during a fund raise pay retroactive fees dating back to the Fund's first close we expect to generate additional retro fees as we hold the final closes for secondary fund six.

Jeff: Moving onto customized separate accounts revenue increased $9 million or 11% compared to the prior year period due to the addition of several new accounts.

Jeff: From existing clients and continued investment activity.

Jeffrey B. Armbrister: Revenue from our advisory, reporting, and other offerings decreased by $2 million compared to the prior year period, due primarily to the sale of the 361 capital asset, partially offset by increases in revenue coming from our technology solution. Lastly, the final component of our revenue is incentives. Year-to-date incentive fees totaled $49 million and are down 65% relative to the prior year period.

Jeff: Revenue from our advisory reporting and other offerings decreased by $2 million compared to the prior year period due primarily to the sale of the 361 capital assets, partially offset by increases in revenue coming from our technology solutions.

Jeff: Lastly, the final component of our revenue is incentive fees year to date incentive fees totaled $49 million and are down 65% relative to the prior year period recall that last year last fiscal year, we generated a large amount of incentive fees due to the catch up period at several of our carry eligible vehicles were in.

Jeffrey B. Armbrister: Recall that last fiscal year, we generated a large amount of incentive fees due to the catch-up period that several of our Cary-eligible vehicles were in. Let me now turn to some additional detail on our unrealized carry balance. The balance is up 18% from the prior year period, while having recognized $66 million of incentive fees during the last 12 months. The unrealized carry balance now stands at approximately $1.1 billion. Moving to expenses, year-to-date total expenses decreased $10 million compared with the prior year pair. Total compensation and benefits decreased by $18 million, driven primarily by lower compensation associated with a decreased amount of incentives.

Jeff: Let me now turn to some additional detail on our unrealized carry balance the balances up 18% from the prior year period, while having recognized $66 million of incentive fees. During the last 12 months. The unrealized carry balance now stands at approximately $1 1 billion.

Jeff: Moving to expenses year to date total expenses decreased $10 million compared with the prior year period.

Jeff: Total compensation and benefits decreased by $18 million, driven primarily by lower compensation associated with the decreased amount of incentive fees.

Jeffrey B. Armbrister: G&A increased $9 million, driven primarily by revenue-related expenses, which are the third-party commissions related to our U.S. Evergreen product being offered on wirehouses that we've discussed on prior calls. I'd like to remind you that the flows that come in through the Wirehouse Channel have an associated upfront fee from the dollars raised. That payment is made and applied to the total amount when those dollars close into the fund.

Jeff: G&A increased $9 million driven primarily by revenue related expenses, which are the third party commissions related to our U S. Evergreen.

Jeff: <unk> being offered on wire houses that we've discussed on prior calls.

Jeff: I'd like to remind you that the flows that come in through the wire House channel happened associated upfront fee from the dollars raised there that payment is made and apply to the total amount when those dollars close into the fund however, the corresponding management fees. We earn from those same dollars come in over the course of a year for as long as the client is invested in the <unk>.

Jeffrey B. Armbrister: However, the corresponding management fees we earn from those same dollars come in over the course of a year for as long as the client is invested in the fund. This creates a timing mismatch between the cost of bringing those dollars in and the revenue associated with those flows. This causes our GNA to increase with the eventual offsetting revenue to come in during the subsequent quarters and years. Said more simply, we bear the full cost up front and then receive our revenue over time. Lastly, year-to-date fee-related earnings, or FRE, were up 16% relative to the prior year period as a result of the management fee and fee-earning AUM growth discussed earlier.

Fund this creates a timing mismatch between the cost of bringing those dollars on and the revenue associated with those flows. This causes our G&A to increase with the eventual offsetting revenue to come in during the subsequent quarters and years.

Jeff: Said more simply we bear the full cost upfront and then receive our revenue over time.

Jeff: Lastly year to date fee related earnings or FRE E were up 16% relative to the prior year period as a result of the management fee and fee, earning AUM growth discussed earlier.

Jeffrey B. Armbrister: As we noted on our prior call, FRE margin for the quarter was impacted due to extending the final close for secondary fund six. Recall that extending the timing of Secondary Fund 6's final close will extend out the timing of receiving the associated retro fees and could potentially cause interim movements in our quarterly FRE margins, which is what we witnessed this quarter. However, for the fiscal year 2024, we expect to maintain levels consistent with fiscal 2023 and the first two quarters of fiscal 2020.

Jeff: As we noted on our prior call FRE margin for the quarter was impacted due to extending the final close for secondary fund six.

Jeff: Recall that extending the timing of secondary fund six is final close we will extend out the timing of receiving the associated retro fees.

Jeff: And could potentially cause interim movements in our quarterly.

Jeff: <unk> margins, which is what we witnessed this quarter. However.

Jeff: However for the fiscal year fiscal year 2024, we expect to maintain levels consistent with fiscal 2023, and the first two quarters of fiscal 2024.

Unnamed Speaker: I'll wrap up here with some commentary on our balance sheet. Our largest asset continues to be our investments 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 regard to our liabilities, we continue to be modestly leveraged. With that, we will now open up the call for questions. Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the number on your touch-tone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by. And if you are using a speakerphone, please lift the handset before pressing.

Jeff: I'll wrap up here with some commentary on our balance sheet, our largest asset continues to be our investments alongside our clients and our customized separate accounts and specialized funds.

