Good morning. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the Hamilton Lane Second Quarter Fiscal 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. A supplemental slide presentation to accompany the prepared remarks can be found on the company's website. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. At this time, I would like to turn the call over to John Oh, Investor Relations Manager. Mr. Oh, you may begin your conference.
Thank you, Dennis.Welcome to Hamilton Lane Q2 fiscal 2023 earnings call. Today, I will be joined by Mario Giannini, CEO, Erik Hirsch, Vice Chairman, Brian Gildea, Managing Director, Investments, and Atul Varma, CFO. Before we discuss the quarter's results, we want to remind you that we will be making forward-looking statements based on our current expectations for the business. These statements are subject to risks and uncertainties that may cause the actual results to differ materially. For a discussion of these risks, please review the risk factors included in the Hamilton Lane fiscal 2022 10-K, and subsequent reports we file with the SEC. We will also be referring to non-GAAP measures that we view as important in assessing the performance of our business. Reconciliation of those non-GAAP measures to GAAP can be found in the earnings presentation materials made available on the shareholder section of the Hamilton Lane website.
Our detailed financial results will be made available when our 10-Q is filed. Please note that nothing on this call represents an offer to sell or a solicitation to purchase interest in any of Hamilton Lane's products. A portion of our presentation will mention an offering of new share classes of our private asset fund that is the subject of a registration statement filed with the Securities and Exchange Commission. The registration statement is not yet effective. We may not sell these securities until the registration statement is effective. This presentation is not an offer to sell or a solicitation of an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. Beginning with the financial highlights.
Year to date, our management and advisory fee revenue grew by 19%, while our fee-related earnings grew by 10% versus the prior year period. This translated into year-to-date GAAP EPS of $1.88 based on $68.4 million of GAAP net income, and non-GAAP EPS of $1.95 based on $104.7 million of adjusted net income. We have also declared a dividend of $0.40 per share this quarter, which keeps us on track for the 14% increase over last fiscal year, equating to the targeted $1.60 per share for fiscal year 2023. With that, I'll now turn the call over to Mario.
Thanks, John, and good morning, everyone. I'll start with some commentary on the current state of the private markets and provide context on how we are navigating this environment and where we are deploying resources. The macro backdrop has remained the same throughout much of 2022. Inflation is high, and interest rates continue to rise. The results, a weakened and volatile public equity market. The public side is being disproportionately impacted by large technology growth companies. That market weighting is simply not the reality for the private markets and is certainly not the reality for the Hamilton Lane portfolios. While not impacted to the same magnitude, the picture is directionally similar, and we don't believe this is likely to change in the near term.
Central banks around the world have signaled that in order to fight rising inflation, rates will need to go higher, and the reality is economic growth is slowing. What does this mean for private markets? Public market volatility is a mixed bag for us. On a positive note, it increases attractive investing opportunities and creates return uncertainty for investors, which causes them to pivot towards the private markets for higher returns. On the negative side, capital bases are shrinking around the globe as wealth is being eroded. Market uncertainty can also cause paralysis or delay for some investors as they opt to wait to see how things sort out. At a portfolio level, the story is also mixed. Consumer spending in certain areas remains strong, as does manufacturing, distribution, along with other sectors. Technology valuations are down based on public market comparables, but rising rates are generally aiding credit portfolios.
Overall, unrealized marks are down, but nowhere in line with what we are seeing in the public sector. Exits, however, are slowing, as is new deal doing. Over our 30+ year history, we've experienced multiple cycles. We rely on those past experiences and stay focused on the fact that private markets are a long-term asset class. Our investment teams remain active, though cautious. We continue to lean in with clients to make sure they remain comfortable and confident. On the fundraising front, we are expanding sales resources and leveraging strategic partnerships to make sure our story is being broadly told. We continue to invest in all facets of our business and expand our global footprint with new offices in strategic areas throughout Europe, such as Milan, Stockholm, and Zurich.
