Hunterbrook Capital on Monday revealed it has established a short position in Hamilton Lane, saying it sees weaknesses in the private equity manager's accounting and a susceptibility to investor redemptions. The short seller's critique centers on how Hamilton Lane records gains after buying secondary stakes in private equity portfolios.
Hamilton Lane, which has a market capitalization of about $4 billion and manages or advises on $1 trillion in assets, has expanded its activity in purchasing secondary interests. Hunterbrook's review of the $6 billion Global Private Assets Fund found that roughly one-third of total valuation gains are attributable to so-called "day-one markups" rather than true appreciation of portfolio companies.
The process identified by the short seller involves Hamilton Lane acquiring secondary stakes at discounts and then immediately revaluing those positions upward to prior reported levels under an accounting allowance referred to as a "practical expedient." Hunterbrook says these upward adjustments occur even when buyers at the higher prices are not present. In response to the short seller's calculations, Hamilton Lane told Hunterbrook that more than 70% of secondary returns in the fund are not from day-one markups, a figure that the short seller says roughly supports its one-third estimate.
Separately, Hamilton Lane altered its fee model in 2025. The firm moved to earn incentive fees on increases in its internal valuations - essentially collecting fees as it marks investments higher - rather than waiting for those gains to be realized through asset sales. That change, when combined with excluding stock-based compensation from fee-related earnings calculations, raised the firm's reported fee-related earnings margin from about 32% to 59% for the nine months ended December 2025.
The timing of the fee structure shift coincided with restricted share awards to the company's co-CEOs. Each of the co-CEOs received 544,000 restricted shares, with those grants valued at roughly $71 million per executive. Hamilton Lane has described the new fee terms as "the industry standard" and said "NAV-based carry" is more suitable for semi-liquid funds that reinvest proceeds.
Hunterbrook's analysis further suggests that absent the 2025 fee structure change, Hamilton Lane's fee-related earnings would have fallen by 16% rather than showing reported growth of 37% over the nine-month period in 2025.
The firm also derives a sizable portion of its fee revenue from retail and evergreen vehicles. Hamilton Lane gets 34% of its management and incentive fees from these products, a proportion higher than comparisons cited for competitors - Blackstone at 24% and Blue Owl at 23%.
Investor flows have shown strain. Hamilton Lane's Global Private Assets Fund registered an estimated net outflow of $172 million in March, the largest on record and roughly nine times greater than a prior $19 million outflow in September. The company's stock has declined about 50% from its peak.
Hamilton Lane maintains that its valuation process complies with U.S. accounting standards and emphasized that the bulk of long-term returns are driven by growth in the underlying portfolio companies.
Key data points:
- Market capitalization: approximately $4 billion.
- Assets managed or advised: $1 trillion.
- Global Private Assets Fund size: $6 billion; estimated one-third of valuation gains from day-one markups per Hunterbrook.
- Fee-related earnings margin moved from ~32% to 59% for nine months ending December 2025 after fee changes and accounting exclusions.
- March net outflow from the Global Private Assets Fund: $172 million.