Jeff: 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.

Jeff: Regards to our liabilities, we continue to be modestly levered with that we will now open up the call for questions.

Speaker Change: Thank you.

Speaker Change: Ladies and gentlemen, we will now the question and answer session should you have a question. Please press the star followed by the one on your Touchtone phone you will hear what prompts that you had has been raised should you wish to decline from the polling question. Please press star followed by Q and.

Speaker Change: And if you are using a speaker phone please lift the handset before pressing any case.

Michael J. Cyprys: The first question comes from Michael Cyprys from Morgan Stanley; please go ahead. Hi, good morning. Thanks for taking the question. I wanted to ask about the new tokenization strategic relationship that you have. I think you had called it Libra.

Speaker Change: Our next question comes from Michael Cyprus from Morgan Stanley. Please go ahead.

Michael J. Cyprys: Hi, good morning, Thanks for taking the question I wanted to ask about the new <unk> strategic relationship that you have I think you had called it.

Michael J. Cyprys: With Libra, maybe you could just elaborate on that and maybe if you can update us on some of the prior to accreditation partnerships that you had to securitize and <unk> over in Asia. I think it was just curious what lessons learned your takeaway from those relationships and how that informs your view on how you see the market developing for token is private market funds.

Michael J. Cyprys: Maybe you could just elaborate on that. And maybe we can update us on some of the prior tokenization partnerships that you had with Securitize and ADEX over in Asia. I think that was it.

Erik R. Hirsch: Just curious what lessons learned you take away from those relationships, and how that informs your view on how you see the market developing for tokenized private markets. Thanks, Mike. It's Erik.

Michael J. Cyprys: Thanks, Mike, It's Eric I'll take that.

Erik R. Hirsch: I'll take that. I think we're clearly at the very beginning of what we think is going to be a journey. How long that journey takes, I think, is a question mark, and this really goes to what is going to be the adoption of this. In my sort of 30 years in this industry, you don't find a lot of things that are better for both the fund manager and the investor. Tokenization is one of those things.

Eric: I think we're clearly at the very beginning of what we think is going to be <unk>.

Eric: Ernie how long that journey goes I think it's a question Mark and this really goes to what is going to be the adoption of this.

Ernie: And my sort of 30 years in this industry you don't find a lot of things that are better for both the fund manager and the Investor <unk> is one of those things it is truly better faster cheaper and so we're big believers in the technology, we are believers in.

Erik R. Hirsch: It is truly better, faster, cheaper. And so we are big believers in the technology. We believe in increasing and easing access to these products for both retail investors and, frankly, institutional investors. And so what you're seeing us do is that it's hard to know today who's going to be a winner. I don't suspect there will be just one winner.

Ernie: Increasing and easing the access into these products for both retail investors and frankly institutional investors and so what you're seeing US do is that it's hard to know today, who is going to be a winner I don't suspect. It is going to be one winner and so were building a set of strategic relationships around the globe to make sure that.

Erik R. Hirsch: And so we're building a set of strategic relationships around the globe to make sure that we cover different kinds of exchanges in different locales because the regulatory markets for each of those are different. What we have experienced so far are flows. We have been receiving capital from a variety of these different partnerships coming through the token channel. But has it been massively significant amounts of capital? No, it has not.

Ernie: We are covering different kinds of exchanges in different locales because the regulatory markets for each of those is different what we have experienced so far is flows we have been receiving capital from a variety of these different partnerships coming through the token channel.

Ernie: Has it been.

Ernie: <unk> significant amounts of capital it is not.

Erik R. Hirsch: But I think our costs around it are modest, and our strategic investments, we believe are panning out well. And so it's telling us that the customers are there, and that they need to continue to be educated, and awareness needs to continue to rise. And we think all those things are happening.

But I think our cost around it are modest and our strategic investments. We believe are panning out well and so I think it's telling us that the customers are there and that they need to continue to be educated and awareness continues needs to continue to rise and we think all of those things are happening and we see ourselves as a very very clear leader in the space I think.

Erik R. Hirsch: And we see ourselves as a very, very clear leader in the space. I think we believe we've got more of these strategic relationships than anybody else out there and a variety of products now sitting in these various channels. Great, thanks.

Ernie: We believe we've got more of these strategic relationships than anybody else out there and a variety of products now sitting in these various channels.

Erik R. Hirsch: And just a follow-up question about new customers coming to Hamilton Lane. You mentioned about 80 percent of the SMA contributions are from existing customers. So even as the installed base continues to grow, this is suggesting that you're still finding a meaningful opportunity to bring new customers to the firm. So maybe you could just elaborate on the opportunities that you see in the marketplace where you're winning new customers. Maybe you can elaborate on these folks that are new to the asset class or these folks that are already invested but need a little bit more assistance. Maybe you can just help flush that out.

Speaker Change: Great. Thanks, and just a follow up question around.

Speaker Change: New customers coming to Hamilton Lane, you mentioned about 80% of the SMA contributions from existing customers. So even as the installed base continues to grow and this is suggesting that you're still finding meaningful opportunities to bring new customers to the firm. So you could just elaborate on the opportunities that you see in the marketplace that where you are winning new customers coming maybe.

Speaker Change: Can elaborate on in these folks that are new to the asset class or these folks had already invested but need a little bit more assistance. Maybe you can just help flush that out thank you.

