Hamilton Lane Incorporated Class A Stock

Good morning, ladies and gentlemen, and welcome to the Hamilton Lane First Quarter Fiscal Year 2027 Earnings Call. [Operator Instructions] This call is being recorded on Tuesday, August 4, 2026.

I would now like to turn the conference over to John Oh, Head of Shareholder Relations. Please go ahead.

Thank you, Joanna. Good morning, and welcome to the Hamilton Lane Q1 Fiscal Year 2027 Earnings Call. Today, I will be joined by Erik Hirsch, Co-Chief Executive Officer; and Jeff Armbrister, Chief Financial Officer. Earlier this morning, we issued a press release and a slide presentation, which are available on our website.

Before we discuss the quarter's results, we want to remind you that we will be making forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business. These forward-looking statements do not guarantee future events or performance and are subject to risks and uncertainties that may cause our actual results to differ materially from those projected. For a discussion of these risks, please review the cautionary statements and risk factors included in the Hamilton Lane fiscal 2026 10-K and subsequent reports we file with the SEC. These forward-looking statements are made only as of today, and except as required, we undertake no obligation to update or revise any of them.

We will also be referring to non-GAAP measures that we view as important in assessing the performance of our business. Reconciliation of those non-GAAP measures to GAAP can be found in the earnings presentation materials made available on the Shareholders section of the Hamilton Lane website. Our detailed financial results will be made available when our 10-Q is filed. Please note that nothing on this call represents an offer to sell or a solicitation of an offer to purchase interest in any of Hamilton Lane's products.

Let's begin with the highlights, and I'll start with our total asset footprint. At quarter end, our total asset footprint stood at over $1 trillion and represents an 8% increase to our footprint year-over-year. AUM stood at $146 billion and grew $5 billion or 4% compared to the prior year period. AUA came in at $914 billion and grew $69 billion or 8% relative to the prior year period. This stemmed primarily from market value growth and the addition of a variety of technology solutions and back office mandates.

For this first quarter of fiscal year 2027, total management and advisory fees were $161 million and were up 21% year-over-year. Total fee-related revenue was $236 million and represents 44% growth year-over-year. Fee-related earnings were $124 million and represents 49% growth year-over-year.

We generated GAAP EPS -- we generated quarterly GAAP EPS of $1.93 based on $80 million of GAAP net income and non-GAAP EPS of $1.94 based on $105 million of adjusted net income. We have also declared a dividend of $0.60 per share this quarter, which keeps us on track for the 11% increase over last fiscal year, equating to the targeted $2.40 per share for fiscal year 2027.

With that, I'll now turn the call over to Erik.

Thank you, John, and good morning, everyone. In May, we celebrated Hamilton Lane's 35th anniversary. A simple AI query will tell you that few companies founded ever reached this milestone. To me, while the longevity is noteworthy, the more important point is what that milestone represents. It represents evolution, a desire to never stand still. As the world and markets have changed around us, Hamilton Lane has built and adapted and innovated, all with a focus on best serving our clients. And while I'm proud of the growth and how many new investors continue to entrust us with capital, I am exceptionally proud to clients who have been with us from the beginning of this journey continue to entrust us with capital today.

But at the end of the day, what makes Hamilton Lane are our people. We are looking forward to continuing to evolve, continuing to grow and continuing to successfully serve our clients.

Let me turn now to fee earning AUM. At quarter end, total fee-earning AUM stood at $83.7 billion and grew $9.3 billion or 12% year-over-year. Net quarter-over-quarter growth was [ $2 billion ] or 3%. Our blended fee rate continues to benefit as our fee earning AUM mix shifts towards the specialized funds part of our business. Our blended fee rate now stands at 69 basis points.

Total fee-earning AUM growth continues to be driven largely by our specialized fund platform. Overall, specialized funds fee-earning AUM ended this quarter at $42.6 billion, having grown $8.5 billion over the last 12 months. This represents an increase of 25%. Quarter-over-quarter growth was $2 billion or 5%.

We produced $2.4 billion of gross contributions in the quarter that stemmed primarily from new subscriptions to our Evergreen products, along with healthy contributions from our drawdown products, namely our sixth Equity Opportunities Fund, our second venture fund and our second infrastructure fund. This was offset with redemptions coming primarily from 2 of our largest non-U.S. Evergreen products, along with exit activity and drawdown funds.

Our Evergreen platform continues to demonstrate resilience. For the quarter that ended in June, we generated nearly $640 million of net inflows across all strategies and ended the period with over $19 billion of AUM. Importantly, we did not enact gates on any of our funds, and we saw positive net inflow across 10 out of 12 funds, with our non-U.S. credit offering essentially being flat for the quarter and our non-U.S. multi-strategy equity fund showing elevated redemptions and finishing in net outflow for the quarter.

The redemptions in this fund came largely from 2 categories of investors, the first being long-standing investors who have seen their exposure grow due to strong performance. As you invested a dollar in the institutional USD share class of our non-U.S. multi-strat equity platform at inception, as of June 30 of this year, that dollar would be worth $2.32. Not surprisingly, we see clients harvesting some gains and rebalancing, with some of those funds flowing back into other Hamilton Lane products.

The second category is a bit more unique: clients housing capital in the Evergreen Fund while awaiting deployment in a separately managed account. They are redeeming to then fund the SMA. In prior times, we saw clients often just leave future private dollars in passive public equity accounts. But with the [ advent of Evergreens ], we are seeing more institutional clients avail themselves of this alternative to temporarily house capital for future use in drawdown funds. While this inevitably results in redemptions, it still means the capital is retained by Hamilton Lane.

As Evergreen market dynamics continue to evolve and mature, we expect over time that redemptions will be driven by different motivators and will need to be examined in context. All that said, we have seen a slowdown on flows on certain products and the general hesitancy with investors given the constant negative headlines. We strongly believe this is temporary and have already begun to see the swing back.

For us, we continue to operate with a long-term mindset. Our Evergreen platform has been purposely built to reach investors around the world and to offer a wide variety of strategies. Today, we are one of only a small number of Evergreen managers with both a scaled U.S. platform and a scaled non-U.S. platform.

Outside the U.S., we offer 7 vehicles with our multi-strategy equity, credit and infrastructure funds each having more than $1 billion of AUM. And our secondaries and venture offerings are fast approaching the $1 billion AUM mark. Performance across the vehicles remain strong. That same breadth is evident in the U.S. as well. We now offer 5 vehicles across multi-strategy equity, infrastructure, venture secondaries, and most recently, credit, which we discussed on our last call. Today, the multi-strategy equity fund represents the majority of our U.S. Evergreen AUM, driven by strong performance since inception and continued traction in the wirehouse channels. The fund has just been added to another wirehouse, bringing distribution for that strategy to now 3 wirehouses.

We have achieved all of this while at the same time, leveling up and expanding our U.S. distribution team. This may beg a logical question. If things are going well, why would we do this? It's simple, and it's where I started earlier: a constant desire to evolve and to be better. Sales professionals are realizing that not all platforms are built the same. And with an increasing amount of data available on brands, product lineups, deal flow and performance, professionals are choosing who they believe will be the winning franchises for the next many years.

Over the last 12 months, we have added 6 highly experienced Evergreen sales professionals to our senior ranks. They have joined from outstanding firms: JPMorgan, Fidelity, Morgan Stanley, BlackRock, PIMCO and Monroe Capital. So while we are pleased with the success we have had so far, we are far more excited with what lies ahead as this team comes together.

Let me turn to performance. We are now entering the phase of the Evergreen journey where track records are getting longer and are getting more scrutiny. Investors are realizing that investment approach and risk-taking are not the same across platforms.

For Hamilton Lane, we are not trying to build an index, nor are we building concentrated portfolios. We are building portfolios with purposeful diversification across managers, strategies, geographies and underlying assets, and are doing so with the benefit of deep sourcing, disciplined pacing, active cash management and rigorous portfolio construction. That matters because in private markets, manager selection and asset selection still drive outcomes in a very meaningful way, and the dispersion between top and bottom performers remains wide. And when you combine that discipline with the advantages of a multi-manager platform, differentiated deal flow, access to high-quality middle market opportunities, flexibility across market environments and the ability to lean into specialized expertise, you give yourself a far stronger foundation for consistency over time. That is what we believe is showing up in our results, which continue to be strong.

As of June 2026, when looking at institutional USD share class and excluding the most recently launched U.S. private credit fund, given its nascency, each of our funds has generated positive double-digit performance both year-to-date and since inception, with the exception being our non-U.S. private credit platform, which targets a high single-digit return and has delivered just that. In addition, for every single one of those funds, we have also produced positive performance in every single calendar year since inception. I will also note that our 3 largest and most seasoned individual products, those being our U.S. and non-U.S. multi-strategy equity product and non-U.S. credit product, have generated over $3.6 billion of total cash realizations from their underlying portfolios.

So when we step back and look at the platform in its entirety, what we see is a business that remains healthy, diversified and well positioned for long-term growth. We have strong performance, growing global reach, expanding distribution and a client base that continues to engage with the platform in different ways across products and structures. There will be periods where flows move around, and there will certainly be noise around the category, but none of that changes our conviction. We believe the Evergreen platform we have built is differentiated, durable and still very early in its growth trajectory.

Let me turn now to our closed-end franchise. We continue to execute well across our fundraising activities and are seeing strong momentum build across several strategies approaching their initial closes. Through the balance of fiscal 2027 and into early fiscal 2028, we expect to be in market with 5 key strategies: 4 secondaries, our inaugural GP-led secondary strategy, venture, credit and infrastructure.

But let me begin with our most recently closed fund. I'm pleased to announce that our direct equity platform finished its raise, collecting $3.8 billion in and alongside the fund. That broke down to $3.3 billion in the fund and $500 million in separate accounts investing alongside. The fund portion alone represents an over 57% growth versus the prior fund. We believe our team, our differentiated deal flow and our near 30-year track record in this space resonated with investors across the globe. We attracted public and private pension funds, sovereign wealth funds, [ capped Hartley ] plans, endowments and foundations and individuals, and we are deeply grateful for their trust in us.

That fund is off to a strong start with nearly 30% of the capital committed across a variety of small and mid-market businesses. And while early performance is strong, This fundraise is yet another prime example of how we are continuing to scale both our closed-end franchise and our business overall. We are proud of what we've been able to accomplish with this fundraise, and we look forward to continuing to build on this momentum.

Turning to our seventh secondary fund. Fundraising is off to a good start as we held the first close just last week on nearly $1.3 billion of investor commitments. This will be followed by another close in this calendar year on which we already have good visibility. Like before, we have 18 months from the timing of the initial close to complete the fundraise. We remain encouraged by the level of support we have already received, and we are looking forward to continuing to grow and expand this franchise.

Turning now to venture. I'm pleased to share that during the quarter, we successfully held the first close for our second venture fund, securing more than $370 million of investor commitments. For context, our first venture fund raised a total of $615 million, which means this initial close already represents more than 60% of the size of the first fund. We believe that is a strong early proof point for the strategy and a clear reflection of the confidence our investors have in the team, the platform and the opportunity set we see in this market.

Wrapping up here with customized separate accounts. At quarter end, customized separate account fee-earning AUM stood at $41.1 billion and grew $818 million or 2% over the last 12 months and was up slightly quarter-over-quarter. We continue to see gross contributions coming from a mix of new client wins, plus re-up activity from existing clients, plus contributions for investment activity and then being offset by fee-based step-downs, which is largely a timing-related impact, as well as capital distribution stemming from exit activity.

During the quarter, we continued to execute well across our separate account business, converting both our back book and active pipeline into closed mandates from existing clients and new relationships alike. From our existing client base, we closed on more than $2.3 billion of total mandate value, driven primarily by re-ups, while also expanding 1 relationship into a new service line. We also closed on more than $1.3 billion of total mandate value from clients that are new to Hamilton Lane. These wins came from both domestic and international institutions, further reinforcing the global relevance for our platform and the continued demand we are seeing across the market for private market solutions delivered at scale.

Lastly, our team continues to make very good progress replenishing the pipeline of re-up opportunities, which today totals multiple [indiscernible]. As we have said before, these mandates do not always convert immediately into fee-earning AUM, particularly where the underlying portfolio construction is more heavily oriented towards primary investing, or where there are commitments being made to our transaction products, either drawdown or Evergreen. There is often a natural pacing element to deployment for the primary element, and that timing should be expected. But what matters most to us is that the capital has been awarded, the client relationships have been established and the foundation for future fee earning growth is in place.

Turning now to our balance sheet updates, and let me highlight some recent exciting events regarding several investments in our strategic investment portfolio. And then Jeff will provide more details in his section. I'll start with Russell Investments. On July 9, Russell announced that a consortium led by B Capital and CalPERS agreed to acquire the firm.

As a reminder, in March of 2021, we entered into a strategic partnership with Russell because we saw a compelling opportunity to combine Russell's global outsource solutions franchise and client reach with Hamilton Lane's private market platform, research, portfolio construction capabilities and technology. Over the past 5 years, that partnership has created differentiated access points and tailored solutions for Russell's global clients, and it stands as a strong example of how we can use our platform to help sophisticated partners expand private market access in a way that is strategic, scalable and aligned with client demand.

During our period of ownership, the investment delivered both strategic and financial benefits. And while this transaction marks the end of our economic ownership in Russell, it does not mark the end of the relationship. We remain excited to continue advancing the partnership and our shared goal for delivering best-in-class private market solutions.

Next, back in fall of 2025, Securitize announced that it had entered into a definitive business combination agreement with Cantor Equity Partners II, a special purpose acquisition company, and they would transition to a publicly traded company. That transaction has now been completed, and Securitize is now a publicly listed company on the New York Stock Exchange. We originally invested $5 million from our balance sheet and now hold approximately 1.1 million shares of Securitize, which, as of yesterday's closing price, traded at $6.94 per share.

Our relationship with Securitize began in 2022 when we partnered with them to tokenize several Hamilton Lane offerings and expand access to private markets through digital-first token-based technology. In May 2024, Hamilton Lane built on our commercial relationship and participated in Securitize's strategic funding round led by BlackRock. We made that investment because we believe Securitize was building important infrastructure for the next evolution of capital markets, trusted regulated technology that can bring traditional financial assets on chain and make private markets more accessible to a broader set of investors.

Securitize's move towards becoming a public company is an important validation of that thesis. It reflects the increasing institutional adoption of tokenization and highlights the role that regulated infrastructure can play in modernizing how financial assets are issued, managed, treated and serviced.

Next up is Canoe. Canoe is an AI-driven platform that automates the collection, extraction and validation of alternative investment data, taking the large volume of fund documents, capital account statements and cash flow that underpin the private markets and turning them into clean, actionable information. Our relationship began in 2019 with pilots on Hamilton Lane's owned documents, which was then followed by our initial investment in Canoe's Series A in 2020 and then continuing to support the business through subsequent rounds.

We invested because Canoe was addressing a need we experienced ourselves and saw across the broader market, that being reducing operational friction and enhancing data quality across the asset class. Bloomberg's agreement to acquire Canoe is a strong validation of that thesis for Hamilton Lane. It is another example of us using our balance sheet in a targeted way to support technology partners that we believe are helping shape the future of the private markets.

And with that, I'll now pass the call to Jeff, who will cover both our financials and the impact stemming from these transactions.

Thank you, Erik, and good morning, everyone. For this first quarter of fiscal 2027, we continued to generate solid growth in our business. Management and advisory fees were up 21% from the prior year period, while total fee-related revenue was up 44%, driven by strong growth in our fee-related performance revenues. Specialized fund management fees increased by $26 million or 32% compared to the prior year period. This was driven primarily by a $6.7 billion increase of fee earning AUM in our Evergreen platform and over $930 million increase from our latest direct equity fund over the last 12 months.

Moving on to customized separate accounts. Revenue increased slightly compared with the prior year period, driven by steady re-ups from existing clients, continued investment activity and the addition of new accounts, partially offset by older accounts reaching the end of their fund term and fee-based step-downs. Revenue from our operating, monitoring, data and analytics offerings increased by $1.5 million or 18% compared to the prior year period as we continued to produce strong growth in our technology solutions offering.

Lastly, the final component of our revenue is incentive fees, which totaled $114 million for the period. This amount includes fee-related performance revenues stemming primarily from the quarterly crystallization of performance fees from our U.S. private assets Evergreen Fund, with additional contributions coming from our more recently launched Evergreen funds.

