Erik Hirsch, CEO of Hamilton Lane, on the Explosive Growth…

PodcastThe Compound and FriendsErik HirschSep 28

Private markets have expanded, but manager outcomes remain widely dispersed, access is uneven, and slower exits and falling distributions are weighing on liquidity. Hirsch says private credit has filled part of the lending gap left by regional banks, while warning that manager quality and portfolio risks vary and that better data are needed to assess concerns. He expects private credit to grow over the next five years, with results ranging from strong to seriously poor.

Private Credit Market Liquidity Risk Management

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Key Takeaways

Hamilton Lane’s AUM grew from $6 billion in 2005 to around $146 billion twenty years later, but the broader private-markets universe still spans thousands of managers and return dispersion remains wide, particularly in venture capital, private equity, and private credit. Hirsch links some private-equity variation to decisions made by company management and sponsors after an acquisition.

Private-market access is uneven: sought-after managers may limit fundraising to a small number of investors, and Hirsch says only 20 firms have viable franchises actively raising capital from individuals. He says customers typically invest in fewer than 10 funds a year, with eight funds potentially providing exposure to hundreds of companies through underlying fund holdings.

Quarterly reporting delays can make private-market investments appear less correlated with public markets, while secondary transactions may also rely on stale valuations—for example, a September deal may use a March statement. A passive LP’s accounting mark follows the GP’s reported value even if the position was bought at a discount; Hirsch puts average secondary discounts at about 13% and says sellers may accept them for liquidity or concerns about the manager.

Hirsch says private markets have lagged exceptionally strong public markets over the last three to five years, with differing industry weightings helping explain the gap. He also says exits are down 25% year over year, distributions are falling, and holding periods are lengthening, while results across the 2021–2023 vintages have varied widely.

Hirsch says private credit returned 10% to 12% in 2022 while bonds fell 15%, attributing the relative performance to floating-rate exposure and noting that there was not really a credit cycle at the time. He also says private credit has replaced some regional-bank lending as those banks’ ability and willingness to lend to private businesses fell while financing needs remained.

MARKETS

AUM Growth — Hamilton Lane’s assets under management grew from $6 billion in 2005 to around $146 billion twenty years later, illustrating the firm’s expansion.

“But from 2005, you've grown from $6,000,000,000 in assets to around $146,000,000,000 twenty years later. Pretty incredible run.”—

Reporting Lag — Private-market investments can appear less correlated with public markets because limited partners typically receive fund statements at least a quarter after quarter-end. Hirsch says this delay can make the relationship appear weaker than it is.

“The reason why it can look less correlated or it's even sometimes uncorrelated is the reporting time lag, which is also another frustration about our industry, which is if you're…”—

Manager Universe — The private-markets universe includes thousands of firms across geographies and subsectors, many managing $1 billion or $2 billion. Because many managers are little known, navigating the industry can be difficult.

“So the vast majority of our market, the players in that space, no one's ever heard of them because they're raising primarily institutional capital…”—

FORECASTS

Credit Growth — Hirsch expects private credit to be larger in five years and says results will span a wide range, from strong examples to serious failures. He forecasts greater scale and wider dispersion, not the asset class’s disappearance.

“Fast forward five years, you and I are gonna be back sitting here hopefully, and we're gonna be talking about, wow, private credit had this really big gapping of great…”—

Hamilton Lane's Business

Hirsch describes Hamilton Lane as a private-markets solutions provider that helps institutional and individual investors access managers, build portfolios, and navigate a large, difficult-to-assess market.

Private Markets Correlation

The speakers agree that private-equity returns are tied to public markets, while reporting lags can make the relationship look weaker and industry messaging has sometimes obscured that reality.

Manager Performance Dispersion

Hirsch says private-market returns remain widely dispersed across managers and asset types, making manager selection and operational choices more consequential than simply buying an index.

Private Market Access

The conversation examines why access and diligence are difficult, how Hamilton Lane evaluates many funds to select a few, and why smaller investors may see fewer opportunities and less information.

Manager Selection Matters

Hirsch argues that manager outcomes have not converged despite industry growth; investors need diversification, but identifying strong managers among thousands requires substantial research.

Liquidity And Fundraising

The speakers assess weaker exits, falling distributions, longer holding periods, and fundraising pressure, while Hirsch notes that individual-investor channels and evergreen funds are not captured by some headline figures.

Private Credit's Growth

Hirsch links private credit's expansion to regional banks retreating from business lending, while warning that a growing number of newer managers have limited experience through a downturn.

Private Credit Risks

Hirsch acknowledges poor underwriting and troubled portfolios but says evidence does not support sweeping conclusions; he expects private credit to grow, with outcomes ranging from strong to seriously poor.

Credit Fund Withdrawals

The speakers discuss investor redemptions, adviser incentives, limited performance data, and why headline-driven concern may prompt newer retail investors to exit while institutions continue investing.

Secondaries And Valuations

Hirsch explains secondary-market discounts, fund reporting lags, and accounting rules behind day-one marks, while the host questions whether rising competition will reduce returns.

Portfolio Construction And Public Markets

Hirsch emphasizes selective portfolio construction and investor education, then argues that private firms remain important sources of economic growth even as public markets discount alternative managers.

Alternative Manager Outlook

The discussion turns to public-market valuations of asset managers, the limits of public-company exposure, and ways individuals can access Hamilton Lane funds, including through tokenized offerings.