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What changed in Hamilton Lane INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Hamilton Lane INC's 2023 and 2024 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 2024 report.

+443 added−443 removedSource: 10-K (2024-05-23) vs 10-K (2023-05-25)

Top changes in Hamilton Lane INC's 2024 10-K

443 paragraphs added · 443 removed · 353 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

117 edited+27 added−43 removed194 unchanged
Biggest changeIn 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.
Biggest changeIn addition, we seek to partner with managers who share our dedication to these issues and exhibit progress towards industry best practices, which we assess through our request-for-information process and annual ESG/DE&I survey. We also seek to invest in diverse organizations and partner with managers who share a commitment to DE&I.
(1) The Class B Holders, who hold Class B units, and Class C Holders, who hold Class C units, are pre-IPO owners of our business who continue to hold their interests directly in HLA.
(1) The Class B Holders, who hold Class B units of HLA, and Class C Holders, who hold Class C units of HLA, are pre-IPO owners of our business who continue to hold their interests directly in HLA.
Leverage proprietary databases and analytics to enhance our existing service offerings and develop new products and services. When compared to more liquid investment areas, the private markets industry is characterized by the limited availability and inconsistency of quality information. We believe that the general trend toward transparency and consistency in private markets reporting will create new opportunities for us.
Leverage proprietary databases and analytics to enhance our existing service offerings and develop new products and services. When compared to more liquid investment areas, the private markets industry is characterized by the limited availability and inconsistency of quality information. We believe that the general trend toward more transparency and consistency in private markets reporting will create new opportunities for us.
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.
Our fee-earning AUM is equal to the amount of capital commitments, net invested capital or 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.
Clients can 16 download timely information on cash flows, adjusted valuations, adjusted capital account schedules, underlying portfolio company information and other data provided by private markets fund managers or developed internally by our in-house reporting team. Fees and Other Key Contractual Terms Customized Separate Accounts We enter into written contracts with each of our customized separate account clients.
Clients can download timely information on cash flows, adjusted valuations, adjusted capital account schedules, 16 underlying portfolio company information and other data provided by private markets fund managers or developed internally by our in-house reporting team. Fees and Other Key Contractual Terms Customized Separate Accounts We enter into written contracts with each of our customized separate account clients.
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.
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 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.
Employee Engagement In addition to our recruiting and retention efforts, we recognize that a true commitment to diversity requires a proactive and multi-faceted approach. 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.
In addition to our recruiting and retention efforts, we recognize that a true commitment to diversity requires a proactive and multi-faceted approach. 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.
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 intermediary clients, which 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.
Newer strategies include investments in businesses with a focus on the core categories of environmental and/or social impact. Diversify and grow client base. We aim to continue to expand our relationships with existing clients and intend to capitalize on significant opportunities in new client segments globally, such as smaller institutions and high-net-worth individuals.
Strategies include investments in businesses with a focus on the core categories of environmental and/or social impact. Diversify and grow client base. We aim to continue to expand our relationships with existing clients and intend to capitalize on significant opportunities in new client segments globally, such as smaller institutions and high-net-worth individuals.
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.
Our 27 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.
Corporate Responsibility For more than 30 years, Hamilton Lane has proudly helped our clients and their beneficiaries achieve more financially secure futures. We believe responsible and sustainable investing is a global business imperative and is key to building long-term value in a rapidly changing and increasingly complex world.
Corporate Social Responsibility For more than 30 years, Hamilton Lane has proudly helped our clients and their beneficiaries achieve more financially secure futures. We believe responsible and sustainable investing is a global business imperative and is key to building long-term value in a rapidly changing and increasingly complex world.
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.
Employees Our Culture and Focus on Diversity, Equity, Inclusion & Belonging 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.
In certain cases, we have formed investment vehicles utilizing other forms, including Delaware limited liability companies, Cayman unit trusts and/or Luxembourg companies. Our capital commitment to such an investment vehicle is generally 1% of total capital commitments but in certain 17 cases may be higher or lower.
In certain cases, we have formed investment vehicles utilizing other forms, including Delaware limited liability companies, Cayman unit trusts and/or Luxembourg companies. Our capital commitment to such an investment vehicle is generally 1% of total capital commitments but in certain cases may be higher or lower.
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.
In early 2021, we became a signatory to the 29 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.
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.
As an important first step towards this goal, we became a signatory to Initiative Climate International (“iCI”) in 2022. iCI is affiliated with PRI and is composed of a platform of leading private equity investors dedicated to understanding and reducing carbon emissions of private equity-backed companies.
Included in our overall approach to ESG is our ongoing focus on diversity, equity and inclusion (“DE&I”), both at the general partner and underlying portfolio company level. For more information on ESG and our investment process, see “—Corporate Responsibility” below.
Included in our overall approach to ESG is our ongoing focus on diversity, equity and inclusion (“DE&I”), both at the general partner and underlying portfolio company level. For more information on ESG and our investment process, see “—Corporate Social Responsibility” below.
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.
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.
Our operational due diligence (“ODD”) team is empowered with separate voting rights on each of the firm’s fund investment opportunities, which means that we will only proceed with investments that are approved by both our investment committee and our ODD team.
Our operational due diligence (“ODD”) team is empowered with 11 separate voting rights on each of the firm’s fund investment opportunities, which means that we will only proceed with investments that are approved by both our investment committee and our ODD team.
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.
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.
The exchange of a Class B unit will result in the redemption and cancellation of the corresponding share of Class B common stock. Voting Rights Except as provided in our certificate of incorporation or by applicable law, holders of Class A common stock and Class B common stock vote together as a single class.
The exchange of a Class B unit will result in the redemption and cancellation of the corresponding share of Class B common stock. 7 Voting Rights Except as provided in our certificate of incorporation or by applicable law, holders of Class A common stock and Class B common stock vote together as a single class.
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.
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 fully integrate ESG into all of our due diligence processes and utilize third-party risk rating and identification metrics to understand the geographic, social and environmental risks across industries and investments.
We fully integrate ESG into all of our investment due diligence processes and utilize third-party risk rating and identification metrics to understand the geographic, social and environmental risks across industries and investments.
We manage these investment vehicles under an investment management agreement between the investment vehicle entity and us, and we manage all aspects of the vehicles, utilizing the services of third parties as needed, including administrators and custodial banks.
We manage these investment vehicles under an investment management 17 agreement between the investment vehicle entity and us, and we manage all aspects of the vehicles, utilizing the services of third parties as needed, including administrators and custodial banks.
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.
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.
Primary investments are investments in private markets funds at the time the funds are initially launched. The investments take the form of a capital commitment, where the fund will call capital from investors over time as investments are made.
Primary investments are investments in private markets funds at the time the funds are initially launched. The investments take the form of a capital commitment, where the fund 10 will call capital from investors over time as investments are made.
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 following chart summarizes the growth of our fee-earning AUM since fiscal year 2020. * 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.
Our client and private wealth solutions groups are responsible for identifying and contacting prospective clients for our products and services. Our sales people also work directly with consultants and financial advisers that advise smaller and medium-size institutional investors and high-net-worth individuals, who often rely on advice in the alternative investment area.
Our client and private wealth solutions groups are responsible for identifying and contacting prospective clients for our products and services. Our sales professionals also work directly with consultants and financial advisers that advise smaller and medium-size institutional investors and high-net-worth individuals, who often rely on advice in the alternative investment area.
We have seen this pattern developing in many places, including Europe, the Middle East, Latin America, Australasia, Japan, South Korea, Southeast Asia and China, and have positioned ourselves to take advantage of it by establishing local presences with global investment capabilities.
We have seen this pattern developing in many places, including Europe, the Middle East, Latin America, Australasia, Japan, South Korea, Southeast Asia and China, and have positioned ourselves to take advantage of it by establishing local presences with global investment capabilities in these regions.
Financial Conduct Authority no longer have “passporting” privileges under certain EU directives, such as the AIFMD and the Markets in Financial Instruments Directive II (“MiFID II”), which certain of our specialized funds and customized separate accounts rely upon for access to markets throughout the EU.
Financial Conduct Authority no longer have “passporting” privileges under certain EU directives, such as the AIFMD and the Markets in Financial Instruments Directive II (“MiFID II”), which certain of our specialized funds and customized separate accounts relied upon for access to markets throughout the EU.
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 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. 30
Management fees would be reduced in the event that any monitoring, consulting, investment banking, advisory, transaction, directors’ or break-up or similar fees are paid to the fund’s general partner, the Manager or any of their affiliates or principals. Incentive Fees.
Management fees would be offset in the event that any monitoring, consulting, investment banking, advisory, transaction, directors’ or break-up or similar fees are paid to the fund’s general partner, the Manager or any of their affiliates or principals. Incentive Fees.
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.
We had approximately $796 billion of AUA as of March 31, 2024. 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.
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.
The difference is due primarily to $40 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 a decrease of $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 80% 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 77.5% of the combined voting power of our common stock.
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.
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, 2024.
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.
The remaining $21 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 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.
The parties to the stockholders agreement control approximately 77.6% 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 some circumstances, we may waive or offset the Cobalt LP subscription fee for clients who pay management fees to us for other services. Distribution Management We enter into written contracts with each of our distribution management clients.
In some circumstances, we may waive or offset the Cobalt LP subscription fee for clients who pay management fees to us for other services. Distribution Management We enter into written contracts with each of our distribution management clients, including our specialized funds.
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.
We have 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 6 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 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.
As of March 31, 2024, our client and investor base included over 1,800 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.
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.
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 60% of our fiscal 2024 management and advisory fee revenues came from clients based outside of the United States.
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.
The partnership seeks to offset carbon dioxide emissions by supporting projects with third-party verified carbon credits as well as societal benefit. We have historically supported 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.
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 generally have discretionary investment authority over our customized separate accounts, which comprised approximately $93 billion of our AUM as of March 31, 2024. • Specialized Funds : We organize, invest and manage specialized primary, secondary and direct investment funds.
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.
We currently have approximately 700 employees, including 238 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, 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.
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, 2024, we had AUM of approximately $124 billion, reflecting a 16% compound annual growth rate (“CAGR”) from March 31, 2020, and our AUM increased in each fiscal year during this timeframe.
(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.
(2) We hold all of the Class A units of HLA, representing the right to receive approximately 73.6% of the distributions made by HLA. We act as the sole manager of HLA and operate and control all of its business and affairs.
