# Inside Hamilton Lane’s Pandora’s Box - HUNTERBROOK > Hunterbrook says Hamilton Lane's returns and fees are flattered by day-one markups, revised FRE metrics, and evergreen outflows. - Canonical URL: https://www.shortreport.fyi/articles/hlne/inside-hamilton-lane-s-pandora-s-box-hunterbrook/ - Published: 2026-06-27T00:20:00.000Z - Authors: Hunterbrook - Tickers: HLNE - Companies: Hamilton Lane Incorporated - Keywords: HLNE, Hamilton Lane Incorporated, Hunterbrook, Accounting Practices, Private Equity, Evergreen Funds, Redemptions **Hunterbrook's analysis finds about one-third of PAF's valuation gains came from same-quarter accounting uplifts, not portfolio company appreciation.** In March 2026, Hamilton Lane's $6.6 billion Global Private Assets Fund appears to have suffered an estimated $172 million net outflow, the largest in the public data reviewed and nearly nine times the size of the only other net-outflow month across an 18-month window. That data point sits at the center of a broader case assembled by Hunterbrook, which holds a short position in Hamilton Lane and alleges that the firm's reported returns and earnings are materially flattered by accounting practices tied to secondary investments and its own unrealized marks. Hunterbrook further alleges that two metric changes adopted in the past year made fee-related earnings growth look like 37% when the underlying figure, on the old definition, was negative 16%. --- **Ticker:** HLNE (Hamilton Lane Incorporated) **Research Firm:** Hunterbrook (hntrbrk.com) **Report URL:** [https://hntrbrk.com/breaking-news/hamilton-lane?ref=shortreport.fyi](https://hntrbrk.com/breaking-news/hamilton-lane?ref=shortreport.fyi) **Position Disclosure:** Hunterbrook holds a short position in Hamilton Lane. --- ## Thesis Hunterbrook argues Hamilton Lane's reported performance and earnings are materially flattered by day-one markup accounting in its secondary investments and by redefined earnings metrics, leaving the stock exposed if retail inflows slow or redemptions rise. - **Day-One Markup Mechanism:** PAF bought a stake in an A.Capital Partners vehicle for $50 million and marked it to $68.5 million within the same month; separately, it bought a Hellman & Friedman fund stake for $20.3 million and marked it to $23.9 million the same day. The report cites prior scrutiny by The Wall Street Journal and Hunterbrook's own analysis of SEC filings (N-PORT and N-CSR). - **One-Third of Gains Are Accounting-Driven:** Hunterbrook's analysis of quarterly SEC filings found that about one-third of total valuation gains across PAF's portfolio were generated by same-quarter accounting uplifts rather than underlying portfolio company appreciation. Hamilton Lane's own response, that "more than 70% of secondary returns in the fund are not a result of the day-one markups," is cited by the report as roughly confirming this proportion. - **Fees on Unrealized Marks:** Hamilton Lane changed its fee structure so it now collects incentive fees based on increasing its own NAV marks rather than waiting for exits. This produced $58 million of incentive fees from PAF in the year ended March 2025. Hamilton Lane says NAV-based carry is a better fit for semi-liquid funds that reinvest proceeds rather than distribute them. - **FRE Definition Rewrite:** Per the 10-Q for the quarter ended December 31, 2025, Hamilton Lane modified its fee-related earnings metric to include fee-related performance revenues and exclude equity-based compensation. Reported FRE for the nine months ended December 31, 2025 was $254.6 million versus $186.1 million prior year, up 37%. Under the old definition, FRE would have been $138.7 million versus $165.2 million, down approximately 16%. - **Margin Inflation from Dual Changes:** The combined effect of adding NAV-based performance fees and stripping out stock-based compensation moved Hamilton Lane's fee-related earnings margin from roughly 32% to approximately 59% for the nine months ending December 2025. - **Executive Grant Timing:** About six months before Hamilton Lane changed its earnings metric, co-CEOs Erik Hirsch and Juan Delgado-Moreira each received 544,000 restricted shares valued at roughly $71 million apiece, with vesting tied to stock price targets. - **Retail Evergreen Concentration:** Goldman Sachs analysis shows Hamilton Lane derives 34% of management and incentive fees from retail and evergreen vehicles, versus 24% at Blackstone, 23% at Blue Owl, and