What is Hunterbrook's core claim about Hamilton Lane (HLNE)?

Hunterbrook alleges that Hamilton Lane's reported earnings growth and fund returns are materially inflated by two related practices: buying secondary private equity stakes at discounts and immediately marking them up to prior NAVs, and collecting incentive fees based on those unrealized paper gains rather than waiting for actual exits. The firm reconstructs Hamilton Lane's fee-related earnings under the prior definition and finds a 16% year-over-year decline instead of the reported 37% growth. Hunterbrook holds a short position in HLNE.

What are the key catalysts Hunterbrook identifies that could pressure Hamilton Lane's stock?

The report identifies Hamilton Lane's May 21 earnings report as the first near-term catalyst, saying it will show whether the inflow/redemption ratio is holding. Beyond that, the catalysts include further net outflows from PAF or GPA, forced asset sales if inflows are insufficient to meet redemptions, markdowns of private equity holdings if marks are tested by real transactions, gating of investor redemptions, software-sector valuation pressure given Hamilton Lane's disclosed exposure, and a potential FASB review of the accounting rule permitting day-one secondary markups.

What does the Hunterbrook report say about Hamilton Lane's software exposure?

A KBW note cited in the report, written after analyst Alex Bond traveled with Hamilton Lane's CFO and investor relations team, states that software represents 23% of Hamilton Lane's total fee-paying AUM and 30% of PAF. Allianz Trade data cited in the report puts software at approximately 25% of all private equity deal value over the past five years. The report links this to Apollo co-president John Zito's privately expressed concerns about software businesses bought between 2018 and 2022 and broader AI-driven pressure on software valuations.

Is Hamilton Lane's day-one markup practice illegal?

No. The practice is permitted under a FASB "practical expedient" and is used by other private equity managers including StepStone and Apollo's S3 Private Markets Fund. However, at least three investor advocates have asked FASB to reconsider the guidance, arguing market conditions have evolved since it was issued. Cliffwater CIO Blake Nesbitt, cited in Private Funds CFO, called the combination of evergreen fee structures and day-one markups "very dangerous" and said it was "unheard of" in private markets history.

Hamilton Lane's 37% Earnings Growth Is an Accounting Illusion — Under the Old Definition, It Declined 16%

The mechanics are specific: Hamilton Lane buys secondary stakes at a discount and immediately marks them back up to prior NAVs, with Hunterbrook's analysis finding roughly one-third of PAF's total valuation gains came from same-quarter markups on newly acquired positions. It then charges incentive fees on those paper gains under a structure changed in fiscal 2025 – the same year co-CEOs each received 544,000 restricted shares worth roughly $71 million, with vesting tied to stock-price targets, about six months before the metric excluding stock compensation was introduced. The retail concentration risk is unusually high: 34% of Hamilton Lane's fees come from evergreen vehicles versus 24% at Blackstone, and those products grew 70% in 2025 alone to $17 billion. The first crack appeared in March 2026, when GPA showed an estimated $172 million net outflow – nearly nine times the prior outflow month – as PAF's annual returns compressed from 20.8% when it managed $330 million to 12.6% at $3.6 billion.

Ticker: HLNE (Hamilton Lane Incorporated)
Research Firm: Hunterbrook
Report URL: https://hntrbrk.com/hamilton-lane/?ref=shortreport.fyi
Position Disclosure: Hunterbrook discloses it holds a short position in HLNE and stands to profit if the share price declines.

Thesis

Hunterbrook alleges that Hamilton Lane's reported growth, returns, and fee-related earnings are materially flattered by private-market valuation practices — specifically same-day secondary markups and fees charged on unrealized gains — and that the model is vulnerable if retail inflows slow or reverse.

