HLNE 10-K & 10-Q changes, risk factors and insider trading

•in recent years, there has been increased competition for investment opportunities resulting from the increased amount of capital invested in the private marketsmarkets, alternativeswhich may increase the cost and high liquidity in debt markets, andreduce the increasedavailability competitionof forsuitable investmentsinvestments, maythereby reducereducing our investment returns in the future;

•the performance of particular funds will also will be affected by risks of the industries and businesses in which they invest; and

Our success largely depends on the identification and availability of suitable investment opportunities for our clients, and in particular the success of funds in which our specialized funds, customized separate accounts and advisory accounts invest. The availability of investment opportunities will be subject to market conditions and other factors outside of our control and the control of the private markets fund managers with which we invest. For example, markets in the last few years experienced meaningful headwinds, including elevated interest rates and volatile geopolitical conditions. Past returns of our specialized funds, customized separate accounts and advisory accounts have benefited from investment opportunities and general market conditions that may not continue or reoccur, including favorable borrowing conditions in the debt markets,markets during such historical periods, and there can be no assurance that our specialized funds, customized separate accounts, advisory accounts or the underlying funds in which we invest will be able to avail themselves of comparable opportunities and conditions. There can also be no assurance that the private markets funds we select will be able to identify sufficient attractive investment opportunities to meet their investment objectives. Further, the due diligence investigations we conduct before recommending investments to our clients may not uncover all facts relevant to the suitability of such opportunities. See “—The due diligence process that we undertake in connection with investments may not reveal all facts that may be relevant in connection with an investment” for more information on the risks we face in connection with the due diligence process.

We seek to maintain excellent relationships with general partners and managers of investment funds, including those in which we have previously made investments for our clients and those in which we may in the future invest, as well as sponsors of investments that might provide direct investment opportunities in portfolio companies alongside the sponsoring fund manager. However, because of the number of investors seeking to gain access to investment funds and direct investment opportunities managed or sponsored by the top performing fund managers, there can be no assurance that we will be able to secure the opportunity to invest on behalf of our clients in all or a substantial portion of the investments we select, or that the size of the investment opportunities available to us will be as large as we would desire.desire or that the terms of the investments will be as favorable as we have come to expect. Access to secondary investment opportunities is also highly competitive and is often controlled by a limited number of general partners, fund managers and intermediaries.

As we expand the scope of our business, as well as the investor channels through which our products are offered, we increasingly confront potential and actual conflicts of interest relating to our advisory and investment management businesses. For example, we may recommend that various advisory clients invest in specialized funds managed by us. Additionally, allocating investment opportunities appropriately frequently involves significant and subjective judgments, and the risk that allocation decisions could be challenged as inconsistent with our obligations under applicable law, governing fund agreements or our own policies cannot be eliminated. It is possible that actual, potential or perceived conflicts could give rise to investor dissatisfaction, litigation or regulatory enforcement actions. As a registered investment adviser,advisor, we owe our clients a fiduciary duty and are required to provide disinterested advice. Furthermore, as we form and launch more registered investment companies under the Investment Company Act, the risk of triggering potential issues under Section 17 of the Investment Company Act, which prohibits certain transactions between registered investment companies and their affiliates, increases. Identification of the affiliates affected by Section 17 is complex, and at times, subject to interpretive judgment. The SEC may disagree with our interpretation of these prohibitions, heightening our regulatory risks and the risk that an investor and/or a regulator could claim that a transaction violated these rules.

Our success depends on our ability to retain our senior management team and to recruit and retain additional qualified investment, sales and other professionals. However, we may not be successful in our efforts, as the market for investment professionals is extremely competitive. The individuals that comprise our senior management team possess substantial experience and expertise and, in many cases, have significant relationships with certain of our clients. Accordingly, the loss or prolonged absence of any one of our senior management team or other key personnel could adversely affect certain client relationships, reduce our productivity or limit our ability to successfully execute our investment strategies, which, in turn, could have a material adverse effect on our business, financial condition and results of operations. In addition, the governing agreements of our specialized funds typically require the suspension of the investment period if, depending on the fund, between two and ten designated members of our senior management team either cease to devote sufficient professional time to or cease to be employed by HLA, often called a “key person event,” or in connection with certain other events. Senior managing directors have left the firm in the past and others may do so in the future. While we cannot predict the impact that the departure of any single senior managing director will have on our ability to achieve our investment objectives, any change to our senior management team could materially and adversely affect our business, financial condition and results of operations. In order to retain and attract qualified investment professionals, we expect to continue to experience a general rise in compensation and benefits expense commensurate with expected growth in headcount and with the need to maintain competitive compensation levels, which could cause our total employee compensation and benefits expense as a percentage of our total revenue to increase and adversely affect our profitability. We also expect to continue to invest both in maintaining our corporate culture and in recruitment activities that serve to increase our pipeline of qualified candidates. If we are not successful in maintaining our culture, we may not be successful in retaining our personnel, and the costs to recruit, train, and retain qualified professionals may increase and adversely impact our profitability. In addition, we may not be able to find suitable successors promptly or be successful in integrating them.

We intend to expand our business and may formulate new business strategiesstrategies, offer new products or services or enter into new geographic markets or strategic partnerships, which may result in additional risks and uncertainties in our business.

We currently generate substantially all of our revenue from asset management and advisory services. However, we have grown, and intend to continue to growgrow, our business by offering additional products and services, by formulating new business strategies, by entering into, or expanding our presence in, new geographic markets and by entering into selected strategic partnerships and corporate investments. These activities have and could continue to increase our operational costs and subject us to new laws and regulations with which we are not familiar, or from which we are currently exempt, which may lead to increased litigation and regulatory risk. For example, we have recently undertaken business initiatives to reach an increasing number of retail investors in the United States and around the world, including seekingby offering tokenized access to tokenize certain of our funds, whichlaunching additional evergreen funds, introducing daily-priced interval funds, and establishing new vehicles intended for EEA retail investors and Asia-Pacific investors. These initiatives, as well as our tokenization and digital-distribution initiatives, exposes us to greater levels of risk, including heightened litigation, regulatory enforcement and reputational risks.risks, Thewhile also increasing our compliance burden and requiring more complex administration and accounting operations. In addition, distribution of retail products, including through tokenization and digital securities exchanges,distribution, whether directly or through market intermediaries, can be complex and could expose us to allegations of improper conduct and/or actions by regulators within and outside the United States with respect to, among other things, product suitability, investor classification, compliance with securities laws, conflicts of interest andor the adequacy of disclosure to customers to whom our products are distributed through those channels. To the extent distribution of our retail or other products is through third-party distributors with whom we engage, we may not be able to effectively monitor or control the manner of their distribution, which could result in claims that products distributed through such channels are distributed to customers for whom they are unsuitable or that they are distributed in an otherwise inappropriate manner. We are exposed to the risks of reputational damage and legal liability to the extent such third parties we engage, whom we do not control, improperly sell our products to investors. This risk increases as the number of third-party distributors increases.disclosure.

In addition, our evergreen funds contain terms that permit investors to request redemption or repurchase of their interests on a periodic basis and,basis, subject to certain limitations, includeincluding limits on the aggregate amount of such interests that may be redeemed or repurchased in a given period. Challenging market or economic conditionsconditions, negative media coverage, changes in intermediary recommendations, increased competition from substitute products and liquidity needs could cause elevated redemption or repurchase requests from investors in such products, which can limit the amount of such redemption or repurchase requests that are fulfilled. We may redeem or repurchase fewer interests than requested or suspend redemptions or repurchases entirely. Such limitations may subject us to reputational harm and may make such vehicles less attractive to investors, which could have a material adverse effect on the cash flows of such vehicles. This may in turn negatively impact the revenues we derive from such vehicles. For more information on the risks associated with our evergreen funds, see “—The exercise of redemption or repurchase rights by investors in our evergreen funds may adversely affect our revenues.”