single digits at Carlyle and Brookfield. Hamilton Lane manages $17 billion in evergreen products today, up from almost nothing in 2020 and up 70% in 2025 alone. - **Inflow Dependency and Early Outflow Signal:** The report describes the model as requiring continuous new subscriptions to fund discounted asset purchases that can then be marked up. PAF's first-half fiscal 2026 data showed roughly $878 million in subscriptions against $79 million in redemptions, an 11-to-1 ratio. However, Hunterbrook estimates March 2026 net outflows from the GPA fund at $172 million, derived from AUM declining from $6.79 billion to $6.55 billion adjusted for monthly performance of negative 1.10%, representing only the second net-outflow month in 18 months and nearly nine times the prior $19 million outflow in September. - **Software Exposure Not Yet Marked Down:** A March KBW note by analyst Alex Bond, following meetings with Hamilton Lane's CFO and investor relations team, found software represents 23% of total fee-paying AUM and 30% of PAF. The report notes public software valuations have declined amid AI disruption concerns, while private marks have not yet reflected this. --- ## Catalysts - **May 21 earnings report:** Hamilton Lane's next quarterly results are scheduled for May 21. The report says this will provide the first clear view of whether inflow-to-redemption ratios in PAF and GPA are holding or deteriorating. - **Continued or rising redemptions in evergreen funds:** Any monthly data showing net outflows accelerating beyond the estimated March 2026 figure of $172 million would directly test the report's core premise that the model requires relentless new subscriptions. - **Potential forced asset sales:** If redemptions outpace subscriptions, Hamilton Lane's funds may need to sell secondary positions, which would expose whether marks reflect realizable prices. - **Fund gating or withdrawal limits:** The report cites Hamilton Lane's own risk disclosure warning that accelerating redemptions could result in a material adverse effect. Any formal limit on withdrawals would constitute a significant adverse event for the stock. - **Private equity markdowns, particularly in software:** Any broad repricing of software assets in private markets, or recognition by Hamilton Lane that its 30%-of-PAF software exposure requires write-downs, would reduce NAV and the FRPR fees that depend on it. - **FASB reconsideration of day-one markup guidance:** The report notes that Mark J. Higgins of Enlightened Investor has asked the Financial Accounting Standards Board to revisit guidance permitting immediate practical-expedient markups. Any formal FASB action would eliminate the accounting basis for the returns the report scrutinizes. --- ## Company Response Hamilton Lane did not initially respond to Hunterbrook over a period of days, and the report states the company made legal threats to a Hunterbrook reporter after receipt of questions was confirmed. Hamilton Lane subsequently provided responses through a spokesperson. The company said its fee calculation is "the industry standard," that NAV-based carry is "a better fit" for semi-liquid funds because they reinvest proceeds rather than distribute them, and that "more than 70% of secondary returns in the fund are not a result of the day-one markups." It also said the vast majority of long-term performance comes from underlying company growth, that simply removing fee-related performance revenue gives an inaccurate picture of the business, and that secondary discounts reflect sellers' willingness to trade value for liquidity based on record-date valuations that may be months or quarters old. --- ## Notable Details - Hamilton Lane's own fund disclosure states: "Because there is significant uncertainty in the valuation of, or in the stability of the value of, illiquid investments, the fair values of such investments as reflected in a fund's NAV do not necessarily reflect the prices that would actually be obtained if such investments were sold." - PAF's annual returns compressed from 20.8% in fiscal 2022, when the fund managed $330 million, to 12.6% in fiscal 2025, when it managed $3.6 billion. The report suggests the decline may reflect the diminishing impact of day-one markups as fresh subscriptions become smaller relative to total fund assets. - Cliffwater CIO Blake Nesbitt, speaking at a recent SEC panel, called the combination of evergreen fee structures and day-one markups "very