JPMorgan is enthused about private equity! Maybe a little too enthused. Tantalizing prizes have a way of clouding the judgement of the most earnest fiduciary.

At least that is the AltView take.

Today we discuss Essentials of private equity investing, apparently intended to help sell, among other things, a retail-oriented, NAV-squeezing JPMorgan fund we’ve covered before.

Amuse-bouche

JPMorgan warms up the reader (and the propaganda-detectors at the AltView) by saying that the equity investment universe is 86% private equity, when (based on value) it is much, much smaller:

JPMorgan then suggests that by investing in private companies, investors don’t just enhance returns, they reduce volatility.

And gosh darn it, PE outperforms public markets, Every. Single. Year….Until. Six. Years. Ago.

So far, this is meat-and-potatoes stuff.

Now, some details. Sorry. Below are the footnotes for the above chart:

The performance shown is based on quintiles vs. the MSCI index, rebalanced quarterly. At least that’s what the first paragraph says. We don’t know, like—at all—what that means, so we asked JPMorgan for an explanation, along with a series of other questions.

JPMorgan (politely) declined to address any of them.

The second paragraph says the performance ‘represents the median performance of global buyout funds.’

We think that even if we did know what “performance of quintiles” meant, it would conflict with the second paragraph. Our best guess: performance of quintiles has nothing to do with the chart and was left there by mistake.

UP….

We agree with one premise in the article: investing in PE is about returns.

It’s good that JPMorgan is staying strong here, because others are suggesting that since PE is so big, we all just gotta have it, whatever the returns are.

The below shows both risk (volatility) and return for the 10 years ended 2024. If you are unfamiliar, know this: UP (high returns) and TO THE LEFT (low volatility) is good. JPMorgan shows us that this is what adding PE gets us.

Carelessness? Deception? Both, Maybe?

We immediately wondered about the data. Here is another confusing footnote:

JPM says the stocks in the ‘traditional 60/40 portfolio’ are represented by MSCI ACWI, but equities for the rest of the wee pie charts reflect the S&P 500. Which would be weird.

However we don’t think that is what the chart shows. If it did, the 60/40 return would have been under 7%. In fact, it appears that all of the portfolios use the S&P for the equity exposures.

Also: if the pie chart weightings were accurate, you can impute the private equity return: ~17.6% per annum. Massive, ~4-plus percent per annum outperformance for private equity vs. the S&P 500.

This is highly implausible as an industrywide measure. Consider: last spring, State Street published a report saying that for the same 10-year period, PE had not only not outperformed the S&P by ~4.7%, but had actually UNDERPERFORMED the S&P.

Source: State Street

Then we noticed: the chart’s subtitle “Funding Private Equity Allocation from Stocks and Bonds Equally” conflicts with the pie charts, where PE is funded only by investments in the S&P 500.

If PE were equally funded by bonds and S&P 500 investments (which we think is the case):

1. The pie charts would be wrongly labeled, and:

2. The results shown would not surprise. Consider: bonds returned just ~1.5% annually over this period.

The chart proudly shows the private equity portfolios winning. But consider: each dollar of PE is being funded by $.50 of bonds and $.50 of stocks. This mix of assets returned only ~7.5%; not a high hurdle.

Hey JPM! What if, instead of selling bonds and stocks to buy private equity, an investor just sold the same amount of bonds and bought more of the S&P?

If you guessed that the simple, low cost, flexible portfolio might have performed better, well, you’d be right. And of course, the State Street data also validates this.

Are we still feeling exuberant about PE?

… and TO THE LEFT!

JPMorgan doesn’t just say that PE helps returns. Despite its leverage and illiquidity (or maybe because of its illiquidity/less frequent pricing), private equity also makes a portfolio less risky.

TO THE LEFT!

Meanwhile, a different approach; one informed by logic and common sense, might suggest that adding PE adds risk.

JPMorgan’s view seems inconsistent with the way this is taught in school. And in YouTube videos.

But hey, who knows. Maybe the rest of us are wrong. If JPMorgan is right, we wonder, why on earth would they stop at a 15% weighting?

After all (according to JPMorgan), private equity comprises 86% of the total equity investment universe.