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 partnerships with organizations such as Girls Who Invest, Women Societies Alliance, SEO, Heights 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 (“HLWE”), our annual Undergraduate Women’s Private Equity Summit and our Emerging Talent Program, are a testament to this belief.
Our corporate headquarters in Conshohocken, Pennsylvania, a suburb of Philadelphia, was awarded a Silver LEED (Leadership in Energy and Environmental Design) certification as well as a Fitwel certification. The LEED certification demonstrates the value we place on locating our headquarters in an energy and resource-efficient building.
Our corporate headquarters in Conshohocken, Pennsylvania, a suburb of Philadelphia, was awarded a Silver LEED (Leadership in Energy and Environmental Design) certification as well as a Fitwel certification. The LEED certification demonstrates the value we place on locating our headquarters in an energy and resource-efficient building. The Fitwel certification demonstrates our commitment to the health and wellness of our employees.
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.
Our AUA is diversified across geographies with approximately 41% derived from clients based outside of the United States. 13 The following chart summarizes the growth of our AUA since fiscal year 2020.
In 2022, we continued to embed ESG throughout our due diligence processes, including the integration of ESG, earlier, through the inclusion of EU Sustainable Finance Disclosure Regulation (“SFDR”) ratings and ESG factors in our screening and meeting memoranda.
In 2022, we continued to embed ESG throughout our due diligence processes, including the integration of ESG earlier in our process, through the inclusion of tracking EU Sustainable Finance Disclosure Regulation (“SFDR”) Articles and other ESG factors in our screening and meeting memoranda.
This water filter project reduces emissions by removing the current practice of using fire to boil and clean water and promotes health, safety and improved quality of life within the population. In 2022, we worked with a third party on data verification and calculation before purchasing offsets.
This water filter project reduces emissions by removing the current practice of using fire to boil and 26 clean water and promotes health, safety and improved quality of life within the population. Since 2022, we have worked with a third party on data verification and calculation of our carbon footprint before purchasing offsets.
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.
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, 2024, our fee-earning AUM was approximately $66 billion compared to $124 billion in AUM.
The Fitwel certification demonstrates our commitment to the health and wellness 26 of our employees. We incorporated ESG considerations into our design and furnishing choices, the office offers spaces designated for personal wellness, mental health and well-being and employee connectivity, and we have taken steps to reduce paper and single-use plastics consumption and other waste.
We incorporated ESG considerations into our design and furnishing choices, the office offers spaces designated for personal wellness, mental health and well-being and employee connectivity, and we have taken steps to reduce paper and single-use plastics consumption and other waste.
We believe we are uniquely capable of pursuing the opportunities arising from increased allocations among institutional investors and the rapid wealth creation globally among high-net-worth individuals because of our strong brand recognition, multi-office resources, experienced team of investment professionals and comprehensive suite of products and services.
We believe we are particularly well-placed to pursue the opportunities arising from increased allocations among institutional investors and the rapid wealth creation globally among high-net-worth individuals because of our strong brand recognition, multi-office resources, experienced team of investment professionals and comprehensive suite of products and services.
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.
For the year ended March 31, 2024, our top 10 clients generated approximately 14% of management and advisory fee revenues, and our top 20 clients generated approximately 22% of management and advisory fee revenues with all of our top 20 clients having multiple allocations, products or services with us.
In 2022, we partnered with Ownership Works, a nonprofit organization that works with companies and investors to provide all employees with the opportunity to build wealth through equity, and our chief executive officer serves on its board of directors.
In 2022, we partnered with Ownership Works, a nonprofit organization that works with companies and investors to provide all employees with the opportunity to build wealth through equity, and Mario Giannini, one of our executive co-chairmen, serves on its board of directors.
Formed in 2016, our Diversity, Equity & Inclusion Council (“DE&I Council”) aims to raise awareness about the importance and benefits of fostering an inclusive work environment and culture. We know that smart teams do great things, but diverse teams can do truly incredible things, and the way to affect change is to help create it.
Our Diversity, Equity, Inclusion & Belonging (“DEI&B”) Council aims to raise awareness about the importance and benefits of fostering an inclusive work environment and culture. We know that smart teams do great things, but diverse teams can do truly incredible things, and the way to affect change is to help create it.
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.
Specialized funds comprised approximately $32 billion of our AUM as of March 31, 2024. • Advisory Services : We offer non-discretionary investment advisory services to assist clients in developing and implementing their private markets investment programs.
In the case of certain of our direct investment funds, strategic opportunity funds and evergreen funds, we earn carried interest on a deal-by-deal basis.
In the case of certain of our direct investment funds, strategic opportunity funds and evergreen funds other than our credit-focused evergreen fund, we earn carried interest on a deal-by-deal basis.
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.
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 $69 billion as of March 31, 2020 to approximately $124 billion as of March 31, 2024, representing a CAGR of approximately 16%. The following chart summarizes this growth.
Our Class B common stock was issued as part of the Reorganization to the holders of our Class B units, who are certain significant outside investors, members of management and significant employee owners. There is no trading market for our Class B common stock.
Our Class B common stock was issued as part of a series of corporate reorganization transactions in connection with our IPO to the holders of our Class B units, who are certain significant outside investors, members of management and significant employee owners. There is no trading market for our Class B common stock.
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.
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 including ESG in our final investment reports since 2010.
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.
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.
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.
Item 1. Business Our Company We are a global private markets investment solutions provider with approximately $124 billion of discretionary assets under management (“AUM”), and approximately $796 billion of non-discretionary assets under advisement (“AUA”) as of March 31, 2024.
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 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 to investors in the United States.
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.
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.
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.
With approximately 700 employees worldwide as of March 31, 2024, we are proud that our culture has been recognized annually for the last 12 years by Pensions & Investments magazine, a leading investment publication, as a “Best Place to Work in Money Management” since the inception of the list in 2012.
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.
We believe that the “Hamilton Lane” trade name, logos and website are material to our operations. Legal and Compliance Our general counsel reports to Erik Hirsch, one of our co-chief executive officers. Our attorneys are embedded in our corporate legal and investment legal teams.
Environmental Best Practices Climate change and environmental degradation are among the largest challenges that face the investment industry and humanity as a whole. A purely exclusionary approach is not sufficient to solve these problems, but rather a holistic one is required.
RIAA is dedicated to ensuring capital is aligned with achieving a healthy society, environment and economy. Environmental Best Practices Climate change and environmental degradation are among the largest challenges that face the investment industry and humanity as a whole. A purely exclusionary approach is not sufficient to solve these problems, but rather a holistic one is required.
We calculate our AUM as the sum of: (1) the net asset value (“NAV”) of our clients’ and funds’ underlying investments; (2) the unfunded commitments to our clients’ and funds’ underlying investments; and (3) the amounts authorized for us to invest on behalf of our clients and fund investors but not committed to an underlying investment. 12 Management fee revenue is based on a variety of factors and is not linearly correlated with AUM.
We calculate our AUM as the sum of: (1) the net asset value (“NAV”) of our clients’ and funds’ underlying investments; (2) the unfunded commitments to our clients’ and funds’ underlying investments; and (3) the amounts authorized for us to invest on behalf of our clients and fund investors but not committed to an underlying investment.
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.
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.
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.
Assets Under Management and Advisement As of March 31, 2024, we had total AUA and AUM of approximately $921 billion, of which $124 billion represents discretionary AUM from our customized separate accounts and specialized funds, and $796 billion represents non-discretionary AUA managed on behalf of our advisory accounts.
Our benefits include 16 weeks of fully paid parental leave plus one additional week to be used on demand, regardless of gender identity, lactation and milk shipping services, assisted reproductive technology and adoption support, back-up child, elder and self-care, workplace flexibility, mental health services and a number of financial wellness benefits including educational assistance, a student loan refinancing and repayment program, commuter benefits and our Employee Share Purchase Plan, as amended, through which employees can purchase shares of our Class A common stock at a discounted price.
We believe a blend of variable and longer-term components further attracts and incentivizes talent, provides an overall compensation package that is competitive with the market and encourages retention of top performers. 25 Our benefits include 16 weeks of fully paid parental leave plus one additional week to be used on demand, regardless of gender identity, lactation and milk shipping services, assisted reproductive technology and adoption support, back-up child, elder and self-care, workplace flexibility, mental health services and a number of financial wellness benefits including educational assistance, a student loan refinancing and repayment program, commuter benefits and our Employee Share Purchase Plan, as amended, through which employees can purchase shares of our Class A common stock at a discounted price.
Our clients are principally large, sophisticated, global investors that rely on our private markets expertise, deep industry relationships, differentiated investment access, risk management capabilities, proprietary data advantages and analytical tools to navigate the increasing complexity and opacity of private markets investing.
Our clients are principally large, sophisticated, global investors that rely on our private markets expertise, deep industry relationships, differentiated investment access, risk management capabilities, proprietary data advantages and analytical tools to navigate the complexity and opacity of private markets investing. While some maintain their own internal investment teams, our clients look to us for additional expertise, advice and outsourcing capabilities.
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.
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.
Assets related to our advisory accounts have increased from approximately $422 billion as of March 31, 2019, to approximately $745 billion as of March 31, 2023, representing a CAGR of approximately 15%. Our AUA clients are predominately large institutional investors, with 46% of AUA related to public pension funds and 31% related to sovereign wealth funds.
Assets related to our advisory accounts have increased from approximately $434 billion as of March 31, 2020, to approximately $796 billion as of March 31, 2024, representing a CAGR of approximately 16%. Our AUA clients are predominately large institutional investors, with 49% of AUA related to public pension funds and 30% related to sovereign wealth funds.
We have partnered with climate and sustainable development expert, Climate Impact Partners, to offset the emissions of our calendar 2019 - 2021 operations, we are currently working toward offsetting emissions from our calendar 2022 operations, and we intend to continue doing so going forward.
We have partnered with a climate and sustainable development expert, Climate Impact Partners, to offset the emissions of our calendar 2019 - 2021 operations, we are currently working toward offsetting emissions from our calendar 2022 operations, and we are collecting data necessary to calculate our calendar 2023 emissions.
Post-investment, we monitor general partners and their developing portfolios and direct investment portfolio companies to ensure adherence to ESG policies and commitments. We have implemented technology solutions to actively monitor ESG incidents in products and client portfolios.