Speaker Change: Sure, Mike Erik I'll stick with that so I think it's a combination as you noted we are continuing to see both.

Erik R. Hirsch: Sure, Mike, Erik, I'll stick with that. So I think it's a combination, as you noted, we are continuing to see both, investors that are brand new to the asset class. And again, in the SMA business, we're talking about institutional investors. So as we kind of travel around the globe, as we continue to geographically expand, we are absolutely seeing and meeting with institutional investors who have yet to embark on their private equity journey. And we are there and ready and able to assist them.

Investors that are brand new to the asset class and again in the SMA business, we're talking we're talking institutional investors.

Erik: As we kind of travel around the globe as we continue to geographically expand we are absolutely seeing and meeting with institutional investors, who have yet to embark on their private equity journey, and we are there and ready enable to assist them.

Erik: The other source of that 20% is us taking.

Erik: Clients away from competitors.

Erik: There is also an aspect here of us positioning ourselves as a better service provider versus their current alternative and we are then sort of taking clients away from another service provider. So it's really the combination of those two pieces, that's really fueling that 20%.

Erik R. Hirsch: The other source of that 20% is us taking clients away from competitors. So there's also an aspect here of us positioning ourselves as a better service provider versus their current alternative, and we are then sort of taking clients away from another service provider. So it's really the combination of those two pieces that's really fueling that 20%.

Speaker Change: Great. Thanks.

Speaker Change: Thank you. The next question comes from Ken Worthington from Jpmorgan. Please go ahead hi.

Kenneth Brooks Worthington: Thank you. Thank you. The next question comes from Ken Worthington from J.P. Morgan. Please go ahead. Hi, good morning.

Kenneth B. Worthington: Good morning.

Kenneth B. Worthington: So first on margin so FRE margin decline in <unk>.

Kenneth Brooks Worthington: So first on margins, so FRE margin decline in 3Q, you're still guiding to 42%, 43% FRE margins for the year, which suggests that 4Q margins have to pick way up. The next question is, do you think the UGS comp is going to pull way back, all else being equal from third-quarter levels? Do I have all this right?

Kenneth B. Worthington: You're still guiding to 40% to 43% FRE margins for the year.

Kenneth B. Worthington: Which suggests that <unk> margins has to pick way up suggest comp is going to pull way back all else being equal from third quarter levels do I have all this rate puts.

Kenneth B. Worthington: Putting all these pieces together correctly.

Erik R. Hirsch: Am I putting all these pieces together sort of correctly? Sure can, Erik. So I think, as we said on the last earnings call, due to the sort of significant amounts of retro fees and the fact that we have visibility, we opted to do what we've done historically, which is accrue compensation, and we're talking about variable compensation, on a steady basis throughout the year, managing to an ultimate margin, which is in line with what we have been sort of setting expectations around. And that's what we did through this quarter.

Speaker Change: Sure Ken Eric So I think as we said on the last earnings call due to the significant amounts of retro fees and the fact that we have visibility we opted to do what we've done historically, which is accrued compensation and we're talking about variable compensation on a steady basis throughout the year.

Speaker Change: Managing to an ultimate margin, which is in line with what we have been sort of setting expectations around that.

Speaker Change: That's what we did through this quarter and obviously the result of less lower retro fees again, because we pushed some of the closings out into the subsequent quarter resulted in what looks like today artificially inflated compensation ratios.

Erik R. Hirsch: And obviously, the result of lower retro fees, again because we pushed some of the closings out into the subsequent quarter, resulted in what looks like today artificially inflated compensation ratios. Once we get to the next quarter, our view is that compensation ratios are going to remain in line with what they've been historically, and you're going to see margins in line with what we posted for the first two quarters of the year. Okay, great.

Speaker Change: Once we get to the next quarter I'll review was that compensation ratios are going to remain in line with what they've been historically and youre going to see margins in line with what we posted for the first two quarters of the year.

Speaker Change: Okay. Okay, great. Thank you.

Speaker Change: And then I guess next would love to dig into distributions in the SMA business. So in 2020 and 21 the pace of SMA distributions really jumped I think at the time you mentioned there were some recycling of capital, which impacted that pace and then in 'twenty two 'twenty three that piece of distributions came way down.

Kenneth Brooks Worthington: And then I guess next, we'd love to dig into distributions in the SMA. So in 2020 and 21, the pace of SMA distributions really jumped. I think at the time you mentioned there was some recycling of capital, which impacted that pace. And then in 22 and 23, that piece of distributions came way down.

Speaker Change: So as we think about from.

Speaker Change: From here going forward maybe.

Speaker Change: Maybe first what are the factors that really go into this pace of distributions I assume its part contract timing part realizations and as we look to this calendar year, how do we see those kind of pieces fitting together.

Erik R. Hirsch: So as we think about, you know, from here and going forward, maybe first, what are the factors that really go into this pace of distribution? I assume it's part contract timing, part realization. And as we look to this calendar year, how do we see those kinds of pieces fitting together? I don't know, the piece of realizations kind of stay at these levels as they go up because the market's better and there's more deal activity.

Speaker Change: Does.

Speaker Change: I don't know the pace of realizations kind of stay at these levels is it go up because the market's better and there is more deal activity.

Speaker Change: I don't know if theres a whole bunch of moving pieces. Just if you could help us think about the next four quarters.

