Ten Takeaways From Erik Hirsch on Secondaries, Evergreens and a Shrinking Industry

Erik Hirsch, executive co-chairman of Hamilton Lane, told iCapital's Sonali Basak on The Bridge by iCapital that private equity grew faster than its exit market could handle. He expects the number of managers to fall. He also said his firm turns down nearly every secondary deal it sees, and that evergreen funds now draw institutional money.

Here are 10 takeaways from the interview, which aired Nov. 4.

Hamilton Lane turns down nearly every secondary deal

Hamilton Lane passes on about 99% of the secondary deals it reviews. Hirsch put the rate down mainly to the volume of deals reaching the firm. Its large pool of capital still lets it be choosy. He conceded that the screen also catches weak assets. "It also means that there's some bad deals."

Many managers have raised their last fund

The private markets industry has started to shrink, and many managers have raised their last fund "whether they know it or not," according to Hirsch. The process will take a long time because the capital is locked up for years. A manager with no new fund has little reason to sell the assets that pay its fees. In his view, that pushes investors toward secondaries. "We're going to start to sort of rationalize the industry," he said.

Exits are not keeping pace with industry growth

In dollar terms, 2025 was the second-highest year for private equity exits ever, but the total was weak as a share of net asset value, Hirsch noted. The number of managers has grown from a couple hundred to about 8,000. They now hold more than 13,500 companies. He applied the same critique to parts of private credit and real estate. His summary: "It grew too quickly, too fast, too wide, too broad."

Performance dispersion has not narrowed

The gap between the best and worst private equity managers has held steady since the 1980s, Hirsch told Basak. Industries usually revert to the mean as they mature. Private markets have not, because results depend on what owners do with an asset after they buy it. He used a hotel to make the point: two CEOs, the same price and capital structure, and very different results. "This is not a fair asset class."

Value creation has moved to the private side

Early private investors in SpaceX had already earned a 60x return by the time of its IPO, Hirsch observed. Companies like Amazon once went public early and created most of their value as listed firms. Today that pattern is reversed, he argued. The number of public companies has fallen slowly for decades. "It's not being captured in the public market. It's actually being captured in the private market."

Secondary returns depend on the asset

Most secondary returns come from growth in the underlying asset, and the purchase discount plays a smaller role, Hirsch explained. He was answering the "sugar high" criticism of accounting rules. Those rules book a discounted purchase at the manager's reported value. Buying illiquid stakes below par is normal, he argued. A bad asset still wears that discount away over time. "The vast majority of returns come from the underlying fundamental appreciation of the asset itself."

The industry oversold evergreen liquidity

Some managers overstated how liquid evergreen funds are, and Hirsch put the blame on his own industry. These funds generally limit withdrawals to about 5%. Promises of easy liquidity helped spark a run on private credit funds this year, he said, as newer investors reacted to headlines about gating. Redemptions are now generally abating. "I think part of this is our own industry's fault."

Institutions supply a quarter of evergreen flows

About 25% of Hamilton Lane's evergreen flows come from institutional investors, Hirsch said. They like staying fully invested and being able to shift allocations quickly. This shift distorts industry fundraising data, he added, because the reported totals count only closed-end funds. "It's not recognizing that more and more institutional LP capital is migrating into the land of evergreens."

Private credit has beaten its benchmark for 20 years

Private credit has outperformed its public benchmark in every one of the last 20 years, in Hirsch's account. He called fears of a systemic problem overstated. Banks have largely stopped lending to growing companies. Hamilton Lane launched a private credit fund during the turmoil, seeded by a large institution. In his words: "And so private credit has kind of filled that gap."

Daily pricing may arrive with 401(k) plans

No single valuation frequency fits every evergreen fund, though selling into 401(k) plans could force daily pricing, Hirsch argued. Funds now value quarterly or monthly, and a few value daily. He called for clear disclosure of methods. Regulators and customers will set the standard. "The customer is going to ultimately tell the managers what it is they want because they're going to be voting with their wallet."