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real assets market overview 2023 hamilton lane

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Real Assets Market Overview
2023
The information contained herein is based on the latest available information as of 12/31/2022 and Hamilton Lane's opinions as of the date of this presentation and is subject to change at the Firm's discretion.
Agenda
Private Markets
3
Infrastructure
18
Energy
32
Real Estate
48
Agriculture
60
Mining & Materials
77
Timber
85
Proprietary and Confidential | 2
Private Markets
Evolution of the Private Markets
Growth of Private Markets – $ Trillions1
 MSCI World Market Cap
 Private Markets Total Exposure
2022
2020
2007
1999
16.0
0.48
34.1
58.1
50.8
2.17
7.93
8.60
24 Year
CAGR of
4.9%
24 Year
CAGR of
12.8%
Private Markets Diversification2
Infrastructure
1%
Natural Resources
Real Estate
1%
11%
Private Credit
6%
Infrastructure
4%
Natural
Resources
3%
Real
Estate
16%
Private
Credit
11%
Private Equity
81%
1,2
Total exposure and market caps as of year-end for 1999, 2007, 2020 and 9/30/2022 for 2022
Source: Hamilton Lane data via Cobalt, Bloomberg as of September 30, 2022
Natural Resources
Infrastructure
3%
8%
Natural Resources
3%
Infrastructure
8%
Real Estate
10%
Real Estate
11%
Private Credit
14%
Private
Equity
66%
Private Credit
15%
Private Equity
63%
Private Equity
65%
Proprietary and Confidential | 4
Fundraising Activity
Closed-end Fund Fundraising by Strategy
USD in Billions
$350
$300
$250
$200
$150
$100
$50
$0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Real Estate
Infrastructure
Natural Resources
Source: Hamilton Lane data via Cobalt, as of September 30, 2022, for all strategies through 2019 and natural resources through 2022; PERE, Inframation by infralogic data for real estate and infrastructure, respectively, from 2020 to 2022.
Note: 2022 data for natural resources is September 30, 2022 Cobalt data annualized; 2022 data for real estate is September 30, 2022 PERE data annualized.
Proprietary and Confidential | 5
NAV and Unfunded Commitments by Year
Real Estate
Infrastructure
Natural Resources
USD in Billions
USD in Billions
USD in Billions
$700
$700
$700
$600
$600
$600
$500
$500
$500
$400
$400
$400
$300
$300
$300
$200
$200
$200
$100
$100
$100
$-
$-
$0
NAV
Unfunded
Source: Hamilton Lane data via Cobalt as of September 30, 2022
Proprietary and Confidential | 6
Distributions as a % of NAV and Contributions as a % of Unfunded
Real Estate
Infrastructure
180%
180%
180%
160%
160%
160%
140%
140%
140%
120%
120%
120%
100%
100%
100%
80%
80%
80%
60%
60%
60%
Average 47.48%
Natural Resources
Average 46.26%
40%
40%
Average 52.53%
40%
Average 26.75%
20%
20%
20%
0%
0%
Average 26.78%
0%
Dist. As % of NAV
Average 27.00%
Cont. As % of Unfunded
Source: Hamilton Lane data via Cobalt as of December 31, 2022
Proprietary and Confidential | 7
Annual Liquidity Ratio
Liquidity by Year
Private Equity
Source: Hamilton Lane data via Cobalt as of December 31, 2022
Credit
Real Estate
Infrastructure
2022
2021
2020
2019
2018
2017
2016
2022
2021
2020
2019
2018
2017
2016
2022
2021
2020
2019
2018
2017
2016
2022
2021
0.00
2020
0.00
2019
0.50
2018
0.50
2017
1.00
2016
1.00
2022
1.50
2021
1.50
2020
2.00
2019
2.00
2018
2.50
2017
2.50
2016
Liquidity Ratio
Distributions/Contributions
Natural Resources
Proprietary and Confidential | 8
PPMs Received by Strategy
No. of PPMs Received by Hamilton Lane
350
300
14
39
250
36
28
36
17
26
78
61
24
150
10
12
11
24
100
11
0
0
1
4
3
5
56
40
40
45
2002
2003
2004
Real Estate
2005
Infrastructure
Source: Hamilton Lane Diligence as of January 1, 2023
19
23
25
33
9
7
2
3
18
117
110
2007
2008
99
100
2009
2010
24
119
26
45
55
76
31
26
50
57
28
200
54
88
95
41
143
113
135
142
134
2014
2015
2016
158
182
199
199
181
163
71
2006
2011
2012
2013
2017
2018
2019
2020
2021
2022
Natural Resources
Proprietary and Confidential | 9
Real Assets Performance
2006
2007
2008
2009
2010
2011
2012
Energy
47.85%
Mining
98.26%
Agriculture
15.84%
Mining
42.12%
Mining
58.65%
Agriculture
15.18%
Agriculture
18.58%
Mining
36.93%
Energy
28.38%
Timber
9.52%
Energy
9.86%
Real Assets
13.74%
Energy
14.65%
Real Estate
10.54%
Energy
12.09%
Real Estate
13.11%
Real Estate
14.26%
Timber
7.75%
Real Estate
10.99%
Agriculture Infrastructure Real Assets
12.63%
9.17%
10.34%
Energy
12.00%
Real Assets
9.28%
Real Assets
2.59%
Real Assets
8.69%
Real Estate
11.81%
Timber
4.97%
Timber
10.48%
Real Assets
4.41%
Real Estate
7.97%
Real Assets
23.78%
Real Assets Infrastructure Agriculture
18.58%
2.47%
6.33%
2014
2015
Agriculture Infrastructure Real Estate
20.93%
22.09%
13.33%
Real Assets
13.03%
Agriculture
10.34%
Infrastructure
21.32%
Timber
18.43%
Agriculture
21.16%
Agriculture
15.90%
Mining
-3.70%
Real Estate
16.59%
Real Estate
15.84%
Real Estate
-6.46%
Timber
-4.76%
Agriculture
8.79%
Timber
1.58%
Energy
1.21%
Timber
5.92%
Energy
3.18%
Mining
-9.33%
Timber
13.68%
Infrastructure
2.47%
Energy
-18.52%
Real Estate
-16.86%
Timber
-0.16%
Mining
-14.99%
Mining
-8.63%
Mining
-20.75%
Mining
-0.63%
Energy
-22.57%
•
Real Assets Infrastructure
-3.39%
0.87%
2013
Real Assets Infrastructure Infrastructure Infrastructure Infrastructure
-3.49%
11.39%
4.67%
2.07%
7.27%
2016
Mining
24.03%
Energy
17.31%
2017
2018
Infrastructure Agriculture
16.02%
6.74%
Real Assets
8.81%
2019
2021
9/30/22
Energy
41.50%
Energy
32.72%
Real Assets
20.28%
Real Estate
16.08%
Real Estate
1.61%
Mining
19.60%
Real Assets
14.39%
Timber
0.81%
Real Estate
17.70%
Timber
12.55%
Real Estate Infrastructure
6.42%
7.67%
Real Estate Infrastructure Agriculture
6.71%
5.28%
3.09%
Real Estate Infrastructure Agriculture
6.98%
6.16%
4.82%
Infrastructure Agriculture
9.57%
6.19%
2020
Real Assets
4.35%
Real Assets
2.48%
Energy
5.14%
Timber
3.43%
Timber
1.29%
Agriculture
7.09%
Timber
3.63%
Energy
-1.26%
Energy
-8.93%
Mining
-0.36%
Timber
9.17%
Infrastructure
6.26%
Timber
2.59%
Mining
-0.07%
Mining
-10.37%
Mining
-10.46%
Energy
-19.52%
Agriculture
7.84%
Mining
4.32%
Real Assets Infrastructure
0.64%
17.70%
Agriculture
10.21%
Portfolio construction continues to be key in building a real assets portfolio given the variance of sector performance
Real assets consists of 40% real estate, 30% infrastructure, 15% energy, 5% mining, 5% timber and 5% agriculture
Source: Bloomberg, Bison data via Cobalt and NCREIF, as of September 30, 2022
For illustrative purposes only. Actual results may vary.
Proprietary and Confidential | 10
Pooled Returns by Vintage Year
Dispersion of Returns by Strategy and Geography
Vintage Years: 2000-2020; Ordered by Spread of Returns
Dispersion of Returns
Median IRR
20.0%
Geography
Strategy
All PM
2,000
16.0%
12.0%
1,200
8.0%
800
4.0%
400
0
Median IRR
Spread (bps)
1,600
Growth
Equity
Venture
Capital
CI Funds
SMID
Buyout
Mega/
Large
Buyout
Real
Estate
Secondary
FoF
Source: Hamilton Lane Data via Cobalt (January 2023); All PM includes Secondary Fund of Funds and Fund of Funds
FoF
Natural Infrastructure Credit
Resources
Asia
ROW ex.
Asia
Global
North
America
Western
Europe
All PM
0.0%
Proprietary and Confidential | 11
Dispersion of Returns
Top Decile
2nd Quartile
Median
3rd Quartile
Bottom Decile
Dispersion of Returns by Strategy
Vintage Years: 2000-2020
40%
30%
20%
10%
0%
-10%
-20%
Top Q –
Bottom Q
Spread:
1391 bps
1250 bps
969 bps
1615 bps
Real Estate
Natural Resources
Infrastructure
All PM
Source: Hamilton Lane Data via Cobalt (January 2023); All PM includes Secondary Fund of Funds and Fund of Funds
Proprietary and Confidential | 12
Performance in Inflationary Environments
Strategy Correlation to Various Indices
Growth of $100 by Strategy
Quarterly returns from 2002 to 9/30/2022
December 31, 2021 to September 30, 2022
$120
Strategy
CPI
Real Estate
0.37
Infrastructure
0.21
$104.14
$101.85
Natural
Resources
0.39
$94.93
Buyout
0.26
$87.40
Growth
0.17
Venture Capital
0.06
Credit
0.35
S&P 500
0.11
Barclay’s
Aggregate Global
Bond Index
-0.33
$117.71
$115
$110
$105
$100
$95
$90
$85
$83.89
$80
$79.42
$75
$70
Real Estate
Q4 2021
Infrastructure
Q1 2022
Natural Resources
Q2 2022
Buyout
Source: Hamilton Lane data via Cobalt as of September 30, 2022, Bloomberg as of January 2023
Growth Equity
Q3 2022
Venture Capital
S&P 500
Proprietary and Confidential | 13
Pooled Returns by Vintage Year (cont.)
Real Estate IRR vs. PME
By Vintage Year
30%
20%
10%
0%
-10%
-20%
2000
2001
2002
2003
2004
2005
2006
2007
Real Estate IRR
2008
2009
2010
2011
Real Estate 1st & 2nd Quartile IRR
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
FTSE Nareit Equity REIT Index PME
Infrastructure IRR vs. PME
By Vintage Year
25%
15%
5%
-5%
2002 - 2005
2006
2007
2008
2009
2010 - 2011
Infrastructure IRR
Source: Hamilton Lane data, Bloomberg as of January 2023
2012
2013
2014
Infrastructure 1st & 2nd Quartile IRR
2015
2016
2017
2018
2019
2020
2021
DJ Brookfield Global Infrastructure PME
Proprietary and Confidential | 14
Pooled Returns by Vintage Year (cont.)
Natural Resources IRR vs. PME
By Vintage Year
60%
50%
40%
30%
20%
10%
0%
-10%
-20%
2000 2001
2002 2004
2005
2006
2007
2008
Natural Resources IRR
Source: Hamilton Lane data, Bloomberg as of January 2023. Please refer to endnotes
2009
2010
2011
2012
2013
Natural Resources 1st & 2nd Quartile IRR
2014
2015
2016
2017
2018
2019
2020
2021
MSCI World Energy Index PME
Proprietary and Confidential | 15
Risk-Adjusted Returns
3-Year Asset Class Risk-Adjusted Performance
Annualized Time-Weighted Returns as of September 30, 2022
Private Markets Outperforming by 300+ bps
Private Markets Outperforming by 0–300 bps
Public Markets Outperforming
•
Private markets typically deliver a
return premium over public
market alternatives with lower
levels of volatility (even after desmoothing volatility)
•
Private real assets have
historically had low levels of
correlation to the public markets,
including to REITs and public
infrastructure, which have been
highly correlated to the broad
public market
•
The benchmark and timeframe
you use matters
25%
Equity
20%
Real Assets
Credit
15%
10%
Private
Equity
5%
S&P 500
Index
Russell
3000
Index
0%
MSCI
World
Index
Hedge
Funds
Private
Credit
Credit
Suisse
High
Yield
Index
Barclays
Aggregate
Bond
Index
Private
Real
Estate
(NonCore)
Private
Private
Natural
DJ
InfrastrucFTSE
Brookfield Resources
ture
NAREIT
Global
Equity REIT
InfrastrucIndex
ture Index
MSCI World
Energy
Sector
-5%
Sharpe Ratio 0.67
0.26
0.23
0.11
0.29
0.39
n/a
n/a
0.48
n/a
1.09
n/a
0.22
Source: Hamilton Lane Data via Cobalt, Bloomberg. Indices used: Hamilton Lane All Private Equity with volatility de-smoothed; S&P 500 Index; Russell 3000 Index; MSCI World Index; HFRI Composite
Index; Hamilton Lane Private Credit with volatility de-smoothed; Credit Suisse High Yield Index; Barclays Aggregate Bond Index; Hamilton Lane Private Real Estate with volatility de-smoothed; Hamilton
Lane Private Infrastructure with volatility de-smoothed; Hamilton Lane Private Natural Resources with volatility de-smoothed; FTSE NAREIT Equity REIT Index; DJ Brookfield Global Infrastructure Index;
MSCI World Energy Sector Index. Geometric mean returns in USD. Assumes risk free rate of 1.8%, representing the average yield of the ten-year treasury over the last three years. (January 2023)
Source: Hamilton Lane data, Bloomberg as of January 2023. Please refer to endnotes and definitions in appendix.
