Hamilton Lane Incorporated (HLNE) Earnings Call Transcript & Summary

Before we get started, I've been asked to direct your attention to some important disclosures on Morgan Stanley research disclosures website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. Good morning, everyone. Welcome back to Morgan Stanley's Financials Conference. I'm Mike Cyprys, equity analyst covering brokers, asset managers and exchanges for Morgan Stanley Research. And welcome to our fireside chat with Hamilton Lane. We're pleased to have with us today, Erik Hirsch, Hamilton Lane's Vice Chairman and Head of Strategic Initiatives. Hamilton Lane, as many of you know, is a global asset manager focused on the private market with about $69 billion of client assets under management and an additional $434 billion of assets under advisement for which they exercise influence. Erik, welcome. Thanks for joining us today.

Good morning, Mike, thanks for having us.

Great. So we're going to have a fireside chat. I'll kick off with some questions. And investors, feel free to submit any questions of yours on the web portal, and we'll hit them up towards the end.

So why don't we start with LP trends and what you're seeing on the demand front. 2020 saw fundraising decline for the private markets industry. And yet, you look here with the huge rally in public market. It would seem that LP allocations, perhaps, to the asset class have declined. So just curious how that informs your view on the fundraising outlook. And what strategies are part to the industry do you think we could see faster growth?

So Mike, I think one of the reasons why you saw the annual fundraising numbers come down for 2020 was that you basically had LPs like the rest of the market kind of go dormant in the spring. People were not on the road pitching funds, LPs were not having Board meetings are making decisions. So those few months of just sort of total inactivity really drove kind of that downturn in the total fundraising numbers. You're right that the public markets, which represents the largest portion of their assets, kind of the denominator, if you will, has certainly risen. But the private markets have more than kept pace on unrealized values. So people have seen a lot of unrealized gains across their private markets portfolio. As you know better than anyone, just using our carried interest or others carried interest as a barometer on the unrealized side, you saw over the last 12 months, a fairly big uplift in that. And that's sort of the good indicator of what's happening with value. So all of those factors are colliding and then you put over top of that 2 more pieces. One, LPs have seen a lot of liquidity. So that's, again, exposure coming down and returning to them in cash. And you continue to see LP sort of interest in the asset class rise. So when I put that big mess together and sort of sift it through, I think you're going to see pretty strong fundraising in 2021. I think you're going to see the return of travel. You're going to see some pent-up demand. You're going to see liquidity having caused some under exposure. You're going to see some offsetting pieces occurring on the unrealized side from the public marks and the private marks. So I think you're going to see fundraising continue to sort of tick back up and be pretty strong. I think what's -- what are the bigger drivers, secondaries have been a fairly increasing component of the asset class. You've seen it with our own fundraising success there, LP interest is high. The interest continues to be very high around growth equity, late-stage venture. So things that are more tech-enabled or tech-driven are attracting an awful lot of attention. So I would point to 2 of those as some pretty big factors.

Yes. You guys have been putting up some strong and also consistent high single-digit, double-digit growth in fee-paying AUM. How sustainable is that, in your view, over the next couple of years? What might help accelerate that as you look across your business and your initiatives?

I think we've said -- I mean, we think it's quite sustainable. I think it's really driven by a few factors. I mean, one, we sort of get the wind at our back of the asset class continuing to be forecast to grow in sort of mid- to high single digit rates. You add on top of that sort of a market leader status for us, and so you'd expect us to grow certainly a little bit faster than the overall market. And so those 2 pieces are just propelling you into that double-digit growth range. Plant assets continue to grow around the globe. And we don't really sort of foresee any of that on a macro level sort of slowing down. Of course, you could have micro sort of economic interruption, which would slow everything down. But I think if you're sort of taking a big picture view, those tailwinds, I think, continue to be present. What would accelerate that, I think, would be kind of where you started, which is if you continue to see public market rallying so significant and you continue to see liquidity coming out of the private markets, and again, coming back to LPs in the form of cash, it's going to force them to continue to have to reinvest in order to keep that allocation targets. So that would be factor number one. Factor number 2 for us, I think, would be continued growth in the retail space. So a space what we've historically have not been a huge player, now with the launch of these 2 vehicles that you've been mostly covering and the success that they're having, I think that just is adding another growth engine for us. We reported on our last earnings call that those 2 entities, which we sort of view as simply geographically segmented for investor type, has now sort of crossed over the $1 billion in NAV mark, I think, sort of setting you on a pace for real strong growth in the future.

