Hamilton Lane: Private market fund flows soar by 25% in 2021

Hamilton Lane in its 2022 “Market Overview” calculated that private market asset raising reached all new highs — up 25% from 2020 to 2021.

The report is a comprehensive, data-driven analysis of private markets industry activity in 2021, based on Hamilton Lane’s industry-leading database encompassing over $15 trillion in assets, 50 vintage years and 45,000 funds.  

Hamilton Lane CEO Mario Giannini (provided)

Officials at the $851 billion Hamilton Lane found that at least 15 buyout managers are looking to raise $15 billion or more in the coming year. Knowing that many managers outpace their asset targets, this trend could total another $300 billion in an already rapidly expanding private markets industry that already raised $1.2 trillion last year alone.

The numbers are only set to grow alongside greater access to the asset class. The report finds that a 1% increase in the capital high-net-worth individuals invest would lead to a 10% increase in the size of the private markets.

Smaller institutional and high-net-worth investors participating in private markets increased in 2021 as investors searched for yield. An estimated $2 trillion of private assets were held by high-net-worth investors in 2021 with most of this came from larger family offices and ultra-high net worth investors. 

Looking back at the 15/15 club, or the buyout managers eyeing asset raises of $15 billion or more this year, the figures suggest a 50% increase in assets raised from 2020.

“The global financial markets continue along a trend of rapid change that we’ve experienced during the last two years of the pandemic,” said Mario Giannini, CEO of Hamilton Lane. “This year’s Market Overview demonstrates the value of private markets to-date during such an environment — particularly compared to public markets. We’re examining what’s driven outperformance of late, what factors are disrupting and transforming the private markets, as well as what the investor experience could be going forward — particularly as the asset class continues to expand its investor base into the private wealth market.”

Investment gains remain sizable, particularly in private equity. Hamilton Lane calculates that private equity an extra 83 cents per dollar relative to public equities going back to 2017.

An analysis of pooled average buyout returns, which have outperformed in every single one of the past 20 vintage years, showed gains on average of more than 1,000 basis points. Private credit also outperformed in every vintage year over the last 20, officials said.

The research concluded that going forward investors will need to be better at understanding how performance is being generated, while managers will need to be more strategic about how many funds they expect to raise and how big they expect those funds to become. Hamilton Lane also sees the need for GPs and LPs to embrace technology and information to better understand and react to portfolio shifts.

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