For illustrative purposes only. Actual results may vary.
Proprietary and Confidential | 16
Risk-Adjusted Returns
10-Year Asset Class Risk-Adjusted Performance
Annualized Time-Weighted Returns as of September 30, 2022
Private Markets Outperforming by 300+ bps
Private Markets Outperforming by 0–300 bps
Public Markets Outperforming
•
Private markets typically deliver a
return premium over public
market alternatives with lower
levels of volatility (even after desmoothing volatility)
•
Private real assets have
historically had low levels of
correlation to the public markets,
including to REITs and public
infrastructure, which have been
highly correlated to the broad
public market
•
The benchmark and timeframe
you use matters
18%
16%
Equity
Real Assets
Credit
14%
12%
10%
Private
Real Estate
(Non-Core)
8%
6%
Private
Equity
4%
S&P 500
Index
Russell
3000
Index
MSCI
World
Index
2%
Hedge
Funds
Private
Credit
Credit
Suisse
High
DJ
Private Brookfield
FTSE
Infrastruc- Global
NAREIT
Infrastructure
ture Index
Barclays
Aggregat
e Bond
Index
0%
Sharpe Ratio
0.82
0.62
0.57
0.39
0.23
0.79
0.19
n/a
0.70
0.29
1.59
0.26
Private
Natural
Resource
MSCI World
Energy
Sector
0.03
Source: Hamilton Lane Data via Cobalt, Bloomberg. Indices used: Hamilton Lane All Private Equity with volatility de-smoothed; S&P 500 Index; Russell 3000 Index; MSCI World Index; HFRI Composite
Index; Hamilton Lane Private Credit with volatility de-smoothed; Credit Suisse High Yield Index; Barclays Aggregate Bond Index; Hamilton Lane Private Real Estate with volatility de-smoothed; Hamilton
Lane Private Infrastructure with volatility de-smoothed; Hamilton Lane Private Natural Resources with volatility de-smoothed; FTSE/NAREIT Equity REIT Index; DJ Brookfield Global Infrastructure Index;
MSCI World Energy Sector Index. Geometric mean returns in USD. Assumes risk free rate of 2.2%, representing the average yield of the ten-year treasury over the last ten years. (January 2023)
Source: Hamilton Lane data, Bloomberg as of January 2023. Please refer to endnotes and definitions in appendix.
For illustrative purposes only. Actual results may vary.
Proprietary and Confidential | 17
Infrastructure
The Big Picture
•
Transaction activity set a new high-water mark in 2022; SMID
opportunities continue to be an attractive segment of the market given
lack of competition from an increasing number of mega funds
•
Infrastructure has historically outperformed during periods of elevated
inflation; we are keeping an eye on longer term inflation expectations
across geographies
•
Infrastructure assets were remarkably stable during COVID highlighting
the asset class's downside, protected cash flow streams underpinned by
recurring, contracted revenues
•
“Energy transition” encompasses a wide range of opportunities from
early-stage venture to core stabilized assets; significant amounts of
capital will be required to fully transition to clean energy, particularly as
assets reach their growth and stabilization stages
•
Transaction structures in the renewables space continue to evolve with
more developers opting to hold projects through stabilization; investors
need to have a clear understanding of the differences between
development, construction and stabilization risks
•
The data center market has become very competitive in the U.S. with very
few opportunities for brownfield growth remaining; data center capacity
in Europe’s tier-1 markets is approximately 5 years behind the U.S.
•
COVID highlighted the importance of contract structuring and downside
protection for transportation assets; assets underpinned by long-term
contracts continue to exhibit remarkable stability with opportunities for
further upside
Proprietary and Confidential | 19
Infrastructure Transaction Activity
>$2.5B
4%
$1B - $2.5B
7%
Number of
Transactions by
Enterprise Value
in 2022
<$100M 3%
$100M $500M 16%
$500M - $1B
11%
Transaction Volume
by Enterprise Value
in 2022
<$100M
39%
$100M - $500M
39%
$500M - $1B
14%
>$2.5B 50%
$1B - $2.5B 17%
Source: Inframation as of December 31, 2022
Source: Inframation as of December 31, 2022
Transaction Volume by Quarter
$300
$250
Billions
$200
$150
$100
$50
$
Q1
Q2
Q3
2017
Source: Inframation as of December 31, 2022
Q4
Q1
Q2
Q3
2018
Q4
Q1
Q2
Q3
2019
Q4
Q1
Q2
Q3
2020
Q4
Q1
Q2
Q3
2021
Q4
Q1
Q2
Q3
Q4
2022
Proprietary and Confidential | 20
Infrastructure Sector Activity by Region
2022 Infrastructure Transactions by Enterprise Value
Transport
33%
Transport
13%
Energy
30%
Telecom
20%
North America
$320.0B
Transaction Volume
Other
4%
Social
6%
Europe
$358.5B
Transaction Volume
Energy
14%
Renewables
17%
Environment Power
9%
1%
Other
2%
Social
3%
Environment
Power
1%
4%
Renewables
21%
Transport
23%
Transport
34%
Asia Pacific
$183.5B
Transaction Volume
Energy
12%
Other
1%
Environment
1%
Telecom
12%
Renewables
18%
Social
8%
Source: Inframation as of December 31, 2022
Telecom
22%
Power
14%
Energy
27%
Rest of World
$150.2B
Transaction Volume
Other
2%
Social
1%
Environment
6%
Telecom
10%
Renewables
18%
Power
13%
Proprietary and Confidential | 21
Infrastructure Performance During COVID
As an asset class, infrastructure was resilient during the
COVID-19 pandemic
In particular, assets in North America and Europe
were very stable
Median Infrastructure MOIC by Quarter
Median Return by Subsector
Portfolio-Company Level; n=410
1.41x
Transportation
1.09x
Telecom
1.26x
1.36x
Environment
1.37x
0.75x
1.00x
1.30x
ROW
1.29x
Q3
Q4
Q1
2020
1.29x
Q2
Q3
2021
Q4
Q1
Q2
2022
Asia Pacific
0.75x
* EU data = 2009 – TTM Q2 2022
1.75x
2.00x
1.35x
1.37x
1.34x
1.12x
1.00x
Source: Hamilton Lane data as of September 30, 2022
1.43x
1.41x
1.25x
Q1 2020
Sources: Bloomberg, Hamilton Lane data as of September 30, 2022
2.00x
1.50x
1.35x
Europe
Q2
1.75x
Q2 2022
1.10x
North America
Q1
1.50x
Median Return by Region
South America
1.29x
1.46x
1.25x
Q1 2020
1.34x
1.38x
1.29x
Energy
1.36x
1.33x
1.41x
1.10x
Power
1.38x
1.38x
1.31x
Renewables
1.39x
1.49x
0.89x
Social
1.41x
1.44x
1.50x
Q2 2022
Proprietary and Confidential | 22
Infrastructure Has Outperformed During Elevated Inflation to Date
Infrastructure assets tend to perform well during periods
of elevated inflation…
Average Performance During Periods of Elevated Inflation
(≥2%)
Average inflation over the next decade is expected to
cross the 2% mark
Expected Inflation Over the Next 10Y vs. Past 10Y Inflation
1999 - TTM Q3 2022
Australia
9.4%
9.1%
7.5%
7.4%
7.0%
6.8%
Germany
France
4.4%
2.7%
UK
US
N. America
Infra
EU
Infra*
Periods with inflation ≥2%
Sources: Bloomberg, Hamilton Lane data via Cobalt as of September 30, 2022
* EU data = 2009 – TTM Q3 2022
APAC
Infra
All periods
Global Infra
0.0%
0.5%
1.0%
Average Past 10Y
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
Expected 10Y Breakeven Inflation
Source: Bloomberg as of January 9, 2023
Inflation metric used for US and Australia is respective CPI, metric used for UK is RPI and the metric
used for France and Germany is HICP
Proprietary and Confidential | 23
“Energy Transition” Can Be Played in Many Different Ways
Opportunities abound across emerging, growth and established energy transition investments
Company Growth Cycle
Generation
Transmission
Storage
• Over the last few years, we have discussed the continuum of “energy transition” investments and how investors can access the space based on their desired
risk-return profile
• Across the infrastructure space, we focus on assets that are in their later stages of growth or are beginning to enter into stabilization
• As the energy transition market continues to mature and evolve, we believe there are three main sub-sectors where infrastructure investors can participate in
the “energy transition”: generation, transmission and storage
• In the following case studies, we compare several projects across geographies that highlight the nuances and potential risks investors should look out for
when evaluating infrastructure opportunities in the energy transition space
Proprietary and Confidential | 24
Theme: Energy Transmission – North America Case Study
Build and Hold
Buy and Hold
Project A
Project B
4.0x
4.0x
2.9x
3.0x
Gross MOIC
Gross MOIC
3.0x
2.0x
1.0x
0.0x
-1.0x
2.0x
1.5x
1.0x
0.0x
Year 0
Year 5
Year 10
Year 15
-1.0x
Year 20
Year 0
Projected Base Case Returns (20-year hold)
Gross IRR
Year 5
Year 10
Year 15
Year 20
Projected Base Case Returns (20-year hold)
~12% IRR
Gross IRR
~6-7% IRR
Gross multiple
~2.9x
Gross multiple
~1.5x
Payback period
Year 12
Payback period
Year 17
Stabilized yield on cost (excl. recaps)
~8.3%
Stabilized yield on cost (excl. recaps)
~5.6%
• One of the largest bottlenecks slowing the build out of renewables today is lack of
transmission capacity
•
• Project A is a to-be-built 1,250MW high voltage transmission line spanning 339 miles
between Canada and NYC
•
• The project is expected to provide NYC with 24/7 renewable power for ~20% of NYC’s
total daily power consumption
•
• The project is fully permitted and construction-ready, backed by an investment-grade
counterparty and 40 year take-or-pay with annual escalators
•
Source: Hamilton Lane internal data as of December 2022; for illustrative purposes only; actual results may vary
Project B is comprised of 2 existing transmission assets in in the Southwest U.S. with
opportunities for additional growth through further build out of renewable generation and
related interconnection infrastructure
The assets are also under long-term, fixed price contracts with investment grade
counterparties and no volume or commodity risk
Existing transmission assets are typically bid down into single-digit returns given their
bond-like cash flow streams
Due to their stability, existing transmission assets are typically, highly levered, reducing
opportunities for future debt-funded recaps
Source: Hamilton Lane internal data as of December 2022; for illustrative purposes
only; actual results may vary
Proprietary and Confidential | 25
Theme: Energy Storage –
Europe Case Study
Project Example
Energy storage needs are substantial and are forecast to
be accelerated by the energy transition
Europe Energy Storage Needs
800
GW
600
165
Transaction Dynamic
Opportunity to invest in a vehicle to acquire a 50% stake in an essential
infrastructure asset involved in the storage of strategic energy reserves
with energy transition upside
400
265
200
0
Mix
60
40
88
89
Current Capacity
2030 Capacity Needs
Short Term Storage
(seconds to hours)
Long Term Storage
(days to seasons)
170
2050 Capacity Needs
Power-to-X Storage
•
Storage solutions are expected to range from battery storage and EV-to-grid to longer
solutions such as pumped hydro storage and hydrogen storage
•
Hydrogen storage has the potential to provide a part of the baseload needed to
balance the increasing proportion of intermittent energy sources
–
•
Asset Description
European company specializing in the underground storage and transport
of hydrocarbons, consisting of more than 30 underground salt caverns
storing a meaningful amount of strategic reserves
Underground storage will be critical to any large-scale hydrogen economy by
providing long-term ballast to the grid
Other forms of storing energy such as batteries and vehicle-to-grid, could be utilized for
short-term balancing of power supply intermittency
Source: European Association for Storage of Energy, June 2022
Investment Thesis
• Opportunity to acquire core infrastructure with high resilience and
pre-identified growth potential
• Significant market opportunity; asset offers attractive brownfield
characteristics and is well-positioned to capitalize on the energy
transition
2018
Hydrocarbon Storage
2028 Onward
Diversified revenue away from
hydrocarbons
2022 - 2028
Hydrogen Storage Development
and Construction
Proprietary and Confidential | 26
Theme: Energy Generation – Asia Pacific Case Study
Taiwan - a leader in Asia driving toward net-zero
and anchoring the push for renewable energy
4 Asian economies have net-zero policies and legislation
Taiwan Offshore Wind
Supportive Governmental Policies
• 5.7GW by 2025
• 20.7GW by 2035
• Aiming to power 380,000 households
Energy
Lifestyle
Industrial
Social
To acquire an additional stake in a pre-baked, greenfield, offshore wind farm
under a platform with a track record of successful offshore wind
farm installations
~13% Gross IRR; ~1.6x MOIC base case returns
Investment Thesis
Target Milestones
2025
No new coal-fired
plants
2040
CCUS in all coal and
gas-fired plants
2035
100% smart meter
installation
• In 2021, 98% of Taiwan’s total energy
supply was imported fossil fuels
• 82% of electricity generated from coal
and natural gas
Opportunity
Target Areas for Taiwan 2050 Net-Zero
2030
40 GW wind & solar
capacity
For an energy import-reliant economy
2050
Renewable electricity
>60%
100% smart substation installation
Source: Hamilton Lane internal data as of December 2022; for illustrative purposes only; actual results may vary




Energy import-dependent market supportive for FIT rates
Renewable energy generation to support energy independence and security
Downside protection with long-term, full-offtake PPAs with a local power co.