We've brought in key senior people to bolster our local presence, which helps with our distribution capabilities, client service, and proximity to investment opportunities. We take comfort from our scale, brand, and culture, and are determined to maintain our growth story. A key piece of that continued growth story centers around our people. In an effort to both retain key talent and to maintain alignment with shareholders across a broader employee base, we have instituted a new equity program. Awards are made to employees across level and department who we believe are playing an important role in driving the company forward for years to come.
Importantly, no awards were given to the three largest inside Hamilton Lane shareholders. In order for the recipients to receive value from the award, they need to remain with the company over a multi-year time period, and the stock has to cross certain thresholds over the next seven years. Those three stock performance tiers are $150 per share, $190 per share, and a final one struck at $230 per share. We have set the bar high for ourselves, with the final price threshold representing an 18% compounded annual growth rate from the grant date price. We believe these thresholds keep us focused on our commitment to growth and driving value for our shareholders.
The financial impact of the award this quarter was de minimis, and going forward will be approximately $3 million per year for the next five years. Let me now turn to the results for the quarter. Total asset footprint, which we define as the sum of our AUM, Assets Under Management, and AUA, Assets Under Advisement, stood at approximately $824 billion and represents a 2% increase to our footprint year-over-year, continuing our long-term growth trend. AUM growth year-over-year, which was over $11 billion or 12%, came from both our Specialized Funds and Customized Separate Accounts. As for our AUA, similar to that of our AUM, growth was across client type and geographic region and came in at over $7 billion or 1%. With that, I will turn it over to Brian to cover Fee-Earning AUM fund flows.
Thank you, Mario, and good morning, everyone. Moving on to our Fee-Earning AUM. At quarter end, total Fee-Earning AUM stood at $52.7 billion and grew $8.1 billion or 18% relative to the prior year, stemming from positive fund flows across both our Specialized Funds and our Customized Separate Accounts. Taken separately, $4.9 billion of net Fee-Earning AUM came from our Customized Separate Accounts, and over the same time period, $3.1 billion came from our Specialized Funds. Additionally, our blended fee rate across both Customized Separate Accounts and Specialized Funds remains steady. Moving to Customized Separate Account flows. Fee-Earning AUM from our Customized Separate Accounts stood at $32.3 billion, growing 18% over the past twelve months. We continue to see the growth coming across type, size, and geographic location of the clients.
Over the last 12 months, more than 80% of the gross inflows into Customized Separate Accounts came from our existing client base, which continues to be a steady source of growth for our separate account business. As for our Specialized Funds, growth here continues to be strong. Fee-Earning AUM from our Specialized Funds stood at $20.4 billion at quarter-end. Over the past 12 months, we achieved positive net inflows of $3.1 billion, representing growth of 18% relative to the prior year period. This growth stemmed from additional closes for funds in market, robust investment activity, and continued growth of our Evergreen platform. I'll provide a quick recap of some of the ongoing fundraising activity in our Specialized Funds and where those stand today. During our last call, we highlighted a number of closings that occurred.
Those closings came from our current sixth secondaries fund, fifth direct equity fund, and seventh installment of our direct credit series. For our current secondaries fund and market, we held the first close of the fund in April 2022, then subsequently held another close in July and anticipate an additional close before year-end. The fund currently stands at nearly $1.1 billion of LP commitments based on the two closes and will be in market into the fourth quarter of calendar 2023. Secondary strategies continue to benefit from the strong demand from investors who continue to seek exposure to this segment of the private markets. We believe our dominant position as one of the largest allocators of capital, along with our global investment platform and solid track record, will continue to benefit us as we progress with this current fundraise.
