Hamilton Lane Incorporated (HLNE) Earnings Call Transcript & Summary

So good morning, and thank you all for joining us today. For those of you where this is your first time in Conshohocken, Pennsylvania, welcome. And also, welcome to all of those who are joining us virtually on the webcast. We're excited to present a comprehensive overview of Hamilton Lane, and we've gathered several of our senior leaders throughout the firm who will take you through today's presentation. Erik Hirsch, our Co-Chief Executive Officer, will kick things off with an overview of Hamilton Lane and the private markets. Andrea Kramer, our Chief Operating Officer; and Jackie Rantanen, our Head of Investor Solutions, will take you through how we work with clients. Steve Brennan, our Head of Private Wealth Solutions, will spotlight our Evergreen platform; Griff Norville, Head of Technology Solutions, will walk you through the importance of data and technology and how we use it here at Hamilton Lane. Jeff Armbrister, our Chief Financial Officer, will walk you through the operating model and KPIs, and then we'll go back to Erik for why HLNE. I'll then wrap things up at the end and then we can move into the question-and-answer portion. For those of you joining virtually, there is a text function on the webcast where you can submit your questions there. Lastly, for those of you who are in person here with us, we will make our way to the fifth floor. At the conclusion of the Q&A segment, we will host the lunch. Before we get started with the presentation, we want to remind you that we will be making forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business. These forward-looking statements do not guarantee future events or performance, and are subject to risks and uncertainties that we -- that may cause our actual results to differ materially from those projected. For a discussion of these risks, please review the cautionary statements and risk factors included in the Hamilton Lane fiscal 2024 10-K and subsequent reports we filed with the SEC. These forward-looking statements are made only as of today, and except as required, we undertake no obligation to update or revise any of them. We will also be referring to non-GAAP measures that we view as important in assessing the performance of our business. Reconciliation of those non-GAAP measures to GAAP can be found in today's presentation materials, which are available on the Shareholders section of the Hamilton Lane website. Lastly, please note that nothing on this presentation represents an offer to sell or a solicitation of an offer to purchase interest in any of Hamilton Lane's products. So let's start with how we're organized here at Hamilton Lane. Our Board is comprised of 8 members. Juan Delgado, our other Co-Chief Executive Officer, was the most recent addition to the Board at the beginning of 2024, with Mario Giannini becoming Executive Co-Chairman alongside Hartley Rogers. While Erik and Juan run the business very much in a unified and collective manner, each has specific business functions that reports up to them, respectively. Together, they oversee our global investment function as well. And with that, I'd like to bring up Erik Hirsch, Hamilton Lane's Co-Chief Executive Officer.

This feels wildly formal for this room. So thank you for coming. We're going to blaze through a bunch of data here. And as John said, we got a bunch of my partners who are also going to present and have a chance for Q&A at the end. And so we'll start here. This has been our journey since IPO. Growth has just been strong across all measures. So whether it's been people, offices, AUM, fee earning AUM, et cetera. This is what that growth has looked like and our expectation is this is where we're going, and we expect this to continue. If you look at our sort of assets under management, many of you have seen this before, this has been really a sort of steady up and to the right journey, particularly since IPO. I would say what's causing sort of that larger sort of growth spurt has been 2 things: one, as we move into the Evergreen retail channel, that has obviously been a big driver of that; and secondly, we've continued to do a good job scaling our existing specialized funds. So where are we going? It's really about kind of continuing the march that we've been on, which is growing our existing product suite. And I think that's really about taking funds that we currently have and making them bigger. We are not a market leader in any of our specialized funds category. So in the secondary world, despite having our biggest fund ever just closed, we're still kind of a mid-tier player in that space. There are other franchises that are multiples larger than us in direct equity and direct credit. Again, lots of chance for us to continue to scale those businesses. And we've been doing that. So if you think about where we started, our first secondary fund was only a couple of hundred million dollars back in 2005. And so that growth has been meaningful over that. The second leg of where we're going is introducing new products. So there are still a whole lot of areas where we currently don't really offer products. We don't have a lot of geographically specialized products. We are just beginning to sort of move into some venture and growth products. But again, if you sort of think about the continuum of the industry, there are a lot of places where we don't offer products today. Third is expanding our geographic footprint. So we have opened up a number of offices since being public. That will continue as we want to open up offices for 2 reasons: one, it puts us closer to customers and prospects; and secondly, it always increases our deal flow as we become, again, more local into that market community. And then the last piece of this is despite having a nonworking television, we think we do have a significant technology advantage and we're going to continue to sort of push on that. You're going to talk to Griff Norville today, someone who you've not been exposed to, to date, who really runs Hamilton Lane Technology Solutions business, and we'll actually give you a little bit of a deeper dive into some of the technology that we're using. So this is what we sort of show prospects when we sort of kick off a presentation on, okay, who are we? So you can see here sort of our AUA and AUM, the number of clients and investors. Today, we are sort of about 700 employees. I would expect that we're going to add probably 60 employees this calendar year. And so growth on the employee front continues really across all areas. Last year, we deployed about $32 billion across the franchise on behalf of our customers. And to date, we've got about $700 million of our capital invested alongside of our clients in our various separate accounts and funds and then you see the offices. We talk about doing 2 things here. We can sort of be big and successful and drive great returns for our customers and do all those things that a good investment firm should do and we can also do it in a way that makes us proud culturally. And so we talk about being able to do both things at the same time. We don't think that one necessitates not being able to do the other. We believe in doing both. This is the footprint. I won't sort of belabor this, but you can see a couple of the newer offices in the last few years: Mexico City, Toronto, Stockholm, Milan, et cetera. And so you can also see on this map that there are some places where there is no geographic presence that you would think over time probably makes sense. And so hence, the expansion geographically will continue. We are a true full-service solutions provider. There's really no part of the market that we don't participate in today. And so whether that is sort of the tools that we're using, primaries, directs or secondaries is kind of the big 3 or, again, covering all of the various investment strategies. We do all of that today. And then from a service providing standpoint, our view is that when we meet a client regardless of what their needs are in the private market, we want to be able to help address whatever that need is. So if they need a fund, if they need a separate account, if they just need technology or back office, again, we're able to kind of serve them. So our view is our addressable market is very simple. Our addressable market is anybody who wants to participate in the private markets. At this point, we really have something for everybody. Data and technology for us, we are both using it in sort of 2 ways: one, it's a big differentiator; two, for us, it is a way for us to be sort of more insightful. We are monetizing this both directly and indirectly. So on the direct side, our product, which is Cobalt is something that, again, you'll see a bit of a demo of that later on today. That is a SaaS business. We're selling licenses to that. That is a double-digit grower of a business. And so that alone is just direct monetization. Indirect is we're using this to win. So think about a scenario where we are in a finals for a secondary fund commitment and the client is going to allocate $75 million to us or competitor X. And both of us have good track records and both of us have good deal flow and both of us have been doing this for a long time, and they're struggling to make the decision. And we come along and say, "Well, what if we give you 1 year free Cobalt license. The competitor doesn't have that. And so that breaks the tie. We win. For us, that's a no cost option. We obviously already own the technology, so giving out a license for free for a year or 2 doesn't sort of have any negative impact to us, very positive impact for the customer. And then again, we're so confident because the re-up and renewal rate on Cobalt is extraordinarily high that once you have it and use it, you like it, and you will keep using it. So on the left-hand side of this page, the database is significant. We've been in this business for so long. And because we're providing back-office services to customers, in a way that a lot of our peers don't do, we're able to get a database that is much beyond simply funds that we've invested in. So we go out a client tomorrow who has been in the industry for 20 years, we take over their back office, we're getting 20 years of their data for investments that we had no involvement in. So this sort of database and the number of funds that we have are far beyond things that we have simply invested in on behalf of customers. It represents a much broader swap because of that back-office relationship. On the right-hand side of the page, you can just see a variety of the strategic technology investments that we have done off of balance sheet. Again, a lot of these are leaders in their space being used broadly by peers, competitors and folks across the industry. But the brand for us of being able to say, hey, we were there at the beginning, we helped to create this. We recognize the value of this and we put capital in it is powerful. For some of you, this is going to be less interesting. But again, the audience here is broad. And so I'm going to just do a quick tutorial of the private markets and some of the mechanics of this. Again, we operate in a very different world. So in a closed-end fund structure, when you think about the timing, investors are being asked to make a commitment. On day 1, no one is funding anything. So if fund goes off to raise capital, so our secondary fund, we're sort of starting off on day 1, you're looking for people to give you capital commitments that is different than actually wiring you money. So you go through kind of a 12- to 18-month fundraise process. Lately that is becoming longer, so 12 to 24 is becoming more the norm. And then the fund enters their investment period where they actually start deploying capital. For most funds, that's sort of -- if you think about it, practically, it's a 3- to 5-year time period where that capital is getting deployed and then capital begins to sort of come back to investors and typically takes kind of 12-plus years for a fund to fully liquidate. If you think about that in a cash perspective, if I'm making a $10 million commitment to a fund, I'm never exposed at a $10 million level because that $10 million is getting called down, some in year 1, some in year 2, year 3, but distribution start to come back at some point. And so you can sort of see here on just an example of you tend to become cash flow positive in kind of year 5, 6. That's not to say that you're generating tons of profit. But again, the distributions begin to offset the capital that's going out. So this is why for LPs, they overexpose themselves. If you're trying to get a $10 million exposure, you would never make one $10 million commitment because you're not going to get there. That capital is kind of moving both directions. It's being funded and it's being distributed. But LPs understand this. We spend a lot of time modeling this for customers so that they can figure out if they're trying to get to a target at a certain time period, how much do they actually have to commit? What is their exposure going to look like? What is their cash flow profile going to look like? But this for us is an important piece to kind of just understand mechanically what's happening. If you think about just sort of portfolio construction, again, very kind of generic version of this, but this is sort of generically what kind of a client portfolio looks like today. About 50% in public equities, 10%-plus in kind of what we think of as the private markets, not -- notice, we don't say alternatives because we're not focused on hedge funds or anything like that. So we sort of talk about just about the private markets. And then on the right-hand side of the page, you can see again, generically sort of what a typical portfolio would look like in terms of how much money is going into buyouts or secondaries or credit or venture. And then you can also see kind of what that looks like geographically. Most LPs today are running kind of 60% to 70% North America. That is sort of still the biggest part of the market. Europe sort of 10% to 20% and then, rest of world, anywhere from sort of 5% to 15%. So who invests? So this is sort of telling you basically kind of now what is the breakout. So public pension funds continue to be a really significant portion of this market. Retail, small, but growing. And so I think over the next kind of 5 to 10 years, you'll see how this chart changes. For us, we're kind of active across all of this, Taft-Hartleys, family offices, insurance, et cetera, again, sort of a broad addressable market of all kinds of different entities participating in this asset class. The asset class is challenging. This is just kind of us sort of providing examples of what we see as what LPs struggle with. And this then sort of gets to why do we get to exist. Negotiating and navigating all of this is difficult. And so when we sort of think about what's our value proposition, it's really helping kind of deal with all of these different things so that, that experience for them can be easy and seamless. If you think about returns, so LPs are on some levels relatively simple. They sort of get up in the morning and think about how they're going to sort of hit their target rate of return. Today, we're in a market environment where most of them are sort of thinking about a 7% to 8%-plus kind of nominal or actuarial rate of return. And so if you think back to what that required for your portfolio in 1993, it's pretty simple. You could put it all in fixed income and you could then kind of just call it a day and go play some golf or something. So things were very different than what they look like today. Today, in order to get to those return targets or to believe that you're going to get to those return targets, you need private markets. And as the public markets sort of continue to gyrate and people are worrying about overvaluation or increased concentration in a handful of stocks driving that performance, all you're starting to see is the model is just getting rerun and rerun and rerun, with capital increasingly getting directed back into the private markets. And so that has just been steadily growing. And if you look at a Bain study or a McKinsey study, you're going to see that they're all kind of forecasting that, that growth is set to continue. Our world also continues to evolve, both in its kind of size, scale and complexity. So if you think about sort of early days, we'll go back to 2000 sort of 5-year trailing fundraising, $0.7 trillion. And you can see credit was only about 9% of that equity was the vast, vast majority at 72%. And if you sort of then move that to today, you can see how that's changed. Credit continues to get bigger the number of strategies and what's sort of happening inside of people's portfolios. And also the 5-year trailing is now $5.2 trillion, up from $0.7 trillion, so the industry itself is just also getting substantially larger. And the complexity is continuing, both in terms of number of strategies and number of managers. So each one of these little dots represents a fund, a fund manager, and that sort of the dot sizes, their AUM. And then the colors are sort of reflecting both geography and strategy. So go back 20 years ago, about 1,500 funds across 1,000 firms essentially. So 1,000 firms had 1,500 funds, and you can see what that looks like. You go out to today, 18,500 funds across 9,500 fund families. So what that's telling you is, obviously, growth in multi-directions, but also most fund managers now have multiple strategies. Back here, very few did, right, 1,000 GPs for 1,500 funds versus today, 9,500 GPs or 1,800 funds. So that's continuing to sort of just get more of the norm. I'm going to sort of knock out a couple of the myths that we get asked about routinely. So first is performance. How is the market done? Go back to 2017, if you put $1 in any of these strategies, what did you end up with? $2.41, if you were in private equity. So despite good public market performance over that time period, $1 got you back to $1.67. Private equity has still been substantially outperforming. That private credit number is always eye-catching because you sort of get investors saying, well, I'm taking a lot less risk than public equity, and I'm not making very much differential return. Again, part of the reason why flows to private credit continue to be strong. And if you benchmark this here, we're sort of showing you a couple of pieces. So on the equity side, private equity only against the S&P, the Russell, the MSCI or against hedge funds. You can see outperformance over the last 15 years has been there. The one place that hasn't been has been real assets. You can see that the REITs have actually done a better job than sort of private real estate on the core side. So the next thing we sort of get asked about is, yes, but are the valuations good? There's a lot of unrealized value out there, and are they good? And the cynics like to sort of tell us that they are dramatically overinflated, and so the returns are a little bit focused because the valuations aren't good. This is a math exercise. Again, part of the reason why we get so much rumor and gossip in this industry is that so few people actually have access to good data. It just allows them to go off and make bold pronouncements, like the valuations are bogus. We can measure this. So all we have to do is look when a company was actually sold for cash and then just go back one quarter prior and see where it was marked. If it's an industry that's full of bogus valuations, if we go back one quarter prior, we would see it's marked at, whatever, $1 and then it was actually sold for $0.75. That would indicate that valuations are bad. What this tells you is one quarter prior to exit and the valuation differential between the valuation and the ultimate sale price was 1%. That's pretty close. If you go back 4 quarters prior, the asset was actually marked at 27% lower than the ultimate sales price, not overmarked, undermarked. This is why the secondary business has been a pretty good business. GPs are conservative in their values, not aggressive. They look like dopes if they're constantly marking something at $1 and then selling it for $0.75. That's not a good business model for them because they look stupid. And once you look stupid, people like us don't want to give you money. And they don't get paid on unrealized gains, and they're not getting paid on net asset value. So they really don't have incentive to kind of go in here and overmark their book. What they have incentive to do is actually undermark and then come out and tell you that they were a hero. "I told you it was $0.75. I sold it for $1, I'm very, very smart." And so that's much more of what we see. So 1% lower, 6% lower, 17% lower and 27% lower as you move back on the quarters. So the next thing we hear about is sort of, "Okay. But yes, leverage, leverage, leverage. And what does that look like?" Well, here's the interesting thing. As leverage is getting -- so we're showing you all kind -- we took tons and tons of deals and simply looked at how levered were they, and then when they actually exited, what kind of performance did they have? So if the cynics were right, what we should see is, as leverage is going up, returns should be coming down because we're over levering these businesses and then we bankrupt them. That's what we hear a lot. Private equity comes in, loads up the leverage, ruins the business, and kaboom. Let me know if you see correlation between leverage and return here. I do not. I see a random scatter plot. So we have lowly levered businesses with really high performance. We have highly levered businesses with good performance, and we've got all things all over the place. We don't see a lot of correlation between leverage and return. The next thing we hear about, "Fundraising is out of Control. There's just too much money. This industry can't possibly handle all of this." Focus on the dotted line. This is total fundraising as a percent of MSCI market cap. We are a whopping 1.5%. So all the capital raised last year represents 1.5% of just the MSCI market cap. This industry, despite a lot of growth, continues to actually be small. And so we would say there's a whole lot of room to grow here because when you put it in context, it's not very big. What is the market cap of NVIDIA today? Probably not as much as we raised last year as an entire industry. So that, again, when we sort of step back and sort of look at this on a relative basis, when we just look at charts that are going up and to the right, there's no relativity. And so you put it in context and it has a very different picture. This is simply fundraising going back to 2000 and sort of breaking it out by what part of the asset class is raising. And what you can see here is that sort of there's been a little shrink. I mean DCM growth is that sort of light blue, that sort of gyrates. I mean it was actually a much bigger percentage of fundraising back in 2000, and it's now become a much smaller percent. That will widen out as that industry comes back in favor and it will shrink again as it goes out of favor. The thing that's been relatively steady is the bottom of this, which is about 40% to 45% is kind of going into the buyout world that you would think of. But this is how this is kind of moving around. Real estate, on a relative basis, shrinking a little bit and natural resources continues to be a really small part of this industry. This is taking all of the unrealized net asset value by strategy and just kind of showing you what's been happening. So there's no question that there's a lot of NAV that needs to get liquidated and you can sort of see how that's broken out. I would say this is a sign of a healthy market. It's growing, you're raising more money. Deals are getting done, deals are actually well valued. So there's a lot of net asset value that needs to get sort of work through, but again, you could have made that argument at any point in the cycle. It always been going up and to the right because, of course, it has. The industry is growing. This is what's happening on the distribution side. So this is just taking all industry distributions by year. And here, you can see there's no question that distributions have been coming down. You all have been asking about it and have been seeing it, which is people aren't selling as much as they used to, and that is true. We're in a cycle where I think until people feel like we're sort of getting more normalized in the market environment, people have been hesitant to part with assets. And you can see that here in terms of how long it would take using the current distribution rate to liquidate all of that net asset value about 5 years, which then isn't surprising when we sort of look at this, which is we're taking every deal exited in that vintage year. So we're taking all the exits by year that occurred in that year. And we're simply measuring how long were they held before being sold. And you can see that for the deals exited last year, about 50% of them were held 5 years or more. Very, very small percentage of them, the dark blue being held for sort of less than 3 years. And so what you can see here is that, in general, the sort of the 3-year hold is actually dramatically reducing. The ability to sort of buy something in today's market, turn it around in sort of 3 years or less and sell it successfully, hard to do. You're paying a full price. Leverage is obviously not the way to kind of generate performance. You actually have to grow and kind of earn your way out of it, but that's what is clearly happening. And with that, I'm going to turn it over to my able colleague, so Andrea Kramer, our Chief Operating Officer; and Jackie Rantanen, Head of Investor Solutions. I will give you the clicker, and the floor is yours.

