Q&A with Hamilton Lane: ESG Investing and More…

We recently shared the announcement of Hamilton Lane’s pending acquisition of 361 Capital. With this exciting news, we dedicated a few of our blogs to Q&As with Erik Hirsch, Vice Chairman and Head of Strategic Initiatives at Hamilton Lane, to share more about HL, its philosophy, and its products.

This week we are talking to Erik about ESG investing, the importance of data in private markets, and why he believes HLNE has been one of the best performing financial services stocks.

Question: ESG is such an important consideration in many advisors’ investment processes. How is ESG evaluated in the private markets?

Erik: This goes back to our customization. In our market today, ESG does not have standardized metrics, nor is there a standardized benchmark. We may find ourselves there eventually, but we’re not there today. At Hamilton Lane, ESG is something that we take very seriously and spend a lot of time on. And that means, we’re able to deal with that nuance; with the wide variety of aspects that we’re required to evaluate, including factors such as greenhouse gas emission, pollution, natural resource consumption and waste management.

And as far as Hamilton Lane specifically, in 2008 we became a signatory to the United Nations Principles for Responsible Investment (“PRI”). As part of their 2019/2020 Transparency Assessment, our firm received an A+ in Indirect Private Equity. We also recently appointed Paul Yett, a long-tenured, senior member of our organization, to the newly created position of Director of ESG & Sustainability whose focus is on bringing more cohesion, consistency and centralization to our ESG efforts.

Question: How does Hamilton Lane use data in your investment process?

Erik: It’s a combination of data and technology, and it’s everywhere; it’s in everything we do. We know that data in a vacuum is not as powerful as data combined with great systems, so we’ve invested a significant amount of time and capital to make sure that we have lots of both. It’s our goal that they’re working together as a collaboration tool for our investment teams to help us make better, faster decisions and to drive better results.

We have one of the largest private markets databases in the world, having been in the industry for nearly 30 years. As of December 31, 2020, that database spans 40,000 funds, 50 vintage years, 98,000 companies and trillions of dollars, and really allows us to not only evaluate fund performance as well as investment trends, but to take a look into the underlying companies, so we’re able to ascertain what’s happening in portfolios across different geographies.

Question: What are three trends that Hamilton Lane sees playing out in 2021?

Erik: We expect to see a pivot to more of a return to normal, which will have ripple effects across the industry. What will the LP-GP dynamic look like in a return to normal? What is the fundraising market going to look like? How will the industry interact (i.e., what will change about conferences)? I think those are going to be the things that we’re thinking about and everyone’s talking about this year.

Question: Since its IPO in March 2017, HLNE has been one of the best performing financial services stocks. What do you attribute that to?

Erik: I think it’s been a combination of the business model itself and the recognition of how we’re combining the stability of locked-in revenue with participating in a business segment that results in significant amounts of growth. I think investors also appreciate the diversification within the business and the globalized nature, and they like the backdrop of the private markets and see it as investing in a sector that continues to have a lot of runway ahead of it and is poised to continue to deliver growth.

Ask Your Questions: Send your questions on private markets or our upcoming transition to Hamilton Lane to info@361capital.com and it may be featured in a future blog.

Read more in our first Q&A blog with Hamilton Lane on their company and culture >