We are certainly pleased with the early success so far and look forward to providing you updates in the future. Moving on to our direct equity fund. We're in the final stretch of raising our fifth fund, and to date have raised over $2 billion in LP commitments. This amount includes our most recent close on October 28th, that totals over $160 million of LP commitments. At this level, we have surpassed the total amount raised for our prior vintage. Originally, we had until October 2022 to finish raising this fund, but due to a small number of investors who are still wrapping up their processes, we received approval to extend out the final closing. We expect to hold the final close for the fund in the coming months.
Before I move on, I'd like to take a moment and acknowledge an award that our direct equity platform has recently won. Hamilton Lane Co-Investment Fund IV, the fourth vintage in our direct equity family of funds, came out on top in the category of Best Performance over $1.5 billion co-investment at Private Equity Wire's U.S. Awards ceremony. We are proud to have won this award as it highlights our commitment to delivering results for our investors. Let's turn now to our annual direct credit series. During the quarter, we announced the final close for our seventh installment with over $940 million of investor commitments. Similar to our direct equity fund, this seventh installment marks the largest fund ever in this series. Interest in this sector remains strong, and we remain well-positioned.
As for this series, as many of you know, we are constantly raising and deploying capital here, and we've already begun work on raising our eighth installment. With that, I will turn the call over to Erik.
Thank you, Brian. I'll start with a quick update regarding some recent developments around the 361 Capital acquisition we closed on in April of 2021.
For quick background, when we embarked on the launch of the U.S. sleeve of our Evergreen product, we identified 361 Capital as a great partner to help us build out our distribution capabilities within the fragmented RIA channel. After we closed on the acquisition, the goal for the 361 Capital team was to sell and grow Hamilton Lane's U.S. Evergreen product, which they have done and continue to do successfully. The acquisition of 361 Capital included two existing long-short products which, while not core to our strategy, were generating revenue to cover the full cost of the 361 Capital team. Now, having successfully transitioned the team to be solely focused on the Hamilton Lane's retail products, we've entered into a transaction agreement whereby management of the two funds is expected to be transferred to a third party.
On August 19th, we, along with Allspring Global Investments, announced that the respective boards of those two funds have approved a proposed transaction whereby the 361 Capital funds will merge into new entities managed by Allspring. Allspring is the current subadviser to both funds. The transaction is still subject to certain closing conditions, including approval of fund shareholders, but we expect that the deal will close sometime before the end of 2022. We remain very focused on growing our presence across the retail channel and are continuing to add additional resources. We are also focused on broadening out our product offering within the channel. Our newest addition to our Evergreen platform is the Hamilton Lane Senior Credit Opportunities Fund, or simply SCOPE. This fund will invest in private credit transactions with a focus on current cash yield and capital preservation.
The credit space is growing, is offering increasingly interesting opportunities, and is an area where we bring deep, strong, and tenured experience. While it's still early days with SCOPE, initial flows have begun, and we look forward to providing you with more updates in the coming quarters. I'll wrap up this section with commentary on our existing Evergreen funds and the continued expansion of our retail distribution channels. On our last call, we provided color around what we are experiencing with regards to capital flows against the continued uncertain economic macro backdrop and summer seasonality. In short, while we have not been immune from some of the short-term impacts of the markets and have seen fund flows slow, we have experienced net positive inflows in all but one month year to date.
Despite the market downturn, we are averaging over $80 million of monthly net inflow for 2022. Given that continued success, our Evergreen platform stands at approximately $2.8 billion. Our growth here is being fueled by a combination of factors, increasing the number of internal sales resources, expanding distribution channels, and leveraging technology partners. In addition to our strategic partnerships with iCapital, CAIS, and TIFIN, we've also been an early adopter of blockchain technology and tokenization, as seen by our partnership in Asia with ADDX. We've now expanded our efforts on both those fronts by bringing on two new partners to bolster our success and help us grow in the U.S.
