Hamilton Lane Incorporated (NASDAQ:HLNE) Q4 2026 Earnings Call Transcript

Hamilton Lane Incorporated (NASDAQ:HLNE) Q4 2026 Earnings Call Transcript May 21, 2026

Hamilton Lane Incorporated beats earnings expectations. Reported EPS is $1.49, expectations were $1.43.

Operator: Good morning, ladies and gentlemen, and welcome to the Hamilton Lane Fiscal Fourth Quarter and Full Year 2026 Earnings Conference Call. [Operator Instructions]. Also note that this call is being recorded on Thursday, May 21, 2026. And I would like to turn the conference over to John Oh, Head of Shareholder Relations. Please go ahead, sir.

John Oh: Thank you, Sylvie. Good morning, and welcome to the Hamilton Lane Q4 and Fiscal Year-end 2026 Earnings Call. Today, I will be joined by Erik Kirsch, Co-Chief Executive Officer; and Jeff Armbrister, Chief Financial Officer. Earlier this morning, we issued a press release and a slide presentation, which are available on our website. Before we discuss the quarter’s results, we want to remind you that we will be making forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business. These forward-looking statements do not guarantee future events or performance, and are subject to risks and uncertainties that may cause our actual results to differ materially from those projected.

For a discussion of these risks, please review the cautionary statements and risk factors included in the Hamilton Lane fiscal 2025 10-K and subsequent reports we file with the SEC, including our upcoming Form 10-K for fiscal 2026. These forward-looking statements are made only as of today, and except as required, we undertake no obligation to update or revise any of them. We’ll 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 Shareholders section of the Hamilton Lane website. Our detailed financial results will be made available when our 10-K is filed. Please note that nothing on this call represents an offer to sell or a solicitation of an offer to purchase interest in any of Hamilton Lane’s products.

Let’s begin with the highlights, and I’ll start with our total asset footprint. At fiscal year-end 2026, our total asset footprint stood at $1 trillion, which represents a 9% increase year-over-year. AUM stood at $142 billion at year-end and grew $4 billion or 3% compared to the prior year. Growth came from both our specialized funds and customized separate accounts. came in at $905 billion and grew over $86 billion or 10% relative to the prior year. This stemmed primarily from market value growth of the portfolio and the addition of a variety of technology solutions and back-office mandates. For fiscal year 2026, total management fee and adviser — total management and advisory fees came in at $584 million and were up 14% year-over-year. Total fee-related revenue, which is the sum of management fees and fee-related performance revenues was $687 million and represents 20% growth year-over-year.

The related earnings were $345 million and represents 25% growth year-over-year. We generated fiscal year 2026 GAAP EPS of $5.92 and based on $249 million of GAAP net income and non-GAAP EPS of $5.90 based on $321 million of adjusted net income. Lastly, our board has approved an 11% increase to our annual fiscal dividend to $2.40 per share or $0.60 per share per quarter. We have increased our dividend every single year since going public and this now marks the ninth consecutive annual double-digit percentage increase since 2017. Our ability to consistently increase distributions to shareholders every year speaks to the growth and the strength of our business. And with that, I’ll now turn the call over to Erik.

Erik Hirsch: Thanks, John, and good morning, everyone. If you only read the headlines about our industry and all you see is endless handwringing and concerns about the future. Yes. problem with headlines is that they are often driven by anecdotes, not extensive data. [indiscernible] prides ourselves on having one of the most powerful databases in the industry, we see a very different picture. I’ll lean in here with a number of observations that we see from that data. We believe private equity is transitioning from a slower period into a healthier deal doing and exit environment with more activity, narrower bid-ask spreads and entering a pattern in which short-term softness has historically set up strong multiyear rebounds. Global buyout deal volume rose more than 40% in 2025 and while total exit value was up nearly 50%, the second best year on record and not far off of 2021’s peak.

GPs are expecting even more exits again in 2020. Private credit fundamentals remain solid with disciplined leverage benign defaults and continued attractive spreads over public loans. Equity contributions averaged approximately 50% in 2025 and versus approximately 33% in 2007. The default rate remains at sub 2% below historical averages, and private credit has posted positive performance in every vintage year for nearly 25 years. Venture and growth equity remain one of the clearest ways to access the AI opportunity set, along with access to data infrastructure, defense innovation and next-generation software businesses. Much of the value creation in these themes is still happening while these companies are private, where many of today’s leaders are building and scaling well before they ever reach the public markets if they ever reach the public markets.

Platforms like can provide investors with unique access and exposure to these opportunities during these transformative years. Secondary is continue to offer one of the most compelling risk/reward profiles across private markets. Even after a record 2025 with a reported $240 billion of transaction volume completed, the market remains supported by a favorable supply/demand dynamic with available dry powder covering that volume at roughly 1x. For investors, that continues to create an attractive backdrop defined by buyer-friendly pricing, the potential for discounted entry, faster distributions and a more muted J curve. Infrastructure continues to stand out as one of the most durable areas within the private market, supported by long track record of consistent performance and attractive risk-adjusted returns.

According to Infrastructure Investors 2025 full year fundraising report and Hamilton Lane’s proprietary database, fundraising momentum remains robust with the infrastructure asset class reaching a record year and more than 50% of funds being oversubscribed. At the same time, industry reports suggest over 40% of institutions remain underallocated to the space with more than 90% expected to maintain or increase allocations in 2026. And lastly, real estate has moved from valuation reset to opportunity with a more attractive entry point, greater dispersion across sectors and geographies and improving transaction and refinancing activity, favoring skilled data-driven managers. Fundraising rebounded in 2025 to over $240 million after a post-2021 slowdown.

