By Bill Alpert

Private asset manager Hamilton Lane reported its fiscal year results last week, and fee earnings grew 25%. Yet the firm's stock is down 36% since December, while the S&P 500 has risen 9%.

Most private-market stocks have slumped, of course, as wealthy individuals crowded the exits of credit funds after reading about loan problems.

Hamilton Lane has also gotten heat for booking profits on the discounts it extracts when acquiring pieces of private-equity and credit funds from other investors. On a call this month, Apollo Global Management CEO Marc Rowan criticized such "day-one markups" in funds pitched to individual investors.

Like its rival StepStone Group, Hamilton Lane has quickly grown a series of fund-of-funds by filling them with limited-partnership stakes that it buys on the secondary market from institutions seeking to cash out of some holdings. Since 2020, Hamilton Lane has doubled the assets it manages, to $142 billion.

Hamilton Lane co-CEO Erik Hirsch spent much of his prepared remarks on last Thursday's call defending the accounting for these discounted fund stakes, which the firm immediately marks up to the higher value ascribed by the general partners of the underlying fund. This has been the industry practice for decades, and follows generally-accepted accounting principles.

Hirsch tells Barron's that the accounting may confuse investors used to the public markets, where the best price for an asset is what you just paid. But there are few buyers for a private-fund stake that may be tied up for years to come. That's why Hamilton Lane can get those fund pieces at a discount.

"You've got a seller who wants liquidity in a no-liquidity environment, and there's a very narrow number of buyers," Hirsch says. "There's going to be a price for that."

"Does that mean that the assets are worth less than the [general partner] is telling us? No, it just means that the seller needed liquidity."

Hamilton Lane is stepping into the seller's shoes as a limited-partner in a private fund, so it books the position at the same price as every other limited partner in that other fund.

For all the recent noise about day-one markups, Hirsch says he hasn't heard a better alternative put forward for accounting for them. If a new rule emerges, that will be what Hamilton Lane uses.

Most of the gains on the firm's secondary-market purchases come from the long-term returns on those investments. Over the many years that Hamilton Lane has invested in secondaries, Hirsch says about 70% of its returns have come from asset appreciation, with the remaining 30% coming from savvy buying.

Hirsch thinks the accounting concerns will dissipate.

"This is something that you solve by putting up good results -- by showing investors that it's a great business and that it has great future prospects," he says.

Write to Bill Alpert at william.alpert@barrons.com

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May 28, 2026 16:37 ET (20:37 GMT)

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