We use our best efforts not to invest discretionary capital in companies that operate in excluded sectors. Post-investment, we monitor general partners and their developing portfolios and direct investment portfolio companies to ensure adherence to ESG policies and commitments. We have implemented technology solutions to actively monitor ESG incidents in products and client portfolios.
We are one of just five firms to hold this distinction. In addition, we have been recognized by the Central Penn Business Journal as a “Best Place to Work in Pennsylvania,” also for the last 11 consecutive years. Most recently, Hamilton Lane was named to Forbes’ inaugural Financial All-Stars list in 2023.
In addition, we have been recognized by the Central Penn Business Journal as a “Best Place to Work in Pennsylvania,” also for the last 12 consecutive years. Most recently, Hamilton Lane was named to Forbes’ inaugural Financial All-Stars list in 2023. At Hamilton Lane, we remain fully committed to DEI&B.
Our success is because of our people – our colleagues across the globe who bring their authentic selves to work every day. Together, we believe diverse perspectives lead to informed decisions designed to benefit our clients, our employees and our competitive edge. Cybersecurity Our cybersecurity programs and strategies are continuously evolving in response to new and emerging threats.
We are proud of our organization’s history of embracing and championing diversity. Our success is because of our people – our colleagues across the globe who bring their authentic selves to work every day. Together, we believe diverse perspectives lead to informed decisions designed to benefit our clients, our employees and our competitive edge.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeA widespread reoccurrence of COVID-19, or the occurrence of another pandemic or global health crisis, could increase the possibility of periods of increased restrictions on business operations, which may adversely impact our business, financial condition, results of operations, liquidity and prospects materially and exacerbate many of the other risks discussed in this Form 10-K. 55 It is not possible to predict with certainty the possible future business and economic ramifications arising from a widespread reoccurrence of COVID-19 or the occurrence of another pandemic or global health crisis, but such events could: (i) restrict our ability to easily travel and meet with prospective and current clients in person (which inhibits building and strengthening our relationships with them); (ii) impede our ability to market our funds and attract new business (which may result in lower or delayed revenue growth); (iii) restrict our ability to conduct on-site due diligence as may be appropriate for a potential investment (which can impede the identification of investment risks); (iv) cause a slowdown in fundraising activity (which could result in delayed or decreased management fees); (v) cause a slowdown in our deployment of capital (which could adversely affect our revenues and our ability to raise capital for new or successor funds); (vi) limit the ability of general partners to exit existing investments (which could decrease incentive fee revenue); and (vii) adversely impact our liquidity and cash flows due to declines in revenues.
Biggest changeIt is not possible to predict with certainty the possible future business and economic ramifications arising from the occurrence of another pandemic or global health crisis, but such events could: (i) restrict our ability to easily travel and meet with prospective and current clients in person (which inhibits building and strengthening our relationships with them); (ii) impede our ability to market our funds and attract new business (which may result in lower or delayed revenue growth); (iii) restrict our ability to conduct on-site due diligence as may be appropriate for a potential investment (which can impede the identification of investment risks); (iv) cause a slowdown in fundraising activity (which could result in delayed or decreased management fees); (v) cause a slowdown in our deployment of capital (which could adversely affect our 55 revenues and our ability to raise capital for new or successor funds); (vi) limit the ability of general partners to exit existing investments (which could decrease incentive fee revenue); and (vii) adversely impact our liquidity and cash flows due to declines in revenues.
The secure processing, maintenance and transmission of this information are critical to our operations. We, our service providers and their vendors face various security threats on a regular basis, including ongoing cybersecurity threats to and attacks that are intended to gain unauthorized access to our sensitive or proprietary information, destroy data or disable, degrade or sabotage our systems.
The secure processing, maintenance and transmission of this information are critical to our operations. We, our service providers and their vendors face various security threats on a regular basis, including ongoing cybersecurity threats and attacks that are intended to gain unauthorized access to our sensitive or proprietary information, destroy data or disable, degrade or sabotage our systems.
See “—Rapidly developing and changing privacy laws and regulations could increase compliance costs and subject us to enforcement risks and reputational damage.” Some jurisdictions have also enacted laws requiring companies to notify individuals and governmental agencies of data security breaches involving certain types of personal data.
See “—Rapidly developing and changing data security and privacy laws and regulations could increase compliance costs and subject us to enforcement risks and reputational damage.” Some jurisdictions have also enacted laws requiring companies to notify individuals and governmental agencies of data security breaches involving certain types of personal data.
Difficult or volatile market, geopolitical and economic conditions can adversely affect our business and the investments made by our specialized funds, customized separate accounts and advisory accounts in many ways, each of which could materially reduce our revenue, earnings and cash flow.
Difficult or volatile market, economic and geopolitical conditions can adversely affect our business and the investments made by our specialized funds, customized separate accounts and advisory accounts in many ways, each of which could materially reduce our revenue, earnings and cash flow.
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.
In addition, during periods of adverse market, 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.
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.
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: 36 • 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.
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.
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.
Poor investment performance could lead clients to terminate their agreements with us and/or result in negative reputational effects, either of which could materially and adversely affect our business, financial condition and results of operations. Finally, some matters covered by our due diligence process, such as ESG, are continuously evolving and we may not accurately or fully anticipate such evolution.
Poor investment performance could lead clients to terminate their agreements with us and/or result in negative 45 reputational effects, either of which could materially and adversely affect our business, financial condition and results of operations. Finally, some matters covered by our due diligence process, such as ESG, are continuously evolving and we may not accurately or fully anticipate such evolution.
In addition, we could be criticized for the accuracy, adequacy or completeness of the disclosure related to our or our specialized funds’ or customized separate accounts’ ESG-related policies, practices, initiatives, commitments and goals, and progress against those goals, which disclosure may be based on frameworks and standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.
In addition, we could be criticized for the accuracy, adequacy or completeness of the disclosure related to our or our specialized funds’ or customized 52 separate accounts’ ESG-related policies, practices, initiatives, commitments and goals, and progress against those goals, which disclosure may be based on frameworks and standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.
If regulators disagree with the procedures or standards we use for ESG or impact investing, or new regulations or legislation require a methodology of measuring or disclosing ESG impact that is different from our current practice, it could result in fines or other regulatory sanctions, which could have a material adverse effect on fundraising efforts, our business as a whole and our reputation.
Further, if regulators disagree with the procedures or standards we use for ESG or impact investing, or new regulations or legislation require a methodology of measuring or disclosing ESG impact that is different from our current practice, it could result in fines or other regulatory sanctions, which could have a material adverse effect on fundraising efforts, our business as a whole and our reputation.
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.
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 33 with certain other events.
In addition, negative publicity and press speculation about us, our investment activities or the private markets in general, whether or not based in truth, or litigation or regulatory action against us or any third-party managers recommended by us or involving us may tarnish our reputation and harm our ability to attract and retain clients and materially adversely affect our financial condition or results of operations.
In addition, negative publicity and press speculation about us, our investment activities or the private markets in general, whether or not based in truth, or litigation or regulatory action against us or any third-party managers recommended by us or 50 involving us may tarnish our reputation and harm our ability to attract and retain clients and materially adversely affect our financial condition or results of operations.
This risk may be further exacerbated if, as a result of poor fund 59 performance or difficult market and fundraising environments, investors and clients negotiate lower fees or fee concessions that are materially less favorable to us than our desired fee structure. If our revenue declines without a commensurate reduction in our expenses, our net income will be reduced.
This risk may be further exacerbated if, as a result of poor fund performance or difficult market and fundraising environments, investors and clients negotiate lower fees or fee concessions that are materially less favorable to us than our desired fee structure. If our revenue declines without a commensurate reduction in our expenses, our net income will be reduced.
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.
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. The exercise of redemption or repurchase rights by investors in our evergreen funds may adversely affect our revenues.
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.
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 41 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.
While this can create opportunities, not addressing these changed expectations could create business risks for portfolio companies, which could negatively impact the returns in our specialized funds and customized separate accounts. Further, advances in climate science may change society’s understanding of sources and magnitudes of negative effects on climate, which could also negatively impact portfolio company financial performance.
While this can create opportunities, not addressing these changed expectations could create business risks for portfolio companies, which could negatively impact the returns in our specialized 53 funds and customized separate accounts. Further, advances in climate science may change society’s understanding of sources and magnitudes of negative effects on climate, which could also negatively impact portfolio company financial performance.
In addition, if the United States were to default on its debt, the negative ramifications on the U.S. and global economies could be unprecedented and long-lasting and may dramatically exacerbate risks highlighted here and elsewhere in this Form 10-K. Extensive government regulation, compliance failures and changes in law or regulation could adversely affect us.
In addition, if the United States were to default on its debt, the negative ramifications on the U.S. and global economies could be unprecedented and long-lasting and may dramatically exacerbate risks highlighted here and elsewhere in this Form 10-K. 58 Extensive government regulation, compliance failures and changes in law or regulation could adversely affect us.
Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a company in which one or more of our specialized funds, customized separate accounts or advisory accounts hold an investment, holders of securities ranking senior to our clients’ investments would typically be entitled to receive payment in full before distributions could be made in respect of our clients’ investments.
Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a company in which one or more of our specialized funds, customized separate accounts or advisory accounts hold an investment, holders of securities ranking senior to our clients’ investments would 43 typically be entitled to receive payment in full before distributions could be made in respect of our clients’ investments.
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.
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.
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.
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 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.
A disaster or a disruption in technology or infrastructure that supports our business, including a disruption involving electronic communications, cloud-based infrastructure or other services used by us, our third-party service providers or other third parties with whom we conduct business, or a disruption directly affecting our principal offices, could negatively impact our ability to continue to operate our business without interruption.
A disaster or a disruption in technology or infrastructure that supports our business, including a disruption involving electronic communications, cloud-based infrastructure or other 46 services used by us, our third-party service providers or other third parties with whom we conduct business, or a disruption directly affecting our principal offices, could negatively impact our ability to continue to operate our business without interruption.
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.
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 48 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.
These strategies and procedures may fail under some circumstances, particularly if we are confronted with risks that we have underestimated or not identified, including those related to difficult market or geopolitical conditions. Given the large number and size of our funds, we often have large positions with a single counterparty.