Liquidity ratios, measuring the ratio of distributions to contributions have improved meaningfully and rising from about 0.4x in 2023 to approximately 0.7x in 2027, signaling a more functional exit and recapitalization environment. On credit specifically, where the public narrative tends to jump from more headlines to systematic problem, our own platform experience points to something far more mundane. Specific manager and specific asset issues in a still healthy market. Perspective is important here. Private markets asset class is very large and diverse. It contains thousands and thousands of fund managers managing tens of thousands of funds. Over the decades of this industry’s existence, 1 thing has remained true. Explosion of performance is wide.

Our industry is not reverting to some mean or average as it matures. Talent, risk management and portfolio construction remains significant variables and it shows in the numbers. Looking across opportunistic and origination style credit funds, our data shows roughly 7 to 12 percentage points of annualized spread between top and bottom quartile managers and older vintages and around 5 to 7 points in the post-GFC period. Those aren’t small differences. Those are material. Earning 2% versus earning 14% is a big difference, and that is exactly what the credit world can and does look like. Manager and asset selection matters. It matters a lot. And this is true across all of our sub-asset classes. For private equity, there is an approximate 10 to 14 percentage points in annual return gap between top and bottom quartile buyout and growth managers.

Venture and Growth equity showed the widest dispersion with venture managers separated by about 16 percentage points per year and growth managers by 10 to 14 points, for secondaries, there is a consistent high single to 10-point annual gap between top and bottom quartiles. Infrastructure displays about an 11-point annual dispersion in earlier vintages and around 7 points in more recent ones. And lastly, real estate, well, real estate has some of the highest dispersions with mid-teens annual gaps historically and around 12 points post GFC. Reinforcing that after the recent valuation reset, sector, asset quality and manager selection is critical. These gaps regardless of subsector are significant, and they are persistent manager selection matters enormously as those sector weighting.

You continue to see top decile managers even in extremely out-of-favor sectors and they’re delivering excellent performance. This is one of the reasons that firmly Hamilton Lane exists. The clients understand this dynamic. They understand sourcing and selection are crucial. They are not looking to build an index. This is why they turn to us to do the sourcing and the selection for them. Let me dive a bit deeper into the secondary market because it continues to be a topic that garners attention and frankly, a topic that too many people simply don’t understand. Here, when we talk about secondaries, we’re talking about investors buying and selling existing private market fund interest from an existing limited partner. For buyers of secondary interest, instead of starting with a blank fleet, as is the case with a brand-new commitment to a fund that is being raised, buyers instead step into portfolios that already own a diversified set of private companies and they have operating history.

It means less guessing about what might get bought in the future and more focus on what is actually in the portfolio today. It allows for valuing existing assets rather than blind pool investing. For sellers, the benefit is getting liquidity on a fundamentally illiquid asset. Given this liquidity dynamic, you would expect that secondary sales typically had occurred at discount to stated net asset value, and that shouldn’t be surprising. Maybe the most important point when we talk about discounts, is that these are negotiated transactions between a willing seller and a willing buyer, typically anchored to a valuation date that may be months and, in some cases, quarters ahead of when the deal actually closes. When you were buying a fund interest where the net asset value valuations are provided by the manager on a quarter lag, you need to agree on a reference date.

Further, these transactions can be complicated and it may take months and months to negotiate and ultimately close. What matters during that period is not where the portfolio was, but instead, where is it going? Further, the buyer universe is quite limited. And in some cases, where the fund manager actually imposes selling restrictions, there may only be 1 or 2 approved buyers. Again, in that scenario, the seller knows that if they want liquidity and they are going to be selling at a discount to NAV, not a surprise. So if we were to step back and scrutinize the last 10 years of data to see how trading valuations have looked, we could turn to data provided by Jefferies, who runs a large secondary brokerage business. What that data shows is that from 2015 to 2025, average discounts by year purchased have ranged from 7% to 19%.

And over that 10-year period, they have averaged 12%. That is the cost of an illiquid asset trading in an inefficient market. It is also the reality of asymmetric information across the buyer and seller universe. Now does that price of the secondary buyer pays for the fund interest then in turn have bearing on the valuation of the fund itself, it does not. In fact, the selling price is often not even disclosed or provided to the underlying fund manager. Why? Because it has no bearing on the ownership, the management or the ultimate valuation of the assets. are there accounting regulations that govern this? Yes, there are. Are they different for Evergreen for closed-end funds? No, they are not. Are the secondaries done inside of the evergreen funds, a big driver of the secondary market?

No. They are a relatively small part of the overall $250 billion secondary market which is dominated by closed-end funds and LPs buying directly from each other. Do we see different firms use different valuation policies and dealing with their purchase discounts? We do not. As the secondary business has been around for nearly 30 years and has been continually examined and studied by the SEC, yes, it has. Our investors and secondary funds getting audited financials that follow generally accepted accounting rules, they are. Does this mean that a secondary buyer may buy an asset at a discount to NAV and then turn around and Mark and hold that asset at the stated NAV, which is the same value as every other limited partner in that fund? Yes, of course, they would.

Just because the selling limited partner wanted liquidity such that they were willing to part with their assets for less than NAV, why would that impact the value of the asset or the holding value for the potentially hundreds or thousands of other limited partners in that exact same fund. It doesn’t, and it wouldn’t. For Hamilton Lane, our approach to the secondary market is to buy quality assets at appropriate prices. We are not trying to buy everything that comes for sale. In fact, in calendar 2025, we turned down nearly 99% of all the total dollar deal flow we saw, despite committing nearly $5.5 billion in capital. We always acquire secondary stakes at a discount to NAV. No. In fact, there are numerous instances where we have paid a premium to NAV.

