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What changed in Hamilton Lane INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Hamilton Lane INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+571 added−510 removedSource: 10-K (2023-05-25) vs 10-K (2022-05-26)

Top changes in Hamilton Lane INC's 2023 10-K

571 paragraphs added · 510 removed · 410 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

133 edited+39 added−19 removed182 unchanged
Biggest changeSee “Risk Factors—Risks Related to Our Business—Our international operations are subject to certain risks, which may affect our revenue” and “Risk Factors—Risks Related to Our Industry—Regulation of investment advisors outside the United States could adversely affect our ability to operate our business.” included in Part I, Item 1A of this Form 10-K for more information on the risks we face in connection with Brexit. 23 Employees Our Culture and Focus on Diversity, Equity & Inclusion Fostering a diverse, equitable and inclusive environment is core to our corporate mission to enrich lives and safeguard futures, and we leverage our status as a global leader in the private markets to promote diversity and inclusion to the benefit of employees, clients, the community and our industry overall.
Biggest changeEmployees Our Culture and Focus on Diversity, Equity & Inclusion Fostering a diverse, equitable and inclusive environment is core to our corporate mission to enrich lives and safeguard futures, and we leverage our status as a global leader in the private markets to promote diversity and inclusion to the benefit of employees, clients, the community and our industry overall.
Our sales organization comprises our client and private wealth solutions groups, which are dedicated to marketing our services and products globally. In addition, we intend to increase our profile with influential intermediaries that advise individual and institutional clients, particularly small and medium-sized institutions and high-net-worth individuals and family offices.
Our sales organization comprises our institutional client and private wealth solutions groups, which are dedicated to marketing our services and products globally. In addition, we intend to increase our profile with influential intermediaries that advise individual and institutional clients, particularly small and medium-sized institutions and high-net-worth individuals and family offices.
To enhance our access to markets where we do not currently have a local presence or that are dominated by captive client relationship models, we selectively engage highly respected third-party organizations to market our products and services. For example, we use third-party distributors in Asia and Latin America.
To enhance our access to markets where we do not currently have a local presence or that are dominated by captive client relationship models, we selectively engage highly respected third-party organizations to market our products and services. For example, we selectively use third-party distributors in Asia and Latin America.
Management Fees . We earn management fees based on a percentage of limited partners’ capital commitments to, net invested capital or net asset value in, our specialized funds.
We earn management fees based on a percentage of limited partners’ capital commitments to, net invested capital or net asset value in, our specialized funds.
Incentive fees comprise carried interest earned from our specialized funds and certain customized separate accounts structured as single-client funds in which we have a general partner commitment, and performance fees earned on certain other customized separate accounts.
Incentive fees comprise carried interest earned from our specialized funds and certain customized separate accounts structured as single-client funds in which we have a general partner commitment, and performance fees earned on certain other specialized funds and customized separate accounts.
We seek to partner with managers who share our dedication to these issues and exhibit best practices, including: • An official DE&I policy statement at the managing and portfolio company levels • A focus on expanding diversity of decision-making within the managing and portfolio company management • A diverse board composition • Diversity mandates for hiring third-party service providers • Monitoring and reporting of social KPIs • Supplier due diligence We also seek to invest in diverse organizations and partner with managers who share a commitment to DE&I.
In addition, we seek to partner with managers who share our dedication to these issues and exhibit best practices, including: • An official DE&I policy statement at the managing and portfolio company levels • A focus on expanding diversity of decision-making within portfolio company management • A diverse board composition • Diversity mandates for hiring third-party service providers • Monitoring and reporting of social KPIs • Supplier due diligence We also seek to invest in diverse organizations and partner with managers who share a commitment to DE&I.
As part of the Reorganization, we changed our structure to what is commonly referred to as an “Up-C” structure, which 6 provides our pre-IPO owners with the tax advantage of continuing to own interests in a pass-through structure and provides potential future tax benefits for both the public company and the legacy owners (through the tax receivable agreement) when they ultimately exchange their pass-through interests for shares of Class A common stock or, at our election, for cash.
As part of the Reorganization, we changed our structure to what is commonly referred to as an “Up-C” structure, which provides our pre-IPO owners with the tax advantage of continuing to own interests in a pass-through structure and provides potential future tax benefits for both the public company and the legacy owners (through the tax receivable agreement) when they ultimately exchange their pass-through interests for shares of Class A common stock or, at our election, for cash.
Our attorneys also review and make 21 recommendations regarding amendments and requests for consents presented by the fund managers from time to time. In addition, our legal team is responsible for preparing, reviewing and negotiating all documents relating to the formation and operation of our funds. We utilize the services of outside counsel as we deem necessary.
Our attorneys also review and make recommendations regarding amendments and requests for consents presented by the fund managers from time to time. In addition, our legal team is responsible for preparing, reviewing 21 and negotiating all documents relating to the formation and operation of our specialized funds. We utilize the services of outside counsel as we deem necessary.
Our long-standing focus on ESG and sustainability issues has been reinvigorated in part because of the growing importance such practices have for our clients and our own genuine commitment to responsible investing. 26 Investing Responsibly Hamilton Lane’s RIC was established in 2012 and is responsible for oversight, strategy and guidance on all ESG matters, including our ESG policy.
Our long-standing focus on ESG and sustainability issues has been reinvigorated in part because of the growing importance such practices have for our clients and our own genuine commitment to responsible investing. Investing Responsibly Hamilton Lane’s RIC was established in 2012 and is responsible for oversight, strategy and guidance on all ESG matters, including our ESG policy.
Responsible investing makes good business sense as it integrates the desire for reducing risk with the goal of creating better outcomes for all stakeholders. Our Continued Commitment to ESG & Sustainability Issues Hamilton Lane has long been focused on ESG issues, and has been formally issuing our ESG Questionnaire to fund managers since 2010.
Responsible investing makes good business sense as it integrates the desire for reducing risk with the goal of creating better outcomes for all stakeholders. Our Continued Commitment to ESG & Sustainability Issues Hamilton Lane has long been focused on ESG issues, and has been formally issuing our ESG diligence questionnaire to fund managers since 2010.
In addition, we believe we are a leading provider of private markets solutions for U.S. labor union pension plans, and we serve numerous smaller public and corporate pension plans, sovereign wealth funds, financial institutions and insurance companies, endowments and foundations, as well as family offices and selected high-net-worth individuals.
In addition, we believe we are a leading provider of private markets solutions for U.S. labor union pension plans, and we serve numerous smaller public and corporate pension plans, sovereign wealth funds, financial institutions and insurance companies, endowments and foundations, as well as family offices and high-net-worth individuals.
At the time we commit capital to a fund on behalf of our specialized funds or customized separate accounts, the investments that the fund will make are generally not known and investors typically have very little or no ability to influence 10 the investments that are made during the fund’s investment period.
At the time we commit capital to a fund on behalf of our specialized funds or customized separate accounts, the investments that the fund will make are generally not known and investors typically have very little or no ability to influence the investments that are made during the fund’s investment period.
Our funds are generally subject to extension for up to two years at the discretion of the general partner and thereafter if consent of the requisite majority of limited partners or, in some cases, the fund’s advisory committee is obtained. Our evergreen funds do not have a fixed term.
Our funds are generally subject to extension for up to two years at the 19 discretion of the general partner and thereafter if consent of the requisite majority of limited partners or, in some cases, the fund’s advisory committee is obtained. Our evergreen funds do not have a fixed term.
In addition, the governing agreements of our funds typically require the suspension of the commitment period if, depending on the fund, between two and ten designated principals of the Manager cease to devote sufficient professional time to or cease to be employed by the Manager, often called a “key person event”, or in connection with certain other 18 events discussed under “—Duration, Redemption and Termination.” See “Risk Factors—Risks Related to our Business—Our ability to retain our senior management team and attract additional qualified investment professionals is critical to our success” included in Part I, Item 1A of this Form 10-K.
In addition, the governing agreements of our funds typically require the suspension of the investment period if, depending on the fund, between two and ten designated principals of the Manager cease to devote sufficient professional time to or cease to be employed by the Manager, often called a “key person event”, or in connection with certain other events discussed under “—Duration, Redemption and Termination.” See “Risk Factors—Risks Related to our Business—Our ability to retain our senior management team and attract additional qualified investment professionals is critical to our success” included in Part I, Item 1A of this Form 10-K. 18 Management Fees .
Our RIC was established in 2012, and each of our investment teams factor ESG considerations into their investment processes. We raised our first dedicated Impact Opportunities Fund in 2019 and our second Impact Opportunities Fund in 2021, with each fund seeking to make direct investments in businesses with a focus on environmental and social impact.
Our RIC was established in 2012, and each of our investment teams factor ESG considerations into their investment processes. We raised our first dedicated Impact Opportunities Fund in 2019 and launched our second Impact Opportunities Fund in 2021, with each fund seeking to make direct investments in businesses with a focus on environmental and social impact.
Many nations, communities and individuals are demanding that companies prioritize ESG issues, as well as 25 advance more diverse, equitable and inclusive workplaces. Investment sectors cannot afford to sit on the sidelines of these issues, and that certainly holds true for the private markets.
Many nations, communities and individuals are demanding that companies prioritize ESG issues, as well as advance more diverse, equitable and inclusive workplaces. Investment sectors cannot afford to sit on the sidelines of these issues, and that certainly holds true for the private markets.
Given our leading market position and strong reputation for investing and client service, our objective is to continue to leverage the following strategic advantages to exceed the industry growth rate. 8 Leverage our market leading position as one of the largest allocators of primary capital to the world’s leading fund managers.
Given our leading market position and strong reputation for investing and client service, our objective is to continue to leverage the following strategic advantages to exceed the industry growth rate. Leverage our market leading position as one of the largest allocators of primary capital to the world’s leading fund managers.
Our main primary, secondary and direct investment funds have an average term of approximately 12 19 years. Certain of our strategic opportunities funds terminate five years after the last date on which a limited partner may be admitted to the fund.
Our main primary, secondary and direct investment funds have an average term of approximately 12 years. Certain of our strategic opportunities funds terminate five years after the last date on which a limited partner may be admitted to the fund.
As a global leader in our asset class, Hamilton Lane has consistently been at the forefront of industry changes, often helping to influence and drive them. And our commitment to responsible and sustainable investing practices is no exception.
As a global leader in our asset class, Hamilton Lane has consistently been at the forefront of industry changes, often helping to influence and drive them. And our commitment to responsible and sustainable 25 investing practices is no exception.
We intend to use the advantages afforded to us by our proprietary databases, analytical tools and deep industry knowledge to drive our performance and provide our clients with customized solutions across private markets asset classes.
We intend to use the advantages afforded to us by our proprietary databases, analytical tools and deep industry knowledge to drive our performance and provide our clients with customized solutions across private 10 markets asset classes.
Given this status, we are often a sought-after partner for technology-oriented businesses that are developing cutting-edge and innovative solutions that will help grow and improve the industry.
Given this status, we are often a sought-after partner for technology-oriented businesses that are developing cutting-edge and innovative solutions that will help grow 9 and improve the industry.
Each review completed by our ODD team results in a full report documenting each risk area and any existing 11 mitigating factors, our recommendations to each manager and our proprietary risk-rating system.
Each review completed by our ODD team results in a full report documenting each risk area and any existing mitigating factors, our recommendations to each manager and our proprietary risk-rating system.
Furthermore, given the risks they pose to our planet and collective well-being, we do not directly invest through our discretionary capital in thermal coal, oil sands, or non-sustainable forestry practices. • Social—Employee diversity, workplace conditions, supply chain practices, consumer protections and broader societal impacts are criteria that we evaluate and consider in our investment process.
Furthermore, given the risks they pose to our planet and collective well-being, we do not directly invest through our discretionary capital in thermal coal, oil sands, or non-sustainable forestry practices. • Social—Board composition and employee diversity, workplace conditions, supply chain practices, consumer protections and broader societal impacts are criteria that we evaluate and consider in our investment process.
The following chart summarizes the growth of our fee-earning AUM since fiscal year 2018. * Amounts may not foot due to rounding Our Clients Our client base primarily comprises investors that range from those seeking to make an initial investment in alternative assets to some of the largest and most sophisticated private markets investors.
The following chart summarizes the growth of our fee-earning AUM since fiscal year 2019. * Amounts may not foot due to rounding Our Clients Our client base primarily comprises investors that range from those seeking to make an initial investment in alternative assets to some of the largest and most sophisticated private markets investors.
The difference is due primarily to $35 billion of discretionary AUM earning a flat fee or fee on number 14 of funds for which we categorize revenue as advisory and reporting. This was partially offset by $3 billion of fee-earning AUM from customized separate accounts clients with non-discretionary AUA.
The difference is due primarily to $36 billion of discretionary AUM earning a flat fee or fee on number 14 of funds for which we categorize revenue as advisory and reporting. This was partially offset by $3 billion of fee-earning AUM from customized separate accounts clients with non-discretionary AUA.
Because a Sunset may not take place for some time, certain of the Class B Holders will, by virtue of their voting control of us and the stockholders agreement described below, continue to control us for the near future. Our Class B common stockholders collectively hold 81% of the combined voting power of our common stock.
Because a Sunset may not take place for some time, certain of the Class B Holders will, by virtue of their voting control of us and the stockholders agreement described below, continue to control us for the near future. Our Class B common stockholders collectively hold 80% of the combined voting power of our common stock.
As an important first step towards this goal, we became a signatory to Initiative Climat International (“iCI”) in 2022. iCI is affiliated with the PRI and is composed of a platform of leading private equity investors dedicated to understanding and reducing carbon emissions of private equity-backed companies.
As an important first step towards this goal, we became a signatory to Initiative Climate International (“iCI”) in 2022. iCI is affiliated with the PRI and is composed of a platform of leading private equity investors dedicated to understanding and reducing carbon emissions of private equity-backed companies.
If, upon the final distribution of any of our specialized funds from which we earn carried interest, we and our affiliates have received cumulative carried interest in excess of the amount to which we would be entitled from the profits calculated for such investments in the aggregate, or if the limited partners have not received distributions equal to those to which they are entitled, the general partner will typically return such part of any carried interest to the limited partners as is necessary to ensure that they receive the amounts to which they are entitled, less taxes on the carried interest.
If, upon the final distribution of any of our specialized funds from which we earn carried interest, we and our affiliates have received cumulative carried interest in excess of the amount to which we would be entitled from the profits calculated for such investments in the aggregate, or if the limited partners have not received distributions equal to those to which they are entitled, the carried interest recipient will typically return such part of any carried interest to the limited partners as is necessary to ensure that they receive the amounts to which they are entitled, less taxes on the carried interest.
Our investment advisory services include asset allocation, strategic plan creation, development of investment policies and guidelines, the screening and recommending of investments, legal negotiations, the monitoring of and reporting on investments and investment manager review and due diligence. Our advisory clients include some of the largest and most sophisticated private markets investors in the world.
Our investment advisory services include asset allocation, strategic plan creation, development of investment policies and guidelines, the screening and recommending of investments, the monitoring of and reporting on investments and investment manager review and due diligence. Our advisory clients include some of the largest and most sophisticated private markets investors in the world.
The contents of our websites are not incorporated by reference into this Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. 31
The contents of our websites are not incorporated by reference into this Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. 32
The parties to the stockholders agreement control approximately 81% of the combined voting power of our common stock. This group is therefore able to exercise control over all matters requiring the approval of our stockholders, including the election of our directors and the approval of significant corporate transactions.
The parties to the stockholders agreement control approximately 80% of the combined voting power of our common stock. This group is therefore able to exercise control over all matters requiring the approval of our stockholders, including the election of our directors and the approval of significant corporate transactions.
In many of these countries and jurisdictions, which include the European Union (“EU”), the European Economic Area (“EEA”), the individual member states of each of the EU and EEA, Australia, Canada, Hong Kong, Israel, Japan, Singapore, South Korea and the United Kingdom (“U.K.”), we and our operations, and in some cases our personnel, are subject to regulatory oversight and requirements.
In many of these countries and jurisdictions, which include the European Union (“EU”), the European Economic Area (“EEA”), the individual member states of each of the EU and EEA, Australia, Canada, China, Hong Kong, Israel, Japan, Mexico, Singapore, South Korea, Switzerland and the United Kingdom (“U.K.”), we and our operations, and in some cases our personnel, are subject to regulatory oversight and requirements.
Termination or dissolution of the funds and the suspension of their commitment periods, however, can generally be accelerated upon the occurrence of certain customary events, including key person events, bankruptcy and similar events and the occurrence of fraud, willful malfeasance or gross negligence and other similar events.
Termination or dissolution of the funds and the suspension of their investment periods, however, can generally be accelerated upon the occurrence of certain customary events, including key person events, bankruptcy and similar events and the occurrence of fraud, willful malfeasance or gross negligence and other similar events.
We had approximately $795 billion of AUA as of March 31, 2022. 5 • Distribution Management : We offer distribution management services to our clients through active portfolio management to enhance the realized value of publicly traded stock they receive as distributions in-kind from private equity funds. • Reporting, Monitoring, Data and Analytics : We provide our clients with comprehensive reporting and investment monitoring services, usually bundled into our broader investment solutions offerings, but also on a stand-alone, fee-for-service basis.
We had approximately $745 billion of AUA as of March 31, 2023. 5 • Distribution Management : We offer distribution management services to our clients through active portfolio management to enhance the realized value of publicly traded stock they receive as distributions in-kind from private equity funds. • Reporting, Monitoring, Data and Analytics : We provide our clients with comprehensive reporting and investment monitoring services, usually bundled into our broader investment solutions offerings, but also on a stand-alone, fee-for-service basis.
That is why one of our corporate values is “Promoting Equity and Inclusion from Within.” We believe that our strong culture is a key factor driving our success in developing and maintaining high-quality relationships with current/prospective employees, clients, prospects, business partners and the communities within which we live and work.
This is articulated in one of our corporate values, “Promoting Equity and Inclusion from Within.” We believe that our strong culture is a key factor driving our success in developing and maintaining high-quality relationships with current/prospective employees, clients, prospects, business partners and the communities within which we live and work.
Our sales people lead this process, coordinate meetings, and continue to be the prospective client’s principal contact with us through the decision-making process. Client Service Our client service group includes employees located in the United States, United Kingdom, Japan, Hong Kong, Brazil, Israel, South Korea, and Australia.
Our sales people lead this process, coordinate meetings, and continue to be the prospective client’s principal contact with us through the decision-making process. Client Service Our client service group includes employees located in the United States, United Kingdom, Italy, Israel, Japan, Hong Kong, South Korea, Singapore and Australia.
Most of our customized separate account clients and certain of our advisory clients rely on us to review, analyze and negotiate the terms of the documents relating to primary, secondary and direct investments.