dangerous" and "unheard of" in the history of private markets. The criticism came from an industry insider, not a short seller. - In Hamilton Lane's 2026 market overview presentation, former CEO Mario Giannini dressed as Gandalf and told investors to think of Hamilton Lane as the "Gandalf of the private markets Middle Earth," while also invoking Pandora's Box. The report uses the episode as a contrast to the valuation and liquidity concerns it documents. - Goldman Sachs' analyst model, as cited in the report, assumes that after a 2026 redemption-related blip, PAF's value appreciates at a steady 2.5% quarterly rate from March 2027 onward, approximately 10.4% compounded annually. The report notes it is difficult to identify a 30-year private equity period with positive marks in every quarter. --- > _"The fair values of such investments as reflected in a fund's NAV do not necessarily reflect the prices that would actually be obtained if such investments were sold."_ > > _Hamilton Lane's own fund risk disclosure, cited by Hunterbrook as the clearest statement that the marks underpinning the firm's reported returns and fee-related earnings may not reflect exit values._ --- --- ## FAQs #### What is Hamilton Lane's Private Assets Fund and how does the day-one markup work? Hamilton Lane's Private Assets Fund (PAF) is an evergreen fund with nearly $6 billion in assets that invests heavily in secondary private equity stakes. Secondary stakes are purchases of existing fund interests from other investors, often at a discount to the fund's stated net asset value because the seller wants liquidity quickly. Hunterbrook's analysis of SEC filings (N-PORT and N-CSR) found that Hamilton Lane then marks these stakes back up to prior NAV values within the same quarter, generating an immediate paper gain. In December 2025, for example, PAF bought a stake in an A.Capital Partners vehicle for $50 million and marked it to $68.5 million within the same month, and bought a Hellman & Friedman fund stake for $20.3 million and marked it to $23.9 million the same day. Hunterbrook's analysis found about one-third of cumulative valuation gains across PAF's portfolio were generated by these same-quarter accounting uplifts. #### How did Hamilton Lane change its fee-related earnings definition, and why does it matter? Per the 10-Q for the quarter ended December 31, 2025, Hamilton Lane modified its fee-related earnings (FRE) metric to include fee-related performance revenues (FRPR), which are incentive fees collected on unrealized NAV increases including day-one markups, and to exclude equity-based compensation. The combined effect moved the reported FRE margin from roughly 32% to approximately 59% for the nine months ending December 2025. On the old definition, FRE for that period would have been $138.7 million, down about 16% year over year. Under the new definition, it was $254.6 million, up 37%. Hamilton Lane says removing FRPR gives an inaccurate picture of the business because NAV-based carry is a better fit for semi-liquid funds. #### What was Hamilton Lane's involvement in the Abraaj scandal? According to reporting by Bloomberg and The National, on September 20, 2017, an anonymous whistleblower emailed Hamilton Lane warning that Abraaj was overvaluing its holdings and that pipeline deals were dead. Hamilton Lane employee Tarang Katira, who ran fund investments across Europe, the Middle East, and Africa, forwarded that email directly to Abraaj founder Arif Naqvi, writing that he was sending it so Naqvi would know the email was "out there." Despite those warnings, The Economist reported that Hamilton Lane committed clients' money to Abraaj, and the report states Hamilton Lane planned to commit $100 million to Abraaj Fund 6, a commitment that reportedly encouraged approximately $900 million from other investors. Hamilton Lane's total Abraaj exposure across funds was approximately $382 million. Abraaj later collapsed amid alleged fraud. #### What have prominent market voices said about private market valuations broadly? The report cites several external figures expressing concern about private market marks. Apollo co-president John Zito said at a recent event, thought to be off the record, "I literally think all the marks are wrong," expressing particular concern about private software businesses and take-private deals from 2018 to 2022. Cliffwater CIO Blake Nesbitt called the combination of evergreen fee structures and day-one