Why would we do that? Simple. What matters at the end of the day is the value of the asset when it is ultimately and eventually monetized. After over 25 years of doing secondary deals and over $29 billion of committed capital, Nearly 70% of our performance is achieved from the appreciation of the underlying investments post purchase. And that means that about 30% of our return came from good purchasing and good structuring. That is a skill set that is not luck. So if we have high conviction that an asset marked today at $1, will ultimately be worth and sold for $3, we might gladly pay the seller $1.50 today to get them to transact because we are ultimately paying for the $3 at some point in the future. When we do that, do we take the asset on our books at a value less than we paid?

Yes, we do. And we show a near-term loss as a result. From our vantage point, the real engine of returns in secondaries is still company performance over time. Discounts are a benefit. They can create initial return tailwinds, but they are not it for owning good businesses. They are not a substitute for owning good businesses and backing capable general partners. That is where we continue to focus our efforts, using our data relationships and scale to find high-quality portfolios, partner with high-quality managers and when we can buy those exposures at prices that are appropriately reflective of the liquidity that we are providing. With that as context, Hamilton Lane delivered another very strong quarter and the momentum across the business continues to build.

Our breadth of offerings and reach across geographies continues to serve us well in an environment defined by volatility, fear and uncertainty, but the engine behind all of this is our team. The organization continues to grow and strengthen and Jeff and I are proud of the work they do every single day to deliver for our clients. Let me turn now to fee earning AUM. At fiscal year-end, Total fee-earning AUM stood at $82 billion and grew $9 billion or 13% relative to the prior year. Net quarter-over-quarter fee-earning AUM growth was $2 billion or 3%. During the past fiscal year, our blended fee rate continued to rise as our fee earning AUM mix shifts towards the faster-growing specialized funds part of our business. Our blended fee rate now stands at 67 basis points.

Total fee earning AUM growth continues to be driven largely by our specialized fund platform with our Evergreen products at the center of that momentum. Overall, specialized fund fee earning AUM ended fiscal 2026 at $41 billion, having grown $8 billion over the last 12 months. This represents an increase of 24% and Quarter-over-quarter growth was approximately $3 billion or 7%. Importantly, for our Evergreen platform, this came in the face of what was an extremely challenging backdrop for evergreen funds in calendar Q1. In this environment, the industry has seen elevated redemption requests, particularly in private credit evergreen funds, with several evergreen funds receiving redemption requests far in excess of their caps. Against that environment, the Hamilton Lane experience has been quite different.

Our Evergreen platform finished the quarter with net positive inflows in aggregate, positive quarterly performance across all funds and not having to impose gates in any of our evergreen funds. For the quarter, our Evergreen suite generated over $1 billion of net inflows in aggregate and no individual fund finished the quarter in a net outflow position. Every single evergreen product we manage was in net subscription for the quarter. In addition, total Evergreen AUM ended the quarter at over $17.5 billion which represents a 64% growth year-over-year. We view this as a real vote of confidence in how these vehicles are constructed in the diversification and quality of the underlying portfolios and in the role they play for long-term focused investors, even when the headlines are working against the asset class.

That said, individual month dynamics we witnessed inside the quarter do tell a different story, but one that coincides with the general movement observed across the industry. January and February, net subscription activity remained robust, with near record aggregate net inflows in February that resulted in the second highest individual month for the franchise ever. But as we moved into March and as the market narrative really picked up, we were certainly not immune to what was happening around us. Gross redemption activity increased and gross sales slowed, but the experience was not the same across all of our funds, highlighting the benefit of our diverse offerings. Going back to the over $1 billion in quarterly net subscriptions in aggregate, that broke down to positive $471 million for January positive $591 million for February and negative $17 million for March.

Spending on March, we saw net outflows for both our global credit and global multi-strategy equity offerings. While all other funds were in a net positive inflow position. Again, we were never put in a position for any fun to have to impose a gate. And for additional context from our global multi-strategy equity fund, while we were in a net outflow position for March, we believe it was partially driven by rebalancing exercises for some investors and platforms due to a long sustained positive performance. Investors will seek to rebalance out of strong performers who have grown in size relative to the rest of their portfolio. Looking through to what we are seeing for April activity across the products, we expect to take in over $265 million in aggregate net inflows across the entire group of products.

On the institutional side, pensions, endowments, insurance companies, family offices and others are selectively tactically using Evergreens as one component of their broader portfolio construction. Institutional flows continue to rise, and they now represent over 25% of the capital coming into our evergreen products. And as we’ve seen in several recent instances where institutional new wins and re-ups they’re now allocating meaningful capital to our Evergreen suite as part of their overall portfolio construction. We’ve discussed previously our partnership with Guardian where $250 million has been allocated and invested into our evergreen funds. Another example of this shift saw us winning a private credit mandate in April from a large U.S. public pension plan.

Half of that mandate went to seeding a new U.S. credit Evergreen interval fund, which I’ll come back to in a moment, and the balance being deployed in a separate account. We’re also seeing existing relations and clients expand with us across Evergreen, an institutional investor in the Nordic region that has historically allocated only to our closed-end funds, has now chosen to supplement those commitments with an investment in our global multi-strategy Evergreen Fund. In addition, we launched a highly specialized insurance-wrapped commingled product that we’ll invest in our secondary evergreen offerings and is expected to bring new insurance clients to Hamilton Lane, reinforcing our expanded push into the insurance channel. And finally, we secured multiple institutional separate account mandates in Canada where a portion of the capital will be invested in our Evergreen products and the remaining invested in primaries and closed end specialized funds.

The growth and expansion of our Evergreen product suite is strong, and we’re not standing still. In April, we launched the Hamilton Lane Credit Income Fund, or CIF, our newest U.S. registered Evergreen vehicle which is focused on senior private credit and it’s our first daily subscription and daily priced offering. This is our 12th evergreen fund and serves as the U.S. complement to our global senior credit Evergreen Fund which has been in the market for more than 3 years. We’ve assembled a strong group of seed investors, which includes the U.S. — the large U.S. public pension plan I mentioned earlier, several multi-employer union retirement pension plans and an additional U.S. public pension plan and capital from our own balance sheet. Combined, this group committed nearly $325 million to launch this product.