On October 5th, we announced a partnership with leading digital asset security firm Securitize, where we will work with them to provide qualified U.S. investors with tokenized access to three Hamilton Lane funds: direct equity, credit, and secondaries. Subsequently, on October 26th, we announced a partnership with blockchain-focused fintech firm Figure to launch the first-ever private markets-focused, blockchain-native share classes of a registered investment fund. The partnership will provide investors access via the blockchain to the U.S. version of our Evergreen platform. We see tokenization and blockchain technology as important steps towards making this asset class easier and more efficient to access. We are proud of our market-leading early adopter status, and we are excited to be partnering with Securitize and Figure, both firms whom we believe to be at the forefront of their domains.
Let's now move on to our strategic investment portfolio, and I'll start with two new investments that we closed on in the quarter. On August 23rd, we joined FINTOP Capital, a firm with whom we've worked closely in the past, in investing in Hazeltree, which is a leading technology platform focused on delivering treasury and liquidity management solutions to alternative asset management firms. Hazeltree's platform provides critical cash management and treasury oversight solutions that allow investment managers to increase the speed and reliability of their treasury operations and gain greater security over the entire cash management processing cycle. We have been users of the Hazeltree technology for a number of years prior to making this investment and now look forward to being both client and shareholder. Next up is our investment in StashAway.
Headquartered in Singapore, StashAway is a data-driven digital wealth management platform through which retail and accredited investors across Asia can access a variety of financial planning and portfolio management tools. StashAway aims to help individual investors build wealth for their future financial security, and they've identified private markets as a key avenue towards achieving this goal. We share in the vision of providing expanded access to the private markets for the non-institutional channel and are proud to have invested in and now begin partnering with StashAway to provide their clients with seamless access to private market opportunities. Let me end here with some additional positive news. Recall that several years ago, we partnered with then IHS Markit to create a data solutions business called Private Market Connect, or PMC. At the creation, Hamilton Lane contributed both startup capital as well as personnel.
The partnership between us and IHS Markit resulted in PMC quickly becoming one of the leaders in the private markets data solution space, with Hamilton Lane serving as one of the company's largest clients. With the acquisition of IHS Markit now completed by S&P, we, PMC, and S&P agreed that the next best step for PMC would be a full integration into S&P Global Market Intelligence division. On August 29th, S&P announced that they have acquired our 50% ownership stake in the PMC joint venture. For Hamilton Lane, the exit, along with dividends paid out along the way, generated over a 20x multiple on our initial investment. More importantly, given we remain a key customer, we believe this transaction best positions PMC to continuing to deliver best-in-class service at an attractive economic level.
With that, I'll now turn the call over to Atul to cover the financials.
Thank you, Erik, and good morning, everyone. Year-to-date, we achieved strong growth in our business with management advisory fees up 19% versus the prior year period. Our Specialized Funds revenue increased by $21.1 million or 30% compared to the prior year, driven primarily by a $1.2 billion increase in fee-earning AUM in our Evergreen platform, approximately $450 million raised in our latest secondary fund in the quarter, and approximately $1.8 billion raised through September from our latest direct equity fund. Retro fees for the year were approximately $1.2 million, stemming primarily from our direct equity fund versus a minimal amount in the prior year period. As a reminder, investors that come into later closes during a fundraise pay a retroactive fee dating back to the fund's first close.
We expect to generate additional retro fees as we hold subsequent closes for both our latest direct equity fund as well as our latest secondary fund. Moving on to Customized Separate Accounts, revenue increased $8.2 million or 17% compared to the prior year period due to re-ups from existing clients, the addition of several new accounts, and continued investment activity. Revenue from our advisory, reporting, and other offerings decreased to $0.4 million compared to the prior year period, primarily due to a decrease in revenue from our distribution management business, partially offset by an increase in fund reimbursement revenue. Lastly, the final component of our revenue is incentive fees. Incentive fees year-to-date totaled $110.1 million.