And we'll certainly come back to the retail initiatives. But while we're on the topic of LP demand, you've introduced a number of strategies over the years. At this point, what would you say are the top 2 or 3 unmet needs of your clients today?

I'm not sure I would characterize it as unmet. I mean -- I think, remember, even if we don't have a product for a certain need of the client, that just likely means that, that need is being met via a separate account. And so I wouldn't sort of say today as we look out that there is some big sort of demand coming from the clients that we're not providing to them. I think not all of the demand has to sort of be met through a product, and that's really the benefit of these separate accounts. A lot of our separate accounts are purposely structured by us and the customer to be incredibly opportunistic and nimble so that as market conditions change, that same separate account that -- I'm making this up, maybe historically had been for sort of pursuing sort of leveraged buyouts or turnaround strategies now sort of tilts to begin to focus a lot more on growth equity or credit or infrastructure. So that is one of the beauties of that separate account structure because it's a single LP in that vehicle, and thus, they and we can kind of decide where we want to take that next year or the year after.

Why don't we dig in a little bit on the retail side? Over the past year, Hamilton Lane has made significant progress in opening up the private markets to a broader universe of investors. Most recently with the launch of the private assets fund in the U.S., this follows some of the initiatives outside the U.S. that you alluded to. Can you talk about the overall fund strategy here? How you're constructing the portfolio for retail customers? And what are the investment returns that clients are expecting here for these products?

I think one of the -- there's a few reasons why I think we've come out of the gate in relatively short order and have had a lot of success. And that is, I think we're taking a pretty different approach than a lot of the other products that are out there. We started our -- this process by really asking the simple questions of what hasn't worked in the past and what are some of the frustrations that retail investors have when they look at this asset class. And one of the big issues is cash drag. When you're dealing with mass affluent, you can't sort of deal and have a vehicle that's dealing with capital calls. Things need to be funded onetime upfront as they buy into the vehicle. Now if they do that, and then you're putting the vehicle in a lot of primary funds, which is what a lot of our competitors are doing, that just sits. That cash is just sitting there and you've got tremendous cash drag. And so you're creating that negative J-curve effect that we all talked about and no one finds to be particularly a good thing. If you look at how we structured our vehicles, there are no primary funds. We're doing all transactions, so that when we take in capital, it's going into 1 of 2 places: it's either going into a direct transaction, a co-investment, whether that's equity or credit; or it's going into a secondary, and that -- those secondaries are funded secondary positions. So we're really eliminating the cash drag and we're still providing the underlying customer base with a lot of exposure and diversity across the asset class. So it's kind of one-stop shop to get a nice broad exposure to the private markets. And we've taken this down to not ultra-high net worth or high net worth, but really, again, more mass affluent. In the U.S., we're talking about kind of a minimum ticket size in that sort of $50,000 range. And we have a vehicle that is providing you with the ability to have monthly liquidity features. Again, something that a retail investor in that size range is going to be very sensitive to. They don't want to be locked up for 10, 20 years in some vehicles. So I think the combination of all of that, very, very strong performance, has resulted in us kind of coming out of the gate very fast and again, kind of getting to that, I think, major first hurdle, which is, can you get to that $1 billion of net asset value.

And what would you say you're looking for in terms of expected returns with these sort of strategies. You're bringing together some secondaries, co-invest, it sounds like, maybe a little bit of primaries in there, maybe not. But just what's the overall blended?

So no primaries. And on the return side, I think you're looking at kind of that 12% to 15%. So this is not a sort of shoot the lights out ultra-high-risk venture capital kind of return. We don't think that's what the retail market is looking for. I think they're looking for something that is going to produce for them an alternative to public equity returns, higher returning. But again, accessing a part of the market that heretofore their portfolio has just not been exposed to.

And how do the economics work for Hamilton Lane?

So they're very similar to our specialized funds in that there is a management fee component and then that there is a carried interest component. The big difference here is that because of the evergreen nature of the vehicle that you can't have a sort of a European waterfall like we would have in our normal vehicle, where we return all the money, pay back all fees, et cetera, et cetera, et cetera. So what that leads you to is a carried interest structure that is actually deal by deal. Each deal will have a hurdle rate. So we make a -- we do a co-investment or we do a secondary and then that performance of that individual transaction is tracked as it's liquidated to the extent that it's sort of over the hurdle rate, then the carried interest kicks in. And the overall economics are relatively similar to what we're sort of seeing on the specialized funds. If anything, they err slightly higher on the management fee side, but you're generally in kind of that same specialized fund range, which is that hundred basis point of management fee and then sort of that 10% to 12.5% on carried interest.