These strategies and procedures may fail under some circumstances, particularly if we are confronted with risks that 44 we have underestimated or not identified, including those related to difficult market or geopolitical conditions. Given the large number and size of our funds, we often have large positions with a single counterparty.
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.
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.
In the United States, the Committee on Foreign Investment in the United States has the authority to review and potentially block, unwind or impose conditions on certain foreign investments in U.S. companies or real estate, which may reduce the number of potential buyers and limit the ability of our funds to realize value from certain existing and future 62 investments.
In the United States, the Committee on Foreign Investment in the United States has the authority to review and potentially block, unwind or impose conditions on certain foreign investments in U.S. companies or real estate, which may reduce the number of potential buyers and limit the ability of our funds to realize value from certain existing and future investments.
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.
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 effective.
We expect to cause HLA to make distributions to its members, including us. However, the ability of HLA to make such distributions will be subject to its operating results, cash requirements and financial condition, restrictive covenants in the Loan Agreements and applicable Pennsylvania law (which may limit the amount of funds available for distribution to its members).
We expect to cause HLA to make distributions to its members, including us. However, the ability of HLA to make such 66 distributions will be subject to its operating results, cash requirements and financial condition, restrictive covenants in the Loan Agreements and applicable Pennsylvania law (which may limit the amount of funds available for distribution to its members).
Difficult market conditions or slowdowns affecting a particular asset class, industry, geographic region or other category of investment could have a significant adverse impact on a given specialized fund or customized separate account if its investments are concentrated in that area, which would result in lower investment returns.
Difficult market conditions or slowdowns affecting a particular asset class, industry, geographic region or other category of investment could have a significant adverse impact on a given specialized fund or customized separate account if its investments are concentrated in that area, which could result in lower investment returns.
The legislation could hinder our ability to deploy capital as freely as we would wish and to recruit and incentivize staff. Different and extended internal governance, disclosure, reporting, liquidity and group “prudential” consolidation requirements (among other things) could also have a material impact on our EU-based operations.
The legislation could hinder our ability to deploy capital as freely as we would wish and to 62 recruit and incentivize staff. Different and extended internal governance, disclosure, reporting, liquidity and group “prudential” consolidation requirements (among other things) could also have a material impact on our EU-based operations.
In the event that our specialized funds, customized separate accounts or individual investments perform poorly, our revenues and earnings derived from incentive fees will decline, and it will be more difficult for us to raise capital for new specialized funds or gain new or retain current customized separate account clients in the future.
In the event that our specialized funds, customized separate accounts or individual investments perform poorly, our revenues and earnings derived from incentive fees will decline, and it will be 39 more difficult for us to raise capital for new specialized funds or gain new or retain current customized separate account clients in the future.
For more information on our Loan Agreements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Loan Agreements”. We expect to continue to utilize debt to finance our operations, which will expose us to the typical risks associated with the use of leverage.
For more information on our Loan Agreements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Loan Agreements”. We expect to continue to utilize debt to finance and grow our operations, which will expose us to the typical risks associated with the use of leverage.
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.
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.
Any change to our senior management team could materially and adversely affect our business, financial condition and results of operations. 35 We intend to expand our business and may formulate new business strategies or enter into new geographic markets or strategic partnerships, which may result in additional risks and uncertainties in our business.
Any change to our senior management team could materially and adversely affect our business, financial condition and results of operations. We intend to expand our business and may formulate new business strategies or enter into new geographic markets or strategic partnerships, which may result in additional risks and uncertainties in our business.
If a new strategy or fund does not develop as 36 anticipated or our balance sheet assets cease to provide adequate liquidity, we may be forced to realize losses or become limited in our ability to seed new funds or strategies or support existing ones as currently contemplated.
If a new strategy or fund does not develop as anticipated or our balance sheet assets cease to provide adequate liquidity, we may be forced to realize losses or become limited in our ability to seed new funds or strategies or support existing ones as currently contemplated.
In addition, regulatory initiatives to require more disclosures regarding ESG matters are becoming increasingly common, which may further increase the number and type of clients and investors who place importance on these issues and who demand certain types of reporting from us.
In addition, regulatory initiatives to require more disclosures regarding ESG matters are becoming increasingly common, which may further increase the 51 number and type of clients and investors who place importance on these issues and who demand certain types of reporting from us.
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.
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 59 “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.
Climate change, climate change-related regulation and sustainability concerns could adversely affect our business and the operations of portfolio companies in which our specialized funds and customized 54 separate accounts invest, and any actions we take or fail to take in response to such matters could damage our reputation.
Climate change, climate change-related regulation and sustainability concerns could adversely affect our business and the operations of portfolio companies in which our specialized funds and customized separate accounts invest, and any actions we take or fail to take in response to such matters could damage our reputation.
In addition, we believe Hamilton Lane Incorporated is not an investment company under section 3(b)(1) of the Investment Company Act because it is primarily engaged in a non-investment company business. The Investment Company Act and the rules thereunder contain detailed parameters for the organization and operations of investment companies.
In addition, we believe Hamilton Lane Incorporated is not an investment company under section 3(b)(1) of the Investment Company Act because it is primarily engaged in a non-investment company business. 68 The Investment Company Act and the rules thereunder contain detailed parameters for the organization and operations of investment companies.
This may subject us to reputational harm, make such vehicles less attractive to investors in the future and negatively impact future subscriptions to such vehicles, which could have a material adverse effect on the cash flows of such vehicles and may negatively impact the revenues we derive from them.
This may subject us to reputational harm, make such vehicles less attractive to investors in the future and negatively impact future subscriptions to such 40 vehicles, which could have a material adverse effect on the cash flows of such vehicles and may negatively impact the revenues we derive from them.
For example, government authorities of certain U.S. states have requested information from and scrutinized certain asset managers with respect to whether such managers have adopted ESG policies that would restrict investing in certain industries or sectors, such as traditional energy.
For example, government authorities of certain U.S. states have requested information from and publicly scrutinized certain asset managers with respect to whether such managers have adopted ESG policies that would restrict investing in certain industries or sectors, such as traditional energy.
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.
As a result, in certain circumstances, payments could be made under the tax receivable agreement in excess of our ultimate cash tax savings. 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.
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.
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.
However, the impact of the penalty is directly correlated to the amount of capital previously invested by the investor in the fund. For instance, if an investor has invested little or no capital early in the life of the fund, then the forfeiture penalty may not be as meaningful.
However, the impact of the penalty is directly correlated to the amount of capital previously invested by the investor in the fund. For 38 instance, if an investor has invested little or no capital early in the life of the fund, then the forfeiture penalty may not be as meaningful.
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.
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.
Portfolio companies in which the investment is made may make business, financial or management decisions with which we do not agree. In addition, the majority stakeholders or our management may take risks or otherwise act in a manner that does not serve our interests.
Portfolio companies in which the investment is made may make business, financial or management decisions with which we do not agree. In addition, the majority stakeholders or their management may take risks or otherwise act in a manner that does not serve our interests.
The HLA membership units held directly and indirectly by the members of HLA other than HLI, including members of our senior management team, may in the future be exchanged for shares of our Class A common stock or, at our election, for cash.
The HLA membership units held directly and indirectly by the members of HLA other than HLI, including members of our senior management team, may in the future be exchanged for shares of our Class A 63 common stock or, at our election, for cash.
A general market downturn or a specific market dislocation may result in lower investment returns for the private markets funds or portfolio companies in which our specialized funds and customized separate accounts invest, which consequently would materially and adversely affect investment returns for our specialized funds and customized separate accounts.
A general market downturn or a specific market dislocation may result in lower investment returns for the private markets funds or portfolio companies in which our specialized funds and customized 42 separate accounts invest, which consequently would materially and adversely affect investment returns for our specialized funds and customized separate accounts.
As a registered investment adviser, HLA has fiduciary duties to its clients. Similarly, our subsidiary, Hamilton Lane Securities LLC, is registered as a broker-dealer with the SEC and FINRA, and it is subject to their rules and regulations.
As a registered investment adviser, HLA has fiduciary duties to its clients. Similarly, our subsidiary, Hamilton Lane Securities LLC, is registered as a broker-dealer 60 with the SEC and FINRA, and it is subject to their rules and regulations.
We, our specialized funds and customized separate accounts and portfolio companies in which our specialized funds and customized separate accounts invest are subject to increasing scrutiny from clients, 52 investors, regulators, elected officials, stockholders and other stakeholders with respect to ESG matters.
We, our specialized funds and customized separate accounts and portfolio companies in which our specialized funds and customized separate accounts invest are subject to increasing scrutiny from clients, investors, regulators, elected officials, stockholders and other stakeholders with respect to ESG matters.
In addition, because most of our senior management and other professionals hold most of their economic interests in us through HLA and certain of its affiliates, which are not subject to U.S. federal and state entity-level income taxes, and our Class A common stockholders hold their interests through Hamilton Lane Incorporated, which is subject to entity-level taxation as a corporation in the United States, conflicts relating to the selection and structuring of investments or other matters may arise between senior management and our other professionals, on the one hand, and the Class A stockholders of Hamilton Lane Incorporated, on the other hand.
In addition, because many of our senior management and other professionals hold their economic interests in us through HLA and certain of its affiliates, which are not subject to U.S. federal and state entity-level income taxes, and our Class A common stockholders hold their interests through Hamilton Lane Incorporated, which is subject to entity-level taxation as a corporation in the United States, conflicts relating to the selection and structuring of investments or other matters may arise between senior management and our other professionals, on the one hand, and the Class A stockholders of Hamilton Lane Incorporated, on the other hand.
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.
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 market, economic and geopolitical conditions and events in the United States or throughout the world that are outside our control, including 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.
In addition, we may be subject to successor liability for FCPA violations or other acts of bribery, or violations of applicable sanctions or other export control laws committed by companies in which we or our funds invest or which we or our funds acquire.
In addition, we may be subject to successor liability for FCPA violations or other acts of bribery, or violations of applicable sanctions or 61 other export control laws committed by companies in which we or our funds invest or which we or our funds acquire.
(“JPMorgan”), as successor to First Republic Bank (“First Republic”). In early May 2023, JPMorgan announced its purchase of First Republic after that bank’s failure. The purchase included our Loan Agreements.
(“JPMorgan”), as successor to First Republic Bank (“First Republic”). In early May 2023, JPMorgan announced its purchase of 35 First Republic after that bank’s failure. The purchase included our Loan Agreements.