To the extent we introduce new types of investment structures, products or services, we will face numerous risks and uncertainties, including risks associated with the possibility that we have insufficient expertise to engage in such activities profitably or without incurring inappropriate amounts of risk, that we do not have the required investment of capital and other resources and that we could potentially lose clients due to the perception that we are no longer focusing on our core business. Further, the expansion into new geographies and strategies (including making products available on the blockchain and through tokenization and digital securities exchanges) and the launch of daily-priced vehicles has demanded greater management attention and dedication of resources to manage the increasing complexity of operations and regulatory compliance, thereby increasing the risk of litigation and regulatory enforcement actions being brought against us. Our initiatives to expand our retail investor base, including outside of the United States, requires the investment of significant time, effort and resources, including the hiring of additional personnel, upfront costs in connection with distribution through wirehouses, the implementation of new operational, technological, compliance and other systems and processes and the development or implementation of newvaluation technology.and liquidity-management frameworks tailored to registered funds and daily-priced products. There is no assurance that our efforts to further grow the assets we manage on behalf of retail investors will be successful. Further, in light of the August 2025 Executive Order on Democratizing Access to Alternative Assets for 401(k) Investors, there may be significant future opportunity for the alternative asset management industry to increase the distribution of products to retail investors through 401(k) accounts. We are likely to face significant competition in addressing such opportunity, which could require us to spend substantial time, effort and resources, and may not ultimately be successful in increasing distribution of our products in this channel. In addition, such expansions increase various risks including the potential for litigation and regulatory scrutiny, oversight or disclosure requirements.

We have and will continue to provide resources to foster the development of new product offerings and business strategies by our investment professionals and launch successor and related products, such that our new strategies seek to achieve a level of scale and profitability. To raise new funds and pursue new strategies, we have and expect to continue to use our balance sheet capital to warehouse seed investments, which may decrease the liquidity available for other parts of our business. In the past, we have supplemented our balance sheet capital for this purpose with proceeds of privately placed debt, and we may choose to issue additional debt in the future to further supplement our capital. If a new strategy or fund does not develop as anticipated or our balance sheet assets cease to provide adequate liquidity, we may be forced to realize losses or become limited in our ability to seed new funds or strategies or support existing ones as currently contemplated. Further, we have from time to time explored, and intend to continue to exploreexplore, opportunities to grow our business via acquisitions, partnerships, investments or other strategic transactions and have and may continue to use our balance sheet capital or issue shares of Class A common stock to do so. There can be no assurance that we will successfully identify, negotiate or complete such transactions, that any completed transactions will produce favorable financial results or that we will be able to successfully integrate an acquired business with ours. Further, our strategic initiatives include the acquisition of minority interests in third parties, in which case we will be subject to additional risks and uncertainties in that we may be dependent upon, and subject to liability for, losses or reputational damage relating to, systems, controls and personnel that are not under our control. In addition, if we choose to issue equity to fund an acquisition, our stockholders may experience dilution.

The revenues that we earn are driven in part by the amount of capital committed by our clients for investment, our fundraising efforts and the pace at which we make investments on behalf of our specialized funds and customized separate accounts. Declines in the pace or the size of fundraising efforts or investments reduce our revenues. The private markets investing environment continues to see increased competition,competition and elevated interest rates, which can make fundraising and the deployment of capital more difficult. In addition, many other factors cause declines in the pace of investment, including a market environment characterized by high prices or uncertainty, the unavailability of suitable opportunities for investors and clients to exit existing investments and redeploy realized capital into new investments, the inability of our investment professionals to identify attractive investment opportunities and decreased availability of financing on attractive terms or decreased availability of investor capital, including potentially as a result of a challenging fundraising environment or heightened requests for redemptions or repurchases in our evergreen funds. Further, we may fail to consummate identified investment opportunities because of business, regulatory or legal complexities or uncertainty and adverse developments in the U.S. or global economy, financial markets or geopolitical conditions, and our ability to deploy capital in certain countries may be adversely impacted by U.S. and foreign government policy changes and regulations. In addition, if we are unable to deploy capital at a pace that is sufficient to offset the pace of realizations, our fee revenues could decrease.

Our indebtedness may expose us to substantial risks, including to the extent we fail to comply with certain covenants, and our cash balances are exposed to the credit risks of the financial institutions at which they are held.

We maintain a Term Loan and Security Agreement (as amended, the “Term Loan Agreement”), a 2020 Multi-Draw Term Loan and Security Agreement (as amended, the “2020 Multi-Draw Term Loan Agreement”), a 2022 Multi-Draw Term Loan and Security Agreement (the “2022 Multi-Draw Term Loan Agreement”) and a Revolving Loan and Security Agreement (as amended, the “Revolving Loan Agreement” and, together with the Term Loan Agreement, the 2020 Multi-Draw Term Loan Agreement and the 2022 Multi-Draw Term Loan Agreement, the “Loan Agreements”) with JPMorgan Chase & Co. (“JPMorgan”),. asAdditionally, successor to First Republic Bank. On October 8,in 2024, we issued $100,000,000 aggregate principal amount of 5.28% senior notes due October 15, 2029 (the “Senior Notes”), pursuant to a note purchase agreement (the “Note Purchase Agreement”) in a private placement among HLA and the purchasers party thereto.

We expect to continue to utilize debt to finance and grow our business and operations, including warehousing investments for our funds, which will expose us to the typical risks associated with the use of leverage. An increase in leverage could make it more difficult for us to withstand adverse economic conditions or business plan variances, to take advantage of new business opportunities, or to make necessary capital expenditures. Any portion of our cash flow required for debt service will not be available for our operations, distributions, dividends, stock repurchases or other purposes. Any substantial decrease in net operating cash flows or any substantial increase in expenses could make it difficult for us to meet our debt service requirements or force us to modify our operations. Further, there is no guarantee that we will be able to obtain new borrowings or refinance existing borrowings on favorable terms when they mature. Our level of indebtedness may make us more vulnerable to economic downturns and reduce our flexibility in responding to changing business, regulatory and economic conditions, which could materially and adversely affect our business, financial condition and results of operations.

In addition, the availability of capital from our Loan Agreements and our cash balances are exposed to the credit risks of the financial institutions at which they are held. Events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or the financial services industry generally, or concerns or rumors about any such events or other similar risks, have in the past and may in the future lead to market-wide liquidity problems or the fear of market-wide liquidity problems. Our material credit facility consists of our Loan Agreements, which are now held at JPMorganJPMorgan. since its purchase of First Republic after that bank’s failure. While the balances and liquidity of the accounts we maintained at First Republic were not materially adversely affected by that bank’s failure, ifIf any of the financial institutions at which we maintain account balances or upon which we rely for credit were to become unstable or insolvent, our ability to access existing cash, cash equivalents and investments, or to access existing or enter into new banking arrangements or facilities to pay operational and other costs, could be threatened or lost, which could have a material adverse effect on our business and financial condition. Our account balances at each institution typically exceed Federal Deposit Insurance Corporation (“FDIC”) insurance coverage of $250,000 per depositor, and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. In some cases, we have transferred uninsured cash balances to money market mutual funds.