Hi, everyone. Thank you very much for being here today, and I'm thrilled to join you. I'm going to talk a little bit about how we work with clients, myself and my partner Jackie will really cover this topic. I'll jump right in. This is who we work for. One of the key takeaways here is that it is a very diverse group of investors. From the largest to the smallest, we're able to work across and deliver a full suite of services for all of these different types of clients. You'll see some of the big global institutions like pension, global pension plans, sovereign wealth funds to the smallest types of clients like Taft-Hartley, some of the retail and high net worth clients. We're able to meet them where they are and to provide a full-service offering. Talking a little bit about how we work with these clients, we've created a one-stop shop. We've really tried to deliver an offering that is a full spectrum across the entirety of the private markets. We've done this in a way that's global, and we'll talk a little bit about that. But you'll see here, intention is to ensure that every component of the private market offering is delivered to them. So we've invested a great deal in the services, the solutions as well as the products. How do we do it? Well, first of all, we're an asset management. And so in order to do this, you need a broad investment team. We've created a global footprint. You need to be global in order to be local investors. So it really starts with the investment team. And you can see across the different types of strategies that we've added people, more than 234 individuals at this point, almost 235, and see a group of interns that we have here and our brand-new analysts, which will be coming in, and that number will increase pretty dramatically. So 3 key kind of areas, the top pillar, which is the fund investment team, and this really fundamentally is the thing that's driving the investment, the platform. It's driving the relationships and access and deal flow. And we'll talk a little bit more about that. And then, of course, our direct investment team as well as our secondary investment team. It's a collaborative group. We are one team organized across all of the private markets, with an intention of really driving opportunities together. We're also collecting a lot of information. And so how do we do that? We're leveraging technology, things like DealCloud, for example, which provides 24/7 real-time access to information so that everybody has it sort of at their fingertips. A lot easier than having 5 people in a group and being able to talk across the table. You need to do this around the world. So we've really invested meaningfully in these tools. If you look at the platform, what does this key takeaway really share here? One, I would say we're one of the largest investors in the private market. So just look at the size and the breadth of this platform. We've invested, again, with real intention in this. The other thing I would say here is if you look at the primaries line, this sort of, again, is the -- this is what feeds into the platform. The relationships we're creating, the amount of capital we're deploying across thousands of funds each year, it really does drive the opportunity set and creates relationships that give us access to direct investments, assets, secondaries and so forth. The other takeaway I would highlight here is just look at how much we're looking at and how little we're actually -- if you look at the hit rate, it's 7% on the primaries side, and it drops down pretty quickly when you look at the transactions. To me, that's see a lot, do a little, but the other piece here is that there's plenty of room still to grow because I can assure you we're saying no to really quality and interesting assets. So there's plenty of room for growth. Lastly, I'll highlight one of the key tools that we think is essential in the asset management business, and that is our portfolio management group. It does start with the investment platform. That is the area where we're sourcing the opportunities. We're looking at investments. And obviously, we're going to then deploy those. But we need to layer over top of that what we've described as our portfolio management group, which is essentially a macro overlay. We're leveraging a ton of data in this group. It's qualitative data, it's quantitative data, but this is where we're making decisions on what is going into which portfolios. And essentially, that's driving the buildup of the portfolios as well as the performance ultimately for our clients. Now I'm going to hand it over to my colleague, Jackie Rantanen, who's going to talk to you a little bit about the 2 key areas of growth for management fees.

