Masters in Business: The Future of Private Credit with Erik Hirsch
Podcast Information:
- Title: Masters in Business
- Host: Barry Ritholtz, Bloomberg Radio
- Episode: The Future of Private Credit with Erik Hirsch
- Release Date: July 31, 2025
- Description: Barry Ritholtz engages in in-depth discussions with influential figures shaping markets, investing, and business. In this episode, he converses with Erik Hirsch, co-CEO of Hamilton Lane, about the evolving landscape of private credit and private markets.
Introduction and Guest Background
[02:02 – 03:17] Barry Ritholtz Introduces Erik Hirsch
Barry Ritholtz opens the episode by welcoming Erik Hirsch, highlighting his extensive experience in private equity and his pivotal role at Hamilton Lane. Hirsch has been with Hamilton Lane for nearly three decades, serving as CIO and Head of Strategic Initiatives before becoming co-CEO. Barry emphasizes the significance of Hirsch's insights into the explosive growth and future trajectory of private credit and private equity.
Notable Quote:
Barry Ritholtz: "If you want to get a sense of why this space has been growing so dramatically and what the future of private credit, private capital, private equity, et cetera is going to look like, then you're gonna find this conversation to be absolutely fascinating."
[02:08]
Erik Hirsch’s Career Path
[03:17 – 04:36] From Philosophy to Finance
Erik Hirsch shares his unconventional path into the finance industry, starting with a philosophy degree from the University of Virginia. Initially aspiring to become a lawyer, Hirsch found himself entering finance by chance, joining Public Financial Management in Philadelphia. There, he specialized in public finance, particularly in financing sports stadiums for cities, gaining foundational expertise in Excel modeling and budget management.
Notable Quote:
Eric Hirsch: "I think I had no career plan because I originally studied philosophy, which I think is pretty much the definition of I'm not sure what I'm gonna do with my life."
[03:17]
Transition to Private Equity
[04:36 – 07:35] Investment Banking and Brown Brothers Harriman
Hirsch recounts his move to investment banking, focusing on mergers and acquisitions in the 1990s—a period marked by intense workloads and significant learning opportunities. His tenure at Brown Brothers Harriman, a longstanding private partnership, provided him with deep insights into corporate finance and the private equity landscape. Hirsch notes the firm's conservative nature and strong client alignment as key factors in its resilience, especially during financial crises.
Notable Quote:
Eric Hirsch: "We have partners who have a lot of their capital invested in the business alongside of customers. Also a good business model."
[07:27]
Growth of Hamilton Lane and Private Markets
[08:11 – 09:53] Joining Hamilton Lane as CIO
In 1999, Hirsch was recruited by Hamilton Lane, then a small firm with around 20-25 employees. He started as an associate on the investment side and quickly rose to Chief Investment Officer, overseeing the firm's transition from a consulting-focused operation to one with a robust asset management service offering. This period marked the beginning of significant growth both for Hamilton Lane and the private markets sector.
Notable Quote:
Eric Hirsch: "So, have been growing right alongside of the asset class."
[09:28]
Explosive Growth of Private Markets
[17:37 – 20:08] Factors Driving Private Markets Growth
Hirsch attributes the explosive growth of private markets to several factors:
- Performance: Private markets have consistently outperformed public markets over extended periods.
- Diversification: With public markets becoming increasingly concentrated, private markets offer broader diversification.
- Economic Significance: Private companies constitute the majority of businesses globally, representing a substantial portion of the economy.
He emphasizes that despite this growth, private markets still represent a small fraction (~2%) of global market capitalization, indicating vast potential for further expansion.
Notable Quote:
Eric Hirsch: "If you want to get access to that part of the economy, a substantially large portion of the economy, the only way to do that is through investing in the private markets."
[18:54]
Hamilton Lane’s Growth and Strategic Expansion
[21:03 – 23:01] Surprising Growth and Maintaining Core Values
Hirsch expresses surprise at Hamilton Lane’s substantial growth from a small firm to managing nearly $1 trillion in private assets. He credits this success to maintaining the firm's core DNA—client-centricity, strong values, and consistent interaction with customers and employees, even as the company expanded geographically and across different private market sectors.
Notable Quote:
Eric Hirsch: "The roots of the firm are still very present in how we interact with customers today, how we interact with our own employees, how we interact as a team."
[21:54]
Geographical and Sectoral Expansion
[23:01 – 27:32] Global Footprint and Diversification
Hamilton Lane operates from 22 global offices, serving a diversified client base split evenly between North America and international markets. Hirsch discusses plans for further global expansion, particularly into emerging markets like India, which currently have a nascent private markets industry. The firm has also diversified across various sectors including private equity, private credit, infrastructure, and real estate, adapting to the evolving demands of the market.