Erik R. Hirsch: There's a whole bunch of moving pieces, just if you could help us. [inaudible] Sure, Ken, Erik. So what you saw a couple years ago was really the impact of COVID. And as we discussed, then it did a couple of things. The market environment changed dramatically, and two things occurred.

Speaker Change: Sure Ken Eric So what you saw.

Eric: A couple of years ago was really the impact of Covid and as we had discussed than it did a couple of things that market environment changed dramatically and two things occurred one investment pacing increased significantly and distributions increased significantly we're now in a market environment, where hold periods are extending out.

Erik R. Hirsch: One, investment pacing increased significantly, and distributions increased significantly. We're now in a market environment where hold periods are extending out, and distribution activity is coming down. So what's happening in the SMA is really no different than what's happening in the market at large. And you've seen it across a variety of other fund managers. Hold periods are extending.

Speaker Change: <unk>.

Speaker Change: Distribution activity is coming down so what's happening in the SMA is really no different than what's happening in kind of the market at large and you've seen it across a variety of the other fund managers hold periods are extending.

Speaker Change: Exit activity is somewhat muted and so whether that's in specialized funds or SMA is thats, what youre seeing here to the extent and we sort of continue to see that the public markets and the overall economy stabilizing and investors, believing that it's kind of safe to go back in the water.

Erik R. Hirsch: Exit activity is somewhat muted, and so whether that's in specialized funds or SMAs, that's what you're seeing here. To the extent that we sort of continue to see the public markets and the overall economy stabilizing, and investors believing that it's kind of safe to go back in the water, our expectation is that you will see distribution activity increase, and so that will come across SMAs, specialized funds, and it will also come across the carried interest line. Okay. Thank you very much.

Speaker Change: Our expectation is that you will see distribution activity increase and so that will come across SMA specialized funds.

Speaker Change: And it will also come across the carried interest line.

Speaker Change: Okay. Okay.

Speaker Change:

Alexander Blostein: Thank you. The next question comes from Alex Blostein from Goldman Sachs. Please go ahead. Hey, thanks, guys. Good morning.

Speaker Change: Thank you very much.

Speaker Change: Thank you. The next question comes from Alex <unk> from Goldman Sachs. Please go ahead.

Alexander Blostein: Just maybe zooming out a little bit on the margin question, the FRE margin question. You guys are clearly investing in the business. That all makes a lot of sense.

Alex: Hey, Thanks, guys. Good morning, just maybe zooming out a little bit on the margin question. The FRE margin question. You guys are clearly investing in the business that all makes a lot of sense in the retail dynamic with the wire houses really masked some of the kind of embedded profitability in that channel as you look out a couple of years from now how should we think about the trajectory.

Erik R. Hirsch: And the retail dynamic with the wire houses really masks some of the kind of embedded profitability in that channel. As you look out a couple of years from now, how should we think about the trajectory of FRE margins for the business as a whole relative to kind of where you're likely to end up in fiscal 2024? Sure, Alex, Erik, I think, as you know, we are clearly investing for the future. So I think the way we look at margin is that, among our peer set, we're already posting a substantially larger margin than most, if not all.

Alex: Terry of FRE margins for the business as a whole relative to kind of where you are likely to end up for your fiscal 2024.

Terry: Sure Alex Eric I think as you know we are clearly investing for the future. So I think the way we look at margin as that among our peer set we're already posting.

Terry: Abstentious larger margin than most if not all.

Erik R. Hirsch: And we've been doing that with continued double-digit growth. We see a lot of opportunity to continue to put capital back into the firm to both expand resources around institutional and retail sales to continue that geographic footprint expansion and to continue to invest in a variety of these technology partnerships, all of which we think are contributing to the results you're seeing on the fundraising side today. That said, you're seeing the fee shift occurring because of higher price and also, by the way, higher margin product lines. And so from a management standpoint, we'll have strategic decisions to make around what we want to do with the margin going forward. You mentioned a few years out relative to continued investment back in the firm for growth versus letting those margins sort of rise up a little bit further and out. I think our view is that over the next several years, we can do both. I gotcha, that's helpful. And then maybe some clarifications around the flagship funds. So I heard the details on a number of them.

Terry: And we've been doing that with continued double digit growth.

Terry: We see a lot of opportunity to continue to put capital back into the firm to both expand resources around institutional and retail sales to continue that geographic footprint expansion and to continue to invest in a variety of these technology partnerships all of which we think are contributing to the results youre seeing on the fundraising.

Terry: <unk> today.

Terry: That said youre seeing the fee shift occurring because higher price and also by the way over time higher margin product lines and so from a management standpoint.

Terry: Have strategic decisions to make around what we want to do with the margin going forward. You mentioned a few years out relative to continued investment back in the firm for growth versus letting those margins sort of rise up a little bit further.

Terry: I think our view is over the next several years, we can do both.

Speaker Change: Hi, guys. That's helpful. And then a couple of clarifications, maybe around the flagship.

Speaker Change: Funds.

Speaker Change: So heard the details on a number of them I don't know if we got an update on infrastructure. So maybe give us a sense of where that is shaking out and as you sort of look beyond this quarter next quarter and as you wrap up the secondaries fund what else are you guys expecting to be in the market with.