Source: JPMorgan

Be careful out there, fiduciary-investors!

Source: JPMorgan

Today we explore an article found on KKR’s website, where the private equity pioneer argues for Evergreen funds, including the underwhelming title:

Part of a series aimed at ‘Bringing you insights about private equity investing,’ it seems geared towards intermediaries who might invest in evergreen funds on behalf of their rich retail clients, aka the wealth channel.

The vibe is very Blackstone University or Goldman Sachs Investment University, or Blackrock’s Alternatives Academy:

KKR seems aiming to Educate… but also: Sell. Not (at all) like our favorite fictional used-car salesperson, Paul Rizzo, but still.

The AltView’s take: Alternative Academy authors don’t get raked over the coals by their peers as they might at legitimate academic institutions: instead, their review is legal/compliance driven.

Agreed-Upon Facts

Let’s start with some agreed upon truths: KKR says of evergreen funds:

…assuming you’ve decided you have the skills to invest in PE, of course.

And (of buyout/private equity):

Is it not funny that 100% of managers note the importance of being among the top 25%?

KKR shares 15-year returns through 2023, for stocks, bonds, and buyouts (16 years of vintages through 2021):

Oranges on the right bar, Apples on the rest

The difference between the top and bottom quartile managers of private equity (buyouts) is YUUUGE! 14%! And boy, doesn’t that top quartile PE return of 23% look inviting…

Except, wait. The bottom quartile buyout figure was still nine percent. That doesn’t seem terrible. Hasn’t the AltView been saying bottom quartile returns for PE were pretty crappy when compared with public market returns?

Checking the footnotes:

Ahhhhh. KKR is comparing Internal Rates of Return, or IRRs (for buyouts, the right bar) to Time-weighted returns (for stocks and bonds).

IRRs employ an entirely different math than time-weighted returns.

Another thing that caught our eye in the KRR article: the surprisingly crappy returns for public equities. Let’s look again:

The data shows median returns of small and large-cap active managers: 11% and global equities of 9%, for the 15-year period.

Meanwhile: S&P 500 return: 14%, MSCI ACWI gross return of 10.4%.

The AltView reached out to KKR and they very graciously responded, indicating that the exhibit is designed to make a specific, narrow point about the much-larger dispersion among PE managers vs. active public managers, not to compare public equity results to private.

Nonetheless, KKR’s framing seems to flatter PE results. And while performance dispersion is higher among private equity managers, it still feels like a red herring. Like, isn’t a passive index the starting point for public equity investors?

KKR also noted that they try to be careful about the distinction between IRRs to TWRs. KKR has likely considered the ideas of JP Morgan, Howard Marks, INSEAD business school, and of course, Ludovic Phallipou’s “The Tyranny of IRR.”

KRR does seem more careful than Cambridge Associates, which noted the impropriety of such comparisons, and then did it anyway in an SEC presentation in support of private investments in 401(k) plans💀:

The AltView on Cambridge Associates

Notably, according to KKR, even if TWRs were employed, the result would have been about 15%, vs. 16% as shown in the chart.

This may be true.

As a counterpoint, we share some data from the lived experience of DB plan investors over the same period. Our source is a report commissioned by NAREIT which tracks the performance of $3.8 trillion in assets from hundreds of public and private sector pension plans. Aggregated asset class returns for the same 15-year period are shown below:

Source: REIT.COM

The public equity returns achieved by this pool of capital were better, and the private equity returns worse than those shown in the KKR presentation.

To summarize:

And:

We go from a Public-Private Equity performance gap of ~ 5% in KKR’s presentation to something much smaller.

Or, possibly, no gap at all.

KKR’s 10-K is also worth examining. It shows a median net IRR of 11% from KKR’s own funds for the same 15-year period as the KKR article.

Would this suggest that KKR isn’t among the best-in-class managers?

Let’s put a pin in that for a minute.

Fun with Numbers

KKR’s article also stresses the evergreen fund investor’s ability to quickly get fully invested, facilitating more rapid compounding of capital.

AltView translation: IRRs are kind of bullshit

This means lower returns can get you the same ending dollar amount. 13.3% is the new 22.5%. Missing from the discussion: an examination of how this highlights the pointlessness of IRRs.