Notable Quote:
Eric Hirsch: "We've expanded geographically, across sectors, and now are incorporating a broader clientele, including mass affluent individuals."
[23:01]
Technological Innovations and Tokenization
[51:14 – 53:59] Embracing Tokenization
Hirsch highlights Hamilton Lane’s proactive adoption of tokenization—a process of digitizing assets using blockchain technology. Tokenization aims to streamline investment processes, making them more accessible and frictionless for retail investors. By digitizing funds, investors can manage and trade their investments via digital wallets, potentially reducing the traditional illiquidity premium associated with private markets.
Notable Quote:
Eric Hirsch: "Tokens are simply tracking of investments using blockchain technology. And so instead of dealing with subscription docs and all of the pain points... you can access a fund digitally using a digital wallet."
[52:07]
Current Challenges and Market Dynamics
[34:04 – 42:28] Navigating Market Volatility and Deal Flow
Hirsch discusses the current market environment characterized by political instability, such as tariffs and regulatory changes, which contribute to volatility in both public and private markets. Unlike public markets, private market investments are long-term and less influenced by short-term macroeconomic trends. This fundamental focus ensures that private equity decisions are driven by the intrinsic performance of the underlying assets rather than market sentiment.
Notable Quote:
Eric Hirsch: "We're thinking about things over many, many years... how can I invest a dollar today and five years from now, turn that dollar into $3 or $4."
[26:26]
Future Outlook and Strategic Priorities
[46:42 – 55:42] The Rise of Retail Investors and Technological Infrastructure
Looking ahead, Hirsch anticipates a significant influx of retail capital into private markets. He envisions technological advancements, such as improved digital platforms and tokenization, as key drivers enabling retail investors to access private markets with the same ease as public markets. Hamilton Lane is strategically focused on enhancing its technological infrastructure to cater to this expanding investor base, ensuring seamless and efficient access for both institutional and retail clients.
Notable Quote:
Eric Hirsch: "We're very focused on making sure that we're getting that market segment right, that we're purpose building to make sure that we're properly caring and feeding of that customer base."
[48:47]
Under-the-Radar Insights
[49:10 – 50:39] Impact of Retail Investors on the Industry
Hirsch points out that the emergence of retail investors will have profound effects on the private markets industry. This shift will necessitate substantial investments in technology and infrastructure, leading to consolidation as only firms capable of scaling and adapting to these changes will survive. He predicts that while the asset base will continue to grow, the number of active participants may decrease due to the increasing complexity and technological demands.
Notable Quote:
Eric Hirsch: "The number of firms that are going to be capable of successfully servicing that investor base is relatively small."
[50:25]
Advice for Aspiring Investors
[57:53 – 59:19] Mentorship and Adaptability
Erik Hirsch advises recent graduates and aspiring investors to seek mentorship, emphasizing the irreplaceable value of learning from experienced professionals. He underscores the importance of adaptability, encouraging young professionals to anticipate and embrace change, and to develop the ability to think strategically about future industry shifts.
Notable Quote:
Eric Hirsch: "Get a mentor. I just don't believe that [everything] is true. There is something about learning from the mistakes that others who have gone before you have made that is invaluable."
[57:53]
Personal Reflections and Recommendations
[55:17 – 59:19] Hirsch’s Personal Interests and Learning
Beyond his professional insights, Hirsch shares his personal interests, including a passion for historical literature and a commitment to continuous learning. He reflects on the importance of anticipating change and developing a forward-thinking mindset, which has significantly benefited his career in the dynamic landscape of private markets.
Notable Quote:
Eric Hirsch: "I wish I had done more of that when I was younger."
[59:55]
Conclusion
Barry Ritholtz wraps up the episode by thanking Erik Hirsch for his valuable contributions and insights into the future of private credit and private markets. He encourages listeners to explore past episodes for more enriching conversations and promotes his new book on investment strategies.
Notable Quote:
Barry Ritholtz: "If you enjoy this conversation, be sure and check out any of the past 500 we've done over the past 11 years."
[59:19]
Key Takeaways:
- Private Markets Growth: Driven by superior performance, diversification benefits, and economic significance.
- Hamilton Lane’s Success: Stemmed from maintaining core values, strategic expansion, and technological innovation.
- Technological Advancements: Tokenization and improved digital platforms are pivotal for future growth and accessibility.
- Emerging Retail Investors: Represent a significant untapped capital pool that will reshape the private markets industry.
- Industry Challenges: Including market volatility, regulatory changes, and the need for robust technological infrastructure.
- Professional Development: Emphasizes the importance of mentorship and adaptability in navigating the evolving investment landscape.
This episode provides a comprehensive overview of the current state and future prospects of private credit, offering valuable insights for investors, professionals, and anyone interested in the dynamics of private markets.