Moving on to our closed-end fundraising. On our prior call, we highlighted that we have launched our seventh secondary fund and our second venture product. Momentum for both the strong and demand continues to build, and we expect to hold initial closes for both those products in the coming months. In addition, we are pleased to share that we have officially launched fundraising for our first GP-led secondary fund. For those less familiar with this fast-growing segment of the secondaries landscape, one of the most important developments over the last decade has been the growth of the GP-led continuation vehicle market. This market segment is now a mainstream high-quality part of the secondary toolkit, giving GPs a way to offer their existing LPs optional liquidity while retaining ownership of assets that they believe will continue to grow in value.

High-quality managers are now using GP led as a regular portfolio management tool and in some cases, as an alternative to a traditional M&A exit or IPO. The result is that GP leads today represent a diverse and growing opportunity set across the full spectrum of private market NAV, and we believe this segment will remain a meaningful driver of activity and deployment for our secondary platform going forward. Hamilton Lane was an early mover in this space, having completed our first GP led transaction back in 2014 before these types of solutions were common in the market. Since then, our track record across buyout GP-led transactions has been strong, driven by a focus on high-quality, hard-to-access middle-market opportunities sponsored by general partners with whom we enjoy deep access and long-standing relationships.

With the launch of this new fund, we believe we have a compelling opportunity to build another closed-end franchise that complements our broader secondaries platform. We expect to hold a first close for this inaugural fund before calendar ’26 year-end, and we look forward to providing updates as the raise progresses. Moving now to our sixth Equity Opportunities Fund. As a reminder, this strategy focuses on direct equity investments alongside leading general partners, and it offers two fee structures, one that charges management fees on a committed capital basis with a 10% carry, the other, the charges on a net invested basis with a 12.5% carry. Our prior direct equity fund offered in this exact same structure raised $2.1 billion. On our last call, we noted that we had closed on $2.3 billion of investor commitments through the end of January, which meant we had already surpassed the prior fund size of $2.1 million.

Since then, we have held additional closes through the first half of May, totaling over $455 million, bringing the current total raise to approximately $2.8 billion. At this size, the fund now stands at over 35% larger than the prior vintage and the management fee mix is currently about 35% on committed capital and 65% on net invested and Jeff will provide additional detail on the retro fees associated with capital that closed in this quarter. We have received approval to extend the fund raise through the end of calendar Q2 and to allow the remaining prospects to complete their work and close into the fund. We are extremely proud of the continued growth of our direct equity franchise, and we look forward to the final close in the coming weeks.

Let’s wrap up here with customized separate accounts. At quarter end, customized separate account fee-earning AUM stood at $41 billion and grew $1.6 billion or 4% over the last 12 months. Net quarter-over-quarter change was essentially flat. We continue to see gross contributions coming from a mix of new client wins, plus re-up activity from existing clients, plus contributions for investment activity and then all that being offset by fee-based step-downs, which is largely a timing-related impact as well as capital distribution stemming from exit activity. We continue to carry substantial committed and contractual dry powder ready to deploy, and that’s supported by a strong pipeline of mandates that have been awarded and are currently moving through the contracting stage.

Since the start of calendar 2026, we have been continuously adding to the back book of business. During the first calendar quarter of 2026, we contracted with a diverse set of leading global institutions including large public and corporate pension funds, insurances, companies, university endowments, foundations and other long-standing plan sponsors across North America, Europe and Asia. Behind that, our pipeline of live opportunities in various stages of negotiation remain sizable and in the multibillion-dollar range. One dynamic we’ve highlighted before and continue to see is more separate account allocations migrating into our specialized funds, both closed-end and Evergreens. As clients increasingly want secondaries Enco investments embedded in their programs, they are accessing those exposures through our various products.

In fact, during this reported quarter, there was over $620 million of commitments allocated to our closed-end and Evergreen products from separate account clients. What this leaves behind are primary allocations. Which are increasingly being priced on net invested or net asset value basis, which means it takes time for AUM to convert to fee-earning AUM. So a large primary SMA win may not be seen in fee earning AUM for several years, but it will come on eventually. Before I move on, I want to spend a minute on performance. What we are seeing across our platforms is that exits are happening and more importantly, they are happening at values above where those assets were being previously marked. Let’s just take our direct equity platform. So far in calendar ’26.

We have seen 8 exits, 6 of which have closed and 2 that have been announced and are slotted to close in the coming months. Together, those transactions represent over $1.2 billion of gross proceeds and were achieved at a 3.6 multiple on the capital that Hamilton Lane invested across a variety of products and client accounts. Maybe most importantly, in aggregate, those 8 assets are expected to generate an aggregate value at nearly 34% above where the GP had those companies value just 2 quarters prior to their exit. Now if we step back and look at another part of our business, secondaries in our most recent 6 secondary fund from calendar ’23 through calendar ’25, there were more than 340 individual company exits across the underlying portfolio.

On average, those assets were monetized at values nearly 9% higher than where they were marked 2 quarters earlier. To us, this reinforces the point that we have made for a long time. In private markets, good outcomes still come from making good investments backing quality businesses and just as importantly, selecting quality GPs who know how to create value and ultimately realize that value. Let’s move now to an update on our latest additions to the Hamilton Lane innovations portfolio, where we utilize our balance sheet capital to invest in differentiated technology solutions that broaden access to the asset class enhance the investor experience and strengthen the overall infrastructure of the private markets ecosystem. On March 9, we announced a strategic investment in core stone alongside fidelity investments and future standard, joining Franklin Templeton, KKR and Apollo.