Let's turn now to our unrealized carry balance. The balance is up 11% from the prior year period even while having recognized $113 million of incentive fees, excluding fee-related performance revenues during the last 12 months. The unrealized carry balance now stands at approximately $1.5 billion.

Moving on to expenses. Fiscal year-to-date total expenses increased $50 million or 50% compared with the prior year period. Total compensation and benefits increased $38 million or 55% due primarily to increases in operating performance and headcount. G&A increased by $12 million, primarily driven by revenue-related expenses and onetime benefits in the prior year period. Revenue-related expenses include the third-party commissions related to our U.S. Evergreen funds, along with other Evergreen fund platform fees, closed-end fund placement agent fees and fund reimbursement expenses which are expected to lead to corresponding revenue over time. The increase in these expenses is a good thing and can be an indicator of growth to come. We continue to successfully offset this with cost savings and expense discipline in other parts of the business where we have discretion.

Moving to FRE. FRE for the quarter was $124 million and was up 49% relative to the prior year period, with FRE margin year-to-date came in at 53% compared to 51% for the prior year period. Both FRE and FRE margins benefited from strong fee-related performance revenues in the period.

Let me now move to our share repurchase activity during the quarter. We repurchased approximately 559,000 shares at a weighted average price of $89.51 per share, resulting in roughly $50 million spent under the program during the quarter. Throughout the life of the program, we have spent $70 million on share repurchases.

Before I wrap up with balance sheet commentary, I want to take a moment to outline our expectations on how the recent events that Erik mentioned regarding our investments in Russell, Securitize and Canoe will come through our income statement. With respect to Russell, we expect to realize just under $50 million based on our share of the proposed transaction value. The company has indicated that the transaction is expected to close in the first quarter of calendar year 2027, subject to regulatory approvals and other customary closing conditions. Assuming the transaction closes as expected, we would anticipate recording a gain of approximately $18 million at that time.

With respect to Securitize, as Erik mentioned, following the close of the business combination, we now own approximately 1.5 million shares of Securitize, which trades under the ticker SECZ. Because the transaction closed after the end of the reporting period, we will begin making this position to -- we will begin marketing this position to the publicly traded share price next quarter and at the end of each quarter going forward. Our shares remain subject to a 180-day lockup period, after which we will continue to evaluate the position.

With respect to Canoe, based on our ownership stake in the proposed transaction, we expect to receive proceeds of approximately $30 million. This represents an estimated gain of over $15 million versus our current carrying value, which is based on the valuation from Canoe's most recent funding round. We expect to recognize this gain upon the transaction's closing.

Let's wrap up now with some commentary on our balance sheet. Our largest asset continues to be our investments alongside our clients in our customized separate accounts and specialized funds. Over the long term, we view these investments as an important component of our continued growth, and we'll continue to invest our balance sheet capital alongside our clients. In regard to our liabilities, we continue to be modestly levered.

Lastly, I'd like to reiterate that we will continue to evaluate opportunities to strategically utilize the strength of our balance sheet in support of future growth initiatives. These activities have generally taken the form of seed capital to help stand up new product launches and have also come with having to consolidate these products onto our balance sheet during the ramp and scaling up phases. While this can introduce noise into our financials, this is generally a short-term phenomenon with the goal of deconsolidation once our initial contribution is diluted down as the products grow.

And with that, we'd like to thank everyone for listening in, and we'll now open up the call for questions.

[Operator Instructions] Michael Cyprys with Morgan Stanley, please go ahead.

Just wanted to circle back on the private wealth commentary regarding the redemptions in the international vehicle, the Global Private Asset Fund. Just curious, what your expectation is around the path for that fund to return to net inflows on a more consistent basis? And maybe you could also talk about how you are expanding distribution reach of that vehicle to capture new customers and new platforms.

Sure, Mike. It's Erik. I think we're doing all of the above. So the team continues to expand. The number of relationships continues to expand. And I think increasingly, we're starting to see rotation out of some competitive products. And we believe we'll start to see that rotation back into our products on a relative performance basis.

So I think that's sort of the tailwind and the headwind right now is what I mentioned on the call, the sort of the rebalancing due to kind of being at that sort of 5-plus year mark with good performance. And just all of the noise around the sector that is just causing people to either pause or to sort of act a little spooked.

Got you. And then just more broadly on the Evergreen fund lineup continues to expand and bring in assets. But also just given some of the experiments you've had with tokenization that you alluded to in some of your commentary, just curious, what learnings you've had around tokenization so far? Where are you seeing greatest utility? And ultimately, just curious, could tokenization prove as important to private markets as maybe ETFs were to public markets? Just curious how you're thinking about that and how you're thinking about some of the next generation of Evergreen and semiliquid product structures.

Sure. I think the tokenization is -- still remains kind of when is this going to start to become the norm as opposed to the exception in terms of utilization. I think our early belief in this is it's one of the few things that we've seen where all parties benefit. It is truly better, faster, cheaper.

The adoption, I think, has been muted due to continued confusion in the market that somehow, people are equating tokens to cryptocurrency. They share nothing in common, other than a blockchain backbone. But I think there is confusion around that linkage, which just does not exist.

So education continues to be important. Having companies like Securitize become publicly traded, I think that's enormously helpful because, again, that helps the education. It sort of shows stability. It shows future growth. And what we're seeing is some very, very large asset management firms tokenizing, I would say, very mundane product. Think about that like tokenizing cash funds. And that's been good because I think it's sort of showing people that this does not need to be exotic assets, that this is just a better way to operate.

I think the other reality is that we're going through -- we're about to undertake a huge generational wealth transition, particularly in this country. And as that sort of younger generation who is much more comfortable operating in a fully digital environment starts to become the holders of wealth, I think that's going to be another big push. So for us, I think it sort of widens out the addressable market. It allows us to capture customers who are looking to operate in a digitally native environment. And as tokenization utilization increases, we believe that, that will drive down some operating costs for us.

Alex Blostein with Goldman Sachs, please go ahead.

This is Anthony on for Alex. You spoke to clients redeeming out of your Global Private Assets Fund and switching into other Hamilton Lane products. Could you quantify how much in inflows is driven to other products? And like what other funds are seeing kind of the biggest demand from this like switching aspect?

Yes, Anthony, it's Erik. So one, when we're selling, we're doing this all as a package. So this is not a surprise to us because when we are pitching that client, one of the reasons why we're being selected is that they want that sort of fully invested aspect for their portfolio. And so the way they achieve that is they make an asset allocation decision, and they decide that they're going to put x amount of dollars with us. Those dollars, in this case, are starting in the Evergreen, and then they're migrating the biggest -- the second biggest movement of client of capital out was because of large client moving into SMAs.

And so that's, for us, known. So while it is a redemption, it's just moving from one pocket of Hamilton Lane capital to another pocket. And again, a much better experience for the client. So that, we think, is a positive. Again, in a prior world prior to Evergreens, that capital was largely kept in a passive public equity index, obviously, that we were not managing. And so we think the advent of this and the evolution of this continues to be a positive thing.

Got it. That's helpful. And then maybe switching over to the U.S. Evergreen channel flows, and some of the newer products have been relatively slow. I guess, what are you hearing on the ground from platforms and advisers? And what are your expectations on flows as you guys kind of expand the distribution and sales efforts?

Sure. It's Erik. So as I said, I mean, we've done a big overhaul of the sales team, a lot of them sort of not fully productive today because they're literally just joining the firm. But I also think that a lot of these products are in sort of their infancy. And so they're not sitting at that kind of magical $1 billion mark, which we see as a big stepping stone to getting on to larger platforms and picking up larger flows.

So I think we expect that the early phases of this are always a bit of a grind as you're kind of getting to scale. I think with the expansion of the team and bringing in more senior, seasoned talent, we think that all will help accelerate this. And then I think you got to get to that magical size and then you start to see a ramping occurring much quicker space, and that's what we expect.

Alex Bond with KBW, please go ahead.

Maybe I just wanted to ask around the Evergreen suite to start. Maybe just following the $640 million of net inflows in the quarter. Wondering if you can share any July trends as it relates to the Evergreen suite?

And then secondly, more of a bigger picture question. Wondering how you would juxtapose the trajectory of the growth in terms of the U.S. funds versus the international funds here? You mentioned that the international funds are a bit more mature and have had strong performance to date. But maybe any color there that you could share around the long-term growth potential for both the international suite in and of itself and then maybe relative to the U.S. suite would be helpful as well.

Sure. Alex, it's Erik. I would say I'll take the latter part first. I mean, I think what we're seeing is education levels are rising across geographies. And that really is, I think, the most important piece here.

You've seen over the last few months that the market is simply not mature when it comes to this space. So headlines largely not driven by good data caused investor behavior. And to me, that is an example of a lack of maturity and confidence in an industry and in a sub-asset class that I think is not surprising given how young it is and how little experience investors have with the space.

So to me, this is a combination of the industry needs more education. The industry needs time for them to start to kind of normalize so that, again, scary headlines don't cause investors to actually take action. We're not seeing material differences on the ground between non-U.S. and U.S. We're seeing those markets kind of continuing to develop hand in hand.

We just started outside the U.S. first, and so our presence there had well over a full year head start versus U.S. activities. And so you see a little bit of sort of a playing catch-up in the U.S. But from a flow perspective, as I look into July and sort of into the future, we're seeing some of the noise subsiding. And so we're generally just seeing this more positive sentiment across the product offerings and across the geographies.

Got it. Okay. That's helpful. And then maybe one for Jeff, just on the accrued carried interest balance. It looks like the sequential decline there was around $90 million, whereas the non-Evergreen incentive fee realizations in the quarter were closer to $30 million. So just wondering if you could share maybe what drove that delta here in the quarter?

Yes. We're continuing to see strong activity in terms of realizations, and that's impacting the unrealized carried interest balance. So we're optimistic and hopeful that will continue, but it's hard to predict what's going to happen in the future, especially in this environment, but that's what we're largely seeing is just strong performance, and the realization is carrying through.

Ken Worthington with JPMorgan, please go ahead.

This is Madeline Daleiden on for Ken. So Evergreen questions, all pretty much asked and answered, but just digging into your earlier comments on the products coming back to market. Any other details or time lines you can provide on what we should expect to be back in market over the next 2 to 3 quarters?

So Madeline, it's Erik. Thanks for the question. I think it's sort of what we sort of touched on. So direct equity is now out of market. That flagship secondary, the GP-led secondary, we're a few more quarters away from infrastructure, but venture is in market. So we've got a full suite of offerings. So it's going to be a busy year for us on the specialized fund front. Madeline, did you have a follow-up?

[Operator Instructions] Brennan Hawken with BMO, please go ahead.

It's [ Mark ] on for Brennan. Just wanted to ask on FRE margin, it was strong in the quarter, 53% benefiting from FRPR. As we think through the remainder of the fiscal year, how should we kind of think about a sustainable margin? And would incremental margin expansion come from continued top line growth and mix shift or from expense discipline?

Yes. It's Erik. Thanks for the question, Mark. I think it's going to be a combination of those things. As we've said before, when we're generating meaningful amounts of FRPR as we did this quarter, that is a natural margin enhancer. And so to the extent that we continue to see that along with the sort of the shifting that we've been seeing across the asset mix, all of that is margin lifting. And the team here continues to, I think, execute very well on expense discipline, comp ratios remain consistent. And expenses that we can control, I think we've continued to do a good job controlling.

Okay. And then within customized separate accounts, you highlighted a strong pipeline of awarded mandates in the billions of dollars. Can you provide more color on the timing of converting that pipeline into fee-paying AUM? And additionally, when existing clients re-up with you, are you generally seeing larger mandate sizes?

So it's Erik. On the latter, I mean, that really varies by the client, how mature their portfolio is. So for the client who is newer in their private market journey and who's sort of grossly underallocated still, yes, you tend to see re-ups at larger levels because they're still trying to hit and achieve target. For clients that are much more mature and are kind of at allocation and are looking to just sort of steady state, maintain, those mandates tend to be more similarly sized. So it does vary by client.

On the first part of your question around the timing of conversion, again, it varies depending on what is the mandate. If the mandate is a separate account that is full of just primary funds, those often take years to continue to move in as you're continuing to find managers have that capital drawn down and begin to charge fees on that. So a primary-only mandate is a much slower process to fee conversion. If the SMA is much more transactionally oriented, then that is obviously much, much quicker as those -- as that capital tends to get deployed over a 1- or 2-year time table.

And for the SMA portion that's moving into specialized funds, well, that depends on whether the funds on committed capital or invested capital and how quickly that sort of moves over and how quickly that capital turns into fee earning AUM.

Thank you. We have no further questions. I will turn the call back over to Erik Hirsch, Co-Chief Executive Officer, for closing comments.

I want to say thank you for taking the time to join us today. Hopefully, your takeaway is that we remain very excited about the opportunity that lies ahead, and we are firmly committed to continuing to deliver for our clients and our shareholders. Thank you very much.

Ladies and gentlemen, this concludes your conference call. We thank you for participating and ask that you please disconnect your lines.

Good morning, ladies and gentlemen, and welcome to the Hamilton Lane Fiscal Fourth Quarter and Full Year 2026 Earnings Conference Call. [Operator Instructions]. Also note that this call is being recorded on Thursday, May 21, 2026. And I would like to turn the conference over to John Oh, Head of Shareholder Relations. Please go ahead, sir.

Thank you, Sylvie. Good morning, and welcome to the Hamilton Lane Q4 and Fiscal Year-end 2026 Earnings Call. Today, I will be joined by Erik Kirsch, Co-Chief Executive Officer; and Jeff Armbrister, Chief Financial Officer.

Earlier this morning, we issued a press release and a slide presentation, which are available on our website. Before we discuss the quarter's results, we want to remind you that we will be making forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business.

These forward-looking statements do not guarantee future events or performance, and are subject to risks and uncertainties that may cause our actual results to differ materially from those projected. For a discussion of these risks, please review the cautionary statements and risk factors included in the Hamilton Lane fiscal 2025 10-K and subsequent reports we file with the SEC, including our upcoming Form 10-K for fiscal 2026.

These forward-looking statements are made only as of today, and except as required, we undertake no obligation to update or revise any of them. We'll also be referring to non-GAAP measures that we view as important in assessing the performance of our business. Reconciliation of those non-GAAP measures to GAAP can be found in the earnings presentation materials made available on the Shareholders section of the Hamilton Lane website.

Our detailed financial results will be made available when our 10-K is filed. Please note that nothing on this call represents an offer to sell or a solicitation of an offer to purchase interest in any of Hamilton Lane's products. Let's begin with the highlights, and I'll start with our total asset footprint. At fiscal year-end 2026, our total asset footprint stood at $1 trillion, which represents a 9% increase year-over-year.

AUM stood at $142 billion at year-end and grew $4 billion or 3% compared to the prior year. Growth came from both our specialized funds and customized separate accounts. came in at $905 billion and grew over $86 billion or 10% relative to the prior year. This stemmed primarily from market value growth of the portfolio and the addition of a variety of technology solutions and back-office mandates. For fiscal year 2026, total management fee and adviser -- total management and advisory fees came in at $584 million and were up 14% year-over-year.

Total fee-related revenue, which is the sum of management fees and fee-related performance revenues was $687 million and represents 20% growth year-over-year. The related earnings were $345 million and represents 25% growth year-over-year. We generated fiscal year 2026 GAAP EPS of $5.92 and based on $249 million of GAAP net income and non-GAAP EPS of $5.90 based on $321 million of adjusted net income.

Lastly, our board has approved an 11% increase to our annual fiscal dividend to $2.40 per share or $0.60 per share per quarter. We have increased our dividend every single year since going public and this now marks the ninth consecutive annual double-digit percentage increase since 2017. Our ability to consistently increase distributions to shareholders every year speaks to the growth and the strength of our business.

And with that, I'll now turn the call over to Erik.

Thanks, John, and good morning, everyone. If you only read the headlines about our industry and all you see is endless handwringing and concerns about the future. Yes. problem with headlines is that they are often driven by anecdotes, not extensive data. [indiscernible] prides ourselves on having one of the most powerful databases in the industry, we see a very different picture. I'll lean in here with a number of observations that we see from that data.