De-risked opportunity with considerable construction progress with only tailend construction risk remaining
Ability to invest alongside a skilled, renewable energy
manager in a de-risked, greenfield, offshore wind asset with a
high degree of revenue certainty in a supportive market
1
Proprietary and Confidential | 27
Representative Stabilized Cap Rates & Development Yields
Theme: European Data Centers
14.0%
European data center immaturity offers
attractive opportunity set
• Data center capacity per capita in Europe’s “FLAPD”* market (Tier-1) is
5 years behind the U.S.
• The European data-center market is significantly concentrated in Tier 1
cities (83% of capacity), with Tier 2 and 3 cities lagging far behind
• The current low capacity of Tier 2 and 3 cities offers a strong investment
and development opportunity
• Less developed European market offers greater potential yield than
similar projects in the U.S.
• The projected demand for European data centers is supported by new
government regulations on digital sovereignty and local data storage
25.0
Watts
6.0%
5.8%
6.7%
4.0%
2.0%
0.0%
USA
European Reference
- Tier 1**
Europe - Tier 2
Europe - Tier 3
Data Centers
Cap Rate
Development Yield
17%
16.1
15.0
11.8
11.5
0.0
7.7%
8.0%
22.0
20.0
5.0
10.0%
Split of Data Center Capacity in Europe (MW)
Data Center Capacity per Capita
10.0
12.0%
12.0%
12.9
14.3
11.6
9.7
9.4
3.5
3.6
2014
2015
4.3
2016
US
* FLAPD means Frankfurt, London, Amsterdam, Paris and Dublin
** Data from one European Tier 1 project
5.9
5.1
2017
2018
Europe FLAPD
7.3
8.4
83%
2019
2020
2021
FLAPD (Tier 1)
Tier 2&3
Proprietary and Confidential | 28
Theme: Transportation Market Evolution
Long-Term Contracts Lead to Stability
Short-Term Contracts Exhibit Volatility
Project A - Throughput YoY
91%
18%
77%
81%
80%
5%
72%
72%
95%
85%
79%
58%
42%
-8%
-2%
79%
68%
-1%
2%
6%
10%
77%
5%
6%
3%
5%
9%
1%
5%
8%
3%
10%
17%
5%
13%
8%
11%
14%
18%
90%
6%
13%
28%
Project B - Utilization Rates
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Global Throughput
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Project A Throughput
• Transportation infrastructure assets have historically exhibited high correlation with
GDP growth
• Project A is a container terminal operator with more than 40 sites across 27 countries,
which serve key ports and trade routes globally
• The company benefits from a privileged partnership with the majority shareholder (70%)
and largest container shipping line in the world
• The partner’s majority ownership ensures alignment of interest underpinned by longterm contractual commitments that address capacity, volume, and pricing
• These long-term contracts have historically reduced profit volatility in absolute terms
and relative to peers
• Project B owns and manages dry and refrigerated shipping containers including
generator sets used to power refrigerated containers when transported over land for
prolonged periods of time
• The business serves multiple industries including frozen food, pharma, construction,
retail and storage
• The company’s contract structures are a combination of long-term operating leases,
direct finance leases and short-term leases
• The utilization rates of company B’s shipping containers have historically been highly
correlated with macro economic events and GDP growth, introducing volatility into the
business and uncertainty in underlying cash flows
• During the GFC as global shipping declined by 8%, the company’s volumes contracted
by 2%; during COVID the company grew by 5% while the industry shrunk by 1%
Source: Hamilton Lane internal data as of December 2022; for illustrative purposes only
Source: Hamilton Lane internal data as of December 2022; for illustrative purposes only
Proprietary and Confidential | 29
Infrastructure Sentiment Indicators
Today
2021
•
Purchase price multiples jumped
over the last year as investors
focused on growth platforms
and energy transition
opportunities
•
We expect purchase multiples to
moderate over the medium term
as new projects continue to
mature
•
Leverage has decreased over the
last year and remains at
conservative levels on an
absolute and relative basis
•
Average public market returns
were relatively flat YoY but still
below historical norms
•
Fund size and time to next
fundraise data is skewed in
2022, driven by several mega
cap funds coming to market
during the year and delayed
fundraises following COVID
2007
Legend
+2σ
Long-Term Average
-2σ
18.6x
11.9x
5.2x
8.5x
4.0x
-0.6x
Purchase Price
Multiples
Leverage Multiples
Trailing Public
Market Returns
30.7%
10.0%
(10.7%)
Fund Size Step Up
4.4x
2.0x
-0.4x
Time to Next
Fundraise
1.2 years
3.2 years
Source: Hamilton Lane Data, Bloomberg, Cobalt, Pitchbook (January 2023). Please refer to endnotes in appendix
5.2 years
Proprietary and Confidential | 30
Attractive Areas for Investment
Focus Sectors
Market-Driven Themes
Renewable &
Traditional Power
• High power prices driving corporate users to sign longterm PPAs with cost pass throughs and escalators
• Interim opportunities in conventional peaking assets to
address renewable intermittency
• Expect to see more distributed generation opportunities
Data/
Communications
• Continued growth in data usage and cloud services
• Hyperscale valuations look rich today; risk of overbuild in
the medium term
• Demand driven by multinational telcos following
customers into “emerging” markets
Transportation
• Valuations and opportunities for platform growth
improving in current market
• Seeing most opportunities in mid-market platform roll-up
strategies
Waste/Water
Energy
Infrastructure
• EfW continues to grow as landfills become constrained;
regulations hinder new development
• Need for efficiency in water and sewage
• Aging infrastructure
• LNG export to become a major theme as countries around
the world seek energy independence
• Water delivery, treatment, storage and transportation
infrastructure still required
• Early days for carbon capture; may be an angle to retrofit
legacy midstream assets for carbon capture
Target Investment Characteristics
• Entry price defined by attractive, relative value
• Cash flow streams underpinned by recurring,
contracted revenues
• Assets with diversified, credit-rated
counterparties
• High barriers to entry created by high capex,
pricing power, market or other regulatory
constraints
• Low risk of technological disruption
• Limited commodity price, merchant or cyclical
volume risk
• Limited development risk
• Upside driven by platform growth, operational
improvements, re-contracting, and/or execution
of pre-contracted, success-based capex
programs
The information contained herein is based on the latest available information as of 1/31/22 and Hamilton Lane's opinions as of the date of this presentation and subject to change at the Firm's discretion.
Proprietary and Confidential | 31
Energy
The Big Picture
•
Energy takes center stage globally amid energy security concerns,
energy’s role as an inflationary input, and the potential for energy
availability and cost determining the viability of whole industries in
certain regions
•
Conversations around energy gains nuance, with less absolutism than in
prior years, as lofty decarbonization commitments by both governments
and market participants are put to the test
•
Record profits for E&P companies amid surging commodity prices and
investment restraint. Lack of investment in new production sets the
stage for a period of sustained, strong investment returns despite select
headwinds on the horizon
•
Energy transition gains steam; massive capital requirements
and investment opportunities exist across the risk/reward spectrum
and capital stack
•
Energy markets are complex, volatile and evolving; not a place for the
inexperienced or faint of heart. Despite significant growth and
tremendous opportunity for investment, proceed cautiously
Proprietary and Confidential | 33
Energy’s Foundational Role in Modern Society
Takes Center Stage
Energy Takes Many Forms, All of Which Embedded in Day-to-Day Life
U.S. Energy Consumption by Sector
Commercial
12%
Transportation
37%
Residential
16%
Industrial
35%
U.S. Energy Consumption by Source
Nuclear
8%
Coal
11%
Petroleum
36%
Renewable
Energy
12%
Natural Gas
32%
Source: EIA. Accessed January 2023. Data through year-end 2022
Proprietary and Confidential | 34
The Energy Transition Gains Steam, Encompassing a Vast Opportunity Set
Net Annual Generation; Coal vs. Renewables
Energy Transition Opportunity Set
2,500
RNG
Generation
2,000
Transmission &
Storage
EFW
Million mWh
1,500
Energy
Transition
1,000
CO2
500
Demand-Side
0
2001
2004
2007
Wind
Source: EIA.
2010
Solar
2013
2016
2019
2022
H2
De-Carbonization
CO2
Coal
Proprietary and Confidential | 35
...Requiring Vast Sums of Capital
Global EV Unit Sales
Energy Transition Investment
Investment Priorities for 1.5
Annual, Millions
2020 vs. Projected Requirements, $ Trillions
Annual Investment Allocation Requirements
70
$4.4
60
•
Energy transition encompasses a
broad opportunity set “fueled” by
electrification and a push toward
renewable generation
•
Supply and demand is
transforming, requiring
substantial investment in
infrastructure and technology
Other
18%
50
Heat, Transport
Electrification
22%
40
30
Renewables
26%
20
10
0
Efficiency
34%
$0.5
2017
2020
2023
2026
2029
2032
2035
2020 Energy Transition
Annual Required Investment
-> 2050
Sources: Bloomberg as of January 2023; IRENA World Energy Transitions Outlook as of June 2021; and IEA World Energy Investments 2021
Proprietary and Confidential | 36
Electrification will require substantial investments
in generation, transmission and storage
U.S. Household Electricity Consumption Impact of EV Adoption1
Annual kilowatt-hours
Building Heating Energy Demand Change (2021-2030)2
EJ
4
20000
2
15000
•
A trend toward electrification
across residential, industrial,
commercial and transport
applications will require substantial
investment
•
At the household level, EV and heat
pump adoption to drive
significant demand growth for
electricity
+34%
0
-2
10000
-4
5000
-6
0
-8
2022
2022 +EV
Electricity
Coal
Oil
Natural gas
Source: Hamilton Lane illustration leveraging information from Ev-database.org, Federal Highway Administration, EIA. Assumptions: EV consumption rate of 170 Wh/Km, average annual household
electricity consumption of 10,632 KWh as of May 2022, and average miles driven of 13,476 per NHTSA as of October 2022. single EV addition per household in +EV scenario
2 Source:, IEA. Changes account for national emissions reduction and net zero national announcements as of September 2022 for 2030
1
Proprietary and Confidential | 37
Select Renewables Cost Competitive With Traditional Generation
Technologies Have Rapidly Matured, Incentivizing Investment, Often on an Unsubsidized Basis
Wind Unsubsidized LCOE
Levelized Cost of Energy Comparison – Unsubsidized Analysis
LCOE ($MWh)
Levelized Cost ($MWh)
$180
Conventional
Gas Combined Cycle
$160
Coal
$140
Nuclear
Gas Peaking
$120
Wind
$100
Renewable Energy
Geothermal
$80
Solar Thermal Tower w/Storage
Solar PV - Thin Film Utility Scale
$60
Solar PV - Crystalline Utility Scale
$40
Solar PV - Community
Solar PV - Rooftop C&I
$20
Solar PV - Rooftop Resi
$0
$50
$100
$150
$200
$250
$-
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Source: Lazard Levelized Cost of Energy and Levelized Cost of Storage – 2021. Published October 2021
Proprietary and Confidential | 38
$750+ Billion of Key Policy Initiatives
Support Energy Transition
Recent Policy Support Initiatives:
Annual Investment in Energy Supply-Related Infrastructure
Current Policy (including bipartisan infrastructure law) vs. Senate Inflation Reduction Act (“IRA”)
•
November 2021, $65 billion of
Infrastructure Investment & Jobs
Act related to grid upgrades
resiliency
•
January 2022, U.S. Department of
Energy launched “Building a Better
Grid” Initiative, $20 billion
•
March 2022, RePowerEU, €300
billion ($315 billion)
•
August 2022, Inflation Reduction
Act, $369 billion
•
In response to the IRA, the EU has
suggested that additional climate
legislation is a priority for 2023
•
The IRA and other policy
initiatives seek to incentivize
global investment in established
and nascent area of the energy
transition
USD Billions Per Year
900
800
700
600
500
400
300
200
100
0
2026
Transmission
2026
Sola r
2026
Wind
2028
Nuclear
2028
Fossil Power
2028
Fossil Power w/CCs
2030
2030
2030
CO2 Transport & Storage
Source: Princeton University, Preliminary Report: The Climate and Energy Impacts of the Inflation Reduction Act of 2022, August 2022
2035
Hydrogen
2035
2035
Biofuels & Synthetic Fuels
Other
Proprietary and Confidential | 39
Despite Tailwinds, Challenges Abound
•
Despite tailwinds, intermittency
can compound challenges
facing the grid, particularly
during system-wide failures
•
Reliable baseload nuclear and
coal plants (running 80-95% of
time) are being shut down in
favor of intermittent renewables
(running 10-30% of the time)
•
NIMBY-ism and opposition
blocks development of crucial
new transmission capacity
•
Limited transmission grid
expansion with an increasing
demand for renewables will lead
to further strain on grid
•
As of October 2022, S&P Global
is tracking more than 21,000
proposed transmission miles to
help integrate the nearly
320,000 MW of wind and solar
capacity in early planning stages
Grid Constraints and Intermittency Pose Continued Challenges
Hourly U.S. Electricity Generation by Energy Source
August 9, 2022 ERCOT
Megawatthours
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
12
1
2
3
4
5
6
7
8
9
10 11 12
1
2
3
4
5
6
7
8
9
10 11 12
a.m. a.m. a.m. a.m. a.m. a.m. a.m. a.m. a.m. a.m. a.m. a.m. p.m. p.m. p.m. p.m. p.m. p.m. p.m. p.m. p.m. p.m. p.m. p.m. a.m.
