And so, from a management standpoint, we’ll have strategic decisions to make around what we want to do with the margin going forward, you mentioned a few years out, relative to continued investment back in the firm for growth versus letting those margins sort of rise up a little bit further and out. I think our view is over the next several years we can do both.
Alex Blostein: I got you. That’s helpful. And then a couple of clarifications maybe around the flagship funds. So, I heard the details on a number of them. I don’t know if we got an update on infrastructure. So maybe give us a sense of where that is shaking out. And as you sort of look beyond this quarter, next quarter and as you wrap up the secondaries fund, what else are you guys expecting to be in the market with on the specialized fund side of things?
Erik Hirsch: Sure. Alex. Erik. So infrastructure, early days. We’ll get started, we’ll have — I expect you’ll have multiple updates from us over the coming quarters on that fund raise as we get in and start having closes that we’ll start reporting on. The other big mover will eventually be the direct equity fund, which is now officially in market. But again, nothing to report yet because we’ve started the marketing process with existing investors, but we have not yet had a close.
Alex Blostein: All righty. Thank you.
Operator: Thank you. The next question comes from Adam Beatty from UBS. Please go ahead.
Adam Beatty: Thank you, and good morning. In prepared, Erik mentioned the credit business and a lot of opportunity there, currently 15%, I think you said, of AUM. So I just wanted to get some thoughts and maybe some more detail around growing that business, whether you’re looking to new products, growing existing products with future vintages or what have you. And also where you would expect that to shake out as a proportion of total AUM given growth in other areas? Thank you.
Erik Hirsch: Sure, Adam. Erik. So as I mentioned in the prepared remarks, the credit piece today is growing because it has a multitude of avenues for which it can grow. So today, we have dedicated specialized funds for credit, both in institution, that’s the strategic opportunities, and in retail, which is our non-U.S. credit-only Evergreen product. So, we already have the specialized fund piece covered outside of the U.S. I think over time, we’ll certainly look to have a U.S. credit Evergreen product. On the institutional side, so both again, as I noted, the specialized fund, and we have a variety of dedicated SMAs, we also have a lot of multi-strat SMAs of which credit is a portion. And in addition to that, our sort of two flagship retail Evergreen Funds, U.S. and non-U.S., both have meaningful credit co-investment aspects to them.
So, the growth has been occurring because we have lots of different buckets that are all absorbing credit opportunities today. We’re continuing to invest in that team and expand those resources. And we believe that, at 15%, it’s already a very meaningful portion of AUM. But as you see in kind of a relatively high rate environment and with the kind of consolidation of sort of lending resources around the globe, particularly in the U.S. with kind of the diminishing impact of regional banks, we see the attractiveness of private credit continuing to be there. It’s been a very good performer inside of client portfolios. And so our view is we continue to lean in, we continue to see lots of opportunities, and we continue to see growth.
Adam Beatty: Sounds good. Thanks, Erik. And just one follow-up on tokenization. Just wondering whether you see that or how you see it. Now, obviously, early days. But interacting with your existing sort of wealth management channel, do you feel as though you could actually productively introduce tokenization into some existing accounts? Or do you see it more as an avenue to kind of expand the TAM in retail and wealth management? Thanks.
Erik Hirsch: Yeah, Adam. Erik. I think it’s both. I think if you sort of just look at what the retail investor is going to eventually demand of this asset class, it is ease of use. When we think about how easy it is for us to transact in the public equities world, we have apps on our phone, they’re tied to funding accounts, we can very easily pull up research, and trade and transact, we can pull up views of our portfolio, all stored in one easy location. The private markets is going to need to meet the investor there. I don’t believe that the investors are going to have two wildly different expectations of what they kind of get and receive on the public equity side versus what they get and receive on the private market side.
So, our view is that tokenization and digital wallets are a real move towards more replicating that public equity experience. Single funding source, single kind of know your customer anti-money laundering aspects again, single point of portfolio management and construction. And with tokens, a much more ease of use around trading positions. And so,, we see all of that as very attractive. And our belief is that, while in a lot of places it’s the institutional investor who kind of drives change, we think here, it’s going to be the opposite. We think the retail investor is going to be the one that drives change, and that the institutional investors will actually follow behind them. So we think it’s an and. We think it’s both tying into some of the existing opportunities and channels and, frankly, getting clients who otherwise don’t want to invest if they can’t do it in the digital world.
Adam Beatty: Got it. Makes sense. Thank you very much.
Operator: Thank you. The next question comes from Mike Brown at KBW. Please go ahead.
Mike Brown: Hey, great. Thank you for taking my questions. The Evergreen Funds have been a tremendously strong story. But I guess as you alluded to, it is becoming a bit more of a competitive market. Can you just speak to the competitive dynamics that you’re seeing? I guess on one hand, it’s maybe a little tough to stand out in a crowded field with some strong brands coming into the space. But on the other hand, I can almost envision there’s like a rising tide lifts all boats dynamic for the wealth channel as you were just kind of talking to, there’s maybe greater comfort for these products that will continue to make the pie grow larger. So, I’d love to just hear how you’re thinking about maybe the push and pull between those two dynamics.
Erik Hirsch: Sure, Mike. Erik. I think this is probably, again, similar to my comment to Adam, it’s probably an and, which is there’s no question that interest in the space very high among the retail investor. And they’re starting with an exposure that in most cases is basically zero. So you have a tremendously large pool of capital, both in the U.S. and outside the U.S. that is either dramatically underexposed to this asset class or not exposed at all. And so if you see that trend more mirroring, if not exceeding, what the institutional investor is doing, then you’re going to see allocation levels for the retail investor well into double digits. We’re nowhere near that today. Again, most investors today are single digits and low single digits.
So the sheer amount of capital that is present and available is massive. So you’re talking about a huge market. We also don’t see this as a one winner. I think if we sort of compare it to, again, the public equity world, today, you have a large group of very large, very successful asset managers controlling billions, if not trillions, of dollars of capital. It’s not a single firm or a single winner. And so, we think that that’s what this is going to look like over time for this asset class as well. So, huge addressable market, massively underpenetrated, room for lots of successful product offerings. And so the way you stand out, we think, is great results, unique product offerings and great customer service. And we think one of the reasons why we’re having the success that we’re having with great flows and kind of getting onto these various channels which, again, everyone is not doing, is because we’re doing well across all three of those things.
And we will look to continue to make sure that that’s the experience that the investors have and that we’re finding ways to stand out, continue to invest in our brand, we think these various technology partners are again, additive and unique to what others are doing. And that’s how we sort of see this playing out over time.
Mike Brown: Okay. Great. And then, if I just change gears to some of your strategic partnerships and some of your tech investments. I know this is an important part of the culture and fabric of Hamilton Lane. Can you maybe just expand on some of the — how some of the recent investments could translate to growth for you? And maybe give us a little bit of inside baseball. When you’re considering these investments, how do you think about what the growth potential could be? Like what does the framework look like in terms of what your growth expectations are? And then maybe how much capital to deploy into these strategies on an annual basis?