We believe private equity is transitioning from a slower period into a healthier deal doing and exit environment with more activity, narrower bid-ask spreads and entering a pattern in which short-term softness has historically set up strong multiyear rebounds. Global buyout deal volume rose more than 40% in 2025 and while total exit value was up nearly 50%, the second best year on record and not far off of 2021's peak. GPs are expecting even more exits again in 2020. Private credit fundamentals remain solid with disciplined leverage benign defaults and continued attractive spreads over public loans. Equity contributions averaged approximately 50% in 2025 and versus approximately 33% in 2007.

The default rate remains at sub 2% below historical averages, and private credit has posted positive performance in every vintage year for nearly 25 years. Venture and growth equity remain one of the clearest ways to access the AI opportunity set, along with access to data infrastructure, defense innovation and next-generation software businesses. Much of the value creation in these themes is still happening while these companies are private, where many of today's leaders are building and scaling well before they ever reach the public markets if they ever reach the public markets. Platforms like can provide investors with unique access and exposure to these opportunities during these transformative years.

Secondary is continue to offer one of the most compelling risk/reward profiles across private markets. Even after a record 2025 with a reported $240 billion of transaction volume completed, the market remains supported by a favorable supply/demand dynamic with available dry powder covering that volume at roughly 1x. For investors, that continues to create an attractive backdrop defined by buyer-friendly pricing, the potential for discounted entry, faster distributions and a more muted J curve.

Infrastructure continues to stand out as one of the most durable areas within the private market, supported by long track record of consistent performance and attractive risk-adjusted returns. According to Infrastructure Investors 2025 full year fundraising report and Hamilton Lane's proprietary database, fundraising momentum remains robust with the infrastructure asset class reaching a record year and more than 50% of funds being oversubscribed.

At the same time, industry reports suggest over 40% of institutions remain underallocated to the space with more than 90% expected to maintain or increase allocations in 2026. And lastly, real estate has moved from valuation reset to opportunity with a more attractive entry point, greater dispersion across sectors and geographies and improving transaction and refinancing activity, favoring skilled data-driven managers. Fundraising rebounded in 2025 to over $240 million after a post-2021 slowdown.

Liquidity ratios, measuring the ratio of distributions to contributions have improved meaningfully and rising from about 0.4x in 2023 to approximately 0.7x in 2027, signaling a more functional exit and recapitalization environment. On credit specifically, where the public narrative tends to jump from more headlines to systematic problem, our own platform experience points to something far more mundane. Specific manager and specific asset issues in a still healthy market. Perspective is important here. Private markets asset class is very large and diverse. It contains thousands and thousands of fund managers managing tens of thousands of funds.

Over the decades of this industry's existence, 1 thing has remained true. Explosion of performance is wide. Our industry is not reverting to some mean or average as it matures. Talent, risk management and portfolio construction remains significant variables and it shows in the numbers. Looking across opportunistic and origination style credit funds, our data shows roughly 7 to 12 percentage points of annualized spread between top and bottom quartile managers and older vintages and around 5 to 7 points in the post-GFC period.

Those aren't small differences. Those are material. Earning 2% versus earning 14% is a big difference, and that is exactly what the credit world can and does look like. Manager and asset selection matters. It matters a lot. And this is true across all of our sub-asset classes. For private equity, there is an approximate 10 to 14 percentage points in annual return gap between top and bottom quartile buyout and growth managers.

Venture and Growth equity showed the widest dispersion with venture managers separated by about 16 percentage points per year and growth managers by 10 to 14 points, for secondaries, there is a consistent high single to 10-point annual gap between top and bottom quartiles. Infrastructure displays about an 11-point annual dispersion in earlier vintages and around 7 points in more recent ones. And lastly, real estate, well, real estate has some of the highest dispersions with mid-teens annual gaps historically and around 12 points post GFC.

Reinforcing that after the recent valuation reset, sector, asset quality and manager selection is critical. These gaps regardless of subsector are significant, and they are persistent manager selection matters enormously as those sector weighting. You continue to see top decile managers even in extremely out-of-favor sectors and they're delivering excellent performance. This is one of the reasons that firmly Hamilton Lane exists. The clients understand this dynamic. They understand sourcing and selection are crucial. They are not looking to build an index.

This is why they turn to us to do the sourcing and the selection for them. Let me dive a bit deeper into the secondary market because it continues to be a topic that garners attention and frankly, a topic that too many people simply don't understand. Here, when we talk about secondaries, we're talking about investors buying and selling existing private market fund interest from an existing limited partner.

For buyers of secondary interest, instead of starting with a blank fleet, as is the case with a brand-new commitment to a fund that is being raised, buyers instead step into portfolios that already own a diversified set of private companies and they have operating history. It means less guessing about what might get bought in the future and more focus on what is actually in the portfolio today. It allows for valuing existing assets rather than blind pool investing.

For sellers, the benefit is getting liquidity on a fundamentally illiquid asset. Given this liquidity dynamic, you would expect that secondary sales typically had occurred at discount to stated net asset value, and that shouldn't be surprising. Maybe the most important point when we talk about discounts, is that these are negotiated transactions between a willing seller and a willing buyer, typically anchored to a valuation date that may be months and, in some cases, quarters ahead of when the deal actually closes.

When you were buying a fund interest where the net asset value valuations are provided by the manager on a quarter lag, you need to agree on a reference date. Further, these transactions can be complicated and it may take months and months to negotiate and ultimately close. What matters during that period is not where the portfolio was, but instead, where is it going? Further, the buyer universe is quite limited. And in some cases, where the fund manager actually imposes selling restrictions, there may only be 1 or 2 approved buyers.

Again, in that scenario, the seller knows that if they want liquidity and they are going to be selling at a discount to NAV, not a surprise. So if we were to step back and scrutinize the last 10 years of data to see how trading valuations have looked, we could turn to data provided by Jefferies, who runs a large secondary brokerage business. What that data shows is that from 2015 to 2025, average discounts by year purchased have ranged from 7% to 19%. And over that 10-year period, they have averaged 12%. That is the cost of an illiquid asset trading in an inefficient market. It is also the reality of asymmetric information across the buyer and seller universe.

Now does that price of the secondary buyer pays for the fund interest then in turn have bearing on the valuation of the fund itself, it does not. In fact, the selling price is often not even disclosed or provided to the underlying fund manager. Why? Because it has no bearing on the ownership, the management or the ultimate valuation of the assets. are there accounting regulations that govern this? Yes, there are. Are they different for Evergreen for closed-end funds? No, they are not. Are the secondaries done inside of the evergreen funds, a big driver of the secondary market?

No. They are a relatively small part of the overall $250 billion secondary market which is dominated by closed-end funds and LPs buying directly from each other. Do we see different firms use different valuation policies and dealing with their purchase discounts? We do not. As the secondary business has been around for nearly 30 years and has been continually examined and studied by the SEC, yes, it has. Our investors and secondary funds getting audited financials that follow generally accepted accounting rules, they are.

Does this mean that a secondary buyer may buy an asset at a discount to NAV and then turn around and Mark and hold that asset at the stated NAV, which is the same value as every other limited partner in that fund? Yes, of course, they would. Just because the selling limited partner wanted liquidity such that they were willing to part with their assets for less than NAV, why would that impact the value of the asset or the holding value for the potentially hundreds or thousands of other limited partners in that exact same fund. It doesn't, and it wouldn't.

For Hamilton Lane, our approach to the secondary market is to buy quality assets at appropriate prices. We are not trying to buy everything that comes for sale. In fact, in calendar 2025, we turned down nearly 99% of all the total dollar deal flow we saw, despite committing nearly $5.5 billion in capital. We always acquire secondary stakes at a discount to NAV. No. In fact, there are numerous instances where we have paid a premium to NAV. Why would we do that? Simple. What matters at the end of the day is the value of the asset when it is ultimately and eventually monetized.

After over 25 years of doing secondary deals and over $29 billion of committed capital, Nearly 70% of our performance is achieved from the appreciation of the underlying investments post purchase. And that means that about 30% of our return came from good purchasing and good structuring. That is a skill set that is not luck. So if we have high conviction that an asset marked today at $1, will ultimately be worth and sold for $3, we might gladly pay the seller $1.50 today to get them to transact because we are ultimately paying for the $3 at some point in the future. When we do that, do we take the asset on our books at a value less than we paid? Yes, we do. And we show a near-term loss as a result.

From our vantage point, the real engine of returns in secondaries is still company performance over time. Discounts are a benefit. They can create initial return tailwinds, but they are not it for owning good businesses. They are not a substitute for owning good businesses and backing capable general partners. That is where we continue to focus our efforts, using our data relationships and scale to find high-quality portfolios, partner with high-quality managers and when we can buy those exposures at prices that are appropriately reflective of the liquidity that we are providing.

With that as context, Hamilton Lane delivered another very strong quarter and the momentum across the business continues to build. Our breadth of offerings and reach across geographies continues to serve us well in an environment defined by volatility, fear and uncertainty, but the engine behind all of this is our team. The organization continues to grow and strengthen and Jeff and I are proud of the work they do every single day to deliver for our clients.

Let me turn now to fee earning AUM. At fiscal year-end, Total fee-earning AUM stood at $82 billion and grew $9 billion or 13% relative to the prior year. Net quarter-over-quarter fee-earning AUM growth was $2 billion or 3%. During the past fiscal year, our blended fee rate continued to rise as our fee earning AUM mix shifts towards the faster-growing specialized funds part of our business. Our blended fee rate now stands at 67 basis points. Total fee earning AUM growth continues to be driven largely by our specialized fund platform with our Evergreen products at the center of that momentum.

Overall, specialized fund fee earning AUM ended fiscal 2026 at $41 billion, having grown $8 billion over the last 12 months. This represents an increase of 24% and Quarter-over-quarter growth was approximately $3 billion or 7%. Importantly, for our Evergreen platform, this came in the face of what was an extremely challenging backdrop for evergreen funds in calendar Q1. In this environment, the industry has seen elevated redemption requests, particularly in private credit evergreen funds, with several evergreen funds receiving redemption requests far in excess of their caps. Against that environment, the Hamilton Lane experience has been quite different.

Our Evergreen platform finished the quarter with net positive inflows in aggregate, positive quarterly performance across all funds and not having to impose gates in any of our evergreen funds. For the quarter, our Evergreen suite generated over $1 billion of net inflows in aggregate and no individual fund finished the quarter in a net outflow position. Every single evergreen product we manage was in net subscription for the quarter. In addition, total Evergreen AUM ended the quarter at over $17.5 billion which represents a 64% growth year-over-year.

We view this as a real vote of confidence in how these vehicles are constructed in the diversification and quality of the underlying portfolios and in the role they play for long-term focused investors, even when the headlines are working against the asset class. That said, individual month dynamics we witnessed inside the quarter do tell a different story, but one that coincides with the general movement observed across the industry.

January and February, net subscription activity remained robust, with near record aggregate net inflows in February that resulted in the second highest individual month for the franchise ever. But as we moved into March and as the market narrative really picked up, we were certainly not immune to what was happening around us. Gross redemption activity increased and gross sales slowed, but the experience was not the same across all of our funds, highlighting the benefit of our diverse offerings.

Going back to the over $1 billion in quarterly net subscriptions in aggregate, that broke down to positive $471 million for January positive $591 million for February and negative $17 million for March. Spending on March, we saw net outflows for both our global credit and global multi-strategy equity offerings. While all other funds were in a net positive inflow position. Again, we were never put in a position for any fun to have to impose a gate.

And for additional context from our global multi-strategy equity fund, while we were in a net outflow position for March, we believe it was partially driven by rebalancing exercises for some investors and platforms due to a long sustained positive performance. Investors will seek to rebalance out of strong performers who have grown in size relative to the rest of their portfolio. Looking through to what we are seeing for April activity across the products, we expect to take in over $265 million in aggregate net inflows across the entire group of products.

On the institutional side, pensions, endowments, insurance companies, family offices and others are selectively tactically using Evergreens as one component of their broader portfolio construction. Institutional flows continue to rise, and they now represent over 25% of the capital coming into our evergreen products. And as we've seen in several recent instances where institutional new wins and re-ups they're now allocating meaningful capital to our Evergreen suite as part of their overall portfolio construction.

We've discussed previously our partnership with Guardian where $250 million has been allocated and invested into our evergreen funds. Another example of this shift saw us winning a private credit mandate in April from a large U.S. public pension plan. Half of that mandate went to seeding a new U.S. credit Evergreen interval fund, which I'll come back to in a moment, and the balance being deployed in a separate account. We're also seeing existing relations and clients expand with us across Evergreen, an institutional investor in the Nordic region that has historically allocated only to our closed-end funds, has now chosen to supplement those commitments with an investment in our global multi-strategy Evergreen Fund.

In addition, we launched a highly specialized insurance-wrapped commingled product that we'll invest in our secondary evergreen offerings and is expected to bring new insurance clients to Hamilton Lane, reinforcing our expanded push into the insurance channel. And finally, we secured multiple institutional separate account mandates in Canada where a portion of the capital will be invested in our Evergreen products and the remaining invested in primaries and closed end specialized funds. The growth and expansion of our Evergreen product suite is strong, and we're not standing still.

In April, we launched the Hamilton Lane Credit Income Fund, or CIF, our newest U.S. registered Evergreen vehicle which is focused on senior private credit and it's our first daily subscription and daily priced offering. This is our 12th evergreen fund and serves as the U.S. complement to our global senior credit Evergreen Fund which has been in the market for more than 3 years. We've assembled a strong group of seed investors, which includes the U.S. -- the large U.S. public pension plan I mentioned earlier, several multi-employer union retirement pension plans and an additional U.S. public pension plan and capital from our own balance sheet.

Combined, this group committed nearly $325 million to launch this product. Moving on to our closed-end fundraising. On our prior call, we highlighted that we have launched our seventh secondary fund and our second venture product. Momentum for both the strong and demand continues to build, and we expect to hold initial closes for both those products in the coming months. In addition, we are pleased to share that we have officially launched fundraising for our first GP-led secondary fund.

For those less familiar with this fast-growing segment of the secondaries landscape, one of the most important developments over the last decade has been the growth of the GP-led continuation vehicle market. This market segment is now a mainstream high-quality part of the secondary toolkit, giving GPs a way to offer their existing LPs optional liquidity while retaining ownership of assets that they believe will continue to grow in value. High-quality managers are now using GP led as a regular portfolio management tool and in some cases, as an alternative to a traditional M&A exit or IPO.

The result is that GP leads today represent a diverse and growing opportunity set across the full spectrum of private market NAV, and we believe this segment will remain a meaningful driver of activity and deployment for our secondary platform going forward. Hamilton Lane was an early mover in this space, having completed our first GP led transaction back in 2014 before these types of solutions were common in the market.

Since then, our track record across buyout GP-led transactions has been strong, driven by a focus on high-quality, hard-to-access middle-market opportunities sponsored by general partners with whom we enjoy deep access and long-standing relationships. With the launch of this new fund, we believe we have a compelling opportunity to build another closed-end franchise that complements our broader secondaries platform.

We expect to hold a first close for this inaugural fund before calendar '26 year-end, and we look forward to providing updates as the raise progresses. Moving now to our sixth Equity Opportunities Fund. As a reminder, this strategy focuses on direct equity investments alongside leading general partners, and it offers two fee structures, one that charges management fees on a committed capital basis with a 10% carry, the other, the charges on a net invested basis with a 12.5% carry. Our prior direct equity fund offered in this exact same structure raised $2.1 billion.

On our last call, we noted that we had closed on $2.3 billion of investor commitments through the end of January, which meant we had already surpassed the prior fund size of $2.1 million. Since then, we have held additional closes through the first half of May, totaling over $455 million, bringing the current total raise to approximately $2.8 billion. At this size, the fund now stands at over 35% larger than the prior vintage and the management fee mix is currently about 35% on committed capital and 65% on net invested and Jeff will provide additional detail on the retro fees associated with capital that closed in this quarter.

We have received approval to extend the fund raise through the end of calendar Q2 and to allow the remaining prospects to complete their work and close into the fund. We are extremely proud of the continued growth of our direct equity franchise, and we look forward to the final close in the coming weeks. Let's wrap up here with customized separate accounts. At quarter end, customized separate account fee-earning AUM stood at $41 billion and grew $1.6 billion or 4% over the last 12 months. Net quarter-over-quarter change was essentially flat.