Most of our customized separate account clients, certain of our advisory clients and our specialized funds rely on us to review, analyze and negotiate the terms of the documents relating to primary, secondary and direct investments.
Our evergreen investment team utilizes the same investment process and allocation priority as our institutional single-strategy funds. Lastly, our private market analytics team draws upon data analysis to form views at the industry level. Each of these teams, with the exception of private market analytics, has its own discrete investment committees, although there is significant overlap among committee members.
Our evergreen investment team utilizes the same investment process and allocation priority as our institutional single-strategy funds. Lastly, our portfolio management group draws upon data analysis to form 11 views at the industry level. Each of these teams, with the exception of private market analytics, has its own discrete investment committees, although there is significant overlap among committee members.
HLI has dual-class common stock, the rights of which are described in more detail below. The below chart summarizes our organizational structure as of March 31, 2022.
HLI has dual-class common stock, the rights of which are described in more detail below. The below chart summarizes our organizational structure as of March 31, 2023.
The remaining $25 billion is non fee-earning AUM, which includes accounts that earn fees as discretionary AUM is invested or considered active as well as accounts past their fee-earning period.
The remaining $22 billion is non fee-earning AUM, which includes accounts that earn fees as discretionary AUM is invested or considered active as well as accounts past their fee-earning period.
We generally reduce the management and/or incentive fees or carried interest on customized separate accounts to the extent that assets in the accounts are invested in our specialized funds so that our clients do not pay duplicate fees. Duration and Termination.
We generally reduce the asset-based and/or incentive fees or carried interest on customized separate accounts to the extent that assets in the accounts are invested in our specialized funds so that our clients do not pay duplicate fees. Duration and Termination.
We will seek to invest meaningfully into climate solutions and areas where we and our investment partners can drive significant de-carbonization and will endeavor to invest in the fossil fuel production sector only through managers who realize and are working to de-risk these assets in ways aligned with the Paris Agreement.
On behalf of our clients, we will seek to invest meaningfully into climate solutions and areas where we and our investment partners can drive significant de-carbonization and will endeavor to invest in the fossil fuel production sector only through managers who realize and are working to de-risk these assets in ways aligned with the Paris Agreement.
In early 2021, Hamilton Lane became a signatory to ILPA’s newly announced Diversity in Action Initiative. This effort focuses on foundational actions that limited partner and general partner organizations are taking to advance diversity, equity and inclusion, both internally and throughout the industry more broadly.
In early 2021, Hamilton Lane became a signatory to ILPA’s newly announced Diversity in Action Initiative. This effort focuses on foundational actions that limited partner and general partner organizations are taking to advance DE&I, both internally and throughout the industry more broadly.
Our fee-earning AUM is equal to the amount of capital commitments, net invested capital and NAV of our customized separate accounts and specialized funds depending on the fee terms. Substantially all of our customized separate accounts and specialized funds earn fees based on commitments or net invested capital, which are not affected by market appreciation or depreciation.
Our fee-earning AUM is equal to the amount of capital commitments, net invested capital and NAV of our customized separate accounts and specialized funds depending on the fee terms. The vast majority of our customized separate accounts and specialized funds earn fees based on commitments or net invested capital, which are not affected by market appreciation or depreciation.
We have built a significant presence to serve clients in Europe, Latin America, the Middle East, Asia, Australia and Canada, and we have offices in London, Frankfurt, Milan, Zug, Tel Aviv, Hong Kong, Seoul, Singapore, Tokyo, Sydney and Toronto.
We have built a significant presence to serve clients in Europe, Latin America, the Middle East, Asia, Australia and Canada, and we have offices in Frankfurt, London, Milan, Stockholm, Zug, Mexico City, Tel Aviv, Hong Kong, Seoul, Shanghai, Singapore, Tokyo, Sydney and Toronto.
For the year ended March 31, 2022, our top 10 clients generated approximately 17% of management and advisory fee revenues, and our top 20 clients generated approximately 26% of management and advisory fee revenues. 15 Sales and Marketing Our client and private wealth solutions groups consist of employees around the world, including in the United States, United Kingdom, Hong Kong, Japan, Singapore, South Korea, Israel, Australia, Canada and throughout continental Europe.
For the year ended March 31, 2023, our top 10 clients generated approximately 16% of management and advisory fee revenues, and our top 20 clients generated approximately 24% of management and advisory fee revenues. 15 Sales and Marketing Our client and private wealth solutions groups consist of employees around the world, including in the United States, United Kingdom, Hong Kong, Japan, Singapore, South Korea, Israel, Australia, Canada and throughout continental Europe.
Furthermore, given the risks they pose to our neighbors around the world, we do not directly invest through our discretionary capital in companies with material operations in controversial weapons (defined as chemical/biological, nuclear, cluster munitions and landmines), abusive lending practices, tobacco/nicotine products, pornography, or companies that support animal cruelty, child labor, human trafficking or forced labor. • Governance—Ownership structures, voting rights, compensation, accounting practices and processes for dealing with conflicts of interest are critical to our underwriting process.
Furthermore, given the risks they pose to our neighbors around the world, we do not directly invest through our discretionary capital in companies that derive revenue from or support controversial weapons (defined as chemical/biological, nuclear, cluster munitions and landmines), abusive lending practices, pornography, animal cruelty, child labor, human trafficking or forced labor. • Governance—Ownership structures, voting rights, compensation, accounting practices and processes for dealing with conflicts of interest are critical to our underwriting process.
The management fee during the commitment period is often charged on capital commitments and after the commitment period (or a defined anniversary of the fund’s initial closing) is typically reduced by a percentage of the management fee for the preceding year or charged on net invested capital.
The management fee during the investment period is often charged on capital commitments and after the investment period (or a defined anniversary of the fund’s initial closing) is typically reduced by a percentage of the management fee for the preceding year or charged on net invested capital or net asset value.
As of March 31, 2022, our client and investor base included over 800 institutions and intermediaries and is broadly diversified by type, size and geography. Our intermediary clients enable us to provide our investment products to an expanded range of high-net-worth individuals and family offices.
As of March 31, 2023, our client and investor base included over 1,000 institutions and intermediaries and is broadly diversified by type, size and geography. Our intermediary clients enable us to provide our investment products to an expanded range of high-net-worth individuals and family offices.
We generally have discretionary investment authority over our customized separate accounts, which comprised approximately $83 billion of our AUM as of March 31, 2022. • Specialized Funds : We organize, invest and manage specialized primary, secondary and direct investment funds.
We generally have discretionary investment authority over our customized separate accounts, which comprised approximately $85 billion of our AUM as of March 31, 2023. • Specialized Funds : We organize, invest and manage specialized primary, secondary and direct investment funds.
We have multiple employee-led programs designed to help our colleagues with skill development, career progression and work-life balance, as well as to facilitate open dialogues around important topics such as race, inclusion and social justice, including: • Coffee Connects—internal networking opportunities for Hamilton Lane women intended to facilitate building new relationships and sharing experiences across the organization • DE&I Speaker Series—interview series intended to promote and encourage the honest discussion of issues related to diversity and inclusion within our firm and broader industry • HLWE—creating experiences designed to bring Hamilton Lane women together to support their development and success • Mentoring Program—formal program designed to help employees foster relationships with more experienced colleagues and/or peers in different departments for professional and personal development and growth • #SJChats—employee-facilitated small group sessions discussing a variety of racial inequality and social justice topics At Hamilton Lane, we remain fully committed to Diversity, Equity & Inclusion.
We have multiple employee-led programs designed to help our colleagues with skill development, career progression and work-life balance, as well as to facilitate open dialogues around important topics such as race, inclusion and social justice, including: • Coffee Connects—internal networking opportunities for Hamilton Lane women intended to facilitate building new relationships and sharing experiences across the organization • DE&I Speaker Series—interview series intended to promote and encourage the honest discussion of issues related to diversity and inclusion within our firm and broader industry • HL WE—creating experiences designed to bring Hamilton Lane women together to support their development and success • Mentoring Program—formal program designed to help employees foster relationships with more experienced colleagues and/or peers in different departments for professional and personal development and growth At Hamilton Lane, we remain fully committed to DE&I.
(2) We hold all of the Class A units of HLA, representing the right to receive approximately 68.9% of the distributions made by HLA. We act as the sole manager of HLA and operate and control all of its business and affairs.
(2) We hold all of the Class A units of HLA, representing the right to receive approximately 70.1% of the distributions made by HLA. We act as the sole manager of HLA and operate and control all of its business and affairs.
The partnership seeks to offset carbon dioxide emissions by supporting projects with third-party verified carbon credits as well as societal benefit, including a wind power project in India and two world-leading clean cooking projects in Bangladesh and Ghana.
The partnership seeks to offset carbon dioxide emissions by supporting projects with third-party verified carbon credits as well as societal benefit, including a wind power project in India, two world-leading clean cooking projects in Bangladesh and Ghana and the Aqua Clara water filter project in Kenya.
Specialized funds comprised approximately $24 billion of our AUM as of March 31, 2022. • Advisory Services : We offer investment advisory services to assist clients in developing and implementing their private markets investment programs.
Specialized funds comprised approximately $27 billion of our AUM as of March 31, 2023. • Advisory Services : We offer investment advisory services to assist clients in developing and implementing their private markets investment programs.
Talent Acquisition and Retention In 2020, our Human Resources Department, in conjunction with the firm’s DE&I Council, introduced a new strategic plan, called HL All, aimed at expanding upon existing efforts to intentionally embed diversity, equity and inclusion into the fabric of the firm’s values, culture, and recruiting and retention practices.
Talent Acquisition and Retention In 2020, our Human Resources Department, in conjunction with the firm’s DE&I Council, implemented a strategic plan, called HL All, aimed at expanding upon existing efforts to intentionally embed DE&I into the fabric of the firm’s values, culture, and recruiting and retention practices.
With approximately 540 employees worldwide as of March 31, 2022, we are proud that our culture has been recognized annually for the last 10 years by Pensions & Investments (“P&I”) magazine, a leading investment publication, as a “Best Place to Work in Money Management” since P&I created their list in 2012.
With approximately 600 employees worldwide as of March 31, 2023, we are proud that our culture has been recognized annually for the last 11 years by Pensions & Investments (“P&I”) magazine, a leading investment publication, as a “Best Place to Work in Money Management” since P&I created the list in 2012.
In early 2021, we became a signatory to the newly announced Diversity in Action Initiative of the Institutional Limited Partners Association (“ILPA”). This effort focuses on foundational actions that limited partner and general partner organizations are taking to advance diversity, equity and inclusion, both internally and throughout the industry more broadly.
In early 2021, we became a signatory to the Diversity in Action Initiative of the Institutional Limited Partners Association (“ILPA”). This effort focuses on foundational actions that limited partner and general partner organizations are taking to advance DE&I, both internally and throughout the industry more broadly.
Our AUA is diversified across geographies with approximately 50% derived from clients based outside of the United States. 13 The following chart summarizes the growth of our AUA since fiscal year 2018.
Our AUA is diversified across geographies with approximately 44% derived from clients based outside of the United States. 13 The following chart summarizes the growth of our AUA since fiscal year 2019.
We have a diversified revenue stream from a variety of client types in multiple geographic regions, with no single client representing more than 4% of management and advisory fee revenues. Approximately 53% of our fiscal 2021 management and advisory fee revenues came from clients based outside of the United States.
We have a diversified revenue stream from a variety of client types in multiple geographic regions, with no single client representing more than 3% of management and advisory fee revenues. Approximately 58% of our fiscal 2023 management and advisory fee revenues came from clients based outside of the United States.
Specialized Funds Since 1997, we have sponsored 29 primary funds, six secondary funds, eight direct investment funds, seven strategic opportunities funds, two social and environmental impact funds and two Small Business Investment Company funds. The terms of each fund vary. We have described below the key terms of these funds.
Specialized Funds Since 1997, we have sponsored primary funds, secondary funds, direct investment funds, strategic opportunities funds, social and environmental impact funds and Small Business Investment Company funds. The terms of each fund vary. We have described below the key terms of these funds.
In addition, the compliance team is responsible for all regulatory matters relating to Hamilton Lane Securities, LLC, our SEC- and Financial Industry Regulatory Authority (“FINRA”)-registered broker-dealer affiliate through which we offer interests in our specialized funds. Risk Management Risk management oversight and direction across the firm is provided by the Risk Management Committee.
In addition, the compliance team is responsible for all regulatory matters relating to Hamilton Lane Securities LLC, our Securities and Exchange Commission (“SEC”)- and Financial Industry Regulatory Authority (“FINRA”)-registered broker-dealer affiliate through which we offer interests in our specialized funds. Risk Management Risk management oversight and direction across the firm is provided by various committees.
As of March 31, 2022, approximately 40% of our employees were women and 28% of senior leadership roles were held by women. We believe that our culture and commitment to fostering a truly diverse workforce will continue to play an important role in supporting our future growth.
As of March 31, 2023, approximately 42% of our employees were women and 32% of senior leadership roles were held by women. We believe that our culture and commitment to fostering a truly diverse workforce will continue to play an important role in supporting our future growth.
One evergreen fund is marketed to investors outside of the United States on a private placement basis, and in the United States, we offer a similar vehicle for U.S. investors, which is registered under the Securities Act and as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). Capital Commitments.
One evergreen fund is marketed to investors outside of the United States, and in the United States, we offer a similar vehicle for U.S. investors, which is registered under the Securities Act and as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”).
Working together with our investment teams, our attorneys negotiate directly with fund managers and deal sponsors and their counsel the terms of all limited partnership agreements, subscription documents, side letters, purchase agreements and other documents relating to primary, secondary and direct investments.
Working together with our investment teams, our attorneys, using outside law firms as needed, negotiate directly with fund managers and deal sponsors and their counsel the terms of all limited partnership agreements, subscription documents, side letters, purchase agreements and other documents relating to primary, secondary and direct investments.
Our definition of fee-earning AUM is not based on any definition that is set forth in the agreements governing the customized separate accounts or specialized funds that we manage. As of March 31, 2022, our fee-earning AUM was approximately $49 billion compared to $106 billion in AUM.
Our definition of fee-earning AUM is not based on any definition that is set forth in the agreements governing the customized separate accounts or specialized funds that we manage. As of March 31, 2023, our fee-earning AUM was approximately $57 billion compared to $112 billion in AUM.
We currently have approximately 530 employees, including 180 investment professionals, operating across 20 global offices servicing our clients throughout the world. We offer a variety of investment solutions to address our clients’ needs across a range of private markets, including private equity, private credit, real estate, infrastructure, natural resources, growth equity, venture capital and impact.
We currently have over 600 employees, including 204 investment professionals, operating across 22 global offices servicing our clients throughout the world. We offer a variety of investment solutions to address our clients’ needs across a range of private markets, including private equity, private credit, real estate, infrastructure, natural resources, growth equity, venture capital and impact.
Since our inception, we have experienced consistent, strong growth, which continues to be reflected in our more recent AUM and AUA growth. As of March 31, 2022, we had AUM of approximately $106 billion, reflecting a 19% compound annual growth rate (“CAGR”) from March 31, 2018, and our AUM increased in each fiscal year during this timeframe.
Since our inception, we have experienced consistent, strong growth, which continues to be reflected in our more recent AUM and AUA growth. As of March 31, 2023, we had AUM of approximately $112 billion, reflecting a 16% compound annual growth rate (“CAGR”) from March 31, 2019, and our AUM increased in each fiscal year during this timeframe.
In support of our DE&I strategy, we launched the Hamilton Lane Emerging Talent Internship program, designed to introduce women and people of color to Hamilton Lane and to the opportunities in the private markets.
In support of our DE&I strategy, we launched the Hamilton Lane Emerging Talent Internship program, designed to introduce women and ethnically underrepresented students to Hamilton Lane and to the opportunities in the private markets.
Item 1. Business Our Company We are a global private markets investment solutions provider with approximately $106 billion of assets under management (“AUM”), and approximately $795 billion of assets under advisement (“AUA”) as of March 31, 2022.
Item 1. Business Our Company We are a global private markets investment solutions provider with approximately $112 billion of assets under management (“AUM”), and approximately $745 billion of assets under advisement (“AUA”) as of March 31, 2023.
For the year ended March 31, 2022, our top 10 clients generated approximately 17% of management and advisory fee revenues, and our top 20 clients generated approximately 26% of management and advisory fee revenues with all of our top 20 clients having multiple allocations, products or services with us.
For the year ended March 31, 2023, our top 10 clients generated approximately 16% of management and advisory fee revenues, and our top 20 clients generated approximately 24% of management and advisory fee revenues with all of our top 20 clients having multiple allocations, products or services with us.
Finally, we completed the final implementation phase of a software program for financial management and human capital management, which provides a platform to deliver our human capital processes, allowing enhanced data analysis, better controls through trackable and auditable transactions, and employee and manager self service.
Finally, we have a software program for financial management and human capital management, which provides a platform to deliver our human capital processes, allowing enhanced data analysis, better controls through trackable and auditable transactions, and employee and manager self service.
Our intermediary clients, which also include registered investment advisers, enable us to provide our investment products to an expanded range of high-net-worth individuals and family offices. Historically, this segment of investors has had limited options for gaining exposure to the private markets.
Our intermediary clients, which also include registered investment advisers, enable us to provide our investment products to an expanded range of high-net-worth individuals and family offices. Historically, this segment of investors has had limited options for gaining exposure to the private markets. Hamilton Lane’s private wealth platform offers this segment access to private capital and its wealth creation potential.
Our client base primarily comprises institutional investors that range from those seeking to make an initial investment in alternative assets to some of the world’s largest and most sophisticated private markets investors.
Our client and investor base is broadly diversified by type, size and geography. Our client base primarily comprises institutional investors that range from those seeking to make an initial investment in alternative assets to some of the world’s largest and most sophisticated private markets investors.
Committing to Being an Ally As a firm, Hamilton Lane acknowledges the systemic racism that oppresses billions of people around the world, and we recognize that we share in the responsibility to listen to our communities, to understand the issues and to act.
Committing to Being an Ally As a firm, Hamilton Lane acknowledges the systemic racism that oppresses billions of people around the world, and we recognize that we share in the responsibility to listen to our communities, to understand the issues and to act. We are committed to offering attention, influence and resources to be part of the solution.
Assets Under Management and Advisement As of March 31, 2022, we had total AUA and AUM of approximately $901 billion, of which $106 billion represents AUM from our customized separate accounts and specialized funds, and $795 billion represents AUA managed on behalf of our advisory accounts.
Assets Under Management and Advisement As of March 31, 2023, we had total AUA and AUM of approximately $857 billion, of which $112 billion represents AUM from our customized separate accounts and specialized funds, and $745 billion represents AUA managed on behalf of our advisory accounts.
