Demetrius Sidberry - Principal and Head of IR Mario Giannini - CEO Erik Hirsch - Vice Chairman Randy Stilman - CFO & Treasurer

Michael Cyprys - Morgan Stanley Ken Worthington - JPMorgan Robert Lee - KBW Alex Blostein - Goldman Sachs Chris Harris - Wells Fargo

Thanks, Mike, and thanks, everyone for joining us. Slide 3 of our earnings presentation provides a snapshot of our financial performance through Q2 of fiscal 2018.

Year-to-date, our revenue for management and advisory fees grew by 16% versus last year with growth in each of our core business offerings. As a result of this growth, fee-related earnings were also up 16% year-over-year.

Our GAAP net income year-to-date was approximately $10 million, which translated into GAAP EPS of $0.56. Non-GAAP EPS year-to-date was $0.59, and this is based on approximately $32 million of adjusted net income or nearly 53 million adjusted shares.

For the quarter, we posted GAAP EPS of $0.26, and non-GAAP EPS of $0.27. Finally, as in the previous two quarters, we announced the dividend of $0.175 per share.

This quarterly dividend keeps us on track for our targeted payout of $0.17 per share for the entire fiscal year. Now moving to additional business highlights for the quarter starting with our asset footprint on Slide 4.

As you could see from the chart, our total asset footprint continues to expand. Both our assets under management and under advisement grew versus the prior quarter.

Additionally, we reached a new high of more than $400 billion for our platform. This continued growth in assets further enhances our presence in a market where size and scale matter in driving best-in-class deal flow and information.

On Slide 5, we highlighted by-product of our asset growth, fee-earning AUM. Our fee-earning AUM comes from our customized separate accounts and our specialized funds.

As we stated in the past, the fee-earning AUM is a significant driver of our business, as it makes up approximately 85% of our management and advisory fee revenue. For this quarter, the growth came from both organic and inorganic sources.

The organic growth was driven by the recurring theme of separate account re-ups and new client wins in that area. The inorganic growth was due to us closing the acquisition of real asset portfolio management, which is the real assets investment platform that we discussed on the previous earnings call.

More specifically, the acquisition added nearly $400 million of fee-earning AUM during the quarter. Now as you could see on the slide, in addition to the solid growth, we've also maintained attractive fee rates across our business.

Switching gears, and before I turn the call over to Mario, I want to mention that the team is joining today's call from 2 different locations. Mario and Randy are joining from our headquarters in Pennsylvania, while Eric and I are joining from London.

We are in London for one of the stops on our annual Market Overview Tour, which is profiled here on Slide 6. Over a decade ago, Hamilton Lane altered the unique private market's overview as a way for us to provide clients with our industry insights and proprietary data-driven analysis.

Today, we shared an overview with our clients, prospects, fund managers and key industry participants around the world. Last year's overview spanned nine cities around the world, and saw nearly 450 firms participated globally.

This year, we expect to reach even more clients, prospects and general partners. We find that our clients and others truly appreciate our market perspectives, and is yet another opportunity to show the strength of our platform.

As a part of today's call, Eric will share some of the core themes from this year's market overview. Hopefully, you will find our takeaways useful as you think about the private market's environment today.

With that, I'll now turn the call over to our CEO, Mario Giannini.

Thanks, Demetrius, and good morning, everyone. As with previous calls, I want to provide a quick refresher of who we are and how we serve our growing client base.

Starting on Slide 7. Our goal is affirm, is to work with our clients to build out and manage best-in-class private markets portfolios.

We believe that our client-first mentality has enabled us to continue to win and grow. Over 330 employees operating across 15 offices, we offer our clients a truly global reach unmatched by others in our space.

This approach and an unwavering focus on our clients has resulted in an asset footprint of over $400 billion, giving us and our clients a powerful market presence. One of the compelling aspects of our business is that we serve a very diversed and sophisticated client base.

As you can see on Slide 8, our client groups range from sovereign wealth to state pension funds, endowments to unions and financial service firms to, high-net-worth individuals. While each of our client groups are important, our business is not significantly concentrated in one area or with any other individual client.