We continue to see gross contributions coming from a mix of new client wins, plus re-up activity from existing clients, plus contributions for investment activity and then all that being offset by fee-based step-downs, which is largely a timing-related impact as well as capital distribution stemming from exit activity. We continue to carry substantial committed and contractual dry powder ready to deploy, and that's supported by a strong pipeline of mandates that have been awarded and are currently moving through the contracting stage.

Since the start of calendar 2026, we have been continuously adding to the back book of business. During the first calendar quarter of 2026, we contracted with a diverse set of leading global institutions including large public and corporate pension funds, insurances, companies, university endowments, foundations and other long-standing plan sponsors across North America, Europe and Asia. Behind that, our pipeline of live opportunities in various stages of negotiation remain sizable and in the multibillion-dollar range. One dynamic we've highlighted before and continue to see is more separate account allocations migrating into our specialized funds, both closed-end and Evergreens.

As clients increasingly want secondaries Enco investments embedded in their programs, they are accessing those exposures through our various products. In fact, during this reported quarter, there was over $620 million of commitments allocated to our closed-end and Evergreen products from separate account clients. What this leaves behind are primary allocations. Which are increasingly being priced on net invested or net asset value basis, which means it takes time for AUM to convert to fee-earning AUM.

So a large primary SMA win may not be seen in fee earning AUM for several years, but it will come on eventually. Before I move on, I want to spend a minute on performance. What we are seeing across our platforms is that exits are happening and more importantly, they are happening at values above where those assets were being previously marked. Let's just take our direct equity platform. So far in calendar '26. We have seen 8 exits, 6 of which have closed and 2 that have been announced and are slotted to close in the coming months.

Together, those transactions represent over $1.2 billion of gross proceeds and were achieved at a 3.6 multiple on the capital that Hamilton Lane invested across a variety of products and client accounts. Maybe most importantly, in aggregate, those 8 assets are expected to generate an aggregate value at nearly 34% above where the GP had those companies value just 2 quarters prior to their exit. Now if we step back and look at another part of our business, secondaries in our most recent 6 secondary fund from calendar '23 through calendar '25, there were more than 340 individual company exits across the underlying portfolio.

On average, those assets were monetized at values nearly 9% higher than where they were marked 2 quarters earlier. To us, this reinforces the point that we have made for a long time. In private markets, good outcomes still come from making good investments backing quality businesses and just as importantly, selecting quality GPs who know how to create value and ultimately realize that value.

Let's move now to an update on our latest additions to the Hamilton Lane innovations portfolio, where we utilize our balance sheet capital to invest in differentiated technology solutions that broaden access to the asset class enhance the investor experience and strengthen the overall infrastructure of the private markets ecosystem. On March 9, we announced a strategic investment in core stone alongside fidelity investments and future standard, joining Franklin Templeton, KKR and Apollo.

Today, too many processes in our industry still rely on manual work and one-off connections between systems, which can make it slow, cumbersome to open accounts, process subscriptions or move data between managers, advisers and administrators. Fareston uses a private permission blockchain as a secure shared backbone. So the key information can be entered once and then flow automatically to the right partners. In practical terms, that means fewer errors, faster processing and a way better overall experience for investors and their advisers as this ecosystem continues to grow.

We are excited about the opportunity that lies ahead for core stone and the problems it will help tackle to deliver even more seamless and efficient access to private markets for an increasingly broad addressable base of investors. In addition to the core stone investment on March 17, we also announced a strategic investment in Republic, a leading on chain global investment platform. This strategic balance sheet investment builds upon our existing relationship with Republic that began with the launch of our infrastructure Evergreen Fund on the Republic platform in March of 2025.

That relationship was designed to bring institutional quality private market strategies to a much broader retail audience with low investment minimums and the potential for tokenized access and improved liquidity. Republic operates a global digital investment marketplace, and our investment will support Republic's efforts to further expand that platform. Cross-product design, distribution, tokenization and investor education.

We see this as a core building block for our digital asset strategy and a meaningful enabler of the continued growth of our Evergreen platform. Taken together with our broader Hamilton Lane innovation portfolio, we see our investments in Republic and Corston further strengthen the digital infrastructure around private markets and directly support our mission of serving clients by expanding access, improving usability and reducing friction for investors globally.

With that, I'll now pass the call to Jeff, who will cover the financials.

Thank you, Erik, and good morning, everyone. For fiscal year 2026, management and advisory fees were up 14% from the prior year. However, this includes the impact of lower retro fees year-over-year. Namely, we received $3 million in retro fees in fiscal 2026 from our latest direct equity fund versus nearly $21 million of retro fees in fiscal 2025 and primarily from the final close of our sixth secondary fund in that period. Retro fees for the quarter were $2 million coming from our latest direct equity fund.

As Erik alluded to in his comments, we also held additional closes subsequent to quarter end for the direct equity fund and may have additional retro fees next quarter on the remaining final closes charged on a committed capital basis. Now moving to total fee-related revenue, which includes the impact from fee-related performance revenue or FRPR. This was up 20%, driven by a combination of strong management fee growth and our first full fiscal year of fee-related performance revenues. Specialized revenue increased by $59 million or 19% compared to the prior year period.

This was driven primarily by a $7 billion increase to fee-earning AUM in our Evergreen platform and over $1 billion raised in our latest direct equity fund in fiscal 2026. Again, the year-over-year growth here was impacted by the retro fee element that I just alluded to. Moving on to customized separate accounts. Revenue increased $7 million or 5% compared to the prior year period due to the addition of new accounts, re-ups from existing clients and continued investment activity.

Revenue from our reporting, monitoring, data and analytics offerings increased by approximately $7 million or 22% compared to the prior year period as we continue to produce strong growth in our technology solutions offering. Lastly, the final component of our revenue is incentive fees, which totaled $175 million for the period. This amount includes fee-related performance revenues stemming primarily from the quarterly crystallization of performance fees for our U.S. private assets Evergreen Fund with additional contributions from -- coming from our more recently launched evergreen phones.

Let's now turn to our unrealized carry balance. The balance is up 23% from the prior year period, even while having recognized $80 million of incentive fees, excluding fee-related performance revenues, during the last 12 months. The unrealized carry balance now stands at approximately $1.5 billion. Moving to expenses. Total expenses increased $38 million compared with the prior year. Total compensation and benefits increased by $25 million relative to the prior year, driven primarily by higher compensation associated with increased head count and equity-based compensation.

G&A increased $13 million, driven primarily by revenue-related expenses, including the third-party commissions and platform fees related to our U.S. Evergreen product that we've discussed on prior calls. And while we are seeing overall G&A expense increase with revenue-related expenses, which is a good thing and can be an indicator of growth to come. We continue to successfully offset this with cost savings and expense discipline in other parts of the business where we have discretion.

Let's move now to fee-related earnings or FRE for the year was up $68 million relative to the prior year as a result of the fee-related performance revenues and management fee growth discussed earlier. FRE margin for the year came in at 50% compared to 48% for the prior year. Both FRE and FRE margin benefited from strong fee-related performance revenues in the period. Let me now move to share repurchase activity during the quarter. Recall on February 20, we announced that we had commenced share repurchases under our authorized repurchase program. In total, we repurchased 199,000 shares at a weighted average price of $143 or $10.43 resulting in roughly $20 million spent under the program. In addition, this morning, we announced that our Board of Directors approved an increase to the authorization under our repurchase program that now allows us to repurchase up to $100 million of our Class A common stock less the approximately $20 million already spent.

This leaves us with approximately $80 million available for future share repurchases. We will continue to revisit utilization in the future. I'll wrap up now with some commentary on our balance sheet. Our largest asset continues to be our investments alongside our clients in our customized separate accounts and specialized funds. Over the long term, we view these investments as an important component of our continued growth, and we'll continue to invest our balance sheet capital alongside our clients.

In regard to our liabilities, we continue to be modestly levered and we'll continue to evaluate utilizing our strong balance sheet in support of continued growth for the firm. With that, we will now open up the call for questions.

[Operator Instructions]. And your first question will be from Ken Worthington at JPMorgan.

I wanted to spend my time on wealth distribution and the wirehouse channel. PAF is the big fund with critical mass in the wirehouse channel. You have a number of other funds that you've been driving to see enough scale to get them onto the wires as well. So how does the pipeline look for that warehouse distribution? And are those additions something that we should see in 2026.

Thanks, Ken. It's Erik. So I wish we controlled the decision ourselves as to whether we got placed in those areas, but we do not. That said, as you noted, we have a variety of products that are heading to critical mass. I view critical mass as $1 billion or more and we're in active dialogue with a number of distribution partners that we think will aid further what has already been good traction and good success.

Great. And then can you talk about the hiring you're doing on the wealth side to help you expand access to these distribution channels. how have you ramped up hiring? Where are you hiring from? What's the season like of these new salespeople that you're bringing on?

Sure, Ken. It's Erik, I'll stick with that. So we've made a number of high-profile hires over the last few months. Those folks are getting onboarded and are getting into their positions or their territories depending on what their specific roles are. I would say, in general, these are very seasoned executives coming from generally much larger asset management firms than Hamilton Lane, who have had a decade or more experience in the space distributing products.

And I think for us, always flattering when you can recruit really good talent, particularly when you can recruit talent from really excellent franchises. And I think one of the appeals of why they are coming here is the suite of products. I think they see us as well positioned and then, frankly, a relatively early part of our journey, and they're excited to be on board and we're excited to have them. And I think I would say despite again, a lot of recruiting and onboarding. We haven't seen a lot of benefit from those folks because they are just getting here now and just getting started.

Next question will be from Alex Blostein at Goldman Sachs.

I was hoping just to follow up on your comments around some of the recent trends and unpack dynamics in April, if you don't mind. So million on a net basis. One, I just wanted to clarify whether that included the seed investment that you mentioned, I think it was over $300 million. And then if you could just maybe spend a minute on what you're seeing at a product level basis, not just in total but trends within the products, both on the gross sales and growth redemption side of things. Sure. So let me take the first part first. If you're referring to the Guardian seed, which I presume you are, that came in well before April. That was coming at the first part of the calendar year. So that's not included in those figures.

So if I go to the second part of the question, what I would say was you've seen Redemptions were generally focused on credit and our international multi-strat with everything else having either no redemption activity or extremely muted activity and then you saw flows coming across the totality of the full product suite.

Got it. That's helpful. And then for my second question, just wanted to surmount and talk through some of the fee dynamics and the structures in the space. As you guys continue to shift more of your focus into the evergreen funds from some of your institutional clients, are there any scrutiny in the fries given that the evergreen funds are generally higher than the separate accounts.

And just as that part of the business gets larger, meaning institutional gets larger over time within the evergreens, do you see any sort of potential risk and fee structures change and migrating more to kind of what we see in institutional channel versus the more retail focused have green products?

Well, it's an interesting question, Alex. So I think it depends on what's the reference point. For the client, if the reference point is do a Hamilton Lane Evergreen Fund or do a normal GP closed-end fund, then our product is demonstrably cheaper. And I think for a lot of them, that is exactly what they're weighing. They're weighing a Hamilton Lane Evergreen versus a 2 and 20 classic GP closed end product. And so there, it is material cost savings. And relative to doing a Hamilton Lane separate account, it's still cheaper because remember, in our separate accounts, the preponderance of that capital is going into other primary funds.

So we're putting a 30 to 40 basis point wrapper around a series of underlying GPs that are charging 2 and 20. So that's one of the most expensive things that we have. So I think the migration from the client capital is totally rational. They're moving towards a generally a lower fee structure that, in our case, is offering them the benefit of diversity of kind of the manager of managers' model. And so that is better for the customer that's certainly -- that's better for Hamilton Lane. And I think that's just a natural healthy evolution that we're seeing here.

Next question will be from Michael Cyprys at Morgan Stanley.

On the private wells evergreen products, I think you mentioned nearly $18 billion of NAV. I was hoping you could help unpack what portion is from institutional clients versus what portion of that $18 billion or so is from the U.S. channel versus from the wires versus the private banks. And as you look out over the next couple of years, just curious how you think that mix will continue to evolve compared to where -- how it looks today?

So thanks, Mike. It's Erik. The institutional piece today, as we look at the flows that are coming in, as I said, about 5% are coming from straight up institutions. And that is a range of size I think this dynamic is interesting because at the very small end of the institutional world, a lot of those clients had frankly migrated out of the asset class because if they're putting in $10 million or $15 million they would have typically been a fund-to-funds customer, and that market segment doesn't really exist today.

So a lot of them either drifted into, like, say, a secondary product, but even that wasn't sort of fully representative of getting kind of broad asset class exposure like a fund to funds would have done for you. So we're seeing them toggle back. And at the larger end, as I noted in sort of my large U.S. pension plan example, we're seeing them use evergreens for tactical portfolio construction. You're just using drawdown funds, it's really hard to put on like an overweight.

You're using a drawdown fund and you as a CIO or a Board want to put on an overweight. It's going to take you years for that overweight to kick in, you're going to have to find the subscribe to the funds, have the funds called the capital down, see net asset value build up over time. And so you need to have a 5- or 6-year forward crystal ball in order to do tactical overweighting.

With Evergreen funds, given their fully invested nature, it's on, it could be off, it could be back on, but it gives you a tool gives you a tool that they've just historically not had as an asset class. And I think that's been an interesting addition for them. So if you look at the weightings, you can see in the reported numbers, our international funds. So you can kind of see that split. In the U.S., the majority of capital is coming through wire houses, but you -- but as I've noted before, only one of our products in the U.S. is on a wire or wires. And so the split today is the international to U.S. split is sort of shown in the numbers because we designate which of those or which.

The institutional flows are at 25% today and have been rising. And then wire is what's driving the PAF product in the U.S.

Got it. So it sounds like within the U.S., it's predominantly wires, if I'm hearing you on the U.S. retail side?

Just because it's predominantly wire for in terms of the sheer amount of capital just because PAF is so much bigger than our other U.S. But if you look at all the other U.S. products, none of that's coming from wire because none of those are on wires today. U.S. venture Evergreen, any of those things are all coming from just us directly selling into RIA and wealth platforms.

Okay. And then just a follow-up question, if I could, also on private wealth. And hear that and see clearly net flow positive across each of your products. But I was hoping you could help remind us around how you approach managing liquidity across these funds, particularly the larger ones like PAF and GPA and how you might navigate a potentially hypothetical period if redemptions were actually to exceed the inflows, say, if redemptions were to be extended for an extended period of time in excess of a 5% cap. So just curious how you think about managing liquidity there and your approach to that.

Sure. I suspect it's like most every other manager. I mean those vehicles are constantly generating distributions and thus cash liquidity. And so we're maintaining cash reserves. And on top of that, we have lines of credit that are in place to also help manage.

And to what extent is that dependent on exit and monetization events? Just curious how you think about all of that, sorry.

Well, I think it's just -- I mean, these are hugely diversified portfolio. So it's hard to imagine a scenario where liquidity dries up across each and every underlying strategy or vintage. And so we just -- we're not seeing that and aren't modeling anything that looks like that. The line of credit is obviously not dependent on exit activity. It's just a line tied back to the fund size.

So we feel like this is a generally quantitative exercise and one that we're constantly modeling and making sure that the funds are in the right position to deal with whatever level of liquidity is desired by the investors.

Next question will be from Mike Brown at UBS.

Erik, you spend a lot of time talking about the secondaries business. You made a comment I wanted to ask a little bit more about -- you talked about turning down 99% of deal flow despite still committing $5.5 billion. Can you just maybe elaborate on what characteristics are causing to pass on those opportunities? Is competition influencing some of that selectivity threshold? Is it getting more competitive out there? In essence, have the 99 shifted over time?

And then in the wealth channel, the incentive fees are calculated on kind of NAV basis but put it simply meaning they do include unrealized gains and that's, of course, drawn some more increased attention. Again, it's an industry practice. But there obviously does is some scrutiny on kind of the day 1 mark component of that. So maybe just walk us through the rationale of using that approach for incentive fees for the industry? And then would you -- do you think there would ever be a shift in the approach to kind of shift back to more of a realized gain framework?