Nuclear (MWh)
Coal (MWh)
Natural Gas (MWh)
Solar (MWh)
Wind (MWh)
Hydro (MWh)
Other (MWh)
Limited Growth in Transmission Capacity
Miles of transmission lines added by year and region
3,000
2,500
2,000
1,500
1,000
500
0
2018
2019
CAISO
ERCOT
2020
MISO
SPP
New York
Source: U.S. EIA. Data for August 9, 2022 and accessed January 2023, S&P CapIQ and accessed January 2023
2021
Non-ISO
New England
2022
PJM
Proprietary and Confidential | 40
Challenges: Increasing Costs & Underperformance
•
Demand for raw material inputs
associated with energy
transition investments is
causing inflation in input costs,
pressuring profit margins
•
For example, the price of solargrade polysilicon tripled in 2021
and continues in 2022 to trend
above historic averages
•
Trade policy presents another
challenge to importing raw
materials
•
Despite renewable technologies
maturing, persistent
underperformance relative to
underwriting remains an issue
for select technologies. KWh
Analytics documents solar
projects underperforming P50
forecasts by ~7% on average, a
figure that has not improved in
recent years
Despite Challenges, a Robust Opportunity Set for Active Management
Polysilicon Raw Material Cost
$/kg, through December 31, 2022
Underproduction is the largest driver of EBITDA shortfalls
Average difference between actual & expected EBITDA
Curtailment
7%
50
Increased Operating Expenses
& Other
1%
45
40
Underproduction due to
poor availability, unrealistic
P50 estimates and weather
92%
35
30
25
Solar Projects are experiencing P99 events,
17x more often than expected
20
20%
1 in 7 projects are persistently underperforming their P99 over multiple years
15
17%
15%
15%
10
10%
5
5%
P99
events happening
17x more
frequently than
expected in any
given year​
1%
0
Feb-16
Jun-16
Oct-16
Feb-17
Jun-17
Oct-17
Feb-18
Jun-18
Oct-18
Feb-19
Jun-19
Oct-19
Feb-20
Jun-20
Oct-20
Feb-21
Jun-21
Oct-21
Feb-22
Jun-22
Oct-22
0%
Source: Bloomberg accessed in January 2023; kWh Analytics: Solar Risk Assessment: 2022
Over 1 Year
Expected P99 Probability
Persistent
underperformance
exponentially
higher than expected
over multiple years​
<1%
Over 4 Years
Actual P99 Probability
Proprietary and Confidential | 41
Lines Blurring Amid Rise of “Energy” Companies
Oil & Gas Companies Broaden Horizons Amid Expanding Opportunity Set
Select Energy Transition Investments by “Traditional” Energy Companies
Generation
Transmission &
Storage
Demand-Side
De-Carbonization
Source: Hamilton Lane, Capital IQ, As of January 2023. HL custom energy index equal-weighted and comprised of : Ørsted A/S, Brookfield Renewable Corporation, Atlantica Sustainable Infrastructure
plc, Voltalia SA, Falck Renewables S.p.A., Northland Power Inc., NextEra Energy Partners, LP, Ormat Technologies, Inc., Scatec ASA, Sunnova Energy International Inc.
•
Traditional energy companies
around the world are beginning to
play a leading role in the energy
transition, with noteworthy
investments across the
opportunity set
•
Traditional energy companies have
been able to play to their strengths,
leveraging their expertise and
scale in areas such as carbon
capture and in offshore wind
Proprietary and Confidential | 42
E&P Profitability Reached Historic Highs in 2022
Levered Free Cash Flow Margin
Median Across Selected Peer Sets
40%
37%
$120
32%
30%
20%
$100
20%
18%
18%
Levered FCF Margin
14%14%
16%
10%
0%
-6%
-10%
$60
0% -1%
-1%
-7%
-21%
-30%
-40%
$20
-30%
-30%
2012
2013
Continued capex restraint drove
outsized free cash flow generation
for North American and
international producers in 2022 as
growth in operating cash flow
exceeded capex
$40
-12%
-15%
-20%
•
$80
WTI Price ($/bbl)
23%
2014
2015
US Onshore
2016
2017
2018
International/Offshore
2019
2020
2021
2022
$-
WTI (LHS)
Source: Hamilton Lane, CapitalIQ. Data as of January 28, 2023, with available LTM data shown for 2022. *U.S. producers include: Vital Energy, Inc., Permian Resources Corporation, Callon Petroleum
Company, SM Energy Company, PDC Energy, Inc., Matador Resources Company, Devon Energy Corporation, APA Corporation, Chord Energy Corporation, Pioneer Natural Resources Company, Ovintiv
Inc., Marathon Oil Corporation, Civitas Resources, Inc., Diamondback Energy, Inc., EOG Resources, Inc. and Northern Oil and Gas, Inc.. International producer universe includes: DNO ASA, Woodside
Petroleum Ltd, Talos Energy Inc., Aker BP ASA,, Frontera Energy Corporation, Tullow Oil plc, Harbour Energy plc, Canadian Natural Resources Limited, EnQuest PLC, Kosmos Energy Ltd., Hurricane
Energy plc.
Proprietary and Confidential | 43
A Paradigm Shift For Shale; Will It Last?
“The aggressive growth of US shale is over…The shale model definitely is no longer a
swing producer” – Scott Sheffield, CEO, Pioneer Natural Resources (January 2023)
E&P Levered FCF Margin vs. Oil Prices1
Shale Well Cost2
2003 – 2022
Average, $ Millions
•
“The world was really lulled into
sleep by the success of the
shale revolution…The US took
control of prices from OPEC,
because we became the sole
source of growth for oil supply
globally. Until suddenly, all of
that changed” – Will VanLoh
•
Lack of reinvestment, inventory
concerns and cost inflation
weigh on outlook
•
Concerns particularly
pronounced for short-cycle
producers given decline rates
and rising gas-to-oil ratios
•
New investments in natural gas
takeaway capacity required
amid rising gas production in
Permian
$9.0
30%
$7.3
2021
Levered FCF Margin
20%
2022
2019
10%
Current
Reinvestment3
Capex / Operating Cash Flow (%)
0%
250%
200%
-10%
150%
100%
-20%
50%
-30%
0%
$-
$20
$40
$60
WTI ($/bbl)
$80
$100
$120
2012
2014
US Shale
2016
2018
2020
International/Offshore
2022
1Source: Hamilton
Lane, Capital IQ, FRED, As of January 2023. LTM Levered FCF margin shown for 2022. S&P 1500 Oil & Gas E&P (Sub-Index) Levered Free Cash Flow Margin (%) vs. Oil Prices shown
Average WTI Price ($/bbl) by Year vs. Levered FCF Margin (%).
2 Financial Times, Rystad Energy. January 5, 2023.
3 Hamilton Lane analysis, Capital IQ. Median reinvestment figures shown across selected universe. See custom universe on page 11. Latest LTM figures shown for 2022. As of January 29, 2023.
Proprietary and Confidential | 44
Carbon Capture Is a Part of the Energy
Transition and Decarbonization
Capture and Storage of CO2
Source: California Air Resource Board Accessed January 2023
•
Carbon capture technology
sequesters carbon
derived from difficult-todecarbonize industrial
processes such as steel and
cement production
•
The oil and gas industry is
uniquely positioned to deliver
carbon capture solutions to
industry by leveraging existing
infrastructure and expertise
while also benefitting from
enhanced oil recovery
Proprietary and Confidential | 45
Parting Thoughts…Have We Seen This Story Before?
TEV/EBITDA
2012 - 2022
•
45x
40x
35x
30x
•
25x
20x
15x
Valuations in the clean energy
sector remain well above
historic averages on the heels
of technological advancement
and commercialization, policy
support initiatives and a bright
outlook for demand/adoption
The U.S. shale revolution was
largely driven by improvements
in technology, enabling the
extraction of oil and gas from
shale rock formations
10x
5x
Renewable Energy: Custom Index*
Sep-22
May-22
Jan-22
Sep-21
May-21
Jan-21
Sep-20
May-20
Jan-20
Sep-19
May-19
Jan-19
Sep-18
May-18
Jan-18
Sep-17
May-17
Jan-17
Sep-16
May-16
Jan-16
Sep-15
May-15
Jan-15
Sep-14
May-14
Jan-14
Sep-13
May-13
Jan-13
Sep-12
May-12
Jan-12
0x
S&P Oil & Gas E&P Select Index
Source: Hamilton Lane, Capital IQ, As of January 2023. HL custom energy index equal-weighted and comprised of : Ørsted A/S, Brookfield Renewable Corporation, Atlantica Sustainable Infrastructure
plc, Voltalia SA, Falck Renewables S.p.A., Northland Power Inc., NextEra Energy Partners, LP, Ormat Technologies, Inc., Scatec ASA, Sunnova Energy International Inc.
Proprietary and Confidential | 46
Attractive Areas for Investment
Focus Sectors
Market-Driven Themes
•
Upstream
•
•
Midstream/
Downstream
•
•
•
•
Generation
•
•
•
Transmission/
Distribution
Strong commodity prices paired with capital discipline
have driven strong returns; cost inflation and inventory
considerations moderate outlook
Opportunities to acquire existing production from
energy majors who seek to divest non-core assets,
some in heeding calls for de-carbonization
Preference for long-lived offshore opportunities
Rising gas production in North America to require
additional pipeline takeaway capacity
Focus on energy transition-oriented opportunities,
including LNG
De-carbonization opportunities, including CO2 EOR
Favorable contracting backdrop amid elevated power
prices; cost inflation and supply-chain constraints pose
challenges globally
Opportunities to invest in conventional generation
assets addressing intermittency associated with
renewables
Technological advancement and government support
pose as tailwinds to the energy transition
Target Investment Characteristics
• Long-lived, free cash flow-generating, upstream
assets that are well positioned on the global
cost-curve
• Contracted, midstream assets connecting
supply and demand (e.g. LNG, natural gas
pipelines)
• Select opportunities to capitalize on return
premiums associated with de-risking/
advancing renewable development projects
• Projects and assets benefitting from, yet not
wholly dependent upon, government support
schemes
Substantial investments in grid transmission required
amid rising interconnection queues and strains on the
grid from intermittent renewables
The information contained herein is based on the latest available information as of 1/31/22 and Hamilton Lane's opinions as of the date of this presentation and subject to change at the Firm's discretion.
Proprietary and Confidential | 47
Real Estate
The Big Picture
Rising rates, capital markets volatility
and reduced liquidity
• “Risk-off” sentiment amid rising rates and
questions of “how high” and for “how long”
central banks and the Fed will go in raising
rates, resulting in higher borrowing spreads on
top of higher base rates
• Rising rates and a pullback in lending from
traditional real estate lenders has reduced
liquidity in the real estate market, setting the
stage for select distress in the market
+
Despite market volatility, there are
reasons for optimism
+
Reduced competition drives better
buying opportunities
• Fundamentals remain strong overall, with high
levels of demand and positive rent growth
across most sectors
• Real estate income yields have generally been
low over the past decade, a trend we see
reversing rapidly
• There has been a meaningful flight to quality
from a user perspective leading to
sustained, high performance of high-quality,
well-located assets
• Particularly compelling opportunities to provide
financing at rates seemingly unimaginable ~12
months ago. Credit investors with existing
exposure to floating rate loans to see
meaningful uplift in returns going forward.
Attractive secondary pricing.