And just how does the liquidity work for investors? Are they locking up their money? How do they access that?

Yes. So there is a redemption feature that's available to investors throughout the calendar year. There are caps on that. We're able to provide that by really 3 things. One, secondaries generate sort of shorter-term liquidity. And so we are often getting cash back. We can use that to provide liquidity to the extent we need to. Two, we're doing a lot of credit co-investing, and so that also has a cash yield. And then three, we're sort of using a line of credit to the extent we need that. So again, very, very nice feature for the investor. Particularly, if you think about the client that we're dealing with, they've never had exposure to this asset class before, and so I think they're going to want to walk before they run. So having that sort of notion of, hey, I'm not here forever can be pretty comforting.

Now earlier this year, you announced the acquisition of 361 Capital, which is a boutique investment firm. What do they bring to the table? And how does this tie in with the distribution strategy for your Evergreen product?

Yes. So 361, we've really viewed as sort of a leader in distributing alternative product into this retail space. They were targeting really the exact same customer that we are here. And so nice sales team with sort of full U.S. coverage, with good relationships across the RIA market, which is really where you need to start for this kind of a product. And so we have taken that team, coupled with the existing Hamilton Lane resources that we already had prior to the acquisition that were also focused on distribution, brought those together under one team, one structure, one leadership piece, and that's really what we're doing. We are sort of going through, breaking up the United States by territories, breaking up the globe by regions and then really sort of starting with the RIA market and working through that and then other wealth management platforms.

And how is that going so far? Any update? I know it's probably been just a couple of months. How is that progressing? And maybe you can just give a little bit more color around the go-to-market strategy there?

Yes. I -- look, I think the integration has occurred basically over the last couple of months. We closed the deal as we said. We announced it months ago. There was then sort of a wait period as we had to get sort of permissioning and consents from their existing customers. So I would say it's going really great. And I think, again, sort of getting to that $1 billion of NAV is pretty indicative of the fact that we're off to a hot start here and things continue to be good.

And as you think about the different channels out there and the different levels of investable assets of retail customers, where do you see the sweet spot for this Evergreen product?

I don't know that there is a sweet spot. I mean, I think, if we look at the customer base that has come in, we've seen a pretty wide range of sort of underlying net worth, again with a relatively modest minimum but the ability to accept much, much larger check sizes, I think, again, we've created a product that is -- that has appealed to a fairly large target audience around the globe.

Shifting gears a bit. Earlier this year, you announced a strategic partnership with Russell, where you're now, I believe, the exclusive provider for their private market offerings for their clients. How does this partnership come about? And can you talk about the types of products that can make sense for Russell's clients?

I mean, I think I want to just make sure I kind of correct the first part. So we're definitely not the exclusive. I think for Russell, they're a fiduciary and they're running as the OCIO. I think Russell always needs to sort of do what's best for their customer. That said, I think the fact that we're exclusive -- we're the only ones they have a partnership with and so I think that's indicative of them having canvassed all of our peer groups and feeling that we are sort of the best solution for their customer base as it comes to getting access to the private markets. I think Russell was really faced with a choice. I think they're the #2 OCIO provider in the world, huge asset base, very large customer set. And I think for them, they were seeing what we're all seeing, which is clients want more and more access to the private markets. And so Russell was faced with the choice of do they continue to build their own resources internally, do they go and buy a firm and tuck that inside of Russell or do they partner? And I think after I'm sort of now quoting the Russell CEO, Michelle has said publicly they looked at all 3 of those very carefully. They interviewed lots and lots and lots of other firms, and came to the conclusion that we were the right fit both culturally. The sort of the depth of the offering, the quality of the track record, the data and technology were all things that were very, very appealing to the Russell team and to the Russell customer base. And so we've entered into this partnership. Hamilton Lane, as you remember, invested from our balance sheet to taking a small ownership stake in Russell to provide that sort of full alignment of interest, and the sort of telegraph for the customers that we view this as a serious long-term strategic partnership. Michelle has also noted that the Russell customer base relative to sort of peers in the market is underallocated to the private markets. The quote -- the number that she's been quoting is they're running kind of average allocations around 4%, whereas, Mike, you know that our customer base is running at numbers that are well above that, often it sort of 7%, 8%, 9%, 10%. And so I've said in the past, I don't think this is a sprint. I don't think that you take that customer base and then within a short timetable, take them from 4% to 10%, I think they're going to want vintage here, diversification, and they're going to want to do this tactically. So we view this as a long sort of marathon for us to align with an OCIO provider who has a very strong footprint and one that we see as growing, and to try to be there and to be the partner for them.

