May 23, 2024 - Business

Hamilton Lane's Hirsch sees a tokenized future for private equity

Illustration of a row of cube-shaped bags of money

Illustration: Sarah Grillo/Axios

The future of private equity will be tokenized, according to Erik Hirsch, co-CEO of alternative asset giant Hamilton Lane.

The big picture: This is about how individuals and institutions invest in private equity, rather than the sorts of companies and projects in which private equity invests.

  • Hirsch, speaking at an Axios event in New York on Tuesday, believes that putting LP interests on the blockchain would expand retail investor participation in private equity (i.e., the industry's holy grail), by simplifying both onboarding and secondaries.
  • He also believes that institutions would eventually follow suit, even though to date they've forgone a lot of innovation. "We still get documents faxed to us," Hirsch noted.

Zoom in: Hirsch was, to some extent, talking his book. Hamilton Lane is among the investors in Securitize, a Bay Area startup that tokenizes fund interests and other "real-world assets."

  • But it's also been a customer, having launched a group of tokenized feeder funds in late 2022. Hirsch acknowledges that customer uptake has been "slow," but that he expects comfort levels to accelerate (a bit like online purchase curves in the aughts).
  • Others testing the water have included KKR, which has tokenized access to both a health-care growth equity fund and a tech growth fund. It used Securitize for the former, and Singapore-based ADDX for the latter.
  • There's also an industry group focused on developing a single distributed ledger for the entire private alts ecosystem. It's led by iCapital, with participants including KKR, Apollo, Blackstone, BlackRock, and WestCap.

The bottom line, per Hirsch: "This industry has changed very little in the last 40 years, getting them to completely rethink how it works is going to take some time. ... We're going from basically writing checks to getting people to be used to using Apple Pay. That will take some time, but there will be an inflection point and it will happen."

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