Hamilton Lane plots family of SPACs via new business line

Hamilton Lane is planning a new business line dedicated to special purpose acquisition companies as interest in launching such vehicles increases.

Speaking on the firm’s latest earnings call on February 2, Andrea Kramer, chief executive of its debut SPAC, Hamilton Lane Alliance Holdings I (HLAHU), said the firm was likely to raise successive vehicles.

“You will notice with this first SPAC, we have assigned the number one to it,” Kramer said. “That is purposeful as our goal is to raise additional SPACs in the future and create a new business line for Hamilton Lane.”

The Pennsylvania-based asset manager raised $276 million for HLAHU in January, according to a statement. The SPAC, which will not be limited to a particular industry, will avoid highly cyclical sectors, such as upstream and midstream energy, commodities and real estate.

Hamilton Lane’s SPAC does not generate traditional management fees or carried interest, Kramer added. The sponsor’s income will typically come via promote shares and warrants, which it can monetize subject to certain lock-up restrictions.

“We’ve used SPAC as a natural extension of our existing investment activities,” Kramer added. “We intend to bring to bear our access and dealflow via a number of longstanding important relationships with private markets fund managers, which we believe will be vital when searching for a business combination.”

SPACs have taken the US by storm over the past year. Some 248 of these vehicles raised $83 billion at IPO in 2020, six times the sum raised across 59 SPACs the prior year, according to SPAC Data. More than $28 billion has been raised across 100 SPAC IPOs this year alone.

A confluence of events is pushing the SPAC phenomenon, affiliate title Buyouts reported last year. Tailwinds include strong equity markets; covid-19 shrinking if not eliminating, at least temporarily, the window for conventional IPOs; increasing familiarity with SPACs; and the allure caused by fear of missing out.

SPACs raised by high-profile sponsors, such as Social Capital chief executive officer Chamath Palihapitiya, have helped turn these vehicles into the hottest financial product for the venture world in 2020.

In less than a year after merging with Virgin Galactic, Palihapitiya’s first SPAC is on track to return about 15x invested capital, an LP told Venture Capital Journal late last year.

Other venture firms involved in raising their own SPACs are Ribbit Capital, FirstMark Capital, Lux Capital and General Catalyst. In addition to SPACs formed by venture funds, several individual investors have also jumped into the fray. Reid Hoffman, a partner with Greylock Partners, Bradley Tusk, co-founder and CEO of Tusk Ventures, and Ryan Gilbert, a partner with Propel Ventures, each have partnered with other investors and operators to raise SPACs.

“Because of the volume of this over the last several months, you’re seeing many [established] organizations getting involved here,” Kramer said last month. “In many ways, that is a sign that the market is making some real changes to make the public offering a more efficient process, both from an implementation standpoint and a cost standpoint.”

This article first appeared in affiliate publication Private Equity International