Erik R. Hirsch: I don't know if we got an update on infrastructure, so maybe give us a sense of where that is shaking out. And as you sort of look beyond this quarter, next quarter, and as you wrap up the secondaries fund, what else are you guys expecting to be in the market with on the specialized fund side? Sure, Alex, Erik. So infrastructure early days, we'll get started, we'll have it. I expect you'll have multiple updates from us over the coming quarters on that fundraise as we get in and start having closes that we'll start reporting The other big, big mover will eventually be the direct equity fund, which is now officially in the market. But again, nothing to report yet because we've started the marketing process with existing investors, but we have not yet had to close. All righty, thank you.

Speaker Change: The specialized fund side of things.

Speaker Change: Sure Alex Eric So infrastructure early days, we'll get started we will have I expect youll have multiple updates from us over the coming quarters on that fundraise as we get in and start having closes that will start reporting on the.

Eric: The other big Big mover will eventually be the direct equity fund, which is now officially in market, but again nothing to report yet because we've started the marketing process with existing investors, but we have not yet had to close.

Speaker Change: Alright, thank you.

Speaker Change: Thank you. The next question comes from Adam Beatty from UBS. Please go ahead.

Adam Beatty: Alright, Thank you and good morning.

Erik R. Hirsch: The next question comes from Adam Beatty from UBS. Please go ahead. Thank you and good morning.

Adam Beatty: And prepare to Erik mentioned.

Adam Beatty: <unk> business and a lot of opportunity. There currently 15% I think you said of AUM. So just wanted to get some thoughts and maybe some more detail around growing that business, whether you are looking to new products growing existing products with with future vintages or what have you and also where you would expect that to shake.

Adam Quincy Beatty: In the prepared remarks, Erik mentioned the credit business and a lot of opportunity there, currently 15%, I think you said of AUM. So just wanted to get some thoughts and maybe some more detail around growing that business, whether you're looking to, you know, new products, growing existing products with future vintages, or what have you. And also, you know, where you would expect that to shake out as a proportion of total AUM given growth in other areas. Thank you. Sure, Adam, and Erik.

Adam Beatty: Out as a proportion of total AUM given growth in other areas. Thank you.

Speaker Change: Sure Adam Eric So as I mentioned in the prepared remarks, the credit piece today is growing because it has a multitude of avenues for which it can grow. So today, we have dedicated specialized funds for credit both an institution that's the strategic opportunities.

Erik R. Hirsch: So, as I mentioned in the prepared remarks, the credit piece today is growing because it has a multitude of avenues for which it can grow. So today we have dedicated specialized funds for credit, both in institution, that's the strategic opportunities, and in retail, which is our non-U.S. credit-only evergreen product. So, we already have the specialized fund piece covered outside of the U.S.

Eric: And in retail, which is our non U S credit only evergreen product.

Eric: We already have the specialized fund piece covered outside of the U S. I think over time, we'll certainly look to have a U S credit evergreen product.

Erik R. Hirsch: I think over time we'll certainly, On the institutional side, so both, again, as I noted, the specialized fund, and we have a variety of dedicated SMAs. We also have a lot of multi-strat SMAs of which credit is a portion. And in addition to that, our sort of two flagship retail evergreen funds, U.S. and non-U.S., both have meaningful credit co-investment aspects to

Eric: On the institutional side. So both again as I noted the specialized fund and we have a variety of dedicated SMA. We also have a lot of multi strat SMA of which credit is a portion.

Eric: And in addition to that our two flagship retail evergreen funds U S and non U S. Both have meaningful credit co investment aspects to them. So the growth has been occurring because we have lots of different buckets that are all absorbing credit opportunities today.

Erik R. Hirsch: So the growth has been occurring because we have lots of different buckets that are all absorbing credit opportunities today. We're continuing to invest in that team and expand those resources, and we believe that at 15 percent, it's already a very meaningful portion of AUM, but as you see, in kind of a relatively high-rate environment and with the kind of consolidation of lending resources around the globe, particularly in the U.S., with the kind of diminishing impact of regional banks, we see the attractiveness of private credit continuing to be there. It's been a very good performer inside of client portfolios, and so our view is we continue to lean in, we continue to see lots of opportunities, and we continue to see growth. Sounds good!

Eric: We're continuing to invest in that team and expand those resources and we believe that at 15%. It is already a very meaningful portion of <unk>, but as you see in kind of a relatively high rate environment.

Eric: And with the kind of the consolidation of sort of lending resources around the globe, particularly in the U S with kind of the diminishing impact of regional banks, we see the attractiveness of private credit continuing to be there. It's been a very good performer inside of client portfolios and so our view is we continue to lean in we continue to see lots of opportunities than we can.

Eric: To see growth.

Speaker Change: Great. Thanks, Eric.

Speaker Change: And just one follow up on <unk>, just wondering whether you see that or how you see it now obviously early days, but.

Speaker Change: Interacting with your existing sort of wealth management channel do you do you feel as though you could actually productive we introduce <unk> into some existing accounts or do you see it more as an avenue to kind of expand.

Adam Quincy Beatty: Thanks, Erik and Jen, and just one follow up on tokenization. Just wondering whether you see that or how you see it now, obviously, early days, but, you know, interacting with your existing sort of wealth management channel? Do you feel as though you could actually productively introduce tokenization into some existing accounts? Or do you see it more as an avenue to kind of expand the TAM in retail and wealth management? Thanks. Yeah, Adam, Erik, I think it's both.

Speaker Change: Tam in retail and wealth management.