Today, too many processes in our industry still rely on manual work and one-off connections between systems, which can make it slow, cumbersome to open accounts, process subscriptions or move data between managers, advisers and administrators. Fareston uses a private permission blockchain as a secure shared backbone. So the key information can be entered once and then flow automatically to the right partners. In practical terms, that means fewer errors, faster processing and a way better overall experience for investors and their advisers as this ecosystem continues to grow. We are excited about the opportunity that lies ahead for core stone and the problems it will help tackle to deliver even more seamless and efficient access to private markets for an increasingly broad addressable base of investors.

In addition to the core stone investment on March 17, we also announced a strategic investment in Republic, a leading on chain global investment platform. This strategic balance sheet investment builds upon our existing relationship with Republic that began with the launch of our infrastructure Evergreen Fund on the Republic platform in March of 2025. That relationship was designed to bring institutional quality private market strategies to a much broader retail audience with low investment minimums and the potential for tokenized access and improved liquidity. Republic operates a global digital investment marketplace, and our investment will support Republic’s efforts to further expand that platform. Cross-product design, distribution, tokenization and investor education.

We see this as a core building block for our digital asset strategy and a meaningful enabler of the continued growth of our Evergreen platform. Taken together with our broader Hamilton Lane innovation portfolio, we see our investments in Republic and Corston further strengthen the digital infrastructure around private markets and directly support our mission of serving clients by expanding access, improving usability and reducing friction for investors globally. With that, I’ll now pass the call to Jeff, who will cover the financials.

Jeffrey Armbrister: Thank you, Erik, and good morning, everyone. For fiscal year 2026, management and advisory fees were up 14% from the prior year. However, this includes the impact of lower retro fees year-over-year. Namely, we received $3 million in retro fees in fiscal 2026 from our latest direct equity fund versus nearly $21 million of retro fees in fiscal 2025 and primarily from the final close of our sixth secondary fund in that period. Retro fees for the quarter were $2 million coming from our latest direct equity fund. As Erik alluded to in his comments, we also held additional closes subsequent to quarter end for the direct equity fund and may have additional retro fees next quarter on the remaining final closes charged on a committed capital basis.

Now moving to total fee-related revenue, which includes the impact from fee-related performance revenue or FRPR. This was up 20%, driven by a combination of strong management fee growth and our first full fiscal year of fee-related performance revenues. Specialized revenue increased by $59 million or 19% compared to the prior year period. This was driven primarily by a $7 billion increase to fee-earning AUM in our Evergreen platform and over $1 billion raised in our latest direct equity fund in fiscal 2026. Again, the year-over-year growth here was impacted by the retro fee element that I just alluded to. Moving on to customized separate accounts. Revenue increased $7 million or 5% compared to the prior year period due to the addition of new accounts, re-ups from existing clients and continued investment activity.

Revenue from our reporting, monitoring, data and analytics offerings increased by approximately $7 million or 22% compared to the prior year period as we continue to produce strong growth in our technology solutions offering. Lastly, the final component of our revenue is incentive fees, which totaled $175 million for the period. This amount includes fee-related performance revenues stemming primarily from the quarterly crystallization of performance fees for our U.S. private assets Evergreen Fund with additional contributions from — coming from our more recently launched evergreen phones. Let’s now turn to our unrealized carry balance. The balance is up 23% from the prior year period, even while having recognized $80 million of incentive fees, excluding fee-related performance revenues, during the last 12 months.

The unrealized carry balance now stands at approximately $1.5 billion. Moving to expenses. Total expenses increased $38 million compared with the prior year. Total compensation and benefits increased by $25 million relative to the prior year, driven primarily by higher compensation associated with increased head count and equity-based compensation. G&A increased $13 million, driven primarily by revenue-related expenses, including the third-party commissions and platform fees related to our U.S. Evergreen product that we’ve discussed on prior calls. And while we are seeing overall G&A expense increase with revenue-related expenses, which is a good thing and can be an indicator of growth to come. We continue to successfully offset this with cost savings and expense discipline in other parts of the business where we have discretion.

Let’s move now to fee-related earnings or FRE for the year was up $68 million relative to the prior year as a result of the fee-related performance revenues and management fee growth discussed earlier. FRE margin for the year came in at 50% compared to 48% for the prior year. Both FRE and FRE margin benefited from strong fee-related performance revenues in the period. Let me now move to share repurchase activity during the quarter. Recall on February 20, we announced that we had commenced share repurchases under our authorized repurchase program. In total, we repurchased 199,000 shares at a weighted average price of $143 or $10.43 resulting in roughly $20 million spent under the program. In addition, this morning, we announced that our Board of Directors approved an increase to the authorization under our repurchase program that now allows us to repurchase up to $100 million of our Class A common stock less the approximately $20 million already spent.

This leaves us with approximately $80 million available for future share repurchases. We will continue to revisit utilization in the future. I’ll wrap up now with some commentary on our balance sheet. Our largest asset continues to be our investments alongside our clients in our customized separate accounts 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 and we’ll continue to evaluate utilizing our strong balance sheet in support of continued growth for the firm. With that, we will now open up the call for questions.

Q&A Session

Operator: [Operator Instructions]. And your first question will be from Ken Worthington at JPMorgan.

Kenneth Worthington: I wanted to spend my time on wealth distribution and the wirehouse channel. PAF is the big fund with critical mass in the wirehouse channel. You have a number of other funds that you’ve been driving to see enough scale to get them onto the wires as well. So how does the pipeline look for that warehouse distribution? And are those additions something that we should see in 2026.