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.
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.
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.
For example, members of our senior management team have different tax positions 65 from Class A common stockholders and from 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.
Because most members of our senior management team hold most of their economic interest in HLA directly through holding companies and other vehicles rather than through ownership of shares of our Class A common stock, they may have interests that do not align with, or conflict with, those of the holders of Class A common stock or with us.
Because many members of our senior management team hold their economic interest in HLA directly through holding companies and other vehicles rather than through ownership of shares of our Class A common stock, they may have interests that do not align with, or conflict with, those of the holders of Class A common stock or with us.
The Term Loan Agreement matures on January 1, 2030, the 2020 Multi-Draw Term Loan Agreement matures on July 1, 2030, the 2022 Multi-Draw Term Loan Agreement matures on October 1, 2029 and the Revolving Loan 37 Agreement matures on March 24, 2025.
The Term Loan Agreement matures on January 1, 2030, the 2020 Multi-Draw Term Loan Agreement matures on July 1, 2030, the 2022 Multi-Draw Term Loan Agreement matures on October 1, 2029 and the Revolving Loan Agreement matures on March 24, 2025.
Also, a situation in which asset values turn out to be materially different from values reflected in fund NAVs, whether due to misinformation or otherwise, could cause investors to lose confidence in us and may, in turn, result in difficulties in our ability to raise additional capital, retain clients or attract new clients.
Also, a situation in which asset values turn out to be materially different from values reflected in fund NAVs, whether due to error or otherwise, could cause investors to lose confidence in us and may, in turn, result in difficulties in our ability to raise additional capital, retain clients or attract new clients.
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.
New climate change and sustainability-related 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.
Moreover, the due diligence investigation that we will carry out with respect to any investment opportunity may not reveal or highlight all relevant facts (including bribery, fraud or other illegal activities) or risks that are necessary or helpful in evaluating such investment opportunity.
Moreover, the due diligence investigation that we will carry out with respect to any investment opportunity may not detect or highlight all relevant facts (including bribery, fraud or other illegal activities) or risks that are necessary or helpful in evaluating such investment opportunity.
As we expand the scope of our business, we increasingly confront potential and actual conflicts of interest relating to our advisory and investment management businesses. For example, we may recommend that 34 various advisory clients invest in specialized funds managed by us.
As we expand the scope of our business, we increasingly confront potential and actual conflicts of interest relating to our advisory and investment management businesses. For example, we may recommend that 32 various advisory clients invest in specialized funds managed by us.
See “—Operational risks may disrupt our business, damage our reputation, result in financial losses or limit our growth.” 48 Operational risks may disrupt our business, damage our reputation, result in financial losses or limit our growth.
See “—Operational risks may disrupt our business, damage our reputation, result in financial losses or limit our growth.” Operational risks may disrupt our business, damage our reputation, result in financial losses or limit our growth.
We may also communicate certain climate-related initiatives, commitments and goals in our SEC filings or in other disclosures, which subjects us to additional risks, including the risk of being accused of “greenwashing.” Certain portfolio companies in which our specialized funds and customized separate accounts invest operate in sectors that could face transition risk if carbon-related regulations or taxes are implemented.
We may also communicate certain climate-related initiatives, commitments and goals in our SEC filings or in other disclosures, which subjects us to additional risks, including the risk of being accused of “greenwashing”. Certain portfolio companies in which our specialized funds and customized separate accounts invest operate in sectors that could face transition risk if carbon-related regulations or taxes are implemented.
We have and will continue to provide resources to foster the development of new product offerings and business strategies by our investment professionals and launch successor and related products, such that our new strategies achieve a level of scale and profitability.
We have and will continue to provide resources to foster the development of new product offerings and business strategies by our investment professionals and launch successor and related products, such that our 34 new strategies seek to achieve a level of scale and profitability.
Any inability, or perceived inability, to adequately address privacy concerns, or comply with applicable laws, regulations, policies, industry standards and guidance, contractual obligations, or other legal obligations, even if unfounded, could result in significant regulatory and third-party liability, increased costs, disruption of our business and operations, and a loss of client confidence and other reputational damage.
Any actual or perceived inability by us to adequately address privacy concerns, or comply with applicable privacy laws, regulations, policies, industry standards and guidance, contractual obligations, or other legal obligations, even if unfounded, could result in significant regulatory and third-party liability, increased costs, disruption of our business and operations, and a loss of client confidence and other reputational damage.
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.
We have 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 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.
Because most members of our senior management team hold most of their economic interest in HLA through other entities, conflicts of interest may arise between them and holders of shares of our Class A common stock or us.
Because many members of our senior management team hold their economic interest in HLA through other entities, conflicts of interest may arise between them and holders of shares of our Class A common stock or us.
Attacks on our or their information technology 49 infrastructure could enable the attackers to gain unauthorized access to and steal our sensitive or proprietary information, destroy data or disable, degrade or sabotage our systems or divert or otherwise steal funds, and attackers have in the past gained unauthorized access to sensitive information about us, our clients and investors by attacking the systems of certain of our service providers.
Attacks on our or our service providers’ information technology infrastructure could enable the attackers to gain unauthorized access to and steal our sensitive or proprietary information, destroy data or disable, degrade or sabotage our systems or divert or otherwise steal funds, and attackers have in the past gained unauthorized access to sensitive information about us, our clients and investors by attacking the systems of certain of our service providers.
Furthermore, underlying investments within our specialized funds and customized separate accounts reflect valuations reported elsewhere in this Form 10-K that are determined as of December 31, 2022.
Furthermore, underlying investments within our specialized funds and customized separate accounts reflect valuations reported elsewhere in this Form 10-K that are determined as of December 31, 2023.
In addition, we could be criticized for the scope or nature of such initiatives or goals, or for any revisions to these goals. Further, as part of our ESG practices, we rely from time to time on third-party data, services and methodologies and such services, data and methodologies could prove to be incomplete or inaccurate.
We could also be criticized for the scope or nature of our initiatives or goals or for any revisions to these goals. Further, as part of our ESG practices, we rely from time to time on third-party data, services and methodologies and such services, data and methodologies could prove to be incomplete or inaccurate.
We regularly are subject to requests for information, inquiries and informal or formal examinations by the SEC and other regulatory authorities, with which we routinely cooperate.
We regularly are subject to requests for information, inquiries and routine informal or formal examinations by the SEC and other regulatory authorities, with which we cooperate.
For more information on this risk, please see “—Our indebtedness may expose us to substantial risks, and our cash balances are exposed to the credit risks of the financial institutions at which they are held.” Failure to maintain the security of our information and technology networks or data security breaches could harm our reputation and have a material adverse effect on our results of operations, financial condition and cash flow.
For more information on this risk, please see “—Our indebtedness may expose us to substantial risks, and our cash balances are exposed to the credit risks of the financial institutions at which they are held.” Failure to maintain the security of our information technology networks, or those of our third-party service providers, or data security breaches could harm our reputation and have a material adverse effect on our results of operations, financial condition and cash flow.
We rely heavily on our and our third-party service providers’ financial, accounting, compliance, monitoring, administration, reporting and other data processing systems and technology platforms, including those of our fund administrators and AIFMs.
We rely heavily on our and our third-party service providers’ financial, accounting, compliance, monitoring, administration, reporting and other data processing systems and technology platforms, including those of our fund administrators and AIFMs, to conduct our business.
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.
The approximately 14.2 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.
We may find it harder to retain and raise funds, and we may lose investment opportunities in the future, if we do not match the prices, structures and terms offered by our competitors. We may not be able to maintain our current fee structure as a result of industry pressure from private markets investors to reduce fees.
We may find it harder to retain and raise funds, and we may lose investment opportunities in the future, if we do not offer prices, structures and terms competitive with those offered by our competitors. We may not be able to maintain our current fee structure as a result of industry pressure from private markets investors to reduce fees.
A 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.
A 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, 56 including with respect to products with mandates that incorporate ESG considerations, or products that are targeted toward retail; • further innovations in financial technology (or fintech) 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.
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.
Hamilton Lane Incorporated is the sole managing member of HLA and holds an approximately 73.6% 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.
Although we assess our banking relationships as we believe necessary or appropriate, our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect our company, the financial institutions with which we have credit agreements or arrangements, including the Loan Agreements, directly, or the financial services industry or economy in general. 38 We may be unable to remain in compliance with the financial or other covenants contained in the Loan Agreements.
Although we assess our banking relationships as we believe necessary or appropriate, our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect our company, the financial institutions with which we have credit agreements or arrangements, including the Loan Agreements, directly, or the financial services industry or economy in general.
Shares of Class A common stock that were issued in the Reorganization to the original members of HLA who became HLI stockholders owning our Class A common stock are “restricted securities”, and their resale is subject to future registration or reliance on an exemption from registration.
Shares of Class A common stock that were issued in connection with our IPO to the original members of HLA who became HLI stockholders are “restricted securities”, and their resale is subject to future registration or reliance on an exemption from registration.
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.
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 capital and willingness to invest, investment terms and conditions (including fees and liquidity terms), brand recognition and business reputation.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe 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.
Biggest changeWe 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 Zürich. We do not own any real property.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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”).
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. 72 3/31/19 3/31/20 3/31/21 3/31/22 3/31/23 3/31/24 Hamilton Lane Incorporated $ 100.00 $ 129.38 $ 210.91 $ 187.05 $ 183.34 $ 284.77 S&P 500 100.00 93.01 145.40 168.13 155.09 201.41 Dow Jones US Asset Managers Index 100.00 85.38 148.70 162.10 146.43 193.58 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, 2024: 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, 2024 1,973 $ 117.9 — $ 50,000,000 February 1-29, 2024 — $ — — $ 50,000,000 March 1-31, 2024 32,974 $ 107.81 — $ 50,000,000 Total 34,947 $ 108.38 — $ 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”).
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
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 2023. Item 6. [Reserved] 73
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.
The graph and table assume $100 invested on March 31, 2019, and dividends reinvested in the security or index. The performance graph and table are not intended to be indicative of future performance.
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 payment date will be July 5, 2024. 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.
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.
Stock Performance Graph The following graph and table depict the total return to stockholders from the closing price on March 31, 2019 through March 31, 2024, 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 23, 2023, there were 27 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 20, 2024, there were 26 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 23, 2023, there were six 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 20, 2024, there were five stockholders of record of our Class A common stock.