Certain of the specialized funds and customized separate accounts we manage, the funds in which we invest and portfolio companies within our funds and customized separate accounts currently rely on leverage.leverage Ifand are expected to continue to do so. Certain of our specialized funds,funds and customized separate accountsaccounts, oras well as the companies in which our specialized funds or customized separate accounts investinvest, raise capital in the structured credit, leveraged loan and high yield bond markets,markets. If elevated interest rates persist or further increase or credit markets experience continued or increasing dislocations, contractions or volatility, the results of theiroperations operationsof our specialized funds and customized separate accounts, as well as the companies in which our specialized funds or customized separate accounts invest, may suffer if such markets experience dislocations, contractions or volatility.suffer. Any such events could adversely impact the availability of credit to businesses generally, the cost or terms on which lenders are willing to lend, or the strength of the overall economy.

TheReductions absence ofin available sources of sufficient debt financingfinancing, foran extended periodsor ofincreased timetightening in credit markets, or an increase in either the general levels of interest rates or in the risk spread demanded by sources of indebtedness would make it more expensive to finance thoseinvestments investments,made by our specialized funds and customized separate accounts and, in the case of rising interest rates, decrease the value of fixed-rate debt investments made by our funds. Certain investments may also be financed through fund-level credit facilities, which may or may not be available for refinancing on favorable terms, or at all, at the end of their respective terms. Further, the cost of borrowing may not be covered by the appreciation of the assets in the investment, which could be exacerbated in difficult market conditions and adversely impact our revenues. We also make arrangements with financial institutions for loans and to hold cash balances on behalf of our clients to fund contributions to and hold distributions from investments. The availability of capital from these debt facilities and cash balances is exposed to the credit risks of the financial institutions at which they are held. Adverse developments that affect financial institutions or the financial services industry generally, or concerns or rumors about any such events or other similar risks, have in the past and may in the future lead to market-wide liquidity problems or the fear of market-wide liquidity problems. If the financial institutions at which our specialized funds’, customized separate accounts’, clients’ or investors’ credit facilities or cash account balances are held were to be placed into receivership or become insolvent, their ability to access existing cash, cash equivalents and investments, or to access existing or new banking arrangements or facilities to fund commitments, could be threatened or lost, which could have a material adverse effect on our reputation and results of operations. Account balances at these institutions typically exceed FDIC insurance coverage of $250,000 per depositor, and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. Finally, limitations on the deductibility of interest expense on indebtedness used to finance our specialized funds’ investments reduce the after-tax rates of return on the affected investments and make it more costly to use debt financing. Any of these factors may have an adverse impact on our business, results of operations and financial condition.

Similarly,In privateaddition, marketswe funds’may portfolioinvest companiesin regularlybusinesses utilizewith thecapital corporatestructures debtthat marketshave tosignificant obtain additional financing for their operations.leverage. The leveraged capital structure of such businesses increases the exposure of the funds’ portfolio companies to adverse economic factors such as rising interest rates, decreases in credit availability, financial institution risks discussed above, downturns in the economy or deterioration in the condition of such business or its industry. Tighter credit conditions or higher interest rates may also make it more difficult or more expensive for portfolio companies to refinance or extend existing indebtedness, comply with financial covenants or access incremental debt financing, which could increase the risk of default or restructuring. These factors may make such companies less able to cope with changes in business and economic conditions and may impair the operations, value or sustainability of such companies. If the portfolio companies in our funds default on their indebtedness, or otherwise seek or are forced to restructure their obligations or declare bankruptcy, we could lose some or all of our investment and suffer reputational harm. Any adverse impact caused by the use of leverage by portfolio companies in which we directly or indirectly invest could in turn adversely affect the returns of our specialized funds, customized separate accounts and advisory accounts.

Our business is exposed to the risk that clients that owe us money for our services may not pay us, and investors may default on their obligations to fund their commitments. We believe that these risks increase during periods of economic uncertainty, such as in the case of difficult or volatile market and geopolitical conditions, and if the financial institutions holding cash to be used for funding commitments are in financial distress. If investors in our specialized funds and certain customized separate accounts default on their obligations to fund commitments, there may be adverse consequences on the investment process, and we could incur losses and be unable to meet underlying capital calls. For example, investors in mostmany of our specialized funds make capital commitments to those funds that we are entitled to call from those investors at any time during prescribed periods. We depend on investors fulfilling and honoring their commitments when we call capital from them for those funds to consummate investments and otherwise pay their obligations when due. In addition, certain of our funds and customized separate accounts utilize lines of credit to fund investments. Because interest expense and other costs of borrowings under lines of credit are an expense of the fund or account, the fund’s or account’s net multiple of invested capital may be reduced, as well as the amount of carried interest generated. Any material reduction in the amount of carried interest generated may adversely affect our revenues. We have not had clients or investors fail to honor capital calls to any meaningful extent.

When clients retain us to manage assets on their behalf,behalf as discretionary manager of a customized separate account, they specify certain guidelines regarding investment allocation and strategy that we are required to observe in the management of their portfolios. Our failure to comply with these guidelines and other limitations could result in clients terminating their investment management agreement with us, as these agreements generally are terminable without cause on 30 to 90 days’ notice. Clients could also sue us for breach of contract and seek to recover damages from us. Even if we comply with all applicable investment guidelines, a client may be dissatisfied with its investment performance or our services or fees, and may terminate their customized separate accounts or advisory accounts or be unwilling to commit new capital to our specialized funds, customized separate accounts or advisory accounts. Any of these events could cause a reduction to our AUM and consequently cause our earnings to decline and materially and adversely affect our business.

There is a risk that our employees, advisors or third-party service providers could engage in misconduct that adversely affects our business. We are subject to a number of laws, obligations and standards arising from our advisory and investment management businesses and our discretionary authority over the assets we manage. The violation of these laws, obligations and standards by any of our employees, advisors or third-party service providers would adversely affect our clients and us by subjecting us to, among other things, civil and criminal penalties or material fines, profit disgorgement, injunctions on future conduct, securities litigationlitigation, reputational damage and a general loss of investor confidence. Our business also often requires that we deal with confidential matters of great significance to companies and funds in which we may invest for our clients. If our employees, advisors or third-party service providers were to engage in fraudulent activity, violate regulatory standards or improperly use or disclose sensitive or confidential information, we could be subject to legal or regulatory action and suffer serious harm to our reputation, financial position and current and future business relationships. The pervasiveness of social media and electronic communications and the increasing prevalence of artificial intelligenceAI could also lead to faster and wider dissemination of any adverse publicity or inaccurate information about us, making effective remediation more difficult and further magnifying the reputational risks associated with negative publicity. It is not always possible to detect or deter misconduct, and the precautions we take that seek to detect and prevent undesirable activity may not be effective. In addition, we allow our employees to work on a hybrid schedule or remotely, which has required us to develop and implement additional precautions in order to detect and prevent employee misconduct. Such additional precautions, which may include the implementation of security and other restrictions, may make our systems more difficult and costly to operate and may not be effective in preventing employee misconduct in a remote work environment. If one of our employees, advisors or third-party service providers were to engage in misconduct or were to be accused of misconduct, our business and our reputation could be materially and adversely affected. See “—Risks Related to Our Industry—Extensive government regulation, compliance failures and changes in law or regulation could adversely affect us.”