Erik Hirsch: Thanks, Ken. It’s Erik. So I wish we controlled the decision ourselves as to whether we got placed in those areas, but we do not. That said, as you noted, we have a variety of products that are heading to critical mass. I view critical mass as $1 billion or more and we’re in active dialogue with a number of distribution partners that we think will aid further what has already been good traction and good success.

Kenneth Worthington: Great. And then can you talk about the hiring you’re doing on the wealth side to help you expand access to these distribution channels. how have you ramped up hiring? Where are you hiring from? What’s the season like of these new salespeople that you’re bringing on?

Erik Hirsch: Sure, Ken. It’s Erik, I’ll stick with that. So we’ve made a number of high-profile hires over the last few months. Those folks are getting onboarded and are getting into their positions or their territories depending on what their specific roles are. I would say, in general, these are very seasoned executives coming from generally much larger asset management firms than Hamilton Lane, who have had a decade or more experience in the space distributing products. And I think for us, always flattering when you can recruit really good talent, particularly when you can recruit talent from really excellent franchises. And I think one of the appeals of why they are coming here is the suite of products. I think they see us as well positioned and then, frankly, a relatively early part of our journey, and they’re excited to be on board and we’re excited to have them.

And I think I would say despite again, a lot of recruiting and onboarding. We haven’t seen a lot of benefit from those folks because they are just getting here now and just getting started.

Operator: Next question will be from Alex Blostein at Goldman Sachs.

Alexander Blostein: I was hoping just to follow up on your comments around some of the recent trends and unpack dynamics in April, if you don’t mind. So million on a net basis. One, I just wanted to clarify whether that included the seed investment that you mentioned, I think it was over $300 million. And then if you could just maybe spend a minute on what you’re seeing at a product level basis, not just in total but trends within the products, both on the gross sales and growth redemption side of things. Sure. So let me take the first part first. If you’re referring to the Guardian seed, which I presume you are, that came in well before April. That was coming at the first part of the calendar year. So that’s not included in those figures.

Erik Hirsch: So if I go to the second part of the question, what I would say was you’ve seen Redemptions were generally focused on credit and our international multi-strat with everything else having either no redemption activity or extremely muted activity and then you saw flows coming across the totality of the full product suite.

Alexander Blostein: Got it. That’s helpful. And then for my second question, just wanted to surmount and talk through some of the fee dynamics and the structures in the space. As you guys continue to shift more of your focus into the evergreen funds from some of your institutional clients, are there any scrutiny in the fries given that the evergreen funds are generally higher than the separate accounts. And just as that part of the business gets larger, meaning institutional gets larger over time within the evergreens, do you see any sort of potential risk and fee structures change and migrating more to kind of what we see in institutional channel versus the more retail focused have green products?

Erik Hirsch: Well, it’s an interesting question, Alex. So I think it depends on what’s the reference point. For the client, if the reference point is do a Hamilton Lane Evergreen Fund or do a normal GP closed-end fund, then our product is demonstrably cheaper. And I think for a lot of them, that is exactly what they’re weighing. They’re weighing a Hamilton Lane Evergreen versus a 2 and 20 classic GP closed end product. And so there, it is material cost savings. And relative to doing a Hamilton Lane separate account, it’s still cheaper because remember, in our separate accounts, the preponderance of that capital is going into other primary funds. So we’re putting a 30 to 40 basis point wrapper around a series of underlying GPs that are charging 2 and 20.

So that’s one of the most expensive things that we have. So I think the migration from the client capital is totally rational. They’re moving towards a generally a lower fee structure that, in our case, is offering them the benefit of diversity of kind of the manager of managers’ model. And so that is better for the customer that’s certainly — that’s better for Hamilton Lane. And I think that’s just a natural healthy evolution that we’re seeing here.

Operator: Next question will be from Michael Cyprys at Morgan Stanley.

Michael Cyprys: On the private wells evergreen products, I think you mentioned nearly $18 billion of NAV. I was hoping you could help unpack what portion is from institutional clients versus what portion of that $18 billion or so is from the U.S. channel versus from the wires versus the private banks. And as you look out over the next couple of years, just curious how you think that mix will continue to evolve compared to where — how it looks today?

Erik Hirsch: So thanks, Mike. It’s Erik. The institutional piece today, as we look at the flows that are coming in, as I said, about 5% are coming from straight up institutions. And that is a range of size I think this dynamic is interesting because at the very small end of the institutional world, a lot of those clients had frankly migrated out of the asset class because if they’re putting in $10 million or $15 million they would have typically been a fund-to-funds customer, and that market segment doesn’t really exist today. So a lot of them either drifted into, like, say, a secondary product, but even that wasn’t sort of fully representative of getting kind of broad asset class exposure like a fund to funds would have done for you.

So we’re seeing them toggle back. And at the larger end, as I noted in sort of my large U.S. pension plan example, we’re seeing them use evergreens for tactical portfolio construction. You’re just using drawdown funds, it’s really hard to put on like an overweight. You’re using a drawdown fund and you as a CIO or a Board want to put on an overweight. It’s going to take you years for that overweight to kick in, you’re going to have to find the subscribe to the funds, have the funds called the capital down, see net asset value build up over time. And so you need to have a 5- or 6-year forward crystal ball in order to do tactical overweighting. With Evergreen funds, given their fully invested nature, it’s on, it could be off, it could be back on, but it gives you a tool gives you a tool that they’ve just historically not had as an asset class.

And I think that’s been an interesting addition for them. So if you look at the weightings, you can see in the reported numbers, our international funds. So you can kind of see that split. In the U.S., the majority of capital is coming through wire houses, but you — but as I’ve noted before, only one of our products in the U.S. is on a wire or wires. And so the split today is the international to U.S. split is sort of shown in the numbers because we designate which of those or which. The institutional flows are at 25% today and have been rising. And then wire is what’s driving the PAF product in the U.S.

