Hamilton Lane raises USD 2.1bn for fifth co-investment fund

Gibson Dunn & Crutcher provided legal advice on the fundraise, alongside Hamilton Lane's in-house legal team.

The fund's predecessor vehicle, Hamilton Lane Co-Investment Fund IV, held a final close in 2019 on USD 1.7bn.

Although the fund series has undergone a name change between its two most recent vehicles, this does not reflect a strategy change, said Demetrius Sidberry, managing director at Hamilton Lane.

The rebrand is "more of an acknowledgment of where we are today as a platform," he said. "Rewinding to our first and second funds, the market had more of a syndicated co-investment approach, and we functioned in kind. But we now consider ourselves to be a ‘strategic partner', and it's a phrase we don't use lightly – we are a strategic source of capital and we help get deals done. We can come into deals earlier and we are less passive from a sourcing  and monitoring perspective."

The fund close comes at a time in which Hamilton Lane is seeing strong dealflow, said Sidberry. Although global M&A fell in 2022, the firm had a record year of dealflow, with nearly USD 30bn of potential investible transactions, he added.

"In the current market, leverage is not as readily available and is more expensive; and even now, fundraising is not as dynamic as it was a few years ago," he said. "That means even good GPs are finding it hard to raise the capital they thought they would for their funds, so they can't put as much equity into their deals. All of this puts us in a strong position. Our job as a firm is to develop relationships with GPs and LPs, and those have not slowed down, so we are seeing a tremendous amount of dealflow."

In addition to monitoring the macroeconomic situation, Hamilton Lane has also been implementing ESG across the Equity Opportunities strategy. The firm views ESG as a key risk mitigation tool, Sidberry said, meaning that it uses "the highest, most stringent requirements for a fund without an impact angle" to govern how it invests and positions the fund, he added.

"ESG is critical to us and our GPs," he added We look out for red flags in our due diligence and ESG considerations can make us pass on an opportunity, just the same as we would if we did not like the cashflow profile. We have a global strategy and LP base. Europe is  an important part of this equation and is leading the charge around this, which we are conscious of in our approach."

Investors
The fund's LP base comprises public pensions, Taft-Hartley pension plans, sovereign wealth funds, endowments, foundations, high-net-worth individuals and other financial institutions, according to a press release.

"We have added some new LPs to the roster but we have a huge re-up business, and some of our investors have been with us from Fund II," Sidberry said. "We've added some new names in categories including sovereign wealth and private pension funds."

Given that the fund was launched in 2020, it gathered commitments over a rapidly changing cycle. "It was an exciting fundraise in terms of working through an interesting market environment, from the pandemic, to people feeling better about our portfolios, to finding ourselves in a more uncertain environment than we have for some time," Sidberry added.

Investments
The fund will make buyout and growth investments. Around 60%-70% of the fund will be invested in North America, with the second largest portion for Europe, and the remainder deployed opportunistically elsewhere, Sidberry said.

The fund deploys tickets of USD 25m-USD 75m, with a USD 35m-USD 45m sweet spot, he added.

"We are sector-agnostic, so we can lean in and out of strategies and sectors," he said. "The key for us to invest is to see expert management teams and GPs that can run repeatable, strong playbooks across different market environments."

When selecting managers for co-investments, Hamilton Lane will continue to leverage its relationships with GPs. "The vast majority of our deals are with managers with whom we already have an existing primary relationship, but we have flexibility here and we can be tactical," Sidberry said. "We wouldn't do something with a manager we didn't know or have a relationship with at all, but if a GP is very good in one specific area, we can do a deal with them there."

The vehicle is around 50% deployed, Sidberry said. "We invested the fund as we raised it – some LPs were happy with a blind pool, but some wanted to see how the portfolio was developing," he said. "We started fundraising at the beginning of the pandemic, and things got quite dark for a while at a macro and company performance level. So we've invested this find with eyes wide open and we have ended up with a true all-weather portfolio, with a couple of dozen portfolio companies in the ground today with a significant amount of dry powder left to deploy in whatever is to come in the market."

People
Hamilton Lane – Demetrius Sidberry (managing director).

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