Unlike traditional privatedrawdown market vehicles,funds, which generally do not permit redemptions of fund interests until the liquidation of the fund upon scheduled termination dates, our evergreen funds, including our funds registered under the Investment Company Act, contain investor liquidity features that permit investors to redeem or repurchase their interests from time to time. Our evergreen funds have grown substantially in recent years and now represent a more significant portion of our AUM and our management and revenues. As these products expand across strategies, geographies and investor types, the potential impact of material redemption or repurchase activity on our business has increased. Factors that could result in investors leaving our evergreen funds include changes in interest rates or market conditions that make other investments more attractive, changes in or rebalancing due to investors’ asset allocation policies, changes in investor perception regarding our focus or alignment of interest, unhappiness with a fund’s performance or investment strategy,strategy or liquidity profile, changes in our reputation, negative media coverage of us, our peers or the private markets more broadly, departures or changes in responsibilities of key personnel, performance and liquidity needs of fund investors and legal or regulatory issues that investors perceive to have a bearing on the fund. In a declining market, our evergreen vehiclesfunds, including our funds registered under the Investment Company Act, may experience declines in value, and the pace of redemptions or repurchases and consequent reduction in our assets under management could accelerate. Such declines in value may be both provoked and exacerbated by forced selling of assets, as further described below. Actions taken to meet substantial redemption requests could result in a material adverse effect on the fund’s investments, ability to make new investments or ability to achieve its investment objectives.

To the extent appropriate and permissible under a vehicle’s constituent documents,documents and applicable law, we may limit redemptions or repurchases in such vehicle for a period of time. ThisWhile the use of such tools (or “gates”) is meant to avoid forced asset sales and protect remaining investors in a fund, the use of such tools may be negatively received by investors, as well as distributors or regulators and could lead to negative publicity, which may lead to volatility in the price of our Class A common stock, regulatory inquiries or litigation. Such events may subject us to reputational harm, make such vehicles less attractive to investors in the future and negatively impact future subscriptions to such vehicles, which could have a material adverse effect on the cash flows of such vehicles and may negatively impact the revenues we derive from them. In addition such events could negatively impact future fundraising for our platform more broadly.

In addition, multiple and sustained redemption or repurchase requests could exhaust a fund’s sources of liquidity and create pressure to dispose of investments by a fund sooner than anticipated to satisfy such requests. The investments of such funds are generally illiquid in nature and disposing of such investments within the necessary timeframe could reduce the price at which counterparties are willing to transact.transact and require the fund to sell investments it would otherwise prefer to continue to hold. In most cases, transferring such investments requires the consent of a third-party sponsor, and, if such sponsors are unwilling to consent, a fund may need to liquidate a less desirable investment as an alternative. Such accelerated disposition could reduce or eliminate our potential carried interest associated with such investment, and the reduction in such fund’s NAV resulting from the redemption or repurchase would reduce the management fees payable to us.us and may reduce or eliminate any incentive fees or carried interest to which we might otherwise have been entitled.

Finally, the inclusion of redemption or repurchase rights in our evergreen funds create heightened risk of operational error, including with respect to the calculation of NAV. Any such errors could adversely affect the exercise of redemption rights and could adversely affect our revenues and profitability, including as a result of investors’ indemnification requirements, litigation and/or regulatory investigations. As we launch and scale funds that strike NAV more frequently, including those that calculate NAV on a daily basis, the complexity and frequency of these operational processes increase as do the potential consequences of any errors.

We are a global private markets investment solutions provider and operate our business in a single segment. We offer a variety of investment solutions to address our clients’ needs across a range of private markets, including private equity, private credit, direct equity, real estate, infrastructure, other real assets, growth equity, venture capital and impact. These solutions are constructed from a range of investment types, including primary investments in funds managed by third-party managers, direct investments alongside such funds and acquisitions of secondary stakes in such funds, with a number of our clients utilizing multiple investment types. These solutions are offered in a variety of formats covering some or all phases of private markets investment programs:

•Advisory Services: We offer non-discretionary investment advisory services to assist clients in developing and implementing their private markets investment programs. Our investment advisory services include asset allocation, strategic plan creation, development of investment policies and guidelines, the screening and recommending of investments, the monitoring of and reporting on investmentsinvestments, and investment manager review and due diligence. Our advisory clients include some of the largest and most sophisticated private markets investors in the world. We had $819.5$905.3 billion of AUA as of March 31, 2025.2026.

•Reporting, Monitoring, Data and Analytics: We provide our clients with comprehensive reporting and investment monitoring services, usually bundled into our broader investment solutions offerings, but also on a stand-alone, fee-for-service basis. We also provide comprehensive research and analytical services as part of our investment solutions, leveraging our large, global, proprietary and high-quality database forto transparencysupport transparency, decision making and powerfulportfolio analytics.construction. Our data, as well as our benchmarking and forecasting models, are accessible through our proprietary technology solution, Cobalt LP, on a stand-alone, subscription basis.

Our client and investor base is broadly diversified by type, size and geography. Our client base primarily comprises institutional investors that rangeranges from those seeking to make an initial investment in alternativeprivate assetsmarkets to some of the world’s largest and most sophisticated private markets investors. As we offer a highly customized, flexible service, we are equipped to provide investment services to institutional clients of all sizes and with different needs, internal resources and investment objectives. Our clients include prominent institutional investors in the United States, Canada, Europe, the Middle East, Asia, Australia and Latin America. We provide private markets solutions and services to some of the largest global pension, sovereign wealth and U.S. state pension funds.funds, In addition, weand believe we are a leading provider of private markets solutions for U.S. labor union pension plans,plans. andWe wealso serve numerousa growing number of smaller public and corporate pension plans, sovereign wealth funds, financial institutions and insurance companies, endowments and foundations, as well as family offices and high-net-worth individuals.

Our results of operations are affected by a variety of factors, including conditions in the global financial markets and the economic and political environments, particularly in the United States, Western Europe and Asia. As interestInterest rates remain elevated in responserelative to continuedrecent historical levels, inflationary pressures have persisted and public equity volatility continues, leadingcontributing to a wider range of equity returns,returns. Against this backdrop, we continue to see increasing investor demand for alternative investments toas achieveinvestors higherseek attractive yield, return and lessdiversification correlated relative yieldsopportunities, and returns on invested capital. As a result, some investors have increased their allocation to private markets relative to other asset classes. In addition, the opportunities in private markets havecontinue expandedto expand as firms have created new vehicles and products in which to access private markets across different geographies and opportunity sets.

•Unpredictable, volatile and uncertain macroeconomic conditions. Global economic conditions, including political environments, financial market performance, tariff policies, interest rates, credit spreads or other conditions beyond our control, all of which affect the performance of the assets underlying private market investments, are unpredictable and could negatively affect the performance of our clients’ portfolios or the ability to raise funds in the future. Since early 2025, theThe United States and countries around the world havecontinue experiencedto experience elevated levels of market volatility and uncertainty driven principallyin part by geopolitical conflicts and global trade concerns, including, in particular, the announcements of the imposition of tariffs by the United States on certain of its trading partners in April 2025 and retaliation by certain such trade partners.concerns. This volatility and uncertainty adds to the risks and uncertainties in the business environment in which we operate and may have various negative impacts on our business and results of operations, including with respect to decreased valuations of investments by our specialized funds and customized separate accounts, deployments, realizations, and fundraising activities.

Management and advisory fees comprise specialized fund and customized separate account management fees, advisory fees and reportingreporting, monitoring data and analytic fees and distribution management fees.