Michael Cyprys: Got it. So it sounds like within the U.S., it’s predominantly wires, if I’m hearing you on the U.S. retail side?

Erik Hirsch: Just because it’s predominantly wire for in terms of the sheer amount of capital just because PAF is so much bigger than our other U.S. But if you look at all the other U.S. products, none of that’s coming from wire because none of those are on wires today. U.S. venture Evergreen, any of those things are all coming from just us directly selling into RIA and wealth platforms.

Michael Cyprys: Okay. And then just a follow-up question, if I could, also on private wealth. And hear that and see clearly net flow positive across each of your products. But I was hoping you could help remind us around how you approach managing liquidity across these funds, particularly the larger ones like PAF and GPA and how you might navigate a potentially hypothetical period if redemptions were actually to exceed the inflows, say, if redemptions were to be extended for an extended period of time in excess of a 5% cap. So just curious how you think about managing liquidity there and your approach to that.

Erik Hirsch: Sure. I suspect it’s like most every other manager. I mean those vehicles are constantly generating distributions and thus cash liquidity. And so we’re maintaining cash reserves. And on top of that, we have lines of credit that are in place to also help manage.

Michael Cyprys: And to what extent is that dependent on exit and monetization events? Just curious how you think about all of that, sorry.

Erik Hirsch: Well, I think it’s just — I mean, these are hugely diversified portfolio. So it’s hard to imagine a scenario where liquidity dries up across each and every underlying strategy or vintage. And so we just — we’re not seeing that and aren’t modeling anything that looks like that. The line of credit is obviously not dependent on exit activity. It’s just a line tied back to the fund size. So we feel like this is a generally quantitative exercise and one that we’re constantly modeling and making sure that the funds are in the right position to deal with whatever level of liquidity is desired by the investors.

Operator: Next question will be from Mike Brown at UBS.

Michael Brown: Erik, you spend a lot of time talking about the secondaries business. You made a comment I wanted to ask a little bit more about — you talked about turning down 99% of deal flow despite still committing $5.5 billion. Can you just maybe elaborate on what characteristics are causing to pass on those opportunities? Is competition influencing some of that selectivity threshold? Is it getting more competitive out there? In essence, have the 99 shifted over time? And then in the wealth channel, the incentive fees are calculated on kind of NAV basis but put it simply meaning they do include unrealized gains and that’s, of course, drawn some more increased attention. Again, it’s an industry practice. But there obviously does is some scrutiny on kind of the day 1 mark component of that.

So maybe just walk us through the rationale of using that approach for incentive fees for the industry? And then would you — do you think there would ever be a shift in the approach to kind of shift back to more of a realized gain framework?

Erik Hirsch: Sure. So several questions there. On the first part, in terms of the 99%, not a competition issue. As I mentioned, if you just look at kind of the capital available versus deal flow, this is — the secondary space continues to be one of the most imbalanced in terms of just tons of volume and frankly, not enough capital. I think in terms of why do we turn things down. Number one is just quality of asset. As I said, we’re looking to buy really good assets that are managed by really good fund managers. So we get shown, as you can imagine, lots and lots of deal flow, and you sort of see everything. You see lousy assets. You see mediocre assets managed by poor managers. For us, you’re looking for the right combo, you’re looking for really high-quality assets managed by really high-quality fund managers at an appropriate price.

It’s a combo of all of those. And our team is sort of designed to screen through that and look for that. So the luxury of having as much deal flow as we have means that the team doesn’t need to agonize over things that don’t quite hit the bar. They just have a quick now, and they move on to the next thing. From a market perspective, I think as others have commented over the last sort of couple of weeks of earnings calls, we’re all following GAAP accounting. And so to the extent that there’s going to be a change, which I’m not sure why there would be, as I said, has been going on for 30-plus years. But if there was a change, it would be an industry change and it would be the same for everybody. What we’re doing is not different or unique from anybody else.

And so as I said in my comments, I think the sort of — the notion that’s misleading is this kind of a when we take it on our books, as I said, oftentimes months and months and months have elapsed since we actually agreed to a reference date and a transaction with the seller. And so sure, it does come on at some point in time. But again, it’s reflective of that day 1 event is reflective of what could be an extremely long period of time and events that preceded that. So for us, we’re going to follow whatever accounting regulations are put forth. That’s what’s put forth today. That’s what we’re doing. That’s what everyone in the industry is doing. I can’t imagine that it changes. But if it does, we’ll follow whatever is there and so will everyone else.

And so it doesn’t alter the playing field. On the carry piece, you will recall that PAF, one of our largest funds had a traditional realized carry model, not kind of an unrealized high watermark. That product got changed at the request of the investors, who wanted a different structure and one that more mirrored what the rest of the industry was doing. And so we went through an investor vote, it was overwhelmingly supported by investors to make the change, despite them knowing that, that was going to result and some performance fees being paid to us, but that also came with it lower management fee, which is what they were desiring of. And so, today, most of our products follow that sort of high watermark, which is by far the industry norm. GPA does not.

That is a realized carry product still. And so I mean that’s where the industry is. We’re not unique or different in that space. And to the extent clients are desirous of a different structure, then we’ll meet their needs, and so too will the rest of the industry.

Michael Brown: Great. And [indiscernible] on PAF in the change there. Maybe change gears for my follow-up here. I wanted to ask on the seventh secondary fund. I think you mentioned the initial close is trending to be done in the next couple of months. Just maybe touch on how is interest there on the institutional side? How could the latest vintage compare at size to the last vintage? And One of your peers talked about a shift in the approach to the fee rate over the life of the fund. Is that something that you’re also planning to do or might consider?