Sure. So several questions there. On the first part, in terms of the 99%, not a competition issue. As I mentioned, if you just look at kind of the capital available versus deal flow, this is -- the secondary space continues to be one of the most imbalanced in terms of just tons of volume and frankly, not enough capital. I think in terms of why do we turn things down.

Number one is just quality of asset. As I said, we're looking to buy really good assets that are managed by really good fund managers. So we get shown, as you can imagine, lots and lots of deal flow, and you sort of see everything. You see lousy assets. You see mediocre assets managed by poor managers. For us, you're looking for the right combo, you're looking for really high-quality assets managed by really high-quality fund managers at an appropriate price. It's a combo of all of those. And our team is sort of designed to screen through that and look for that.

So the luxury of having as much deal flow as we have means that the team doesn't need to agonize over things that don't quite hit the bar. They just have a quick now, and they move on to the next thing. From a market perspective, I think as others have commented over the last sort of couple of weeks of earnings calls, we're all following GAAP accounting. And so to the extent that there's going to be a change, which I'm not sure why there would be, as I said, has been going on for 30-plus years. But if there was a change, it would be an industry change and it would be the same for everybody.

What we're doing is not different or unique from anybody else. And so as I said in my comments, I think the sort of -- the notion that's misleading is this kind of a when we take it on our books, as I said, oftentimes months and months and months have elapsed since we actually agreed to a reference date and a transaction with the seller. And so sure, it does come on at some point in time. But again, it's reflective of that day 1 event is reflective of what could be an extremely long period of time and events that preceded that. So for us, we're going to follow whatever accounting regulations are put forth. That's what's put forth today.

That's what we're doing. That's what everyone in the industry is doing. I can't imagine that it changes. But if it does, we'll follow whatever is there and so will everyone else. And so it doesn't alter the playing field. On the carry piece, you will recall that PAF, one of our largest funds had a traditional realized carry model, not kind of an unrealized high watermark.

That product got changed at the request of the investors, who wanted a different structure and one that more mirrored what the rest of the industry was doing. And so we went through an investor vote, it was overwhelmingly supported by investors to make the change, despite them knowing that, that was going to result and some performance fees being paid to us, but that also came with it lower management fee, which is what they were desiring of.

And so, today, most of our products follow that sort of high watermark, which is by far the industry norm. GPA does not. That is a realized carry product still. And so I mean that's where the industry is. We're not unique or different in that space. And to the extent clients are desirous of a different structure, then we'll meet their needs, and so too will the rest of the industry.

Great. And [indiscernible] on PAF in the change there. Maybe change gears for my follow-up here. I wanted to ask on the seventh secondary fund. I think you mentioned the initial close is trending to be done in the next couple of months. Just maybe touch on how is interest there on the institutional side? How could the latest vintage compare at size to the last vintage? And One of your peers talked about a shift in the approach to the fee rate over the life of the fund. Is that something that you're also planning to do or might consider?

Yes. So we're not planning on shifting the fee rate. I mean there are -- we're in market as are a variety of players. I would say we look very normal. I'd say the vast majority of the industry is on a fee on committed capital basis, shifting either to a fee on the net asset value post investment period or a fee on invested capital or net asset value. So that's been the norm.

That's exactly where we're priced today. Interest remains high. As I mentioned in my comments, I think the sort of the risk return profile of secondaries is one of the most attractive things that you're seeing in the market, the ability to have look through I think the market today still feels a little bit uncertain and taking away some of that blind pool risk is powerful. Also pricing assets based on oftentimes, as I said, asymmetric information advantages, really a good thing. Certainly for us as a buyer.

And so we continue to see interest high. If you look at us on kind of a stack rank rate weighting from just capital under management in the secondary space, we're sort of a mid-tier player who has aspirations to be a top-tier player. So we think we've got a lot of room to grow in that market environment. There are plenty of funds that are much, much bigger than us, and we aspire over time to join their ranks.

[Operator Instructions]. Next is Brennan Hawken at BMO.

Mark on for Brandon. I wanted to ask, within Park Avenue Securities, I believe you now have 3 Evergreen products on the platform. So can you provide an update on the current contribution from that channel and how you would define success over the next 12 months?

Sure. Thanks, Mark. It's Erik. So we -- this is -- we're a couple of months into this. They've been a terrific partner. This is the affiliate of Guardian. And so this is again, it's early days. We haven't broken out the contribution of that. I think I would measure success by more products and obviously, higher subscriptions to state the overwhelming obvious. I think one of the reasons that platform is interesting is because they have a lot of respect for the parent company.

And obviously, as you know, the parent company, $250 million into Evergreen coming out of the beginning of the calendar year. another couple of hundred million dollars going into closed-end products and then turning over a mandate where over the next 10 years or so is $5 billion or more. So certainly, a big mark of confidence from the parent, and we're hopeful that the subsidiary and the advisers feel the same way.

And then on reporting and monitoring fees, it's clearly been a tailwind up 22% year-over-year. How much of that growth is driven by sort of bundling cobalt? And what needs to happen for that revenue line item to continue scaling from here?

I think a lot of it has been us getting this sort of combination right. I think what clients are valuing today is the service of not wanting to build out and manage a complicated back-office system. We can do it much more cost efficiently because of just how robust our tech stack is. And then what they want is they want seamless access to their data and the ability to analyze it.

And I think us bundling this together, showing them the power of their data into our system putting that power at their fingertips, making that as real time as possible, letting them analyze and be good stewards of their own portfolio. That's resonating in the market. lots and lots of customers in that service agreement with us already gives us a lot of good reference points across all different types of clients.

And so we continue to see a big pipeline for that ahead. And on top of that, we're selling Cobalt also as a stand-alone. So for those that maybe are using a fund admin or something else to handle their back office, we still offer Cobalt just as a straight up subscription and that has been growing and even that as a stand-alone has been growing at an even higher rate than the combined service has been.

Next question will be from Alex Bond at KBW.

Just wanted to follow up on the April flow commentary in the Evergreen suite and certainly appreciate all the color there, particularly the monthly breakdowns. But if we look at the -- and I think it makes sense that March is seasonally low, given that the redemptions occur there. But if we look at the April flows of $2.65 and compare that to the 525 roughly monthly average in January, February implies that did slow a decent amount in April, which again makes sense given the backdrop. But just want to get your thoughts around forward expectations for gross flows here? And if you think the April results are a reasonable way to think about the run rate for gross flows from here?

It's Erik. I'd be very disappointed if April is the new reference mark. So I think in April, you were still dealing with a lot of hangover, a lot of headline pieces and a lot of manufactured sort of hysteria and concerns. And so I don't think that's the new reference point. I think if I look at what's happening now in the pipeline and the channel, as I mentioned, a lot of new hires for us coming on board, new relationships getting established. So I think we're -- obviously, our goal is to sort of get back to and exceed what we were seeing in January and February. And I think we've got the resources in place to do all of that.

Okay. Great. That's helpful. And then maybe just for my follow-up, I just wanted to ask on overall exit activity. You did mention that you see exit activity improving, which is certainly positive. But maybe if you could help us think about what the potential magnitude of a pickup could be there in the second half of the year or any additional color around why the improved line of sight for improved exit activity over the rest of the year?

Sure. So it's Erik. I'll stick with that. I think there's a couple of things. I mean I think exit activity is a combination of a couple of factors. One is just the general aging of your asset base. So today, on average, private companies are being held by their manager slightly over 5 years, and that number has actually been up the last couple.

And so part of it is just look at when the deals were done and just sort of general aging. And so you're also -- you're just hitting that maturation window. The second is that you need a little bit of market equilibrium where you've got buyers and sellers seeing kind of the economy, pricing kind of the same way. And I think we've achieved that. If you went back a couple of years ago, you had each of the side of the equation was either more robust or more pessimistic than the other, and you were not at equilibrium.

Today, I think people are seeing the world as potentially volatile as is they're seeing it through the same lens. There's a lot of capital that needs to be deployed, so there's no shortage of people to acquire. And then you add on top of that, what is an increasing sort of corporate M&A environment as well as an IPO market. I think you add all of that together, and I think that paints a much better picture than what we've seen for the last couple of years.

At this time, we have no other questions registered. I will turn the call back over to Erik Hirsch, Co-CEO

Again, just thank you for the time. Thank you for the engagement. Thank you for the support and wishing everyone a safe and enjoyable Memorial Day weekend.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.

Good morning, ladies and gentlemen, and welcome to the Hamilton Lane Fiscal Third Quarter 2026 Earnings Call. [Operator Instructions] This call is being recorded on Tuesday, February 3, 2026. I would now like to turn the conference over to John Oh, Head of Shareholder Relations. Please go ahead.

Thank you, Natasha. Good morning, and welcome to the Hamilton Lane Q3 Fiscal 2026 Earnings Call. Today, I will be joined by Erik Hirsch, Co-Chief Executive Officer; and Jeff Farestter, Chief Financial Officer. Earlier this morning, we issued a press release and a slide presentation, which are available on our website. Before we discuss the quarter's results, we want to remind you that we will be making forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business.

These forward-looking statements do not guarantee future events or performance and are subject to risks and uncertainties that may cause our actual results to differ materially from those projected. For a discussion of these risks, please review the cautionary statements and risk factors included in the Hamilton Lane fiscal 2025 10-K and subsequent reports we file with the SEC.

These forward-looking statements are made only as of today, and except as required, we undertake no obligation to update or revise any of them. We will also be referring to non-GAAP measures that we view as important in assessing the performance of our business. Reconciliation of those non-GAAP measures to GAAP can be found in the earnings presentation materials made available on the Shareholders section of the Hamilton Lane website.

Our full financial statements will be made available when our 10-Q is filed. Please note that nothing on this call represents an offer to sell or a solicitation of an offer to purchase interest in any of Hamilton Lane's products. Let's begin with the highlights, and I'll start with our total asset footprint.

At quarter end, our total asset footprint stood at over $1 trillion and represents a 6% increase to our footprint year-over-year. AUM stood at $146 billion and grew $11 billion or 8% compared to the prior year period. The growth came from both our specialized funds and our customized separate accounts. AUA came in at $871 billion and grew $50 billion or 6% relative to the prior year period.

This stemmed primarily from market value growth of the portfolio and the addition of a variety of technology solutions and back-office mandates. Total management and advisory fees for the year-to-date period were up 11% year-over-year. Total fee-related revenue for the period, which is the sum of management fees and fee-related performance revenues, was $507 million and represents 31% growth year-over-year.

Fee-related earnings were $254.6 million year-to-date and represents 37% growth year-over-year. We generated fiscal year-to-date GAAP EPS of $4.35 based on $183 million of GAAP net income and non-GAAP EPS of $4.41 based on $240.1 million of adjusted net income. We have also declared a dividend of $0.54 per share this quarter, which keeps us on track for the 10% increase over last fiscal year, equating to the targeted $2.16 per share for fiscal year 2026. And with that, I will now turn the call over to Erik.

Thank you, John, and good morning, everyone. As we look back on calendar 2025, Juan and I are very proud of all that has been accomplished, and we are enthusiastic about the significant opportunity that lies ahead. Our team successfully navigated changing markets, industry evolution and high client expectations. We delivered strong growth and outstanding results, and we exited calendar year 2025 with real momentum.

We have a larger, more global reach, a more diversified platform, expanded and deeper client relationships and new product lines that are gaining traction and growing. While Juan and I have the privilege of witnessing what this team does every day, it is also rewarding to be recognized by those outside of Hamilton Lane.

So I am honored to say that Hamilton Lane was once again recognized by Pensions & Investments as one of the best places to work in money management. We have now earned this recognition for the 14th consecutive year and are one of only 5 companies that has been recognized every single year since the award's inception in 2012.

Our people are our asset, and we have worked hard to create an environment that is collaborative and growth-oriented where we all focus on what matters, doing the very best we can for our customers. Let me move now to a quick update on the strategic partnership with Guardian that I highlighted on our last call. I'm proud to announce that the partnership has officially closed, and we are already hard at work.

As a reminder, Hamilton Lane will oversee nearly $5 billion of Guardian's existing private equity portfolio, and these assets will be reflected in our total asset footprint beginning next quarter. Also, we expect to receive additional annual commitments of approximately $500 million for at least 10 years, enabling Guardian to access a broad range of private market opportunities across primary, secondary and co-investment strategies through our platform.

This also includes support for Hamilton Lane's global Evergreen platform, where at least $250 million of capital will be invested into our Evergreen. In addition, the partnership also with Guardian with HLNE equity warrants and other financial incentives driving alignment and opportunities for long-term value creation.

The initial economic impacts of the partnership will be recognized in our fiscal fourth quarter of 2026, and we will provide additional details on our next call. Our partnership with Guardian is a clear proof point of our ability to work alongside the world's most sophisticated institutional investors to design and execute comprehensive private market programs.

In a very short period of time, we are already fully engaged. Capital has been allocated to our U.S. secondaries and venture evergreen funds, complemented by a sizable commitment to our latest closed-end direct equity fund and to the upcoming first close of our next secondary fund. Additionally, we have also successfully onboarded three of our U.S. Evergreen offerings onto their Park Avenue securities platform, and we look forward to working closely with their extensive adviser network to deliver Evergreen solutions for their clients.

We remain excited about this partnership and all the opportunities for mutual success that lie ahead. Let me now turn to an update on our capital raising and fee-earning AUM. Total fee-earning AUM stood at $79.1 billion and grew $8.1 billion or 11% relative to the prior year period.

Net quarter-over-quarter growth was $2.7 billion or 4%. Fee-earning AUM growth continues to be largely driven by our specialized fund platform with our semi-liquid evergreen products leading our strong momentum. The combination of our net positive fundraising, product additions and strong performance has driven the growth of total fund net asset value in our Evergreen offering.

We have also executed well on our closed-end offerings as evidenced by recent closes and momentum for those funds in market or that have recently held final closes. I will provide more detail on that shortly. Before I move on, I want to reiterate that our blended fee rate continues to benefit from the shift in the mix of fee-earning AUM towards higher fee rate specialized funds, most notably our Evergreen products.

Today, our blended fee rate stands at 67 basis points with the mix of separate accounts to specialized fund fee-earning AUM at 52% and 48%, respectively. This fee rate is 10 basis points or 18% higher than when we went public in 2017. Then our mix was 67% customized separate accounts and 33% specialized funds.

We view this shift as a powerful component of our business model and an important driver supporting the trajectory of our management fees over time. Let's move now to specialized funds, where fee-earning AUM ended fiscal Q3 at $38.1 billion, having grown $6.9 billion over the last 12 months. This represents an increase of 22%. Quarter-over-quarter net growth was $2.4 billion or 7%, with much of this driven by our Evergreen platform with a strong combination of net new flows and positive net asset value appreciation.

Additionally, we benefited from Evergreen non-fee-earning AUM that turned to fee-earning AUM in the quarter, as I had detailed on our prior call. In addition to the growth numbers we are experiencing, we have in front of us several recent closed-end fund launches, most notably our seventh secondary product, which we discussed on our last call and more recently, our second venture access product.

To put that in context, our sixth secondary fund raised $5.6 billion and extended our track record of raising larger successive funds in that franchise. We believe we are capable of successfully managing increasingly larger pools of capital in both of these spaces. And in neither space, are we anywhere close to the largest player. We have plenty of room to continue to grow.

On the venture side, we're looking to build on the success of our inaugural Venture Access product, which closed in February 2025 with nearly $610 million of investor commitments. We currently expect to hold first closes for both the new secondary fund and the second Venture Access fund sometime in the second calendar quarter of 2026. Now let's move to the rest of the product suite, and I'll start with our sixth equity opportunities fund.

As a quick reminder, this fund focuses on direct equity investments alongside leading general partners, and it offers 2 fee arrangements that either charge management fees on a committed capital basis and a 10% carry or fees on a net invested basis with a 12.5% carry. Our prior direct equity fund offered the same arrangement and raised $2.1 billion. Now during the quarter, we held additional closes totaling nearly $300 million of LP commitments. Then in January, we held another close of approximately $500 million.

So taken together, the fund now stands at over $2.3 billion. And at that size, we have surpassed the prior fund by nearly 15%, and we have solid visibility on additional capital in the pipeline that has yet to close. The management fee mix is currently about 35% on committed capital and 65% on net invested. Jeff will provide additional detail on the retro fees associated with the capital that closed both in the quarter and post quarter end.

