Hunterbrook questions sustainability of Hamilton Lane new fee structure, markups

A new investigation by Hunterbrook claims Hamilton Lane (HLNE) boosted its reported profitability through accounting changes that allowed the firm to collect incentive fees based on unrealized gains rather than actual asset sales. “The change allowed Hamilton Lane to pull forward fees that may have taken years to accrue,” the new report reads. Hunterbrook adds that the shift, combined with excluding stock based compensation from expenses, nearly doubled fee related earnings margin and pulled forward tens of millions in fees. The report argues that “about a third of the total gains in valuations across PAF’s portfolio were largely generated by these accounting uplifts, rather than any actual appreciation of the companies owned,” and concludes that “the only question, for now, is whether investors open that Pandora’s Box.” Based on Hunterbrook Media’s reporting, Hunterbrook Capital is short Hamilton Lane and long a basket of comparable securities at the time of publication.