- Research findings note some areas of concern in private
markets in the short-term, with positive tailwinds across long-term
fundamentals
- Report also highlights strong runway for growth within
evergreen
CONSHOHOCKEN, Pa., March 12,
2025 /PRNewswire/ -- Hamilton Lane (Nasdaq:
HLNE), a leading global private markets investment management firm,
published its 2025 Market Overview today. This year's report
offers a nuanced picture of the global private markets landscape,
backed by historical data around outperformance, downside risk and
diversification benefits, as well as a burgeoning evergreen
landscape, demonstrating its compelling case for a growing number
of investors.
The firm's annual Market Overview is a comprehensive,
data-driven review and analysis of private markets investment
activity over the prior year, as well as predictions for the year
ahead. The detailed report leverages Hamilton Lane's
industry-leading database that encompasses data on more than 58,000
funds across 57 vintage years*. Among the report's findings:
WHERE TO INVEST
- Credit, infrastructure and secondaries: Each of these
sectors is set up for success.
- Venture and growth: Investors should have exposure to
these areas. AI applications will likely sweep the business
landscape and many of those companies will be incubated and
developed in the private markets sphere.
- Equity: In particular, the co-investment side where
investors can be selective.
- U.S.: The U.S. market is expected to be relatively more
attractive than all other geographies over the next 4-5 years.
- Data and technology: Invest in portfolio analytics,
whether for construction or analysis.
AREAS TO WATCH
- Evergreen structures: When it comes to evergreen funds,
Hamilton Lane expects the following to be true:
- Evergreen funds will grow faster than the overall rate of
public markets over the next five years;
- Institutional investors will become bigger players in the
evergreen space;
- Evergreen fund fees will decline over time;
- Closed-end funds in certain strategies will decline and largely
disappear;
- The growth of evergreen funds will result in the largest
private markets firms getting larger and smaller private markets
firms struggling to get any market share.
- Short-term performance: Infrastructure and real estate
have done very well, private credit has remained stable, while
private equity has underperformed. But does this short-term view
signal the end of private equity's historical outperformance? While
recent vintages will likely face challenges, manager and asset
selection will play a crucial role, perhaps more so than in most
market conditions. [See 'Private vs. Public Performance'
chart]
- Fundraising prediction: The next 12 months will
likely bring increased challenges. Exit activity must see a
meaningful rebound for fundraising to pick up. Competition is
expanding, and the race to retail is on. The firms who are
successfully accessing the fundraising market today are those who
are investing in technology and innovative investment structures
that address the demands of new audiences.
STRONG LONG-TERM FUNDAMENTALS CONTINUE
- Long-term performance: As shown in the Pooled Returns by
Vintage Year' chart, private credit has remained undefeated: 23
straight years of outperforming the public markets. Infrastructure
has also maintained this trend for the past 12 years. It is only
private equity buyout and real estate that saw the streak end in
the last year. Hamilton Lane expects that this one-year dip is an
anomaly and that, in five years, when looking at the vintage
returns, the buyout IRR will have outperformed public returns in
every year. Investors assuming that the last year is a window into
future performance are ignoring the prior 30 years.
- Co-investment and secondaries uptick: Co-investment
activity continues to increase, driven by several factors: fewer
co-investment players in the market, a desire by general partners
to conserve capital in a tough fundraising environment, increased
acceptance by the market of co-investment as a standard practice of
doing deals, and strong returns for funds and investors who have
done co-investments on a regular basis. There has been an increase
in secondaries activity for some of the same reasons, as well as
interest from both LPs and GPs in secondary deals as a liquidity
solution.
Mario Giannini, Executive
Co-Chairman and author of the Market Overview, commented: "We
believe that investors deserve high-quality data, actual
transparency and continued education around this long-term asset
class. And as we look at the year ahead, investors need to come to
terms with the reality that there appears to be a recalibration in
certain pockets of the global private markets, despite the fact
that overall, the private markets are neutral right now. Longer
term, we continue to have high conviction in the value of this
asset class, and we urge investors to read, study and think
carefully about portfolio construction and the diversification
benefits that private markets have consistently
demonstrated."
To access the full 2025 Hamilton Lane Market Overview, click
here.
*as of 12/31/24
+++
Definitions
All Private Markets: Hamilton Lane's definition of "All Private
Markets" includes all private commingled funds, excluding
fund-of-funds, and secondary fund-of-funds.
BofAML High Yield Index: The BofAML High Yield index tracks the
performance of below investment grade U.S. dollar-denominated
corporate bonds publicly issued in the U.S. domestic market.
Corporate Finance/Buyout: Any PM fund that generally takes
control position by buying a company.
Credit: This strategy focuses on providing debt capital.
DJ Brookfield Global Infrastructure Index: The DJ Brookfield
Global Infrastructure Index is designed to measure the performance
of companies globally that are operators of pure-play
infrastructure assets.
Growth Equity: Any PM fund that focuses on providing growth
capital through an equity investment.
Infrastructure: An investment strategy that invests in physical
systems involved in the distribution of people, goods, and
resources.
Internal Rate of Return (IRR): IRR is the annual rate of growth
that an investment is expected to generate. Mathematically, the
interest rate that sets the net present value of all cash flows to
zero.
MSCI World Index: The MSCI World Index tracks large and mid-cap
equity performance in developed market countries.
PME (Public Market Equivalent): Calculated by taking the fund
cash flows and investing them in a relevant index. The fund cash
flows are pooled such that capital calls are simulated as index
share purchases and distributions as index share sales.
Contributions are scaled by a factor such that the ending portfolio
balance is equal to the private equity net asset value (equal
ending exposures for both portfolios). This seeks to prevent
shorting of the public market equivalent portfolio. Distributions
are not scaled by this factor. The IRR is calculated based on these
adjusted cash flows.
Real Estate: Any closed-end fund that primarily invests in
non-core real estate, excluding separate accounts and joint
ventures.
S&P 500 Index: The S&P 500 Index tracks 500 largest
companies based on market capitalization of companies listed on
NYSE or NASDAQ.
Venture Capital: Venture Capital incudes any PM fund focused on
any stages of venture capital investing, including seed,
early-stage, mid-stage, and late-stage investments.
About Hamilton Lane
Hamilton Lane (Nasdaq: HLNE) is one of the largest private
markets investment firms globally, providing innovative solutions
to institutional and private wealth investors around the world.
Dedicated exclusively to private markets investing for more than 30
years, the firm currently employs approximately 740
professionals operating in offices throughout North America, Europe, Asia
Pacific and the Middle
East. Hamilton Lane has $956
billion in assets under management and supervision, composed
of nearly $135 billion in
discretionary assets and more than $821 billion in non-discretionary assets, as
of December 31, 2024. Hamilton Lane
specializes in building flexible investment programs that provide
clients access to the full spectrum of private markets strategies,
sectors and geographies. For more information, please
visit http://www.hamiltonlane.com or follow Hamilton Lane
on LinkedIn.
View original content to download
multimedia:https://www.prnewswire.com/news-releases/2025-hamilton-lane-market-overview-private-markets-reach-an-inflection-point-though-long-term-fundamentals-remain-strong-302399056.html
SOURCE Hamilton Lane
