Investing.com — Short seller Hunterbrook Capital disclosed on Monday it has taken a short position in , citing concerns about the private equity firm’s accounting practices and vulnerability to investor redemptions.
The $4 billion market cap firm, which manages or advises on $1 trillion in assets, has increasingly relied on purchasing secondary stakes in private equity portfolios. Hunterbrook’s analysis found that approximately one-third of total valuation gains in Hamilton Lane’s $6 billion Private Assets Fund stem from what the short seller calls “day-one markups” rather than actual appreciation of underlying companies.
Hamilton Lane purchases secondary stakes at discounts and immediately marks them back up to previous valuations under accounting rules known as a “practical expedient,” even without buyers at those higher prices. The firm told Hunterbrook that more than 70% of secondary returns in the fund are not from day-one markups, roughly confirming the one-third estimate.
In 2025, Hamilton Lane changed its fee structure to collect incentive fees based on increasing its own marks on investments, rather than waiting for actual asset sales. The change, combined with excluding stock-based compensation from fee-related earnings calculations, moved the firm’s reported fee-related earnings margin from approximately 32% to 59% for the nine months ending December 2025.
The timing coincided with co-CEOs Erik Hirsch and Juan Delgado-Moreira each receiving 544,000 restricted shares valued at roughly $71 million apiece. Hamilton Lane said the new fee structure is “the industry standard” and that “NAV-based carry” is more appropriate for semi-liquid funds that reinvest proceeds.
Hunterbrook’s analysis suggests that without the fee structure change, Hamilton Lane’s fee-related earnings would have declined 16% rather than growing 37% over the nine months of 2025.
The firm derives 34% of its management and incentive fees from retail and evergreen vehicles, higher than competitors like Blackstone at 24% and Blue Owl at 23%. Hamilton Lane’s Global Private Assets Fund experienced an estimated net outflow of $172 million in March, its largest on record and nine times larger than a previous $19 million outflow in September.
Hamilton Lane’s stock has fallen 50% from its peak. The company said its valuation process follows U.S. accounting standards and that the majority of long-term performance comes from underlying company growth.
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