As we touched on last quarter, the relative increase in incentive fees compared to the prior quarters is due primarily to the fact that a number of our Specialized Funds entered into the GP catch-up portion of their respective fund waterfalls. You typically find GP catch-ups in connection with European-style waterfalls, which is the most conservative method related to earning carried interest and represents the method the vast majority of our carry-eligible funds employ. While this method does delay the receipt of carried interest, it is more favorable to the client and avoids any clawback risk and thus represents stability for our shareholders. During the GP catch-up period, you typically see an outsized amount of value that flows to the GP, which is what we experienced again this quarter. Let me now turn to some additional detail on our unrealized carry balance.
The balance was down 1% from the prior year period, even as we recognized $138.2 million of incentive fees during the last 12 months. The unrealized carry balance now stands at just under $1 billion. Moving to expenses. Total expenses increased $63.5 million compared with the prior year period. Total compensation and benefits increased by $52.5 million, driven primarily by compensation associated with the increased amount of incentive fee in the period. G&A expenses for the period increased $10.9 million, which included increases in travel and conference costs that were limited during COVID. In addition, we saw increases in fund expenses and third-party commissions, which are tied to the strong fundraising and revenue growth we saw in the period.
Year-to-date, our fee-related earnings were up 10% relative to the prior year period as a result of the management fee revenue growth discussed earlier. I'll wrap up here with some commentary on our balance sheet. Our largest asset continues to be our investment alongside our clients in our Customized Separate Account and Specialized Funds. Over the long term, we view these investments as an important component of our continued growth, and we'll continue to invest our balance sheet capital alongside our clients. In regard to our liabilities, we continue to be modestly levered. With that, we thank you for joining the call and are happy to open it up for questions.
At this time, I would like to remind everyone in order to ask a question, simply press star then the number one on your telephone keypad. We ask that you please limit yourself to one question and one follow-up question. If you have any additional questions, please re-enter the queue. We'll pause for just a moment to compile the Q&A roster. Your first question's from the line of Ken Worthington with JPMorgan. Please go ahead.
Hi. Good morning. Thanks for taking the questions. First, I'd love to dig deeper into tokenization and the use of blockchain technology to improve access to the products. Maybe first, can you talk a little bit more about how tokenization improves distribution and access to the product? Flesh out the comments that you made.
In terms of cost, is there a savings element in terms of the back and/or mid-office to pursuing this sort of, you know, tokenization and listing? Lastly, to what extent do you retain either greater control over the client or the client data from a relationship when you utilize sort of the blockchain technology? I know there's a little fishing in there, but thought you could comment.
Thanks, Ken. Erik, I will dive in there. There's a lot, so let me do my best. I think the way we look at this is, to date, our asset class has operated in a very traditional environment. Lots of documentation, lots of manual processes, lots of lawyers. I think as you look forward, there are a number of companies, I think especially, the ones that we've recently partnered with, that are focused on trying to use different kinds of technology to make access easier. If you think about a world where to date, every investor needs to go through a KYC process for every individual investment because there's no tie between.
In a world where you have a centralized digital wallet that's housed on chain and you're offering fund products via tokens in that world, you can streamline a lot of the legal processes, and yes, that would bring cost savings. I think more importantly, you start to more rapidly enter into a point-and-click environment where simply making acquisitions and investments in our industry begins to look much more similar to what you experience today in the public markets, where we can all sort of pull out our phone as we're walking down the sidewalk and go into whatever app we favor and buy a stock. I think this is really just reflecting that there's a move afoot with some very sophisticated technology, with some very interesting firms that are trying to drive more towards that.
No different than the evolution you saw in the public markets where things got easier, access became more broad, and frankly, costs came down for your interfacing costs. We expect the same thing over time here to be the case as this all begins to mature and take hold.
Okay. Control of data and the customer, anything there, or is that far-fetched?
Well, it's different. I mean, you're again selling digital securities and digital tokens, so your customer base is really the entity that sort of holds the wallet. Today, I mean, that's such a tiny part of our world. There's no positive or negative impact as it relates to that.