Day-One Markups: Hamilton Lane's Private Assets Fund buys secondary stakes at a discount and immediately marks them back up to prior NAVs. Hunterbrook's analysis of PAF's SEC filings found roughly one-third of total valuation gains across the portfolio came from same-quarter markups on newly acquired positions. Hamilton Lane told Hunterbrook that more than 70% of secondary returns are not from day-one markups — a response the report says roughly confirms its one-third estimate.
Fees on Unrealized Gains: Hamilton Lane changed its fee structure so incentive fees can now be collected based on rising NAV marks rather than waiting for realized exits. Per the Wall Street Journal, Hamilton Lane collected $58 million in incentive fees from PAF in the year ended March 2025 under the new structure. Hamilton Lane told Hunterbrook that NAV-based carry is a better fit because semi-liquid funds typically reinvest proceeds rather than distribute them.
Earnings Growth Is an Accounting Artifact: Per Hamilton Lane's 10-Q for the nine months ended December 31, 2025, reported fee-related earnings rose 37% year over year, from $186.1 million to $254.6 million. Reconstructing FRE under the prior definition — removing $77.7 million in fee-related performance revenues and adding back $38.1 million in equity-based compensation — yields $138.7 million for 2025 versus $165.2 million for 2024, a 16% decline. The report states more than 100% of reported FRE growth came from definitional changes.
Margin Transformation by Policy Change: The combined effect of adding unrealized-gain fees and excluding stock-based compensation moved Hamilton Lane's reported FRE margin from roughly 32% to approximately 59% for the nine months ending December 2025, per Hamilton Lane SEC materials cited in the report.
Executive Grant Timing: About six months before Hamilton Lane changed its earnings metric to exclude stock-based compensation, 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. The report presents the timing as notable.
Outsized Retail Exposure: Goldman Sachs analysis cited in the report found 34% of Hamilton Lane's management and incentive fees come 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, up 70% in 2025 alone.
Redemption Risk: PAF's first-half fiscal 2026 N-CSR showed an 11-to-1 subscription-to-redemption ratio. But public data for the Global Private Assets Fund shows an estimated $172 million net outflow in March 2026 — the largest in the 18-month window reviewed and nearly nine times the prior outflow month. The report argues this is the first visible sign that the inflow dynamic may be shifting.
Forced Sale Danger: Hamilton Lane's own 3/31/2025 filing warns that in a declining market, evergreen vehicles may face accelerated redemptions, and that actions taken to meet substantial redemption requests could materially adversely affect investments. The report infers — circumstantially — that forced asset sales could expose lower realizable values and trigger a self-reinforcing markdown cycle.
Performance Dilution: Per Hamilton Lane N-CSR filings, 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. Assets grew roughly tenfold while returns nearly halved.

Notable Details

In Hamilton Lane's 2026 market overview presentation, executive chairman Mario Giannini dressed as Gandalf and described Hamilton Lane as the "Gandalf of the private markets Middle Earth," while a colleague in knight costume declared, "Secondaries to the rescue!" — a theatrical pitch made, per the report, while the firm's returns were compressing and its accounting practices were drawing scrutiny.
A December 2025 example from PAF's N-PORT filing: a stake in an A.Capital Partners vehicle was purchased for $50 million and marked up to $68.5 million within the same month — a 37% paper gain before any exit.
On September 20, 2017, an anonymous whistleblower warned Hamilton Lane that Abraaj was overvaluing holdings and had dead pipeline deals. Per reporting by The National and Bloomberg, Hamilton Lane employee Tarang Katira forwarded the email directly to Abraaj founder Arif Naqvi, writing that he wanted Naqvi to know the email was "out there and clearly targeting LPs." Hamilton Lane subsequently committed $100 million to Abraaj Fund 6. Bloomberg reported Hamilton Lane's total Abraaj exposure across funds reached approximately $382 million.
Goldman Sachs' model, as cited in the report, assumes that after a 2026 redemption-related blip, PAF's value will appreciate at a steady 2.5% per quarter — roughly 10.4% compounded annually — from March 2027 onward. The report notes the difficulty of finding a 30-year private equity window in which marks were positive every single quarter. The characterization of this assumption as unrealistic is circumstantial.
After Hunterbrook sought comment, Hamilton Lane allegedly made legal threats to one of its reporters before ultimately providing answers. The company's response: its fee calculation is "the industry standard," and "simply removing FRPR would create an inaccurate picture."

"In other words, more than 100% of the firm's fee-related earnings growth came from technical adjustments, not any change to the fundamental value of the businesses it owns."

— Hunterbrook report, authored by Bethany McLean, in the section analyzing Hamilton Lane's fee-related earnings under old versus new definitions.