We expect to hold a final close for this fund over the coming months, and we remain focused on finishing this fundraise on a strong note. Turning now to our second infrastructure fund. As a reminder, this strategy focuses on direct equity and secondaries across the infrastructure landscape, and the fund earns management fees on a net invested basis.

I am pleased to report that just yesterday, we announced the final close, bringing total capital raised in and alongside the fund to nearly $2 billion, with over $1.5 billion coming into the fund and nearly $400 million alongside the fund and related vehicles. At this size, we have now more than tripled the capital raised in our inaugural infrastructure fund.

This second vintage is off to a strong start with over 40% committed as of December 31. We view this outcome as evidence of our ability to launch and scale new strategies, and we remain confident in our ability to further grow this franchise. Let's now turn to our annual Strategic Opportunities fund, which is our closed-end direct credit strategy. As a reminder, this fund charges management fees on a net invested basis.

On December 31, we held the final close for the ninth series and raised a total of $527 million of investor commitments. This will be our final series of our strategic opportunities franchise. When we launched our strategic opportunities franchise more than a decade ago, private credit looked very different. Investors looking for a blended approach between senior and junior credit, and we build a product to match.

Now over time, private credit has scaled and has become more segmented and investor preferences have followed. We're now reshaping how we position and construct this closed-end franchise, so it's set up for the next leg of growth and better aligned with how clients are allocating across senior, junior and opportunistic credit.

We are in process of launching a variety of closed-end credit funds that are more segmented, and those will sit alongside our credit evergreen funds, but they will now follow a more traditional fundraising cadence where we raise capital every few years. Importantly, the management fee dynamics will be unchanged. Fees will continue to be charged on a net invested basis and will move into fee-earning AUM as capital is deployed.

We launched our first credit vehicle 10 years ago, and then we managed a sum total of $70 million in credit product AUM. Today, across closed-end and Evergreen, we are managing nearly $4 billion in fee-earning AUM, reflecting a compounded growth rate of more than 45%.

While we are proud of this success, we also recognize how modest this is in context of the credit markets, and we are excited to continue scaling this business in a very significant way, and we believe we have a clear path to do just that. Let's now move to our Evergreen platform. Our Evergreen platform delivered another strong quarter.

For the quarter ended December 31, 2025, we generated over $1.2 billion of net inflows across the suite, driven by a combination of expanded product offerings, robust fundraising and solid investment performance. At quarter end, total Evergreen AUM reached over $16 billion, representing over 70% year-over-year growth. Within that total, our core multi-strategy private markets offering continues to anchor the platform.

It ended 2025 at over $11.7 billion of AUM and once again delivered sustained positive net inflows. We are making real progress broadening distribution for this flagship strategy in the U.S. and internationally, while also seeing healthy recurring flows from existing partners many of whom are now adding allocations to our newer Evergreen strategies. Turning to credit.

Despite recent headlines and volatility in certain parts of the private credit market, our international credit Evergreen fund remains on extremely solid footing. It continued to generate positive net inflows in the quarter with AUM surpassing the $2 billion mark at calendar year-end 2025. Performance remains strong with a since inception net annualized return of over 9.5% and positive monthly performance throughout all of calendar year 2025.

December net inflows were the fourth highest month since its launch in 2022. And for calendar year 2025, we averaged over $90 million of monthly net inflows. In addition to that, we remain on track to introduce its U.S. registered counterpart in the coming months.

Finally, we are encouraged by the trajectory of our newer Evergreen offerings. Both our infrastructure Evergreen, which was launched in the second half of 2024 and our secondaries Evergreen, which was launched in early 2025, are both approaching the $1 billion AUM threshold, respectively. That progress reinforces our conviction that the Evergreen platform can be and is increasingly becoming a multi-strategy, multi-asset growth engine for the firm over time. Let's wrap up here with customized separate accounts.

At quarter end, customized separate account fee-earning AUM stood at $41.1 billion and grew $1.3 billion or 3% over the last 12 months. Net quarter-over-quarter growth was $280 million or 1% with the gross contributions stemming from a mix of new client wins, re-up activity from existing clients and contributions for investment activity.

This was offset by fee basis step-downs and returns of capital stemming from exit activity. We continue to carry substantial committed and contractual dry powder ready to deploy, supported by a strong pipeline of mandates that have been awarded and are currently moving through the contracting stage.

Across our platform, we have long-dated relationships with the majority of our separate account clients and have experienced minimal churn over our history, underscoring the durability and depth of these partnerships. Because separate account programs are highly tailored rather than formulaic, the pace at which they move from sale to full deployment can vary, introducing timing variability in which assets and revenues come online.

In fact, in December alone, we closed on more than $2 billion of new SMA capital coming from a mix of existing client re-ups, new service lines with current clients and new relationships to Hamilton Lane. Behind that, our pipeline of live opportunities at various stages of negotiation remains sizable and in the multibillion-dollar range.

That said, we continue to see our clients adopting and desiring product solutions at a faster pace than SMAs. We believe that serves them and us well. Let me move now to the update on our latest addition to the Hamilton Lane Innovations portfolio, where we utilize our balance sheet capital to invest in differentiated technology solutions that broaden access to the asset class, enhance the investor experience and strengthen the overall infrastructure of the private markets ecosystem.

On January 6, we announced an investment in Pluto Financial Technologies alongside Apollo, Motive Ventures and Portage. Pluto operates at the intersection of 2 important trends for our industry, the continued expansion of private markets and the growing need for sophisticated technology-enabled infrastructure to support that growth.

Pluto's platform is built specifically for private market investors and uses AI-driven technology to connect directly to underlying portfolios, providing access to credit without forcing the sale of positions or the need to work through multiple intermediaries. The objective is straightforward: give investors a practical liquidity tool while allowing them to stay committed to their long-term private market allocations.

As individual investors continue to allocate more capital to the private markets and in turn, become incrementally larger and larger parts of investor portfolios, the importance of liquidity has only increased. Historically, many individual investors and their advisers view limited liquidity as a barrier to meaningful allocation even when they were convinced of the return and diversification benefits.

As structures, secondary solutions and product design have evolved to offer more frequent liquidity windows and better tools for managing flows, we are seeing that hesitancy begin to fade. We believe that continuing to improve the liquidity experience for individuals in a thoughtful, risk-aware way is one of the keys to deeper penetration of private markets in the wealth channel.

Simply put, the more we can marry institutional quality exposure with a liquidity profile that works for individuals, the larger the opportunity set becomes. We believe that Pluto is helping to drive increased liquidity in our asset class and uniquely leveraging technology to make that happen. We are proud to join them on this important journey and look forward to providing you with future updates. And with that, I'll pass the call to Jeff to cover the financials.

Thank you, Erik, and good morning, everyone. Year-to-date for fiscal 2026, management and advisory fees were up 11% from the prior year period. However, this includes the impact of nearly $21 million of retro fees from specialized funds, namely the final close for our sixth secondary fund in the prior year period versus $2 million in the current year-to-date period, stemming primarily from our latest direct equity fund.

Total fee-related revenue was up 31%, largely driven by fee-related performance revenues recognized year-to-date in fiscal 2026 versus a minimal amount during the same period in fiscal 2025. Year-to-date, specialized funds revenue increased by $35 million or 15% compared to the prior year period.

Growth in specialized fund revenue was driven by continued growth in our Evergreen platform, which continues to be a key driver of specialized fund fee-earning AUM. Again, the year-over-year growth here was impacted by the retro fee element that I just alluded to. Moving on to customized separate accounts. Revenue increased $4 million or 4% compared to the prior year period due to the addition of new accounts, re-ups from existing clients and continued investment activity.

Revenue from our reporting, monitoring, data and analytics offerings increased by over $5 million or 24% compared to the prior year period as we continue to produce strong growth in our technology solutions offering. Lastly, the final component of our revenue is incentive fees, which totaled $136 million for the period.

This amount includes fee-related performance revenues stemming primarily from the quarterly crystallization of performance fees from our U.S. private assets Evergreen fund with additional contributions coming from our more recently launched Evergreen funds. Let's turn now to our unrealized carry balance.

The balance is up 15% from the prior year period, even while having recognized $77 million of incentive fees, excluding fee-related performance revenues during the last 12 months. The unrealized carry balance now stands at approximately $1.5 billion. Moving to expenses. Fiscal year-to-date total expenses increased $40 million or 14% compared with the prior year period. Total compensation and benefits increased $29 million or 15% due primarily to increases in operating performance, headcount and equity-based compensation.

This was offset by lower incentive fee compensation due to a decrease in non-FRPR incentive fee revenue compared to the prior year period. G&A increased by $11 million. We continue to see growth in revenue-related expenses, including the third-party commissions related to our U.S. Evergreen product being offered on wirehouses.

We will continue to emphasize that while overall G&A expenses increased over time, the bulk of the increase stems from these revenue-related expenses, which is a good thing and can be an indicator of growth to come. We continue to successfully offset this with cost savings and expense discipline in other parts of the business where we have discretion. Let's move now to FRE.

And just a quick reminder, FRE will now include the fee-related performance revenues and exclude the impact of equity-based compensation in the calculation of FRE. With that, fiscal year-to-date FRE came in at $255 million and was up 37% relative to the prior year period, while FRE margin year-to-date came in at 50% compared to 48% for the prior year period. Both FRE and FRE margin benefited from strong fee-related performance revenues in the period.

Before I wrap up and end with some balance sheet commentary, I wanted to reiterate and summarize the financial impacts from the Guardian partnership. And as Erik mentioned earlier, the initial financial impact will not be reflected until next quarter.

We expect to earn management fees on capital invested into our Evergreen funds, which will be reflected in specialized funds revenue as well as fees from a separate account that will resemble a typical institutional mandate in both portfolio construction and fee schedule. In both cases, there is also potential for performance fees aligned with the underlying strategies.

The associated warrant package is expected to result in less than 1% dilution based on our fully diluted share count as of December 31, 2025, and be based on the vesting schedule. Additional details on the warrant package can be found in our prior Q2 10-Q and our upcoming 10-Q filing. I'll wrap up now with some commentary on our balance sheet.

Our largest asset continues to be our investments alongside our clients in our customized separate accounts and specialized funds. Over the long term, we view these investments as an important component of our continued growth, and we expect that we will continue to invest our balance sheet capital alongside our clients. In regard to our liabilities, we continue to be modestly levered, and we'll continue to evaluate utilizing our strong balance sheet in support of continued growth for the firm. With that, we will now open up the call for questions.

[Operator Instructions] Your first question comes from Ken Worthington with JPMorgan.

Erik, can you talk about the product road map for wealth in calendar 2026? You opened a handful plus of new wealth-focused specialized fund products in '25, including the registration of existing funds into different regions. How should we see 2025 for new product launches really geared to this wealth customer?

Thanks, Ken. A couple of things. I think that -- and I had mentioned this on a prior call, I think the part that's been noteworthy for us is how these products are actually resonating with the institutional customer. So today, we're still seeing about 15% to 20% of our flows coming from the institutional customer.

And I think we believe that as folks get more acclimated and more educated that, that number will continue to go up. So you mentioned it in calendar 2025, we launched a lot of product. I don't think 2026 will see nearly that volume coming from us. We've now built out strategies in a lot of our core areas. So while we will add some additional products, it won't be nearly at the rate as we saw a year prior. And our focus right now is really getting the products that we have in market to scale.

Your next question comes from Alex Blostein with Goldman Sachs.

This is Anthony on for Alex. I wanted to ask about software exposure in the business, just given recent events. There's been a growing number of concerns around software exposure for a lot of your peers. So could you expand on what that looks like at Hamilton Lane and how you see those businesses performing given potential AI risk?

Sure, Anthony, it's Eric. I'll take that. So I think different than a lot of the other large publicly traded managers, our portfolios are much more diversified because we're not taking ownership directly of single assets. So that co-investment secondary and fund model for us results in our customer exposure being very, very diversified across sector, geography, size, et cetera. So one, we don't have any kind of concentration across portfolios in software. And so that's not a topic for us that right now we're -- that we see at all of an issue for us nor for the customers.

Your next question comes from Michael Cyprys with Morgan Stanley.

Just wanted to ask about exit activity. Just curious how you're seeing exit pathways evolve across your platform and the broader industry and -- what would you say is maybe the 1 or 2 gating items that you're watching that could make distributions accelerate sharply across the industry.

Sure Michael. it's Erik. So we are seeing distribution activity pick up. I think this has been more buyers and sellers reaching more of a kinda of an equilibrium and how their each viewing the market. The IPO market better but as you know and as we have discussed in the past, that's not a huge exit activity for our business and not a huge exit activity portfolios. .

So generally, I think what moves the needle more is simply having buyers and sellers agreeing kind of where the markets are agreeing on price. So we see that happening. We see a rationalization occurring there. It's also driven by just the maturing of the assets and the fact that they -- a lot of them are now reaching kind of their fourth or fifth or sixth year of ownership.

The work has been done. The growth has been achieved, and now they're ready to go and harness the profit. So I see 2026 as a stronger exit environment than we saw certainly in calendar 2025.

And if I could ask a follow-up question on the Evergreen platform that's quickly becoming multi-asset, multi-strategy and with a number of scaled products over $1 billion in size. Just how are you thinking about opportunities that can open up now as a result of that evolution, whether it's model portfolios, maybe even updating placement within target date or other liquid fund strategies and partnership with others. Curious how you're thinking about that. .

I think we're thinking about all of those pieces, Michael. I think what you're seeing is Wave #1 was sort of the introduction of these products to the market. Wave #2 has really been focused on education around some of the benefits of these products to both institutional and individual investors and Wave #3, to me becomes more around kind of the structuring and partnership where you start using these products as tools in a variety of different ways, a number of which you mentioned.

So we're kind of through Wave 1. We're getting towards wave -- finishing up Wave 2 on the education piece, which still continues. And now we're heading into Wave 3. And so we're involved in dialogue across all those aspects.

Your next question comes from Alex Bond with KBW.

I actually have a follow-up on the Evergreen side and specifically, the increasing institutional base there. So you've highlighted previously that one of the reasons these products are attractive for institutional investors as they're more liquid nature relative to a traditional drawdown fund.

But maybe it would be helpful if you can help us think about maybe what the dispersion has been in terms of redemption requests between institutional and retail clients within the Evergreen Suite to date? And maybe -- to what extent institutional clients have taken advantage of this feature today?

Yes, Alex, Erik. So I actually don't think the liquidity provision is one of the top two most attractive pieces to them. I think the top two most attractive pieces are much more around ease of use, dealing with capital calls distributions and sort of severely lagging reporting schedules, not optimal.

Benefit # 2 is the ability to actually tactically manage your portfolio in a more thoughtful way. If you're a CIO today of an institution and you want to apply some sort of a credit overweight or an infrastructure overweight or a venture overweight. Doing that through drawdowns is really impractical. You have to go have us find the funds for you subscribe to the funds.

It takes years for those funds to get capital to put to work to see the net asset value grow -- and so trying to do a tactical overweight using drawdown funds means that you need to sort of have a 3- to 5-plus year view outwards that, that overweight is going to sort of still be a good thing in that timetable.

In Evergreen, they can simply put on an overweight instantaneously because the capital is obviously fully invested. So we're not seeing the institutional investor behave with a higher redemption rate or moving in and out -- we're seeing them use this as a portfolio construction tool and ease of use.

Third piece I mentioned is actually small institutional investors. Back in the day, they would be a fund-to-funds customer. And as you know, Hamilton Lane hasn't even offered a fund-to-funds product in years. That market segment altered that investor base, in some cases, left the asset class altogether or they got convinced that going into a secondary or co-investment fund was an okay solution.

Today, that small institutional investor is much more embracing reenter the private markets. So we see all those as thoughtful, good, and those are going to be long-term sustaining trends.

Your next question comes from Brennan Hawken with BMO.

I was hoping you could speak a little bit to what you're seeing on the ground in the wealth channel. I hear about a little bit of a sitting on hands with the headlines around private credit that we saw at the year-end. So curious what you're seeing there. And when we also have heard that there's the potential for a greater shift or a greater preference for model portfolios sort of centralizing the allocations. Are you seeing any early signs of that? And what are your thoughts about how to deal with such a shift.

