Hamilton Lane's Q2 2026 Earnings Call: Contradictions Emerge on Evergreen Growth, Fee Rates, and Compensation Strategies

Date of Call: November 4, 2025

Financials Results

• Revenue: Fee-related revenue $321.6M, up 23% YOY (YTD); management and advisory fees up 6% YOY (impacted by prior-year retro fees of $20.7M vs $0.8M current)
• EPS: GAAP EPS $2.98 (based on $124.6M GAAP net income); Non-GAAP EPS $2.86 (based on $155.7M adjusted net income) (YTD)

Guidance:

• Guardian will commit approximately $500M per year for 10 years; $250M of early capital will seed Evergreen and HLNE warrants tied to the deal are expected to dilute <1%.
• Management fees from Guardian capital are expected to be realized immediately via Evergreen; separate-account fees will scale as the portfolio is deployed and performance fees are possible.
• >50% of the ~$1B of Evergreen AUM currently on fee holidays is expected to become fee-earning in Q4 2025; the remainder will convert through calendar 2026.
• Blended fee rate is expected to trend higher as flows favor higher-fee specialized funds; Bloomberg data revenue-share will grow over time (initially modest).

Business Commentary:

• Growth in Asset Footprint and AUM:
• Hamilton Lane's total asset footprint crossed over $1 trillion for the first time, marking a 6% increase year-over-year.
• AUM reached $145 billion, growing by 11% compared to the prior year, driven by strong performance and market value growth, particularly in specialized funds and customized separate accounts.

• Guardian Life Partnership Impact:
• The partnership with Guardian Life Insurance Company involves managing nearly $5 billion of their private equity portfolio and an additional $500 million annual commitment for 10 years.

• This partnership will generate management fees from invested capital and includes HLNE equity warrants and financial incentives, contributing to Hamilton Lane's revenue growth.

• Evergreen Fund Expansion:

• Hamilton Lane's Evergreen funds achieved over $1.6 billion in net inflows across their suite, marking the largest quarter ever.
• The expansion was driven by the launch of new products, robust fundraising, and strong performance, contributing to a nearly doubling of Evergreen AUM to over $14 billion.

• Revenue and Fee Growth:
• Total fee-related revenue was $321.6 million, reflecting 23% growth year-over-year, with fee-related earnings up 34%.
• Growth was due to increased management and advisory fees, higher performance fees from Evergreen funds, and the scaling of specialized funds.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management: "We have had another very strong quarter." Firm crossed $1 trillion total asset footprint (up 6% YOY); AUM $145B (+11% YOY). Announced Guardian strategic partnership and Bloomberg index distribution; highlighted fee-related revenue growth of 23% YOY and FRE up 34% YOY, and stated expectation that fee mix and blended fee rate will continue to improve.

Q&A:

• Question from Alexander Blostein (Goldman Sachs Group, Inc., Research Division): On the Guardian announcement. Maybe we could start there. I heard your comments around just the structure of the arrangements, but maybe you could help us with the actual fees that are likely to hit P&L. I heard the geography of different line items. But as you sort of think about the $5 billion that's going to come over, maybe help us with the fee structure there and also with the $500 million a year that's going to get allocated over time. So maybe we can start there.
  Response: Most revenue will come from the $5B of future commitments (the existing $5B is largely a monitoring assignment); $250M will seed Evergreen; SMA allocations will be a mix of primary and specialized funds and will earn fees at prevailing rates as deployed.

• Question from Michael Cyprys (Morgan Stanley, Research Division): I wanted to ask about the Bloomberg partnership and more broadly partnerships on the data side. I was hoping you could elaborate a bit around that. What's the scope for more broadly enhanced monetization of your data sets as you look out from here as well as indices? And what's the scope for creating investable index products as you think about looking at over time?
  Response: Bloomberg is a revenue-share distribution that should grow as usage expands; focus is on data, benchmarks and brand enhancement rather than creating investable index products, which management does not view as an area of traction.

• Question from Kenneth Worthington (JPMorgan Chase & Co, Research Division): Erik, I wanted to dig a bit further into the SMA business. Can you talk about how the pipeline is developing and at what rate that pipeline is growing? And then if we think about your sales force and the sales effort, to what extent do you have as many resources today sort of allocated to SMAs versus what you've had in the past, given the superior economics you see in Evergreen and the customized funds part of the business?
  Response: Sales are organized by geography (not product); pipeline is large (billions) but contracting timing creates variability; specialized funds/Evergreen now address many client needs and offer superior economics, supporting continued robust pipeline.

• Question from Kenneth Worthington (JPMorgan Chase & Co, Research Division): In terms of Guardian, the warrants, you mentioned that the commitments will come over the next decade. Are the warrants being awarded over the next decade? Or are they more front-end loaded? And you mentioned like a rev share. Are the warrants being attached to the rev share? Or was that separate?
  Response: Warrants are front-end loaded with some additional issuance over time; the revenue-share is separate from the warrant package.

