A shorter duration complement to an overall private markets portfolio
The secondary market has been an attractive place for investors to deploy capital as demonstrated by the growth in both transactions and fundraising. As this market has become increasingly mature and sophisticated, transaction structures have grown more complex. We believe today’s market conditions, characterized by the global growth of private markets and more active management of private market allocations, lend themselves to the strengths of Hamilton Lane’s differentiated approach. With 20+ years of experience in this market, we remain focused on finding value in more complex and innovative secondary opportunities.
Our goal is to provide investors with significant capital appreciation by delivering attractive risk-adjusted returns. Through our unique approach and competitive positioning, we have implemented this strategy by focusing on:
- Quality, mature assets
- Partnering with quality general partners
- Flexibility and expertise across the spectrum of secondary investments
- Attractive entry prices and strong cash yield
The ChallengeAn anchor limited partner in a mid-market U.S. buyout fund was seeking liquidity due to internal changes. The general partner wanted to ensure the existing limited partner was provided with a fair liquidity option while finding a suitable long-term investor as a replacement. The general partner also sought guidance in structuring a new investment vehicle, with which Hamilton Lane was able to assist.
The HL Approach
- Negotiated directly with the seller in an off-market transaction facilitated by the general partner
- Due to the general partner’s involvement and desired partnership with the firm, Hamilton Lane was given access to detailed information and unique insights on the transaction
- Hamilton Lane offered the seller an attractive price and secured an investment in what we believe to be a high-quality portfolio of growth-oriented, high cash flow assets
- Attractive entry price with a double-digit closing discount
- Near-term liquidity events identified in diligence served to de-risk the secondary investment and generated strong early returns
- The GP benefitted from Hamilton Lane’s guidance and successfully raised multiple successor funds
The ChallengeAs the Fund was nearing the end of its life, the general partner had to determine whether to request an extension or sell assets prematurely. The Fund had previously generated strong returns and there were a handful of unrealized investments remaining in the portfolio that would benefit from more time.
The HL Approach
- Hamilton Lane proactively approached the general partner with a solution that was both limited partner- and general partner-friendly
- Through detailed diligence, Hamilton Lane confirmed there was significant value embedded in the portfolio that would benefit from additional time
- Hamilton Lane was able to offer a price for the assets that would lock in attractive realized returns for existing investors while providing new investors with the ability to generate strong go-forward returns
- Limited partners were provided with the option to receive a complete liquidity solution or participate in a continuation vehicle for the remaining portfolio assets
- Hamilton Lane expanded an existing relationship with a top-tier manager through a proprietary transaction
- The firm leveraged our secondary team’s and in-house legal counsel’s expertise to structure and execute on a highly technical secondary transaction
The ChallengeThe seller was looking to reduce exposure to managers expeditiously and in a manner that preserved general partner relationships. Therefore, the seller did not provide diligence information and was looking for a buyer who could leverage its own relationships to conduct diligence and offer speed and certainty ahead of an internal deadline.
The HL Approach
- Hamilton Lane was an existing investor in eight of the nine funds and already had familiarity with the underlying portfolio from current and prior sponsors
- The team was able to underwrite using internal information and leveraged existing relationships to conduct general partner diligence calls over a holiday period
- Top assets were exhibiting strong growth trends, generated strong free cash flow and were conservatively valued
- Portfolio was >80% funded at closing and Hamilton Lane had a high level of visibility into early liquidity events that could drive attractive secondary returns
- HL was an approved buyer for all the funds and was only buyer able to offer full solution to the seller
- Team leveraged transfer restrictions and the seller’s motivation to acquire the portfolio at a very attractive price
The secondary market has seen exponential growth over the last several years. With our experience, scale and network, we believe we’re well positioned to deliver attractive risk-adjusted returns to our clients.
Head of Secondary Investments
Utilizing our market-leading data to gain a greater level of insight
Hamilton Lane’s proprietary technology combined with our database of over 4,600 funds and 60,000+ private companies* provides a unique advantage to better understand the drivers of value within a deal. Our data advantage and extensive global primary platform represent a crucial competitive advantage and drive our ability to be a conviction buyer. We use our market-leading data to gain a greater level of insight, which is essential when the objective is to limit the downside and generate strong risk-adjusted returns.