Great. And how can we think about any sort of quantification of the growth opportunity here? And maybe sort of guidepost on the financial impact. I know you just mentioned in terms of allocations, maybe taking that from 4 to something higher for their customer set, any sense on the timing? How realistic would you say that is? And how to think about the financial impact for Hamilton Lane?

I think it's early here. So I think Russell and we are sort of undertaking strategic reviews of that Russell customer base to sort of figure out who needs what. Now again, they've got a wildly diversified set of clients, not all of whom are going to need or want the exact same thing. So some of that's going to need to be us creating separate accounts. Some of that is going to likely be that some existing Hamilton Lane product is the right solution. And so I don't think this is a sort of a Russell line item, if you will. We could see Russell capital flowing into all of the existing Hamilton Lane activities and just being part of fueling that overall growth.

Maybe shifting over to the data side. Hamilton Lane has one of the largest investors in the private market. You've amassed a proprietary data set. Can you talk about how you're expanding that data set? And what insights have you gleaned on the private market trends through the COVID pandemic?

So our data set continues to grow along with our business. So as we bring on new customers, they bring with them historical private markets data, some of it is obviously overlapped the data we already have. Some of that will be addition to data that we had not priorly had. So the growth -- as we grow the business, so too do we grow the data. So our group is -- I mean that's part of what we do is that we are constantly studying that data, looking for trends, looking for analysis. I think what we've seen in COVID is there's been a fairly wide performance gap across the industry that while generally the industry is performing well as a whole, you're also like you're seeing in the public market, seeing some outliers where growth equity, some sort of value turnaround players that sort of have benefited from the big uplift technology has all been just fast, fast, fast growers. We're taking that data, and as you know, we're monetizing that through our SaaS platform, which is cobaltlp.com. And that subscription sales continues to grow very, very significantly. And I think part of what we saw during COVID is that users, unable to go to as many events, unable to interact with peers, unable to see managers face-to-face, need that data in order to stay smart and to stay relevant. And so I think that has also fueled continued strong sales of that software as people want to be more and more and more informed.

Great. Anything else you would point out to, just on the scarcity of the private markets data, just around monetization efforts, how you might be able to sort of increase that over time?

Well, I mean we've said I think the value of that data comes to us in a few different ways. I mean, we're monetizing it directly in one channel with that Cobalt LP product. But I would say that we monetize mostly indirectly, which is if you're thinking about hiring us to be your separate account manager, part of what you want confidence in is that we are that market expert, that we are going to be that partner for you. And so a big part of that sales process is us being interviewed about the industry and us using data to get that Board or that government entity or that bank or whoever it is, comfortable around the asset class and comfortable that we are going to build for them kind of the optimal portfolio based on their needs. So I think one of the reasons why we are not just out there kind of doing big data partnerships is because we think the scarcity of that data continues to benefit us. And it continues to be one of the drivers and one of the differentiators that we bring to the market and is helping fueling our growth.

Now you have a number of strategic investments that you've made in the private markets, in particular in technology-oriented companies. Can you just give us an update on where that investment portfolio stands today and how they tie into your business?

Yes. I think for us, when we look at needs that we have, particularly on the data and technology side, we have the data. Having a big box full of data and not being able to do things with it doesn't make the data that worthwhile or that interesting. So we've been all about kind of bringing the 2 things together. And as you know, we've had a long history of, frankly, putting our money where our mouth is. We don't believe that we're the only people with good ideas out there. And so we have found that partnering has actually been a much more beneficial path to success. So we have had a long history of going and taking ownership stakes in technology businesses, where we are a user of the technology. In many cases, we're helping to create the technology. So whether that was back office sort of software reporting, with iLEVEL, where we were an early shareholder, we became the first LP to be using iLEVEL, we helped build that. Whether that was with Black Mountain around portfolio allocation and portfolio tracking. Whether that was with DealCloud, which is kind of a CRM system. Or whether it was with Cobalt, there's a good history of those. And Mike, as you know, we've also had a number of those companies where we've kind of gotten a strategic benefit or a strategic partner or a strategic user. But then we had the ability to go sell our ownership stake, oftentimes for very, very strong results. So I think I sort of view this as sort of a win, win, win, where we're helping to kind of make the asset class better. We're bringing better technology. We're also monetizing through that. And we just don't see our peers doing this. And so I think it's another way that we kind of continue to set ourselves apart.

