Hamilton Lane’s Hirsch: No, Industry Not In Decline

Erik Hirsch said the difficult fundraising environment isn’t deterring fund managers trying to raise more capital. The chief investment officer of Hamilton Lane Advisors told attendees of the Dow Jones Private Equity Analyst Conference on Tuesday that the Bala Cynwyd, Pa.-based asset management firm received no less than 610 private placement memos in 2009. This year, he expects more than 500, but not quite as many as in 2009.

Hirsch was discussing the numbers in the context of whether private equity as an asset class is in decline. “It’s expensive, it’s illiquid and it doesn’t beat the public markets,” Hirsch said of the industry’s negative side. He added that, in the aggregate, private equity is a “lousy asset class.”

Nonetheless, top-performing funds that beat the public markets are what keep investors like Hamilton Lane, which has more than $88 billion of assets under management and supervision, engaged and fund managers hopeful. The number of firms trying to raise capital is indicative of that, he said. “That, to me, is not an asset class that is in decline,” said Hirsch, who also argued that there should be standard industry benchmarks to grade fund performance.

Fundraising is actually slightly up this year on the late-stage side of the market, with buyout and mezzanine fund managers raising $55.5 billion so far this year, compared to $48.9 billion this time last year, according to sister publication Buyouts Magazine. Reporter Nancy Gordon has a much broader look at the fundraising market in the next issue of Buyouts, which will be published Oct. 4.