Revenues from customized separate accounts are generally based on a contractual rate applied to committed capital orcapital, net invested capital underand/or management.net asset value (“NAV”). These fees often decrease over the life of the contract due to built-in declines in contractual rates and/or as a result of lower net invested capital balances as capital is returned to clients. In certain cases, we also provide advisory and/or reporting services, and, therefore, we also receive fees for services such as monitoring and reporting on a client’s existing private markets investments. In addition, we may provide for investments in our specialized funds as part of our customized separate accounts. In these cases, we generally reduce the asset-based and/or incentive fees on customized separate accounts to the extent that assets in the accounts are invested in our specialized funds so that our clients do not pay duplicate fees.

Revenues from specialized funds are based on a percentage of limited partners’ capital commitments to, net invested capital or net asset value (“NAV”) in, our specialized funds. The management fee during the investment period is often charged on capital commitments and after the investment period (or a defined anniversary of the fund’s initial closing) is typically reduced by a percentage of the management fee for the preceding year or charged on net invested capital or NAV. In the case of certain funds, we charge management fees on capital commitments, with the management fee increasing during the early years of the fund’s term and declining in the later years. Management fees for certain funds are discounted based on the amount of the limited partners’ commitments, whether the limited partners commit early in the offering period or if the limited partners are investors in our other funds. Revenues from specialized funds that charge management fees during their fundraising periods include retroactive fees. Retroactive fees are management fees earned from investors that commit to a specialized fund after the first close of the fund and are required to pay a catch-up management fee as if they had committed to the fund at the first closing.

Incentive fees comprise carried interest earned from our specialized funds and certain customized separate accounts structured as single-client funds in which we have a general partner commitment, and performance fees earned on certain other specialized funds and customized separate accounts.

General, administrative and other includes travel, accounting, legal and other professional fees, commissions, placement fees, office expenses, depreciationdepreciation, fund reimbursement expense and other costs associated with our operations. Our occupancy-related costs and professional services expenses, in particular, generally increase or decrease in relative proportion to the number of our employees and the overall size and scale of our business operations. Commissions and placement fees generally fluctuate based on the level and timing of fundraising activity, capital raised for our products and the extent to which we engage third-party placement agents and other distribution channels. Fund reimbursement expenses generally fluctuate in connection with the timing of new fund formations.

We have commitments in our specialized funds and certain customized separate accounts that invest solely in primary funds, secondary funds and direct investments, as well as those that invest across investment types. Equity in income (loss) of investees will increase or decrease as the change in underlying fund investment valuations increases or decreases. Since our direct investment funds invest in underlying portfolio companies, their quarterly and annual valuation changes are more affected by individual company movements than our primary and secondary funds that have exposures across multiple portfolio companies in underlying private markets funds. Our specialized funds and customized separate accounts invest across industries, strategies and geographies, and therefore our investments do not include any significant concentrations in a specific sector or area outside the United States.

Non-operating gain (loss), net consists primarily of gains and losses on certain investments, changes in liability under the tax receivable agreement and other non-recurring or non-cash items.

Other income (expense) of consolidatedConsolidated variableFunds interestand entities (“VIEs”)Partnerships consists of earnings from consolidated funds in whichand consolidated general partners entities, that are not wholly-owned by us, have commitments as well as interest income, unrealized gains on investments and interest expense on consolidated funds.

We are a corporation for U.S. federal income tax purposes and therefore are subject to U.S. federal and state income taxes on our share of taxable income generated by HLA. HLA is treated as a pass-through entity for U.S. federal and state income tax purposes. As such, income generated by HLA flows through to its limited partners, including us,members and is generally not subject to U.S. federal or state income tax at the partnership level. Our non-U.S. subsidiaries generally operate as corporate entities in non-U.S. jurisdictions, with certain of these entities subject to non-U.S. income taxes. Additionally, certain of our subsidiaries are subject to local jurisdiction income taxes at the entity level. Accordingly, the tax liability with respect to income attributable to non-controlling interests (“NCI”) in HLA is generally borne by the holders of such NCI. Our non-U.S. subsidiaries generally operate as corporate entities in non-U.S. jurisdictions and are subject to non-U.S. income taxes.

Fee-earning AUM is a metric we use to measure the assets from which we earn management fees. Our fee-earning AUM comprise assets in our customized separate accounts and specialized funds from which we derive management fees that are generally derived from applying a certain percentage to the appropriate fee base. We classify customized separate account revenue as management fees if the client is charged an asset-based fee, which includes the majority of our discretionary AUM accounts but also includes certain non-discretionary AUA accounts. Our fee-earning AUM is equal to the amount of capital commitments, net invested capital and NAV of our customized separate accounts and specialized funds depending on the fee terms. TheA vastsubstantial majorityportion of our customized separate accounts and specialized funds earn management fees based on capital commitments or net invested capital, which are generally not affected by short‑term market appreciation or depreciation. Therefore,However, revenuescertain of our products, earn management fees based on NAV, and fee-earningaccordingly, management fees and fee‑earning AUM arefor notthose significantlyproducts may be affected by changes in market value.valuations. As a result, the extent to which our revenues and fee‑earning AUM are affected by changes in market value varies based on the mix of fee structures across our products.

The following table shows our total revenues of the Company (excluding consolidated VIEsfunds and general partner entities that are not wholly-owned (“Consolidated Funds and Partnerships”)):

Total revenues increased $158.3$42.6 million for fiscal 20252026 compared to fiscal 2024,2025, due to increasesan increase in management and advisory feesfees, andpartially offset by a decrease in incentive fees.

Management and advisory fees increased $61.9$70.4 million for fiscal 20252026 compared to fiscal 2024.2025. Specialized funds revenue increased by $54.2$59.2 million compared to the prior year, due primarily to increases of $52.1$72.1 million in revenue from our evergreen funds and $10.6$11.9 million in revenue from our latest secondarydirect fund,equity fund which added $4.1$7.1 billion and $1.2$0.9 billion, respectively, in fee-earning AUM year-over-year. Revenue from our latest secondary fund included $20.7 million in retroactive fees during fiscal 2025 compared to $19.6 million during fiscal 2024. Retroactive fees are management fees earned from investors that commit to a specialized fund after the first closing of the fund and are required to pay a catch-up management fee as if they had committed to the fund at the first closing in a prior period. Revenue from our specialized funds was partially offset by a$20.7 decreasemillion of $10.3retroactive fees from our latest secondary fund recognized during fiscal 2025 compared to $3.3 million from contractualour steplatest downsdirect andequity fundsfund reachingduring thefiscal end of their term.2026. Customized separate accounts revenue increased $5.6$7.1 million compared to the prior year due primarily to a $1.8$1.6 billion increase in fee-earning AUM from the addition of new accounts, additional allocations from existing accounts and continued investment activity during the fiscal year. Reporting, monitoring, data and analytics revenue increased $4.5$6.5 million compared to the prior year due primarily to increased Cobalt LP subscriptions during fiscal 2025.2026. Fund reimbursement revenue increased by $1.5 million compared to the prior year attributed primarily to the timing of newly created funds. Distribution managementAdvisory revenue decreased $2.4$2.3 million in fiscal 20252026 compared to the prior year due primarily to decreasedadvisory stockagreements distributionreaching activitythe fromend investmentsof heldtheir by clients that are managed by us.term.