• Slowing new supply, reduced buyer
competition and market distress leading to
lower prices and better yields
• Opportunity set no longer dominated by four
major property types
Proprietary and Confidential | 49
Myths About Today’s Real Estate Market
Sell-Off in the Non-Traded
REIT (“NTR”) Space
Signals a Market
Downturn
The NTR selloff in late 2022 / early 2023 was driven by retail investors primarily seeking liquidity and
portfolio rebalancing
Overall, fundamentals in the US real estate market remain strong with high occupancy and strong
NOI growth
A Rising Interest Rate
Environment Leads to
Declines in Property
Values
The impact of a rising interest rate environment on property values depends on whether NOI growth
offsets a potential increase in cap rates
- As interest rates increase, cap rates also tend to rise (though at a narrower range), negatively
impacting property values
- Rent growth typically accelerates during periods of higher inflation, resulting in NOI expansion,
which positively impacts property values
A Strong Dollar Deters
Foreign Investment in
U.S. Real Estate
Even though the U.S. Dollar is at 2-year highs relative to other world currencies, foreign investors are
still buying US real estate for several reasons:
- Properties are trading at higher yields
- U.S. commercial real estate is viewed as a safe haven for capital
- U.S. real estate has historically produced consistent returns and portfolio diversification
Proprietary and Confidential | 50
Real Estate Fundamentals
Cap Rate by Property Type
Effective Rent Growth
Transaction Volume
$900
10%
$200
$800
9%
$180
$700
$600
$ Billion
8%
$160
$500
7%
$140
$400
6%
$120
$300
$100
5%
$80
4%
$60
3%
2008
$200
$100
$0
2010
2012
2014
2016
2018
Multifamily
Office
Retail
Hotel
Industrial
Source: Bloomberg as of December 31, 2022
2020
2022
2008
2010
Multifamily
2012
Office
2014
2016
Retail
Source: Bloomberg as of December 31, 2022 & Green Street Advisors
2018
Industrial
2020
2022
2010
Multifamily
2012
Office
2014
2016
Retail
2018
Hotel
2020
2022
Industrial
Source: Green Street Advisors and Bloomberg as of December 31, 2022
Proprietary and Confidential | 51
Real Estate Fundamentals
Real Estate Returns (NPI) vs. 10-Year
Treasury Yield1
Cap Rate vs. 10-Year Treasury
Yield Spreads
NPI Income vs. Appreciation
20%
8%
7%
•
Given rising interest rates, cap
rate spreads have come in
significantly since 2021, with
multifamily and industrial
continuing to have the tightest
spreads
•
The NPI (“NCREIF Property
Index”) posted its highest
calendar year return since the
Global Financial Crisis (“GFC”) in
2021 thanks in large part to
record multifamily and industrial
sector returns
•
The one-year return for 2022 was
5.5%, driven primarily by income
15%
6%
5%
10%
4%
5%
3%
2%
0%
NPI Total Return (LTM)
10-year Treasury Yield
NPI Income
Source: NCREIF as of December 31, 2022; FRED, as of December 31, 2022
Multifamily
Office
Retail
Hotel
Industrial
All Prop Type LT Avg.
Source: FRED, Green Street Advisors, and Bloomberg as of December
31, 2022
-5%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
0%
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
1%
Income
Appreciation
Source: NCREIF as of December 31, 2022
1Yield associated with 10-year constant maturity treasury note shown relative to last twelve-month return for NCREIF Property Index (“NPI”) total return, as well as annualized quarterly income return
associated with the NPI
Proprietary and Confidential | 52
Performance Across Real Estate Sector
NPI Quarterly Returns
7%
6%
5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
-4%
-5%
-6%
Jun-17
Income
Appreciation
Total Return
•
•
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Dec-20
Jun-21
Dec-21
Jun-22
– This was primarily driven by a
strong rebound in income for
the sector
Dec-22
NPI Performance by Property Type
•
25%
Multifamily
20%
Office
Retail
Hotel
Industrial
Though 2022 was off to a strong
start, the fourth quarter posted
negative returns, primarily driven
by negative appreciation
Industrial continued to lead other
property types; however, the hotel
sector posted a strong 1-year total
return of almost 10%
The office sector continued to face
challenges, driven by negative
appreciation during the year
– Negative returns for office were
partially offset by positive incomedriven returns during the year
15%
10%
5%
0%
-5%
-10%
1 Year
Source: NCREIF as of December 31, 2022
3 Year
5 Year
10 Year
15 Year
20 Year
Inception
Proprietary and Confidential | 53
Performance Divergence Across Real Estate Sector
Annual NOI Growth by Property Type (%)
Vacancy Rates by Property Type
25%
15%
20%
15%
13%
10%
11%
5%
9%
0%
7.8%
7%
-5%
-10%
6.4%
5%
-15%
•
•
YoY NOI growth was highest in the
industrial sector, with multifamily NOI
growth remaining strong, albeit
normalizing from 2021 levels
Industrial vacancy rates remained
low, with a slight uptick observed in
multifamily
3%
-20%
-25%
12.8%
2010
2012
Multifamily
2014
Office
2016
Retail
Source: NCREIF as of December 31, 2022
For illustrative purposes only. Actual results may vary.
2018
2020
Industrial
2022
1.5%
1%
Multifamily
Office
Retail
Industrial
Source: NCREIF as of December 31, 2022
Proprietary and Confidential | 54
Housing
U.S. Multifamily Fundamentals
400
98%
300
96%
95%
200
94%
93%
100
•
Significant decline in new
multifamily starts due to
increased construction costs
and borrowing costs should
protect sector fundamentals
•
Multifamily rent growth
remained the strongest in the
Southeast region of the U.S.,
with 13.5% year-over-year rent
growth, approximately 300bps
higher than the national average
•
With cap rates bottoming out in
2021, the market observed
considerable cap rate expansion
in 2022 as transaction volume
slowed and asset repricing
began to occur
Occupancy
Thousand Units
97%
92%
91%
0
2012
Completions
2014
Net Absorption
2016
2018
2020
90%
2022
Occupancy
Source: Bloomberg as of December 31, 2022
U.S. Multifamily Cap Rates
5.5%
5.1%
4.9%
4.9%
5.0%
4.5%
4.3%
4.4%
4.0%
Source: CBRE Research, September 30, 2022
Dec-22
Sep-22
Jun-22
Mar-22
Dec-21
Sep-21
Jun-21
Mar-21
Dec-20
Sep-20
Jun-20
Mar-20
Dec-19
Sep-19
Jun-19
Mar-19
3.8%
Dec-18
3.5%
Source: Green Street Advisors, December 31, 2022
Proprietary and Confidential | 55
Industrial/E-Commerce
Net Absorption by Region – 3Q 2022
U.S. Industrial Completions, Net
Absorption and Occupancy
Million SqFt
99%
200
Million SqFt
150
All Markets
South
98%
100
• The market absorbed over
359 million sq. ft. through the first
three quarters of 2022, with the
South accounting for over 45% of
all demand
52.8
Midwest
20.4
West
20.4
97%
50
0
108.2
Q2 '21
Q3 '21
Completions
Q4 '21
Q1 '22
Net Absorption
Q2 '22
Q3 '22
96%
Northeast
13.8
0
Occupancy
20
40
60
80
100
Source: Cushman & Wakefield Marketbeat U.S. National, Q3 2022
Source: Cushman & Wakefield Marketbeat U.S. National & NCREIF Q3 2022
120
• While preleasing activity is still
happening, it has fallen 11.2% yearover-year, as of 3Q 2022
• Despite some economic slowdown,
strong demand from larger
occupiers and third-party logistics
continued, while less demand was
observed from smaller businesses
YTD Leasing by Facility Size
1,200k+ SqFt
700-1,200k SqFt
300-700k SqFt
100-300k SqFt
20-100k SqFt
Under 25k SqFt
0
• In 3Q 2022, industrial supply began
to outpace demand as absorption
slightly slowed, although vacancy
rates remained very low
50
100
150
200
250
– Small businesses are top occupiers
of light industrial facilities under
25k sq.ft., for which demand
decreased by 20% year-over-year,
as of 3Q 2022
Million SqFt Leased
2022
2021
Source: CBRE Research, September 30, 2022
Proprietary and Confidential | 56
Office Sector
50
92%
40
90%
30
88%
20
86%
10
2011
Completions
2012
2013
2014
Net Absorption
2015
2016
2017
2018
2019
2020
2021
2022
•
This trend continued into 2022,
with 88.5 million sq.ft. of net
absorption in new vintage/Class
A product, with older
vintage/lower quality product all
facing negative absorption
•
Sublease availability space in the
U.S. grew to a high of 169.9
million sq.ft. in 3Q 2022, with
additions doubling quarter-overquarter
•
Fundamentals for medical
office, however, held strong, with
significant demand outpacing
supply and rising occupancy
rates
Occupancy
U.S. Medical Office Fundamentals
92.5%
92.3%
20
15
2015-present
91.9%
2010-2014
91.5%
91.3%
5
91.1%
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
2020 2020 2020 2020 2021 2021 2021 2021 2022 2022
Completions (TTM)
Absorption (YOY)
Source: JLL Office Market Outlook, 2Q 2022
Million SqFt
92.1%
91.7%
10
Net Absorption Since COVID-19 by Building
Vintage
90.9%
Occupancy Rate (TTM)
Year of delivery
25
Millions SqFt
Since the onset of the pandemic,
we have seen a flight to quality
in the office sector
82%
Source: Bloomberg as of December 31, 2022
0
•
84%
0
-10
Occupancy
Millions SqFt
U.S. Office Fundamentals
88.5
-4.5
2000-2009
-43.2
1990s
1980s
-34.4
-89.0
1970s
-31.2
1960s
-16.7
Pre-1950s
-125
-37.7
-75
-25
25
75
125
Source: JLL Research, September 30, 2022
Proprietary and Confidential | 57
Attractive Areas for Investment – U.S.
Focus Sectors
Industrial
Residential
Office & Retail
Market Driven Themes
•
E-commerce tailwinds
•
•
•
Sustained supply/demand imbalance
Evolving sector with deep demand characteristics
Logistics users constantly looking to reduce distance
to consumers
•
Structural demand tailwinds
•
Short term leases benefit from rental growth
•
Multiple ways to play
•
Capital flows support build-to-core
•
Rental housing growing internationally
•
•
•
Alternative Sectors &
Real Estate Credit
•
•
•
•
Considerations
•
Rental growth slowing in certain markets
•
Cap rates remain low, despite slight increases in 2022
•
Narrow or negative spreads over borrowing rates
•
Highly competitive environment
•
Rental growth slowing in certain markets
•
Cap rates remain low despite slight increases in 2022
•
Negative leverage spreads may impact performance
•
Highly competitive environment
Grocery-anchored retail has demonstrated defensive, resilient
demand
Flight to quality for newly delivered, Class A modern
office space
Portfolio premiums for medical office assets given fragmented
market
•
Structural headwinds for brick and mortal retail due to rise of ecommerce
•
•
•
•
Cyclical lack of demand for office during economic downturns
Potential distress for office leases and loans coming due
Fragmented medical office market
Life science demand to decline if venture capital funding erodes
Structural demand drivers for self-storage and data centers
Post-Covid rebound in demand for travel and leisure services
Aggressive push for content fueling demand for modern
studio real estate
Opportunity to generate equity-like returns as traditional
sources of financing have pulled back; opportunities across
the capital stack including senior loans, mezzanine and
preferred equity
•
Non-institutional, self-storage owners with poorly managed
facilities creates need for top-quality operators
Fragmented, self-storage market creates barriers to scale
Specialized nature of data centers requires need for
experienced operating partners
Limited land availability in infill locations
Limited upside relative to equity; cash flow may also be
limited through PIK structures
•
•
•
•
The information contained herein is based on the latest available information as of 1/28/22 and Hamilton Lane's opinions as of the date of this presentation and subject to change at the Firm's discretion.
Proprietary and Confidential | 58
Attractive Areas for Investment – Europe and Asia
Europe
Focus Sectors
Industrial
•
•
•
•
Multifamily
Retail
•
•
•
Office
•
•
•
Asia
Robust demand for logistics with continued rise in e-commerce
Shortage of new spaces and rising inflation have put upward
pressure on rental growth
Prime yields are expected to widen in leading European markets
due to rising long-term yields and inflationary pressures
•
Multifamily remained resilient throughout the Covid-19
pandemic as shrinking households and rising house prices
have led to strong growth in private rentals
Mixed outlook for PBSAs with a shortage of beds amid
disruptions from Covid-19
•
Recovery of footfall and sales in luxury retail has led to upward
rental pressure, outpacing mass-market streets
Headwinds continue to dominate the sector with the growth of
e-commerce and weaker household incomes
•
Undersupplied core markets to support rental growth
Vacancy rates remain low in prime markets
Dislocation in sub-prime markets remains, driven by
obsolescence risks and remote work trends
•
•
•
•
•
•
•
Other/Niche
•
Led by strong absorption from hyperscalers, upcoming
supply of data center space is expected to be met by
demand with vacancies remaining flat or decreasing
Increasing environmental concerns has resulted in fewer
new project approvals in FLAP regions, driving demand for
data centers outside these core markets
•
•
Low-to-moderate yield expansion is expected across the region after
experiencing rises in capital values during the pandemic
Australia is an attractive logistics market, as low vacancy rates (0.8% in
2022) are driving rental growth
Japan remains the key multifamily market, supported by continual net
migration into Tier I cities (Tokyo, Osaka, Fukuoka, Nagoya)
Japan multifamily investment volumes are expected to remain
healthy, underpinned by strong fundamentals, low cost of debt and a
relatively cheaper yen
While fundamentals have started to improve, concerns over recession,
inflation and rising interest rates continue to weigh on investor sentiment
Domestic-focused and suburban retail expected to outperform in the near
term
Office space utilization is back to pre-pandemic levels, as most employees
are returning to office-based working
Grade A office rents are expected to remain resilient in the near term, as
workers demand more workspace amid supply pressures
Cap rates are expected to tick upwards with rising rates (Japan is exception)
Data centers are supported by strong, unmet demand from e-commerce
and hyperscale players. Tight cap rates result in transactions dominated
by greenfield opportunities
The hospitality sector is expected to rebound sharply, riding on the surge
in tourism from the reopening of China's borders
The information contained herein is based on the latest available information as of 12/31/22 and Hamilton Lane's opinions as of the date of this presentation and subject to change at the Firm's discretion.