No client accounts for more than 5% of revenue, and most of our largest clients have a multiple product and/or service relationship with the firm, leading to an even more diversified revenue stream. What we're doing for those clients also varies.

Approximately 85% of our revenue falls into the asset management category, which is almost evenly split between our customized separate accounts and specialized fund offerings. The remainder of our revenue comes from three areas; advisory services, distribution management and a suite of back-office tools, technology and services.

Having this full set of resources combined with our mindset of being a partner and solution provider truly makes Hamilton Lane a one-stop shop for clients of all types and across all geographies. This is something that is increasingly attractive as investors seek to consolidate service providers, doing more with fewer.

We've also been a beneficiary of an environment where institutional investors are increasing their exposure to the private markets and are looking for help in doing so. This is being driven by a number of aspects, including growth in plan assets globally and increasing liability gaps for student certain fiduciaries.

The attractive performance of the private markets relative to other asset classes has positioned them as a potential solution to address these dynamics, which has led to meaningful growth in the asset class. As LP demand has increased and our opportunity set has grown, we too have grown.

And you can see on Slide 9 that the positive trends in the private markets are expected to continue. With that, I'll turn the call over to Erik Hirsch, to touch on some of the themes we are seeing in the private markets.

Thanks, Mario. As Demetrius stated earlier, the themes that I will touch on are some of the insights that we have shared with our global client base as a part of this year's market overview.

Despite the very positive picture painted on the previous slide, it is hard today to not hear the analysts' drumbeat about the market speaking. In particular, there has been questioning of the private markets with many proclaiming imminent doom and gloom or simply questioning whether the model is sustainable.

The reality, however, is that many of these pundits espouse opinions but they lack actual data. In our industry, data has not been readily available historically and little has changed there today.

But those who have it have a significant competitive advantage. Data is one of Hamilton Lane's key points of strength.

As one of the largest allocators of private market capital in the world, we have a massive substantial database covering 40 vintage years, approximately $3 trillion in fund commitments, over 1,200 unique fund managers, and thousands and thousands of underlying portfolio companies. You can see the scale of our database graphically depicted here on Slide 10.

And it hasn't just been our size and scale, it has also been the focus and recognition at collecting and managing data is important. We have invested firm capital and resources to better harness the power of this data.

We have an in-house research team, a market-leading analytics platform in conjunction with our partner, Bison, a leading SaaS business. And we've recently formed the Private Market Connect joint venture with Ipreo, providing solutions for large complex back-office challenges.

We believe these efforts and relationships make Hamilton Lane the true market leader around data, technology and process-oriented solutions. So, what does that data tell us in response to the most common criticism of the industry, which is too much money is being raised and the industry can't possibly scale to absorb it.

Yes, the industry is growing and thriving, and as you can see on Slide 11, this year is tracking to be a record year for fundraising. The expansion of the private markets is occurring across strategies, across geographies and across fund sizes.

But let's put that into some context. The total amount of capital raised will be less than 2% of the MSCI Global Market Cap.

In fact, if you were to take all of the private market's capital raised this year and invested in say, Apple, you wouldn't be able to buy that company. The chart on Slide 12 shows that the global fundraising market has implications for our business.

Comparing 2010 to 2016 and 2017 has actually continued to poise this trend, you can see that the number of investment opportunities that we are reviewing is growing meaningfully. There are more choices for investors than ever before.

And that increasing diversification is allowing for capital to be absorbed in a responsible manner. It also means that in order to see and process that much opportunity, you need the resources we have.

You need that global footprint, that rigorous process and a very large investment team, something most investors simply don't have and cannot replicate. And lastly, Slide 13 shows how the industry continues to perform well against the other asset classes, something investors are keenly aware.

So, summing up, what you see is a macro picture with the fundamental asset growth, combined with increasing demand for private market's exposure, is continuing to drive very positive fund flows. What you also see is an LP world getting increasingly sophisticated and turning more toward service providers who can truly partner with them and provide the market insights they need and want.

Hamilton Lane is benefiting from all of this, and it is reflected in our existing business and our pipeline of new opportunities. As we said before, for competitive and confidentiality reasons, we do not discuss specific aspects of our pipeline.