Sure. It's Erik. I'll take those. So look, we kind of laid out our flows. We're not seeing the sitting on hands that you're sort of referencing. I think part of this is we're positioned as a differentiated product. That manager of managers is simply different than single manager strategy. And I think the market has obviously been very receptive to our positioning there, and our flows continue to be good. Model portfolio, certainly a topic of conversation. You're seeing early moves there.

But to say today that you're seeing some massive sort of fee change, I would say, just the data is not bearing that out. as I mentioned on the prior question, we're engaged in dialogue around that. We have some model portfolio exposure already.

And I think this is going to come down to investor preference. I don't see a world where all investors are going to simply want the model portfolio. Investors, generally, whether we're talking about buying private market assets, we're talking about buying food or clothing. Investors want choice, and they tend to want to control.

And so for some, that model portfolio will be ease of use, and that will be the most attractive aspect to it, and that will be sort of the guarding item. And for others, they're going to want to make much more tailored individualized selection.

So I think it's a world where you're going to see both pieces exist. And we're all going to have to make sure that our products and our lineup is meeting the customer where the customer is, not trying to force the customer to kind of adhere to whatever game or structure that we want them to be playing.

[Operator Instructions]

The next question comes from Mike Brown with UBS.

I wanted to ask on the secondary side. So it's clearly a hot asset class, maybe the hottest asset class in the space at the moment. And the industry saw record capital raising for the industry last year. One of the funds that closed was over $30 billion. Not expecting a $30 billion fund for Hamilton Lane, but -- when you think about Fund VII, we look at Fund VI, that closed at $5.6 billion.

That was up over 40% versus the prior vintage. So when we're thinking about Fund VII and the tailwinds for the space? Any view on relative size versus the prior vintage? And maybe just touch on how investor sentiment and interest is in secondaries currently.

Sure. It's Erik. I'll take that. So as you noted, the space has grown. I frankly think if you step back and just look at that at a macro level, it's healthy. [ Liquid ] investors is a good thing. It gives people more choices and so investors more liquid options, whether it's through traditional secondaries or whether it's through our recent partnership with Pluto, we think all that's good.

Second point, it's still one of the most undercapitalized parts of our asset class. If you look at capital raised relative to size of deals brought to market, huge capital mismatch. There's not nearly enough capital in the market to deal with sort of the demand and interest of transactions looking to get financed.

So massively undercapitalized. Scale, third point has also changed. So industry is getting a lot bigger. Funds are getting bigger as a result of that. And so what it means to be a big secondary player today is very different than what it meant to be that sort of big player 10 years ago. I think for us, we've tended to be more of a mid-market oriented player. And so that has sort of caused us to still grow substantially, as you noted, from fund to fund to fund.

Our goal is to continue to be one of those leading players. And so that means there's a whole lot of runway ahead of us. So as I said very clear on the call, we are not one of the top handful of largest players in the space. We have aspirations to continue to move up market, and we think we've got a lot of room to do that, and we are based on investor sentiment, management meetings, feedback, et cetera, all that feels encouraging .

[Operator Instructions] As there are no further questions, sorry, Mike Brown has one more question. Please go ahead, Mike.

Erik, I just wanted to follow up on the software question earlier in the call. Just given your unique visibility into funds and the underlying portfolio companies, and I'm sure you're active dialogues with the managers -- can you just maybe expand on your view on how AI disruption could really kind of flow through the software landscape and how certain parts of the market could be more impacted than others in certain areas that perhaps have better insulation from these AI disruption-related risks?

Sure. I think it's -- I think this is sort of the danger of painting with an overly broad brush. I think it's frankly not a lot different than what we're seeing in credit. You've got a handful of managers who have credit portfolio problems due to their own investment selection, and then we want to sort of turn that into kind of a broad industry issue. There's no question that there are some software businesses that were bought sort of pre-COVID.

High prices were paid. AI was far away when those transactions were done. The impact was not sort of priced in. And there will be certainly some companies that are going to struggle and are going to struggle to result in good performance or any performance for their investors.

That said, the notion that every software business is going to suffer hugely negative consequences due to AI, I think, is not true. And frankly, we're sort of seeing that we've got a number of companies in the software space that are continuing to grow, continuing to rack up customers.

I think there's another way to look at this, which is, in some cases, the AI solution is in need of the client and the traditional old-school software companies have the customer. I actually think you could see some mergers and acquisitions that are coming from kind of what we'll think of as new tech versus old tech and that might be a completely fine outcome.

So I think what we're saying to our clients today, whether it's around software, whether it's around credit or whether it's around any sub strategy, we need to have a much more granular conversation about companies, fund managers, individual funds rather than having big macro strategies, and that's one of the macro discussions, and that's one of the benefits of where we sit.

We get to go and due diligence on every fund manager looking through every asset that they hold -- and if we're looking at a secondary deal, we're getting to price through every company in that underlying portfolio. And so we're not making big investment decisions kind of thematically. We're making them kind of a bottoms-up asset-by-asset look through to figure out whether there's high-quality assets and making sure we're getting those at the right price with the right partner.

Thank you. And this concludes the question-and-answer session for today. I will now turn the call over to Erik Hirsch, Co-Executive Officer for closing remarks. Please continue.

It's fun to say we're proud of the quarter. Juan and I are very proud of the team for the hard work. This doesn't happen by accident. It takes real effort, particularly in this kind of market environment. We appreciate your time, support and the questions. And for those of you on the East Coast, stay warm. Thank you. .

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Good morning, ladies and gentlemen, and welcome to the Hamilton Lane Fiscal Second Quarter 2026 Earnings Conference Call.

[Operator Instructions]

This call is being recorded on Tuesday, November 4, 2025.

I would now like to turn the conference over to John Oh, Head of Shareholder Relations. Please go ahead.

Thank you, Danny. Good morning, and welcome to the Hamilton Lane Q2 Fiscal 2026 Earnings Call. Today, I will be joined by Erik Hirsch, Co-Chief Executive Officer; and Jeff Armbrister, Chief Financial Officer.

Earlier this morning, we issued a press release and a slide presentation, which are available on our website. Before we discuss the quarter's results, we want to remind you that we will be making forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business. These forward-looking statements do not guarantee future events or performance and are subject to risks and uncertainties that may cause our actual results to differ materially from those projected.

For a discussion of these risks, please review the cautionary statements and risk factors included in the Hamilton Lane fiscal 2025 10-K and subsequent reports we file with the SEC. These forward-looking statements are made only as of today and, except as required, we undertake no obligation to update or revise any of them. We will also be referring to non-GAAP measures that we view as important in assessing the performance of our business. Reconciliation of those non-GAAP measures to GAAP can be found in the earnings presentation materials made available on the Shareholders section of the Hamilton Lane website.

Our full financial statements will be made available when our 10-Q is filed. Please note that nothing on this call represents an offer to sell or a solicitation of an offer to purchase interest in any of Hamilton Lane's products.

Let's begin with the highlights, and I'll start with our total asset footprint. At quarter end, our total asset footprint stood at just over $1 trillion and represents a 6% increase to our footprint year-over-year. While this number can and will swing quarter-to-quarter due to our AUA, it is worth noting that this is the first time in the firm has crossed over the $1 trillion mark. AUM stood at $145 billion and grew $14 billion or 11% compared to the prior year period. The growth came from both our specialized funds and customized separate accounts. AUA came in at $860 billion and grew $44 billion or 5% relative to the prior year period. This stemmed primarily from market value growth and the addition of a variety of technology solutions and back-office mandates.

Total management and advisory fees for the year-to-date period were up 6% year-over-year. This year-over-year change includes the impact of $20.7 million of retro fees in the prior year period versus $800,000 in the current year period. Total fee-related revenue for the period, which is the sum of management fees and fee-related performance revenue was $321.6 million and represents 23% growth year-over-year. Fee-related earnings were $160.7 million year-to-date and represents 34% growth year-over-year. We generated fiscal year-to-date GAAP EPS of $2.98 based on $124.6 million of GAAP net income and non-GAAP EPS of $2.86 in based on $155.7 million of adjusted net income.

We have also declared a dividend of $0.54 per share this quarter, which keeps us on track for the 10% increase over last fiscal year equating to the targeted $2.16 per share for fiscal year 2026.

With that, I'll now turn the call over to Erik.

Thank you, John, and good morning, everyone. We have had another very strong quarter. Our job is difficult but not complicated. Take care of the customer, build thoughtfully constructed portfolios, deliver strong risk adjusted returns. We did all of those things this quarter and the reward for that is being entrusted with more clients and more capital. Let me start here by recognizing the hard work and dedication of the entire team at Hamilton Lane. Our unrelenting focus on delivering for our clients to fuel our growth and success.

As I've said before, we're building Hamilton Lane for the long term. Every decision we make is about positioning ourselves for sustainable growth and success into the future. This quarter was another great example of that approach. We expanded our product offerings, including the launch of additional Evergreen products. And just yesterday, we announced a significant new strategic partnership.

Let me dive into some initial details on that now. Guardian Life Insurance Company of America has partnered with Hamilton Lane to be their core strategic partner within the private equity markets. Guardian is 1 of the nation's largest life insurers and a leading provider of employee benefits. With this partnership, Hamilton Lane will take on the management of Guardian's current and future private equity portfolio. Hamilton Lane will oversee Guardian's existing private equity portfolio of nearly $5 billion and Guardian will also commit to invest approximately $500 million per year for the next 10 years with Hamilton Lane. This commitment maintains Guardian's typical annual contribution to the asset class and supports its general account target allocation goals.

This capital will be managed by Hamilton Lane through a separately managed account and like most of our current SMAs, will include meaningful capital into our various investment funds. Part of the earlier capital deployment will be $250 million being used as seed and investment capital to help further expand and accelerate our growing global evergreen platform. To support the partnership's shared goals of accelerating growth and driving value creation Guardian will receive HLNE equity warrants and additional financial incentives.

We will also partner with Guardian's registered broker-dealer and registered investment adviser, Arc Avenue Securities, and look to deliver investment solutions for their clients and provide strategic support and education on the private equity markets for their 2,400 advisers, who collectively cover approximately $58.5 billion of client assets as of December 31, 2024.

In addition, regarding investment professionals currently supporting the private equity portfolio are expected to join Hamilton Lane after the transaction closes. Overall, we believe this partnership is a testament to our ability to provide customized solutions to the world's leading institutions. In recent years, the convergence of private market asset management and the insurance industry, I've taken on a variety of partnership forms, this evolving and growing opportunity set has been a focus for us as we have been scaling our insurance platform to over $119 billion.

In 2024, we formalized this focus when we announced the forming of a dedicated insurance solutions team. Our aim was straightforward, bring greater intentionality to how we serve insurers keep in our expertise and relationships and elevate our ability to execute at a strategic level for the sophisticated client set. We believe the partnership with Guardian is a proved statement to these efforts. We are thrilled to have been selected by Guardian with this critical task of delivering for their policyholders with the goal that their private equity portfolio will continue to thrive.

Jeff will provide some more specifics on the expected financial impact in his section shortly. Before I turn to our results, I'd like to share my perspective on the current popular narrative, that being that the industry is on some verge of a broader credit crisis. Today, we see no data to support this notion particularly within the context of private credit. In fact, we are seeing a further reduction of what was already a very low bankruptcy rate. What we do see happening is simple. There have been a tiny number of high-profile bankruptcy filings and the broader public market has extrapolated this to believe a credit crisis is looming.

I will note with some irony that some of the parties weren't warning about the impending doom are some of the exact same parties with losses stemming from these recent bankruptcies. Seemingly saying, well, yes, I have a problem, and I'm taking a large charge-off, but I'm likely not alone, I get others also have problems.

Coming back to the data. Credit fundamentals are strong and defaults are low. Today, leverage levels remain prudent around 5x and are down a full turn from 2022. Interest coverage also remains healthy at 2.8x, having moved up half a turn over the past 2 years. Today, the default rate is at around 1%, below the historical average of 2.5% and well below the levels seen during the global financial crisis, where overall default rates peaked to near 10%. But even that specific is noteworthy. In the midst of the global financial crisis, total bankruptcies and credit losses grew to 10%. But most of our managers were in the low single digits and still generated positive performance during that period. In fact, private credit as a whole posted positive annual returns each of the years from 2007 through 2010 at approximately 9% to 10% per annum. Quartile private equity -- private credit managers were doing even better with returns over 12%.

Private credit outperformed the S&P Leveraged Loan Index in each of those years. When we peer inside our own direct credit portfolio, we see more of the same, growing top line cash flows prudent leverage levels and near 0 losses on investments. This is the power of having actual data on a large segment of the industry and not living and prognosticating via anecdotes. Our database covers nearly 65,000 funds and 165,000 total private companies. We have great insight as to what is happening inside these entities. We have the visibility and we know the reality. This remains 1 of our strengths to customers, the ability to provide more clarity and transparency in an okay world.

Lease over. Let me turn now to a few business highlights, and I'll start with the earning AUM. Total fee earning AUM stood at $76.4 billion and grew $6.7 billion or 10% relative to prior year period. That quarter-over-quarter growth was $2 billion or 3%. The earning AUM growth continues to be largely driven by our specialized fund platform. Specifically, our semi-liquid evergreen products continue to experience strong momentum. The combination of our fundraising, new product additions and strong performance has driven the growth of total funds net asset value.

Our blended fee rate also continues to benefit from the shift of fee-earning AUM towards higher fee rate specialized funds, most notably our evergreen products. Today, our blended fee rate stands at 65 basis points. This is up 8 basis points or 14% since we went public in 2017. At quarter end, customized separate accounts fee-earning AUM stood at $40.8 billion and grew $1.4 billion or 4% over the last 12 months. Net quarter-over-quarter growth was $517 million or 1% with the gross contribution stemming from a mix of new client wins, free up activity from existing clients and contributions for investment activity. This was offset by returns of capital from exit activity and the timing [indiscernible] of existing client legacy tranches rolling off and new tranches yet to come on.

That said, we continue to maintain large amounts of committed and contractual dry powder to deploy, along with a strong backlog of business that has been won and is now in the contracting phase. As we mentioned in the past, the scale and contracting dynamic in our SMA business can lead to some unpredictability as to when these dollars come on, but we simply remain focused on winning new business. And further, these quarter end numbers do not reflect the impact of the Guardian partnership I discussed earlier.

Let's move now to specialized funds, and I'll spend a few moments and provide some updates on our closed-end fundraises and Evergreen platform. Specialized funds fee-earning AUM ended fiscal Q2 at $35.6 billion, having grown $5.3 billion over the last 12 months. This represents an increase of 17%. Quarter-over-quarter net growth was $1.5 billion or 4%. Specialized funds fee-earning AUM growth continues to be largely driven by Arbor Green platform, both in net inflows and net asset value growth, poses for certain closed-end funds and market and continued robust investment activity for those closed-end funds that derive their management fees on an invested capital basis.

On the closed-end side of our lineup, we remain in market with our 6 equity opportunities funds. As a current reminder, this fund focuses on direct equity investments alongside leading general partners and offers 2 fee arrangements that either charge management fees on a committed capital basis and the 10% carried or on a net invested basis with a 12.5%. [indiscernible] the same arrangement and raised $2.1 billion. During the quarter, we held additional closes that totaled [indiscernible] $246 cuts and brought the total amount raised to nearly $1.6 billion. Of the [indiscernible] came in on a committed capital basis and $158 million came in on a net invested basis which brings the total mix of capital raised to nearly 30% uncommitted and 70% on net invested.

We have clear visibility into near-term expected closes that we expect will bring the total capital raise to over $2 billion, and we have a strong line of sight to exceed the prior funds over the coming months.

Moving to our second infrastructure fund. We continue to make great progress with the second fund and have nearly doubled what was raised for our first fund. This is a good example of launching a product, starting small, demonstrating strong performance, gaining trust from investors to support the larger product. As a quick refresher, the strategy for this product centers around direct equity and secondaries in the real assets and infrastructure space and the fund generates management fees on a net invested basis. During the quarter, we held additional closes that totaled $270 million of LP commitments, which now brings the total raise to over $1.1 billion in and alongside the fund.

Again, at this point, we have nearly doubled the size of our first infrastructure fund, which speaks to our ability to execute new product launches and scale them effectively. Capital continues to flow in and we will look to wrap up fundraising for this fund in the coming months. This fund has also deployed meaningful capital and we expect to be back in market sometime in late 2026 or early calendar 2027.