Erik Hirsch: Yes. So we’re not planning on shifting the fee rate. I mean there are — we’re in market as are a variety of players. I would say we look very normal. I’d say the vast majority of the industry is on a fee on committed capital basis, shifting either to a fee on the net asset value post investment period or a fee on invested capital or net asset value. So that’s been the norm. That’s exactly where we’re priced today. Interest remains high. As I mentioned in my comments, I think the sort of the risk return profile of secondaries is one of the most attractive things that you’re seeing in the market, the ability to have look through I think the market today still feels a little bit uncertain and taking away some of that blind pool risk is powerful.

Also pricing assets based on oftentimes, as I said, asymmetric information advantages, really a good thing. Certainly for us as a buyer. And so we continue to see interest high. If you look at us on kind of a stack rank rate weighting from just capital under management in the secondary space, we’re sort of a mid-tier player who has aspirations to be a top-tier player. So we think we’ve got a lot of room to grow in that market environment. There are plenty of funds that are much, much bigger than us, and we aspire over time to join their ranks.

Operator: [Operator Instructions]. Next is Brennan Hawken at BMO.

Unknown Analyst: Mark on for Brandon. I wanted to ask, within Park Avenue Securities, I believe you now have 3 Evergreen products on the platform. So can you provide an update on the current contribution from that channel and how you would define success over the next 12 months?

Erik Hirsch: Sure. Thanks, Mark. It’s Erik. So we — this is — we’re a couple of months into this. They’ve been a terrific partner. This is the affiliate of Guardian. And so this is again, it’s early days. We haven’t broken out the contribution of that. I think I would measure success by more products and obviously, higher subscriptions to state the overwhelming obvious. I think one of the reasons that platform is interesting is because they have a lot of respect for the parent company. And obviously, as you know, the parent company, $250 million into Evergreen coming out of the beginning of the calendar year. another couple of hundred million dollars going into closed-end products and then turning over a mandate where over the next 10 years or so is $5 billion or more. So certainly, a big mark of confidence from the parent, and we’re hopeful that the subsidiary and the advisers feel the same way.

Unknown Analyst: And then on reporting and monitoring fees, it’s clearly been a tailwind up 22% year-over-year. How much of that growth is driven by sort of bundling cobalt? And what needs to happen for that revenue line item to continue scaling from here?

Erik Hirsch: I think a lot of it has been us getting this sort of combination right. I think what clients are valuing today is the service of not wanting to build out and manage a complicated back-office system. We can do it much more cost efficiently because of just how robust our tech stack is. And then what they want is they want seamless access to their data and the ability to analyze it. And I think us bundling this together, showing them the power of their data into our system putting that power at their fingertips, making that as real time as possible, letting them analyze and be good stewards of their own portfolio. That’s resonating in the market. lots and lots of customers in that service agreement with us already gives us a lot of good reference points across all different types of clients.

And so we continue to see a big pipeline for that ahead. And on top of that, we’re selling Cobalt also as a stand-alone. So for those that maybe are using a fund admin or something else to handle their back office, we still offer Cobalt just as a straight up subscription and that has been growing and even that as a stand-alone has been growing at an even higher rate than the combined service has been.

Operator: Next question will be from Alex Bond at KBW.

Alexander Bond: Just wanted to follow up on the April flow commentary in the Evergreen suite and certainly appreciate all the color there, particularly the monthly breakdowns. But if we look at the — and I think it makes sense that March is seasonally low, given that the redemptions occur there. But if we look at the April flows of $2.65 and compare that to the 525 roughly monthly average in January, February implies that did slow a decent amount in April, which again makes sense given the backdrop. But just want to get your thoughts around forward expectations for gross flows here? And if you think the April results are a reasonable way to think about the run rate for gross flows from here?

Erik Hirsch: It’s Erik. I’d be very disappointed if April is the new reference mark. So I think in April, you were still dealing with a lot of hangover, a lot of headline pieces and a lot of manufactured sort of hysteria and concerns. And so I don’t think that’s the new reference point. I think if I look at what’s happening now in the pipeline and the channel, as I mentioned, a lot of new hires for us coming on board, new relationships getting established. So I think we’re — obviously, our goal is to sort of get back to and exceed what we were seeing in January and February. And I think we’ve got the resources in place to do all of that.

Alexander Bond: Okay. Great. That’s helpful. And then maybe just for my follow-up, I just wanted to ask on overall exit activity. You did mention that you see exit activity improving, which is certainly positive. But maybe if you could help us think about what the potential magnitude of a pickup could be there in the second half of the year or any additional color around why the improved line of sight for improved exit activity over the rest of the year?

Erik Hirsch: Sure. So it’s Erik. I’ll stick with that. I think there’s a couple of things. I mean I think exit activity is a combination of a couple of factors. One is just the general aging of your asset base. So today, on average, private companies are being held by their manager slightly over 5 years, and that number has actually been up the last couple. And so part of it is just look at when the deals were done and just sort of general aging. And so you’re also — you’re just hitting that maturation window. The second is that you need a little bit of market equilibrium where you’ve got buyers and sellers seeing kind of the economy, pricing kind of the same way. And I think we’ve achieved that. If you went back a couple of years ago, you had each of the side of the equation was either more robust or more pessimistic than the other, and you were not at equilibrium.

Today, I think people are seeing the world as potentially volatile as is they’re seeing it through the same lens. There’s a lot of capital that needs to be deployed, so there’s no shortage of people to acquire. And then you add on top of that, what is an increasing sort of corporate M&A environment as well as an IPO market. I think you add all of that together, and I think that paints a much better picture than what we’ve seen for the last couple of years.

Operator: At this time, we have no other questions registered. I will turn the call back over to Erik Hirsch, Co-CEO

Erik Hirsch: Again, just thank you for the time. Thank you for the engagement. Thank you for the support and wishing everyone a safe and enjoyable Memorial Day weekend.

Operator: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.