What I can say is that the pipeline across each aspects of our business; separate accounts, products and advisory, shown here on Page 14, is as robust as we have ever seen it. On the advisory side, we've added a few additional mandates and continue to grow our back-office and technology offerings.

The separate account side, as noted by Demetrius earlier, is benefiting from continued re-ups from existing clients and the addition of brand-new mandates. And lastly, on the specialized funds, specifically, we are currently in market with several of our products.

These include our fourth co-investment fund, the 2018 vintage of our credit-oriented fund and our 10th private equity fund-to-funds. And now with that, I will turn the call over to our CFO, Randy Stilman.

Thanks, Eric, and hello, everyone. Now moving to our financial highlights for the quarter.

As you can see on Slide 16, our total revenue year-to-date was up 12% versus the prior year period. We continued to see nice momentum in the business with growth across each of our offerings year-to-date, reflecting our strong positioning in a market with significant long-term tailwinds.

Our management and advisory fees year-to-date were up 16% versus the prior year period. The uptick in our specialized funds revenue was a key driver of this growth with an increase of 23% compared to the prior year period.

The biggest contributor to the specialized funds revenue growth was an increase in management fees from our latest secondary fund, which held its final close in the first quarter of this fiscal year. The impact of Secondary Fund IV's retro fees year-to-date was also meaningful at $5.8 million.

As a reminder, investors that come in to later closes of the fund raise for many of our products, pay retroactive management fees dating back to the fund's first close. Therefore, you typically see a spike in management fees related to that fund for the period, in which subsequent closes occur.

Revenue from our customized separate accounts offering year-to-date was up 10% compared to the prior year period. We added over $2 billion in customized separate account fee-earning AUM during the last 12 months, as we continued to add new clients and benefited from additional allocations from our existing clients with many of whom we have had long-standing relationships.

Based on the robust pipeline of new business opportunities and the embedded organic growth from our existing relationships, we continue to have a positive outlook on the growth of this area of our business. However, and as I stated on the previous call, due to the timing of new separate account clients signings and client re-ups being beyond our control, the growth is not always sequential.

In our advisory and distribution management offerings, we experience double-digit year-to-date growth compared to the prior year period as well. For the advisory business, new client-adds were the main driver of the increase, which included some onetime transition and report fees.

Growth and distribution management revenue was driven by higher stock distribution activity year-to-date and related fees earned from this business. In terms of our incentive fee revenue, this was down year-to-date due to a fund catch up that was received in the prior fiscal year.

However, this continues to be on a relatively small base. On an annual basis, we are typically generating less than 10% of our revenue from incentive fees.

Year-to-date, that number was around 3%. As far as how the carry is building, we continued to see an increase in our unrealized allocated carry during the quarter.

At over $300 million, our allocated carry increased over 50% from the prior year and over 12% from the prior quarter. We continued to diversify our carry base, which includes over 3,000 portfolio companies across 40 unique funds.

It is our expectation that some of this carry will flow through the PNO -- P&L over the next several years and that over the longer-term, we will see more stability in incentive fees given the level of diversification. Now turning to Slide 17, which profiles our earnings.

As Demetrius stated earlier, our fee-related earnings were up 16% year-over-year. Similar to our year-to-date management fee revenue growth, the key drivers of earnings performance were growth across each of our offerings as well as the retro fees linked to the Secondary Fund IV fundraise.

As far as expenses are concerned, total expenses year-to-date were up 13% versus the prior year. Comp and benefits year-to-date were up 10%, and G&A was up 20%.

As discussed previously, much of this was driven by the organic growth of the platform, the implementation of various strategic initiatives and the build-out of our public company infrastructure. The increase in the comp and benefits line item is mainly due to our growing headcount, which occurred in all areas of the business ranging from client-facing and investment roles to legal, finance and accounting functions.

Approximately $400,000, a contingent compensation related to the real asset portfolio management acquisition, was included in comp and benefits for the quarter. This represents an accrual for an earnout provision payable approximately one year after the acquisition based on certain targets.