Okay. Then follow up on the Evergreen side. I think you said in the prepared remarks inflows this year in all but one month of the year. Was the one month of outflows in September? And if it was September, do you see September as sort of a one-off, or is it sort of a near-term inflection point given, you know, the macro environment that we're seeing?
I believe it was-
I think it was.
Go ahead, Mario.
I believe it was August or September. I'll have to check on that. We view it as a one-off, not something that we have seen since then in terms of the outflows. No, we don't take that as a harbinger of what's happened since.
Okay. Awesome. Thank you very much.
Your next question is from the line of Adam Beatty with UBS. Please go ahead.
Thank you and good morning. Just first of all, a quick follow-up on a bit of the blockchain discussion, and maybe I know the answer from the tone of Erik's remarks so far, but just wondering about product suitability, you know, for that kind of environment. Do you see this as something where all private markets products and vehicles would eventually migrate to that? Or are there certain products or vehicles that, you know, you would think even long term would just stay in kind of a more conventional environment? Thank you.
Sure, Adam. It's Erik. I'll take that. I mean, let's leave aside the registration and legalities and what type of investor you're going to 'cause there's different rules across all the different geographies. You can see even in the firms that we're doing business with today, they're all kind of taking a slightly different approach. If you just take a more macro perspective, accessing private market investment funds is easier in this tokenized blockchain world. Easier also means less friction points, which also means less costs and expenses for the customer. Our belief is that over time, and there's no way of knowing what time means today, will this transition be two years, 20 years, or 200 years?
Over time, you're talking about a customer base who is gonna want to access more things and want to access them easier, faster, cheaper. Our view is that it's all appropriately suited for it. How that migration occurs, how quickly it occurs is sort of to be determined. I think you can see very clearly strategically what we're doing, which is we've identified a variety of partners who we think are bringing an interesting value add perspective with very interesting technology, and we're aligning with a variety of them. Because it's not clear today which piece is gonna ultimately resonate in the market. I suspect just like in the public markets, there's no single platform today that you utilize to access the public markets. There are lots of market leading platforms, and I suspect over time, that will be true here as well.
Makes sense. Thank you, Erik. Just shifting over to the credit opportunities product. Just wanna get a little bit more detail around the underlying kind of strategies that you're targeting with that. Is it something that's fairly opportunistic, more of a core plus orientation? Also kind of maybe some background about what drove those decisions as to how and where to focus the fund. Was it, you know, opportunities that you're seeing from your in-house research or more around client demand or some mix of that? Thank you.
Sure. This is Brian. I'll take that one. Across our private credit, we're broadly investing in the private credit strategy. Think small to mid-size companies, cash flow positive in a segment of the market that is moved away from bank financing, and that provides a little bit better return. It's generally a floating rate return part of the market and very attractive risk and reward characteristics compared to the public credit markets.
Excellent. Any concerns around kind of the potential credit cycle that we might be heading into?
I think as an investor, of course, we're always very much focused on where we are in the market, as we're shaping the investments that we're making. We've been doing that for a number of years leading into this market, recognizing that we are late cycle. High quality is of course a focus. The underlying credit statistics have remained strong across portfolios. Of course, we're mindful of the environment that we're in.
Excellent. Thank you, Brian. Appreciate it.
Your next question comes from the line of Finian O'Shea with Wells Fargo Securities. Please go ahead.
Hi. Good morning. Thank you. A follow-on to the SCOPE product. Given its more recurring income-oriented nature, will that seek to be marketed more broadly to the retail market versus the other Evergreen funds?
Sure. This is Brian. I will take that one. I think that we're envisioning a similar audience to what we're currently marketing our other evergreen funds. We've seen that there's strong demand in the credit space from that investor type. This portfolio will have slightly different characteristics than the equity-oriented portfolios that we have today, but we think that many of the same attributes will really resonate with that market.
Your next question.
Sorry, go ahead.
