Hamilton Lane $5.6B close showcases secondaries demand

Asset manager Hamilton Lane has closed a $5.6 billion fund Tuesday that will buy and sell private equity assets on the secondary market.

As its sixth secondaries fund, it’s also Hamilton Lane’s largest vehicle ever, demonstrating growing interest from limited partners in gaining exposure to returns generated on the secondary market.

The firm’s LPs include corporate and public pension funds, sovereign wealth funds, endowments, foundations and private wealth platforms—institution types that have looked to capitalize on increased secondary market activity amid liquidity challenges over the past few years. In 2023, secondaries funds raised a total $81.7 billion, according to PitchBook’s Q1 2024 Global Private Market Fundraising Report, a 124.5% year-over-year increase over 2022.

Amid high interest rates and lower private market valuations, fund managers turned to the secondary market to generate liquidity for their LPs, employing mechanisms like continuation vehicles to hold onto mature assets for longer and still produce returns for their investors. Over the past year, exit counts for continuation funds nearly doubled, with 27 through the 12-month period ending in Q1 2024, up from 13 in the 12 months trailing Q1 2023, according to the report.

At the same time, LPs are often active participants in the secondary market, selling stakes in funds through LP-led secondary transactions. In recent years, LPs used this strategy to mitigate the impact of the denominator effect on their portfolios.

Hamilton Lane is one of the most prominent secondary buyers, alongside HarbourVest partners, Lexington Partners and Stepstone Group.

At the beginning of the year, Lexington Partners raised $22.7 billion for its fund dedicated to private market secondary acquisitions, surpassing its original $15 billion target.

Stepstone closed its largest-ever fund dedicated to venture capital secondaries on June 5 at $3.3 billion, addressing a market that has also grown in activity over the past few years amid valuation corrections and limited liquidity.