Our expectation is the total earnout payments will be approximately $3.5 million, with $2 million recognized in fiscal year 2018. This contingent compensation will be excluded from adjusted EBITDA, fee-related earnings and non-GAAP EPS.

On the G&A front, the primary drivers of the uptick were the fees related to our new Private Market Connect joint venture, which is made up of former employees who were previously in our comp and benefits line, along with additional consulting and professional fees linked to being a public company. Overall, our expectations for fiscal 2018 have not changed.

The final slide, on Page 18, highlights the key stats from our balance sheet. Nothing new here to report in terms of the makeup.

We are an asset-light business, and the largest part of our balance sheet is the investments alongside our clients and investors. You can see on the slide that our investment balance continues to grow as we commit capital to new funds and client relationships and as investment values appreciate.

Finally, our largest liability is our senior debt, which we believe is at a modest level given the cash flow characteristics of our business. During the second quarter, we completed the refinancing of our senior debt facility that we referred to on the previous earnings call.

We were successful in maintaining a similar level of senior debt, but at more attractive pricing given the robust lending environment we were seeing at the time. In doing so and based on the current interest rates, we expect to save over $1.7 million in interest expense annually, a result that we are pleased with.

Before we open up for questions, let me conclude the formal remarks by saying that we continue to be excited by the momentum that we are seeing in the business. Our core business continues to post solid results, which we see as providing a strong foundation for organic growth.

Additionally, we believe that we are in the early innings on several of our strategic initiatives, initiatives that will not only enhance the Hamilton Lane client experience but also benefit our shareholders. With that, we are happy to take questions from the line.

Hey. Good morning.

Can you hear me?

Yes. We can.

Okay. Great.

Sorry, we should have these new phones here. So just a question on the earnout that came through this quarter.

Curious how we should be thinking about the forward look around that over the next couple of quarters and even longer term? And what are some of the goalposts that are going to be determining how much ultimately comes through?

And any color you can share on where the business RAPM is today relative to where those goalposts would be for the amounts to come through?

Great, Mike. Why don't we turn to Randy for the answer on that?

Sure. The first thing to note on the earnout is the recognition of compensation expense is due to the fact that the earnout is contingent on the principles who sold the business, remaining employees of the company.

Had there not been that contingency, the earnout would not be expensed through the P&L but would be accounted for on the balance sheet. The earnout is based on revenues -- the retention of revenues and also new revenues that are earned during the earnout period.

Great. And any color around amounts or timing that you might be able to share?

Randy, on the amounts and timing?

The -- it's sort of the traditional structure in terms of having, as Randy said, the earnout on existing client retention and new ones. At this time, it's not something we're going to share in terms of what those earnouts are and what the goalposts are, we view that as confidential information around that business.

Okay. Fair enough.

And if I could just ask a follow-up question, just on the performance fee front. Just curious how we should be thinking about the timing for performance fees coming through the accrued receivable balance continues to grow nicely up, tremendously year-on-year.

Is there any color that you might be able to share around where some of these funds are in the stages of the waterfall where they would begin to pay out? Just -- if there's any sort of way to kind of help us think through where the different funds are and which funds specifically, might we see performance fees come through sooner versus others?

Sure, Mike. It's Erik.

I think as you noted, we're very pleased with how the overall kind of picture is developing, and I think it's a reflection of two things. One, that we continue to add new sources of carry-generating dollars, so that diversification is continuing to widen out even further.

We mentioned the stat, it's now, again, over 40 different vehicles, again, over 3,000 companies underpinning that. The second thing that's driving it is obviously, healthy investment results.

So that appreciation is continuing, I think reflecting not only the scale of the assets getting bigger, but also the assets we've invested continuing to perform well. I think our direction here continues to be what we've been messaging, which is that we expect that we're going to start to see this coming in, in a more meaningful way -- 2018, 2019 and 2020.

I think -- we've not been commenting and I think we'll stick with that on, which individual fund is where. I think unlike the GP world where there controlling the specific exit and timing, as you know, we're in a different position around that, more in a co-investment general orientation.

And so, our ability to control the timing is significantly reduced relative to the GP. But as we do our modeling, as we look at those assets, I think we start to see the pickup coming in the next sort of two, three, four years.

