Individual investors will demand a more sophisticated customer experience with better ease of access and improved transparency, Hirsch tells PE Hub
As the third quarter draws to a close, PE Hub’s Outlook series of Q&As featuring insights from private equity thought leaders continues here with Erik Hirsch, co-CEO of Hamilton Lane.
Hamilton Lane is one of the largest private markets investment firms in the world, with $940 billion in assets under management and supervision as of June 30, 2024. Hirsch and Juan Delgado-Moreira began serving as co-CEOs on January 1, as Mario Giannini, who had held the CEO role for 22 years, joined Hartley Rogers as executive co-chairman. (See PE Hub’s Outlook Q&A with Rogers, published in January.)
We asked Hirsch about his forecast for PE dealmaking in the months ahead, including post-election, and also the roles he thinks retail investors and tokens will play.
PE Hub (PEH): What do you expect will be the biggest driver of PE dealmaking in 2025? In what sectors do you see the most potential?
Erik Hirsch (EH): Broadly, we expect to see markets stabilize now that the Fed has begun lowering interest rates and we’ll soon get through the US election. From there, we expect to see a more normalized market in the US, where seller and buyer expectations are aligned, and when you couple that with the amount of capital that needs to be deployed, we believe we’ll see an uptick in deal volume. The potential headwinds for this are (a) challenges around the US election and (b) continuing geopolitical instability around the globe.
Looking at specific sectors, we continue to see a lot of opportunity in infrastructure. It’s one of the fastest-growing sectors within the private markets, underpinned by the fundamental themes of energy transition and the ongoing rollout of AI, which is driving strong demand for datarelated infrastructure and the requisite power that goes with that. In addition, there are clearly significant needs related to healthcare, considering the significant aging populations in many major economies.
PEH: What’s your view on how the upcoming US election might affect private markets investors?
EH: So far, what we’ve seen from each candidate in terms of policy has been both divergent and light on detail. What we don’t know yet is what ideas will actually crystalize and what either parties’ ability to govern will be if they don’t secure both houses. Our expectation is that we’re more likely to see a split government than a unified one, which has historically resulted in more of a power balance and less direct impact on the overall economy. Private markets investors are unlikely to see a significant impact, and while there may be short-term fluctuations within public markets, we know that long-term, private markets historically outperform.
PEH: How do you think tokenization will continue to change the private markets?
EH: In our view, this will be one of the key areas of change for the industry. Investors, of all types, should focus here because tokens represent an easier, faster, cheaper and more organized way for them to transact. It’s about taking a process that, today, feels like writing a check and improving it to something more akin to Apple Pay. This change is mostly being driven by retail investors, but as this technology continues to mature, we see expansion into institutional use cases. Making access easier, cheaper and more efficient benefits all of us.
PEH: What’s your view on how the growth of wealth/retail will impact the PE industry overall?
EH: Total individually held wealth globally is measured in the hundreds of trillions of dollars – the opportunity is massive, and the impact will be seismic if even a small percentage of those dollars move into private markets.
But building out a practice to support retail investors will not be the right fit for every firm – it’s likely that the larger firms will be the ones that focus on growing in this area, since it will require significant scale to execute effectively. From brand recognition to sales teams to technology, some of the elements required to serve a retail audience are broader and more extensive than on the institutional side.
We expect there will be several key impacts on the industry. First, the sheer amount of potential money moving in, which has the potential to – and we think will – completely change the scale of the private markets for better and worse. Second, improvements in technology and operations will be necessary to meet the needs of individual investors, who will demand a more sophisticated customer experience with better ease of access and improved transparency. This technology, while initially oriented towards retail investors, will ultimately benefit all investors.
As bigger firms continue to focus more on this area, it will likely lead to a positive ripple effect across the industry as a whole, as institutional investors become accustomed to an enhanced customer experience. Overall, this should lead to healthy competition and a more transparent, efficient and accessible market.
PEH: What keeps you up at night on the PE front?
EH: Two areas of focus. As retail continues to grow, so too will media scrutiny on the asset class. Historically, as an industry, we’ve done a lousy job successfully telling our story. That needs to change. Second, technology change is here and it will be rapid. Being at the forefront of that change is where Hamilton Lane is today, and our job is to now remain there.
PEH: You are coming up on one year as co-CEO of Hamilton Lane. What have been some of your notable accomplishments so far, and what can we expect to see from the firm moving forward?
EH: It is a true honor to have the chance to lead this firm, along with my co-CEO Juan Delgado, as we build on Hamilton Lane’s track record of success and do so alongside some of the top talent in our industry. In just the last year, we’ve continued our growth trajectory, launched new products and enhanced our technology and innovation offering – and we are just getting started. We’re also proud to carry forward our strong, award-winning culture, rooted in integrity, collaboration, innovation and the pursuit of excellence.
As I look ahead, we will continue to put our clients first and stay true to our core mission and values, while also leaning into our ability to grow and adapt to meet the needs of an evolving industry with new technology, new markets and new regions globally. Our model of having localized teams that embrace the culture and speak their native language has allowed us to deliver best-in-class client service and strong results, and we will build upon that as we leverage our truly global “one team” approach.
Our business is strong (in fact, S&P recently announced that HLNE is being added to its MidCap 400 Index, a testament to the health of our business), and we will continue to be a global leader in private markets investment management, both as a champion for our clients and for the future potential of our industry.