Thank you. Good morning, everyone. So as Andrea said, I'm going to talk about the 2 components of our service offering that really drive our management fee growth. And here, we start with customized separate accounts. And they are exactly like they sound. They are individual accounts for clients built to meet their specific objectives. We take a collaborative partnership approach in building these accounts. And there are a lot of benefits for our clients. First, the focus is them and what they need and what they want out of their private markets program. We're very flexible in terms of their amount of interaction, both with us as well as with the general partners with whom we invest. We have a big focus on their experience and educating them and providing a knowledge transfer for our client staff as well as for their fiduciaries and a big, big focus on transparency. Transparency in terms of our investment decisions, as well as the portfolio and what's happening inside as the portfolio develops and matures. And then our approach to implementation is very strategic. We set the guidelines based on the objectives and then we go and implement according to a strategic portfolio construction plan based on the portfolio management group that Andrea just showed. But maybe the best way to talk about why we think this is such an important and exciting part of our business is really to understand the mechanics of how private markets work in terms of investing from an investor experience. And that's really at the bottom of the chart here. The way that most investors think about a private markets allocation is as a percentage of their overall plan assets. But it's not a static number. So as the plan assets grow, the allocation grows. Oftentimes, the percentage increases. Sometimes, both happen. But by the way that the kind of dynamic works of committing, investing and distributing, even to maintain an allocation requires additional capital allocation. So those fund flows really are additive to Hamilton Lane and what we're doing for clients. And it really leads to a number of the things that you see at the top. This business is long tenured. So you can see we have a 10-year average age of our customized separate account businesses on a fee earning AUM basis. They're very sticky. And they often anchor a bigger, broader relationship with clients where we do more than one thing for them. Here, we're looking at kind of an illustration of a portfolio construction of a specific customized separate account. Now they're all a little bit different, but they have a number of characteristics that are the same. First and foremost, diversification. While often anchored in primary investing, the customized separate accounts typically include transactions in the form of secondaries and direct investments. They do so because they are fee efficient, they offer deployment, J-curve mitigation and return enhancement. I think what's also important is, increasingly, that transaction exposure is gained through Hamilton Lane's specialized funds. Other parts of diversification: strategy. It's not just private equity, it's not just buy out. You can see venture and growth, credit, real assets, real estate and infrastructure. Same with geography. These are not just North American portfolios. They're global, with meaningful exposure typically to Europe and to Asia and the rest of the world. Here, we're looking at kind of the totality of our diversified customized separate account platform. So while each account is different -- this is fiscal year ending 2024. This is a fee earning AUM basis. While each one is individualized and customized when you put them together in aggregate, you see we have a really diverse business here. We work for clients that are diversified by profile, size, type and geography. Their mandates include an array of investment types, from primaries to secondaries to direct equity, direct credit, and then they're investing across the spectrum, growth, venture, buy-out, credit, infrastructure, real assets, you get the story here. So it's a diversified business. This is foundational for us. Last one on the customized separate account. And here, we're looking at the fee earning AUM by the tenure of the relationship that we have with the clients. And you can see, it's a span with each of kind of the different age segments really contributing significantly. But I'll do the math for you. If you look at the number, it's about 40% of the fee earning AUM is with client relationships that are 10 years old or older, meaning about 60% is with relationships that are less than 10 years. But both are active. So I think Erik gave the best description of this on a recent earnings call when he talked about 2 client wins that we have had on opposite ends of the spectrum. One was a brand-new client, brand new to Hamilton Lane, brand new to the asset class. So it shows that we're bringing on new clients and we're bringing new clients into the asset class. On the other hand, was a longstanding Taft-Hartley client that was on tranche 14 of their private equity program and tranche 10 of their private credit program. So both are examples of dynamics that are happening quite frequently, and it shows kind of the spectrum here. So now let's turn to our specialized funds. So first, what are they? Well, in contrast to the 1:1 that the customized separate accounts are, us building a client portfolio uniquely suited to them, this is one too many. They are co-mingled funds, allowing us to provide solutions to a number of investors. They're typically focused either on a transaction type, so secondaries or direct investments, or on a specific strategy, so think venture or infrastructure. But they're important tools for clients to use. They allow them to be tactical in building their exposure. So they get to pick and choose how they're building out their portfolio and the exact exposure that they're getting. It provides access to an array of general partner managers and their deals. And that's because that's Hamilton Lane's approach. You saw the numbers that Andrea showed. We're investing across these strategies. We have really significant deal flows. That is kind of the fuel for these funds. And then they leverage Hamilton Lane experience. We've been doing this for a long time. And you can see the fund families continue to grow. We've been successful in expanding our funds here, but we're thoughtful and methodical when we launch new funds, and we do so because we want to ensure success. What we typically do is identify a client need where we have the experience and the track record to meet that need. And we create a fund around it. We typically start small to kind of gauge the interest and then we go from there. You can see they include the kind of stack of fund names. The majority of these are kind of traditional closed-end drawdown funds, but we also have increasingly Evergreen funds. On the next part, I'm going to walk through the closed-end funds. My colleague, Steve Brennan, will talk about the Evergreen Funds here in a minute. But we'll start with the most established of our funds, our flagship funds, if you will. First, the secondary funds. These are portfolios of mature assets. They offer J-curve mitigation, diversification and deployment. Secondaries has been a really interesting part of the market and a part that is growing and growing significantly, along with the kind of maturation of the overall asset class, so it makes sense. But it includes an array of different types of opportunities. No longer are they just LPs selling a portion of what they have, but more and more GPs are using the secondary market to provide liquidity. Next, we have our direct equity funds. These are investments directly into small and midsized businesses, into the equity alongside a general partner sponsor. This allows us to create a portfolio of diversified assets across different industry sectors, across geographies and importantly, across those general partner lead sponsors. We do so in a fee-efficient way, and these are typically thought of as return enhancers. Next, our strategic opportunities funds. These are our direct credit funds. So similarly, investing directly into small and midsized companies, but into the debt rather than the equity. And with the credit component, there is a current income component, J-curve mitigation opportunity, our offerings offer an annual deployment and a short duration. Here, we have our newer funds, at least on a relative basis. I'll start with impact. Impact our direct equity investments into companies that have a compelling financial opportunity and profile, alongside with the business that is driving meaningful and positive either environmental or social impact. And this is important and it allows investors to align their investing with their core mission and values. Next, infrastructure. This is a portfolio of transactions, so secondaries and direct investments, into infrastructure assets. Infrastructure has been resonating with investors because of its low correlation with the public markets, its inflation hedge, it has a yield component and downside protection. And then finally, venture funds. These are portfolios of compelling venture opportunities across funds and transactions. We've purposefully constructed the portfolio to help shorten the duration and mitigate the J curve. Venture continues to be a place that's difficult for investors to build a diversified exposure. And so these funds are meant to do just that. So here you see kind of our suite of closed-end fund offerings. You can see the growth over time. We've been scaling many of these funds for years, decades in some cases. And we continue to offer new funds. And it's really important when you step back and you think about the environment that we're in, growing private market opportunity set, increasing demand from investors and, importantly, a growing appreciation of the value of transactions to portfolios. This really sets us up well to continue to grow this platform, both by scaling our existing funds as well as continuing to introduce new funds. So with that, I'll turn it back over to Andrea to continue to talk about other parts of our business.

So you've heard from Jackie quite a bit about our discretionary area of the business, and this is a key area of growth for us. I will turn now to a nondiscretionary area of business, which, honestly, is where we cut our teeth. And in many ways, it also is a growth driver. Historically, when we started in '91, we were focused on this in the U.S. pension plan. And what is the advisory business? Essentially, it's leveraging our platform to become an extension of staff, to add resources to what might be a brand-new program or a program that's long-standing and need some additional resources. So why is this a growth area? It provides us the opportunity to work with institutions around the world who may not have the investors in private markets, but really want to start and want to learn and are just kicking off. So we'll leverage advisory. The way this works, you heard a little bit about the fee earning AUM. It's different than the discretionary side because often this is a fixed cost. It's contractual, and we're paid on that contractual basis on the advisory side. So this remains an important area for us. I will also say that the assets in this area fall under the AUA category, which you will see in our earnings. Now if I move over to reporting and monitoring, this, again, is also a critical area of business. We're providing this across the full client base, but we also offer this on a stand-alone basis. So when you see fees that show up in reporting and other, that's where this is coming from. It's an incredibly powerful tool. There are large institutions out there who really need us to help them with what is a long-term asset class. It's not just long term, there are daily feeds off of this asset class. We're constantly looking at cash flows, distributions, contributions, all the capital calls. We're feeding that into our team and into our technology, which I'll talk a little bit about. And it is a huge contributor to value to support from many of our clients and again, we're selling this directly. So we are -- we've also established and have the resources in-house to support from an accounting standpoint, all of the accounting work that comes along with this, often, we have quarterlies and we also have K-1s that are key components of managing a private market portfolio. It is a sticky area. Jackie talked about sticky. I think that's true here as well because once you send this into reporting and monitoring team, again, this is often a 10-, 12-, 15-year asset class for some funds, it's sort of hard to pick that up and move it. And then I will add in the next slide, the technology that we layer over top of this, which makes it even harder to walk away from us because we've created really this game changer in the industry. Our technology, which Griff will talk a little bit about more in depth actually on Cobalt, we are using this as the way to manage the reporting and monitoring information, all those cash flows that are coming in, all of that data is getting fed into the system. I would say enormous volume of data, which you saw in the prior page. But here, data is only as good as you can actually overlay an engine, an analytics engine to really pull information out of that data. So we're utilizing this as data analytics to help us underwrite. It also helps us make decisions, key decisions, things like I talked about in our portfolio management group. Bluntly, again, it's also a user interface for many of our clients, so it helps them do their own portfolio management and portfolio tools. So incredibly powerful system. We've created this system on our own, again, invested enormous resources, not just in the global footprint and the human resources and the offices around the world, but continuing to invest meaningfully in technology solutions, which we think are just differentiated within the private market space. And here, the fees that would come from just the technology would also be embedded in the reporting and other line item in the income statement. So last but not least, I'll talk quickly about our distribution management. This is a small fee earning area within our income statement, but it's an incredibly powerful tool. And it's one that we utilize in portfolio management. In the old days, venture and growth would often kick off, again, a lot of distributions. Not surprisingly, a fair amount of that used to be in cash, but increasingly, what we have seen is a lot more stock distributions. The challenge with stock distributions is that the LPs or the investors here would sort of sell them immediately into the market. And you can just imagine what happens when you're sort of dumping it all at the same time, the second you get the stock. Many of our clients are not set up to do this. And so in 2013, we acquired this company. We embedded them and integrated that into our business, and it's an incredibly powerful tool for us. Again, it allows us to thoughtfully sell down the stock once we've gotten it to ensure that we're maximizing again the performance for our portfolio. So again, still small fee component, but it's an important tool as we think about that one-stop shop and entirety of delivery mechanism to our client base. So I'm going to turn it over now to Steve Brennan, who's going to come in and talk to you a little bit about our private wealth solutions and he's going to spend more time on Evergreen, which we know is an exciting area of growth for us.