Proprietary and Confidential | 59
Agriculture
The Big Picture
•
Farm incomes are higher than they’ve ever been before, buoyed by high
commodity prices but tempered by increasing expenses
•
Geopolitical upheaval has led to disturbances in agricultural supply
chains worldwide, including famine
•
Labor remains a perennial issue for U.S. farmers, and H2A work visas
remain the best option to fix it
•
Farms are getting larger as the industry continues to consolidate
•
ESG issues are at the forefront for agriculture investors, and there is an
abundance of opportunity
Proprietary and Confidential | 61
The Inflation Correlation
Farmland Averaged Returns During Periods of High, Medium and Low Inflation
(1960 – 2012)
14.7%
10.5%
10.0%
•
7.3%
Farmland returns are
historically, positively correlated
with inflation
3.2%
1.7%
High
Medium
Farmland
Source: Morningstar, NCREIF, Bureau of Labor Statistics and Hancock Agricultural Investment Group, as of December 31, 2022
Low
Inflation
Proprietary and Confidential | 62
Net Farm Incomes Are Higher Than Ever,
Giving Equity a Boost
U.S. Net Farm Income and Net Cash Farm
Income, Inflation Adjusted
Total Farm Equity
2.9
200
2.82
2.85
2.8
175
2.73
2.7
125
$ in Trillions
2022 Dollars (Billions)
150
100
This performance was largely driven
by an increase in receipts from both
the sale of product and the highestever insurance payments
2.59
2.54
•
Production expenses have also
increased significantly, a move which
is expected to be sticky into next year
as farmers look to prepay many
expenses
•
Farm equity continues to increase as
leverage remains relatively subdued
and farmland prices continue to
increase
2.45
2.4
50
2.3
25
0
•
2.62 2.62
2.52
75
Real farm incomes were the highest
in history in 2022
2.66
2.6
2.5
•
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Net Farm Income
Source: USDA, as of December 1, 2022
2.2
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Net Cash Farm Income
Source: USDA, as of December 31, 2022
Proprietary and Confidential | 63
Farmer Mac: Lender’s Top Concern for Producers
Third-Party Financing
Water Availability
A Slowing Economic Recovery
Total Leverage
Farm Labor Cost or Availability
Land Rents
•
Inflationary pressures remain a
top concern for farm financers
•
These pressures tighten liquidity
Weather
Farm Income Levels
Liquidity
Inflationary Pressures
0%
10%
20%
1 - High
Source: Federal Agricultural Mortgage Corporation, as of December 31, 2022
30%
2
3
40%
4
50%
5
6
60%
7
8
70%
9
80%
90%
100%
10 - Low
Proprietary and Confidential | 64
Crop Prices Remain Elevated
Commodity Futures Prices (Indexed to 100)
350
300
250
•
200
The major farmed commodities are
priced at historically high levels
150
100
50
2018
2019
2020
Corn
Source: Bloomberg, as of January 17, 2023
2021
Soybean
2022
2023
Wheat
Proprietary and Confidential | 65
Geopolitics Has Seeped Into Agricultural Markets
U.S. Wheat Export Prices, Monthly Averages
550
500
Dollars per Metric Ton
450
•
Wheat prices, in
particular, surged in early 2022
•
Russia and Ukraine are nearly
1/3 of the export market, and
other key exporters were also
forecasting tight supplies
•
Generally, spring wheat is the
highest-priced, but the winter
wheats compete more with
Russian and Ukrainian supply
400
350
300
250
200
Hard Red Winter
Soft Red Winter
March 2021
Source: USDA and International Grains Council, as of April 22, 2022
January 2022
Hard Red Spring
March 2022
Proprietary and Confidential | 66
Increasing Food Insecurity
Global Oil Prices and U.S. Exports of Wheat to Nigeria
Dollars (Billions)
1.0
0.5
0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
U.S. Wheat Exports to Nigeria
120
100
80
60
40
20
0
Oil Price (U.S. Dollars)
1.5
Change in the Prevalence of Food Insecurity
in 2022 Relative to 2021
Oil Price
300
150
200
100
100
50
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: USDA, as of August 11, 2022
U.S. Poultry Exports to Angola
0
Oil Price (U.S. Dollars)
Dollars (Millions)
Global Oil Prices and U.S. Exports of Poultry to Angola
Change in food insecurity prevalence, percent
 <0
 1-10
 11-30
 >50
 Non-IFSA country
Note: USDA's International Food Security Assessment (IFSA) model estimates how
food prices affect food demand and access in 77 low-and middle-income countries.
Source: USDA, Economic Research Service based on results from the International
Food Security Assessment model.
Oil Price
•
All of this has led to a 10% increase in the global population that is food-insecure, with North Africa as high as 25%
•
This is also affected by the terms of trade for particular countries; oil exporters’ food imports vary directly with the
price of oil
Source: USDA, as of October 11, 2022
 31-50
Proprietary and Confidential | 67
Food Prices Are Increasing Across the Board
Inflation for Major U.S. Food Categories
Food at Home
(all categories)
Eggs
Fats and Oils
Poultry
Other Foods
•
The U.S. and other Western nations
are also affected by geopolitics and
agricultural issues, with significant
increases in the price of food in
nearly all categories
•
2022 saw retail food prices increase
more than 5x the 20-year average
Cereals and Bakery Products
Dairy Products
Fish and Seafood
Fresh Fruits
Nonalcoholic Beverages
Meats
Sugar and Sweets
Fresh Vegetables
0
5
2022
2021
10
Percent change in retail price, January-July
15
20
Historical Average (2001 - 2020)
Source: USDA and U.S. Bureau of Labor Statistics Consumer Price Index, as of August 25, 2022
Proprietary and Confidential | 68
Farmers’ Costs Are Increasing Too
Total Costs of Producing Corn on High-Productivity Farmland in Central Illinois
$1,200
$ per acre
$1,000
$800
$600
$400
$200
•
The cost of production has increased
significantly this year, driven largely
by inflationary pressures on
expenses like chemicals
•
A decline in input costs (natural gas)
may mitigate this in the future, but
not for the coming crop year
$0
Non-land Costs
Source: University of Illinois, as of December 31, 2022
Cash rent
Fertilizer Prices per Ton in Illinois from 2008 to 2022
1,600
$1,469
1,400
1,200
1,000
$983
800
DAP
600
Anhydrous Ammonia
$862
Potash
400
200
0
2008
2009
2010
Source: USDA, as of September 2022
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Proprietary and Confidential | 69
Labor Is a Perennial Issue for Farmers
Number of H-2A Jobs and Visas
Labor as a Portion of Total Cash Expenses
by Crop or Livestock Enterprise
350,000
•
Crops vary in their labor intensity,
with the high-value permanent crops
targeted by investors the most
vulnerable to labor costs
•
The H-2A program continues to be
the favored method for contending
with the need for seasonal labor
•
Six states account for half of H2A
labor: Florida, Georgia, Washington,
California, North Carolina and
Louisiana
•
H2A workers are subject to a specific
minimum wage, which is increasing
300,000
All Farms
Specialty Crops
250,000
Other Livestock
Dairy
200,000
Other Field Crops
Poultry
Hogs
150,000
Cotton, Tobacco and…
General Cash Grains
100,000
Wheat
Cattle
50,000
Corn
Soybeans
Jobs Certified
Source: USDA, as of December 31, 2020
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
0
2009
50
2008
40
2007
20
30
Percent
2006
10
2005
0
Visas Created
Source: USDA, the U.S. Department of Labor and the U.S. Department of State, as of October 3, 2022
Proprietary and Confidential | 70
Crop Insurance Can Provide Significant Protection,
With Caveats
Spring Wheat Acres Planted in the First Full
Week
Share of Fruit and Nut Acreage by
Insurance
40
100%
90%
35
80%
Late-Planted Acres (Percent)
50%
40%
30%
20
10%
5
Almonds
Apples
Avocados
Blueberries
Cherries
Cranberries
Grapefruits
Grapes
Hazelnuts
Kiwifruits
Lemons
Macadamia Nuts
Olives
Oranges
Peaches
Pears
Pecans
Pistachios
Plums & Prunes
Strawberries
Walnuts
10
Acreage Not Covered
Source: USDA, as of December 31, 2017
FCIP Acres
NAP Acres
6
15
20%
Each program has a different design,
and some are more palatable to
farmers than others
•
The USDA is constantly adjusting
these programs in order to increase
their use and applicability to farming
operations; farmers who stay on top
of these changes can benefit
•
Usage is also defined by cutoff dates,
with a third of this year’s wheat
missing the insurance cutoff due to
poor weather
•
Farmers have two choices after this
date: get a payment to recoup preplanting costs (and letting the land
lie), or planting regardless if crop
prices are high enough, as they likely
were this year
4
2
0
0
Minnesota
•
8
25
Dollars per Bushel
60%
Crop insurance programs vary in use
depending on crop
10
30
70%
0%
12
•
North Dakota
Source: USDA, as of September 30, 2022
Spring Wheat Projected Price
Proprietary and Confidential | 71
It’s Hard to Avoid GMOs
Adoption of Genetically Engineered Crops in the U.S.
100
Percent of Planted Acres
75
•
50
Genetically engineered crops were
introduced in 1996 and have quickly
come to dominate the market
25
0
HT Soybeans
Source: USDA, as of October 27, 2022
HT Cotton
Bt Cotton
Bt Corn
HT Corn
Proprietary and Confidential | 72
Farm Consolidation Is a Slow Process
Farms, Land Included in Farms, and Average Acres per Farm
8
•
The number of farms in the U.S. and
average farm size has remained
relatively steady over the past
several decades
•
The real consolidation happened in
the first half of the 20th century; it is
by no means a recent phenomenon
•
The ongoing aging of farm owners
and increasing interest from
institutional capital providers may
lead to a second wave of
consolidation, as investors look to
take advantage of the benefits of
scale and aging farmers look to
settle their estates
Million Farms, Billion Acres, or 100 Acres per Farm
7
6
5
4
3
2
1
0
1850
1870
1890
Farms (millions)
Source: USDA, as of June 30, 2022
1910
1925
1935
1945
1954
1964
Average Farm Size (100 acres per farm)
1974
1982
1992
2002
2012
2021
Land included in Farms (billion acres)
Proprietary and Confidential | 73
Family Farms Still Dominate the Industry
Value of Production of Selected
Commodities by Farm Type
Distribution of Farms, Land Operated and
Value of Production by Farm Type
90%
2
6
3
80%
100
10
17
27
70%
60%
46
18
50%
40%
89
30%
18
45
20%
10%
0%
90
Percent of Value of Production
100%
5
13
18
80
8
16
18
35
30
14
47
73
•
The value of production they control
is tempered by investors’ focus on
higher value crops
•
Family farms still dominate many
crop categories
69
35
40
39
30
10
Family farms still manage the vast
majority of U.S. land in production,
despite the fear of their demise
51
50
20
•
43
20
70
60
7
47
53
11
26
17
26
13
0
15
16
4
8
5
10
8
18
Percentage of Farms
Small Family Farms
Percentage of
Agricultural Land
Percentage of Value
of Production
Midsize Family Farms
Large-Scale Family Farms Nonfamily Farms
Source: USDA, as of December 31, 2022
Small Family Farms
Midsize Family Farms
Large-Scale Family Farms Nonfamily Farms
Proprietary and Confidential | 74
Droughts and Floods Across the Western U.S.
Percent of Land in Western States Experiencing Drought, 2000-22
Western state land area experiencing drought (percent)
80
Drought Classifications:
 Severe
 Extreme
 Exceptional
•
While much of the Western U.S. is
still in a state of drought, recent
weather events have led to
massive flooding and an above
average snowpack in many areas,
particularly California
•
The Colorado snowpack is also
healthy (150%+ of average in
January 2023) so far, and this
feeds the Colorado River
60
40
20
0
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
Notes: The Western states include Arizona, California, Colorado, Idaho, Kansas, Montana, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Washington, and Wyoming.