Our partnerships with organizations such as Girls Who Invest, Women Societies Alliance, Cristo Rey Philadelphia, Big Brothers Big Sisters and Philadelphia Financial Scholars, as well as initiatives such as the Hamilton Lane Women’s Exchange (“HLWE”), our annual Undergraduate Women’s Private Equity Summit, our Emerging Talent Program and our targeted campus recruiting program, are a testament to this belief.
Our partnerships with organizations such as Girls Who Invest, Women Societies Alliance, Cristo Rey Philadelphia, Big Brothers Big Sisters and Philadelphia Financial Scholars, as well as initiatives aimed at expanding our recruiting efforts at diverse colleges and universities, the Hamilton Lane Women’s Exchange (“HL WE”), our annual Undergraduate Women’s Private Equity Summit and our Emerging Talent Program, are a testament to this belief.
Our Diversity, Equity & Inclusion Speaker Series, which launched in 2017 as a means to provide outside perspectives on DE&I issues, shifted its focus to activism and social justice, hosting speakers on topics such as corporate responsibility, general awareness of racism and implementing effective approaches to racial equality. • Our DE&I Council also launched a new series called Social Justice Chats (“#SJChats”), a series of employee-facilitated small group conversations about racial and social inequities, barriers and constructs.
Our Diversity, Equity & Inclusion Speaker Series, which launched in 2017 as a means to provide outside perspectives on DE&I issues, shifted its focus to activism and social justice, hosting speakers on topics such as corporate responsibility, general awareness of racism and implementing effective approaches to racial equality. • Our DE&I Council also hosts outside speakers offering perspectives and conversations around allyship, racial and social inequities, barriers and constructs.
Economic Rights Holders of Class A common stock are entitled to full economic rights, including the right to receive dividends when and if declared by our board of directors, subject to any statutory or contractual restrictions on the payment of dividends and to any restrictions on the payment of dividends imposed by the terms of any outstanding preferred stock.
Economic Rights Holders of Class A common stock are entitled to full economic rights, including the right to receive dividends when and if declared by our board of directors, subject to any statutory or contractual restrictions on the payment of dividends and to any restrictions on the payment of dividends imposed by the terms of any outstanding preferred stock. 7 Holders of Class B common stock are entitled to receive only the par value of the Class B common stock upon exchange of the corresponding Class B unit pursuant to the exchange agreement.
However, we believe AUM is a useful metric for assessing the relative size and scope of our asset management business. 12 Our AUM has grown from approximately $54 billion as of March 31, 2018 to approximately $106 billion as of March 31, 2022, representing a CAGR of approximately 19%. The following chart summarizes this growth.
However, we believe AUM is a useful metric for assessing the relative size and scope of our asset management business. Our AUM has grown from approximately $61 billion as of March 31, 2019 to approximately $112 billion as of March 31, 2023, representing a CAGR of approximately 16%. The following chart summarizes this growth.
We believe that the “Hamilton Lane” trade name, logo and website are material to our operations. Legal and Compliance Our general counsel reports to our chief executive officer. Our attorneys are embedded in our legal corporate, customized separate accounts, commingled funds and investment teams.
We believe that the “Hamilton Lane” trade name, logos and website are material to our operations. Legal and Compliance Our general counsel reports to our chief executive officer. Our attorneys are embedded in our corporate legal, relationship management and investment teams.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeA number of factors serve to increase our competitive risks: • some of our competitors have more relevant experience, greater financial and other resources and more personnel than we do; • some of our specialized funds and investments that we recommend to our advisory clients may not perform as well as competitors’ funds or other available investment products; • there are relatively few barriers to entry impeding new asset management firms, including a relatively low cost of entering these lines of business, and the successful efforts of new entrants into our various lines of business is expected to continue to result in increased competition; • if allocation of assets to alternative investment strategies increases, there will be increased competition for alternative investments and access to fund general partners and managers; • some of our competitors may have a lower cost of capital and access to funding sources that are not available to us, which may create competitive disadvantages for us with respect to our specialized funds, particularly funds that directly use leverage or rely on debt financing of their portfolio companies to generate superior investment returns; 52 • some of our competitors may be more successful than us in the development of new products to address investor demand for new or different investment strategies and/or regulatory changes, including with respect to products with mandates that incorporate ESG considerations, or products that are targeted toward retail; • developments in financial technology (or fintech), such as a distributed ledger technology (or blockchain), have the potential to disrupt the financial industry and change the way financial institutions, as well as investment managers, do business, and could exacerbate these competitive pressures; • some of our competitors may be more successful than us in the development and implementation of new technology to address investor demand for product and strategy innovation; • some of our competitors may be subject to less regulation and accordingly may have more flexibility to undertake and execute certain strategies or investments than us and/or bear less compliance expense than us; • some of our competitors may have more flexibility than us in raising certain types of investment funds under the investment management contracts they have negotiated with their clients; • some of our competitors may have more expertise or be regarded by investors as having more expertise in a specific strategy or geographic region; • certain investors may prefer to invest with private partnerships; and • other industry participants will from time to time seek to recruit our investment professionals and other employees away from us.
Biggest changeA number of factors serve to increase our competitive risks: • some of our competitors have more relevant experience, greater financial and other resources and more personnel than we do; • some of our specialized funds and customized separate accounts or the investments that we recommend to our clients may not perform as well as competitors’ funds or other available investment products; • there are relatively few barriers to entry impeding new asset management firms, including a relatively low cost of entering these lines of business, and the successful efforts of new entrants into our various lines of business is expected to continue to result in increased competition; • if allocation of assets to alternative investment strategies increases, there will be increased competition for alternative investments and access to fund general partners and managers; • some of our competitors may have a lower cost of capital and access to funding sources that are not available to us, which may create competitive disadvantages for us with respect to our specialized funds, particularly funds that directly use leverage or rely on debt financing of their portfolio companies to generate superior investment returns; • some of our competitors may be more successful than us in the development of new products to address investor demand for new or different investment strategies and/or regulatory changes, including with respect to products with mandates that incorporate ESG considerations, or products that are targeted toward retail; • developments in financial technology (or fintech), such as a distributed ledger technology (or blockchain), have the potential to disrupt the financial industry and change the way financial institutions, as well as investment managers, do business, and could exacerbate these competitive pressures; • some of our competitors may be more successful than us in the development and implementation of new technology to address investor demand for product and strategy innovation; • some of our competitors may have instituted, or may institute, low cost, high speed financial applications and services based on artificial intelligence, and new competitors may enter the investment management space using new investment platforms based on artificial intelligence; • some of our competitors may be subject to less regulation and accordingly may have more flexibility to undertake and execute certain strategies or investments than us and/or bear less compliance expense than us; • some of our competitors may have more flexibility than us in raising certain types of investment funds under the investment management contracts they have negotiated with their clients; • some of our competitors may have more expertise or be regarded by investors as having more expertise in a specific strategy or geographic region; • certain investors may prefer to invest with private partnerships; and • other industry participants will from time to time seek to recruit our investment professionals and other employees away from us. 58 This competitive pressure could adversely affect our ability to make successful investments and restrict our ability to raise future funds, either of which would materially and adversely impact our business, financial condition and results of operations.
Certain of the specialized funds we manage, the funds in which we invest and portfolio companies within our funds and customized separate accounts currently rely on leverage.
Certain of the specialized funds and customized separate accounts we manage, the funds in which we invest and portfolio companies within our funds and customized separate accounts currently rely on leverage.
If our specialized funds or the companies in which our specialized funds or customized separate accounts invest raise capital in the structured credit, leveraged loan and high yield bond markets, the results of their operations may suffer if such markets experience dislocations, contractions or volatility.
If our specialized funds, customized separate accounts or the companies in which our specialized funds or customized separate accounts invest raise capital in the structured credit, leveraged loan and high yield bond markets, the results of their operations may suffer if such markets experience dislocations, contractions or volatility.
In addition, our effective tax rate and tax liability are based on the application of current income tax laws, regulations and treaties. These laws, regulations and treaties are complex, and the manner which they apply to us and our funds is sometimes open to interpretation.
In addition, our effective tax rate and tax liability are based on the application of current income tax laws, regulations and treaties. These laws, regulations and treaties are complex, and the manner in which they apply to us and our funds is sometimes open to interpretation.
Such non-U.S. investments involve certain factors not typically associated with U.S. investments, including risks related to (i) currency exchange matters, such as exchange rate fluctuations between the U.S. dollar and the foreign currency in which the investments are denominated or commitments to the specialized funds or portfolio funds are denominated, and costs associated with conversion of investment proceeds and income from one currency to another, (ii) differences between the U.S. and foreign capital markets, including the absence of uniform accounting, auditing, financial reporting and legal standards, practices and disclosure requirements and less government supervision and regulation, (iii) certain economic, social and political risks, including exchange control regulations and restrictions on foreign investments and repatriation of capital, the risks of political, economic or social instability, and (iv) the possible imposition of foreign taxes with respect to such investments or confiscatory taxation.
Such non-U.S. investments involve certain factors not typically associated with U.S. investments, including risks related to (i) currency exchange matters, such as exchange rate fluctuations between the U.S. dollar and the foreign currency in which the investments are denominated or commitments to the specialized funds or portfolio funds are denominated, and costs associated with conversion of investment proceeds and income from one currency to another, (ii) differences between the U.S. and foreign capital markets, including the absence of uniform accounting, auditing, financial reporting and legal standards, practices and disclosure requirements and less government supervision and regulation, (iii) certain economic, social and political risks, including exchange control regulations and restrictions on foreign investments and repatriation of capital, the risks of war, political, economic or social instability, and (iv) the possible imposition of foreign taxes with respect to such investments or confiscatory taxation.
Our international operations carry special financial and business risks, which could include the following: • greater difficulties in managing and staffing foreign operations; • fluctuations in foreign currency exchange rates that could adversely affect our results; • additional costs of complying with, and exposure to liability under, foreign regulatory regimes; • unexpected changes in trading policies, regulatory requirements, tariffs and other barriers; 50 • longer transaction cycles; • higher operating costs; • local labor conditions and regulations; • adverse consequences or restrictions on the repatriation of earnings; • potentially adverse tax consequences, such as trapped foreign losses; • less stable political and economic environments; • potentially heightened risk of theft or compromise of data and intellectual property, in particular in those jurisdictions that do not have levels comparable to the United States of protection of proprietary information and assets such as intellectual property, trademarks, trade secrets, know-how and client information and records; • potentially compromised protections or rights to technology, data and intellectual property due to government regulation; • terrorism, political hostilities, war, public health crises and other civil disturbances or other catastrophic events that reduce business activity; • cultural and language barriers and the need to adopt different business practices in different geographic areas; and • difficulty collecting fees and, if necessary, enforcing judgments.
Our international operations carry special financial and business risks, which could include the following: • greater difficulties in managing and staffing foreign operations; • fluctuations in foreign currency exchange rates that could adversely affect our results; • additional costs of complying with, and exposure to liability under, foreign regulatory regimes; • unexpected changes in trading policies, regulatory requirements, tariffs and other barriers; • longer transaction cycles; • higher operating costs; • local labor conditions and regulations; • adverse consequences or restrictions on the repatriation of earnings; • potentially adverse tax consequences, such as trapped foreign losses; • less stable political and economic environments; 56 • potentially heightened risk of theft or compromise of data and intellectual property, in particular in those jurisdictions that do not have levels comparable to the United States of protection of proprietary information and assets such as intellectual property, trademarks, trade secrets, know-how and client information and records; • potentially compromised protections or rights to technology, data and intellectual property due to government regulation; • terrorism, political hostilities, war, public health crises and other civil disturbances or other catastrophic events that reduce business activity; • cultural and language barriers and the need to adopt different business practices in different geographic areas; and • difficulty collecting fees and, if necessary, enforcing judgments.
The historical performance of our funds should not be considered indicative of the future performance of these funds or of any future funds we may raise, in part because: • market conditions and investment opportunities during previous periods may have been significantly more favorable for generating positive performance than those we may experience in the future; • the performance of our funds is generally calculated on the basis of NAV of the funds’ investments, including unrealized gains, which may never be realized; • our historical returns derive largely from the performance of our earlier funds, whereas future fund returns will depend increasingly on the performance of our newer funds or funds not yet formed; • our newly established funds may generate lower returns during the period that they initially deploy their capital; • competition continues to increase for investment opportunities, which may reduce our returns in the future; • the performance of particular funds also will be affected by risks of the industries and businesses in which they invest; and • we may create new funds that reflect a different asset mix and new investment strategies, as well as a varied geographic and industry exposure, compared to our historical funds, and any such new funds could have different returns from our previous funds. 32 The success of our business depends on the identification and availability of suitable investment opportunities for our clients.
The historical performance of our funds should not be considered indicative of the future performance of these funds or of any future funds we may raise, in part because: • market conditions and investment opportunities during previous periods may have been significantly more favorable for generating positive performance than those we may experience in the future; • the performance of our funds is generally calculated on the basis of NAV of the funds’ investments, including unrealized gains, which may never be realized; • our historical returns derive largely from the performance of our earlier funds, whereas future fund returns will depend increasingly on the performance of our newer funds or funds not yet formed; • our newly established funds may generate lower returns during the period that they initially deploy their capital; • competition continues to increase for investment opportunities, which may reduce our returns in the future; • the performance of particular funds also will be affected by risks of the industries and businesses in which they invest; and • we may create new funds that reflect a different asset mix and new investment strategies, as well as a varied geographic and industry exposure, compared to our historical funds, and any such new funds could have different returns from our previous funds. 33 The success of our business depends on the identification and availability of suitable investment opportunities for our clients.
These companies may be in an early stage of development, may not have a proven operating history, may be operating at a loss or have significant variations in operating results, may be engaged in a rapidly changing business with products subject to a substantial risk of obsolescence, may be subject to extensive regulatory oversight, may require substantial additional capital to support their operations, to finance expansion or to maintain their competitive position, may have a high level of leverage, or may otherwise have a weak financial condition.
These companies may be in an early stage of development, may not have a proven operating history, may be operating at a loss or have significant variations in operating results, may be engaged in a rapidly changing business with products subject to a 44 substantial risk of obsolescence, may be subject to extensive regulatory oversight, may require substantial additional capital to support their operations, to finance expansion or to maintain their competitive position, may have a high level of leverage, or may otherwise have a weak financial condition.
In addition, our reputation may be harmed if certain stakeholders, such as our clients, believe that we are not adequately or appropriately responding to climate change, including through the way in which we operate our business, the composition of our specialized funds’ and customized separate accounts’ existing portfolios, the new investments made by them, or the decisions we make to continue to conduct or change our activities in response to climate change considerations.
In addition, our reputation may be harmed if certain stakeholders, such as our clients or stockholders, believe that we are not adequately or appropriately responding to climate change, including through the way in which we operate our business, the composition of our specialized funds’ and customized separate accounts’ existing portfolios, the new investments made by them, or the decisions we make to continue to conduct or change our activities in response to climate change considerations.
Any payment of distributions, loans or advances to and from our subsidiaries could be subject to restrictions on or taxation of dividends or repatriation of earnings under applicable local law, monetary transfer restrictions, foreign currency exchange regulations in the jurisdictions in which our subsidiaries operate or other restrictions imposed by current or future agreements, including debt instruments, to which 51 our non-U.S. subsidiaries may be a party.
Any payment of distributions, loans or advances to and from our subsidiaries could be subject to restrictions on or taxation of dividends or repatriation of earnings under applicable local law, monetary transfer restrictions, foreign currency exchange regulations in the jurisdictions in which our subsidiaries operate or other restrictions imposed by current or future agreements, including debt instruments, to which our non-U.S. subsidiaries may be a party.
We are also required to comply with foreign data collection and privacy laws in various non-U.S. jurisdictions in which we have offices or conduct business, including the GDPR, which applies to all organizations processing or holding personal data of EU data subjects (regardless of the organization’s location) as well as to organizations outside the EU that offer goods or services in the EU, or that monitor the behavior of EU data subjects.
We are also required to comply with foreign data collection and privacy laws in various non-U.S. jurisdictions in which we have offices or conduct business, including the GDPR, which applies to all organizations processing or holding personal data of EU and U.K. data subjects (regardless of the organization’s location) as well as to organizations outside the EU and U.K. that offer goods or services in the EU or U.K., or that monitor the behavior of EU or U.K. data subjects.
Further, we often engage third-party valuation agents to assist us with the valuations. It is possible that a material fact related to the target of the valuation might be inadvertently omitted from our communications with them, resulting in an inaccurate valuation. 40 Further, the SEC has instituted enforcement actions against advisors for misleading investors about valuation.
Further, we often engage third-party valuation agents to assist us with the valuations. It is possible that a material fact related to the target of the valuation might be inadvertently omitted from our communications with them, resulting in an inaccurate valuation. Further, the SEC has instituted enforcement actions against advisors for misleading investors about valuation.
In addition, during periods of adverse economic or geopolitical conditions, our specialized funds may have difficulty accessing financial markets, which could make it more difficult or impossible for them to obtain funding for additional investments. A general market downturn, or a specific market dislocation, may result in lower investment returns for our 53 funds, which would adversely affect our revenues.
In addition, during periods of adverse economic or geopolitical conditions, our specialized funds may have difficulty accessing financial markets, which could make it more difficult or impossible for them to obtain funding for additional investments. A general market downturn, or a specific market dislocation, may result in lower investment returns for our funds, which would adversely affect our revenues.
Attacks could range from those common to businesses generally to those that are more advanced and persistent, which may target us because members of our senior management team may have public profiles or because, as an alternative investment management firm, we hold a significant amount of confidential and sensitive information about our clients and potential investments.
Attacks range from those common to businesses generally to those that are more advanced and persistent, which may target us because members of our senior management team may have public profiles or because, as an alternative investment management firm, we hold a significant amount of confidential and sensitive information about our clients and potential investments.
Any changes or potential changes in the regulatory framework applicable to our business may impose additional expenses or capital requirements on us, limit our fundraising activities, have an adverse effect on our results of operations, financial condition, reputation or prospects, impair employee retention or 56 recruitment and require substantial attention by senior management.
Any changes or potential changes in the regulatory framework applicable to our business may impose additional expenses or capital requirements on us, limit our fundraising activities, have an adverse effect on our results of operations, financial condition, reputation or prospects, impair employee retention or recruitment and require substantial attention by senior management.
Even if an investigation does not result in sanctions, or results in a sanction imposed against us or our personnel that is small in monetary amount, the adverse publicity relating to the investigation or the imposition of sanctions against us by regulators could harm our reputation and cause us to lose existing clients or fail to gain new clients.
Even if an investigation does not result in sanctions, or results in a sanction imposed against us or our personnel that is small in monetary amount, the adverse publicity relating to the investigation or the imposition of sanctions 61 against us by regulators could harm our reputation and cause us to lose existing clients or fail to gain new clients.