Great. Thanks, Andrea and Jackie. Appreciate it. As Andrea said, my name is Steve Brennan. I head up the Private Wealth Solutions business here at Hamilton Lane. I'm going to spend a few minutes talking about our Evergreen Fund platform, which is an area that we're incredibly excited about here. Before I jump in, in specifics, I wanted to talk a little bit about the macro and some of the reasons why we're so excited about the private wealth efforts and the adoption of the private markets by the private wealth community. And so if you look at this chart here, on the right side of the page, there's somewhere around $280 million to $290 trillion in global AUM as represented by the high net worth world and the institutional world. And that wealth is relatively split evenly between individual investors and institutional investors. So about $140 million to $150 trillion each. But if you look at the adoption of the private markets or alternative investment fund by those individual areas, individual investors only represent 16% of the AUM in the private markets. And so there is a huge gap there between the adoption of institutional investors of the private markets and what individual investors have done to date. And we're excited to report that we think that, that gap is actually narrowing. The reason is that we conducted a survey of 250 or so financial advisers around the world recently. And we asked them questions like what percentage of your clients' portfolios do you anticipate allocated to private markets in 2024? And you could see somewhere about 52% of those said they're allocating 10% or more of their client portfolios into private markets. The remaining 48% were somewhere below 10%. But what was most encouraging that we heard was that of those people we surveyed, 70% of them said that their allocations to private markets in 2024 will be greater than what they previously allocated to private markets in 2023. And so allocation to private markets are growing by financial advisers and their clients. And we think that, that gap of adoption of the private markets between institutional investors and individual investors will be narrowing. The reason -- the primary reason that we believe that, that gap is narrowing and that there is significantly more adoption of the private markets in the private wealth space is the introduction of the Evergreen Funds or semi-liquid funds. And so if you think about prior to the introduction of Evergreen Funds, if an individual investor wanted to go into a private equity or a private markets fund, they would have the experience that you see on the left side of the page here. So they would make a commitment to a fund. That fund would have a 5- to 6-year investment period, during which their capital will get called down periodically as investments are made. They would begin to receive distributions from that fund in years 4, 5, 6 and beyond. They wouldn't control the liquidity. They would control when they get those distributions, just that they would get them back sometime in the 10- to 12-year life of the fund. And then in terms of diversification, they would have to make commitments to multiple funds or a fund of funds in order to get diversified exposure. And so if you think about what the Evergreen Funds bring to this space, it really solves for a lot of those challenges of traditional funds and our really custom catered to the needs of individual investors. And so when an investor comes into an Evergreen Fund or a semi-liquid fund, their capital is fully invested on day 1. When you think about the administration, that means that you don't have to make any capital calls and importantly, the investment minimums are substantially lower for Evergreen Funds than they are for traditional funds. So in a traditional fund, you might have to meet a $5 million to $10 million investment minimum or maybe access the fund through a costly theater fund. In an Evergreen Fund, like a Hamilton Lane private asset fund, the investment minimums is as low as $50,000. In terms of liquidity, this is probably the biggest and most important element you -- in an Evergreen Fund, you typically see monthly or quarterly liquidity in some limited basis subject to certain restrictions. And then in terms of diversification, you're investing in a fully diversified portfolio on day 1, and you're doing that typically in a cost-efficient manner with someone like Hamilton Lane because we're investing directly into transactions not into private equity funds where there would be a double layer of fees. And so as we talk to investors about Evergreen Funds, we get lots of questions about the key differences between the investor experience for someone in a traditional private equity fund and the investor experience in an Evergreen Fund, and then we get further questions around the returns that you could expect from an Evergreen Fund and should they be different than a traditional fund with the thinking being that part of the reason why people are attracted to private equity funds in the traditional structure is that there should be an illiquidity premium that you can achieve by being in a long-dated 10- to 12-year life fund where you don't control the liquidity. And so to focus on that a little bit on the left side of the page, we show really the investor experience in a traditional private equity fund versus an evergreen fund. If you look at the dark blue mountain there, that essentially is the invested -- net invested capital that an investor receives when going into a traditional fund. So you could see -- you start to move up the mountain there during the 5- or 6-year investment period of a fund as capital is called. You sort of peak in years 5 through 6 when all the capital has been invested in the underlying portfolio. And then as distributions come in, your net invested capital starts to decrease. You contrast that with an Evergreen Fund. At the bottom of the page there, you could see, in an Evergreen Fund, your capital is fully deployed on day 1. It stays fully deployed for 10 or so years, however long you choose to be in the fund, if you don't request liquidity. And there may be a small percentage, approximately 10% or though -- or so there that is allocated towards shorter duration, liquidity-type investments. And so vastly different experience in terms of the invested capital between an Evergreen Fund and a traditional fund. And I think that brings to the question around performance, and we think one of the key benefits of what you see here on the left side of the page is the compounding effect that you achieve in terms of your returns by being in an Evergreen Fund versus a traditional fund. And so because of that compounding effect, we think that it actually more than offsets the illiquidity premium that you may generate by being in a traditional fund. And one way to illustrate that is to think about the investor experience. And so the chart on the right side of the page is showing you if you're an investor and you wanted to achieve a certain multiple of your invested capital through investing in an Evergreen Fund or a traditional private equity fund, what return hurdle would you need to achieve in order to generate that multiple of invested capital? And so if you look at the 2.5x multiple there, basically, what you see is if you go into an Evergreen Fund for the 10-year period, you would need to achieve about a 12% or 13% annualized return in order to generate a 2.5x multiple of your capital. If you went into a traditional fund, you need to generate about a 22% IRR over that 10-year period in order to generate 2.5x multiple of your capital. So an interesting way to look at the return profiles. And so now to get into a little bit of detail on Hamilton Lane's Evergreen platform. I'll talk to you a little bit about what we have offering today, which is 3 Evergreen private market funds. We have 2 private market funds focused in the private equity space and one in private credit. We started in the -- our Evergreen business back in May of 2019 with the global private asset fund. This is a flagship private equity Evergreen Fund offering made available for non-U.S. investors. That fund had a really tremendous growth over the last 5 years. It currently sits at about $4 billion in AUM and generated a 14% annualized return since inception. Its sister fund is the Hamilton Lane Private Asset Fund. We launched that fund in January of 2021. This is our '40 Act registered fund available for U.S. investors looking to access private equity. That fund is just under $2 billion today. It's generated a 17% annualized return since inception. And so you could see here really strong private equity-like returns from both of those funds. In aggregate, we have over $6 billion in capital today in our Evergreen private equity platform and we have track records bearing in lengths between 3.5 and 5 years. So we've really scaled up that Evergreen private equity business into one of the leading platforms in the industry. And then more recently, we launched our first private credit Evergreen Fund called SCOPE, focused on senior credit. So that fund was launched in November 2022. It has just under $500 million of assets today. It has just under a 10% annualized rate of return, really a return profile that we would expect out of senior credit today. And then probably what we're most excited about is the product development that we're working on in the Evergreen space. So we would expect to launch this year an infrastructure Evergreen offering. And that offering will include both a U.S. fund and a non-U.S. fund. And then we have a whole host of other ideas and things that are in various stages of product development for us, including a U.S. credit Evergreen Fund, a secondaries Evergreen strategy and even a venture and growth-oriented Evergreen strategy. So lots more to come from Hamilton Lane as we build out our Evergreen platform. So as we move forward here, just to give you some detail on the diversification of our Evergreen platform by investment type, geography, industry sponsor, lots of information on this chart here. I think what I would highlight for you is that in Hamilton Lane's Evergreen platform and across all of our strategies, we take a multi-manager approach. And so what I mean by that is every time that we go and access or invest in one of our Evergreen funds, we're investing alongside of a leading private market sponsor, either directly into a transaction or acquiring a fund interest in the secondary market. And so at the bottom, if you look at all those colors, that represents all of the different sponsors that we work with in each of these strategies in our multi-manager approach. And I think that's a huge differentiator for Hamilton Lane in this space because as the Evergreen market grows and continues to scale, the biggest challenge for a manager like Hamilton Lane and others will be finding the deal flow to actually execute the transactions. And so for us, you could see here, we're already working with hundreds of sponsors across our Evergreen platform to source deals, and we'll continue to be able to do that as we grow the platform. And so moving forward, the last couple of slides here, I'll talk about the growth of our Evergreen platform. It's been a really tremendous story for us. You could see we started in May of 2019. You could see our global private asset funds experienced 162% CAGR. Our private asset fund came in January 2021, 148% CAGR. In November 2022, we launched our SCOPE fund, over a 400% CAGR there. And you could see the growth of the platform generally and then the impact that having new and additional Evergreen Funds has on the growth of the overall platform. And so that's -- if you look at this picture here, you could see exactly why we're incredibly excited about our product development efforts in the Evergreen space. And then the last slide I'll lead you with here is a little bit more about the growth. And what we're focusing on here is the net flows into our Evergreen platform. So what this looks at is how much capital are we taking in, in subscriptions versus how much capital we're paying out redemptions. And I think the most important takeaway from this chart is that going back 5 years, we've never had a quarter where the amount of money we paid out in redemptions has been larger than the amount of money we've taken in, in contribution. So we've been net positive in terms of our flows from the beginning and every quarter since we started. You could see in May of 2019, when we started the GPA fund, we added the PAF fund in January 2021 and I'd highlight November -- or I'd highlight September 2022 as an area where we were at a particularly down period in the public markets. And if you look at just the growth of our platform since then, with the addition of our private credit offering, and then in April of 2023, we were added to 2 of the largest wirehouse platforms here in the U.S. for our private asset fund. You could see the growth has really increased significantly. And we would expect that growth to continue. I think it's been a great story for us at Hamilton Lane with the Evergreen platform. We're incredibly excited about the 3 products that we have today and even more excited about the new offerings that we'll be coming to market with shortly. So with that, happy to turn it over to my colleague, Griff Norville, talk about technology.