Drought classifications determined by U.S. Drought Monitor.
Source: USDA, Economic Research Service using U.S. Drought Monitor data; as of September 19, 2022
Proprietary and Confidential | 75
Agriculture Comprises a Large Portion of GHG
Emissions
Estimated U.S. Greenhouse Gas Emissions by Sector
Industry, 30.3%
U.S. Territories, 0.4%
•
Greenhouse gas emissions from
agriculture are declining overall
but increasing as a percentage of
U.S. emissions as a whole
•
Fertilizer usage, manure and
fermentation all contribute to
emissions
Direct N2O, 5.6%
Residential, 15.4%
Agriculture, 11.2%
Direct CO2, 4.2%
Transportation, 27.3%
ElectricityRelated, 0.6%
Commercial, 15.4%
Direct CH4, 0.8%
Source: USDA and the U.S. Environmental Protection Agency, as of April 30, 2022
Proprietary and Confidential | 76
Mining & Minerals
The Big Picture
•
Mining capex remains subdued even through rising commodity prices
•
Any kind of “green” energy transition is going to require a massive
amount of newly-mined raw materials
•
Despite the Western nations best efforts, coal is back
Proprietary and Confidential | 78
All Major, Mined Commodity Prices Have Increased
Since 2015
Commodity Prices (Indexed to 100)
800
700
600
•
Mined commodity prices are up,
driven by supply disruptions
worldwide as economies reopen
•
Coal has been the real outperformer
as nations fight to keep the lights on,
coming after many proclamations of
the death of the industry
500
400
300
200
100
0
2015
2016
2017
2018
Gold
Source: Bloomberg, as of December 31, 2022
2019
Iron Ore
Coal
2020
2021
2022
Copper
Proprietary and Confidential | 79
Investment in Future Supply Has Fallen
Capital Expenditure - Mining
Major Copper Discovery Drought Continues
35,000
150
5000
30,000
4000
•
100
25,000
3000
Mt
2000
50
15,000
1000
10,000
0
5,000
0
2002
U.S. ($M)
20,000
Mining capex and exploration
budgets are well below their prior
peak, leading to a dearth of new mine
supply
1990
1995
2000
2005
2010
2015
2020
0
Projected new copper from major discoveries (Mt)
2007
2011
2015
2019
Chain Volume Measures ($m)
Source: Australian Bureau of Statistics, as of December 31, 2022
2022
Copper in reserves, resources and past production (Mt)
Copper exploration budgets ($m)
Source: S&P Global, as of May 10, 2022
Proprietary and Confidential | 80
Green Energy Needs Mined Materials
Steel t/MW of Capacity
Wind Offshore
190
Hydro
161
Wind Onshore
124
Nuclear
59
Coal
58
Solar
45
Gas
•
Any kind of energy transition is going
to require a massive investment in
mining and the extraction of raw
materials to supply development
•
Wind energy, in particular, is highly
steel-intensive, necessitating iron ore,
coking coal, and other commodities
•
Batteries require an array of
materials, often currently mined in
sub-optimal locations and in less
desirable manners
35
Oil
15
Non-Fossil Fuel Share of Steel Demand in Power Generation (%)
2015
2030
2050
63%
94%
~100%
Source: Hatch and ArcelorMittal, as of December 31, 2022
Proprietary and Confidential | 81
India Needs Cheaper Energy Storage to Phase Out Coal
$ per Megawatt-Hour
300
Solar
$33
200
Wind
GW
$38
Coal
100
$59
Wind with Storage
0
$78
China Planned Thermal Capacity Additions
2016-2020
2011-2015
2006-2010
Source: Bloomberg, as of December 31, 2022
Despite headlines to the contrary,
coal is not dead, in fact its use is
increasing globally
•
Coal is the best performing
commodity of 2022; even nations like
Germany and the UK are restarting
coal plants as they contend with a
reduced gas supply from Russia
$65
Solar with Storage
2021-2025
•
270 GW
210 GW
280 GW
320 GW
Proprietary and Confidential | 82
Africa Is a Key Destination for Mining All Sorts
of Materials
100
500
90
80
400
•
New projects are generally farther
afield, as many resources near to
end users have already been
tapped
•
Resource nationalism is a key
issue in many nations with
prospective geology
•
This is not isolated to Africa and
other developing nations, as even
Australia has imposed new taxes
and royalties on resource
extraction now that prices have
risen
60
300
50
40
200
30
20
100
Number of Active African Projects
Metal Reserves (%)
70
10
0
Manganese
PGM
Cobalt
Diamonds
African Reserves
Source: S&P Global, as of November 11, 2022
Specialty
Uranium
World Reserves
Gold
Base
Bulk
Silver
0
African Projects Count
Proprietary and Confidential | 83
The Big Miners Have Diversified Businesses
Top 40 Revenue-Based Commodity Mix
12%
13%
17%
22%
24%
22%
•
The big miners operate in many
commodities, so there are many
opportunities to sell them good
projects
•
Changes in commodity prices can
dramatically shift revenues from
one category to another as can be
seen with coal over the past three
years
16%
21%
20%
9%
8%
8%
17%
16%
2020
Gold
Source: PwC, as of December 31, 2022
31%
23%
Coal
11%
10%
2021
2022 Forecast
Other Crucial Minerals
Iron Ore
Copper
Others
Proprietary and Confidential | 84
Timber
Key Themes
•
Mill capacity has been expanding in the Southeastern U.S., leading to
increasing timber demand
•
Demographics look good for ongoing, high timber demand
Proprietary and Confidential | 86
Mills Are Increasing Capacity in the Southeastern U.S.,
Driving Timber Demand
U.S. South Softwood Lumber Capacity
4.4 BBF
+18%
30
28.4
BBF
5.0 BBF
+26%
25
24.0
BBF
•
There has been significant
investment in mill capacity across
the Southeastern U.S.
•
Mill capacity creates timber
demand, as fixed costs are high,
so throughput is crucial
Billion Board Feet
20
19.0
BBF
15
Last 5 Years
Next 5 Years
10
5
0
2016
2017
2018
Source: Timberland Investment Resources, as of 12/31/22
2019
2020
2021
2022
2023
2024
2025
2026
Proprietary and Confidential | 87
-30%
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Dec-20
Jan-21
Feb-21
Mar-21
Apr-21
May-21
Jun-21
Jul-21
Aug-21
Sep-21
Oct-21
Nov-21
Dec-21
Jan-22
Feb-22
Mar-22
Apr-22
May-22
Jun-22
YoY Change in Price
-30%
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Dec-20
Jan-21
Feb-21
Mar-21
Apr-21
May-21
Jun-21
Jul-21
Aug-21
Sep-21
Oct-21
Nov-21
Dec-21
Jan-22
Feb-22
Mar-22
Apr-22
May-22
Jun-22
YoY Change in Price
Timber Prices Are Rising in Response
U.S. South - Pine Sawtimber
30%
20%
10%
0%
-10%
-20%
Pacific Northwest - Douglas Fir
30%
20%
10%
Source: Timberland Investment Resources, as of 12/31/22
•
Timber markets are regional,
driven by a limited catchment
area for mills due to
transportation costs
•
Different woods also differ in their
properties and uses
•
These broad regions can be
broken down into much smaller
submarkets, each with its own
supply/demand dynamics
0%
-10%
-20%
Proprietary and Confidential | 88
Inventory Is a Key Driver of Prices
Relationship Between Price of Pine Sawtimber and Years of Supply in the U.S. South
(1990-2021)
80
70
Pine Sawtimber $/ton (current $)
60
•
As with any commodity, timber
prices are a function of supply
and demand
•
Current inventory sits at about 15
years, but all new mill capacity is
expected to drive this down and
prices up
50
40
30
20
10
0
11
12
13
14
15
16
17
18
Years of Inventory
Source: Timberland Investment Resources, as of 12/31/22
Proprietary and Confidential | 89
Demand Is Dependent on Housing-Related Spend
U.S. Housing Starts
Average Age of OwnerOccupied Homes
U.S. Population Age
25-34
1.45
44
46
Million per Year
1.30
Short
200,000
Homes a
Year
1.25
1.20
45.5
45
1.22
44
43
42
42
38
34
41.2
Average
Home 7
Years
Older
36
1.15
41
42
•
The largest driver of timber
demand is for lumber to build and
remodel homes
•
The U.S. has underbuilt housing
just as Millennials come into
prime homebuying age
40
4.3M More
Potential
Home
Buyers
Years of Age
1.35
1.42
Million People
1.40
35
1.10
1.00
32
40
1.05
39
Long-Run Average Last 10 Years
(50 Years)
(thru June '22)
Source: Timberland Investment Resources, as of 12/31/22
2010
2021
30
2011
2021
Proprietary and Confidential | 90
Appendix
Endnotes
Real Estate: NCREIF Property Index – The NCREIF Property Index is a quarterly time series composite total rate of return measure of investment performance of a very large pool of individual commercial real estate properties acquired in the private market for investment purposes only. All
properties in the NPI have been acquired, at least in part, on behalf of tax-exempt institutional investors – the great majority being pension funds. As such, all properties are held in a fiduciary environment. Source: Bloomberg
FTSE NAREIT – The FTSE NAREIT All Equity REITs Index is a free-float adjusted, market capitalization-weighted index of U.S. equity REITs. Constituents of the index include all tax-qualified REITs with more than 50% of total assets in qualifying real estate assets other than mortgages
secured by real property.
Moody’s CPPI – Transaction-based price indices developed and published by Real Capital Analytics (“RCA”), a subsidiary of Moody’s. The Index measures the actual price experience of property investors – the capital appreciation component of total return, by quantifying the change in prices
based on empirical results of validated transaction. The index is based on transaction data exclusively compiled by RCA from research that includes the cumulative sourcing and cross-referencing of hundreds of independent sources.
Bonds: Bloomberg Barclays US Aggregate Bond Index – The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related
and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency). Source: Bloomberg
Energy: Cobalt Energy Manager Universe - Includes all private equity energy managers from 1999 - 2016 that Hamilton Lane clients are invested with either on an advisory or discretionary basis. Source: Cobalt
Infrastructure: Cobalt Infrastructure Manager Universe - Includes all private equity infrastructure managers from 1999 - 2016 that Hamilton Lane clients are invested with either on an advisory or discretionary basis. Source: Cobalt
Agriculture: NCREIF Farmland Index - The NCREIF Farmland Index is a quarterly time series composite return measure of investment performance of a large pool of individual farmland properties acquired in the private market for investment purposes only. All properties in the Farmland
Index have been acquired, at least in part, on behalf of tax-exempt institutional investors - the great majority being pension funds. As such, all properties are held in a fiduciary environment. Source: Bloomberg
Timber: NCREIF Timberland Index - The NCREIF Timberland Index is a quarterly time series composite return measure of investment performance of a large pool of individual timber properties acquired in the private market for investment purposes only. All properties in the Timberland Index
have been acquired, at least in part, on behalf of tax-exempt institutional investors - the great majority being pension funds. As such, all properties are held in a fiduciary environment. Source: Bloomberg
Mining: The Mining index used is a combination of the following two indices:
1) 1999-2007 – 100% MSCI ACWI Metals and Mining Index - The MSCI ACWI Metals and Mining Index is composed of large and mid cap stocks across 23 Developed Markets (DM) countries and 24 Emerging Markets (EM) countries. All securities in the index are classified in the Metals &
Mining industry (within the Materials sector) according to the Global Industry Classification Standard (GICS®). Source: Bloomberg
2) 2007-2016 – 100% Cobalt Mining Manager Universe - Includes all Private Equity Mining Managers from 2007-2016 that Hamilton Lane clients are invested with either on an advisory or discretionary basis. Source: Cobalt
Private Equity: Cobalt Private Equity Manager Universe - Includes all Private Equity from 1999 - 2016 that Hamilton Lane clients are invested with either on an advisory or discretionary basis. Excludes Real Estate, Fund-of-Fund, and Secondary managers/investments. Source: Cobalt
Stocks: S&P 500 Index - The S&P 500 index is a basket of 500 of the largest U.S. stocks, weighted by market capitalization. Source: Bloomberg
Inflation: Consumer Price Index All Urban Consumers: A measure that examines the changes in the price of a basket of goods and services purchased by urban consumers. Source: Bloomberg
Real Asset Portfolio Weighting: The Real Assets Portfolio uses the above indices to create a portfolio with the following weightings:
1) Real Estate – 40%
2) Energy – 20%
3) Infrastructure – 15%
4) Mining – 10%
5) Agriculture – 7.5%
6) Timber – 7.5%
Proprietary and Confidential | 92
Endnotes (cont.)
Page 14: Indices used: Hamilton Lane All Private Markets with volatility de-smoothed; Hamilton Lane All Private Equity ex. Credit and Real Assets with volatility de-smoothed; S&P 500 Index; Russell 3000 Index; MSCI World Index; HFRI Composite Index; Hamilton Lane Private Credit with
volatility de-smoothed; Credit Suisse High Yield Index; Barclays Aggregate Bond Index; Hamilton Lane Private Real Estate with volatility de-smoothed; Hamilton Lane Private Infrastructure with volatility de-smoothed; Hamilton Lane Private Natural Resources with volatility de-smoothed;
FTSE/NAREIT Equity REIT Index; S&P Global Infrastructure Index; MSCI World Energy Sector Index. Geometric mean returns in USD. Assumes risk free rate of 2.8%, representing the average yield of the ten-year treasury over the last fifteen years.
