Hamilton Lane raises $760m for latest performing credit fund

Hamilton Lane has closed its fifth short-term credit fund in as many years, a fundraise that comes as the four predecessor funds continue to meet net internal rate of return goals.

The Pennsylvania-based private markets firm said it wrapped up fundraising for its Hamilton Lane Strategic Opportunities Fund V on $760 million in commitments. The firm has raised such a fund every year since 2015. Last year’s vehicle closed on $900 million.

The asset manager is generally shooting for net returns in the high single digits or low double digits, head of credit Drew Schardt told Private Debt Investor. So far, Fund I’s net IRR has come in at 11.6 percent, Fund II at 12.2 percent, Fund III at 9.2 percent and Fund IV at 9.6 percent, according to Hamilton Lane’s annual report for the fiscal year ending 31 March.

Fund V will invest mainly in performing senior and junior credit opportunities. Unlike other Hamilton Lane funds that last 10-14 years, the Strategic Opportunities series funds have one- to two-year investment periods and a five-year life, the firm’s annual report showed.

“LPs have lots of choices and so the way investors typically think about it is, how are GPs differentiating their returns?” Schardt said. “Obviously, you want to access opportunities where there’s a real value-add or differentiation for you as a lender versus just being the lowest cost of capital.”

Hamilton Lane’s approach to private credit is generally industry agnostic, with an aim to avoid cyclical sectors like energy or ‘brick-and-mortar’ retail. There was a diverse mix of LPs in this fund, he added, including banking institutions, high-net-worth individuals and pension funds.

“The macro picture is important, and you continue to see mixed signals: even amid slowing economic growth, corporate earnings and cashflows continue to be relatively strong,” Schardt said. “On the other hand, geopolitical risks remain heightened, which likely continues to create more volatility and one must be aware of covenant and loan documentation quality erosion.”