Thanks, Steve. Hi, everyone. Thanks for spending time with us today. My name is Griff Norville. I'm Head of Technology Solutions at Hamilton Lane. And you've heard a lot about our data in tech already today. I hope to spend the next session making it come alive for you, showing you some tangible examples of how we approach tech and how we fit it all together. Now fundamentally, we think the ground is shifting in this industry, in this asset class. There's a separation here between those that are dedicated to using data to drive decisions, dedicated to investing in their tech stack. And those that are falling behind. Erik showed the bubble chart earlier. I'm reshowing it here. It's one of our favorite charts that we put together. Each little dot here representing a manager that is raising money on the fundraising trail or a manager that has co-investment deal opportunity for us or a manager who has a mature fund that's available for us to buy in the secondary market. It's an incredible amount of information to track However, there's no great database out there for the average investor to gain access to. This is private information. And we are in a privileged position here where we have not only access to it, but we have invested over decades in the ability to gather it, organize it and make sense of it. And I think it's just as hard to do that second half. It's not just about how big you are and if you have access to it, it's have you invested in the ability to use it? On the investment side, we believe that superior insights and differentiated thinking can be driven by this data. And hopefully, that leads to superior returns. And on the client side, they're looking at an asset class that is incredibly opaque and complex, and they're looking for a partner to help them navigate that. And our data allows us to do that on their math. This is the database we've built. We believe it's one of the largest, if not the largest, databases in the industry. We are extremely focused on that. The new frontier of this data in recent years has been all the way down to the portfolio company level. So as Andrea mentioned, we've got this great back-office monitoring and reporting business. We gathered the cash flows in and out of funds across all geographies, across all sectors and strategies and now what we've been focused on is collecting not only the schedule of investments, meaning what is in these funds, but the operating metrics behind these companies, an incredibly powerful tool for us to have. Why is that important? So the thing that is talked about a lot in this industry, of course, is manager selection. Everybody knows, so to speak, that hundreds of basis points are available to investors if they select top-performing managers. The outperformance of top performers is so large, the spread of returns is so large that picking the best managers, picking the best investments can lead to hundreds of basis points in outperformance. That's what this chart is demonstrating, also avoiding the bottom quartile, avoiding the worst investments can do the same. We use analytics to drive to that decision. Now everyone talks about that, everyone is focused on it. The second half of the story is something that we think is way too undervalued in the industry and that we spend a lot of time thinking about. We've got a whole staff of the portfolio management group upstairs, a staff of data scientists that think about forecasting allocation models, portfolio construction as a concept. How to fit and design a portfolio for client-specific needs, how to optimize the portfolio broadly across Hamilton Lane and all of its accounts. We think that decisions made here can also add or detract, if you're doing it wrong, hundreds of basis points of performance. So those 2 things are equivalently important, and we spend a lot of time thinking about them and using data to drive to our decisions. So data is half the story, technology is the other half. I'm going to walk through how we think about technology and the decisions that we make to bring on new applications, new tools and new partnerships here at Hamilton Lane. The first part is simplify everything. We've got that 30 years plus of experience. We know what the problems are in this asset class in this industry. We do not want to be complacent about that. We are focused on solving problems for ourselves and solving problems for our clients. We are listening to our clients and partners. We keep our ear to the ground. Clients are always inside here at Hamilton Lane. We are a very client-focused business. So not only are we solving things for ourselves, we're listening to their needs. And then it's reflected back and it helps us grow as we design tools that they can use. And you've heard today a number of times how sticky these relationships can be because we've always got the clients inside and we are focused on making their lives easier as it relates to gaining access to and evaluating investment opportunities in this asset class. Third is that we talk about innovation all the time. It's a core part of our DNA. It's in our values that we talk about across the entire firm. Just yesterday, there was a hackathon that was held at the top floor. You usually hear that term among technology companies, but we are a technology-enabled business, and we host hackathons quite frequently among different departments, across the firm at large to innovate new ideas and see what comes out of that, a ton of interesting things typically come out of an activity like that, and then we go search down the in value that we can achieve from deploying these ideas. And the third is think boldly. We're not afraid of disruption. We don't want to be passive and reactive to the change that's coming in this industry. We want to be part of the driving force of this change. We often get asked, though, why not just leave it to the technology companies? Why do we think that we are in a position to innovate as an investment manager? We've talked about the data, but again, I'll say no one else has it. We think it's super valuable. We don't share it easily. We share it with key partners that we're innovating with and we're protecting it for us and our clients. So we've got the data. That's requirement often in order to make true innovation in this asset class. The second piece is that we have a shared purpose with our client. And this doesn't come with a lot of technology solutions that would otherwise independently be built in this asset class. We put billions and billions to work in the market every year. We feel the pain. And when you're using a technology tool built by us versus one built by just a pure tech company that's not an investor, you really do feel that difference. Our tools are built and maintained by the experts. And that's why our clients come to us to use them. We've got a very unique effort here at Hamilton Lane called Hamilton Lane Innovations, HL Innovations. This was an opportunistic and now it has a bit more structure around it. Strategy for us to identify companies that are going to change the way this business operates to pull us from the stone ages of this asset class into the digital age. You see here, we've done about 18 investments over the years off of our balance sheet. These are companies that are focused on increasing transparency and access to data on the left-hand side, in the middle, opening up access points for newer investors to the asset class. On the right-hand side, making everything simple, making it efficient. There's way too much friction in this asset class. And we're going to talk about how we go about solving some of that. So there are terrific companies here, management teams, investors, many management teams and investors are shared across these companies. We've now been doing this for a decade-plus. And so some of these are mature and have been sold and been very successful, and we are choosing to repartner with some of the same people that had so much success at places like DealCloud and high level just to pick a couple that are in a much more mature phase. All right. This is the fun part for me. We're going to take some of these logos. We're going to line them up and show you how we fit these things together. The most common question I get asked, though, is to look at all those logos and people say, that's -- I can't evaluate all that or fit that together. Isn't there just one solution to do it all, one easy button? The unfortunate truth is we have not found that easy button. We find that any system that tends to be a CRM, an analytics tool, an allocation tool, sort of this inch-deep, mile-wide approach, they just really tends to underwhelm. So what we do is we find the best-of-breed solutions, those are the logos that you saw in the earlier chart. And we use our in-house technologists to fit that together. And sometimes we build. So this is both a buying, building and partnership effort and using in-house people to fit it all together. So this is one example. Not every logo is shown on screen here, but this is one workflow, I'm going to show you 2 workflows in total. This is the pre-investment or diligence workflow. And for those of you that might not be familiar with this asset class, I'm going to have to describe some of the pain that we go through. And so I will set some of these things up. Otherwise, it might be hard for you to understand why it's so innovative. What's that on the left-hand side? Daphne. This is a newer investment for us. All right. So let's say that you are an investor in this asset class and you're interested in identifying new investment opportunities, new funds that are coming to market. How do you go about doing that? You typically don't have access to a terrific investment database, but you might be looking into ones that you can subscribe to. What you're most often doing is you're being reactive. GPs are sending you PPMs or pitch decks, that's a private placement memorandum or a pitch deck over e-mail where you're getting introduced to somebody by e-mail. A lot of it is through e-mail or they're coming into your office and asking for a visit. You're not sure whether you're seeing all the opportunities in the market in the first place. But then when you do want to evaluate a manager, they might give you this PDF document that's unstructured and hard for you to extract data from, and it might give you access to a deal room. And the deal room experience, which I imagine many of you are much more familiar with, for fundraising is super archaic. We're talking about an experience where you're logging in, spelunking through folders, pulling down PDFs. Every GP has Excel files of their track record, they all look different. You're trying to run an operation. We're trying to run an operation that has 1,000 GPs a year coming through our door. We need to standardize all of this information and run it through our analytics systems. It's incredibly hard for us to do. Daphne is revolutionizing the way this process is going to work. Daphne is going to offer a service to general partners. Daphne will take the documents from the GP and whatever format the GP has them in. They will utilize their AI and machine learning tools to extract data into the standardized Daphne data model, and they will send that data downstream the systems where it needs to go. The GP will have full permission to control over where that data goes. So the GP data is not out of its control. It's controlling it. But the GP is choosing to say, yes, please send my data downstream to Hamilton Lane system, that would be Cobalt. Or send my data downstream to another investment manager or consultant or marketplace. The GP has control over that. When the GP updates the data, it updates in every system. It flows right downstream. We're living in a totally different world now, getting rid of that e-mail, those PDFs and all the data extraction that we have to do at Hamilton Lane. And now Cobalt is being refreshed with all of the new data, updated data on track records or fundraising schedule or changes to terms from any opportunity that's out there in the market. That Daphne data flows downstream to our CRM, DealCloud. DealCloud has been described to you today. It's the secret weapon of our investment team. Our investment team is all across the globe. They're focused on secondary transactions, direct equity, direct credit, fund investment, but it's one global team. They are staying connected and interacting with managers across our entire team through DealCloud. Within DealCloud, we have automatic alerts that flow to our key investment team members when certain key triggers are hit. We hear of a co-investment opportunity. We hear of a secondary transaction. We might hear of those things in a totally different conversation. Maybe some basic update that we're having or typical update we're having on progress with the fund investment. We might hear something like that. That triggers an automatic alert that's actionable. We have a reward system. It's called Project Skills, and you don't just get candy for it. We are rewarding our employees for surfacing actionable investment opportunities through DealCloud. DealCloud was built bottoms up for this industry, frankly, bottoms up for us because we were so early in using it. And that's a consistent theme across these groups. We are typically early. We've got a voice at the table that we want to exercise. They value our capital. They also value our experience and insight in how to make their systems successful. And so DealCloud, just like many of these others, was built with our industry in mind, our workflow in mind. It's not a generic CRM. It's built for us. And DealCloud is able to take that model and they have a lot of success bringing it to others in the marketplace, and we were happy to see them do that. Before I go right hand side, I'm going to go vertical. So for some percentage of the deals, we're going to do deep due diligence on them. How does that process go? The old process for conducting deep due diligence on a manager is we would take this big Word document with hundreds of questions. We would send it to the manager, they would fill that out. We would have no visibility into where they were in filling that out, we'd be pinging them with e-mails. They might have a question about a question that they saw in the document. We'd have to explain that. We've got rid of all that. DiligenceVault is a digitized questionnaire and interaction system for us in the GPs. Now we are sending the GP a digital interface for them to complete the information that we need to gather about their fundraise. If they have a question about a question, that conversation happens right in the platform. We're tracking where every GP that we have in our funnel is in their response process. All of that data is digitized and now in our database that we can cross-compare managers and immediately raise things like a compliance flag. All of that was incredibly hard to do when it was just in Word documents. So we've moved a long way away from that. That's the qualitative side we're collecting there. We also collect some data on track records. We talked about that. When it flows down to Cobalt, that's quantitative due diligence. Now this system is super unique in a couple of ways. One is that it was so strategic to us that we brought this system in-house. Started as an external investment eventually became something that we've been running in-house for a number of years. Our investment teams are using it. Our portfolio management teams are using it and our clients are using it. So we're building it ourselves. And upstairs, you would find a team of product managers and software developers that we're staffing to build our own tech. It's been very popular and valued by our client base, and we give our clients direct access to it. What it allows us to do and for our clients to follow along with is quantitative due diligence on managers. In the past, we might review a manager's track record somewhat in a vacuum because we didn't have a database of 150,000 private companies to understand how those manager's deals compared to another manager's deals, but now we do have that capability. So we can take that manager's detailed track record, understand how their performance compares to other private market investment opportunities, our managers and their track records, how it compares to the public market, doing something called a PME, or public market equivalent analysis. And then how those deals compare, so within a GP, what purchase prices are they paying? What leverage levels are they using? How are they creating value? What are the levers for value creation and how does all that compare against their competitor, someone else that we might be evaluating for capital that we might put in on behalf of a client fee. And all of that is transparent for our clients to see too, which is fantastic. Cobalt has other features on the post-investment side, which I won't go into detail today. But one of those is to place this prospective investment in your portfolio and see what happens to your cash flow profile. The ability to forecast capital calls and distributions and plan for future exposure targets is incredibly hard in this industry because you saw some of the cyclical nature of cash flows in and out. But we have 50 years' worth of data, we are able to analyze average cash flow patterns by strategy, which are all very different and how those strategies react to different economic cycle -- points in the economic cycle. So where are we in the cycle? Let's place that overlay on the forecast model. Let's have an active conversation. Our clients have access to that tool. We're using it to talk to them about it. It's very effective in us helping plan portfolios internally and talk to our clients about what it all means. So Cobalt, as I mentioned, and I meant to let a video play here, so I'll buy some time while the video plays for you all. Cobalt is something that our clients can access. Again, we do sell it independently. But as Erik, Andrea and Jackie all mentioned, this has been super effective in pairing together with other solutions that we have at Hamilton Lane. We are a global investment manager and solutions provider to our clients. Oftentimes, that relationship is now stretching across multiple aspects of our business, product investing, perhaps a separate account, technology. Most of our big clients all want the tech. If you don't have an internal team, you might not have much use for a technology. Who's going to log into it? If you're outsourcing everything to us, not as useful. If you have anyone in-house that wants to follow along and do their own work, this is incredibly powerful. I'll just say, and we'll come back to this, the data, everything from all these systems is flowing into what we call our Hamilton Lane data fabric. And so hold that in your mind. We'll come back to what that means in the next chart. But once we make an investment decision, we're going to need to allocate that. We are fortunate enough at Hamilton Lane to have over 150 client accounts and accounts that need allocation for these investments. It's extremely important for us and our clients that we allocate capital transparently, fairly, we have a record of it. We use all of you to track -- to check any prospective investment against the restrictions that clients might have in their accounts, their targets, any specific rules we might have about the account and then we utilize the system to allocate across those and keep a record of it. We highly encourage any of our clients to kick the tires on that system to demonstrate that we have a fair and transparent allocation process. And then we also ask them to go ask all of their other managers what their process looks like. And we think that the amount of time and effort and devotion we have put on this makes us really stand out in terms of our process. Okay. We've talked about a lot of pain already, but the worst part for me is the last part, which is you actually want to subscribe to a fund. And you would think that would be easy because we all want to attract capital, but it's actually the hardest, most painful part of the process. You're giving all of these forms to fill out, and you're sending private information over e-mail. As soon as you fill out the 60-page document, you're hit with another legal document that you have to read and fill out more information. And you finally have success you've committed to that fund. Oh, you want to come in to another fund? Let's do it all over again. And so what IDR is going to do, what it's doing is working with the GPs to digitize that subscription process, standardize it across GPs and the LP community. As an LP, you make a subscription and fill out that information once an IDR, and now you have an investment passport that can be applied on your next commitment. When you say it like that, it doesn't seem too complicated, but the industry is still stuck in this past. So you can see how much room that we have to scale and grow by innovating in this industry, just like other places in finance, you see where this is going and where this needs to go for us to continue to grow. Last slide for me. We talked all about pre-investment in that whole process. Post-investment, there's intense amount of data that we have access to. If we can understand how to capture it, organize it and make sense of it, we can drive a huge advantage. And so it's a huge focus for us. We are telling clients that we are interested in increasing transparency in this asset class on their behalf, and we want to give and flow that transparency back down to our clients. We've got a number of tools involved in the process. Two that I want to talk about today would be Canoe and Novata. Canoe, think about this as a new way to capture financial data off of the cash flow notices, the partner capital statements, the annual financials that we're getting from GPs. These things are e-mails and PDFs that's buried underneath paragraphs and in the table somewhere, there's the key data point that you want to pull. Now when we use Canoe, Canoe is using AI and machine learning to extract all that data, highlight exactly where it took it from, show you the data in a data table on the right across all of your funds, and it's highlighting exactly where it pulled it from. Not only that, with this whole idea of going to a data room to pull a document where you got to put in your user name, password, pull that document down, Canoe can do that automatically as well. They're connecting into data rooms with their Canoe connect product. So for financial data, Canoe is allowing us to scale without having to continue to add tons of people to gain access to all these documents, but it's also allowing us to go deeper in the documents because it's not just about the high-level cash flows anymore, it's about breaking them down into fees, expenses carried to understand the companies and the operating metrics of these companies. The more time that we have because we automate the easier stuff, the better for us. Novata is about a whole new type of data. There are many clients around the world that we work with that want to put ESG and sustainability KPI risk framework on their investments. And we want to meet that client where they are in their investment objectives. The problem is, where is this data? The GPs might not even be collecting it from their companies. Novata is offering a technology and a service to GPs to help educate their companies on how to collect this data, where it might be, what needs to be collected. Then Novata has technology to allow that GP to collect on a regular basis, repeatable basis, that data from their companies. And Novata now has built a very large database, an expansive set of benchmarks and tools to send those sustainability KPIs downstream to LPs like us. So a tremendous company here that is meeting a newer need in the asset class, but one that continues to grow in popularity. So think about all the systems you saw on the first chart. If you think about Canoe and Novata, that's all flowing down into what we call the Hamilton Lane data fabric. Now what I really want to underscore here is that there is centralized data that our teams around Hamilton Lane are trained on and capable of accessing in any number of ways. Each of our investment teams is tapping into this data source. The systems themselves are all synced. There are not CUSIPs for this industry. We go through a ton of work to master the data, to have consistent funds linked across systems to the private companies themselves linked across systems and all of the data to be high quality, quality controlled. An example of the use that an investment team might get out of this, just briefly, the Rocket model is something we talk about a lot. The secondary team is super hungry for data. When they are looking to purchase a fund interest or a portfolio of fund interest, they're going to bottoms-up underwrite the companies, the private companies within that portfolio. And if we have information that other potential buyers might not have, of course, that puts us in an incredibly competitive advantaged position. We know that we're more confident in our pricing and we know we can go after the business a bit harder. So the Rocket model automatically will take the portfolio that we're getting from a broker or from a proprietary process, the funds that are in there and will reach into our database. It will know what companies are in there, what are the operating metrics for these companies, what's the history of performance. That data is not available to everyone, but it's available to us. And we've built tools to automate that early screening. It gives the secondary team the ability to -- I think they had $240 billion worth of deal flow last year. It gives them the ability to process all that. Andrea said, or Erik said, you see a lot, select a little. And that's how we go about that process. So hopefully, I helped take our data advantage, technology advantage and really illustrate it through these graphics. The pace of innovation, of course, is just speeding up. I know that you're reading about it everywhere, but we're really excited to continue to build internally for our investment teams, our clients and our shareholders. And I'll turn it over to Jeff to talk about our financial metrics.