In order to retain and attract qualified investment professionals, we expect to experience a general rise in compensation and benefits expense commensurate with expected growth in headcount and with the need to maintain competitive compensation levels, which could cause our total employee compensation and benefits expense as a percentage of our total revenue to increase and adversely affect our profitability.
In order to retain and attract qualified investment professionals, we expect to continue to experience a general rise in compensation and benefits expense commensurate with expected growth in headcount and with the need to maintain competitive compensation levels, which could cause our total employee compensation and benefits expense as a percentage of our total revenue to increase and adversely affect our profitability.
With respect to ESG, the nature and scope of our due diligence will vary based on the investment, but may include a review of, among other things: energy management, air and water pollution, land contamination, diversity, human rights, employee health and 44 safety, accounting standards and bribery and corruption.
With respect to ESG, the nature and scope of our due diligence will vary based on the investment, but may include a review of, among other things: energy management, air and water pollution, land contamination, diversity, human rights, employee health and safety, accounting standards and bribery and corruption.
Any adverse impact caused by the use of leverage by portfolio companies in which we directly or indirectly invest could in turn adversely affect the returns of our specialized funds, customized separate accounts and advisory accounts. 37 Defaults by clients and third-party investors in certain of our specialized funds and customized separate accounts could adversely affect that fund’s operations and performance.
Any adverse impact caused by the use of leverage by portfolio companies in which we directly or indirectly invest could in turn adversely affect the returns of our specialized funds, customized separate accounts and advisory accounts. Defaults by clients and third-party investors in certain of our specialized funds and customized separate accounts could adversely affect that fund’s operations and performance.
If our employees, advisors or third-party service providers were to engage in fraudulent activity, violate 38 regulatory standards or improperly use or disclose sensitive or confidential information, we could be subject to legal or regulatory action and suffer serious harm to our reputation, financial position and current and future business relationships.
If our employees, advisors or third-party service providers were to engage in fraudulent activity, violate regulatory standards or improperly use or disclose sensitive or confidential information, we could be subject to legal or regulatory action and suffer serious harm to our reputation, financial position and current and future business relationships.
Furthermore, if the portfolio companies default on their indebtedness, or otherwise seek or are forced to restructure their obligations or declare bankruptcy, we could lose some or all of our investment and suffer reputational harm. 41 We may pursue investment opportunities that involve business, regulatory, legal or other complexities.
Furthermore, if the portfolio companies default on their indebtedness, or otherwise seek or are forced to restructure their obligations or declare bankruptcy, we could lose some or all of our investment and suffer reputational harm. We may pursue investment opportunities that involve business, regulatory, legal or other complexities.
In our investment management business, we make investment decisions on behalf of our clients, or make investment recommendations to our clients, that could result in substantial losses. Any such losses also may subject us to the risk of legal and regulatory liabilities or actions alleging negligent misconduct, breach of fiduciary duty or breach of contract.
In our investment management business, we make investment decisions on behalf of our clients, or make investment recommendations to our clients, that could result in substantial losses. Any such losses also may subject us to the risk of legal and regulatory liabilities or actions alleging negligent misconduct, fraud, breach of fiduciary duty or breach of contract.
However, if anything were to happen that would cause Hamilton Lane Incorporated to be deemed to be an investment company under the Investment Company Act, requirements imposed by the Investment Company Act, including limitations on our capital structure, ability to transact business with affiliates (including HLA) and ability to compensate key employees, could make it impractical for us to continue our business as currently conducted, impair the agreements and arrangements between and among HLA, us or our senior management team, or any combination thereof and materially and adversely affect our business, financial condition and results of operations. 66 A change of control of our Company, including the occurrence of a “Sunset,” could result in an assignment of our investment advisory agreements.
However, if anything were to happen that would cause Hamilton Lane Incorporated to be deemed to be an investment company under the Investment Company Act, requirements imposed by the Investment Company Act, including limitations on our capital structure, ability to transact business with affiliates (including HLA) and ability to compensate key employees, could make it impractical for us to continue our business as currently conducted, impair the agreements and arrangements between and among HLA, us or our senior management team, or any combination thereof and materially and adversely affect our business, financial condition and results of operations. 70 A change of control of our Company, including the occurrence of a “Sunset,” could result in an assignment of our investment advisory agreements.
Also, during periods of financial distress or 42 following an insolvency, our ability to influence a company’s affairs and to take actions to protect investments by our specialized funds, customized separate accounts or advisory accounts may be substantially less than that of those holding senior interests.
Also, during periods of financial distress or following an insolvency, our ability to influence a company’s affairs and to take actions to protect investments by our specialized funds, customized separate accounts or advisory accounts may be substantially less than that of those holding senior interests.
Nevertheless, when conducting due diligence and making an assessment regarding an investment, we rely on the resources available to us, including information provided by the target of the investment and, in some circumstances, third-party investigations, and such an investigation will not necessarily result in the investment ultimately being successful.
Nevertheless, when conducting due diligence and making an assessment regarding an investment, we rely on the information available to us, including information provided by the target of the investment and, in some circumstances, third-party investigations, and such an investigation will not necessarily result in the investment ultimately being successful.
It is impossible to determine the extent of the impact of any new laws, regulations, initiatives or regulatory guidance that may be proposed or may become law on our business or the markets in which we operate, but they could make it more difficult for us to operate our business.
It is impossible to determine the extent of the impact of any new laws, regulations, initiatives or regulatory 60 guidance that may be proposed or may become law on our business or the markets in which we operate, but they could make it more difficult for us to operate our business.
In the ordinary course of our business, we collect and store a range of data, including our proprietary business information and intellectual property, and personally identifiable information of our employees, our clients and other third parties, in our cloud applications and on our networks, as well as our third-party service 45 providers’ systems.
In the ordinary course of our business, we collect and store a range of data, including our proprietary business information and intellectual property, and personally identifiable information of our employees, our clients and other third parties, in our cloud applications and on our networks, as well as our third-party service providers’ systems.
In addition, a lack of harmonization globally in relation to ESG legal and regulatory reform leads to a risk of fragmentation across global jurisdictions. This may create conflicts across our global business which could risk inhibiting our future implementation of, and compliance with, rapidly developing ESG standards and requirements.
A lack of harmonization globally in relation to ESG legal and regulatory reform leads to a risk of fragmentation across global jurisdictions. This may create conflicts across our global business, which could risk inhibiting our future implementation of, and compliance with, rapidly developing ESG standards and requirements.
If investors in our specialized funds and certain customized separate accounts default on their obligations to fund commitments, there may be adverse consequences on the investment process, and we could incur losses and be unable to meet underlying capital calls.
If investors in our specialized funds and certain customized separate accounts default on their obligations to fund commitments, there may be adverse consequences on the investment process, and we 40 could incur losses and be unable to meet underlying capital calls.
Our specialized funds and customized separate accounts may invest through direct investment arrangements or acquire minority equity interests and may also dispose of a portion of their equity investments in portfolio companies over time in a manner that results in their retaining a minority investment.
Our specialized funds and customized separate accounts may invest through direct investment arrangements or acquire minority equity interests and 45 may also dispose of a portion of their equity investments in portfolio companies over time in a manner that results in their retaining a minority investment.
As part of our Reorganization, we entered into a tax receivable agreement for the benefit of the direct and indirect members of HLA other than us, pursuant to which we will pay them 85% of the amount of the tax savings, if any, that we realize (or, under certain circumstances, are deemed to realize) as a result of increases 61 in tax basis (and certain other tax benefits) resulting from our acquisition of membership units or as a result of certain items of loss being specially allocated to us for tax purposes in connection with dispositions by HLA of certain investment assets.
As part of our Reorganization, we entered into a tax receivable agreement for the benefit of the direct and indirect members of HLA other than us, pursuant to which we will pay them 85% of the amount of the tax savings, if any, that we realize (or, under certain circumstances, are deemed to realize) as a result of increases 65 in tax basis (and certain other tax benefits) resulting from our acquisition of membership units or as a result of certain items of loss being specially allocated to us for tax purposes in connection with dispositions by HLA of certain investment assets.
If, as a consequence of these various limitations and restrictions, we are unable to generate sufficient distributions from our business, we may not be able to make, or may be required to reduce or eliminate, the payment of dividends on our Class A common stock. 64 Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and may negatively affect the market price of our Class A common stock.
If, as a consequence of these various limitations and restrictions, we are unable to generate sufficient distributions from our business, we may not be able to make, or may be required to reduce or eliminate, the payment of dividends on our Class A common stock. 68 Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and may negatively affect the market price of our Class A common stock.
Our 57 failure to comply with applicable laws, regulations or regulatory processes could result in fines, suspensions of personnel or other sanctions, including revocation of our registration as an investment adviser or the registration of our broker-dealer subsidiary.
Our failure to comply with applicable laws, regulations or regulatory processes could result in fines, suspensions of personnel or other sanctions, including revocation of our registration as an investment adviser or the registration of our broker-dealer subsidiary.
The EU regulation on the establishment of a framework to facilitate sustainable investment (“Taxonomy Regulation”) supplements SFDR’s disclosure requirements for certain entities and sets out a framework for classifying economic activities as “environmentally sustainable”.
The EU regulation on the establishment of a framework to facilitate sustainable investment (“Taxonomy Regulation”) supplements SFDR’s disclosure requirements for 53 certain entities and sets out a framework for classifying economic activities as “environmentally sustainable”.
Our business and the performance of investments made by our specialized funds, customized separate accounts and advisory accounts can be materially affected by difficult or volatile financial market and geopolitical conditions and events in the United States or throughout the world that are outside our control, including rising interest rates, inflation, the availability of credit, changes in laws, trade barriers, public health crises, natural disasters, civil unrest, trade conflicts, war or threat of war, terrorism or political uncertainty.
Our business and the performance of investments made by our specialized funds, customized separate accounts and advisory accounts can be materially affected by difficult or volatile financial market and geopolitical conditions and events in the United States or throughout the world that are outside our control, including rising interest rates, inflation, economic recession, the availability of credit, changes in laws, trade barriers, public health crises, natural disasters, civil unrest, trade conflicts, war or threat of war, terrorism or political uncertainty.
ESG factors are not universally agreed upon or accepted by investors, and our consideration of ESG factors or construction of specific ESG or impact funds could attract opposition from certain segments of our existing and potential client base.
Because ESG factors are not universally agreed upon or accepted by investors, our consideration of ESG factors or construction of specific ESG or impact funds could attract opposition from certain segments of our existing and potential client base.
Any failure by us to comply with either existing or new laws or regulations could have a material adverse effect on our business, financial condition and results of operations. 60 Risks Related to Our Organizational Structure We are a “controlled company” within the meaning of the Nasdaq listing standards and, as a result, qualify for, and intend to continue to rely on, exemptions from certain corporate governance requirements.
Any failure by us to comply with either existing or new laws or regulations could have a material adverse effect on our business, financial condition and results of operations. 64 Risks Related to Our Organizational Structure We are a “controlled company” within the meaning of the Nasdaq listing standards and, as a result, qualify for, and intend to continue to rely on, exemptions from certain corporate governance requirements.
Failure to maintain compliance with applicable laws and regulations could 59 result in regulatory intervention, adversely affect our business or ability to provide services to our clients and harm our reputation.
Failure to maintain compliance with applicable laws and regulations could result in regulatory intervention, adversely affect our business or ability to provide services to our clients and harm our reputation.
In addition, the governing agreements of our specialized funds typically require the suspension of the commitment period if, depending on the fund, between two and ten designated members of our senior management team cease to devote sufficient professional time to or cease to be employed by HLA, often called a “key person event,” or in connection with certain other events.
In addition, the governing agreements of our specialized funds typically require the suspension of the investment period if, depending on the fund, between two and ten designated members of our senior management team cease to devote sufficient professional time to or cease to be employed by HLA, often called a “key person event,” or in connection with certain other events.
As a result, achieving steady growth in net income and cash flow on a quarterly basis may be difficult, which could in turn lead to large adverse movements or general increased volatility in the price of our Class A common stock. 39 The exercise of redemption or repurchase rights by investors in our evergreen funds may adversely affect our revenues.
As a result, achieving steady growth in net income and cash flow on a quarterly basis may be difficult, which could in turn lead to large adverse movements or general increased volatility in the price of our Class A common stock. 42 The exercise of redemption or repurchase rights by investors in our evergreen funds may adversely affect our revenues.
Instances of bribery, fraud, accounting irregularities and other improper, illegal or corrupt practices can be difficult to detect and may be more widespread in certain jurisdictions.
Instances of bribery, fraud, 47 accounting irregularities and other improper, illegal or corrupt practices can be difficult to detect and may be more widespread in certain jurisdictions.
We face operational risk from errors made in the execution, confirmation or settlement of transactions, as well as errors in recording, evaluating and accounting for them.
In addition, we face operational risk from errors made in the execution, confirmation or settlement of transactions, as well as errors in recording, evaluating and accounting for them.
If that counterparty is unable to perform its obligations or performs below our standards, our specialized funds, customized separate accounts and other investments may be 43 adversely affected. In addition, some of our methods for managing the risks related to our clients’ investments are based upon our analysis of historical private markets behavior.
If that counterparty is unable to perform its obligations or performs below our standards, we, our specialized funds, customized separate accounts and other investments may be adversely affected. In addition, some of our methods for managing the risks related to our clients’ investments are based upon our analysis of historical private markets behavior.
Despite our efforts to obtain, maintain, protect and enforce our trademarks, service marks, trade names and other intellectual property rights in the United States and other jurisdictions, there can be no assurance that these 47 protections will be available in all cases, and our trademarks, service marks, trade names or other intellectual property rights could be challenged, invalidated, declared generic, circumvented, infringed or otherwise violated.
Despite our efforts to obtain, maintain, protect and enforce our trademarks, service marks, trade names and other 51 intellectual property rights in the United States and other jurisdictions, there can be no assurance that these protections will be available in all cases, and our trademarks, service marks, trade names or other intellectual property rights could be challenged, invalidated, declared generic, circumvented, infringed or otherwise violated.
Further, significant physical effects of climate change including extreme weather events such as hurricanes or floods, can also have an adverse impact on certain portfolio companies and investments, especially those that rely on physical factories, plants or stores located in the affected areas, or that focus on tourism or recreational travel.
Further, significant chronic or acute physical effects of climate change, including extreme weather events such as hurricanes or floods, can also have an adverse impact on certain portfolio companies and investments, especially those that rely on physical factories, plants or stores located in the affected areas, or that focus on tourism or recreational travel.
For example, members of our senior management team have different tax positions from Class A common stockholders, which could influence their decisions regarding whether and when to dispose of assets, whether and when to incur new or refinance existing indebtedness, and whether and when we should terminate the tax receivable agreement and accelerate the obligations thereunder.
For example, members of our senior management team have different tax positions from Class A common stockholders and with us, which could influence their decisions regarding whether and when to dispose of assets, whether and when to incur new or refinance existing indebtedness, and whether and when we should terminate the tax receivable agreement and accelerate the obligations thereunder.
Our compliance obligations include those relating to U.S. state laws and regulations, including, without limitation the CCPA, which provides for enhanced privacy protections for California residents, a private right of action for data breaches and statutory fines and damages for data breaches or other CCPA violations, as well as a requirement of “reasonable” cybersecurity.
Our compliance obligations include those relating to U.S. state laws and regulations, including, without limitation the CPRA, which provides for enhanced privacy protections for California residents, a private right of action for data breaches and statutory fines and damages for data breaches or other CPRA violations, as well as a requirement of “reasonable” cybersecurity.
Shares of our Class A common stock and Class B common stock entitle the respective holders to identical non-economic rights, except that each share of our Class A common stock entitles its holder to one vote on all matters to be voted on by stockholders generally, while each share of our Class B common stock entitles its holder to ten votes until a Sunset becomes 63 effective.
Shares of our Class A common stock and Class B common stock entitle the respective holders to identical non-economic rights, except that each share of our Class A common stock entitles its holder to one vote on all matters to be voted on by stockholders generally, while each share of our Class B common stock entitles its holder to ten votes until a Sunset becomes 67 effective.
In many of these countries and jurisdictions, which include the U.K., the EU, the EEA, certain of the individual member states of each of the EU and EEA, Australia, Canada, Hong Kong, Israel, Singapore, South Korea, Switzerland and Japan, we and our operations, and in some cases our personnel, are subject to regulatory oversight and requirements.
In many of these countries and jurisdictions, which include the U.K., the EU, the EEA, certain of the individual member states of each of the EU and EEA, Australia, Canada, China, Hong Kong, Israel, Mexico, Singapore, South Korea, Switzerland and Japan, we and our operations, and in some cases our personnel, are subject to regulatory oversight and requirements.
The fair value of investments is determined using a number of methodologies described in the particular funds’ valuation policies. These policies are based on a number of factors, including the nature of the investment, the expected cash flows from the investment, the length of time the investment has been held, restrictions on transfer and other generally accepted valuation methodologies.
The fair value of investments is determined using a number of methodologies described in the particular funds’ valuation policies. These policies are based on a number of factors, including the nature of the investment, the expected cash flows from the investment, the length of time the investment has been held and other generally accepted valuation methodologies.
While we have developed and implemented policies and procedures designed to ensure strict compliance by us and our personnel with the FCPA and other anti-corruption, sanctions and export control laws in jurisdictions in which we operate, such policies and procedures may not be effective in all instances to prevent violations.
While we have developed and implemented policies and procedures designed to ensure strict compliance by us and our personnel with the FCPA and other anti-corruption, sanctions and export control laws in jurisdictions in which we operate, such policies and procedures may not be effective to prevent violations.
The approximately 16.7 million shares of Class A common stock issuable upon exchange of the Class B units and Class C units that are held by Class B Holders and Class C Holders will be eligible for resale from time to time, subject to certain exchange timing and volume and Securities Act restrictions.
The approximately 16.1 million shares of Class A common stock issuable upon exchange of the Class B units and Class C units that are held by Class B Holders and Class C Holders will be eligible for resale from time to time, subject to certain exchange timing and volume and Securities Act restrictions.
As a result, in certain circumstances, payments could be made under the tax receivable agreement in excess of our ultimate cash tax savings. 62 In certain circumstances, HLA is required to make distributions to us and the direct and indirect owners of HLA, and the distributions that HLA will be required to make may be substantial.
As a result, in certain circumstances, payments could be made under the tax receivable agreement in excess of our ultimate cash tax savings. 66 In certain circumstances, HLA is required to make distributions to us and the direct and indirect owners of HLA, and the distributions that HLA will be required to make may be substantial.
Compliance with the GDPR requires us to analyze and evaluate how we handle data in the ordinary course of business, from processes to technology. EU data subjects need to be given full disclosure about how their personal data will be used and stored.