Yes, Adam Eric I think it's both I think if you sort of just look at what the retail investor is going to eventually demand of this asset class. It is ease of use when we think about how easy it is for us to transact in the public equities World, we have apps on our phone there.

Erik R. Hirsch: I think if you sort of just look at what the retail investor is going to eventually demand from this asset class, it is ease of use. When we think about how easy it is for us to transact in the public equities world, we have apps on our phone, they're tied to funding accounts, we can very easily pull up research and trade and transact; we can pull up views of our portfolio, all stored in one easy location. The private markets are going to need to meet the investor there. I don't believe that investors are going to have wildly different expectations of what they kind of get and receive on the public equity side versus what they get and receive on the private market side. So our view is that tokenization and digital wallets are a real move towards more replicating that public equity experience. Single funding source, single kind of know-your-customer, anti-money laundering aspects, again, single point of portfolio management and construction, and with tokens, much more ease of use around trading positions.

Speaker Change: Tied to funding accounts, we can very easily pull up research and trade and transact we can pull up views of our portfolio all stored in one easy location. The private markets is going to need to meet the investor there.

Speaker Change: I don't believe that the investors are going to have to wildly different expectations of what they kind of get and receive on the public equity side versus what they get and receive on the private market side.

Speaker Change: So our view is that <unk>.

Speaker Change: <unk> and digital wallets are a real move towards more replicating that public equity experience <unk>.

Speaker Change: Single funding source single kind of know your customer anti money laundering aspects again single point of portfolio management, and construction and with tokens a much more ease of use around trading positions.

Speaker Change: And so we see all of that is very attractive and our belief is that while in a lot of places it's the institutional investor who kind of drives change we think here, it's going to be the opposite we think the retail investor is going to be the one that drives change and that the institutional investors will actually follow behind them.

Erik R. Hirsch: And so we see all of that as very attractive, and our belief is that while in a lot of places it's the institutional investor who kind of drives change, we think here it's going to be the opposite. We think the retail investor is going to be the one that drives change, and that institutional investors will actually follow behind them. So we think it's both. We think it's both, tying into some of the existing opportunities and channels and, frankly, getting clients who otherwise wouldn't want to invest if they couldn't do it in a digital world. Got it. It makes sense. Thank you very much.

Speaker Change: We think it's we think it's we think it's an and we think it's both.

Speaker Change: Tying into some of the existing opportunities in channels, and frankly of getting clients, who otherwise don't want to invest if they can't do it in a digital world.

Speaker Change: Got it makes sense. Thank you very much.

Speaker Change: Yeah.

Speaker Change: Thank you. The next question comes from Mike Brown at VW. Please go ahead.

Michael J. Cyprys: Okay, great. Thank you for taking my questions.

Michael J. Cyprys: The evergreen funds that had been a tremendous a strong story, but I guess as you alluded to it is becoming a bit more of a competitive market can you just speak to the competitive dynamics that you're seeing I guess on one hand.

Michael C. Brown: Thank you. The next question comes from Mike Brown at KBW. Please go ahead.

Erik R. Hirsch: Great, thank you for taking my question. The Evergreen funds have been a tremendously strong story, but I guess, as you alluded to, it is becoming a bit more of a competitive market. Can you just speak to the competitive dynamics that you're seeing, I guess on the one hand? It's maybe a little tough to stand out in a crowded field with some strong brands coming into the space. But on the other hand, I can almost imagine there's like a rising tide lifts all boats dynamic for the wealth channel. I'd love to just hear how you're thinking about maybe the push in the market. Sure, Mike, and Erik.

Michael J. Cyprys: It's maybe a little tough to stand out in a crowded field with some strong brands coming into the space, but on the other hand I can almost envision there was like a rising tide lifts all boats dynamic for the wealth channel as well.

Michael J. Cyprys: So we're just kind of talking to there is maybe greater comfort for these products that we will continue to.

Michael J. Cyprys: Make the pie grow larger so love to just hear how you're thinking about maybe the push and pull between those two dynamics.

Speaker Change: Sure Mike Eric.

Erik R. Hirsch: I think this is probably, again, similar to my comment to Adam, it's probably an and, which is that there's no question that interest in this space is very high among retail investors. And they're starting with an exposure that, in most cases, is basically zero. So you have a tremendously large pool of capital, both in the US and outside the US, that is either dramatically underexposed to the SASA class or not exposed at all. And so if you see that trend more mirroring, if not exceeding, what the institutional investor is doing, then you're going to see allocation levels for the retail investor well into double. We're nowhere near that today. Again, most investors today are single digits and low single digits.

Speaker Change: I think this is probably again similar to my comment to Adam It's probably a NAND, which is there is no question that interest in this space very high among the retail investor.

Speaker Change: And theyre, starting with an exposure that in most cases is basically zero. So you have a tremendously large pool of capital both in the U S and outside the U S.

Speaker Change: That is either dramatically underexposed to this asset class or not exposed at all.

Speaker Change: So if you see that trend more mirroring if not exceeding what the institutional investor is doing and youre going to see allocation levels for the retail investor well into double digits.

Speaker Change: We're nowhere near that today again, most investors today are single digits and low single digits. So the sheer amount of capital that is present and available is massive so youre talking about a huge market.

Erik R. Hirsch: So the sheer amount of capital that is present and available is massive. So you're talking about a huge market. We also don't see this as just one winner.

