2025 Hamilton Lane Market Overview: Private Markets Reach an Inflection Point, though Long-Term Fundamentals Remain Strong
Rhea-AI Summary
Hamilton Lane (HLNE) has released its 2025 Market Overview, providing a comprehensive analysis of private markets based on data from over 58,000 funds across 57 vintage years. The report highlights both opportunities and challenges in the private markets landscape.
Key investment recommendations include focusing on credit, infrastructure, and secondaries, maintaining exposure to venture and growth sectors (particularly AI), and targeting U.S. markets over other geographies for the next 4-5 years. The report emphasizes strong opportunities in co-investments and equity sectors where selective positioning is possible.
While short-term performance shows infrastructure and real estate performing well and private credit remaining stable, private equity has experienced recent underperformance. However, long-term fundamentals remain robust, with private credit outperforming public markets for 23 consecutive years and infrastructure maintaining outperformance for 12 years.
The report predicts significant growth in evergreen structures, projecting faster growth than public markets over the next five years, with institutional investors increasing their presence and fees likely to decline.
Positive
- Private credit maintains 23-year streak of outperforming public markets
- Infrastructure sector shows 12 consecutive years of outperformance
- Strong co-investment activity growth with positive returns
- Increased secondaries activity providing new liquidity solutions
Negative
- Private equity experiencing short-term underperformance
- Challenging fundraising environment expected for next 12 months
- Recent vintage funds likely to face performance challenges
- Smaller private markets firms struggling to gain market share
News Market Reaction 1 Alert
On the day this news was published, HLNE gained 1.01%, reflecting a mild positive market reaction.
Data tracked by StockTitan Argus on the day of publication.
- Research findings note some areas of concern in private markets in the short-term, with positive tailwinds across long-term fundamentals
- Report also highlights strong runway for growth within evergreen
The firm's annual Market Overview is a comprehensive, data-driven review and analysis of private markets investment activity over the prior year, as well as predictions for the year ahead. The detailed report leverages Hamilton Lane's industry-leading database that encompasses data on more than 58,000 funds across 57 vintage years*. Among the report's findings:
WHERE TO INVEST
- Credit, infrastructure and secondaries: Each of these sectors is set up for success.
- Venture and growth: Investors should have exposure to these areas. AI applications will likely sweep the business landscape and many of those companies will be incubated and developed in the private markets sphere.
- Equity: In particular, the co-investment side where investors can be selective.
U.S. : The U.S. market is expected to be relatively more attractive than all other geographies over the next 4-5 years.- Data and technology: Invest in portfolio analytics, whether for construction or analysis.
AREAS TO WATCH
- Evergreen structures: When it comes to evergreen funds, Hamilton Lane expects the following to be true:
- Evergreen funds will grow faster than the overall rate of public markets over the next five years;
- Institutional investors will become bigger players in the evergreen space;
- Evergreen fund fees will decline over time;
- Closed-end funds in certain strategies will decline and largely disappear;
- The growth of evergreen funds will result in the largest private markets firms getting larger and smaller private markets firms struggling to get any market share.
- Short-term performance: Infrastructure and real estate have done very well, private credit has remained stable, while private equity has underperformed. But does this short-term view signal the end of private equity's historical outperformance? While recent vintages will likely face challenges, manager and asset selection will play a crucial role, perhaps more so than in most market conditions. [See 'Private vs. Public Performance' chart]
- Fundraising prediction: The next 12 months will likely bring increased challenges. Exit activity must see a meaningful rebound for fundraising to pick up. Competition is expanding, and the race to retail is on. The firms who are successfully accessing the fundraising market today are those who are investing in technology and innovative investment structures that address the demands of new audiences.
STRONG LONG-TERM FUNDAMENTALS CONTINUE
- Long-term performance: As shown in the Pooled Returns by Vintage Year' chart, private credit has remained undefeated: 23 straight years of outperforming the public markets. Infrastructure has also maintained this trend for the past 12 years. It is only private equity buyout and real estate that saw the streak end in the last year. Hamilton Lane expects that this one-year dip is an anomaly and that, in five years, when looking at the vintage returns, the buyout IRR will have outperformed public returns in every year. Investors assuming that the last year is a window into future performance are ignoring the prior 30 years.
- Co-investment and secondaries uptick: Co-investment activity continues to increase, driven by several factors: fewer co-investment players in the market, a desire by general partners to conserve capital in a tough fundraising environment, increased acceptance by the market of co-investment as a standard practice of doing deals, and strong returns for funds and investors who have done co-investments on a regular basis. There has been an increase in secondaries activity for some of the same reasons, as well as interest from both LPs and GPs in secondary deals as a liquidity solution.
Mario Giannini, Executive Co-Chairman and author of the Market Overview, commented: "We believe that investors deserve high-quality data, actual transparency and continued education around this long-term asset class. And as we look at the year ahead, investors need to come to terms with the reality that there appears to be a recalibration in certain pockets of the global private markets, despite the fact that overall, the private markets are neutral right now. Longer term, we continue to have high conviction in the value of this asset class, and we urge investors to read, study and think carefully about portfolio construction and the diversification benefits that private markets have consistently demonstrated."
To access the full 2025 Hamilton Lane Market Overview, click here.
*as of 12/31/24
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Definitions
All Private Markets: Hamilton Lane's definition of "All Private Markets" includes all private commingled funds, excluding fund-of-funds, and secondary fund-of-funds.
BofAML High Yield Index: The BofAML High Yield index tracks the performance of below investment grade
Corporate Finance/Buyout: Any PM fund that generally takes control position by buying a company.
Credit: This strategy focuses on providing debt capital.
DJ Brookfield Global Infrastructure Index: The DJ Brookfield Global Infrastructure Index is designed to measure the performance of companies globally that are operators of pure-play infrastructure assets.
Growth Equity: Any PM fund that focuses on providing growth capital through an equity investment.
Infrastructure: An investment strategy that invests in physical systems involved in the distribution of people, goods, and resources.
Internal Rate of Return (IRR): IRR is the annual rate of growth that an investment is expected to generate. Mathematically, the interest rate that sets the net present value of all cash flows to zero.
MSCI World Index: The MSCI World Index tracks large and mid-cap equity performance in developed market countries.
PME (Public Market Equivalent): Calculated by taking the fund cash flows and investing them in a relevant index. The fund cash flows are pooled such that capital calls are simulated as index share purchases and distributions as index share sales. Contributions are scaled by a factor such that the ending portfolio balance is equal to the private equity net asset value (equal ending exposures for both portfolios). This seeks to prevent shorting of the public market equivalent portfolio. Distributions are not scaled by this factor. The IRR is calculated based on these adjusted cash flows.
Real Estate: Any closed-end fund that primarily invests in non-core real estate, excluding separate accounts and joint ventures.
S&P 500 Index: The S&P 500 Index tracks 500 largest companies based on market capitalization of companies listed on NYSE or NASDAQ.
Venture Capital: Venture Capital incudes any PM fund focused on any stages of venture capital investing, including seed, early-stage, mid-stage, and late-stage investments.
About Hamilton Lane
Hamilton Lane (Nasdaq: HLNE) is one of the largest private markets investment firms globally, providing innovative solutions to institutional and private wealth investors around the world. Dedicated exclusively to private markets investing for more than 30 years, the firm currently employs approximately 740 professionals operating in offices throughout
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SOURCE Hamilton Lane
FAQ
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