Incentive fees increaseddecreased $96.4$27.7 million for fiscal 20252026 compared to fiscal 20242025 due primarily to increasesdecreases in the tax-related portion of carried interest distributions,distributions and proceeds realized on the salessale of underlying investments in one of our specialized funds,funds andin the recognitionprior ofyear, $58.4partially millionoffset by an increase in performance fees from one of our specialized funds moving from deal-by-deal incentive fees to a high-water markevergreen-related performance fee. High-water mark performance fees are earned based on exceeding the highest period-end net asset value since inception, adjusted for subscriptions and redemptions.fees.

The following table shows our total expenses of the Company (excluding consolidatedConsolidated VIEsFunds and Partnerships):

Compensation and benefits expenses increased $70.5$25.1 million for fiscal 20252026 compared to fiscal 2024.2025. Base compensation and benefits increased $41.8$20.4 million for fiscal 20252026 compared to fiscal 2024,2025, due primarily to an increase in salary expense from additional headcount and an increase in our bonus plan accrual.accrual related to stronger operating performance compared to the prior fiscal year. Equity-based compensation increased $19.3$19.5 million in fiscal 20252026 compared to fiscal 2024,2025, driven primarily by the performance awards granted during fiscal 2025. Incentive fee compensation increaseddecreased $9.4$14.8 million for fiscal 20252026 compared to fiscal 20242025 due to ana increasedecrease in incentive fee revenue in fiscal 2025.2026.

General, administrative and other expenses increased $17.5$11.1 million for fiscal 20252026 compared to fiscal 2024.2025. This change consisted primarily of an increase of $4.2 million in fund reimbursement expense attributed to the timing of newly created funds, an increase of $4.1$5.6 million in consulting and professional fees, an increase of $2.7$3.8 million in third-party commissions primarily attributed to the increase in gross subscriptions to our evergreen funds,funds anand increase of $1.9 millionincreases in conferencefundraising andactivity marketing expenses and an increase of $1.3 million in expenses relating toon our leaseddrawdown office space.funds.

The following table shows theour total other income (expense) of the Company (excluding consolidatedConsolidated VIEsFunds and Partnerships):

Other income (expense) increased $5.4$18.5 million for fiscal 20252026 compared to fiscal 2024,2025, due primarily to an increase in non-operatingequity gainin (loss),income of investees, partially offset by a decrease in equitynon-operating ingain income of investees.(loss).

Equity in income of investees decreasedincreased $5.9$22.9 million for fiscal 20252026 compared to fiscal 20242025 due primarily to relatively smallerlarger increases in investment valuations due to market conditions in fiscal 2025.2026.

Consolidated VariableFunds Interestand EntitiesPartnerships

The following table shows the results of operations of consolidatedConsolidated VIEsFunds and Partnerships:

Our effective income tax rate in fiscal 20252026 and 20242025 was 13.4%16.3% and 19.3%,13.4%, respectively. The fiscal 20252026 effective income tax rate was different from the statutory tax rate primarily due primarily to the portion of income allocated to NCI and a reductionchange in valuation allowance recorded against deferred tax assets.assets . The effective income tax rate for fiscal 20252026 was lesshigher than fiscal 20242025 primarily due primarily to lesschanges in the valuation allowance recorded against deferred tax assets in fiscal 2025.

Net income attributable to NCI in consolidatedConsolidated fundsFunds decreasedand Partnerships increased by $2.2$40.7 million due primarily to thenet deconsolidationgains ofon a fund for which NCI holdersinvestments held aby largerConsolidated economicFunds ownershipthat increased investment activity during fiscal 2024,2026 comparedand toincreased theNCI fundsholder consolidated during fiscal 2025.subscriptions.

Customized separate accounts fee-earning AUM increased $1.8$1.6 billion for fiscal 20252026 compared to fiscal 2024.2025. Customized separate accounts contributions were $6.7$6.2 billion for fiscal 20252026 due primarily to new allocations from existing clients and the addition of new clients. Distributions were $4.9$5.0 billion for fiscal 20252026 due primarily to $1.9 billion from accounts moving from a committed to net invested capital fee base, $1.8$2.0 billion from returns of capital in accounts earning fees on a net invested capital or NAV fee base, and $1.2$1.6 billion from accounts reaching the end of their fund term.term and $1.4 billion from accounts moving from a committed to net invested capital fee base.

Specialized funds fee-earning AUM increased $4.5$7.9 billion for fiscal 20252026 compared to fiscal 2024.2025. Specialized fund contributions were $7.1$8.8 billion for fiscal 2025,2026, due primarily to $4.2$6.6 billion from our evergreen funds and $1.2 billion from our latest secondary fund.funds. Distributions were $3.3$2.6 billion for fiscal 2025,2026, due primarily to $2.0 billion from returns of capital and redemptions in funds earning fees on a net invested capital or NAV fee base and $1.1$0.5 billion from accounts reaching the end of their fund term.

Fee Related Earnings (“FRE”) is used to highlight earnings from revenues that are measured and received on a recurring basis. FRE represents net income excluding (a) incentive fees, net of fee related performance revenues, and related compensation, (b) equity-based compensation, (c) interest income and expense, (d) income tax expense, (e) equity in income of investees, (f) non-operating gain (loss), net and (g) certain other significant items that we believe are not indicative of our core performance. We believe FRE is useful to investors because it provides additional insight into the operating profitability of our business. FRE is presented before income taxes.

Fee related performance revenues (“FRPR”) are incentive fees expected to be measured and received from certain of our funds on a recurring basis and are not dependent on realization events of the fund’s underlying investments. FRPR includes incentive fees earned from Consolidated Funds that are eliminated under GAAP. We believe FRPR is useful to investors because it provides additional insight into our recurring revenues.

Beginning in the fourth quarter of fiscal 2025, the Companywe modified itsour definition of FRE to exclude equity-based compensation and include FRPR. Equity-based compensation is non-cash compensation provided to retain employees and align employee and shareholderstockholder interest. It is not directly correlated with our operating results. FeeFRPR related performance revenues areis expected to be received on a recurring basis depending upon performance of certain funds that pay incentive fees on a high-water mark basis. We believe that reporting non-GAAP results inclusive of these changes provides a supplemental view of our ongoing performance that is useful and relevant to our investors. As a result of the  change, prior period amounts have been recast to reflect the updated presentation.

Adjusted EBITDA is an internal measure of profitability. We believe Adjusted EBITDA is useful to investors because it enables them to better evaluate the performance of our core business across reporting periods. Adjusted EBITDA represents net income excluding (a) interest expense on our outstanding debt, (b) income tax expense, (c) depreciation and amortization expense, (d) equity-based compensation expense, (e ) non-operating (loss)gain, gainnet and (f) certain other significant items that we believe are not indicative of our core performance. Adjusted EBITDA also includes FRPR related to Consolidated Funds and management fees related to Consolidated Funds.

(1) Incentive fee related compensation includes incentive fee compensation expense and bonus related to carried interest that is classified as base compensation.

We are a global private markets investment solutions provider and operate our business in a single segment. We offer a variety of investment solutions to address our clients’ needs across a range of private markets, including private equity, private credit, direct equity, real estate, infrastructure, other real assets, growth equity, venture capital and impact. These solutions are constructed from a range of investment types, including primary investments in funds managed by third-party managers, direct investments alongside such funds and acquisitions of secondary stakes in such funds, with a number of our clients utilizing multiple investment types. These solutions are offered in a variety of formats covering some or all phases of private markets investment programs:

•Customized Separate Accounts: We design and build customized portfolios of private markets funds and direct investments to meet our clients’ specific portfolio objectives with regard to return, risk tolerance, diversification and liquidity. We generally have discretionary investment authority over our customized separate accounts, which comprised $98.1$94.5 billion of our assets under management (“AUM”) as of DecemberJune 31,30, 2025.2026.