Speaker Change: We also don't see this as a one winner I think if we sort of compare it to again the public equity World. Today, you have a large group of very large very successful asset managers controlling billions, if not trillions of dollars of capital.

Erik R. Hirsch: I think if we sort of compare it to, again, the public equity world, today you have a large group of very large, very successful asset managers controlling billions, if not trillions of dollars of capital, not a single firm or a single winner. And so we think that that's what this is going to look like over time for this asset class as well. So, huge addressable market, massively underpenetrated, room for lots of successful product offerings. And so the way you stand out, we think, is great results and unique product offerings. And they have great customer service.

Speaker Change: Not a single firm or a single winter and so we think that that's what this is going to look like over time for this asset class as well so huge addressable market massively underpenetrated room for lots of successful product offerings and so the way you stand out we think is great results unique product offerings and great customer.

Erik R. Hirsch: And we think one of the reasons why we're having the success that we're having with great flows and kind of getting onto these various channels, which, again, everyone's not doing, is because we're doing well across all three of those channels. And we will look to continue to make sure that that's the experience that investors have and that we're finding ways to stand out, and continue to invest in our brand. We think these various technology partners are, again, additive and unique to what others are doing. And that's how we sort of see this playing out over time. Okay, great.

Speaker Change: Service and we think one of the reasons why we're having the success that we're having with great flows and kind of getting onto these various channels, which again everyone's not doing is because we're doing well across all three of those things and we will look to continue to make sure that that's the experience that the investors have and that we're finding ways to stand out.

Speaker Change: Continue to invest in our brand.

Speaker Change: These various technology partners are again additive and unique to what others are doing and Thats, how we sort of see this playing out over time.

Speaker Change: Okay, Great and then if I just change gears to.

Erik R. Hirsch: And then if I just change gears to, you know, some of your strategic partnerships and some of your tech investments. I know this is an important part of the culture and fabric of Hamilton Lane. Can you maybe just expand on how some of the recent investments can translate to growth for you? Give us a little bit of inside baseball when you're considering these investments. How do you think about the growth? https://www.kenhub.com. Thank you for watching. Sure, Mike. Erik.

Speaker Change: Some of your strategic partnerships.

Speaker Change: And some of your tech investments I know this is an important part of our culture and in fabric of Hamilton Lane can you maybe just expand on some of the.

Speaker Change: Now some of the recent investments can translate to growth for you and maybe give us a little bit of inside baseball win when you're considering these investments.

Speaker Change: Hum.

Speaker Change: How do you think about what the growth.

Speaker Change: Potential could be like what is the framework look like.

Speaker Change: In terms of what your growth expectations are and then maybe how much capital to deploy into these strategies on an annual basis.

Erik R. Hirsch: The tech investments are across a variety of different buckets. So, bucket number one, and frankly, the bucket we started with and have done the most around, are technology tools that make Hamilton Lane both more efficient and a better service provider to our customers. So think about back office reporting, data ingestion, analysis, and analytics, sort of think about that as bucket one. The vast majority of those we simply use as a client, oftentimes with preferential terms, or again, different unique strategic angles, or single purpose use cases.

Speaker Change: Sure Mike Eric.

Eric: The tech investments are across a variety of different buckets. So bucket number one and frankly the bucket, we started with and have done the most around our technology tools that make Hamilton Lane.

Eric: With more efficient and a better service provider to our customers. So think about back office reporting data ingestion.

Eric: And now assist analytics sort of think about that as bucket one the vast majority of those <unk>.

Eric: We simply used as a client oftentimes with preferential terms or again different unique strategic angles or single purpose use cases, so I would sort of look at that bucket as Hamilton Lane is a better and frankly higher margin firm delivering better results more.

Erik R. Hirsch: So I would sort of look at that bucket as Hamilton Lane being a better and, frankly, higher-margin firm delivering better results more efficiently to clients as a result of that bucket. Now, as you remember, we have also monetized a variety of those over time with great success. So very large, significant cash multiples. So we've not only gotten the internal benefit, but we've gotten a good return on our balance sheet capital. Bucket number two, I would sort of put around distribution.

Eric: Efficiently to clients as a result of that bucket.

Eric: Now as you remember we bought we have also monetized a variety of those over time with great success. So very large significant cash multiples. So we've not only gotten the internal benefit, but we've gotten good return on our balance sheet capital.

Eric: Bucket number two I would sort of put around distribution. So think about that with not only the token space, but also plugging into firms that are servicing the adviser and offering product on their platforms. So that has been a way for us to try to access.

Erik R. Hirsch: So think about that with not only token space, but also plugging into firms that are servicing the advisor and offering products on their platform. So that has been a way for us to try to access a customer that we might not otherwise be able to reach or reach a customer in a way that is more beneficial to them. We also think that some of those, because they're much more visible, and our brand is associated with them, are great ways for us to enhance the Hamilton Lane brand in a way that we see more value added and is more efficient than, say, putting our logo on a baseball uniform.

Eric: <unk>, a customer that we might not otherwise be able to reach.

Eric: Or reach a customer in a way that is more beneficial to them.

Eric: We also think that some of those because they are much more visible and our brand is associated with them are great ways for us to enhance the Hamilton Lane brand.

Eric: In a way that we see more value added and more efficient than say, putting our logo on a baseball uniform and so.