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.
Dividend Policy We declared a quarterly dividend of $0.445 per share of Class A common stock to record holders in each quarter of fiscal 2024. On May 23, 2024, we declared a quarterly dividend of $0.49 per share of Class A common stock to record holders at the close of business on June 14, 2024.
Removed
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.
Removed
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

83 edited+23 added−17 removed121 unchanged
Biggest changeYear 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.
Biggest changeOur 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 Years Ended March 31, (in thousands) 2024 2023 2022 Revenues Management and advisory fees $ 451,936 $ 371,874 $ 314,228 Incentive fees 101,906 149,931 48,133 Consolidated variable interest entities related: Incentive fees — 6,948 5,558 Total revenues 553,842 528,753 367,919 Expenses Compensation and benefits 204,004 198,412 129,165 General, administrative and other 103,403 89,395 68,040 Consolidated variable interest entities related: General, administrative and other 617 906 1,150 Total expenses 308,024 288,713 198,355 Other income (expense) Equity in income of investees 34,893 5,088 78,813 Interest expense (11,169) (8,617) (4,634) Interest income 5,427 1,789 500 Non-operating (loss) gain (2,515) (5,243) 64,469 Consolidated variable interest entities related: Equity in income of investees 1,598 1,455 483 Unrealized gain 3,034 4,773 4,485 Interest expense (6) — (4) Interest income 4,581 3,325 — Total other income 35,843 2,570 144,112 Income before income taxes 281,661 242,610 313,676 Income tax expense 54,454 55,425 66,423 Net income 227,207 187,185 247,253 Less: Income attributable to non-controlling interests in general partnerships 534 986 376 Less: Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 80,835 71,027 96,548 Less: Income attributable to redeemable non-controlling interests in Hamilton Lane Alliance Holdings I, Inc. — 5,617 4,343 Less: Income attributable to non-controlling interests in consolidated funds 4,980 435 — Net income attributable to Hamilton Lane Incorporated $ 140,858 $ 109,120 $ 145,986 81 Revenues The following table shows total revenues of the Company (excluding consolidated VIEs): Year Ended March 31, Total Change (in thousands) 2024 2023 Revenues Management and advisory fees Specialized funds $ 261,012 $ 196,268 $ 64,744 Customized separate accounts 128,826 117,763 11,063 Advisory 24,229 24,785 (556) Reporting, monitoring, data and analytics 24,711 24,792 (81) Distribution management 5,054 2,560 2,494 Fund reimbursement revenue 8,104 5,706 2,398 Total management and advisory fees 451,936 371,874 80,062 Incentive fees Specialized funds 89,988 118,212 (28,224) Customized separate accounts 11,918 31,719 (19,801) Total incentive fees 101,906 149,931 (48,025) Total revenues $ 553,842 $ 521,805 $ 32,037 Year ended March 31, 2024 compared to year ended March 31, 2023 Total revenues increased $32.0 million for fiscal 2024 compared to fiscal 2023, due to an increase in management and advisory fees partially offset by a decrease in incentive fees.
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.
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 than our previous funds.
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 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 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. 75 • Our ability to generate strong returns.
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”).
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 79 commitment, interest income on our previously consolidated funds and interest income on investments held in trust, and changes in fair value of liabilities of our previously-sponsored special purpose acquisition company (“SPAC”).
Adjusted shares outstanding for the years ended March 31, 2022 and 2023 are equal to weighted-average shares of Class A common stock outstanding - diluted. We believe adjusted net income and non-GAAP earnings per share are useful to investors because they enable them to better evaluate total and per-share operating performance across reporting periods.
Adjusted shares outstanding for the years ended March 31, 2024, 2023 and 2022 are equal to weighted-average shares of Class A common stock outstanding - diluted. We believe adjusted net income and non-GAAP earnings per share are useful to investors because they enable them to better evaluate total and per-share operating performance across reporting periods.
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.
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.
To the extent that our primary funds also directly make secondary investments and direct investments, they generally earn carried interest on a similar basis. Furthermore, certain of our primary funds earn carried interest on their investments in other private markets funds on a primary basis that is generally 5.0% of net profits, subject to the fund’s compounded annual preferred return.
To the extent that our primary funds also directly make secondary investments and direct investments, they generally earn carried interest on a similar basis. Furthermore, certain of our primary funds earn carried interest on their investments in other private markets funds on a primary basis that is generally 5% of net profits, subject to the fund’s compounded annual preferred return.
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.
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.
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.
The capital we are able to attract drives the growth of our AUM and AUA and the management and advisory fees we earn. • 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 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.
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 74 the largest and most sophisticated private markets investors in the world.
Events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or the financial services industry generally, could jeopardize our ability to access existing cash, cash equivalents and investments. 76 • Increasing regulatory requirements .
Events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or the financial services industry generally, could jeopardize our ability to access existing cash, cash equivalents and investments. • Increasing regulatory requirements .
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 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 96 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.
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.
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 2024, fiscal 2023 and fiscal 2022 are to our fiscal years ended March 31, 2024, 2023 and 2022, respectively.
Our ability to invest and maintain our sphere of influence with these high-performing fund managers is critical to our investors’ success and our ability to maintain our competitive position and grow our revenue. • Unpredictable global macroeconomic conditions .
Our ability to invest and maintain our sphere of influence with these high-performing fund managers is critical to our investors’ success and our ability to maintain our competitive position and grow our revenue. 76 • Unpredictable global macroeconomic conditions .
The tax savings achieved may be substantial and we may not have sufficient cash available to pay this liability, in which case, we might be required to incur additional debt to satisfy this liability. We offer an Employee Investment Program (“EIP”) through which certain employees are able to invest directly into certain company managed funds as individual limited partners (“LP”).
The tax savings achieved may be substantial and we may not have sufficient cash available to pay this liability, in which case, we might be required to incur additional debt to satisfy this liability. We offer an Employee Investment Program (“EIP”) through which certain employees are able to invest directly into certain company managed funds as individual limited partners (“LPs”).
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.
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, 2023.
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.
For the year ended March 31, 2024, 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. 89 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 $500 million per fund.
FRE represents net income excluding (a) incentive fees and related compensation, (b) interest income and expense, (c) income tax expense, (d) equity in income of investees, (e) other non-operating income and (f) certain other significant items that we believe are not indicative of our core performance.
FRE represents net income excluding (a) incentive fees and related compensation, (b) interest income and expense, (c) income tax expense, (d) equity in income of investees, (e) non-operating (loss) gain and (f) certain other significant items that we believe are not indicative of our core performance.
Recent Accounting Pronouncements Information regarding recent accounting developments and their impact on our results can be found in Note 2, “Summary of Significant Accounting Policies” in the notes to the consolidated financial statements included in Part II, Item 8 of this Form 10-K. 97
Recent Accounting Pronouncements Information regarding recent accounting developments and their impact on our results can be found in Note 2, “Summary of Significant Accounting Policies” in the notes to the consolidated financial statements included in Part II, Item 8 of this Form 10-K. 99
Substantially all of these funds are globally focused, and they are grouped by the investment strategy utilized. 88 Gross Returns — Realized and Unrealized Fund Vintage year Fund size ($M) Capital invested ($M) Gross multiple Net Multiple Gross IRR (%) Net IRR (%) Gross Spread vs. S&P 500 PME Net Spread vs. S&P 500 PME Gross Spread vs.
Substantially all of these funds are globally focused, and they are grouped by the investment strategy utilized. 90 Gross Returns — Realized and Unrealized Fund Vintage year Fund size ($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 employees also have an option to enter into a loan agreement with a third-party lender to fund committed capital. The loan is collateralized by the underlying LP interest in the fund and return of capital distributions are utilized to pay the outstanding loan balance.
The employees also have an option to enter into a loan agreement with the Company or a third-party lender to fund committed capital. The loan is collateralized by the underlying LP interest in the fund and return of capital distributions are utilized to pay the outstanding loan balance.
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 use of a credit facility affects the fund’s return and magnifies the performance on the upside or on the downside. 92 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.
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 for working capital or to 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.
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.
As interest rates remain elevated 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.
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.
The data are presented from the date indicated through December 31, 2023 and have not been adjusted to reflect acquisitions or disposals of investments subsequent to that date.
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.
For the years ended March 31, 2024, 2023 and 2022, our net cash provided by operating activities was driven primarily by receipts of management fees and incentive fees, partially offset by payment of operating expenses, which includes compensation and benefits and general, administrative and other expenses.
We have not repurchased any of our Class A common stock under the Stock Repurchase Program, and therefore the full purchase authority remains available. Our board of directors periodically reviews the Stock Repurchase Program and most recently re-approved it in December 2022.
We have not repurchased any shares of our Class A common stock under the Stock Repurchase Program, and therefore the full purchase authority remains available. Our board of directors periodically reviews the Stock Repurchase Program and most recently re-approved it in December 2023.
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.
We had approximately $796.2 billion of AUA as of March 31, 2024. • 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.
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.
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, 2024, we had an outstanding balance of $97 million under the Term Loan Agreement.
Performance fees, which are a component of incentive fees, are based on the aggregate amount of realized gains earned by the applicable customized separate account, subject to the achievement of defined minimum returns to the clients.
Performance fees, which are a component of incentive fees, are based on the aggregate amount of realized gains earned by the applicable specialized fund or customized separate account, subject to the achievement of defined minimum returns to the clients.
As of March 31, 2023, the total amount of outstanding loans under the EIP was $0.7 million and we believe the risk of default by an employee to be remote. Critical Accounting Estimates We prepare our consolidated financial statements in accordance with GAAP.
As of March 31, 2024, the total amount of outstanding loans under the EIP was $1.0 million and we believe the risk of default by an employee to be remote. Critical Accounting Estimates We prepare our consolidated financial statements in accordance with GAAP.
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.
Distributions were $5.0 billion for fiscal 2024 due to $2.6 billion from accounts moving from a committed to net invested capital fee base, $1.4 billion from returns of capital in accounts earning fees on a net invested capital or NAV fee base, and $1.0 billion from accounts reaching the end of their fund term.