•Advisory Services: We offer non-discretionary investment advisory services to assist clients in developing and implementing their private markets investment programs. Our investment advisory services include asset allocation, strategic plan creation, development of investment policies and guidelines, the screening and recommending of investments, the monitoring of and reporting on investments and investment manager review and due diligence. Our advisory clients include some of the largest and most sophisticated private markets investors in the world. We had $871.5$914.1 billion of assets under advisement (“AUA”) as of DecemberJune 31,30, 2025.2026.

•Reporting, Monitoring, Data and Analytics: We provide our clients with comprehensive reporting and investment monitoring services, usually bundled into our broader investment solutions offerings, but also on a stand-alone, fee-for-service basis. We also provide comprehensive research and analytical services as part of our investment solutions, leveraging our large, global, proprietary and high-quality database forto transparencysupport transparency, decision making and powerfulportfolio analytics.construction. Our data, as well as our benchmarking and forecasting models, are accessible through our proprietary technology solution, Cobalt LP, on a stand-alone, subscription basis.

Our client and investor base is broadly diversified by type, size and geography. Our client base ranges from those seeking to make an initial investment in alternativeprivate assetsmarkets to some of the world’s largest and most sophisticated private markets investors. As we offer a highly customized, flexible service, we are equipped to provide investment services to institutional clients of all sizes and with different needs, internal resources and investment objectives. Our clients include prominent institutional investors in the United States, Canada, Europe, the Middle East, Asia, Australia and Latin America. We provide private markets solutions and services to some of the largest global pension, sovereign wealth and U.S. state pension funds.funds, In addition, weand believe we are a leading provider of private markets solutions for U.S. labor union pension plans,plans. andWe wealso serve numerousa growing number of smaller public and corporate pension plans, sovereign wealth funds, financial institutions and insurance companies, endowments and foundations, as well as family offices and high-net-worth individuals.

Management and advisory fees comprise specialized fund and customized separate account management fees, advisory fees and reportingreporting, monitoring, data and analytic fees and distribution management fees.

Revenues from customized separate accounts are generally based on a contractual rate applied to committed capital orcapital, net invested capital underand/or management.net asset value (“NAV”). These fees often decrease over the life of the contract due to built-in declines in contractual rates and/or as a result of lower net invested capital balances as capital is returned to clients. In certain cases, we also provide advisory and/or reporting services, and, therefore, we also receive fees for services such as monitoring and reporting on a client’s existing private markets investments. In addition, we may provide for investments in our specialized funds as part of our customized separate accounts. In these cases, we generally reduce the asset-based and/or incentive fees on customized separate accounts to the extent that assets in the accounts are invested in our specialized funds so that our clients do not pay duplicate fees.

Revenues from specialized funds are based on a percentage of limited partners’ capital commitments to, net invested capital or net asset value (“NAV”) in, our specialized funds. The management fee during the investment period is often charged on capital commitments and after the investment period (or a defined anniversary of the fund’s initial closing) is typically reduced by a percentage of the management fee for the preceding year or charged on net invested capital or NAV. In the case of certain funds, we charge management fees on capital commitments, with the management fee increasing during the early years of the fund’s term and declining in the later years. Management fees for certain funds are discounted based on the amount of the limited partners’ commitments, whether the limited partners commit early in the offering period or if the limited partners are investors in our other funds. Revenues from specialized funds that charge management fees during their fundraising periods include retroactive fees. Retroactive fees are management fees earned from investors that commit to a specialized fund after the first close of the fund and are required to pay a catch-up management fee as if they had committed to the fund at the first closing.

General, administrative and other includes travel, accounting, legal and other professional fees, commissions, placement fees, office expenses, depreciationdepreciation, fund reimbursement expense and other costs associated with our operations. Our occupancy-related costs and professional services expenses, in particular, generally increase or decrease in relative proportion to the number of our employees and the overall size and scale of our business operations. Commissions and placement fees generally fluctuate based on the level and timing of fundraising activity, capital raised for our products and the extent to which we engage third-party placement agents and other distribution channels. Fund reimbursement expenses generally fluctuate in connection with the timing of new fund formations.

Non-operating (loss) gain, net consists primarily of gains and losses on certain investments, changes in liability under the tax receivable agreement and other non-recurring or non-cash items.

Other income (expense) of Consolidated Funds and Partnerships consists of earnings from consolidated funds and consolidated partnerships in which consolidated general partner entities, that are not wholly-owned by us, have commitments as well as interest income, net gain on investments and interest expense on Consolidatedconsolidated Funds.funds.

We are a corporation for U.S. federal income tax purposes and therefore are subject to U.S. federal and state income taxes on our share of taxable income generated by HLA. HLA is treated as a pass-through entity for U.S. federal and state income tax purposes. As such, income generated by HLA flows through to its limited partners, including us,members and is generally not subject to U.S. federal or state income tax at the Partnership level. Our non-U.S. subsidiaries generally operate as corporate entities in non-U.S. jurisdictions, with certain of these entities subject to non-U.S. income taxes. Additionally, certain of our subsidiaries are subject to local jurisdiction income taxes at the entitypartnership level. Accordingly, the tax liability with respect to income attributable to non-controlling interests (“NCI”) in HLA is generally borne by the holders of such NCI. Our non-U.S. subsidiaries generally operate as corporate entities in non-U.S. jurisdictions and are subject to non-U.S. income taxes.

Fee-earning AUM is a metric we use to measure the assets from which we earn management fees. Our fee-earning AUM comprise assets in our customized separate accounts and specialized funds from which we derive management fees that are generally derived from applying a certain percentage to the appropriate fee base. We classify customized separate account revenue as management fees if the client is charged an asset-based fee, which includes the majority of our discretionary AUM accounts but also includes certain non-discretionary AUA accounts. Our fee-earning AUM is equal to the amount of capital commitments, net invested capital and NAV of our customized separate accounts and specialized funds depending on the fee terms. TheA vastsubstantial majorityportion of our customized separate accounts and specialized funds earn management fees based on capital commitments or net invested capital, which are generally not affected by short‑term market appreciation or depreciation. Therefore,However, revenuescertain of our products, earn management fees based on NAV, and fee-earningaccordingly, management fees and fee‑earning AUM arefor notthose significantlyproducts may be affected by changes in market value.valuations. As a result, the extent to which our revenues and fee‑earning AUM are affected by changes in market value varies based on the mix of fee structures across our products.

The following is a discussion of our consolidated results of operations for the three and nine months ended DecemberJune 31,30, 20252026 and 2024.2025. This information is derived from our accompanying condensed consolidated financial statements prepared in accordance with GAAP.

Total revenues increased $31.1$99.4 million for the three months ended DecemberJune 31,30, 20252026 compared to the three months ended DecemberJune 31,30, 2024,2025, due to increases in both management and advisory fees and incentive fees.