markups "very dangerous" and "unheard of" in private-market history at a recent SEC panel. Dawn Fitzpatrick, CIO of Soros Fund Management, said in a recent interview she expects "a culling of the alternative asset managers." The report also cites Jamie Dimon and Lloyd Blankfein as having signaled concern about broader private-market valuation issues, though it does not quote them directly. --- _**Disclaimer:** This summary is not primary research and does not constitute investment advice. It is a brief overview of a detailed equity research report authored by the firm, organization, or source referenced in this article or at [https://hntrbrk.com/breaking-news/hamilton-lane?ref=shortreport.fyi](https://hntrbrk.com/breaking-news/hamilton-lane?ref=shortreport.fyi), which contains extensive evidence, regulatory filings, and analysis; readers are encouraged to review the full report there for a comprehensive understanding. The content provided in this publication is not authored or originated by us — we act solely as a distributor and do not endorse, verify, or take responsibility for the accuracy, completeness, or reliability of the information presented. This publication is for informational purposes only and should not be construed as legal, business, investment, or tax advice. Always conduct independent due diligence and consult qualified professionals before making any decisions based on the information contained herein. We disclaim all liability for any loss or damage arising from reliance on third-party content, and the views expressed are solely those of the respective source and do not necessarily reflect our own._ ## Structured Data ```json [ { "@context": "https://schema.org", "@type": "Article", "headline": "Inside Hamilton Lane’s Pandora’s Box - HUNTERBROOK", "description": "Hunterbrook says Hamilton Lane's returns and fees are flattered by day-one markups, revised FRE metrics, and evergreen outflows.", "datePublished": "2026-06-27T00:20:00.000Z", "dateModified": "2026-06-27T00:20:00.000Z", "mainEntityOfPage": "https://www.shortreport.fyi/articles/hlne/inside-hamilton-lane-s-pandora-s-box-hunterbrook/", "isAccessibleForFree": true, "author": [ { "@type": "Organization", "name": "Hunterbrook" } ], "publisher": { "@type": "Organization", "name": "The Short Report", "url": "https://www.shortreport.fyi" }, "keywords": [ "HLNE", "Hamilton Lane Incorporated", "Hunterbrook", "Accounting Practices", "Private Equity", "Evergreen Funds", "Redemptions" ], "about": [ { "@type": "Thing", "name": "HLNE" }, { "@type": "Organization", "name": "Hamilton Lane Incorporated" } ], "image": [ "https://assets.shortreport.fyi/report-covers/%E3%81%91.png" ] }, { "@context": "https://schema.org", "@type": "Report", "name": "Hamilton Lane (HLNE) Collects $58M in Fees on Its Own Unrealized Marks", "description": "Hunterbrook argues Hamilton Lane’s reported returns and earnings are materially flattered by day-one markup accounting in secondary investments and by changes to fee-related earnings definitions. 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The immediate catalyst is an estimated $172 million net outflow from Hamilton Lane's Global Private Assets Fund in March 2026, the largest in the available 18-month public record, which the report argues could signal the beginning of stress on an inflow-dependent model." } }, { "@type": "Question", "name": "What is Hamilton Lane's Private Assets Fund and how does the day-one markup work?", "acceptedAnswer": { "@type": "Answer", "text": "Hamilton Lane's Private Assets Fund (PAF) is an evergreen fund with nearly $6 billion in assets that invests heavily in secondary private equity stakes. Secondary stakes are purchases of existing fund interests from other investors, often at a discount to the fund's stated net asset value because the seller wants liquidity quickly. Hunterbrook's analysis of SEC filings (N-PORT and N-CSR) found that Hamilton Lane then marks these stakes back up to prior NAV values within the same quarter, generating an immediate paper gain. In December 2025, for example, PAF bought a stake in an A.Capital Partners vehicle for $50 million and marked it to $68.5 million within the same month, and bought a Hellman & Friedman fund stake for $20.3 million and marked it to $23.9 million the same day. Hunterbrook's analysis found about one-third of cumulative valuation gains across PAF's portfolio were generated by these same-quarter accounting