Lower interest rates and a lighter regulatory environment under President Donald Trump are expected to fuel more private equity acquisitions of family-owned businesses, Hamilton Lane’s head of private wealth solutions told Crain Currency.
“The new administration brings more certainty to the markets, where we had been going through some uncertainty over the last year,” Steve Brennan said in an interview. “If you add that dynamic to the opportunity set in private equity — of all the companies in the U.S. with over $100 million in revenue, 87% of them are privately held — many of them are family-owned businesses. That's where private equity is going to be shopping.”
Conshohocken, Pennsylvania-based Hamilton Lane manages over $940 billion in assets for its more than 2,000 client investors globally. The firm’s private equity approach targets small and midmarket buyouts, which the majority of family-owned businesses fall under.
“A small buyout manager can buy a family-owned business, own it for three to five years, work with the family to improve it and potentially grow it through acquisitions,” Brennan explained. “They can then sell it to another financial buyer — another private equity fund that’s slightly larger, with greater capabilities and operational expertise — to then take the business to the next level.”
Hamilton Lane’s investment offerings for family offices range from customized accounts for its largest single-family offices that invest between $75 million and $100 million into private market strategies, to smaller family offices investing at minimums of $5 million to $10 million in drawdown private equity funds that typically lock up investors' capital for 10 to 12 years.
In October, Hamilton Lane launched two infrastructure-focused evergreen funds for high-net-worth (HNW) investors, with minimums as low as $25,000 to $50,000. Evergreen funds are seen as a more liquid alternative to drawdown funds, with investors given the opportunity to more frequently redeem their shares for cash, because there’s no set closing dates in evergreen funds.
“We launched a series of evergreen or semiliquid private market funds that allow HNW investors and family offices to access the private markets at lower investment minimums than ever before,” Brennan said. “[Evergreen funds] allow investors to eliminate a lot of the administrative burden associated with traditional private market funds, including eliminating capital calls by deploying capital on day one, and offering the option for liquidity typically on a quarterly basis as opposed to waiting five-plus years to get distributions from a fund. And from a tax reporting standpoint, offering a 1099 instead of a K-1 in many cases.”
Today, Hamilton Lane’s family office clients are served within the firm’s institutional and private wealth divisions based on the size of the family office. However, Brennan does not rule out the launch of a branch at Hamilton Lane that would focus entirely on family office services.
“We don’t have one today, but we’ve certainly considered it and will continue to consider creating dedicated family office coverage,” he said. “Today we split it by size and function of the family office. But over time, as it becomes a growing and increased part of our business, I can see us creating dedicated coverage.”