• Question from Brennan Hawken (BMO Capital Markets Equity Research): The core fee rate on specialized funds ex retro ticked up nicely quarter-over-quarter, likely benefited from the scaling of the Evergreen funds. But were there any other factors that impacted the fee rate? And how should we be thinking about that specialized fee rate going forward?
  Response: The blended fee uplift is driven primarily by mix shifting toward higher-fee specialized funds (notably Evergreen); if those flows continue, the overall blended fee rate should continue to rise.

• Question from Alexander Bond (Keefe, Bruyette, & Woods, Inc., Research Division): Just wanted to ask about how you're thinking about sales incentives or fee holidays on a forward basis for both your more tenured evergreen funds as well as the newer funds. Curious how often this is something you all revisit and then also how this may evolve as more competing Evergreen funds enter the market? And also if you think this is something you may need to extend or enhance as competition continues to increase there?
  Response: Fee holidays/incentives are used tactically to seed new products (typically 6–12 months) to attract initial adopters; management does not expect extending holidays for established funds or materially lengthening typical incentive periods.

• Question from Brennan Hawken (BMO Capital Markets Equity Research): It sounds like from the Guardian deal, there's also some folks from Guardian joining Hamilton Lane. Can you speak about the potential impact on the expense side from that? And then a little bit more broadly, it sounds like this deal is one where the overall economics are going to scale over time. Is that right? Is it right to think about this as probably a pretty modest impact initially? And then as you continue to build and deploy that $5 billion, things are going to scale?
  Response: The financial impact should be modest initially and scale as the $500M/year is deployed; the incoming Guardian team is expected to be de minimis to expense growth and may fill existing open roles rather than add net new headcount.

Contradiction Point 1

Evergreen Product Growth and Fee Rate

It involves the impact of the Evergreen product on fee-paying AUM and fee rate expectations, which are crucial for assessing the company's financial performance and strategy.

Can you elaborate on SMA pipeline development and sales force allocation considering the superior economics of Evergreen and customized funds? - Kenneth Worthington(JPMorgan Chase & Co)

2026Q2: Specialized funds, including Evergreen, have become better solutions for clients, leading to strong growth. - Erik Hirsch(CEO)

Can you explain how institutional demand for the Evergreen product affects fee-paying AUM growth? - Alexander Blostein(Goldman Sachs Group, Inc.)

2025Q2: Institutional investors account for 15% of Evergreen inflows, with a mix of small and large clients. Evergreen serves as a portfolio management tool and is not purely cannibalizing other products but expanding the market. - Erik R. Hirsch(CEO)

Contradiction Point 2

Fee Rate and Incentive Structure for Evergreen Funds

It involves the fee structure and incentives for Evergreen funds, which are key factors in client acquisition and retention, and thus crucial for revenue projections.

How do you view sales incentives or fee holidays for tenured and newer Evergreen funds, and how might they evolve as competition increases? - Alexander Bond(Keefe, Bruyette, & Woods, Inc.)

2026Q2: Sales incentives and fee holidays are typically used when launching new products. This is a normalization in the market, offering financial incentives for the first 6 to 12 months. - Erik Hirsch(CEO)

How would you rank the factors driving the reacceleration of customized separate account growth this quarter—new sales, re-ups, or investment activity—and can you also discuss the pipeline? - Stephanie Ma(Morgan Stanley)

2025Q2: All factors contributed, with sales cycles not being short. The pipeline includes many clients moving through the contracting phase. Inflows were from new wins, re-ups, and increased investment activity. - Erik R. Hirsch(CEO)

Contradiction Point 3

Evergreen Funds Strategy and Economics

It highlights potential contradictions in the company's strategy and expectations regarding the growth and economics of Evergreen funds, which are a significant part of its product offerings.

What factors affected the core fee rate for specialized funds, and how should we expect it to evolve? - Brennan Hawken (BMO Capital Markets Equity Research)

2026Q2: Our Evergreen products, which are driven largely by demand for core infrastructure and credit strategies, are seeing significant interest, and we would view this as an early stage of the penetration for this kind of product. - Erik Hirsch(CEO)

How significant is institutional interest in Evergreen funds, and is fee compression a risk? - Mike Brown (Wells Fargo)

2025Q4: Evergreens as an alternative to traditional closed-end private equity funds in terms of offering that kind of exposure and a cost performance efficiency and more liquidity, and we think that's a very compelling offering. - Erik Hirsch(CEO)

Contradiction Point 4

Compensation Structure and Equity-based Compensation

It involves changes in the reporting and communication regarding the equity-based compensation structure, which is crucial for understanding the company's financial health and management strategy.

How will Guardian team members joining Hamilton Lane impact expenses, and how do you view the economics of scaling the Guardian deal over time? - Brennan Hawken(BMO Capital Markets Equity Research)

2026Q2: Equity-based comp expense is expected at a $30 million run rate annually. The expense flow-through began this quarter and will continue for the next five years. - Jeffrey Armbrister(CFO)

Can you clarify equity-based comp expenses and their trajectory? Are there discussions about changing the reporting? - Michael Brown(Wells Fargo)

2025Q3: The equity-based comp expense is expected at a $30 million run rate annually. The expense flow-through began this quarter and will continue for the next five years. - Jeffrey Armbrister(CFO)