Hamilton Lane has raised $615.3 million for its inaugural venture-focused fund, which will invest in VC, startups, secondary transactions and co-investments, using its existing GP relationships to source startup deals.
The move is a signal of optimism at a time when other asset managers have been pulling back from the asset class.
The fund-of-funds portion of the strategy will comprise:
- 50% of investments in niche managers: established managers who are on fund four and beyond, that have one fund line and have a typical fund size of $600 million or under.
- 20% of investments in emerging managers: typically small vehicles, up to a firm’s third fund.
- 30% of investments in brand-name funds: large, multistage firms.
Hamilton sees the highest venture returns as being largely outside of the multistage firms, says Miguel Luina, managing director and head of venture and growth equity, to explain the small allocation in that last category.
“I think there’s a reason why those managers have grown,” he says, “but to generate outperformance within the venture space going forward, on average you’re going to find better opportunities outside of that group.”
Niche or emerging managers, on the other hand, can post some great returns, Luina adds.
The firm is no stranger to venture capital, having committed nearly $130 billion over its 29-year history.
The asset manager’s decision to double down on venture is swimming against the tide. Since the tech market reset in 2022, asset managers have massively scaled back on raising new venture vehicles as public markets, private equity and private credit have outperformed returns benchmarks.
“That’s one of the reasons why there is such an incredible opportunity right now: those groups came in, they pulled back out,” says Luina. “Do I think they’re making a mistake? Potentially.”
The Venture Access Fund enables Hamilton Lane to pool together capital from a larger cohort of its client base. Previously, the main way Hamilton Lane had invested in venture capital had been through separately managed accounts created on behalf of individual clients.
For its direct investments, Hamilton Lane will target a check size of between $5 million and $20 million, with the majority of the capital deployed into Series B rounds and later, says Luina.
A chunk of the new fund will also be dedicated to secondary investments, which Hamilton Lane has been piling cash into. Its sixth secondaries fund closed last year on $5.6 billion— a 43% step up from its previous vehicle closed in 2021.
As venture funds have struggled to return liquidity to their LPs, crossovers have taken the opportunity to buy up secondary stakes of venture funds and startups at a discount.
With the IPO market still slow, this new market of secondaries funds will no doubt continue to prosper.
Featured image by Jenna O’Malley/PitchBook News
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