Management and advisory fees increased $26.9$27.7 million for the three months ended DecemberJune 31,30, 20252026 compared to the three months ended DecemberJune 31,30, 2024.2025. Specialized funds revenue increased $22.8$26.1 million for the three months ended DecemberJune 31,30, 20252026 compared to the three months ended DecemberJune 31,30, 2024,2025, due primarily to an increase of $17.9$19.6 million in revenue from our evergreen funds and an increase of $4.4$3.8 million in revenue from our latest direct equity fund, which added $6.2$6.7 billion and $0.7$0.9 billion, respectively, in fee-earning AUM between periods. Revenue from our specialized funds for the three months ended DecemberJune 31,30, 20252026 included $2.8$2.1 million of retroactive fees from our latest direct equity fund. Customized separate accounts revenue increased $2.2$0.1 million for the three months ended DecemberJune 31,30, 20252026 compared to the three months ended DecemberJune 31,30, 20242025 duedriven toby thea additionnet ofincrease newin accounts,fee-earning additional allocations from existing accounts and continued investment activity.AUM. Reporting, monitoring, data and analytics revenue increased $2.2$1.5 million, due primarily to increased subscriptions of our technology solutions. Fund reimbursement revenue increased $1.6 million due primarily to the timing of fund related expenses. Advisory revenue decreased $0.9 million in the three months ended June 30, 2026 compared to the three months ended June 30, 2025 due primarily to advisory agreements reaching the end of their term.

Incentive fees increased $4.2$71.7 million for the three months ended DecemberJune 31,30, 20252026 compared to the three months ended DecemberJune 31,30, 2024,2025, due primarily to an increase in evergreen-related performanceincentive fees partially offset by proceeds realized on the sale of underlying investments in one of our specialized funds during the three months ended DecemberJune 31,30, 2024.2026.

Total expenses increased $19.8$47.4 million for the three months ended DecemberJune 31,30, 20252026 compared to the three months ended DecemberJune 31,30, 2024,2025, due to increases in both compensation and benefits and general, administrative and other expenses.

Compensation and benefits expenses increased $16.0$38.1 million for the three months ended DecemberJune 31,30, 20252026 compared to the three months ended DecemberJune 31,30, 2024.2025. Base compensation and benefits increased $21.3$29.8 million for the three months ended DecemberJune 31,30, 2025,2026, due primarily to an increase in salary expense from additional headcount and an increase in our annual bonus plan accrual related to stronger operating performance compared to the prior year period. Equity-based compensation increased $1.2 million driven primarily by awards granted between December 31, 2024period and Decemberan 31,increase 2025.in salary expense from additional headcount. Incentive fee compensation decreasedincreased $6.4$8.2 million for the three months ended DecemberJune 31,30, 20252026 primarily due to aan decreaseincrease in carried interest revenue compared to the prior year period.

General, administrative and other expenses increased $3.7$9.3 million for the three months ended DecemberJune 31,30, 20252026 compared to the three months ended DecemberJune 31,30, 2024,2025. This change was due primarily to an increaseincreases in fund reimbursement expense of $3.0 million and consulting and professional fees.fees of $5.3 million.

Other income (expense) increaseddecreased $8.1$6.7 million for the ninethree months ended DecemberJune 31,30, 20252026 compared to the ninethree months ended DecemberJune 31,30, 2024,2025, due primarily to ana increase$6.4 million decrease in equity in income of investees,investees. partiallyThis offsetwas driven by asmaller decreaseincreases in non-operatinginvestment gain,valuations net.during the three months ended June 30, 2026 compared to the three months ended June 30, 2025 and fluctuations in publicly traded investments held by secondary funds.

Other income (expense) of Consolidated Funds and Partnerships increased $17.7$11.7 million for the three months ended DecemberJune 31,30, 20252026 compared to the three months ended DecemberJune 31,30, 2024,2025, due primarily to increased investment activity of Funds consolidated between periods.periods, partially offset by valuation decreases during the three months ended June 30, 2025 on equity investments held by consolidated partnerships.

OtherGeneral, incomeadministrative (expense)and other expenses of Consolidated Funds and Partnerships increased $40.8$2.5 million for the ninethree months ended DecemberJune 31,30, 20252026 compared to the ninethree months ended DecemberJune 31,30, 2024,2025, due primarily to increasednew investmentfunds activitythat of Fundsare consolidated betweenand periods.increased fund activity.

Our effective tax rate was 22.7%16.7% and 14.1%19.3% for the three months ended DecemberJune 31,30, 20252026 and 2024, respectively, and 17.9% and 12.3% for the nine months ended December 31, 2025 and 2024,2025, respectively. These rates were different from the statutory tax rates due primarily to the portion of income allocated to NCI, change in valuation allowance recorded against deferred tax assets and discrete tax adjustments to true-up prior fiscal year estimated investment taxable income to actual investment taxable income reported to us after the prior fiscal year end.NCI. The effective tax ratesrate for the three and nine months ended DecemberJune 31,30, 20252026 werewas higherlower than the effective tax ratesrate for the three and nine months ended DecemberJune 31,30, 20242025 due primarily to an increasechanges in valuationstate allowancesand againstforeign deferredincome tax assets recorded at December 31, 2025.taxes.

Net income attributable to NCI increased by $9.9$21.1 million for the three months ended DecemberJune 31,30, 20252026 compared to the three months ended DecemberJune 31,30, 2024,2025, due primarily to an increase in overall net income during the period.

Net income attributable to NCI in consolidatedConsolidated Funds and Partnerships increased $9.6$12.0 million for the three months ended DecemberJune 31,30, 20252026 compared to the three months ended DecemberJune 31,30, 2024.2025. The increase was due primarily to gains on investments held by Funds consolidated between periods and increased NCI ownership driven by increased subscriptions in the consolidated Funds by NCI holders.holders, increasing the NCI ownership between periods.

Net income attributable to NCI in Hamilton Lane Advisors, L.L.C. increased by $16.9$9.1 million forin the ninethree months ended DecemberJune 31,30, 2025,2026 compared to the ninethree months ended DecemberJune 31,30, 2024,2025, due primarily to an overall increase in overall net income during the period.income.

Three months ended DecemberJune 31,30, 20252026

Fee-earning AUM increased $2.7$2.2 billion during the three months ended DecemberJune 31,30, 2025,2026, due primarily to contributions from customized separate accounts and specialized funds.contributions.

Customized separate accounts fee-earning AUM increased $0.3$0.2 billion for the three months ended DecemberJune 31,30, 2025.2026. Customized separate accounts contributions were $1.3$1.2 billion for the three months ended DecemberJune 31,30, 2025,2026, due to the addition of new accounts, additional allocations from existing accounts and continued investment activity. Distributions were $1.1$1.0 billion for the three months ended DecemberJune 31,30, 2025,2026, due primarily to $0.6$0.4 billion from returns of capital in accounts earning fees on a net invested capital or NAVNAV, fee$0.4 base,billion $0.3from accounts reaching the end of their fund term, and $0.2 billion from accounts moving from a committed to net invested capital fee base, and $0.2 billion from accounts reaching the end of their fund term.base.

Specialized funds fee-earning AUM increased $2.0 billion for the three months ended June 30, 2026. Specialized fund contributions were $2.4 billion for the three months ended DecemberJune 31,30, 2025.2026, Specializeddue fundprimarily contributionsto $1.2 billion from our evergreen funds, $0.5 billion from our latest infrastructure fund, $0.3 billion from our latest venture fund, and $0.2 billion from our latest direct equity fund. Distributions were $2.7$1.1 billion for the three months ended DecemberJune 31,30, 2025,2026, due primarily to $2.0 billionredemptions from ourtwo evergreen funds.funds Distributions were $0.8 billion for the three months ended December 31, 2025, due primarily to $0.7 billion fromand returns of capital and redemptions in funds earning fees on a net invested capital or NAV fee base.capital.