FAQs

What is a "day-one markup" and why does Hunterbrook say it matters for Hamilton Lane?

A day-one markup occurs when a fund buys a secondary stake at a discount to its stated NAV and then immediately revalues it back up to the prior NAV — booking a paper gain with no underlying business improvement. The practice is permitted under a FASB accounting "practical expedient" and is used by other firms including StepStone and Apollo's S3 fund. Hunterbrook's analysis of PAF's SEC filings found roughly one-third of the fund's total valuation gains came from these same-quarter markups on newly acquired positions.

Did Hamilton Lane respond to Hunterbrook's claims?

Yes. Hamilton Lane told Hunterbrook that more than 70% of secondary returns in PAF are not from day-one markups, that its fee calculation is "the industry standard," and that NAV-based carry is appropriate for semi-liquid funds because they typically reinvest proceeds rather than distribute them. The company also stated that simply removing fee-related performance revenues from the FRE calculation would create an inaccurate picture of its diversified business. Hunterbrook says Hamilton Lane initially did not respond and then made legal threats to one of its reporters before providing these answers.

How did Hamilton Lane change its fee-related earnings definition, and what was the effect?

In fiscal 2025, Hamilton Lane modified its fee-related earnings metric in two ways: it added fee-related performance revenues — incentive fees based on rising fund NAVs rather than realized exits — and it excluded equity-based compensation from expenses, aligning with practices at Blackstone, Apollo, and Carlyle. Per the 10-Q for the nine months ended December 31, 2025, these changes moved reported FRE margin from roughly 32% to approximately 59% and shifted reported earnings growth from a 16% decline to a 37% gain versus the prior year period.

What is Hamilton Lane's Private Assets Fund (PAF) and how big is it?

PAF is Hamilton Lane's flagship semi-liquid evergreen fund, designed to give retail and wealth-channel investors access to private equity. It had roughly $330 million in assets in fiscal 2022 and had grown to approximately $3.6 billion by fiscal 2025; the fund now stands at nearly $6 billion. The Financial Times has reported that secondary stakes appear to account for almost half of PAF's value, making day-one markup dynamics central to how the fund generates returns.

What happened with Hamilton Lane's Global Private Assets Fund (GPA) in March 2026?

Public data for GPA showed AUM falling from $6.79 billion on March 1 to $6.55 billion on March 31 — a $240 million decline. Adjusting for the fund's -1.10% monthly performance, which accounts for roughly $68 million of the drop, Hunterbrook estimates net outflows of approximately $172 million for the month. That was the second net outflow month in the 18-month data window reviewed and nearly nine times larger than the prior outflow month of $19 million in September.

What did the two co-CEOs of Hamilton Lane receive before the accounting change?

About six months before Hamilton Lane changed its FRE definition to exclude stock-based compensation, 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. Hunterbrook presents the timing as notable because the subsequent accounting change removed those equity grants from the profitability metric Wall Street uses to value the company.

What is Hamilton Lane's connection to the Abraaj scandal?

On September 20, 2017, an anonymous whistleblower warned Hamilton Lane that Abraaj — then a Dubai-based private equity firm managing nearly $14 billion — was overvaluing holdings and had dead pipeline deals. Per reporting by The National, Hamilton Lane employee Tarang Katira forwarded the email to Abraaj founder Arif Naqvi, alerting him that the message was circulating among investors. Despite the warning, Hamilton Lane committed $100 million to Abraaj Fund 6. Bloomberg reported Hamilton Lane's total Abraaj exposure across all funds was approximately $382 million. Abraaj later collapsed amid allegations of fraud.

How exposed is Hamilton Lane to retail and evergreen inflows compared to peers?

Goldman Sachs analysis cited in the report found 34% of Hamilton Lane's management and incentive fees derive from retail and evergreen vehicles — higher than Blackstone at 24%, Blue Owl at 23%, and far above Carlyle and Brookfield, which are in single digits. Hamilton Lane now manages $17 billion in evergreen products, up from almost nothing in 2020 and up 70% in 2025 alone. Hunterbrook argues this concentration makes Hamilton Lane more exposed than peers to any slowdown or reversal in retail inflows.

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