Compliance with the GDPR requires us to analyze and evaluate how we handle data in the ordinary course of business, from processes to technology. EU and U.K. data subjects need to be given full disclosure about how their personal data will be used and stored.
Although we believe this provision benefits us by providing 65 increased consistency in the application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against our directors and officers.
Although we believe this provision benefits us by providing 69 increased consistency in the application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against our directors and officers.
The Loan Agreements contain, and any future debt instruments may contain, financial and other covenants that impose requirements on us and limit our and our subsidiaries’ ability to engage in certain transactions or activities, such as: • incur additional debt; • provide guarantees in respect of obligations of other persons; • make loans, advances and investments; • make certain payments in respect of equity interests, including, among others, the payment of dividends and other distributions, redemptions and similar payments, payments in respect of warrants, options and other rights, and payments in respect of subordinated indebtedness; • enter into transactions with investment funds and affiliates; • create or incur liens; • enter into negative pledges; • sell all or any part of the business, assets or property, or otherwise dispose of assets; 36 • make acquisitions or consolidate or merge with other persons; • enter into sale-leaseback transactions; • change the nature of our business; • change our fiscal year; • make certain modifications to organizational documents or certain material contracts; • make certain modifications to certain other debt documents; and • enter into certain agreements with respect to the repayment of indebtedness, the making of loans or advances, or the transfer of assets.
The Loan Agreements contain, and any future debt instruments may contain, financial and other covenants that impose requirements on us and limit our and our subsidiaries’ ability to engage in certain transactions or activities, such as: • incur additional debt; • provide guarantees in respect of obligations of other persons; • make loans, advances and investments; • maintain account balances at other financial institutions; • make certain payments in respect of equity interests, including, among others, the payment of dividends and other distributions, redemptions and similar payments, payments in respect of warrants, options and other rights, and payments in respect of subordinated indebtedness; • enter into transactions with investment funds and affiliates; • create or incur liens; • enter into negative pledges; • sell all or any part of the business, assets or property, or otherwise dispose of assets; • make acquisitions or consolidate or merge with other persons; • enter into sale-leaseback transactions; • change the nature of our business; • change our fiscal year; • make certain modifications to organizational documents or certain material contracts; • make certain modifications to certain other debt documents; and • enter into certain agreements with respect to the repayment of indebtedness, the making of loans or advances, or the transfer of assets.
Valuation methodologies for certain assets in our specialized funds and customized separate accounts can be significantly subjective, and the values of assets established pursuant to such methodologies may never be realized, which could result in significant losses for our specialized funds and customized separate accounts.
Valuation methodologies for certain assets in our specialized funds and customized separate accounts can be highly subjective, and the values of assets established pursuant to such methodologies may never be realized, which could result in significant losses for our specialized funds and customized separate accounts.
Volatility and disruption in the equity and credit markets, whatever the cause, could also adversely affect the portfolio companies in which private markets funds invest, which, in turn, would adversely affect the performance of our specialized funds, customized separate accounts and advisory accounts.
Volatility and disruption in the markets, whatever the cause, could also adversely affect the portfolio companies in which private markets funds invest, which, in turn, would adversely affect the performance of our specialized funds, customized separate accounts and advisory accounts.
Certain investments may also be financed through fund-level debt facilities, which may or may not be available for refinancing on favorable terms, or at all, at the end of their respective terms.
Certain investments may also be financed through fund-level credit facilities, which may or may not be available for refinancing on favorable terms, or at all, at the end of their respective terms.
The new administration has also proposed to increase individual ordinary and capital gains tax rates, which would increase the amount of tax distributions that HLA is required to pay to its members.
The current administration has also proposed to increase individual ordinary and capital gains tax rates, which would increase the amount of tax distributions that HLA is required to pay to its members.
New climate change-related regulations or interpretations of existing laws may result in enhanced disclosure obligations, which could negatively affect us, our specialized funds and customized separate accounts and portfolio companies in which they invest and materially increase the regulatory burden and cost of compliance.
New climate change-related rules and regulations or interpretations of existing laws will result in enhanced disclosure obligations, which could negatively affect us, our specialized funds and customized separate accounts and portfolio companies in which they invest and materially increase the regulatory burden and cost of compliance.
Our advisory and investment management businesses are subject to regulation in the United States, including by the Securities and Exchange Commission (the “SEC”), the Commodity Futures Trading Commission (the “CFTC”), the Internal Revenue Service (the “IRS”), FINRA and other regulatory agencies, pursuant to, among other laws, the Investment Advisers Act, the Securities Act, the Code, the Commodity Exchange Act, the Investment Company Act and the Exchange Act.
Our advisory and investment management businesses are subject to regulation in the United States, including by the SEC, the Commodity Futures Trading Commission, the Internal Revenue Service (the “IRS”), FINRA and other regulatory agencies, pursuant to, among other laws, the Investment Advisers Act, the Securities Act, the Code, the Commodity Exchange Act, the Investment Company Act and the Exchange Act.
Pursuant to the limited liability company agreement of HLA (“HLA Operating Agreement”), HLA makes pro rata cash distributions, or tax distributions, to the members, including us, calculated using an assumed tax rate, to help each of the members to pay taxes on such member’s allocable share of taxable income.
Pursuant to the limited liability company agreement of HLA (“HLA Operating Agreement”), HLA makes pro rata cash distributions (“tax distributions”) to the members, including us, calculated using an assumed tax rate, to help each of the members to pay taxes on such member’s allocable share of taxable income.
A general economic downturn or tightening of global credit markets may result in reduced opportunities to find suitable investments and make it more difficult for us, or the funds in which we and our clients invest, to exit and realize value from existing investments, potentially resulting in a decline in the value of the investments held in our clients’ portfolios and a decrease in incentive fee revenue.
A general economic downturn or tightening of global credit markets may cause us to write down the valuations of investments and result in reduced opportunities to find suitable investments and make it more difficult for us, or the funds in which we and our clients invest, to exit and realize value from existing investments, potentially resulting in a decline in the value of the investments held in our clients’ portfolios and a decrease in incentive fee revenue.
A failure of investors to honor a significant amount of capital calls could have a material adverse effect on our business, financial condition and results of operations.
A failure of clients or investors to honor a significant amount of capital calls could have a material adverse effect on our business, financial condition and results of operations.
Certain investors have also demonstrated increased activism with respect to existing investments, including by urging asset managers to take certain actions that could adversely affect the value of an investment, or refrain from taking certain actions that could improve the value of an investment.
Certain investors have demonstrated increased concern with respect to existing investments, including by urging asset managers to take certain actions that could adversely affect the value of an investment, or refrain from taking certain actions that could improve the value of an investment.
Failure to keep pace with sustainability transition could impact our competitiveness in the market and damage our reputation resulting in a material adverse effect on our business. Failure to manage risks involving ESG investing and compliance could result in a material adverse effect on our business.
Failure to keep pace with sustainability transitions could impact our competitiveness in the market and damage our reputation resulting in a material adverse effect on our business. Failure to manage risks involving ESG investing and compliance also could result in a material adverse effect on our business.
The complexity, operational costs and reduction in flexibility may be further compounded as a result of Brexit. This is because the U.K. both: (i) is no longer required to transpose EU law into U.K. law; and (ii) has transposed certain EU legislation into U.K. law subject to various amendments and subject to the U.K.
The complexity, operational costs and reduction in flexibility may be further compounded as a result of the U.K.’s withdrawal from the EU. This is because the U.K. both: (i) is no longer required to transpose EU law into U.K. law; and (ii) has transposed certain EU legislation into U.K. law subject to various amendments and subject to the U.K.
The disparity in the voting rights among the classes of our common stock and inability of the holders of our Class A common stock to influence decisions submitted to a vote of our stockholders may have an adverse effect on the price of our Class A common stock.
The disparity in the voting rights among the classes of our common stock and limited ability of the holders of our Class A common stock to influence decisions submitted to a vote of our stockholders may have an adverse effect on the price of our Class A common stock.
The revenues that we earn are driven in part by the amount of capital committed by our clients for investment, our fundraising efforts and the pace at which we make investments on behalf of our specialized funds and customized separate accounts. A decline in the pace or the size of fundraising efforts or investments may reduce our revenues.
The revenues that we earn are driven in part by the amount of capital committed by our clients for investment, our fundraising efforts and the pace at which we make investments on behalf of our specialized funds and customized separate accounts. Declines in the pace or the size of fundraising efforts or investments reduce our revenues.
Risks Related to Our Industry The investment management business is intensely competitive. The investment management business is intensely competitive, with competition based on a variety of factors, including investment performance, the quality of service provided to clients, investor liquidity and willingness to invest, investment terms and conditions, brand recognition and business reputation.
Risks Related to Our Industry The investment management business is intensely competitive. The investment management business is intensely competitive, with competition based on a variety of factors, including investment performance, the quality of service provided to clients, investor availability of 57 capital and willingness to invest, investment terms and conditions (including fees and liquidity terms), brand recognition and business reputation.
These restrictions adversely impacted global commercial activity and contributed to significant disruption and uncertainty in the global financial markets, resulting in increased volatility in equity prices (including our common stock), supply chain disruptions and an increase in inflationary pressures, among other things.
Such restrictions adversely impacted global commercial activity and contributed to significant disruption and uncertainty in the global financial markets, resulting in increased volatility in equity prices (including our Class A common stock), supply chain disruptions and an increase in inflationary pressures, among other things.
Furthermore, if we fail to comply with relevant laws and regulations or fail to provide the appropriate regulatory or other notifications of breach in a timely matter, it could result in regulatory investigations and material penalties, which could lead to negative publicity and may cause our clients to lose confidence in the effectiveness of our security measures.
Furthermore, if we fail to comply with relevant laws and regulations or fail to provide the appropriate regulatory or other notifications of breach in a timely manner, it could result in regulatory investigations and material penalties, which could lead to negative publicity and may cause our clients to lose confidence in the effectiveness of our security measures and us more generally.
Market deterioration could cause us, the specialized funds and customized separate accounts we manage or the funds in which they invest to experience tightening of liquidity, reduced earnings and cash flow and impairment charges, as well as challenges in raising and deploying capital, obtaining investment financing and making investments on attractive terms.
Market deterioration has caused us, the specialized funds and customized separate accounts we manage and the funds in which they invest to experience tightening of liquidity, reduced earnings and cash flow and impairment charges, as well as challenges in raising and deploying capital, obtaining investment financing and making investments on attractive terms.
In addition, certain aspects of our cost structure, such as costs for compensation, occupancy leases, communication and information technology services, and depreciation and amortization are largely fixed, and we may not be able to timely adjust these costs to match fluctuations in revenue related to growing our business or entering into new lines of business.
In addition, certain aspects of our cost structure, such as costs for compensation, occupancy leases, communication and information technology services, and depreciation and amortization are largely fixed, and we may not be able to timely adjust these costs to match fluctuations in revenue related to growing our business.
Hamilton Lane Incorporated is the sole managing member of HLA and holds an approximately 68.9% economic interest in HLA. As managing member, Hamilton Lane Incorporated exercises complete control over HLA. As such, we do not believe Hamilton Lane Incorporated’s managing member interest in HLA is an investment security.
Hamilton Lane Incorporated is the sole managing member of HLA and holds an approximately 70.1% economic interest in HLA. As managing member, Hamilton Lane Incorporated exercises complete control over HLA. As such, we do not believe Hamilton Lane Incorporated’s managing member interest in HLA is an investment security.
There can be no assurance that initiatives taken by governmental authorities designed to strengthen and stabilize the economy and financial markets will be successful, and there is no way to predict the ultimate impact of the disruption or the effect that these initiatives will have on the performance of our specialized funds, customized separate accounts or advisory accounts.
There can be no assurance that further initiatives taken by governmental authorities designed to strengthen and stabilize the economy and financial markets will be successful or whether they will lead to a recession, and there is no way to predict the ultimate impact of the disruption or the effect that these initiatives will have on the performance of our specialized funds, customized separate accounts or advisory accounts.
As part of their increased focus on the allocation of their capital to environmentally sustainable economic activities, certain clients and investors also have begun to request or require data to allow them to monitor the ESG impact of their investments.
As part of their increased focus on the allocation of their capital to environmentally sustainable economic activities, certain clients and investors have also begun to request or require data and/or use third-party benchmarks and ESG ratings to allow them to monitor the ESG impact of their investments.
In addition, fees based on invested capital may create an incentive to make investments earlier in the specialized fund’s or customized separate account’s life than it otherwise would if fees were charged based purely on capital commitments, which has more predictability for revenues. Our indebtedness may expose us to substantial risks.
In addition, fees based on invested capital may create an incentive to make investments earlier in the specialized fund’s or customized separate account’s life than it otherwise would if fees were charged based purely on capital commitments, which has more predictability for revenues.
The leveraged capital structure of such businesses increases the exposure of the funds’ portfolio companies to adverse economic factors such as rising interest rates, downturns in the economy or deterioration in the condition of such business or its industry.
The leveraged capital structure of such businesses increases the exposure of the funds’ portfolio companies to adverse economic factors such as rising interest rates, financial institution risks discussed above, downturns in the economy or deterioration in the condition of such business or its industry.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties In June 2021, we moved our corporate headquarters and principal offices from Bala Cynwyd, Pennsylvania to 110 Washington Street, Suite 1300, Conshohocken, Pennsylvania 19428.
Biggest changeItem 2. Properties We lease our corporate headquarters and principal offices, which are located at 110 Washington Street, Suite 1300, Conshohocken, Pennsylvania 19428.
We also lease additional office space in Denver, Frankfurt, Hong Kong, London, Miami, Milan, New York, Portland (Oregon), San Diego, San Francisco, Scranton (Pennsylvania), Seoul, Singapore, Sydney, Herzliya, Israel (a suburb of Tel Aviv), Tokyo, Toronto and Zug. We do not own any real property.
We also lease additional office space in Denver, Frankfurt, Hong Kong, London, Mexico City, Miami, Milan, New York, Portland (Oregon), San Diego, San Francisco, Scranton, Seoul, Shanghai, Singapore, Stockholm, Sydney, Herzliya, Israel (a suburb of Tel Aviv), Tokyo, Toronto and Zug. We do not own any real property.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAlthough there can be no assurance of the outcome of such proceedings, our management does not believe it is probable that any pending or, to our knowledge, threatened legal proceeding or claim would individually or in the aggregate materially affect our consolidated financial statements. Item 4. Mine Safety Disclosures Not applicable. 67 PART II
Biggest changeAlthough there can be no assurance of the outcome of such proceedings, our management does not believe it is probable that any pending or, to our knowledge, threatened legal proceeding or claim would individually or in the aggregate materially affect our consolidated financial statements. Item 4. Mine Safety Disclosures Not applicable. 71 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe performance graph and table shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of the Company’s filings under the Securities Act or the Exchange Act. 68 3/31/17 3/31/18 3/31/19 3/31/20 3/31/21 3/31/22 Hamilton Lane Incorporated $ 100.00 $ 204.54 $ 244.33 $ 316.12 $ 515.31 $ 457.03 S&P 500 100.00 113.98 124.79 116.07 181.45 209.8 Dow Jones US Asset Managers Index 100.00 124.76 104.59 89.3 155.53 169.55 Issuer Purchases of Equity Securities The following table provides information about our repurchase activity with respect to shares of our Class A common stock for the quarter ended March 31, 2022: Period Total Number of Shares Purchased(1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(2) January 1-31, 2022 — $ — — $ 50,000,000 February 1-28, 2022 — $ — — $ 50,000,000 March 1-31, 2022 38,043 $ 75.78 — $ 50,000,000 Total 38,043 $ 75.78 — $ 50,000,000 (1) Represents shares of Class A common stock tendered by employees as payment of taxes withheld on the vesting of restricted stock granted under the Hamilton Lane Incorporated 2017 Equity Incentive Plan, as amended (the “2017 Equity Plan”).
Biggest changeIssuer Purchases of Equity Securities The following table provides information about our repurchase activity with respect to shares of our Class A common stock for the quarter ended March 31, 2023: Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) January 1-31, 2023 205 $ 63.88 — $ 50,000,000 February 1-28, 2023 — $ — — $ 50,000,000 March 1-31, 2023 34,856 $ 64.99 — $ 50,000,000 Total 35,061 $ 64.99 — $ 50,000,000 (1) Represents shares of Class A common stock tendered by employees as payment of taxes withheld on the vesting of restricted stock granted under the Amended and Restated Hamilton Lane Incorporated 2017 Equity Incentive Plan (the “2017 Equity Plan”).
The payment date will be July 7, 2022. We do not pay dividends on our Class B common stock. The declaration and payment by us of any future dividends to holders of our Class A common stock is at the sole discretion of our board of directors.
The payment date will be July 7, 2023. We do not pay dividends on our Class B common stock. The declaration and payment by us of any future dividends to holders of our Class A common stock is at the sole discretion of our board of directors.
The graph and table assume $100 invested on March 31, 2017, and dividends reinvested in the security or index. The performance graph and table are not intended to be indicative of future performance.
The graph and table assume $100 invested on March 31, 2018, and dividends reinvested in the security or index. The performance graph and table are not intended to be indicative of future performance.
Stock Performance Graph The following graph and table depict the total return to stockholders from the closing price on March 31, 2017 through March 31, 2022, relative to the performance of the S&P 500 Index and the Dow Jones U.S. Asset Managers Index.
Stock Performance Graph The following graph and table depict the total return to stockholders from the closing price on March 31, 2018 through March 31, 2023, relative to the performance of the S&P 500 Index and the Dow Jones U.S. Asset Managers Index.
The number of record holders does not include persons who held shares of our Class A common stock in nominee or “street name” accounts through brokers. As of May 24, 2022, there were 29 stockholders of record of our Class B common stock.
The number of record holders does not include persons who held shares of our Class A common stock in nominee or “street name” accounts through brokers. As of May 23, 2023, there were 27 stockholders of record of our Class B common stock.
Holders of Class B common stock are entitled to receive only the par value ($0.001) of the Class B common stock upon exchange of the corresponding Class B unit pursuant to the exchange agreement. Holders of Record As of May 24, 2022, there were five stockholders of record of our Class A common stock.
Holders of Class B common stock are entitled to receive only the par value ($0.001) of the Class B common stock upon exchange of the corresponding Class B unit pursuant to the exchange agreement. Holders of Record As of May 23, 2023, there were six stockholders of record of our Class A common stock.
Dividend Policy We declared a quarterly dividend of $0.35 per share of Class A common stock to record holders in each quarter of fiscal 2022. On May 26, 2022, we declared a quarterly dividend of $0.40 per share of Class A common stock to record holders at the close of business on June 15, 2022.