And I think what we should be focusing on is what's happening to the overall base, it's getting much bigger -- and what's driving that, again, it's that increased diversification as well as good underlying investment performance.

Great. Thank you.

Hi. Good morning So I believe, you've got 3 funds in the market.

You've talked in the past of these funds should raise -- be fundraising over 12 to 18 months. Again, I'm curious, is the fundraising at all happening more quickly than your original time frame?

The second part would be, when do we start to see these funds turning into fee-earning AUM? And then if you could give us, maybe a near-term outlook for catchup fees given probably multiple closes that these funds are having.

Sure, Ken. It's Erik.

Let me start there. As we noted, so three funds of the commingled variety in the market today, our fourth co-investment fund, the next vintage year of our strategic opportunity is credit fund, which is the 2018 series, and then the 10th kind of multi-strat fund-of-funds.

I would say, we can't comment too granular given that they're all live in fundraising and so out of legal restrictions around that. I think what I can say is that we've had a good track record of raising and in oftentimes, kind of exceeding targets.

Our view is that fundraising is going well across the board on these. On the co-investment fund, specifically, that fund doesn't go live until the third fund sort of wraps up.

We're getting to the end of our investment period there. And so, as we think about how we stagger in closings for the co-investment fund, we don't like to be -- ever be out of capital.

So, we start to just move that as we sort of see a need to get the next batch of capital going. On the strategic opportunity fund, as you know, that's the vintage-year product and so we sort of close that capital in this calendar year, and then turn it live in the subsequent.

And so that's what we've been doing with the 2017 series, and as Randy alluded to, you can start to see that revenue figure starting to come online as that product is based on invested capital. And so, as we get sort of further and further into the year, those numbers come up.

I think it's hard for us to give a lot of detail on the catchup given we just don't know today where we are going to sit with each of the subsequent closing schedules for those. And as -- I think as we start to have those closings, those tend to be publicly announced and you'll start to see that coming through.

And then on RAPM. Can you talk about cross-marketing, to what extent you've started to introduce RAPM to Hamilton Lane clients?

How reception has been so far? And maybe, when you would start to see the fruits of your labor in terms of the cross-marketing?

Sure, so Ken, it's Erik, again. I'll take that.

We're early days here. I think first in line with just simply to get that team fully integrated, get their systems plugged in and get their personnel plugged in.

We are kind of substantially complete on all of that and I -- so I would say that's all gone very well. And so RAPM won't kind of exist as an entity on a go-forward basis.

This will just be part of the Hamilton Lane team. I think it's also worth noting that Hamilton Lane has had resources and the presence in the real asset infrastructure space prior to the RAPM acquisition, so this was really just adding to what we already had.

We are doing all the things that you suggested, which is using that now bigger team and those bigger resources to be out in front of both existing clients and prospects. And so, starting to have those meetings and our expectation is as we've done in all other parts of our business, we want to make sure that we're kind of offering all four parts of the service, which is advisory, separate account, back-office solutions and commingled products.

And so, our view is that nothing is new there and nothing is changing our thoughts. We just need to kind of make sure we do all this in a good sequential manner while first and foremost kind of watching over the existing client base that came over as part of the acquisition.

Okay. Great.

Thank you very much.

Thanks. And good morning, everyone.

First question is just on taxes. I mean, clearly, if tax reform happens and corporates go lower, you guys are potentially a large beneficiary of that.

So, I'm just trying to get some sense and maybe, it's a little premature, but I'm sure you're thinking about it a bit, if you had some tax reform and your tax rate came down, I mean, would that at all change your pace of how you -- your pace of investment? You've been opening up offices and obviously, hiring has gone up.

Would that in any way shape kind of accelerate your thinking?

Robert, let's turn to Mario, for the answer on that one.

Yes. I don't know that we know because we've done some thinking about what happens if tax rates change, what that does both on the investing side for us in terms of what companies, industries become more attractive.

It's just -- it's hard to know and you've seen people try to figure out given the tax proposals and how they will all shake out. I think if all were talking about as a reduction in the corporate tax rate, it's hard to find a negative in that from either our investing activity or from a corporate perspective.