Thanks, Griff, and hello, everyone. My name is Jeff Armbrister. I'm the CFO here at Hamilton Lane. I've been in the position for about a year, before being named the CFO, I was the Head of our Direct Equity and co-investment platform for about 5 years. And my goal today is to just walk you through our P&L, give you some insights that hopefully allow you to track our performance whether on earnings calls or otherwise and allow you to build your models a little bit better. So since I'm going to be talking about the P&L, it's great to start off with a slide like this, which highlights our tremendous growth, especially when you look at it from our IPO to where we stand today. In every key metric that we track and report on tremendous growth, but it hasn't always just been growth or it's not only just growth, it's also increased earnings, growth in the earnings and growth in the margins. So all that's really important. It's great for the business. It's great for our shareholders, and it paints a great story. But I think you shouldn't be surprised by this. If you listen to when we talk to the market, when we talk to the press during our market overview, during our quarterly earnings calls, you understand that we feel like we're in the early innings of a big tailwind in the private markets. And we're uniquely positioned to take advantage of that tailwind. Now I'm going to walk through again the P&L, but before I touch upon the revenue, I just want to deconstruct that P&L at a high level for you. We look at our business really through 4 different components and report on these fee-related earnings. Now this is something that we spend a lot of time talking about to the market. And rightfully so, because it's our most repeatable, part of our business, the largest part of our business, and it's -- and it really starts for a management fee and takes out the expenses associated with that. And that's how we get to our fee-related earnings. Now in addition to that is our net incentive fees or net performance fees. This is really just our carried interest. And again, an important part of our total earnings and cash flow generation picture but it's not as repeatable and it's more volatile than our FRE margin or FRE or line item. This though, really does provide some insights into market sentiment. So when things are in the go-go period, where there's a lot of buying and selling activity, a lot of M&A activity, you'll see this creep up. When it's not going so well, or it's we're in a challenging period, that line item will creep down a bit. But together with our FRE and the net incentive fees, that really is our operating earnings. And the next 2 categories are really just below the line. They're tied to our balance sheet investment activities as well as the net interest expense, which is tied to our capital structure, and we'll touch on those a little bit later. But let's take the elevator back up to the revenue line item. And the best way to think about it is it's generated through 3 separate channels here, our separate accounts, our specialized funds and our advisory business. And our separate accounts and specialized funds they're pretty similar. They're long term in nature in terms of the management fee and revenue generation possibility, and that's really just because of how they're structured. The AUM that's captured within these 2 categories, we charge a basis point fee on them, either it's based on committed or net invested in the case of our Evergreens, which sits within our specialized funds, that's on a net asset value basis. And all that flows through our FRE revenue or management advisory revenue fee line item. We also have the ability to earn net incentive fees. So we talked about the carry that flows through in our separate accounts and specialized fund revenue as well. Now for the advisory business, this is really a fixed fee business. This is something that can be long term in nature, 10 to 12 years or very short term, 30 to 60 days, 90 days, what have you. And this really just depends on what our customers and clients need from us and what they're engaging us for. The other thing I'll just point out before leaving this slide is just the size of specialized funds as it relates to our revenue contribution is $58 million, if I'm reading that correctly. And this has been growing, and you'll see that in later slides. Now, this is a very important slide. And it also has themes that are going to carry over in different slides as I go through my presentation here. But this is our fee earnings AUM and again, this is what our management fees are charged off of. And this balance, as you can see from our IPO has been growing pretty dramatically and in all categories. And the stories here are, in addition to growth, we've been able to expand into different categories. We've been able to derisk the business by diversification, and we've been able to go where the market opportunities are. So starting with our base of the customized separate accounts, we've been able to add on specialized products. That has become a more material part of our business and as well as this balance. And then you just look at the specialized -- or sorry, yes, the specialized funds business that's been adding on to this, the direct equity secondaries has had a huge amount of growth, direct credit and again, Evergreens in such a short period is becoming a very large contributor to our fee earnings AUM balance. So holding everything constant, revenue can only grow with this type of activity. Now how does the flow -- how do the flows work with this fee earning AUM balance? Well, there's a couple of different things here and we'll focus on the separate accounts and the specialized funds. On the contribution side, this is really new business wins. You get more new commitments to these different products and separate accounts that's going to flow through that line. Also, if the fee is structured at a net invested basis as you deploy capital, that's going to flow through on the contribution side. And distributions, as you can logically imagine is really related to our realized exits and those returns to our investors and that decreases the balance. The other timing nuance that you should take in account, and this really happens a lot in our separate account business is when there's a fee switch during the life of that contract from a committed to net invested that delta because it is a lower rate, will flow through on the distribution side. But remember, as that capital is deployed on a net invested basis, that bumps up on to the contribution side. So it's really just geography. It's not our customers or clients leaving the business. It's just a timing impact. And FX for those accounts and investors who are on a non-USD basis, small negligible impact from year to year. But again, the growth we've been having more contributions year-over-year, expanding to new products and being able to grow this balance, which is extremely important. Now we've got the best of both worlds occurring here because not only is our fee earning AUM balance increasing, the rate that we've been charging against that balance has been increasing materially. This is just a bridge from our IPO to today. And you can see the Evergreen, which is the largest green bar there, is a huge contributor to this. We're able to charge a higher rate for that business. And then for the specialized funds as well, we can charge a higher rate than we have been able to charge for our customized separate accounts. And the mix is shifting there. So everything is heading in the right direction here. And again, I say we're living with the best of both worlds here. I'll touch on our advisory and reporting business fairly quickly here, and it's been a meaningful grower. It's been a meaningful contributor to our revenue line item. And so it's something that's very important to our fund. You've probably heard through the different presentations today on how we provide this business on the advisory and reporting side. So I won't repeat that. distribution management, this is really us advising our clients on the best way to liquidate any of their public security holdings that they receive most likely from some type of exit event that best payment was presented in kind. Again, something that's growing very meaningfully for us -- we put aside the P&L aspects or impacts aside for a moment. This is probably not the most creative graphic that we have here, but it's a huge contributor to our intangible asset of the data feedstock. And you heard Griff talk about earlier on how important this is, the business intelligence that we gather. This flows through every part of our business, whether it's investing or just advising our clients or just being smart about what we do, which helps us in our pitches and assuming and acquiring new business. This is extremely important, and as I said, is a meaningful intangible asset for us, one that we feel is a competitive differentiator versus the market. Now bouncing back to management fees. Again, you can see the impact from the growing fee-earning AUM and the growing fee rate is presented here in dollars on how our management fee has continued to grow. And as you can see here, the specialized funds is becoming a more and more meaningful part of the mix here on the management fee side, which again is something that's favorable for us. I think the other thing to consider here, and that's extremely favorable for us is just our diversification of our revenue base. And this slide speaks to it from a client perspective. Going back to our IPO days, we were very pension fund heavy, labor, corporate, private -- or public pensions. That mix has shifted. We have now a huge contribution from the high net worth side in the family office side. The financial insurance piece has been growing as well. In fact, I don't want to -- all these pieces of the pie have been growing. Just those have been growing at faster rates and again, it speaks to our ability to go where the puck is going, to unearth opportunities with our clients in different parts of the business, different parts of the financial industry that are interested in the private market and win our share, in fact, win more than our share in those businesses. We've also diversified or lessened our concentration when you look at it from our top 20 customers and clients. IPO time, that was about 35% of our business. Now that's shrunken down to about 20% of our business. That's very, very meaningful in terms of derisking our revenue base. And it also speaks to just the growth of our business in different parts of the -- different parts of the universe that focuses on private markets. And we've also been able to diversify more so by -- on a geography basis as well. We're all over the world. And again, in my view, stabilizes our revenue stream. And this has been tested. I mean, just look at what we've gone through recently with the impact of COVID, the regional banking crisis, the different geopolitical issues that have been going on around the world, higher inflation, higher interest rates. We've been continuing to grow, grow, grow, despite all these things and winning business from all different types of clients from all around the world. Now grow, grow, grow is important, and we say that a lot, but we also have to mind what's going on in the expense side of the equation here. And we have a maniacal focus on this, truly do. We've been able to hold our target FRE margins in the low 40% while we're heavily investing in our business. We need to acquire the best talent in the world. We need to be where our clients are. So that means more offices. That means that we're traveling more. That means that we're investing in technology and data more. But we've been able to do this in a mindful way with our shareholders in mind. And again, hold on to the targets that we've held in the past. Now I have a couple of more slides here before I hand it off to Erik, but I just want to talk about our incentive fees and unrealized carried interest. This balance really is a diversified mix of all the different investments we make across our platform. There's real asset value here. There's real cash flow generation here. And again, on the aspect of diversification. This continues to be diversified. And so this is, in my view, a very positive thing for our business. And we're also investing with the best general partners in the world. So we feel really good about the investment opportunity and the cash flow generation opportunity in this piece of our business. The other thing I'll say is that if you're tracking and thinking about modeling it, it should track towards our fee earning AUM in times when things are going good, the rate of increase may be a little bit lower because we may be selling more things, but in times, again, conversely, slower periods, this may build up a bit more, but those are what I would pay attention to when you're looking at this balance. Now finally, just back to the below the line items I mentioned, just a little bit more detail on that right now. the equity and income of investees. This is really just our GP commitments and investments in our specialized products and customized separate accounts that require this. This will change as we mark-to-market on a quarter-to-quarter basis. There's a quarter lag here. And you'll see a track generally to what we're seeing in the public markets, of course, we always feel that we're going to outperform, and that's the beauty of the private markets and the promise there. But that's how to think about that. The other income, this is all our other balance sheet investment activities are captured here, most notably our technology investments. This is, again, another differentiator for us. We want to invest in opportunities in these companies that Griff was highlighting previously that are really exciting, movers and shakers within the financial markets, that we can be a strategic partner to them that we feel that they're going to have accelerated growth, accelerated influence, and we're getting into these investments on the ground floor, and this is something our competitors have not been able to do. And finally, net interest expense. This, again, pretty self-explanatory. I think the 2 things or the couple of things I want to mention about this is that we're very conservatively capital structured. We have low interest rates. And so this -- we feel is just representative of who we are at Hamilton Lane, finding good deals and being conservative about it and really focusing our business and adjusting the risk profile to the most meaningful parts and most meaningful revenue generators for the company. So I'll just end on saying that -- we've got a great business model. I think you've seen it from the results from our IPO to today. We feel that it's very durable, repeatable and that we're uniquely positioned to again tackle and benefit from the tailwinds that are in the private markets? Right, Erik. I'll take that clicker if you don't.