uplifts." } }, { "@type": "Question", "name": "What is Hunterbrook and what is its financial interest in Hamilton Lane?", "acceptedAnswer": { "@type": "Answer", "text": "Hunterbrook is the research firm that published this report. Hunterbrook holds a short position in Hamilton Lane, meaning it profits if Hamilton Lane's stock price falls. That conflict is disclosed in the report. The core factual claims in the report are drawn from SEC filings (N-PORT, N-CSR, and the company's 10-Q for the quarter ended December 31, 2025), Hamilton Lane's own fund disclosures, and reporting by The Wall Street Journal, the Financial Times, Bloomberg, The Economist, and The National." } }, { "@type": "Question", "name": "How did Hamilton Lane change its fee-related earnings definition, and why does it matter?", "acceptedAnswer": { "@type": "Answer", "text": "Per the 10-Q for the quarter ended December 31, 2025, Hamilton Lane modified its fee-related earnings (FRE) metric to include fee-related performance revenues (FRPR), which are incentive fees collected on unrealized NAV increases including day-one markups, and to exclude equity-based compensation. The combined effect moved the reported FRE margin from roughly 32% to approximately 59% for the nine months ending December 2025. On the old definition, FRE for that period would have been $138.7 million, down about 16% year over year. Under the new definition, it was $254.6 million, up 37%. Hamilton Lane says removing FRPR gives an inaccurate picture of the business because NAV-based carry is a better fit for semi-liquid funds." } }, { "@type": "Question", "name": "What was Hamilton Lane's involvement in the Abraaj scandal?", "acceptedAnswer": { "@type": "Answer", "text": "According to reporting by Bloomberg and The National, on September 20, 2017, an anonymous whistleblower emailed Hamilton Lane warning that Abraaj was overvaluing its holdings and that pipeline deals were dead. Hamilton Lane employee Tarang Katira, who ran fund investments across Europe, the Middle East, and Africa, forwarded that email directly to Abraaj founder Arif Naqvi, writing that he was sending it so Naqvi would know the email was \"out there.\" Despite those warnings, The Economist reported that Hamilton Lane committed clients' money to Abraaj, and the report states Hamilton Lane planned to commit $100 million to Abraaj Fund 6, a commitment that reportedly encouraged approximately $900 million from other investors. Hamilton Lane's total Abraaj exposure across funds was approximately $382 million. Abraaj later collapsed amid alleged fraud." } }, { "@type": "Question", "name": "What would have to happen for this thesis to play out in the stock?", "acceptedAnswer": { "@type": "Answer", "text": "The report identifies several events that would pressure HLNE. The May 21 earnings report is the nearest checkpoint, as it will show whether subscriptions-to-redemptions ratios in PAF and GPA are holding. Sustained or accelerating net outflows beyond the estimated March 2026 figure would force asset sales, testing whether private marks hold up in the secondary market. Any broad markdown in software valuations, which represent 30% of PAF per a KBW March note, would reduce NAV and the fee-related performance revenues that depend on it. A decision by the Financial Accounting Standards Board to revisit guidance permitting immediate practical-expedient markups would remove the accounting basis for the day-one uplift practice entirely." } }, { "@type": "Question", "name": "What have prominent market voices said about private market valuations broadly?", "acceptedAnswer": { "@type": "Answer", "text": "The report cites several external figures expressing concern about private market marks. Apollo co-president John Zito said at a recent event, thought to be off the record, \"I literally think all the marks are wrong,\" expressing particular concern about private software businesses and take-private deals from 2018 to 2022. Cliffwater CIO Blake Nesbitt called the combination of evergreen fee structures and day-one markups \"very dangerous\" and \"unheard of\" in private-market history at a recent SEC panel. Dawn Fitzpatrick, CIO of Soros Fund Management, said in a recent interview she expects \"a culling of the alternative asset managers.\" The report also cites Jamie Dimon and Lloyd Blankfein as having signaled concern about broader private-market valuation issues, though it does not quote them directly." } } ] } ] ```