But I think the real question is what is built into the tax code around that. And I simply don't think anyone knows today.

And so, I would not say that we've formulated any change in plans on the investing side or the corporate side based on provisions of the tax code today.

Okay. Fair enough.

And then, maybe, on thinking on capital management. I mean, obviously, you did RAPM, and you've talked about both types of, I guess, transactions as -- here or there being additive.

But with the focus really on distributing most of your cash in a kind of regular dividend and practically, as we look out to two to four years where you have the potential for a pretty fair amount of incentives to start coming through. Should we all think that your dividend policy could evolve to where it's -- you have your quarterly dividend but maybe you'd start thinking more about whether it's a special dividend or year-end true-up?

I'm just trying to get a sense as your growth and -- as you grow and you've fairly limited capital needs and seeds probably self-funded with the existing investments. How are you kind of thinking of the progression of capital management?

Yes, Rob, it's Mario, again. We've said in the past and we'd say again that our view certainly on the dividends is that dividends increase as our business grow.

I think to your specific question, both Randy and Erik, have alluded to our view of our incentive fee is that they become fairly steady stream in the sense of such a diversed space that hopefully a lot of a lumpiness you see in some of the other public equity asset managers isn't as prevalent in our business, but there'd certainly be some lumpiness around it just because of the capital markets. I don't -- looking at it now, I don't believe our view is that we would want to have lumpy payouts.

I think that having a more consistent stream is the way we have said we want to be, and I don't see anything as we look out that would change that perspective. I think from your question regarding cash management, it is a cash-generative business.

We do have investments in our own products, so some of the cash that you would generate from incentive fees would go into that. And I think, again, for us, it's really a question of having a more consistent stream.

Great. That was it.

Thank you for taking my questions.

Great. Hi.

Good morning, everybody. Just a couple of, I guess, bigger picture questions for you guys.

You've spent a good amount of time talking about the data and clearly, when you guys put together the private markets overview a couple of weeks ago, I think at this point, it's obviously very evident, how much valuable data you guys can produce. Taking a step back, any thoughts about, I guess, a, how you guys are monetizing it today, and in the world where the importance of that seems to kind of evolve and become more critical everyday?

Any new thoughts around how you could monetize this better over time?

Sure, Alex. It's Erik.

I'll give a couple of thoughts. I think one, the market overview that Demetrius and I, sort of spoke about, that's a good example of packaging the data in a way that you create a product for the market.

And so, we talked about doing this again across the 9 or 10 different countries and tons of people and audience. A lot of that -- the folks coming to that are clients and prospects.

And so, I think there's a direct and an indirect monetization to data. I think on the indirect side, it would be things like that, the market overview, market intelligence for our existing clients and prospects, having people think about Hamilton Lane as a true thought leader because we possess something that the market does not possess widely, which is this data and then making sure that it's not simply the raw data, but that you're framing that in a way to provide unique market insights.

On the direct monetization, I think where we continued to message and what we're all focused on is really our kind of partnering with different technology firms as a way to, again, package and distribute that data. We think the data itself in its raw form is interesting and something, again, that the market doesn't have a lot of.

But that we've seen in other industries that, that data becomes a little bit more commoditized over time. What you really want is the delivery mechanism, and you want to own the delivery mechanism for that data and so we pointed to, again, on our balance sheet, a number of strategic investments that we've been making into kind of SaaS-oriented businesses where we're partnering with them to provide technology solutions.

That, I would say, we are simply in very, very early innings but we think we're kind of putting all the pieces in place that we will kind of reap the benefit in years to come.

Got it. And that would be more like a, kind of, like a royalty relationship or kind of direct percentage of sales or something like that?

I think it's unique in each of the instances. In some cases, we're going to participate economically directly through the ownership of the business.

In other cases, we have distribution arrangements where we're doing some of the distribution. And other cases, there are sort of licensing pieces around sort of us licensing different parts of our data.

So again, it's not kind of a one-size-fits-all. We're going after that market segment in a variety of different ways with a variety of different important strategic relationships, and we've kind of formed up structures that we think are appropriate for each of them.