Oh yes. Thank you sir. All right. So just wrapping up here, sort of the why Hamilton Lane? I think those of you who had -- a lot of you have been dealing with us for a long time. I think you have -- hopefully, you have found us to be straightforward, transparent, keeping it simple, not kind of overpromising. We're just sort of delivering. And I think the why us story is also simple. We are in a great position. The business has strong client base, good growth prospects, a strong brand, and we're operating in an industry that's continuing to grow. So we have huge tailwinds at our back. Allocations are rising for institutional investors. And as you heard Steve and others talk about the retail space, we are -- I got asked this question earlier, what stage are we in for that? And I said, like the whistle just blew and the game is just starting. We are barely, barely, barely beginning as to what's going to happen in that space. If you sort of think about the retail investor starting to behave much more in line with the institutional investor, and I frankly see no reason why they won't, you're going to start to see them get to 10% to 15% allocations over time. And when you think about the amount of capital that's sitting in that part of the world, it's massive and 10% to 15% of that is a massive amount of capital and this is not going to be a one person wins that space. There are going to be a whole lot of players as there are today in the private equity world for the institutions. There are literally, as I showed you, thousands of funds, all who have good businesses, successful scaling, et cetera. And we think that in the retail space, again, it will be a lot of winners, a lot of capital, a lot of flows, and that's happening. Jeff just went through this on the bottom, but we continue to see huge AUM growth, steady fee rates, margins and we're delivering on that. So our equation has been simple. We've been a strong double-digit grower. We're actually one of the few financial providers that's actually seeing their effective fee rate rising as opposed to falling. And as that mix shift continues for us with more of those retail dollars continuing to come in. We expect to see some of that growth continue. Again, that's just a much, much higher priced product than what we have in the institutional world. So growth across there, margin continue to sort of be there. Huge amount of unrealized carry that we talk about routinely. Again, we don't control the timing of that. But as we continue to get more dollars under management that have a carry associated with them, all of that also continues to grow. From us, as management and thinngs -- in terms of thinking about how we're managing capital, we've been very consistent on the dividend, continuing to increase that year-over-year-over-year since IPO, we generate good free cash flow. We want to make sure we're sharing that back to shareholders, and we've been doing that. At the same time, we've been investing meaningful money in some of the things that my partner, Griff talked to you about on the strategic technology initiatives. That will continue for us. Again, it's just simply very different. You all cover a lot of people kind of broadly defined in our space. You just don't hear them talking about balance sheet investing in a bunch of technology companies like we do. And so we think that, that is a differentiator. And you can -- hopefully, you understood from Griff how that drives real value to our business and most importantly, to our customers. We're also putting more capital from the balance sheet alongside of our clients. So again, as our products get bigger, that GP commitment gets bigger as we add new products, that's more GP commitment. And as we need to seed products, particularly in the retail world, that will also grow. So that's an absorb -- something that's also absorbing capital from us. Lastly, on M&A, I get asked this question a lot, are you going to buy somebody? When are you going to buy somebody? Should you be doing more M&A? We've done 3 deals in 30-some-odd years. So we've done something. I wouldn't consider us massively acquisitive. And I think it comes down to culture. I think if you look at the transactions that have by and large happened in our space, they've been mostly minority transactions. They're not taking control of the business. And that sort of turns you into kind of a business where it's an amalgamation of lots of different pieces. We think that's a hard way to run a culture, and we think that's a really, really hard way to drive margin. And I think it shows that in our peer set where our margins are significantly different. And we think one of the big reasons for that is because we're all operating as to one footprint, one firm, one culture, one team, et cetera. I also think from just a running the firm perspective, when everyone is simply getting paid out of one pot and wants to all help each other continually work hard together and support each other as opposed to your P&L, your P&L, your P&L, your P&L, I think it's just a much way to drive a happier, healthier functioning business. And lastly, we've delivered. I think when we went public, we made an overview on the road show, we talked about what we thought we could accomplish. And we've been doing those things. So we went public back in 2017 with a $16 share price. As of whatever, May 31, we're at $125. And so I think relative to peers, relative to the index relative to the sector relative to anything we want to be looking at relative, we have done a really good job. And we're very proud of this. We feel like we've been delivering for shareholders, we think that's important. And our expectation is we're going to continue to deliver for shareholders. And so with that, I thank all of you who are not here and attending virtually. I thank all of you that are going to be watching this in the future. And a big thanks to all of you who took the time to come here. And with that, John is going to wrap this up.

All righty. Thank you, Erik. Again, let me extend my thanks to everyone here today. We hope you found that very helpful, informative. Obviously, if you have any follow-up questions, I'm always around. We're going to set up here for some Q&A. We're going to get some chairs for Erik, Jeff and Andrea are going to join us for Q&A. [Operator Instructions] And then after the Q&A session is done, for those of you who are able to join us, we will have lunch down on the -- excuse me, the fifth floor here in our building. I will pass the mic around for those who want to ask a question live in the audience. If you wouldn't mind just stating your name so they get picked up for the transcript. And then we'll have -- we'll have our people start to file in shortly here.

Very fancy here with our stools and set up. This is also how you drive margin. Start with my things simple.

I see a number of folks still walking in here. But maybe just kind of kick off with more of a numbers-oriented question. And thanks for the Investor Day and taking all the time disclosure. This is great. Great to see all the detail. You outlined a whole host of avenues for growth as you look out over the next couple of years, new products, new strategies, new geographies scope for growth in the retail channel with scope for a positive mix shift, fee rate expansion there. Just as you're growing the top line mix shifting, it would seem like there could be significant scope for that margin to go meaningfully higher. We look at some of the others in the industry on the GP side granted different business models, and those folks could be well north of where you guys are. So I guess how do you think about the long-term margin profile for Hamilton Lane? Is there a scope for high 40s, a 5 handle on it at some point in the future? How long might that be? And just maybe you can kind of unpack how you see the progression of the margin over the next 5 years?

Yes. I mean, I think to get to the levels that you're referring to there or to get to the sort of the range where the GPs are today, we would need to see a large amount of sort of shifting in the mix -- and I think we would tread cautiously there. So I then think our view is relative to our peers, we're already the dominant margin provider. And we're doing that, as we talked about, with huge reinvestment in the business expansion geographically, more technology. So today, when we wake up as a management team, we're not thinking about how do we get 43 to be higher? So that is not the #1 thing as management we're thinking about. We're waking up and thinking about how do we make sure we're continuing to maintain kind of that high double-digit growth rates and keep the firm happy, healthy and functioning because when you're hiring as much as we're hiring you need to -- and you're adding new offices. Again, we're a people business at the end of the day, as I say, there's no magic machine downstairs that sort of produces all of this. Our people do. And so we want to make sure that we're investing in those people, building the right culture. Now you've seen the margin has been moving up and to the right, and I think that will likely continue over time. But again, we're focused on growth, getting that expansion out there, and we're not sort of focused on how do we continue to get that ratcheting higher. I think on the Evergreen piece, that's something that we're going to need to think about over time. We're a long way away from that. But again, that's a business that could potentially be volatile. Right now, we all talk about kind of just -- it's been nothing but net positive inflows. We are going to need to think strategically about how much of our business do we want tied over time. And again, this is a problem that will not sort of rear its head for a long time to come. But how much of your business do you want tied to something that does have a redemption function. Today, we don't really think about that. Our institutional business is incredibly sticky and so as we wait to see how this retail world matures, that's something that we're going to need to think about.

Seth Bienstock from TimesSquare Capital. I was curious if you could opine a bit on when you look at the 4 potential broad areas of potential additional Evergreen offerings that may be coming down the road here, which of those 4 areas do you see perhaps the largest opportunity over the next 5 years? Which one are you most excited about?

Yes, I'm not sure we know. I think we're so early here with this customer base and trying to figure out what they want, what they need, what's going to resonate with them. We spend a lot of time internally talking about the need for massive education into that channel. Again, so new, so early in a customer base that is literally just learning how all of this works. So some of the charts I showed you on how does the industry work? And how long are assets held? What are valuations and how accurate? We spend a lot of time with that with the wealth channel to make sure they're really understanding what they're getting. Our view is that we need to build out a diversified product suite. And so we're taking the steps to do that to see and to make sure that as people want certain flavors of what we're offering that those are there. Things like credit, I think, continue to just be large. I think infrastructure, again, has the potential to be very large. It's a big space. That's something that much more, I think, is sort of understood fundamentally by a retail investor of toll roads and bridges, and I get big project finance, that sort of, I think, resonates in the idea of I think of that as a long-dated asset. So -- but the answer is, I think, is what I started with, we simply do not know -- but we're going to make sure that we're there and we're well positioned depending on how this all begins to mature.