Before I move on to Evergreen, a quick word on the secondaries front. We have just launched the fundraising effort for our next flagship secondary fund, and we expect to have a first close in the first half of calendar 2026. We have a demonstrated track record of growing this platform by raising larger successive funds. We believe we are well positioned to continue this trend given the continued secular growth dynamics in the secondary market underpinned by active portfolio management by both LPs and GPs, and our strong investment track record with our current [indiscernible] secondaries fund having generated a net multiple of 1.4x and a net IRR of 44.1% for our investors as of June 30, 2025. We look forward to providing you with future updates on that front.

Turning now to the Evergreen platform. For the quarter ending September 30, 2025, we took in over $1.6 billion in net inflows across our entire suite of Evergreen products. This was our largest quarter ever. This success came from a combination of 3 things: expanded product offerings, robust fundraising and strong performance. The $1.6 billion figure includes initial subscriptions to our newly launched global secondaries, Global Venture and Asia funds, all of which began accepting capital during the third calendar quarter. At quarter end, total Evergreen AUM reached $14.3 billion.

At our 2024 Shareholder Day, we laid out a straightforward strategy to drive continued growth in our Evergreen platform, plan focus on expanding our then existing lineup of free funds and maintaining conviction in our ability to launch scalable new products. 18 months later, that vision has materialized. Our Evergreen suite has grown from 3 funds to 11 and AUM has nearly doubled to over $14 billion. We've also become more agile in bringing products to market. leveraging our scale to accelerate both launch and growth. While our initial 3 funds each took nearly 2 years to reach $500 million in AUM. Our newer global infrastructure and secondary offers have [indiscernible] surpassed or on track to hit that milestone in under 12 months.

I will also reiterate, we continue to see strong support from institutional investors for these products. Due to some of the structural advantages of Evergreen funds, we continue to see some migration away from drawdown funds and into this product line. Before I move on from Evergreen, currently, there remains over $1 billion of Evergreen AUM that is not yet earning management fees due to the timing of initial subscriptions and see holidays that were put in place with the launch of several of our new funds over the last 12 months. And while these funds are not earning management fees yet, we are still eligible to generate performance fees for those funds that have a performance fee element.

We expect that over half of that current $1 billion will move into specialized funds fee-earning AUM during the calendar fourth quarter of 2025 and the remainder to move over during calendar 2026 and as the fee holidays left for those respective funds.

Now moving on to some technology updates. This quarter saw 3 recent announcements around our strategic technology balance sheet portfolio and our proprietary Hamilton Lane private market indices. First up, this is an exciting partnership regarding our proprietary private market indices and benchmarks. We are proud to announce a partnership with Bloomberg, where users now have access to a suite of Hamilton Lane private market indices and benchmarks, be in the Bloomberg Terminal and Bloomer Data License. While the revenue opportunity is in the early stages, will be modest, more importantly, we now have a unique opportunity to reach a wider and increasingly growing private market audience, leveraging Bloomberg's global reach and scale.

We see this as a large brand enhancer, particularly with the RIA community. Bloomberg remains a clear leader in financial news, data and analytics. Bloomberg terminals are found in nearly every corner of financial services and investment management. Bloomberg's clients range from the very largest global institutions to individuals and their advisers. The latter has served as a key segment of growth for private markets, and this partnership will now embed Hamilton Lane's brand and our indices into their workflows. They will demand vendor tools to measure performance across strategies, vintages and geographies. This new partnership will now be able to deliver on those demands and will raise the bar for how private markets are now benchmarked. And it will put the Hamilton Lane name and logo in front of thousands of terminal users around the globe.

This marks an important and significant step in making Hamilton Lane benchmarks broadly available to this growing population of private market investors, expanding access to data and driving even greater transparency across the asset cost.

Let's now move on to news regarding securitize. On October 28, securitize announced that it had entered into a definitive business combination agreement with Cancer Equity Partners to a special purpose acquisition company. Upon closing of the transaction, which is expected in the first half of 2026 securitize will become a publicly traded company. As a refresher, Securitize builds trusted regulated technology that turns traditional financial assets into digital tokens to be issued traded and serviced on chain. Hamilton Lane has cultivated a deep relationship with Securitize, having partnered initially in 2022 to tokenize several of our own offerings and then subsequently participating in a strategic fundraise in May of 2024 that was led by BlackRock.

The other, we shared an addition of making the private markets more accessible to a broader set of investors. [indiscernible] has established itself as a leader in tokenizing real-world assets, and we are proud to deepen our strategic partnership as they embark on this exciting new chapter. As the proposed pre-money valuation of the business combination, we expect to see a mark of more than 2x our initial investment. This outcome further demonstrates our ability to partner with and successfully invest our balance sheet capital into companies that we believe will transform our asset class for continued growth and scale.

Wrapping up this section with an exciting announcement regarding Nevada. On October 7, Nevada announced a key strategic acquisition of Atlas Metrics, which expands Nevada's global reach and unites 2 complementary companies to meet the growing demand from investors and corporates for trusted efficient and scalable sustainability data solutions. Mine entity will now support more than 400 clients and over 13,000 private companies worldwide, equipping investors, banks and corporates with the tools they need to collect report and act on sustainability data. As part of this acquisition, Hamilton Lane was proud to invest additional capital in the fundraising round in support of the acquisition and continued strategic initiatives, and we did this alongside of S&P Global, Motive Ventures and the Ford Foundation.

We continue to support efforts that increase both data transparency and analytic capabilities for our asset class and are proud to support Nevada in their mission to empower private market sustainability. Nevada has achieved tremendous growth since our initial investment and partnership back in 2021. With shared vision and focused execution, we believe Nevada can continue to grow in scale, and we are excited for the opportunities ahead.

And with that, I'll now pass the call to Jeff to cover the financials.

Thank you, Erik, and good morning, everyone. I'll begin with some commentary on our business during the first half of fiscal 2026, and then I'll provide some additional details on the Guardian Life partnership and the potential impacts for our business.

For the first half of fiscal 2026, management and advisory fees were up 6% from the prior year period. However, this includes the impact of $20.7 million of retro fees from specialized funds namely the final close for our sixth secondary fund in the prior year period versus $800,000 of retro fees in this quarter stemming from our latest direct equity fund. Total fee-related revenue was up 23%, largely driven by fee-related performance revenue recognized in the first half of fiscal 2026 versus a minimal amount during the first half of fiscal 2025.

Specialized funds revenue increased by $12 million or 8% compared to the prior year period. Growth in specialized fund revenue was driven by continued growth in our Evergreen platform, which continues to be a key driver of specialized fund earning -- fee earning AUM. Again, the year-over-year growth here was impacted by the retro fee element that I just alluded to.

Moving on to customized separate accounts. Revenue increased $2 million or 3% compared to the prior year period due to the addition of new accounts, re-ups from existing clients and continued investment activity. Revenue from our reporting, monitoring, data and analytics offerings increased by over $3 million or 21% compared to the prior year period as we continue to produce strong growth in our technology solutions offering.

Lastly, the final component of our revenue is incentive fees, which totaled $91 million for the period. This amount includes fee-related performance revenues or FRPR, stemming primarily from the quarterly crystallization of performance fees from our U.S. Private Assets Evergreen Fund with additional contributions coming from our more recently launched Evergreen phones.

Let's turn now to our unrealized carry balance. The balance is up 14% from the prior year period even while having recognized $102 million of incentive fees, excluding fee-related performance revenues during the last 12 months. The unrealized carry balance now stands at approximately $1.4 billion.

Moving to expenses. Fiscal year-to-date, total expenses increased $20 million or 11% compared with the prior year period. Total compensation and benefits increased $13 million or 10% due primarily to an increase in head count and equity-based compensation. This was offset with lower incentive fee compensation due to a decrease in non-FRPR incentive fee revenue compared to the prior year period.

G&A increased by $7 million. We continue to see growth in revenue-related expenses, including the third-party commissions related to our U.S. Evergreen product being offered on wire houses that we've discussed on prior calls. We will continue to emphasize that while overall G&A expense has increased over time, the bulk of the increase stems from these revenue-related expenses, which is a good thing and can be an indicator of growth to come. We continue to successfully offset this with cost savings and expense discipline in other parts of the business where we have discretion.

Let's move now to FRE and just a quick reminder, FRE will now include the fee-related performance revenues and exclude the impact of equity-based compensation and the calculation of FRE. With that, fiscal year-to-date FRE came in at $161 million and was up 34% relative to the prior year period. FRE margin for the quarter came in at 50% compared to 46% for the prior year period and benefited from strong fee-related performance revenues in the period.

Before I wrap up, I want to end with some balance sheet commentary -- before I wrap up and end with some balance sheet commentary. I wanted to take this opportunity to provide some additional detail on the Guardian Life partnership that Erik discussed earlier on. First, I'll reiterate that this partnership is a testament to our capabilities as a trusted private equity solutions provider and we are excited to work with Guardian. As Erik highlighted, in exchange for the capital that we will be managing on behalf of Guardian, Guardian will receive HL&E equity warrants and additional financial incentives, which will primarily be revenue share arrangements related to their seed capital to advance shared objectives of growth and value creation.

The revenue associated with the partnership will come in 2 forms: first, we expect to generate management fees from the capital that will be invested in our Evergreen funds more immediately, and this will get captured in specialized funds. Second, the separate account that we will manage going forward will generally mirror that of a standard institutional separate account by way of portfolio construction and fee schedule and will be captured on separate account management fees. We expect this will scale as the portfolio gets deployed over time. In both cases, we have the ability to generate performance fees commensurate with the associated strategies. As for the warrants, based on our current fully diluted share count as of September 30, 2025, the total dilution expected from the Guardian warrants is less than 1%.

The warrant package will be governed by both a vesting schedule that aligns with the term of the partnership and tiered exercise prices that are based off of a reference price that was set by the HLNE 20-day volume-weighted average price as of the closing price on October 31, 2025. Additional information regarding the warrant package will be included in our 10-Q filing.

I'll wrap up now with some commentary on our balance sheet. Our largest asset continues to be our investment alongside our clients in our customized separate accounts and specialized funds. Over the long term, we view these investments as an important component of our continued growth, and we expect that we will continue to invest our balance sheet capital alongside our clients. In regard to our liabilities, we continue to be modestly levered and we'll continue to evaluate utilizing our strong balance sheet in support of continued growth for the firm.

With that, we will now open up the call for questions.

[Operator Instructions]

Your first question comes from Alex Blostein from Goldman Sachs.

Congrats on the Guardian announcement. Maybe we could start there heard your comments around just the structure of the arrangement, but maybe you could help us with the actual fees that are likely to hit P&L. I heard the geography you have 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 you can start there.

Thanks, Alex. It's Erik. I think you should expect that the vast majority of the revenue that we're generating is on the $5 billion that will be coming in over the next 10 years because the existing $5 billion is basically a monitoring assignment that -- those are dollars already in the ground in a variety of partnerships. And so if you look at the $5 billion that will be coming over, we clearly called out the $250 million going into Evergreen. And then the SMA portion, I think, again, hard to predict exactly what the next decade looks like, but that's going to be a mix of primary funds and a bunch of our specialized bonds at whatever the prevailing fee rate is for those vehicles.

Our next question comes from Michael Cyprys of Morgan Stanley.

I wanted to ask about the Bloomberg partnership and more broadly, partnerships on the data side. I hope 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 out over time?

Yes. Thanks, Mike. It's Erik. So the Bloomberg arrangement is going to be a revenue share model where that will grow over time as that installed base continues to grow and usage grows. I think we've been very tactical and selective at where we've been partnering we view our data to be valuable. And so simply just running out and licensing it here, there and everywhere has not been part of our strategy. I think we've been thoughtful about where we see both chances for revenue. And as I mentioned in my script, real chance for brand enhancement and I think for us, this was a big opportunity for brand, just given the number of RIAs who are regularly daily, minute by minute using Bloomberg Terminals in Bloomberg data. And as we think about that world increasingly needing and wanting more private market benchmarks and information, we're going to be the provider of that.

And we think that is a huge brand enhancer for us. I think investable indices, I don't see that as a focus. I know some have spoken of that. I haven't seen traction for that, I think trying to sort of synthetically replicate what happens inside of private market portfolios using publicly listed securities has been tried by many smart people and generally, they all fail. And so I don't see that as our focus today. I think it's really around data as an education tool, data as a brand enhancer and data for making better investment in portfolio selections.

Next question comes from Ken Worthington of JPMorgan.

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 fund part of the business?

Thanks, Ken. So none of our sales teams are organized by around SMAs in particular, [indiscernible] funds. Think of the vast majority of the sales organization organized in geographic territories where they're owning that geography, getting to know all the respective players in that geography and figuring out what problem that customer is struggling with and then how we can be the solution provider for that. I think what we've been finding is that given the multitude of products that we have in the market, those have been in many cases, better solutions for a lot of customers. And so that's why you've seen such strong growth coming from that specialized funds.

That said, the pipeline and even what you sort of see in kind of 1 but not contracted is billions of dollars. And so that will all just flow in over time as we get through contracting phase and the pipeline is robust. But from a relative market positioning today, if you think about where we were with SMAs 5 or 10 years ago, we had very few specialized funds. Today, we have a lot more specialized funds, and we're finding that those are able to meet the needs for the customer base, which, as you know, is a good thing for the business model given the superior fee model on those funds.

Okay. Great. And I don't know if I'm allowed to do a follow-up, but I'll take a shot at it. 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 attached to the rev share? Or was that separate? .

Ken, this is Jeff Armbrister. So the warrants are front-end loaded, but there is some period of time for additional warrants to be provided. The rev share is not tied to the warrants, they are 2 separate pieces. So that's how you should think about it.

Your next question comes from Brennan Hawken of EMO.

The core fee rate on specialized funds ex [indiscernible] 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?

Brennan, it's Erik. I think this is just what we've been saying, which is as the mix of assets is changing and coming heavier into specialized funds, particularly Evergreen, given that, that comes at a higher fee rate, you're going to see that overall rate continue to blend up we believe that, that will continue over time. So if you just look at relative flows and relative fee rates, stronger flows in specialized funds, both drawdown and Evergreen continues to be robust. All of those are charging at a higher fee rate than the current blended overall rate that we're showing. And so to the extent that those flows continue, that will continue to lift the overall fee rate.

[Operator Instructions]

And your next question comes from Alex Bond of KBW.

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.

Alex, it's Erik. Thanks for the question. I look at it through a different lens. I see this really as when you are launching a brand-new product that's just got some Hamilton Lane balance sheet seed capital in it, and you are trying to attract that first round of adopters, enticing them is important. It's a fund that's going to have short -- relatively short history, relatively short performance history and getting the folks in for the first, say, 6 to 12 months, which is generally the time frame you're talking about, has become more normalized where you're giving them a financial incentive, which is a management [indiscernible].

As Jeff said, we're that -- those are still being calculated and paid and that was part of the driver of the FRPR that you saw this quarter. So I'm not seeing anything on the horizon that would cause us to have to go back and do that with established funds I'm not seeing anything on the horizon that would cause us to need to do that for longer periods of time than we're already doing. I think what's happening, normal market becoming a lot more standard for that, again, as I said, that first 6 or 12 months on a brand-new offering.

Your next question is from Brennan Hawken of BMO.

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 1 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?

Yes, Brennan, it's Erik again. So yes, to answer the second part of that question first. That's the way to think about it because we're going to be building that $500 per year. The initial impact will be higher in that first year because a lot of that capital going into the Evergreen products and so again, higher fee rate. But yes, you're going to continue to see that stacking. And so we think that's beneficial. The team acquisition, I would say, is a de minimis add. And frankly, while we're in process of working through all the details with the team and with Guardian, I would expect and assume that really what's going to be happening is that those team members are coming over, and they're simply causing us to not need to go fulfill 1 of our open recs that is currently sitting on our website.

So we're in growth mode. We continue to have a lot of open recs and open positions. And this is a talented group of people who are very experienced in the private markets. And so I think the more logical answer is they're coming over and taking positions that would have otherwise gone to a brand new hire.

There are no further questions at this time. I will now turn the call back over to Erik Hirsch. Please continue.

Again, thank you for the time. Thank you for the questions, and thank you for the support. Have a great day.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.