Cash Flows Year Ended March 31, 2023 2022 2021 (in millions) Net cash provided by operating activities $ 226.6 $ 169.5 $ 188.2 Net cash provided by (used in) investing activities $ 177.9 $ (70.5) $ (421.8) Net cash (used in) provided by financing activities $ (364.1) $ (113.2) $ 270.7 Operating Activities Our operating activities generally reflect our earnings in the respective periods after adjusting for significant non-cash activity, including equity in income (loss) of investees, equity-based compensation, lease expense, fair value adjustments to investments and depreciation and amortization, all of which are included in earnings.
Cash Flows Year Ended March 31, 2024 2023 2022 (in millions) Net cash provided by operating activities $ 120.9 $ 226.6 $ 169.5 Net cash (used in) provided by investing activities $ (122.2) $ 177.9 $ (70.5) Net cash provided by (used in) financing activities $ 4.4 $ (364.1) $ (113.2) Operating Activities Our operating activities generally reflect our earnings in the respective periods after adjusting for significant non-cash activity, including equity in income (loss) of investees, equity-based compensation, lease expense, fair value adjustments to investments and depreciation and amortization, all of which are included in earnings.
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.
Non-operating gain (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.
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.
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. 95 We are required to maintain minimum net capital balances for regulatory purposes for certain of our foreign subsidiaries and our broker-dealer subsidiary.
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 generally have discretionary investment authority over our customized separate accounts, which comprised approximately $92.5 billion of our AUM as of March 31, 2024. • Specialized Funds : We organize, invest and manage specialized primary, secondary and direct investment funds.
Revenue Recognition of Incentive Fees Incentive fees include both carried interest earned from certain specialized funds and performance fees received from certain customized separate accounts. We recognized $156.9 million of incentive fees in fiscal 2023 and have $1.0 billion of unrecognized carried interest as of March 31, 2023.
Revenue Recognition of Incentive Fees Incentive fees include both carried interest earned from certain specialized funds and performance fees received from certain specialized funds and customized separate accounts. We recognized $101.9 million of incentive fees in fiscal 2024 and have $1.2 billion of unrecognized carried interest as of March 31, 2024.
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.
As of March 31, 2024, we did not have an outstanding balance under the Revolving Loan Agreement. 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%.
Dividend Policy 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. We intend to continue to pay a cash dividend on a quarterly basis.
We are in compliance with these regulatory requirements. Dividend Policy 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. We intend to continue to pay a cash dividend on a quarterly basis.
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.
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, 2024, we had a valuation allowance of $90.5 million.
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.
Specialized funds comprised approximately $31.9 billion of our AUM as of March 31, 2024. • Advisory Services : We offer non-discretionary investment advisory services to assist clients in developing and implementing their private markets investment programs.
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, 2024, we had deferred tax assets of $261.9 million primarily due to our acquisitions of HLA units.
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.
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 97 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.
The 2022 Multi-Draw Term Loan Agreement has a maturity date of October 1, 2029 and the interest rate is a floating per annum rate equal to the prime rate minus 1.50% subject to a floor of 3.00%. As of March 31, 2023, we did not have an outstanding balance under the 2022 Multi-Draw Term Loan Agreement.
As of March 31, 2024, we had an outstanding balance of $100 million under the 2020 Multi-Draw Term Loan Agreement. 93 The 2022 Multi-Draw Term Loan Agreement has a maturity date of October 1, 2029 and the interest rate is a floating per annum rate equal to the prime rate minus 1.50% subject to a floor of 3.00%.
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.
For the years ended March 31, 2024, 2023 and 2022, 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.
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.
Performance fees are recognized when the risk of clawback or reversal is not probable. 78 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.
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.
Specialized funds fee-earning AUM increased $5.5 billion for fiscal 2024 compared to fiscal 2023. Specialized fund contributions were $6.2 billion for fiscal 2024, due primarily to $2.4 billion from our latest secondary fund and $2.7 billion from our evergreen funds.
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.
The obligations under the Loan Agreements are secured by substantially all the assets of HLA. As of March 31, 2024 and 2023, the principal amount of debt outstanding equaled $196.9 million and $214.4 million, respectively. We had $128.1 million in availability under the Loan Agreements as of March 31, 2024.
The purpose of the March 2023 Offering was to provide liquidity to significant direct and indirect owners of HLA. The shares sold consisted of 100,000 shares held by the selling stockholder and 571,737 shares newly issued by us.
The purpose of the March 2024 Offering was to provide liquidity to significant direct and indirect owners of HLA. The shares sold consisted of 55,000 shares held by the selling stockholder and 1,867,322 shares newly issued by us.
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.
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. 77 Revenues from specialized funds are based on a percentage of limited partners’ capital commitments to, net invested capital or net asset value in, our specialized funds.
Recent Transactions March 2023 Offering In March 2023, we and a selling stockholder completed a registered offering of an aggregate of 671,737 shares of Class A common stock at a price to the underwriter of $76.41 per share (the “March 2023 Offering”).
Recent Transactions March 2024 Offering In March 2024, we and a selling stockholder completed a registered offering of an aggregate of 1,922,322 shares of Class A common stock at a price to the underwriter of $108 per share (the “March 2024 Offering”).
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.
Non-controlling interests Non-controlling interests 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.
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.
Distributions were $1.1 billion for fiscal 2024, due to $1.0 billion from returns of capital in funds earning fees on a net invested capital or NAV fee base and $0.1 billion from funds moving from a committed to net invested capital fee base. Non-GAAP Financial Measures Below is a description of our unaudited non-GAAP financial measures.
We received $43.7 million in net proceeds from the sale of our shares and used all of the proceeds to settle exchanges by certain members of HLA of a total of 539,237 Class B units and 32,500 Class C units.
We received $201.7 million in net proceeds from the sale of our shares and used all of the proceeds to settle exchanges by certain members of HLA of a total of 1,744,872 Class B units and 122,450 Class C units.
Performance fees range from 5.0% to 12.5% of net profits, subject to a compounded annual preferred return that varies by account but is generally 6.0% to 8.0%. Performance fees are recognized when the risk of clawback or reversal is not probable.
Performance fees range from 5.0% to 12.5% of net profits, subject to a compounded annual preferred return that varies by account but is generally 6.0% to 8.0%.
For the years ended March 31, 2023, 2022 and 2021, our net cash used in financing activities was driven primarily by dividends paid to stockholders, payments under the tax receivable agreement, distributions to HLA members and drawdowns and repayments under our revolving credit facility. Future Sources and Uses of Liquidity We generate significant cash flows from operating activities.
For the years ended March 31, 2024, 2023 and 2022, our net cash used in financing activities was driven primarily by dividends paid to stockholders, payments under the tax receivable agreement, distributions to HLA members and drawdowns and repayments under our Revolving Credit Agreement.
Adjusted EBITDA represents net income excluding (a) interest expense on our outstanding debt, (b) income tax expense, (c) depreciation and amortization expense, (d) equity-based compensation expense, (e) other non-operating income and (f) certain other significant items that we believe are not indicative of our core performance. 85 The following table shows a reconciliation of net income attributable to Hamilton Lane Incorporated to Fee Related Earnings and Adjusted EBITDA for fiscal 2023, 2022, and 2021: Year Ended March 31, 2023 2022 2021 ($ 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.
Adjusted 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 ) non-operating (loss) gain and (f) certain other significant items that we believe are not indicative of our core performance. 87 The following table shows a reconciliation of net income attributable to Hamilton Lane Incorporated to Fee Related Earnings and Adjusted EBITDA for fiscal 2024, 2023, and 2022: Year Ended March 31, 2024 2023 2022 ($ in thousands) Net income attributable to Hamilton Lane Incorporated $ 140,858 $ 109,120 $ 145,986 Income attributable to non-controlling interests in general partnerships 534 986 376 Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 80,835 71,027 96,548 Income attributable to redeemable non-controlling interests in Hamilton Lane Alliance Holdings I, Inc. — 5,617 4,343 Income attributable to non-controlling interests in consolidated funds 4,980 435 — Incentive fees (101,906) (156,879) (53,691) Incentive fee related compensation (1) 48,406 74,374 25,395 Consolidated VIE related general, administrative and other expenses 566 846 1,176 Revenue related to consolidated funds 394 61 — Non-operating income related compensation 59 367 1,810 Interest income (10,008) (5,114) (500) Interest expense 11,175 8,617 4,638 Income tax expense 54,454 55,425 66,423 Equity in income of investees (36,491) (6,543) (79,296) Non-operating (gain) loss (519) 470 (68,954) Fee Related Earnings $ 193,337 $ 158,809 $ 144,254 Depreciation and amortization 8,186 7,442 5,495 Equity-based compensation 12,133 9,950 7,404 Incentive fees 101,906 156,879 53,691 Incentive fees attributable to non-controlling interests — (302) (228) Incentive fee related compensation (1) (48,406) (74,374) (25,395) Non-operating income related compensation (59) (367) (1,810) Interest income 5,427 1,789 500 Adjusted EBITDA $ 272,524 $ 259,826 $ 183,911 (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. 88 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.
As of March 31, 2023 and March 31, 2022, our cash and cash equivalents were $99.7 million and $72.1 million, respectively.
As of March 31, 2024 and March 31, 2023, our cash and cash equivalents were $114.6 million and $99.7 million, respectively.
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.
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.
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.
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 2024, 2023, and 2022: Year Ended March 31, 2024 2023 2022 (in thousands, except share and per-share amounts) Net income attributable to Hamilton Lane Incorporated $ 140,858 $ 109,120 $ 145,986 Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 80,835 71,027 96,548 Income tax expense 54,454 55,425 66,423 Adjusted pre-tax net income $ 276,147 $ 235,572 $ 308,957 Adjusted income taxes (1) (64,618) (56,066) (73,532) Adjusted net income $ 211,529 $ 179,506 $ 235,425 Weighted-average shares of Class A common stock outstanding - diluted 53,902,467 53,698,681 53,674,293 Adjusted shares outstanding (2) 53,902,467 53,698,681 53,674,293 Non-GAAP earnings per share $ 3.92 $ 3.34 $ 4.39 (1) For the year ended March 31, 2024, represents corporate income taxes at our estimated statutory tax rate of 23.4% applied to adjusted pre-tax net income.
(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.
(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. 86 Year ended March 31, 2024 compared to year ended March 31, 2023 Fee-earning AUM increased $8.4 billion for fiscal 2024 compared to fiscal 2023 due to contributions from customized separate accounts and specialized funds.
