The firm probably will offer more funds of funds, but probably will stay away from commodity-oriented investment offerings. The firm also will offer analytical tools such as private equity and real estate benchmarking analytics, said Mario Giannini, Hamilton Lane's chief executive officer.
"We're capitalizing on our reputation but we are positioning to be competitive," Mr. Giannini said.
Investment management is not new to Hamilton Lane, which has split its business between advisory services and offering funds of funds and separate accounts, said Mr. Giannini: "Our business has been equal parts gatekeeper and asset manager."
Hamilton Lane advises many of the nation's largest pension funds, including the $109 billion New York State Common Retirement Fund, Albany, and $157 billion California Public Employees' Retirement System, Sacramento. It also has $4.7 billion under management.
Hamilton Lane is one of the first private equity gatekeepers to sell off a stake in what usually are closely held firms owned by one or just a few individuals, industry watchers said.
The majority of the firm's shares now will be held by a group of 15 people, with key management members having no more than 20% of Hamilton Lane's equity. Executives there declined to give details of the former ownership, except to say it was owned by a small number of people.
"The (private equity) industry has grown from a cottage or boutique industry and it is growing larger than anyone thought," said Leslie A. Brun, Hamilton Lane's chairman. "This (sale and restructuring) will give us both access to institutional investors with whom they have relationships … and access to capital to capitalize the firm for the consolidation trend."
Firms have to either be a boutique operating in a niche space or they have to grow, said Mr. Giannini.
"It will be the larger and very small boutiques that will survive. It's hard for the middle," he said. "We're positioning the firm to be an independent survivor. We want to be here five, 10, 15 years from now."
Still, some limited partners take into account whether their gatekeeper offers funds of funds and, if it does, whether the client will be competing with the gatekeeper's fund of funds for a position in higher quality private equity investments.
"There can be a conflict," said Christopher J. Wagner, senior investment officer, alternative assets, for the $24 billion Los Angeles County Employees' Retirement Association, Pasadena. "Our current adviser, Pathway (Capital), does not have that sort of product….That was one of the things that was attractive."
LACERA hired Pathway two years ago, when incumbent Hamilton Lane's five-year contract expired.
"You have to build in to your contract with advisers a clear understanding of how interests are allocated," he said. Aries' Mr. Rogers said there is little difference between a fund-of-funds manager that performs every step in the investment management process and a gatekeeper, which does most of the heavy lifting with the help of pension fund executives and approval of a board that rarely strays from the adviser's recommendations.