Dividend Policy We declared a quarterly dividend of $0.40 per share of Class A common stock to record holders in each quarter of fiscal 2023. On May 25, 2023, we declared a quarterly dividend of $0.445 per share of Class A common stock to record holders at the close of business on June 15, 2023.
We have not repurchased any of our Class A common stock under the Stock Repurchase Program, so the full purchase authority remains available under this program, which expires 12 months after the date of the first acquisition under the authorization.
We have not repurchased any of our Class A common stock under the Stock Repurchase Program, so the full purchase authority remains available under this program, which expires 12 months after the date of the first acquisition under the authorization. Our board of directors most recently re-approved the Stock Repurchase Program in December 2022. Item 6. [Reserved] 73
Removed
On December 16, 2021, our board of directors re-approved the Stock Repurchase Program on the same terms as those approved in 2018. Item 6. Reserved 69
Added
The performance graph and table shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of the Company’s filings under the Securities Act or the Exchange Act. 72 3/31/18 3/31/19 3/31/20 3/31/21 3/31/22 3/31/23 Hamilton Lane Incorporated $ 100.00 $ 119.45 $ 154.55 $ 251.93 $ 223.44 $ 219.00 S&P 500 100.00 109.49 101.83 159.20 184.08 169.80 Dow Jones US Asset Managers Index 100.00 83.83 71.57 124.66 135.90 122.76 Unregistered Sales of Equity Securities Pursuant to our exchange agreement, on March 9, 2023, we issued 15,000 shares of our Class A common stock to a legacy member of HLA in exchange for a corresponding number of Class C units in HLA indirectly held by that person.
Added
This issuance did not involve any underwriters, underwriting discounts or commissions or a public offering, and such issuance was exempt from registration requirements pursuant to Section 4(a)(2) of the Securities Act.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFRE is presented before income taxes. 81 The following table shows a reconciliation of net income attributable to Hamilton Lane Incorporated to Fee Related Earnings and Adjusted EBITDA for fiscal 2022, 2021, and 2020: Year Ended March 31, 2022 2021 2020 Net income attributable to Hamilton Lane Incorporated $ 145,986 $ 98,022 $ 60,825 Income (loss) attributable to non-controlling interests in general partnerships 376 (250) 85 Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 96,548 69,720 65,866 Income attributable to non-controlling interests in Hamilton Lane Alliance Holdings I, Inc. 4,343 1,293 — Incentive fees (1) (53,691) (52,191) (29,128) Incentive fee related compensation (2) 25,395 24,438 13,677 SPAC related compensation — 1,686 — SPAC related general, administrative and other expenses 1,176 378 — Non-operating income related compensation 1,810 — — Interest income (500) (1,676) (709) Interest expense 4,638 2,503 2,816 Income tax expense 66,423 24,417 13,968 Equity in income of investees (79,296) (30,266) (20,250) Non-operating income (68,954) (8,035) (6,172) Fee Related Earnings $ 144,254 $ 130,039 $ 100,978 Depreciation and amortization 5,495 4,134 3,291 Equity-based compensation 7,404 7,079 7,183 Incentive fees (1) 53,691 52,191 29,128 Incentive fees attributable to non-controlling interests (1) (228) (756) (320) Incentive fee related compensation (2) (25,395) (24,438) (13,677) SPAC related compensation — (1,686) — Non-operating income related compensation (1,810) — — Interest income 500 1,676 709 Adjusted EBITDA $ 183,911 $ 168,239 $ 127,292 (1) Incentive fees for the years ended March 31, 2022, 2021, and 2020 included $0.2 million, $0.8 million and $0.3 million, respectively, of non-cash carried interest attributable to non-controlling interests.
Biggest changeAdjusted EBITDA represents net income excluding (a) interest expense on our outstanding debt, (b) income tax expense, (c) depreciation and amortization expense, (d) equity-based compensation expense, (e) other non-operating income and (f) certain other significant items that we believe are not indicative of our core performance. 85 The following table shows a reconciliation of net income attributable to Hamilton Lane Incorporated to Fee Related Earnings and Adjusted EBITDA for fiscal 2023, 2022, and 2021: Year Ended March 31, 2023 2022 2021 ($ in thousands) Net income attributable to Hamilton Lane Incorporated $ 109,120 $ 145,986 $ 98,022 Income (loss) attributable to non-controlling interests in general partnerships 986 376 (250) Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 71,027 96,548 69,720 Income attributable to redeemable non-controlling interests in Hamilton Lane Alliance Holdings I, Inc. 5,617 4,343 1,293 Income attributable to non-controlling interests in consolidated funds 435 — — Incentive fees (156,879) (53,691) (52,191) Incentive fee related compensation (1) 74,374 25,395 24,438 SPAC related compensation — — 1,686 SPAC related general, administrative and other expenses 846 1,176 378 Revenue related to consolidated funds 61 — — Non-operating income related compensation 367 1,810 — Interest income (5,114) (500) (1,676) Interest expense 8,617 4,638 2,503 Income tax expense 55,425 66,423 24,417 Equity in income of investees (6,543) (79,296) (30,266) Non-operating income 470 (68,954) (8,035) Fee Related Earnings $ 158,809 $ 144,254 $ 130,039 Depreciation and amortization 7,442 5,495 4,134 Equity-based compensation 9,950 7,404 7,079 Incentive fees 156,879 53,691 52,191 Incentive fees attributable to non-controlling interests (302) (228) (756) Incentive fee related compensation (1) (74,374) (25,395) (24,438) SPAC related compensation — — (1,686) Non-operating income related compensation (367) (1,810) — Interest income 1,789 500 1,676 Adjusted EBITDA $ 259,826 $ 183,911 $ 168,239 (1) Incentive fee related compensation includes incentive fee compensation expense, bonus and other revenue sharing related to carried interest that is classified as base compensation. 86 Non-GAAP Earnings Per Share Non-GAAP earnings per share measures our per-share earnings excluding certain significant items that we believe are not indicative of our core performance and assuming all Class B and Class C units in HLA were exchanged for Class A common stock in HLI.
Since then, our product offerings have grown steadily and now include evergreen offerings that invest primarily in secondaries and direct investments in equity and credit and are available to certain high-net-worth individuals.
Since then, our product offerings have grown steadily and now include evergreen offerings that primarily invest in secondaries and direct investments in equity and credit and are available to certain high-net-worth individuals.
Incentive fees comprise carried interest earned from our specialized funds and certain customized separate accounts structured as single-client funds in which we have a general partner commitment, and performance fees earned on certain other customized separate accounts.
Incentive fees comprise carried interest earned from our specialized funds and certain customized separate accounts structured as single-client funds in which we have a general partner commitment, and performance fees earned on certain other specialized funds and customized separate accounts.
Expenses Compensation and benefits is our largest expense and consists of (a) base compensation comprising salary, bonuses and benefits paid and payable to employees, (b) equity-based compensation associated with the grants of restricted stock awards and (c) incentive fee compensation, which consists of carried interest and performance fee allocations.
Expenses Compensation and benefits is our largest expense and consists of (a) base compensation comprising salary, bonuses and benefits paid and payable to employees, (b) equity-based compensation associated with the grants of restricted stock and performance awards and (c) incentive fee compensation, which consists of carried interest and performance fee allocations.
Incentive fees are typically only required to be returned on a net of tax basis due to a clawback. As such, the tax-related portion of incentive fees is typically not subject to clawback and is therefore recognized as revenue immediately upon receipt.
Incentive fees are typically only required to be returned on a net of tax basis due to a clawback. As such, the tax-related portion of incentive fees is typically not subject to clawback and is therefore recognized as revenue immediately upon receipt.
We have entered into a tax receivable agreement with our pre-IPO owners pursuant to which we will pay them 85% of the amount of tax benefits, if any, that we realize (or are deemed to realize in the case of an early termination payment by us, a change in control or a material breach by us of our obligations under the tax receivable agreement) as a result of increases in tax basis (and certain other tax benefits) resulting from purchases or exchanges of membership units of HLA.
We have entered into a tax receivable agreement with our pre-IPO owners pursuant to which we will pay them 85% of the amount of tax benefits, if any, that we realize (or are deemed to realize in the case of an early termination payment by us, a change in control or a material breach by us of our obligations under the tax receivable agreement) as a result of increases in tax basis (and certain other tax benefits) resulting from 94 purchases or exchanges of membership units of HLA.
We entered into the tax receivable agreement with the other 93 members of HLA, which requires us to pay exchanging HLA unitholders (the “TRA Recipients”) 85% of the amount of cash savings, if any, in U.S. federal, state, and local income tax that we actually realize (or, under certain circumstances, are deemed to realize) as a result of the increases in tax basis in connection with exchanges by the TRA Recipients described above and certain other tax benefits attributable to payments under the tax receivable agreement.
We entered into the tax receivable agreement with the other members of HLA, which requires us to pay exchanging HLA unitholders (the “TRA Recipients”) 85% of the amount of cash savings, if any, in U.S. federal, state, and local income tax that we actually realize (or, under certain circumstances, are deemed to realize) as a result of the increases in tax basis in connection with exchanges by the TRA Recipients described above and certain other tax benefits attributable to payments under the tax receivable agreement.
We evaluate tax positions taken or expected to be taken in the course of preparing an entity’s tax returns to determine whether it is “more-likely-than-not” that each tax position will be sustained by the applicable tax authority. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities.
We evaluate tax 96 positions taken or expected to be taken in the course of preparing an entity’s tax returns to determine whether it is “more-likely-than-not” that each tax position will be sustained by the applicable tax authority. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities.
In addition, we believe we are a leading provider of private markets solutions for U.S. labor union pension plans, and we serve numerous smaller public and corporate pension plans, sovereign wealth funds, financial institutions and insurance companies, endowments and foundations, as well as family offices and selected high-net-worth individuals.
In addition, we believe we are a leading provider of private markets solutions for U.S. labor union pension plans, and we serve numerous smaller public and corporate pension plans, sovereign wealth funds, financial institutions and insurance companies, endowments and foundations, as well as family offices and high-net-worth individuals.
Therefore, as our revenues, profitability and the amount of incentive fees earned by our customized separate accounts and specialized funds increase, our compensation costs rise. Certain current and former employees participate in a carried interest program whereby approximately 25% of incentive fees from certain of our specialized funds and customized separate accounts are awarded to plan participants.
Therefore, as our revenues, profitability and the amount of incentive fees earned by our customized separate accounts and specialized funds increase, our compensation costs rise. 78 Certain current and former employees participate in a carried interest program whereby approximately 25% of incentive fees from certain of our specialized funds and customized separate accounts are awarded to plan participants.
We are required to maintain minimum net capital balances for regulatory purposes for certain of our foreign subsidiaries and our broker-dealer subsidiary. These net capital requirements are met by retaining cash. As a result, we may be restricted in our ability to transfer cash between different operating entities and jurisdictions.
We are required to maintain minimum net capital balances for regulatory purposes for certain of our foreign subsidiaries and our broker-dealer subsidiary. These net capital requirements are met by retaining 93 cash. As a result, we may be restricted in our ability to transfer cash between different operating entities and jurisdictions.
Investing Activities Our investing activities generally reflect cash used for acquisitions, fixed asset purchases and contributions to and distributions from our investments. For the years ended March 31, 2022 and 2021, our net cash used in investing activities was driven primarily by purchases of furniture, fixtures and equipment, purchase of other investments and net contributions to our funds.
Investing Activities Our investing activities generally reflect cash used for acquisitions, fixed asset purchases and contributions to and distributions from our investments. For the years ended March 31, 2023, 2022 and 2021, our net cash used in investing activities was driven primarily by purchases of furniture, fixtures and equipment, purchase of other investments and net contributions to our funds.
Recent Accounting Pronouncements Information regarding recent accounting developments and their impact on our results can be found in Note 2, “Summary of Significant Accounting Policies” in the notes to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.
Recent Accounting Pronouncements Information regarding recent accounting developments and their impact on our results can be found in Note 2, “Summary of Significant Accounting Policies” in the notes to the consolidated financial statements included in Part II, Item 8 of this Form 10-K. 97
For the years ended March 31, 2022 and 2021, our net cash provided by operating activities was driven primarily by receipts of management fees and incentive fees offset by payment of operating expenses, which includes compensation and benefits and general, administrative and other expenses.
For the years ended March 31, 2023, 2022 and 2021, our net cash provided by operating activities was driven primarily by receipts of management fees and incentive fees offset by payment of operating expenses, which includes compensation and benefits and general, administrative and other expenses.
Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this Form 10-K, particularly in “Risk Factors”, the “Summary of Risk Factors” and the “Cautionary Note Regarding Forward-Looking Information.” Unless otherwise indicated, references in this Annual Report on Form 10-K to fiscal 2022, fiscal 2021 and fiscal 2020 are to our fiscal years ended March 31, 2022, 2021 and 2020, respectively.
Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this Form 10-K, particularly in “Risk Factors”, the “Summary of Risk Factors” and the “Cautionary Note Regarding Forward-Looking Information.” Unless otherwise indicated, references in this Annual Report on Form 10-K to fiscal 2023, fiscal 2022 and fiscal 2021 are to our fiscal years ended March 31, 2023, 2022 and 2021, respectively.
We expect that our primary short-term and long-term liquidity needs will comprise cash to: (1) provide capital to facilitate the growth of our business; (2) fund commitments to our investments; (3) pay operating expenses, including cash compensation to our employees; (4) make payments and/or exercise early termination buyout rights under the tax receivable agreement; (5) fund capital expenditures and make strategic investments ; (6) pay interest and principal due on our outstanding debt; (7) pay income taxes; (8) make dividend payments to our stockholders and distributions to holders of HLA units in accordance with our distribution policy; (9) settle exchanges of HLA membership interests by direct and indirect owners of HLA pursuant to our exchange agreement from time to time; (10) fund SPACs sponsored by us; and (11) fund purchases of our Class A common stock pursuant to the Stock Repurchase Program.
We expect that our primary short-term and long-term liquidity needs will comprise cash to: (1) provide capital to facilitate the growth of our business; (2) fund commitments to our investments; (3) pay operating expenses, including cash compensation to our employees; (4) make payments and/or exercise early termination buyout rights under the tax receivable agreement; (5) fund capital expenditures and make strategic investments ; (6) pay interest and principal due on our outstanding debt; (7) pay income taxes; (8) make dividend payments to our stockholders and distributions to holders of HLA units in accordance with our distribution policy; (9) settle exchanges of HLA membership interests by direct and indirect owners of HLA pursuant to our exchange agreement from time to time; and (10) fund purchases of our Class A common stock pursuant to the Stock Repurchase Program.
The capital we are able to attract drives the growth of our AUM and AUA and the management and advisory fees we earn. 71 • Our ability to source investments with attractive risk-adjusted returns. An increasing part of our management fee and incentive fee revenue has been from our direct investment and secondary investment platforms.
The capital we are able to attract drives the growth of our AUM and AUA and the management and advisory fees we earn. 75 • Our ability to source investments with attractive risk-adjusted returns. An increasing part of our management fee and incentive fee revenue has been from our direct investment and secondary investment platforms.
Our ability to maintain our data advantage is dependent on a number of factors, including our continued access to a broad set of private market information on an on-going basis, as well as our ability to maintain our investment scale, considering the evolving competitive landscape and potential industry consolidation. • Our ability to continue to expand globally .
Our ability to maintain our data advantage is dependent on a number of factors, including our continued access to a broad set of private market information on an ongoing basis, as well as our ability to maintain our investment scale, considering the evolving competitive landscape and potential industry consolidation. • Our ability to continue to expand globally .
For the year ended March 31, 2022, the full exchange of Class B and Class C units is already included within the GAAP Weighted-average shares of Class A common stock outstanding - diluted. 83 Investment Performance The following tables present information relating to the historical performance of our specialized funds with fund families having at least two distinct vintages and most recent fund sizes of greater than $500 million per fund.
For the year ended March 31, 2023 and 2022, the full exchange of Class B and Class C units is already included within the GAAP Weighted-average shares of Class A common stock outstanding - diluted. 87 Investment Performance The following tables present information relating to the historical performance of our specialized funds with fund families having at least two distinct vintages and most recent fund sizes of greater than $500 million per fund.
This information is derived from our accompanying consolidated financial statements prepared in accordance with GAAP. Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2021 Annual Report on Form 10-K for management’s discussion and analysis of financial condition and results of operations for fiscal 2021 compared to fiscal 2020.
This information is derived from our accompanying consolidated financial statements prepared in accordance with GAAP. Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2022 Annual Report on Form 10-K for management’s discussion and analysis of financial condition and results of operations for fiscal 2022 compared to fiscal 2021.
(3) Foreign exchange, market value and other consists primarily of the impact of foreign exchange rate fluctuations for customized separate accounts and specialized funds that earn fees on non-U.S. dollar denominated commitments and market value appreciation (depreciation) from customized separate accounts and specialized funds that earn fees on a NAV fee base.
(3) Foreign exchange, market value and other consists primarily of (i) the impact of foreign exchange rate fluctuations for customized separate accounts and specialized funds that earn fees on non-U.S. dollar denominated commitments and (ii) market value appreciation (depreciation) from customized separate accounts and specialized funds that earn fees on a NAV fee base.
Our investment advisory services include asset allocation, strategic plan creation, development of investment policies and guidelines, the screening and recommending of investments, legal negotiations, the monitoring of and reporting on investments and investment manager review and due diligence. Our advisory clients include some of the largest and most sophisticated private markets investors in the world.
Our investment advisory services include asset allocation, strategic plan creation, development of investment policies and guidelines, the screening and recommending of investments, the monitoring of and reporting on investments and investment manager review and due diligence. Our advisory clients include some of the largest and most sophisticated private markets investors in the world.
The 23.7% is based on a federal tax statutory rate of 21.0% and a combined state income tax rate net of federal benefits of 2.7%. (2) Assumes the full exchange of Class B and Class C units in HLA for Class A common stock of HLI pursuant to the exchange agreement.
The 23.8% is based on a federal tax statutory rate of 21.0% and a combined state income tax rate net of federal benefits of 2.8%. (2) Assumes the full exchange of Class B and Class C units in HLA for Class A common stock of HLI pursuant to the exchange agreement.
In the event that a payment is made before it can be recognized as revenue, this amount would be included as deferred incentive fee revenue on our Consolidated Balance Sheet and recognized as income in accordance with our revenue recognition policy.
In the event that a payment is made before it can be recognized as revenue, this amount would be included as deferred incentive fee revenue on our Consolidated Balance Sheets and recognized as income in accordance with our revenue recognition policy.
The use of a credit facility affects the fund’s return and magnifies the performance on the upside or on the downside. 87 Liquidity and Capital Resources Historical Liquidity and Capital Resources We have managed our historical liquidity and capital requirements primarily through the receipt of management and advisory fee revenues.