Got you. And then another bigger picture question, just around kind of fundraising dynamics in the private markets.

In the last couple of quarters now, if not longer, we've seen increased emphasis from LPs in search for more permanent capital to have our products for very longer duration type of products with a couple of private equity firms in the public domain speaking pretty -- being pretty vocal about it. So just curious, if we're going to continue to see that sort of evolution towards longer duration products whether it's kind of core, core plus type of private equity real estate.

How does that impact, I guess, your guidance model, if at all, net negative, net positive, net neutral?

I think good question, we'll turn to Mario, for the answer on that one.

Sure, thanks. I guess, a couple of ways.

First, as much publicity as these vehicles have gotten and when you look at the capital raised, it's really quite small relative to what Erik had talked about on the fundraising slide. And so, for us, it's mixed in the sense that we are asked to help in terms of looking and having clients decide whether to invest in that so it creates more work, if you will, for us.

The longer duration might reduce the number of times you're looking or the number of work required. But you're looking at a very small segment of the market.

There are really large general partners who are sponsoring these vehicles, which is not the part of the market as we talked about in the past that it is our predominant market segment. So, I think as we look at it, it's probably net, slightly positive.

I think the other part is our own ability to look at vehicles like that as you think about future developments. So, I think, for us, it's just part of the evolution of the market and it really doesn't -- it just continues, as I said, to be a more positive impact and that people are looking at different ways to allocate capital.

It's still the private markets and that's where we operate.

Got it. Great.

Thanks for taking the questions.

Thanks. Hey guys.

So, when I look at your capabilities and where you guys are allocating capital, on Slide #7, we take a look of that. I'm just kind of hoping you guys can shed some light on where you see the potential biggest opportunities to grow your business from here?

Is it sizing or scaling up some of these newer strategies to a greater extent? Or is it simply just continue to grow in your bread and butter areas you think over the next couple of years?

Thanks, Chris. It's Erik.

I'll take that. I think it's really a combination of all of the above.

If we look at just as a proxy kind of the separate account re-up activity that we've had as well as the new -- the brand-new separate accounts that we've signed, I think what we pointed to is something we think is very positive is, they're coming out of different geographies. They're coming from different LPs and the mandates themselves are unique.

And we love that diversification. I think what it sort of shows is that the private markets continue to expand and mature allowing for just so much more choice and variety for investors that it's not a one-size-fits-all.

That marries up really well with our notion of we don't have a one-size-fits-all solution for LPs. So, I think from a growth perspective, just because you're starting from a smaller base, you've seen kind of bigger percentage growth come from things like credit, things like real assets, but again, that's partly because you're starting on a smaller base.

We continue to see a lot of interest in kind of core buyout venture, growth equity and so each of these areas continues to expand. We -- obviously our product mix kind of comes into play here as well around things like secondaries and co-investments.

But we would point back to great diversification, folks looking for a different things because the return profile and the risk profile that you can construct using these different pie pieces continues to grow and I think all that choice has really benefited both the LPs and is also clearly benefiting us.

And then how should we think about M&A in terms of your growth strategy? Are you guys going to continue to evaluate potential opportunities as a way to deepen your position in these markets?

Or is the RAPM deal kind of like one-off situation?

Yes. It's Erik, again.

I think we had said before that that's really not kind of a core part to our strategy. We view that is really an acquisition of talent as opposed to us kind of going off in pursuing a large kind of full-fledged M&A activity.

And so, I think you're going to see from us as we'll continue to be opportunistic. If we see chances to add talent -- people that kind of think and share our culture, and our client-centric view of the world, then you might see us doing something else like RAPM, but that's not the way we see kind of the need to grow going forward.

We think we're scaling nicely. Randy pointed to our increasing expenses, which is really the result of us hiring more people.

And so, I think our ability as a firm to continue to grow across all these different areas as well as expand geographically, has been done largely to date by doing that internally, not through M&A.

All right. Thank you.

Thanks, Mike, and thanks, everybody for joining us today. If there are any further questions, please feel free to reach out to me.

Thank you.