As of March 31, 2023, the tax receivable agreement resulted in a liability of $174.7 million.
As of March 31, 2024, the tax receivable agreement resulted in a liability of $201.4 million.
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.
Customized separate accounts revenue increased $11.1 million in fiscal 2024 due to a $2.9 billion increase in fee-earning AUM from the addition of several new accounts, additional allocations from existing accounts and continued investment activity during the fiscal 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.
Specialized funds revenue increased by $64.7 million compared to the prior year, due primarily to a $41.3 million increase in revenue from our latest secondary fund and a $25.3 million increase in revenue from our evergreen funds, which added $2.4 billion and $2.7 billion, respectively, in fee-earning AUM year-over-year.
Revenue from our latest direct equity fund included $2.4 million in retroactive fees for fiscal 2023.
Revenue from our latest secondary fund included $19.6 million in retroactive fees during fiscal 2024 compared to $2.4 million in retroactive fees from our latest direct equity fund during fiscal 2023.
Customized separate accounts contributions were $7.8 billion for fiscal 2023 due to new allocations from existing clients and new clients.
Customized separate accounts fee-earning AUM increased $2.9 billion for fiscal 2024 compared to fiscal 2023. Customized separate accounts contributions were $7.7 billion for fiscal 2024 due to new allocations from existing clients and new clients.
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.
Additionally, the year ended March 31, 2023 included the sale of investments held in trust by our consolidated SPAC due to its liquidation. 94 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.
Contractual Obligations, Commitments and Contingencies The following table represents our contractual obligations as of March 31, 2023, aggregated by type: Contractual Obligations, Commitments and Contingencies (in millions) Total Less than 1 year 1-3 years 3-5 years More than 5 years Operating leases $ 99.2 $ 7.8 $ 14.2 $ 13.2 $ 64.0 Debt obligations payable (1) 214.4 17.5 10.0 44.4 142.5 Interest on debt obligations payable (2) 55.8 11.2 19.9 17.1 7.6 Capital commitments to our investments (3) 211.6 211.6 — — — Total $ 581.0 $ 248.1 $ 44.1 $ 74.7 $ 214.1 (1) Represents scheduled debt obligation payments under our Loan Agreements.
Contractual Obligations, Commitments and Contingencies The following table represents our contractual obligations as of March 31, 2024, aggregated by type: Contractual Obligations, Commitments and Contingencies (in millions) Total Less than 1 year 1-3 years 3-5 years More than 5 years Operating leases $ 97.8 $ 8.8 $ 16.3 $ 13.8 $ 58.9 Debt obligations payable (1) 196.9 2.5 24.4 77.5 92.5 Interest on debt obligations payable (2) 46.8 10.6 19.8 14.4 2.0 Capital commitments to our investments (3) 267.7 267.7 — — — Total $ 609.2 $ 289.6 $ 60.5 $ 105.7 $ 153.4 (1) Represents scheduled debt obligation payments under our Loan Agreements.
We analyze our tax filing positions in all of the U.S. federal, state, local and foreign tax jurisdictions where we are required to file income tax returns, as well for all open tax years in these jurisdictions.
Changes in judgment as it relates to the realizability of these assets, as well as potential changes in corporate tax rates, would have the effect of significantly reducing the value of the deferred tax assets. 98 We analyze our tax filing positions in all of the U.S. federal, state, local and foreign tax jurisdictions where we are required to file income tax returns, as well for all open tax years in these jurisdictions.
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.
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.
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.
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 (“NCI”) in HLA is borne by the holders of such NCI.
The effective income tax rate for fiscal 2023 was greater than fiscal 2022 due to higher other permanent tax adjustments and less income allocated to the NCI in fiscal 2023. 83 Fee-Earning AUM The following table provides the period to period roll-forward of our fee-earning AUM: Year Ended March 31, Year Ended March 31, 2023 2022 (in millions) Customized Separate Accounts Specialized Funds Total Customized Separate Accounts Specialized Funds Total Balance, beginning of period $ 30,938 $ 18,193 $ 49,131 $ 25,664 $ 16,341 $ 42,005 Contributions (1) 7,802 5,098 12,900 8,994 4,228 13,222 Distributions (2) (4,030) (949) (4,979) (4,194) (2,584) (6,778) Foreign exchange, market value and other (3) (26) 320 294 474 208 682 Balance, end of period $ 34,684 $ 22,662 $ 57,346 $ 30,938 $ 18,193 $ 49,131 (1) Contributions represent (i) new commitments from customized separate accounts and specialized funds that earn fees on a committed capital fee base and (ii) capital contributions to underlying investments from customized separate accounts and specialized funds that earn fees on a net invested capital or NAV fee base.
Fee-Earning AUM The following table provides the period to period roll-forward of our fee-earning AUM: Year Ended March 31, Year Ended March 31, 2024 2023 (in millions) Customized Separate Accounts Specialized Funds Total Customized Separate Accounts Specialized Funds Total Balance, beginning of period $ 34,684 $ 22,662 $ 57,346 $ 30,938 $ 18,193 $ 49,131 Contributions (1) 7,689 6,198 13,887 7,802 5,098 12,900 Distributions (2) (5,035) (1,100) (6,135) (4,030) (949) (4,979) Foreign exchange, market value and other (3) 236 415 651 (26) 320 294 Balance, end of period $ 37,574 $ 28,175 $ 65,749 $ 34,684 $ 22,662 $ 57,346 (1) Contributions represent (i) new commitments from customized separate accounts and specialized funds that earn fees on a committed capital fee base and (ii) capital contributions to underlying investments from customized separate accounts and specialized funds that earn fees on a net invested capital or NAV fee base.
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.
Income Tax Expense Our effective income tax rate in fiscal 2024 and 2023 was 19.3% and 22.8%, respectively. The fiscal 2024 effective income tax rate was different from the statutory tax rate due to the portion of income allocated to non-controlling interests and valuation allowance recorded against deferred tax assets.
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.
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. As of March 31, 2024, we were required to maintain approximately $5.0 million in liquid net assets within these subsidiaries to meet regulatory net capital and capital adequacy requirements.
CS LL PME Strategic Opportunities (Tail-end secondaries and credit) Strat Opps 2015 2015 71 68 1.3 1.2 14.1% 10.6% 561 bps 215 bps 862 bps 513 bps Strat Opps 2016 2016 214 216 1.2 1.2 9.9% 7.5% 411 bps 173 bps 537 bps 300 bps Strat Opps 2017 2017 435 448 1.3 1.2 11.7% 9.2% 809 bps 555 bps 807 bps 569 bps Strat Opps IV (Series 2018) 2018 889 863 1.2 1.2 9.5% 7.4% 660 bps 430 bps 684 bps 445 bps Strat Opps V (Series 2019) 2019 762 704 1.2 1.1 11.4% 8.9% 1,041 bps 703 bps 793 bps 445 bps Strat Opps VI (Series 2020) 2021 898 838 1.0 1.0 1.3% 0.5% 739 bps 552 bps 85 bps (36) bps Strat Opps VII 2022 953 359 1.0 1.0 5.6% 2.3% 859 bps 304 bps 242 bps 1 bps 89 Performance Methodology The indices presented for comparison are the S&P 500, MSCI World, Credit Suisse High Yield II (“CS HY II”) and Credit Suisse Leverage Loan (“CS LL”), calculated on a public market equivalent (“PME”) basis.
CS LL PME Strategic Opportunities (Tail-end secondaries and credit) Strat Opps 2015 2015 71 68 1.3 1.2 14.1% 10.6% 561 bps 215 bps 862 bps 513 bps Strat Opps 2016 2016 214 216 1.3 1.2 10.9% 8.5% 493 bps 254 bps 606 bps 370 bps Strat Opps 2017 2017 435 448 1.3 1.3 11.5% 9.1% 727 bps 473 bps 723 bps 484 bps Strat Opps IV (Series 2018) 2018 889 870 1.3 1.2 9.9% 7.8% 592 bps 365 bps 613 bps 377 bps Strat Opps V (Series 2019) 2019 762 711 1.2 1.2 11.8% 9.3% 818 bps 495 bps 631 bps 301 bps Strat Opps VI (Series 2020) 2021 898 852 1.2 1.1 8.1% 6.5% 653 bps 379 bps 259 bps 42 bps Strat Opps VII 2022 953 803 1.1 1.1 14.7% 13.4% 341 bps 105 bps 344 bps 162 bps Strat Opps VIII 2023 700 32 1.0 N/A N/M N/A N/M N/A N/M N/A 91 Performance Methodology The indices presented for comparison are the S&P 500, MSCI World, Credit Suisse High Yield II (“CS HY II”) and Credit Suisse Leverage Loan (“CS LL”), calculated on a public market equivalent (“PME”) basis.
We are entitled to request term loans not to exceed $75 million in the aggregate, subject to the Cap, through September 30, 2025.
As of March 31, 2024, we did not have an outstanding balance under the 2022 Multi-Draw Term Loan Agreement. We are entitled to request term loans not to exceed $75 million in the aggregate, subject to the Cap, through September 30, 2025.
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.
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. The interest rate is a floating per annum rate equal to the prime rate minus 1.50% subject to a floor of 2.25%.
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.
Revenues from advisory and reporting, monitoring, data and analytics services are generally annual fixed fees, which vary depending on the services we provide, and are recognized over the service term. 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.
Management and advisory fees increased $57.6 million, or 18%, to $371.9 million for fiscal 2023 compared to fiscal 2022.
Management and advisory fees increased $80.1 million for fiscal 2024 compared to fiscal 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed12 unchanged
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.
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 7.25% as of March 31, 2024. 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 7.00% as of March 31, 2024.
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.
Based on the floating rate component of our Loan Agreements payable as of March 31, 2024, we estimate that a 100 basis point increase in interest rates would result in increased interest expense of approximately $1.0 million over the next 12 months.
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.
Therefore, changes in exchange rates are not expected to materially impact our financial statements. 100 Interest Rate Risk As of March 31, 2024, we had $196.9 million in borrowings outstanding under our Loan Agreements.
There have been no material changes in our market risk exposures since March 31, 2022. 99
There have been no material changes in our market risk exposures since March 31, 2023. 101

Other HLNE 10-K year-over-year comparisons