Your next question is from the line of Chris Kotowski with Oppenheimer. Please go ahead.
Yeah, just kind of a modeling question. You know, I think most of us have been modeling your incentive fees, you know, as a percentage of the carried interest receivable. You know, kind of what in this environment would normally mitigate that is you think, okay, the markets are down, so you know gonna be a slower harvesting environment. You know, all things being equal, you'd tend to pick less than that. On the other hand, if you're in the catch-up phase on most of these funds, then you know there's a disproportionate amount.
I guess I'm kinda curious what, if any, guidance you can give us on how many quarters you're in this catch-up phase and/or, you know, what, you know, what percentage of your carry receivable in broad terms, you know, comes from those kinds of catch-up payments. Any thoughts you could give us just so our numbers aren't all over the place?
Yeah, sure. It's Erik. This will be a very unsatisfactory answer. You know, I think when you're using a European waterfall, it's very difficult to model, as we've seen. We've been public now for over five years, and I would say if you take a look at the quarterly history, despite everyone being intelligent and working hard and trying to get all this right, we have been either light or heavy, but rarely have we been right on the mark. I think the European waterfall is kind of akin to you spend years sort of pushing the boulder up the hill, and when you finally get to the top, it begins to kinda quickly roll down the other side. Here, that's what we've been doing. We've been pushing the boulder for a long time. We've continued to have liquidity.
We've continued to have good performance. We've continued to have well-diversified portfolios. We've finally gotten the boulder to the top of the hill, and now it's beginning to sort of turn and run. The catch-up obviously doesn't last forever. It lasts until we're caught up. I think our takeaway would simply be that because of good performance, we've gotten a variety of our sort of flagship Specialized Funds to the point where they're in the catch-up. You've seen that very clearly this quarter. You saw that last quarter. That won't last forever. Again, eventually we will be caught up.
The other takeaway I would leave you with is that despite a challenging market environment, I think reflecting on kind of the size and diversity of these portfolios, we continue to have exit activity, which is obviously what's driving the fact that we're able to get the dollars in the catch-up. It only comes because you actually have exits. All of that's happening. What can I tell you for the quarters coming? We're gonna still be working through the catch-up with some of these products. We continue to still see exit activity, although as I noted, it's certainly lower and slower than what we've seen in a more normalized market environment. Predicting beyond that, I would say I'll be as accurate as anyone else, which is to say not very accurate.
Okay. All righty. Thank you. That's it for me.
Your next question comes from the line of Alex Blostein with Goldman Sachs. Please go ahead.
Hey, guys, this is Michael on for Alex. Just a quick one for me. On PE allocation, maybe you can help us think about how things are changing in real time. You know, 2022 was slow, but maybe is there a risk that 2023 new commitments to PE will be worse? Any color you have around there would be helpful. Thanks.
Sure, Michael, it's Mario. Hard to predict on 2023. I think you're right on 2022. It's been slower because of two factors, really. The denominator effect everyone is talking about. LPs don't have as much capital. And by the way, performance has been great. It's been their best performing asset class is the private market. So that NAV has continued to be pretty steady. But the other factor is there's just no rush to do anything. There's a lot of product in market, no rush, and so everything has slowed down. I would expect 2023 will also be a difficult market. Will it be as challenging as what we're experiencing in 2022 now? I don't know.
Part of that will depend on the public markets, on where inflation and interest rates are going, and everyone has different points of view. I would expect 2023 will continue to see LPs with less capital than they'd like to invest and a lot of product coming into market. It will still be a tough environment for some part of 2023.
Great. Thanks so much.
This concludes the Q&A portion of today's call. I will now turn the call back to Erik for any closing remarks.
Great. Again, we always appreciate the time and the interest, and we wish you well. Thanks again.
This does conclude the Hamilton Lane second quarter fiscal 2023 earnings conference call. Thank you all for participating. You may now disconnect.