Erik R. Hirsch: And so that's been the benefit there. Bucket one, the operational side, I think we've already seen significant, meaningful results. Bucket two is where we're a little earlier. And so as we go forward and think about what we're gonna be doing or spending or deploying, we're looking at, we're always looking at firms that are kind of occurring in both buckets to see where we think we're going to have strategic benefits. We don't have a set budget around these because they have been opportunistic to date.

Eric: That's been the benefit there bucket one the operational side I think we've already seen significant meaningful results.

It too is where we're a little earlier and so as we go forward and think about what we're going to be doing or spending are deploying we're looking at we're always looking at firms that are kind of occurring in both buckets to see where we think we're going to have strategic benefits. We don't have a set budget around these because they have been opportunistic to date.

Erik R. Hirsch: But again, we have a meaningful balance sheet, and we think this has been a very good and effective way to use it. Thank you for all that. Thank you. The next question comes from Finian O'Shea from Wells Fargo. Please go ahead.

Eric: <unk>.

Eric: But again, we have a meaningful balance sheet and we think this was has been a very good and effective way to use it.

Speaker Change: Alright, Thank you for all that color.

Speaker Change: Thank you. The next question comes from Finian O'shea from Wells Fargo. Please go ahead.

Finian O'shea: Hi, everyone. Thank you. Good afternoon.

Finian O'shea: Hi, everyone. Thank you good afternoon.

Erik R. Hirsch: Another question on wealth, specifically for the newer credit Evergreen, are you finding that lands with wealth advisors perhaps as a different kind of multi-manager product, or do they tend to group it in with all of the non-traded BDCs in the market? And in that context, how would you describe the addressable flow potential? Yeah, Finney and Erik, I think the way we've been standing out and differentiating is because of that multi-manager approach. It's no secret that our evergreen products are co investment oriented. And we think one of the big advantages of that is the fact that we're providing, in a single vehicle, multi-manager, multi-industry, multi-size, multi-geography exposure in a way that's harder for a single manager to do. And so that is our differentiation, and that is sort of what we are targeting.

Finian O'shea: Another question on wealth, specifically for the newer credits evergreen.

Finian O'shea: Are you finding that lands with wealth advisors, perhaps is a different kind of multi manager product or do they tend to group it in.

Finian O'shea: It's all of the non traded Bdcs in market.

Finian O'shea: That context, how would you describe the addressable flow potential. Thank you.

Speaker Change: Yes, Finian Eric.

Speaker Change: I think the way we've been standing out in differentiating is because of that multi manager approach.

Speaker Change: It's no secret that our evergreen products, our co investment oriented and we think one of the big advantages of that is the fact that we're providing in a single vehicle multi manager multi industry multi site multi geography exposure in a way that's harder for a sing.

Speaker Change: <unk> manager to do and so that is our differentiation and that is sort of where we are targeting if you look at the credit flows are not.

Erik R. Hirsch: If you look at the credit flows, a number of them have come from folks that were already in one of the flagship Evergreen funds, had a good experience, liked the service, thought the returns were strong, and then decided to add additional exposure to us via credit. Okay, thank you. And just a follow up there, given that it does seem to be one of the few products, as described in the market, is it at all on the table to pick up at up to the monthly flow pace that some of the leaders in the market show? That's all for me.

Speaker Change: Number of them have come from folks that were already in one of the flagship evergreen funds have had a good experience like the service thought the returns were strong and then have decided to add additional exposure to us via credit.

Speaker Change: Okay. Thank you and just.

Speaker Change: A follow up there given it does seem to be one of the few products as described in market.

Speaker Change: Is it at all on the table too.

Speaker Change: They invest more meaningfully in distribution.

Speaker Change: It's likely required to.

Speaker Change: Pick up at all.

Speaker Change: Up to the monthly slow pace that some of the leaders in the market show that's all for me. Thanks.

Finian O'shea: I mean, our goal is to increase flows, period. I noted that if you look at evergreen flows, kind of calendar over calendar, we're up 76%. So I think we have been doing a terrific job of that, but we're not stopping or resting on our laurels. And so if you look at sort of future expansion plans for us, it very clearly has additional ads for the sales team, other mechanisms for distribution. And all of this is designed to increase the flows, continue to maintain, and build that brand and that space as a market leader.

Speaker Change: Yeah. Thanks Simeon.

Speaker Change: Our goal is to increase flows period.

Speaker Change: I noted that if you look at evergreen flows kind of calendar over calendar were up 76%. So I think we have been doing a terrific job of that but we're not stopping or resting on our laurels and so if you look at sort of future expansion plans for us. It very clearly has additional adds to the sales team other met.

Speaker Change: <unk> for distribution and all of this is designed is to increase the flows continue to maintain and to build that brand in that space as a market leader so.

Erik R. Hirsch: Seventy-six percent, I think, calendar over calendar, impressive, and our view is, let's keep going. Thank you. There are no further questions. I will now turn the call back over to Erik Hirsch for closing. With that, we thank you for the time, we thank you for the questions, and wishing everyone well. And thanks for the support. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect.

Speaker Change: 76% I think calendar over calendar impressive and our view is let's keep going.

Speaker Change: Thank you there are no further questions I will now turn the call back over to Eric Kirsch for closing comments.

With that we thank you for the time, we thank you for the questions wishing everyone well and thanks for the support.

Erik R. Hirsch: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and we ask that you. Please disconnect your lines.