Could you also talk about your approach to using this data and technology in the investment process? And how do you see that evolving over the next 3 to 5 years?

I think part of this is really -- I think there's really 2 paths here. I think, one, it's sort of making better investment decisions. So it's -- taking your current investment team, arming them with as much information, data, conclusions, insights, et cetera, so that they make good and better -- increasingly better investment decisions. And so you see that in the track record. Track record is strong, you're empowering the team with as many tools and resources as possible. The second piece though is efficiency. I mean our volumes continue to rise and the client pressure on not wanting to pay more continues to be present. So I think it's incumbent on us to not only sort of deliver the better results, but to do so efficiently so that we're not sort of just ballooning resources and then creating for ourselves margin issues or growth issues. So I think it's two-pronged here, efficiency, better results and technology and data are kind of helping power both of those.

Great. While we're on the topic of technology and investments, maybe you could talk a little bit about iCapital. You had joined with a number of wealth and asset managers to make an investment in iCapital, which is a marketplace for private markets. Can you talk about what's unique and compelling about iCapital that you're putting capital behind that?

Well, we think iCapital -- I mean, biased, so recognizing that, we think they sort of are the leader here in sort of that retail money management technology platforms. They are driving at the exact customer base, RIAs, that we're trying to sell our retail product. And so we need to sort of see that the growth and the penetration and the reliance on the iCapital system in that wealth management channel just continues to do nothing but grow exponentially. I think when you look -- and Mike, I know you have, at sort of the caliber of who else is around the table with us there, it's an impressive list of financial institutions. And I think it's a bit of a who's who club. And I think it's telling you that some of the best and the brightest sort of asset management firms are sort of recognizing that iCapital is sort of getting it done. We're proud to be a part of that group. And again, another example of being sort of willing to put our money where our mouth is. For any of you who are iCapital users, and if you go on there today and look at some of the learning channels and learning sections, you're going to see a whole lot of the private market information is being done in partnership with Hamilton Lane. So it's also a great way for us to build our brand. iCapital has been great at sort of using the Cobalt data and Hamilton Lane insights and allowing those brands to exist on that platform. And so we are excited about the partnership. We're very excited about what iCapital is doing. And we have multiple of our products on that platform today, so it's not just the retail product. We had some of our institutional products that are now made available for the iCapital customer base.

Great. While we're on the topic of iCapital, maybe you could just -- for those that are less familiar up with it, maybe just give us a sense of where they sit in the ecosystem? Is it more of a distribution play in terms of getting access to more clients? Or is it also an efficiency play as well? Just any other color you're able to share on iCapital's role.

I think it's sort of a combination. I think they sort of view themselves as the sort of information hub, whereas the RIA is the person who sort of is responsible for needing to go manage a very large customer base. I need tools to do that. So I need tools where I can go find investment opportunities. I need a tool where I can actually access those opportunities. And so these guys are kind of providing that turnkey solution, where it's both access. It's the education because, again, those RIAs are looking for information so that they can kind of get their own customer base comfortable that they are expert in what they're doing and they can justify why they're making this decision or that decision. And then it's kind of all of the support, making sure that the information is available that -- again, the cash flows, the valuations. So they're really doing all of that. And so we see this as if the RIA is sitting here, they're just becoming incredibly linked to this system, iCapital, that is really adjacent to them. So you kind of get all of those pieces. Having our information on there is in the education sections, very powerful, helps the brand. Having our products available there in the access section, also very powerful. It all becomes pretty symbiotic.

Great. We'll turn to audience questions in just a moment. So feel free to continue submitting your questions here on the web portal. Maybe we could talk a little bit about your white labeling initiatives. You've had this for some time now. Can you just maybe bring us up to speed on how that is progressing? And maybe just remind those that are less familiar with it, what exactly are these white labeling arrangements that you have with distribution platforms? Because I think it's a bit unique.

