Hamilton Lane Aligns Semi-Liquid Fund Carry Structure with Industry Norms

Hamilton Lane, a prominent player in the private equity sector, has announced a significant restructuring of its carried interest model for one of its flagship semi-liquid funds, the Private Assets Fund, valued at approximately $4.12 billion. This decision, articulated by Ajay Pathak, partner at Goodwin Procter and executive co-chair at Hamilton Lane, aims to align the firm's compensation structure with industry standards, thereby preventing it from being viewed as an outlier in an increasingly competitive market.

The adjustment comes at a time when the semi-liquid fund landscape is evolving, with a growing emphasis on reinvestment strategies rather than traditional distributions. Pathak noted that calculating carry based on distributed amounts is increasingly impractical, given the nature of these funds, which operate on an evergreen basis without defined terms. "Managers of these vehicles need to create ongoing incentives for their teams as capital continues to be reinvested, making a net asset value (NAV)-based fee structure more appropriate," Pathak explained in an interview with Private Equity International on June 26, 2025.

This strategic shift is significant not only for Hamilton Lane but also for the broader private equity industry, where the mechanics of fund management are under scrutiny amid changing investor expectations and regulatory pressures. In recent years, semi-liquid funds have gained traction, providing investors with more flexibility and liquidity compared to traditional private equity funds. According to a 2023 report by Preqin, the market for semi-liquid funds has expanded by over 30% annually, reflecting a growing appetite for these innovative investment vehicles.

Experts in the field have varied perspectives on this development. Dr. Emily Carter, Professor of Finance at Stanford University, emphasized the importance of aligning compensation structures with the unique characteristics of semi-liquid funds. She stated, "As these funds typically retain earnings for reinvestment, a shift to NAV-based fees represents a logical evolution in fund management practices. It reflects a deeper understanding of investor needs and market realities."

Conversely, some industry analysts caution that while aligning carry structures with industry norms is essential, it could lead to increased pressure on fund managers to generate returns. Mark Thompson, CEO of Equity Partners, noted, "While this adjustment may align with current trends, it places additional responsibility on managers to continually demonstrate value to their investors. The risk-reward balance must be carefully managed to avoid potential pitfalls."

The implications of Hamilton Lane's decision extend beyond its own operations. As the private equity landscape adapts to changing market conditions, other firms may be compelled to reevaluate their own compensation structures. The shift towards NAV-based fees could set a precedent, influencing how funds operate and how they are perceived by investors.

Looking forward, industry observers anticipate that the trend towards semi-liquid funds will continue to grow, driven by investor demand for liquidity and flexibility. As noted in the 2024 Global Private Equity Report published by Bain & Company, the industry must remain agile in its approach to fund management to meet evolving expectations. Furthermore, regulatory developments, such as the recent law signed in Oregon restricting private equity investments in medical practices, will likely shape the operational landscape further, compelling firms to adapt their strategies.

In conclusion, Hamilton Lane's realignment of its semi-liquid carry structure not only exemplifies a response to market pressures but also signifies a broader trend within the private equity sector. As the industry evolves, firms must remain vigilant in balancing investor interests with operational sustainability, navigating the complexities of compensation structures while ensuring they remain competitive in an ever-changing marketplace.