The use of a credit facility affects the fund’s return and magnifies the performance on the upside or on the downside. 90 Liquidity and Capital Resources Historical Liquidity and Capital Resources We have managed our historical liquidity and capital requirements primarily through the receipt of management and advisory fee revenues.
The CS LL Index is an index designed to mirror the investable universe of the U.S. dollar denominated leveraged loan market. Loans must be rated 5B or lower and the index frequency is monthly. 86 Our IRR represents the pooled IRR for all discretionary investments for the period from inception to December 31, 2021.
The CS LL Index is an index designed to mirror the investable universe of the U.S. dollar denominated leveraged loan market. Loans must be rated 5B or lower and the index frequency is monthly. Our IRR represents the pooled IRR for all discretionary investments for the period from inception to December 31, 2022.
Global economic conditions, including political environments, financial market performance, interest rates, credit spreads or other conditions beyond our control, all of which affect the performance of the assets underlying private market investments, are unpredictable and could negatively affect the performance of our clients’ portfolios or the ability to raise funds in the future. • Increasing regulatory requirements .
Global economic conditions, including political environments, financial market performance, interest rates, credit spreads or other conditions beyond our control, all of which affect the performance of the assets underlying private market investments, are unpredictable and could negatively affect the performance of our clients’ portfolios or the ability to raise funds in the future.
The Loan Agreements contain covenants that, among other things, limit HLA’s ability to incur indebtedness, transfer or dispose of assets, merge with other companies, create, incur or allow liens, make investments, make distributions, engage in transactions with affiliates and take certain actions with respect to 88 management fees.
The Loan Agreements contain covenants that, among other things, limit HLA’s ability to incur indebtedness, transfer or dispose of assets, merge with other companies, create, incur or allow liens, make investments, pay dividends or make distributions, engage in transactions with affiliates and take certain actions with respect to management fees.
Non-controlling interests are presented as separate components in our consolidated statements of income to clearly distinguish between our interests and the economic interests of third parties and employees in those entities. Fee-Earning AUM Fee-earning AUM is a metric we use to measure the assets from which we earn management fees.
NCI are presented as separate components in our consolidated statements of income to clearly distinguish between our interests and the economic interests of third parties and employees in those entities. Fee-Earning AUM Fee-earning AUM is a metric we use to measure the assets from which we earn management fees.
Non-operating income (loss) consists primarily of gains and losses on certain investments, changes in liability under the tax receivable agreement and other non-recurring or non-cash items.
Non-operating income (expense) consists primarily of gains and losses on certain investments, changes in liability under the tax receivable agreement and other non-recurring or non-cash items.
The data are presented from the date indicated through December 31, 2021 and have not been adjusted to reflect acquisitions or disposals of investments subsequent to that date.
The data are presented from the date indicated through December 31, 2022 and have not been adjusted to reflect acquisitions or disposals of investments subsequent to that date.
Non-GAAP earnings per share is calculated as adjusted net income divided by adjusted shares outstanding. Adjusted net income is income before taxes fully taxed at our estimated statutory tax rate and excludes any impact of changes in carrying amount of our redeemable non-controlling interest.
Non-GAAP earnings per share is calculated as adjusted net income divided by adjusted shares outstanding. Adjusted net income is income before taxes fully taxed at our estimated statutory tax rate and excludes any impact of changes in carrying amount of our redeemable NCI.
(2) Distributions represent returns of capital in customized separate accounts and specialized funds that earn fees on a net invested capital or NAV fee base, reductions in fee-earning AUM from separate accounts and specialized funds that moved from a committed capital to net invested capital fee base and reductions in fee-earning AUM from customized separate accounts and specialized funds that are no longer earning fees.
(2) Distributions represent (i) returns of capital in customized separate accounts and specialized funds that earn fees on a net invested capital or NAV fee base, (ii) reductions in fee-earning AUM from separate accounts and specialized funds that moved from a committed capital to net invested capital fee base and (iii) reductions in fee-earning AUM from customized separate accounts and specialized funds that are no longer earning fees.
We believe fundraising efforts will continue to be impacted by certain fundamental asset management trends that include: (1) the increasing importance and market share of alternative investment strategies to investors in light of an increased focus on lower-correlated and absolute levels of return; (2) the increasing demands of the investing community, including the potential for fee compression and changes to other terms; (3) shifting asset allocation policies of institutional investors; and (4) increasing barriers to entry and growth. • Our ability to generate strong returns.
We believe fundraising efforts will continue to be impacted by certain fundamental asset management trends that include: (1) the increasing importance and market share of alternative investment strategies to investors (including smaller institutions and high-net-worth individuals) in light of an increased focus on lower-correlated and absolute levels of return; (2) the increasing demands of the investing community, including the potential for fee compression and changes to other terms; (3) shifting asset allocation policies of institutional investors; and (4) increasing barriers to entry and growth. • Our ability to generate strong returns.
We had approximately $795 billion of AUA as of March 31, 2022. • Distribution Management : We offer distribution management services to our clients through active portfolio management to enhance the realized value of publicly traded stock they receive as distributions in-kind from private equity funds. 70 • Reporting, Monitoring, Data and Analytics: We provide our clients with comprehensive reporting and investment monitoring services, usually bundled into our broader investment solutions offerings, but also on a stand-alone, fee-for-service basis.
We had approximately $745 billion of AUA as of March 31, 2023. • Distribution Management : We offer distribution management services to our clients through active portfolio management to enhance the realized value of publicly traded stock they receive as distributions in-kind from private equity funds. 74 • Reporting, Monitoring, Data and Analytics: We provide our clients with comprehensive reporting and investment monitoring services, usually bundled into our broader investment solutions offerings, but also on a stand-alone, fee-for-service basis.
Management fees for certain funds are discounted based on the amount of the limited partners’ commitments, whether the limited partner commits early in the offering period or if the limited partners are investors in our other funds. Revenues from advisory and reporting services are generally annual fixed fees, which vary depending on the services we provide.
Management fees for certain funds are discounted based on the amount of the limited partners’ commitments, whether the limited partners commit early in the offering period or if the limited partners are investors in our other funds. 77 Revenues from advisory and reporting services are generally annual fixed fees, which vary depending on the services we provide.
Our definition of fee-earning AUM is not based on any definition that is set forth in the agreements governing the customized separate accounts or specialized funds that we manage. 76 Annual Consolidated Results of Operations The following is a discussion of our consolidated results of operations for fiscal 2022 compared to fiscal 2021.
Our definition of fee-earning AUM is not based on any definition that is set forth in the agreements governing the customized separate accounts or specialized funds that we manage. 80 Annual Consolidated Results of Operations The following is a discussion of our consolidated results of operations for fiscal 2023 compared to fiscal 2022.
Our fee-earning AUM is equal to the amount of capital commitments, net invested capital and NAV of our customized separate accounts and specialized funds depending on the fee terms. Substantially all of our customized separate accounts and specialized funds earn fees based on commitments or net invested capital, which are not affected by market appreciation or depreciation.
Our fee-earning AUM is equal to the amount of capital commitments, net invested capital and NAV of our customized separate accounts and specialized funds depending on the fee terms. The vast majority of our customized separate accounts and specialized funds earn fees based on commitments or net invested capital, which are not affected by market appreciation or depreciation.
Substantially all of these funds are globally focused, and they are grouped by the investment strategy utilized. 84 Gross Returns — Realized Fund Vintage year Fund size ($M) Realized Capital invested ($M) Realized Gross multiple Realized Gross IRR (%) Realized Gross Spread vs. S&P 500 PME Realized Gross Spread vs.
Substantially all of these funds are globally focused, and they are grouped by the investment strategy utilized. 88 Gross Returns — Realized and Unrealized Fund Vintage year Fund size ($M) Capital invested ($M) Gross multiple Net Multiple Gross IRR (%) Net IRR (%) Gross Spread vs. S&P 500 PME Net Spread vs. S&P 500 PME Gross Spread vs.
The management fee during the commitment period is often charged on capital commitments and after the commitment period (or a defined anniversary of the fund’s initial closing) is typically reduced by a percentage of the management fee for the preceding year or charged on net invested capital.
The management fee during the investment period is often charged on capital commitments and after the investment period (or a defined anniversary of the fund’s initial closing) is typically reduced by a percentage of the management fee for the preceding year or charged on net invested capital or net asset value.
We generally have discretionary investment authority over our customized separate accounts, which comprised approximately $83 billion of our AUM as of March 31, 2022. • Specialized Funds : We organize, invest and manage specialized primary, secondary and direct investment funds.
We generally have discretionary investment authority over our customized separate accounts, which comprised approximately $85 billion of our AUM as of March 31, 2023. • Specialized Funds : We organize, invest and manage specialized primary, secondary and direct investment funds.
As of March 31, 2022, we were required to maintain approximately $4.0 million in liquid net assets within these subsidiaries to meet regulatory net capital and capital adequacy requirements. We are in compliance with these regulatory requirements.
As of March 31, 2023, we were required to maintain approximately $4.8 million in liquid net assets within these subsidiaries to meet regulatory net capital and capital adequacy requirements. We are in compliance with these regulatory requirements.
Specialized funds comprised approximately $24 billion of our AUM as of March 31, 2022. • Advisory Services : We offer investment advisory services to assist clients in developing and implementing their private markets investment programs.
Specialized funds comprised approximately $27 billion of our AUM as of March 31, 2023. • Advisory Services : We offer investment advisory services to assist clients in developing and implementing their private markets investment programs.
Principles of Consolidation We consolidate all entities that we control through a controlling financial interest or as the primary beneficiary of variable interest entities (“VIEs”).
Principles of Consolidation We consolidate all entities that we control through a controlling financial interest or as the primary beneficiary of VIEs.
When considering the data presented below, note that the historical results of our specialized funds are not indicative of the future results you should expect from such investments, from any future investment funds we may raise or from an investment in our Class A common stock, in part because: • market conditions and investment opportunities during previous periods may have been significantly more favorable for generating positive performance than those we may experience in the future; • the performance of our funds is generally calculated on the basis of the net asset value (“NAV”) of the funds’ investments, including unrealized gains, which may never be realized; • our historical returns derive largely from the performance of our earlier funds, whereas future fund returns will depend increasingly on the performance of our newer funds or funds not yet formed; • our newly-established funds may generate lower returns during the period that they initially deploy their capital; • in recent years, there has been increased competition for investment opportunities resulting from the increased amount of capital invested in private markets alternatives and high liquidity in debt markets, and the increased competition for investments may reduce our returns in the future; and • the performance of particular funds also will be affected by risks of the industries and businesses in which they invest.
When considering the data presented below, note that the historical results of our specialized funds are not indicative of the future results you should expect from such investments, from any future investment funds we may raise or from an investment in our Class A common stock, in part because: • market conditions and investment opportunities during previous periods may have been significantly more favorable for generating positive performance than those we may experience in the future; • the performance of our funds is generally calculated on the basis of the NAV of the funds’ investments, including unrealized gains, which may never be realized; • our historical returns derive largely from the performance of our earlier funds, whereas future fund returns will depend increasingly on the performance of our newer funds or funds not yet formed; • our newly-established funds may generate lower returns during the period that they initially deploy their capital; • in recent years, there has been increased competition for investment opportunities resulting from the increased amount of capital invested in private markets alternatives and high liquidity in debt markets, and the increased competition for investments may reduce our returns in the future; • the performance of particular funds also will be affected by risks of the industries and businesses in which they invest; and • we may create new funds that reflect a different asset mix and new investment strategies, as well as a varied geographic and industry exposure, compared to our historical funds, and any such new funds could have different returns from our previous funds.
As interest rates begin to rise in response to increasing inflationary pressures, along with increased public equity volatility leading to a wider range of equity returns, we see increasing investor demand for alternative investments to achieve higher and less correlated relative yields and returns on invested capital.
As interest rates rise in response to continued inflationary pressures and public equity volatility continues, leading to a wider range of equity returns, we see increasing investor demand for alternative investments to achieve higher and less correlated relative yields and returns on invested capital.
In these cases, we generally reduce the management and/or incentive fees on customized separate accounts to the extent that assets in the accounts are invested in our specialized funds so that our clients do not pay duplicate fees.
In these cases, we generally reduce the asset-based and/or incentive fees or carried interest on customized separate accounts to the extent that assets in the accounts are invested in our specialized funds so that our clients do not pay duplicate fees.
Distributions were $4.2 billion for fiscal 2022 due to $1.6 billion from returns of capital in accounts earning fees on a net invested capital or NAV fee base, $1.5 billion from accounts moving from a committed to net invested capital fee base, and $1.1 billion from accounts reaching the end of their fund term.
Distributions were $4.0 billion for fiscal 2023 due to $2.1 billion from accounts moving from a committed to net invested capital fee base, $1.2 billion from returns of capital in accounts earning fees on a net invested capital or NAV fee base, and $0.7 billion from accounts reaching the end of their fund term.
The interest rate is a floating per annum rate equal to the prime rate minus 1.50% subject to a floor of 2.25%. As of March 31, 2022, we had no outstanding balance under the Revolving Loan Agreement.
The interest rate is a floating per annum rate equal to the prime rate minus 1.50% subject to a floor of 2.25%. As of March 31, 2023, we had an outstanding balance of $15 million under the Revolving Loan Agreement.
Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not to be realized. As of March 31, 2022, we had a valuation allowance of $67.6 million.
Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not to be realized. As of March 31, 2023, we had a valuation allowance of $77.2 million.
These judgments include: (a) determining whether the equity investment at risk is sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) evaluating whether the equity holders, as a group, can make decisions that have a significant effect on the economic performance of the entity, (c) determining whether two or more parties’ equity interests should be aggregated, and (d) determining whether the equity investors have proportionate voting rights to their obligations to absorb losses or rights to receive returns from an entity.
These judgments include: (a) determining whether the equity investment at risk is sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) evaluating whether the equity holders, as a group, can make decisions that have a significant effect on the economic performance of the entity, (c) determining whether two or more parties’ equity interests should be aggregated, and (d) determining whether the equity investors have proportionate voting rights to their obligations to absorb losses or rights to receive returns from an entity. 95 For entities that are determined to be VIEs, we are required to consolidate those entities where we have concluded that we are the primary beneficiary.
Other income (expense) of consolidated Variable Interest Entities (“VIEs”) consists primarily of the share of earnings of investments of consolidated general partner entities, which are not wholly-owned by us, in our specialized funds and certain customized separate accounts in which they have a general partner commitment and changes in fair value of liabilities of our sponsored SPAC.
Other income (expense) of consolidated Variable Interest Entities (“VIEs”) consists primarily of the share of earnings of investments of consolidated general partner entities, which are not wholly-owned by us, in our specialized funds and certain customized separate accounts in which they have a general partner commitment, interest income on investments held in trust and changes in fair value of liabilities of our previously-sponsored special purpose acquisition company (“SPAC”).
Customized separate accounts revenue increased $9.3 million in fiscal 2022 due to a $5.3 billion increase in fee-earning AUM from the addition of several new accounts and additional allocations from existing accounts during the fiscal year.
Customized separate accounts revenue increased $14.5 million in fiscal 2023 due to a $3.7 billion increase in fee-earning AUM from the addition of several new accounts and additional allocations from existing accounts during the fiscal year. Distribution management revenue decreased $7.9 million in fiscal 2023 due to decreased distribution activity.
We are entitled to request additional uncommitted term advances not to exceed $25 million in the aggregate, as well as additional committed term advances not to exceed $25 million in the aggregate through March 24, 2023. The Revolving Loan Agreement provides that the aggregate outstanding balance will not exceed $25 million and has a maturity date of March 24, 2023.
We are entitled to request additional uncommitted term advances not to exceed $25 million in the aggregate, subject to the Cap, through December 31, 2023. The Revolving Loan Agreement provides that the aggregate outstanding balance will not exceed $50 million, subject to the Cap, and has a maturity date of March 24, 2025.
Our client base primarily comprises institutional investors that range from those seeking to make an initial investment in alternative assets to some of the world’s largest and most sophisticated private markets investors.
Our client and investor base is broadly diversified by type, size and geography. Our client base primarily comprises institutional investors that range from those seeking to make an initial investment in alternative assets to some of the world’s largest and most sophisticated private markets investors.
The future interest payments are calculated using the variable interest rate of 2.25% on our Term Loan Agreement and the fixed interest rate of 3.50% on our Multi-Draw Term Loan Agreement in effect as of March 31, 2022.
The future interest payments are calculated using the variable interest rate of 6.75% on our Term Loan Agreement, the fixed interest rate of 3.50% on our 2020 Multi-Draw Term Loan Agreement and the variable interest rate of 6.50% on our Revolving Loan Agreement in effect as of March 31, 2023.
Specialized funds revenue increased by $2.1 million compared to the prior year, due primarily to a $17.5 million increase in revenue from our evergreen funds and a $8.2 million increase in revenue from our latest direct equity fund, which added $1.5 billion and $1.1 billion, respectively, in fee-earning AUM year-over-year.
Specialized funds revenue increased by $46.2 million compared to the prior year, due primarily to a $19.4 million increase in revenue from our evergreen funds, a $14.8 million increase in revenue from our latest secondary fund, and an $8.4 million increase in revenue from our latest direct equity fund, which added $1.1 billion, $1.9 billion and $0.6 billion, respectively, in fee-earning AUM year-over-year.
The following table shows a reconciliation of adjusted net income to net income attributable to Hamilton Lane Incorporated and adjusted shares outstanding to weighted-average shares of Class A common stock outstanding for fiscal 2022 , 2021, and 2020 : Year Ended March 31, 2022 2021 2020 (in thousands, except share and per-share amounts) Net income attributable to Hamilton Lane Incorporated $ 145,986 $ 98,022 $ 60,825 Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 96,548 69,720 65,866 Income tax expense 66,423 24,417 13,968 Adjusted pre-tax net income $ 308,957 $ 192,159 $ 140,659 Adjusted income taxes (1) (73,532) (45,734) (33,336) Adjusted net income $ 235,425 $ 146,425 $ 107,323 Weighted-average shares of Class A common stock outstanding - diluted 53,674,293 33,362,365 28,438,772 Exchange of Class B and Class C units in HLA (2) — 20,240,035 25,067,540 Adjusted shares outstanding 53,674,293 53,602,400 53,506,312 Non-GAAP earnings per share $ 4.39 $ 2.73 $ 2.01 (1) For the years ended March 31, 2022 and March 31, 2021, represents corporate income taxes at our estimated statutory tax rate of 23.8% applied to adjusted pre-tax net income.