Page 15: Indices used: Hamilton Lane All Private Markets with volatility de-smoothed; Hamilton Lane All Private Equity ex. Credit and Real Assets with volatility de-smoothed; S&P 500 Index; Russell 3000 Index; MSCI World Index; HFRI Composite Index; Hamilton Lane Private Credit with
volatility de-smoothed; Credit Suisse High Yield Index; Barclays Aggregate Bond Index; Hamilton Lane Private Real Estate with volatility de-smoothed; Hamilton Lane Private Infrastructure with volatility de-smoothed; Hamilton Lane Private Natural Resources with volatility de-smoothed;
FTSE/NAREIT Equity REIT Index; S&P Global Infrastructure Index; MSCI World Energy Sector Index. Geometric mean returns in USD. Assumes risk free rate of 2.2%, representing the average yield of the ten-year treasury over the last ten years.
Page 16: Indices used: Hamilton Lane All Private Markets with volatility de-smoothed; Hamilton Lane All Private Equity ex. Credit and Real Assets with volatility de-smoothed; S&P 500 Index; Russell 3000 Index; MSCI World Index; HFRI Composite Index; Hamilton Lane Private Credit with
volatility de-smoothed; Credit Suisse High Yield Index; Barclays Aggregate Bond Index; Hamilton Lane Private Real Estate with volatility de-smoothed; Hamilton Lane Private Infrastructure with volatility de-smoothed; Hamilton Lane Private Natural Resources with volatility de-smoothed;
FTSE/NAREIT Equity REIT Index; S&P Global Infrastructure Index; MSCI World Energy Sector Index. Geometric mean returns in USD. Assumes risk free rate of 2.0%, representing the average yield of the ten-year treasury over the last three years.
Page 34: If a data set is distributed normally, about 95% of all data points will lie within two standard deviations of the mean.
Proprietary and Confidential | 93
Definitions
Strategy Definitions
Index Definitions
All Private Markets – Hamilton Lane’s definition of “All Private Markets” includes all private commingled funds excluding fund-of-funds and secondary
fund-of-funds.
Barclays U.S. Corporate Aggregate Index – Tracks the performance of U.S. fixed rate corporate debt rated as investment grade.
CI Funds – Any fund that either invests capital in deals alongside a single lead general partner or alongside multiple general partners.
BofAML High Yield Index – The BofAML High Yield index tracks the performance of below investment grade U.S. dollar-denominated corporate bonds
publicly issued in the U.S. domestic market.
Co/Direct Investment Funds – Any PM fund that primarily invests in deals alongside another financial sponsor that is leading the deal.
Credit Suisse High Yield Index – The Credit Suisse High Yield index tracks the performance of U.S. sub-investment grade bonds.
Corporate Finance/Buyout – Any PM fund that generally takes a control position by buying a company.
Credit Suisse Leveraged Loan Index – The CS Leveraged Loan Index represents tradable, senior-secured, U.S. dollar-denominated non-investment grade
loans.
Credit – This strategy focuses on providing debt capital.
Distressed Debt – Includes any PM fund that primarily invests in the debt of distressed companies.
EU Buyout – Any buyout fund primarily investing in the European Union.
FTSE/NAREIR Equity REIT Index – The FTSE/NAREIT All Equity REIT Index tracks the performance of U.S. equity REITs.
HFRI Composite Index – The HFRI Composite Index reflects hedge fund industry performance.
Fund-of-Funds (FoF) – A fund that manages a portfolio of investments in other private equity funds.
MSCI Emerging Markets Index – The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity
market performance of emerging markets.
Growth Equity – Any PM fund that focuses on providing growth capital through an equity investment.
MSCI Europe Index – The MSCI Europe Index tracks large and mid-cap equity performance across 15 developed market countries in Europe.
Infrastructure – An investment strategy that invests in physical systems involved in the distribution of people, goods, and resources.
MSCI World Energy Sector Index – The MSCI World Energy Sector Index measures the performance of securities classified in the GICS Energy sector.
Late Stage VC – A venture capital strategy that provides funding to developed startups.
MSCI World ex. U.S. Index – The MSCI World ex. U.S. Index tracks large and mid-cap equity performance in developed market countries, excluding the
U.S.
Mega/Large Buyout – Any buyout fund larger than a certain fund size that depends on the vintage year.
Mezzanine – Includes any PM fund that primarily invests in the mezzanine debt of private companies.
Multi-Management CI – A fund that invests capital in deals alongside a lead general partner. Each deal may have a different lead general partner.
MSCI World Index – The MSCI World Index tracks large and mid-cap equity performance in developed market countries.
Russell 3000 Index – The Russell 3000 Index is composed of 3000 large U.S. companies as determined by market capitalization.
Multi-Stage VC – A venture capital strategy that provides funding to startups across many investment stages.
Russell 3000 Net Total Return Index – The Russell 3000 NTR Index is composed of 3000 large U.S. companies as determined by market capitalization
with net dividends reinvested.
Natural Resources – An investment strategy that invests in companies involved in the extraction, refinement, or distribution of natural resources.
S&P 500 Index – The S&P 500 Index tracks 500 largest companies based on market capitalization of companies listed on NYSE or NASDAQ.
Origination – Includes any PM fund that focuses primarily on providing debt capital directly to private companies, often using the company’s assets as
collateral.
S&P Global Infrastructure Index – The S&P Global Infrastructure Index tracks the performance of 75 companies from around the world that represent the
infrastructure industry.
Private Equity – A broad term used to describe any fund that offers equity capital to private companies.
Real Assets – Real Assets includes any PM fund with a strategy of Infrastructure, Natural Resources, or Real Estate.
Other
Real Estate – Any closed-end fund that primarily invests in non-core real estate, excluding separate accounts and joint ventures.
De-smoothing – A mathematical process to remove serial autocorrelation in the return stream of assets that experience infrequent appraisal pricing,
such as private equity. De-smoothed returns may more accurately capture volatility than reported returns. The formula used here for de-smoothing is:
ROW - Any fund with a geographic focus outside of North America and Western Europe.
ROW Equity – Includes all buyout, growth, and venture capital-focused funds, with a geographic focus outside of North America and Western Europe.
Where rD(t) = the de-smoothed return for period t, r(t) = the return for period t, ρ = the autocorrelation
Secondary FoF – A fund that purchases existing stakes in private equity funds on the secondary market.
rD(t) = (r(t) – r(t-1) * ρ) / (1 – ρ)
Seed/Early VC – A venture capital strategy that provides funding to early-stage startups.
Single Manager CI – A fund that invests capital in deals alongside a single lead general partner.
SMID Buyout – Any buyout fund smaller than a certain fund size, dependent on vintage year.
U.S. Mega/Large – Any buyout fund larger than a certain fund size that depends on the vintage year and is primarily investing in the United States.
U.S. SMID – Any buyout fund smaller than a certain fund size that depends on the vintage year and is primarily investing in the United States.
VC/Growth – Includes all funds with a strategy of venture capital or growth equity.
Venture Capit al – Venture Capital incudes any PM fund focused on any stages of venture capital investing, including seed, early-stage, mid-stage, and
late-stage investments.
PME (Public Market Equivalent) – Calculated by taking the fund cash flows and investing them in a relevant index. The fund cash flows are pooled such
that capital calls are simulated as index share purchases and distributions as index share sales. Contributions are scaled by a factor such that the ending
portfolio balance is equal to the private equity net asset value (equal ending exposures for both portfolios). This seeks to prevent shorting of the public
market equivalent portfolio. Distributions are not scaled by this factor. The IRR is calculated based on these adjusted cash flows.
Sharpe Ratio – The Sharpe Ratio is the average return earned in excess of the risk-free rate per unity of volatility or total risk.
Time-weighted Return – Time-weighted return is a measure of compound rate of growth in a portfolio.
Total Exposure – Total Exposure is equal to NAV + Unfunded Commitment.
Volatility – Volatility is a statistical measure of dispersion of return, specifically standard deviation.
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Disclosures
This presentation has been prepared solely for informational purposes and contains confidential and proprietary information, the disclosure of which could be harmful to Hamilton Lane. Accordingly, the recipients of this presentation are requested to maintain the confidentiality of the information contained herein. This presentation
may not be copied or distributed, in whole or in part, without the prior written consent of Hamilton Lane.
The information contained in this presentation may include forward-looking statements regarding returns, performance, opinions, the fund presented or its portfolio companies, or other events contained herein. Forward-looking statements include a number of risks, uncertainties and other factors beyond our control, or the control
of the fund or the portfolio companies, which may result in material differences in actual results, performance or other expectations. The opinions, estimates and analyses reflect our current judgment, which may change in the future.
All opinions, estimates and forecasts of future performance or other events contained herein are based on information available to Hamilton Lane as of the date of this presentation and are subject to change. Past performance of the investments described herein is not indicative of future results. In addition, nothing contained
herein shall be deemed to be a prediction of future performance. The information included in this presentation has not been reviewed or audited by independent public accountants. Certain information included herein has been obtained from sources that Hamilton Lane believes to be reliable, but the accuracy of such information
cannot be guaranteed.
This presentation is not an offer to sell, or a solicitation of any offer to buy, any security or to enter into any agreement with Hamilton Lane or any of its affiliates. Any such offering will be made only at your request. We do not intend that any public offering will be made by us at any time with respect to any potential transaction
discussed in this presentation. Any offering or potential transaction will be made pursuant to separate documentation negotiated between us, which will supersede entirely the information contained herein.
Certain of the performance results included herein do not reflect the deduction of any applicable advisory or management fees, since it is not possible to allocate such fees accurately in a vintage year presentation or in a composite measured at different points in time. A client’s rate of return will be reduced by any applicable
advisory or management fees, carried interest and any expenses incurred. Hamilton Lane’s fees are described in Part 2 of our Form ADV, a copy of which is available upon request.
The following hypothetical example illustrates the effect of fees on earned returns for both separate accounts and fund-of-funds investment vehicles. The example is solely for illustration purposes and is not intended as a guarantee or prediction of the actual returns that would be earned by similar investment vehicles having
comparable features. The example is as follows: The hypothetical separate account or fund-of-funds consisted of $100 million in commitments with a fee structure of 1.0% on committed capital during the first four years of the term of the investment and then declining by 10% per year thereafter for the 12-year life of the account.
The commitments were made during the first three years in relatively equal increments and the assumption of returns was based on cash flow assumptions derived from a historical database of actual private equity cash flows. Hamilton Lane modeled the impact of fees on four different return streams over a 12-year time period.
In these examples, the effect of the fees reduced returns by approximately 2%. This does not include performance fees, since the performance of the account would determine the effect such fees would have on returns. Expenses also vary based on the particular investment vehicle and, therefore, were not included in this
hypothetical example. Both performance fees and expenses would further decrease the return.
Hamilton Lane (Germany ) GmbH is a wholly -owned subsidiary of Hamilton Lane Advisors, L.L.C. Hamilton Lane (Germany ) GmbH is authorised and regulated by the Federal Financial Supervisory Authority (BaFin). In the European Economic Area this communication is directed solely at persons who would be classified as
professional investors within the meaning of Directive 2011/61/EU (AIFMD). Its contents are not directed at, may not be suitable for and should not be relied upon by retail clients.
Hamilton Lane (UK) Limited is a wholly-owned subsidiary of Hamilton Lane Advisors, L.L.C. Hamilton Lane (UK) Limited is authorized and regulated by the Financial Conducts Authority. In the UK this communication is directed solely at persons who would be classified as a professional client or eligible counterparty under the FCA
Handbook of Rules and Guidance. Its contents are not directed at, may not be suitable for and should not be relied upon by retail clients.
Hamilton Lane Advisors, L.L.C. is exempt from the requirement to hold an Australian financial services license under the Corporations Act 2001 in respect of the financial services by operation of ASIC Class Order 03/1100: U.S. SEC regulated financial service providers. Hamilton Lane Advisors, L.L.C. is regulated by the SEC under
U.S. laws, which differ from Australian laws. The PDS and target market determination for the Hamilton Lane Global Private assets Fund (AUD) can be obtained by calling 02 9293 7950 or visiting our website www.hamiltonlane.com.au.
Any tables, graphs or charts relating to past performance included in this presentation are intended only to illustrate the performance of the indices, composites, specific accounts or funds referred to for the historical periods shown. Such tables, graphs and charts are not intended to predict future performance and should not be
used as the basis for an investment decision.
The information herein is not intended to provide, and should not be relied upon for, accounting, legal or tax advice, or investment recommendations. You should consult your accounting, legal, tax or other advisors about the matters discussed herein.
The calculations contained in this document are made by Hamilton Lane based on information provided by the general partner (e.g. cash flows and valuations), and have not been prepared, reviewed or approved by the general partners.
Proprietary and Confidential | 95
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