Sure. So just -- I'll give an example that doesn't -- I'll give a fake example. So Mike Cyprys is a wealth management platform, and Mike wants a private markets investment vehicle but doesn't want sort of an off-the-shelf because Mike, as the investment manager, has a view. His clients have hired him because they like his view of the world, of the economy. So Mike is a big believer right now in Europe is undervalued. Mike is a big believer in sort of wanting to increase infrastructure. Mike is a big believer in wanting to add secondaries in credit. Okay. Well, we don't have a product today that matches all of Mike's desires and expectations for his customer. And Mike also is cognizant of his own brand and his own platforms brand, and so would rather create a white label solution that is perhaps branded Mike's solution or Mike and Hamilton Lane's best thoughts. And so Mike sort of arrives and kind of helps us put on the sort of portfolio overlay and perhaps sort of this one that's sort of really setting the strategic plan, and then is asking Hamilton Lane either as the sub-adviser or as the adviser to go off and execute on that plan. And that's really what the white label option is. It allows for uniquely branded product with particular overlay that's being driven by the customer base, and they should drive it because their customers have hired them because they like the overlay. And so the fact that we're then sort of sought out as the person who can execute on that, I think, also speaks to kind of the depth and breadth of what we're bringing to the table, and that's what the white label business looks like. So we have a variety of partnerships around the globe with these. As you can imagine, many of them are sequential, so they look like a separate account. They have one tranche and then another tranche or they might do it by vintage year or however it is they're running their own client base. But it's been a business that we've been involved in for a while. We like it. It looks and feels like a separate account to us, and we're often executing.

And what hurdles would you say you face in terms of getting on more platforms or scaling existing relationships? And what in your view could accelerate the growth with these white labeling initiatives?

I think it's just increasing the brand and the comfort with the -- increasing our own brand. Because, again, we're not -- I mean, if you think about it as an RIA or a wealth management platform, aside from maybe the big wires, it's not set like Hamilton Lane is a household name. And so I think, frankly, there's a -- again, I go back to that symbiotic piece where our push on the retail, I actually think, ends up helping some of the institutional because the brand is going to get introduced into a variety of different channels. And I think that should sort of increase comfort, increase sort of folks reaching out to us and hopefully increasing the ability for us to be partners for them.

Shifting gears over to M&A and industry consolidation. Already this year, you've done an acquisition, you've done a partnership. I guess as you look across your business today, what gaps remain on the product or distribution side that could make sense to fill through strategic actions versus, say, organic extensions?

I don't think -- so I would say these -- none of the acquisitions that we've done in recent, we've not done much, but even the 361 was not a gap, it was really just adding more to what we already had. And then if you go back to the acquisition prior to that, a long time ago, but it was in that sort of real asset space. Again, we already had an existing team. We already had an existing platform. We thought they would just make it bigger and better. And so I think for us, it's more likely to be in that vein. There's nothing that I look at today and say, gosh, we don't do that. It's more of we'd like to do more of this. And so if we can sort of find a firm that we think is highly complementary and believe that they added to us is going to make that all better, I think that's what would be appealing for us.

And what sort of dialogue would you say -- or level of dialogue would you say you're having today versus maybe 6 or 12 months ago?

I would say we don't have a ton of dialogue. I mean it's like -- as you know, we are huge believers in kind of cultural fit. And so we are just been -- we get approached a lot. And the answer is a lot of acquisition targets want to be acquired and then they want to kind of remain in their own silo. And that's just not how Hamilton Lane is structured. It truly is this one firm, one pool of economics. And so that makes deals for us I think a little bit harder. And again, we're not under any -- we don't feel any pressure to do them because, today, we feel like we already sit in the leadership position, we sort of feel like we sit with a very fully built-out platform. And so those are going to continue to be opportunistic.

Great. And we're just almost out on time. Maybe just last question here on the 401(k) space, certainly gets a lot of attention. A lot of money in the retirement accounts, longer-term money, I think some hold out hope that maybe one day the private markets can penetrate this. What hurdles remain for getting private market strategies onto the 401(k) menu?

Lots and lots and lots. There is a whole bunch of structural and regulatory hurdles that exist. It's frankly one of the reasons why we're just not spending time there. I have no doubt that at some point that door will open. But people have been saying that now for 30 years. So we could be waiting a short time or we could be waiting a long time. I think the Hamilton Lane perspective is we don't know. And because we don't know and because we can't control it, it doesn't seem to be a particularly good use of our resources to try to knock those doors down. There are other firms that are as eager, if not more eager, to knock them down. And we don't believe that that's going to be a monopoly situation, nor do we frankly believe that first mover is going to mean much given the space of that market. And we think when that door opens, if it opens, that we'll be as well positioned as anybody to walk through that door. So we will wait for others to beat their head against that door. And if they're successful, terrific, and we'll come in right behind them.

Great. Well, we're out of time, Erik. Thank you so much for joining us today. I appreciate the insights.

Mike, always a pleasure. Thank you.