The following table shows a reconciliation of adjusted net income to net income attributable to Hamilton Lane Incorporated and adjusted shares outstanding to weighted-average shares of Class A common stock outstanding for fiscal 2023 , 2022, and 2021 : Year Ended March 31, 2023 2022 2021 (in thousands, except share and per-share amounts) Net income attributable to Hamilton Lane Incorporated $ 109,120 $ 145,986 $ 98,022 Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 71,027 96,548 69,720 Income tax expense 55,425 66,423 24,417 Adjusted pre-tax net income $ 235,572 $ 308,957 $ 192,159 Adjusted income taxes (1) (56,066) (73,532) (45,734) Adjusted net income $ 179,506 $ 235,425 $ 146,425 Weighted-average shares of Class A common stock outstanding - diluted 53,698,681 53,674,293 33,362,365 Exchange of Class B and Class C units in HLA (2) — — 20,240,035 Adjusted shares outstanding 53,698,681 53,674,293 53,602,400 Non-GAAP earnings per share $ 3.34 $ 4.39 $ 2.73 (1) For the years ended March 31, 2023, 2022, and 2021, represents corporate income taxes at our estimated statutory tax rate of 23.8% applied to adjusted pre-tax net income.
Distributions were $2.6 billion for fiscal 2022, due to $1.4 billion from returns of capital in funds earning fees on a net invested capital or NAV fee base, $0.7 billion from funds reaching the end of their fund term, and $0.5 billion from accounts moving from a committed to net invested capital fee base. 80 Non-GAAP Financial Measures Below is a description of our unaudited non-GAAP financial measures.
Distributions were $0.9 billion for fiscal 2023, due to $0.8 billion from returns of capital in funds earning fees on a net invested capital or NAV fee base and $0.1 billion from funds reaching the end of their fund term. 84 Non-GAAP Financial Measures Below is a description of our unaudited non-GAAP financial measures.
Finally, we have used available cash and borrowings from our Loan Agreements to make strategic investments in companies that seek to offer technology-driven private markets data and wealth management solutions. Loan Agreements We maintain the Term Loan Agreement, the Revolving Loan Agreement and the Multi-Draw Term Loan Agreement with First Republic.
Finally, we have used available cash and borrowings from our Loan Agreements to make strategic investments in companies that seek to offer technology-driven private markets data and wealth management solutions.
The Term Loan Agreement has a maturity date of July 1, 2027 and the interest rate is a floating per annum rate equal to the prime rate minus 1.50% subject to a floor of 2.25%. As of March 31, 2021, we had an outstanding balance of $72 million under the Term Loan Agreement.
The Term Loan Agreement has a maturity date of January 1, 2030 and the interest rate is a floating per annum rate equal to the prime rate minus 1.25% subject to a floor of 3.00%. As of March 31, 2023, we had an outstanding balance of $99 million under the Term Loan Agreement.
Non-controlling interests Non-controlling interests (“NCI”) reflect the portion of income or loss and the corresponding equity attributable to third-party equity holders and employees in certain consolidated subsidiaries that are not 100% 75 owned by us.
Accordingly, the tax liability with respect to income attributable to non-controlling interests (“NCI”) in HLA is borne by the holders of such NCI. Non-controlling interests NCI reflect the portion of income or loss and the corresponding equity attributable to third-party equity holders and employees in certain consolidated subsidiaries that are not 100% owned by us.
The obligations under the Loan Agreements are secured by substantially all the assets of HLA. As of March 31, 2022 and 2021, the principal amount of debt outstanding equaled $171.8 million and $163.6 million, respectively.
The obligations under the Loan Agreements are secured by substantially all the assets of HLA. As of March 31, 2023 and 2022, the principal amount of debt outstanding equaled $214.4 million and $171.8 million, respectively. We had $110.6 million in availability under the Loan Agreements as of March 31, 2023.
We recognized $53.7 million of incentive fees in fiscal 2022 and have $1.2 billion of unrecognized carried interest as of March 31, 2022. 92 Contracts with specialized funds and certain customized separate accounts provide incentive fees, which generally range from 5.0% to 12.5% of profits, when investment returns exceed minimum return levels or other performance targets on either an annual or inception to date basis and are generally payable after all contributed capital and the preferred return on that capital has been distributed to investors.
Contracts with specialized funds and certain customized separate accounts provide incentive fees, which generally range from 5.0% to 12.5% of profits, when investment returns exceed minimum return levels or other performance targets on either an annual or inception to date basis and are generally payable after all contributed capital and the preferred return on that capital has been distributed to investors.
Customized separate accounts contributions were $9.0 billion for fiscal 2022 due to new allocations from existing clients and new clients.
Customized separate accounts contributions were $7.8 billion for fiscal 2023 due to new allocations from existing clients and new clients.
Other Income (Expense) The following shows the equity in income (loss) of investees included in other income (expense): Year Ended March 31, (in thousands) 2022 2021 2020 Equity in income of investees Primary funds $ 9,016 $ 2,443 $ 2,550 Direct investment funds 19,519 8,553 8,869 Secondary funds 15,725 6,226 2,514 Customized separate accounts 25,223 9,508 5,729 Other equity method investments 9,813 3,536 588 Total equity in income of investees $ 79,296 $ 30,266 $ 20,250 Year ended March 31, 2022 compared to year ended March 31, 2021 Other income (expense) increased $106.6 million to $144.1 million for fiscal 2022 compared to fiscal 2021, due primarily to increases in equity in income of investees and other non-operating income.
Other Income (Expense) The following shows the equity in income (loss) of investees included in other income (expense): Year Ended March 31, (in thousands) 2023 2022 2021 Equity in income of investees Primary funds $ 60 $ 9,016 $ 2,443 Direct investment funds (2,551) 19,519 8,553 Secondary funds 693 15,725 6,226 Customized separate accounts (94) 25,223 9,508 Other funds 8,435 9,813 3,536 Total equity in income of investees $ 6,543 $ 79,296 $ 30,266 Year ended March 31, 2023 compared to year ended March 31, 2022 Other income (expense) decreased $141.5 million to $2.6 million for fiscal 2023 compared to fiscal 2022, due primarily to decreases in equity in income of investees and other non-operating income.
As of March 31, 2022, we had gross deferred tax assets of $312.6 million primarily due to our acquisitions of HLA units.
As of March 31, 2023, we had deferred tax assets of $233.9 million primarily due to our acquisitions of HLA units.
As of March 31, 2022 and March 31, 2021, our cash and cash equivalents were $72.1 million and $87.0 million, respectively.
As of March 31, 2023 and March 31, 2022, our cash and cash equivalents were $99.7 million and $72.1 million, respectively.
Certain active management clients may elect a fee structure under which they are charged an asset-based fee plus a fee based on net realized and unrealized gains and income net of realized and unrealized losses.
Distribution management fees are generally earned by applying a percentage to AUM or proceeds received. Certain active management clients may elect a fee structure under which they are charged an asset-based fee plus a fee based on net realized and unrealized gains and income net of realized and unrealized losses.
As of March 31, 2022, the tax receivable agreement resulted in a liability of $180.5 million.
As of March 31, 2023, the tax receivable agreement resulted in a liability of $174.7 million.
Specialized funds fee-earning AUM increased $1.9 billion, or 11%, to $18.2 billion for fiscal 2022. Specialized fund contributions were $4.2 billion for fiscal 2022, due primarily to $1.3 billion from our evergreen funds and $1.1 billion from our latest direct equity fund.
Specialized funds fee-earning AUM increased $4.5 billion, or 25%, to $22.7 billion for fiscal 2023. Specialized fund contributions were $5.1 billion for fiscal 2023, due primarily to $1.9 billion from our latest secondary fund and $1.2 billion from our evergreen funds.
Year ended March 31, 2022 compared to year ended March 31, 2021 Fee-earning AUM increased $7.1 billion, or 17%, to $49.1 billion for fiscal 2022, due to contributions from customized separate accounts and specialized funds. Customized separate accounts fee-earning AUM increased $5.3 billion, or 21%, to $30.9 billion for fiscal 2022.
Year ended March 31, 2023 compared to year ended March 31, 2022 Fee-earning AUM increased $8.2 billion, or 17%, to $57.3 billion for fiscal 2023, due to contributions from customized separate accounts and specialized funds. Customized separate accounts fee-earning AUM increased $3.7 billion, or 12%, to $34.7 billion for fiscal 2023.
Our non-U.S. subsidiaries generally operate as corporate entities in non-U.S. jurisdictions, with certain of these entities subject to non-U.S. income taxes. Additionally, certain of our subsidiaries are subject to local jurisdiction income taxes at the entity level. Accordingly, the tax liability with respect to income attributable to non-controlling interests in HLA is borne by the holders of such non-controlling interests.
Our non-U.S. subsidiaries generally operate as corporate entities in non-U.S. jurisdictions, with certain of these entities subject to non-U.S. income taxes. 79 Additionally, certain of our subsidiaries are subject to local jurisdiction income taxes at the entity level.
We believe that we will be able to continue to meet our short-term and long-term liquidity and capital requirements through our cash flows from operating activities, existing cash and cash equivalents and our ability to obtain future external financing. 89 We believe we will also continue to evaluate opportunities, based on market conditions, to access the capital markets and use proceeds from sales of our Class A common stock to settle in cash exchanges of HLA membership interests by direct and indirect owners of HLA pursuant to our exchange agreement.
We believe we will also continue to evaluate opportunities, based on market conditions, to access the capital markets and use proceeds from sales of our Class A common stock to settle in cash exchanges of HLA membership interests by direct and indirect owners of HLA pursuant to our exchange agreement.
Year Ended March 31, (in thousands) 2022 2021 2020 Revenues Management and advisory fees $ 314,228 $ 289,444 $ 244,920 Incentive fees 48,133 31,134 21,437 Consolidated variable interest entities related: Incentive fees 5,558 21,057 7,691 Total revenues 367,919 341,635 274,048 Expenses Compensation and benefits 129,165 136,319 100,138 General, administrative and other 68,040 49,210 57,481 Consolidated variable interest entities related: General, administrative and other 1,150 378 — Total expenses 198,355 185,907 157,619 Other income (expense) Equity in income of investees 78,813 32,389 20,731 Interest expense (4,634) (2,044) (2,816) Interest income 500 1,676 709 Non-operating income 64,469 5,894 6,172 Consolidated variable interest entities related: Equity in loss of investees 483 (2,123) (481) Unrealized gains 4,485 2,141 — Interest expense (4) (459) — Total other income (expense) 144,112 37,474 24,315 Income before income taxes 313,676 193,202 140,744 Income tax expense 66,423 24,417 13,968 Net income 247,253 168,785 126,776 Less: Income (loss) attributable to non-controlling interests in general partnerships 376 (250) 85 Less: Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 96,548 69,720 65,866 Less: Income attributable to non-controlling interests in Hamilton Lane Alliance Holdings I, Inc. 4,343 1,293 — Net income attributable to Hamilton Lane Incorporated $ 145,986 $ 98,022 $ 60,825 77 Revenues Year Ended March 31, (in thousands) 2022 2021 2020 Management and advisory fees Specialized funds $ 150,079 $ 148,023 $ 111,803 Customized separate accounts 103,229 93,963 90,750 Advisory 24,972 26,439 24,160 Reporting and other 23,327 11,134 9,102 Distribution management 10,466 6,701 4,920 Fund reimbursement revenue 2,155 3,184 4,185 Total management and advisory fees 314,228 289,444 244,920 Incentive fees 53,691 52,191 29,128 Total revenues $ 367,919 $ 341,635 $ 274,048 Year ended March 31, 2022 compared to year ended March 31, 2021 Total revenues increased $26.3 million, or 8%, to $367.9 million, for fiscal 2022 compared to fiscal 2021, due to an increase in management and advisory fees.
Year Ended March 31, (in thousands) 2023 2022 2021 Revenues Management and advisory fees $ 371,874 $ 314,228 $ 289,444 Incentive fees 149,931 48,133 31,134 Consolidated variable interest entities related: Incentive fees 6,948 5,558 21,057 Total revenues 528,753 367,919 341,635 Expenses Compensation and benefits 198,412 129,165 136,319 General, administrative and other 89,395 68,040 49,210 Consolidated variable interest entities related: General, administrative and other 906 1,150 378 Total expenses 288,713 198,355 185,907 Other income (expense) Equity in income of investees 5,088 78,813 32,389 Interest expense (8,617) (4,634) (2,044) Interest income 1,789 500 1,676 Non-operating (loss) income (5,243) 64,469 5,894 Consolidated variable interest entities related: Equity in income (loss) of investees 1,455 483 (2,123) Unrealized gain 4,773 4,485 2,141 Interest expense — (4) (459) Interest income 3,325 — — Total other income (expense) 2,570 144,112 37,474 Income before income taxes 242,610 313,676 193,202 Income tax expense 55,425 66,423 24,417 Net income 187,185 247,253 168,785 Less: Income (loss) attributable to non-controlling interests in general partnerships 986 376 (250) Less: Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 71,027 96,548 69,720 Less: Income attributable to redeemable non-controlling interests in Hamilton Lane Alliance Holdings I, Inc. 5,617 4,343 1,293 Less: Income attributable to non-controlling interests in consolidated funds 435 — — Net income attributable to Hamilton Lane Incorporated $ 109,120 $ 145,986 $ 98,022 81 Revenues Year Ended March 31, (in thousands) 2023 2022 2021 Management and advisory fees Specialized funds $ 196,268 $ 150,079 $ 148,023 Customized separate accounts 117,763 103,229 93,963 Advisory 24,785 24,972 26,439 Reporting and other 24,792 23,327 11,134 Distribution management 2,560 10,466 6,701 Fund reimbursement revenue 5,706 2,155 3,184 Total management and advisory fees 371,874 314,228 289,444 Incentive fees 156,879 53,691 52,191 Total revenues $ 528,753 $ 367,919 $ 341,635 Year ended March 31, 2023 compared to year ended March 31, 2022 Total revenues increased $160.8 million, or 44%, to $528.8 million, for fiscal 2023 compared to fiscal 2022, due to increases in both management and advisory fees and incentive fees.
The fiscal 2022 effective income tax rate was different from the statutory tax rate due to the portion of income allocated to the non-controlling interest and change in the valuation allowance.
Our effective income tax rate in fiscal 2023 and 2022 was 22.8% and 21.2%, respectively. The fiscal 2023 effective income tax rate was different from the statutory tax rate due to the portion of income allocated to NCI and change in the valuation allowance.
The Multi-Draw Term Loan Agreement provides for a term loan in the aggregate principal amount of $100 million with a maturity date of July 1, 2030. Advances could be drawn through March 31, 2022 and the interest rate is a fixed per annum rate of 3.50%.
The 2020 Multi-Draw Term Loan Agreement provides for a term loan in the aggregate principal amount of $100 million with a maturity date of July 1, 2030. The interest rate is a fixed per annum rate of 3.50%. As 91 of March 31, 2023, we had an outstanding balance of $100 million under the 2020 Multi-Draw Term Loan Agreement.
For the years ended March 31, 2022 and 2021, our net cash used in financing activities was driven primarily by dividends paid to stockholders, payments under the tax receivable agreement and distributions to HLA members.
For the years ended March 31, 2023, 2022 and 2021, our net cash used in financing activities was driven primarily by dividends paid to stockholders, payments under the tax receivable agreement, distributions to HLA members and drawdowns and repayments under our revolving credit facility. Future Sources and Uses of Liquidity We generate significant cash flows from operating activities.
Financing Activities Our financing activities generally reflect cash received from debt and equity financings, payments to owners in the form of dividends, distributions and repurchases of shares and scheduled repayments of our outstanding debt.
Additionally, during the years ended March 31, 2023 and 2022, we received proceeds from the sale of investments. 92 Financing Activities Our financing activities generally reflect cash received from debt and equity financings, payments to owners in the form of dividends, distributions and repurchases of shares and scheduled drawdowns and repayments of our outstanding debt.
In limited cases, advisory service clients are charged basis point fees annually based on the amounts they have committed to invest pursuant to their agreements with us.
In limited cases, advisory service clients are charged basis point fees annually based on the amounts they have committed to invest pursuant to their agreements with us. In other cases where our services are limited to monitoring and reporting on investment portfolios, clients are charged a fee based on the number of investments in their portfolio.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe annual interest rate on the Term Loan Agreement, which is at the prime rate minus 1.50%, subject to a floor of 2.25%, was 2.25% as of March 31, 2022. The annual interest rate on the Revolving Loan Agreement, which is at the prime rate minus 1.50%, subject to a floor of 2.25%, was 2.25% as of March 31, 2022.
Biggest changeThe annual interest rate on the Term Loan Agreement, which is at the prime rate minus 1.25%, subject to a floor of 3.00%, was 6.75% as of March 31, 2023. The annual interest rate on the Revolving Loan Agreement, which is at the prime rate minus 1.50%, subject to a floor of 2.25%, was 6.50% as of March 31, 2023.
Our general partner investments include thousands of unique underlying 94 portfolio investments with no significant concentration in any industry or country outside of the United States. • Management fees from our specialized funds and customized separate accounts are not significantly affected by changes in fair value as the management fees are not generally based on the value of the specialized funds or customized separate accounts, but rather on the amount of capital committed or invested in the specialized funds or customized separate accounts, as applicable. • Incentive fees from our specialized funds and customized separate accounts are not materially affected by changes in the fair value of unrealized investments because they are based on realized gains and subject to achievement of performance criteria rather than on the fair value of the specialized fund’s or customized separate account’s assets prior to realization.
Our general partner investments include thousands of unique underlying portfolio investments with no significant concentration in any industry or country outside of the United States. • Management fees from our specialized funds and customized separate accounts are not significantly affected by changes in fair value as the management fees are not generally based on the value of the specialized funds or customized separate accounts, but rather on the amount of capital committed or invested in the specialized funds or customized separate accounts, as applicable. • Incentive fees from our specialized funds and customized separate accounts are not materially affected by changes in the fair value of unrealized investments because they are based on realized gains and subject to achievement of performance criteria rather than on the fair value of the specialized fund’s or customized separate account’s assets prior to realization.
Based on the floating rate component of our Loan Agreements payable as of March 31, 2022, we estimate that a 100 basis point increase in interest rates would result in increased interest expense of $0.5 million over the next 12 months.
Based on the floating rate component of our Loan Agreements payable as of March 31, 2023, we estimate that a 100 basis point increase in interest rates would result in increased interest expense of $1.1 million over the next 12 months.
Therefore, changes in exchange rates are not expected to materially impact our financial statements. Interest Rate Risk As of March 31, 2022, we had $171.8 million in borrowings outstanding under our Loan Agreements.
Therefore, changes in exchange rates are not expected to materially impact our financial statements. 98 Interest Rate Risk As of March 31, 2023, we had $214.4 million in borrowings outstanding under our Loan Agreements.
There have been no material changes in our market risk exposures since March 31, 2021. 95
There have been no material changes in our market risk exposures since March 31, 2022. 99

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