Dave McGonigle, Copeland Capital. Maybe a follow-up to that is just thinking about -- you said, obviously, very early days in the Evergreen. Maybe you can talk about the distribution opportunity versus how much of it is going to be reliant on new product development versus rolling out what you already have to just broader distribution?

Yes, I think it's an and. I think it's going to be both. So if you think about what we're doing on the distribution right now outside the U.S., we're basically doing all of the selling ourselves with our own internal team. Inside the U.S., as we've mentioned in some prior earnings calls, we are on some of the wirehouses, and so they are effectively distributing. We're obviously supporting them, and needing to sort of be there for education, customer support, et cetera. But we get to leverage off of them. We pay a meaningful price for that. And so our view is we're going to need to do both. So if you look at our hiring plans, there's continued hiring for internal resources to make sure that we're just getting, again, more touch points, more distribution partners, more wirehouses, more wealth channels, et cetera. and we're going to have to continue to expand out the product offering. But I think it's -- we're focused on doing both.

Adam Beatty from UBS. I wanted to ask about the deal flow that you're seeing and you talked about the hit rate and kind of a 2-part question. One is the denominator. How is the deal flow increasing? And how much competition are you seeing sole source versus competitive? And what's driving that? And then on the hit rate, maybe where that is right now versus in the past? And if you had kind of more capacity where you might want to see that go.

Yes. No, it's a very good question. It's -- the buildup of that deal flow continues to expand. Our expectation here is we're continuing to sell and build client exposure we're going to continue to grow access to deal flow, whether it's funds or it's transactions via some of these fund relationships that we've created. On the transaction side, you can see the hit rate is very low. There's still additional capacity, meaningful capacity that allows us to grow our direct equity platforms, our direct credit platforms. You name it, we're probably low single digits, actual making the investment. And so our expectation is there's going to continue to be a lot of capacity. We're saying no to good deals today. We want to say yes to more of those deals because they're also very valuable for the relationships that we've created on the primary side. So my expectation here is that there's plenty of runway, on the competitive side to us, there's still a ton of capacity. We're also not just doing deals in the syndication we're, in any cases, co-sponsoring co-underwriting with many of our partners, particularly in the small and midsize of the private equity space because many of these partners are looking for additional capital particularly in an environment where fundraising has not been particularly great from any of these GPs, they are looking for additional capacity. So all of this, in our mind, adds up to continued opportunity for growth. both for ourselves and frankly, for the industry.

So huge growth in the denominator. If you look back over time, we've been low single digits or even less than that for a long time. And I think to Andrea's point, all of us are not sort of built equally -- and so for a GP who wants to sort of offer a co-investment or needs a secondary partner, they can be picky. And I think increasingly, they're just picking us. And so our deal flow is growing at a disproportionate rate to a lot of other players in the market. I think because of the caliber of resources that we're offering, the type of partner that we are, the fact that we can give them access to sort of some of our proprietary data becomes a value-add proposition for them. So again, I think this has been both low hit rate and a big growing denominator.

This is Madeleine Hines from Millennium. I'm curious just on the secondaries market, it feels like that market is getting deeper both by product types, so like [ GP ] on secondaries, [indiscernible] secondaries. And then also by sector, infrastructure, credit, real estate, and I'm curious how you're orienting the firm to address those areas.

Yes. So I think for us, we sort of do it all. Right now, our fund -- so our sort of flagship secondary fund is very opportunistic. And so we are sort of investing across that. We haven't yet decided that we're going to start to segment that business, we could in the future. Today, we've been focused on kind of just getting the flagship bigger. And you're right, -- that market is growing for all the reasons that you just mentioned, and we're active across that. Remember, we're also doing secondaries inside of separate accounts. So some of those might be much more tailored because the separate accounts itself might be an infrastructure-only separate account or a real estate only separate account that we're still doing secondaries in there. But we haven't specialized on the specialized fund side, but the team is active across all of the spaces that you mentioned.

Sanjeev Math with Baron Capital. You obviously talked to the long-held relationships you've had with many of your clients. And I think on the call, you gave these really nice examples about increasing cross-sell even with clients you've had for 10-plus years. Could you maybe just frame some numbers around that? And maybe just explain sort of, a, firstly, when clients -- you getting new clients to Hamilton Lane? What are the initial products that tend to be most sort of successful with them? And then can you maybe speak to sort of once you go sort of 5, 10 years down the line, how many sort of products have you managed to sort of successfully cross-sell or upsell to them, which I think would kind of speak to retention and stickiness with your client base?

Yes. It's a tough question to answer because of the structure of the client. So if a client comes in, they're typically start -- again, we're generalizing here. So most of them are starting with a separate account. And if you take the client that we sort of talked about earlier, I mentioned on the earnings call, so brand new to the asset class, brand new to us. They're thinking about how do I just start getting initial exposure? But the separate account, by definition, is very flexible for them. So in some cases, we may not "have an upsell" but the separate account morphs over time. So in that case, we're still going to get more revenue, and we're still going to grow that business but that isn't kind of as the definition of what you're laying out of did we sort of sell them something else or something extra. So on day 1, the separate account might just be primary funds. They're not thinking about the J curve yet. They just want to get a couple of sort of fund exposures and so it might just be primaries. And then you fast forward to year 3, and now they want to do some co-investing. Maybe that co-investing is going to come via one of our specialized funds or maybe they're just going to alter the separate account language to let us start doing co-investments on their behalf in their separate account. That would be size dependent. But again, the fees would change reflecting that. And then maybe they're thinking about secondaries or maybe another example we had talked about before is we had a client who started with just one simple buyout-oriented separate account. They've been around for 15-plus years with us. They now have separate accounts for credit. They've got sort of transactional separate accounts. They're in some of our specialized funds. That program has just sort of grown and matured, and we've just grown and matured along with them. So I don't think -- we don't think about it as, okay, we have to hook them with this. And then tomorrow, we want to cross-sell them something else. Our view is that if we do a good job, their exposure is going to grow. They're going to need different pieces. We need to educate them on what those pieces are and how we can provide that to them. And that's what we're doing. And so that's what you're seeing as kind of big revenue drivers across those relationships and why you're seeing the turnover across the client base be so incredibly low because we are just morphing and changing along with them. Anything online John?

Yes, I was going to wait until -- is there anyone else in the room that has a question or a follow-up.

Seth Bienstock, TimesSquare Capital. I think you did a great job dispelling the notion that the outsized or superior private equity returns with less volatility or somehow just a byproduct of creative mark-to-market accounting. But curious to hear when you look out over the next several years, what are potential dynamics that could potentially slow down or temporarily disrupt the continued ongoing trend in terms of allocations, particularly from an institutional standpoint towards alternatives.

I'm not sure I would point to 1 trend. I mean I think the sort of the lack of distribution that we're seeing right now are the slowdown of that relative to kind of the capital calls. So that imbalance is not sustainable for LPs. You can't kind of keep taking their money and then not give the money back. And that's really one of the big reasons why you've seen fundraising while still high on a relative basis across sort of time, relative to the last couple of years, fundraising has fallen way off. And it's why you see kind of a log jam of fund managers in market still trying to get capital. Fundraising is very hard. So despite some of our success, fundraising is hard because of the dynamic of how much cash do the LPs have and what's happening with their exposure. And so getting fund managers, GP is focused on not just doing deals, but also selling the stuff you own is really what's happening in the market today and that sort of getting that sort of unstuck a bit more is going to be important. If that remains in this current dynamic, that is going to make things challenging and that could be a real slowdown.

Anyone else in the room? Okay. Erik, we have 2 that came in online, both from [ Lucy Zang ] at Millennium. So we'll start with the first one. as you prepare to launch new Evergreen products and secondaries, credit and venture, how do you think about differentiating yourself or taking share from incumbent Evergreen products in these asset classes that your peers have already offered for some time?

Yes. I don't think this is a sort of a take something away from somebody issue. I think if you're thinking -- if you're looking at the math that we're looking at, you're seeing just tremendous growth. There are new participants entering all the time. Steve went over the statistics of how underallocated individual investors are and where wealth advisers are sort of noting that they're underexposed. So again, I don't think we're talking about, hey, the pie size is fixed and in order for me to sort of get some I have to take some away from you. I think what you're dealing with is a massively growing pie, and you're just trying to position yourself to make sure that you're getting as much of that pie as you can as it's growing but that doesn't have to come at the sort of cost of somebody else. Now that said, our products are very differentiated because we're sort of that manager of manager model. Most of the Evergreen products that are out there are single manager products where the only deal flow they have is their deal flow. So by definition, I like -- I'm hungry for lunch, so we'll use some food analogies. You're basically eating kind of one style of cooking. So if GPX with their Evergreen fund thinks that the world is going this way or that way and bases their entire portfolio on that now is that retail investor. That's the only thing you're exposed to. With our products, manager of manager, we've got tremendous volume of deals sitting inside our Evergreen done with all kinds of different managers with different styles and different viewpoints and different geographies and different size transactions. Most single managers are focused on these industry verticals at this size point. We are co-investing alongside of big things and small things and middle things and growing things and value things and U.S. things and Asia things. Because our network is kind of the entirety of the market. So we're already hugely differentiated. When we walk into the wealth adviser and kind of lay that kind of contrast out, it's broadly understood. Now we're not saying don't do anything with Fund Manager X. We're saying that if you love them, that's a good add-on to kind of increase your exposure to a particular style or a particular area.

The next one. Is fee compression a concern for these evergreen products, particularly when you think about a number of new entrants seeking shelf space at the wirehouses. Could you discuss the barriers that may prevent more competition based on fee rates for greater revenue sharing with distribution partners?

I think you're definitely going to see fee compression. I think there's just no question about it. I mean customers want more and they want it for less. I don't think there's any mystery around that. I think you tend not to see huge fee compression when you're this early in a cycle. And so I think it will come over time. The barrier to entry is whether you can actually, one, if you've got the deal flow to actually handle growth, I mean, think about the mechanics of this. We raised capital monthly -- if we're then just sitting on that capital because we don't have deal flow, huge cash drag, very unhappy customer base. That part is pretty simple. The other part is this retail investor is not going to be patient as the institutional investors are. The institutional investor doesn't love change. They make long-term decisions. They don't -- the retail investor is going to change. So your ability to service them in an excellent way so that their customer service experience is extraordinary is also going to be important. That's going to require technology, size and scale, and everyone doesn't have that. So I think the barrier to entry is, as a firm, do you have the bandwidth to have an expanding amount of deal flow and to provide all that coverage and to provide that service and do it in a seamless way. That to me says it's why you see the larger firms in the space. Very difficult for a small market firm or a mid-market firm to all of a sudden say, I'm going to go hire an entire massive new team to sort of support this brand-new channel. So I don't think we're going to see those kinds of firms move in. I think this will be largely dominated by sort of the bigger brands, which you also need to be successful here. And I think that's where that is going to largely remain.

All right. Thank you. Erik, Jeff, Andrea. Thank you, everyone, for joining us today. We hope that you found that informational, helpful, valuable. I'm always around for follow-up there's if needed. And hopefully, you can join us for lunch on the fifth floor. Thank you again.