We again ask: how many Private Equity investors wrongly think that their historical (IRR returns) of say, 22.5%, show that their Private Equity investments outperformed their public equities?

The evolution of the sales process: from Logos to Ethos/Pathos

KKR’s first fund, in 1976, returned an astounding 17.1 times its gross invested capital of $31 million. Let us pause here and say it: respect. No doubt this evidence of success helped grease the wheels for Fund II, four years later, which returned 5.1x gross MOIC.

Yet since 1996 (thirty years ago!) the best gross multiple of invested capital for a fund shown in KKR’s annual report is 3.4x. And KKR’s average MOIC for all of its funds is 1.9x gross.

Applying the typical fee drag (why doesn’t KKR do this in their annual?), the net multiple of invested capital would be ~ 1.4-1.7x.

That means $1.00 invested turned into ~ $1.40-$1.70 over the course of the average fund.

Why do investors think these returns are good?

Our guess: evidence and logic don’t figure as prominently as they should in the investment decision. Charts like KKRs, and the smooth sales pitches that accompany them, must help. And telling an investor you delivered an IRR of, say, 19%, sounds a hell of a lot better than saying “you gave us $100, we gave you back $150.”

Now, another comparison: Gross MOIC to Gross IRR.

When you see two or more dots in the same vertical line, it means a different IRR for the same amount of capital returned. Sometimes very different.

Hey, investors! Which would you rather?

A $1.20 return on your $1 investment with a 12% IRR (2006 Fund)…..

or the same $1.20 on your $1 investment with a 19% IRR (2007 Asian Fund).

Now: would you rather market 1. Asia Fund II, or 2. 2006 fund’s successor fund?

Or imagine you are a college endowment trustee, trying to impress someone (not the AltView, obvs) with the results of those special funds whose access is reserved for the special few? Might you bust out the 19% number?

The difference expresses vibes, not dollars.

The IRR gaps for more recently launched funds with similar MOICs are giant.

The math behind these differences can always be explained. But when can we admit that a metric that requires this much tutoring and asterisking has stopped being useful?

Eighteenth-century doctors had sensible-sounding explanations for leeching and bloodletting. When can we start acknowledging the damage done by IRR?

(A number) full of sound and fury…

Let’s again consider KKR’s apparently weak 11% IRR figure. If wildly divergent IRRs are often associated with the same amount of dollar profit, then what useful information does it contain?

The same amount of useful information as KKR’s fantastic since-inception 25.5% cumulative gross IRR, actually:^[1]

None at all.

Source: SEC

The Pyramid of Financial Prestige

Since PE performance is not what it once was, how do KKR and others continue to make the sale?

KRR sits atop what we call the pyramid of financial prestige (PFP). It’s a little like being famous, as we understand it. You get away with stuff that mere mortals dare not try.

An incomplete list of PFP factors:

• Clients/counterparts associate wealth with intelligence and sophistication. They therefore think you (if ‘you’ is KKR or a similar firm) are smarter/more qualified than they are;

• Intermediaries (think: consultants) who are in a sense customers, employ people that would much rather work at your company. This makes them deferential/obsequious;

• Your audience is a combination of apathetic/not very bright/intimidated by you;

• If a client/intermediary does find a problem, but it’s after they’ve chosen to invest in your fund(s), genuine inquiry gets harder. Undoing the mistake is too hard (remember: illiquid investments). This is particularly true if the rest of the world seems to be playing along.

Finally and importantly:

• You (and your firm) are staffed by extraordinary professional salespeople. These salespeople have successfully pivoted from relying almost entirely on a logical, evidence-based sales pitch to one far more focused on emotion and credibility.

A track record you could sell on, 40 years ago. Source: KKR 10-K

Wanted: Logic & Evidence

If you have capital to invest and get sales pitches, we have a recommendation:

Listen to the recent Capital Allocators podcast featuring John Kim, a master fundraiser ($70 billion in capital raised) for private equity and venture capital funds. As you listen, reflect on what you hear from your existing and prospective investment managers.

Kim mentions the Greek persuasion techniques, Logos (Logic), Ethos (Credibility), and Pathos (Emotion), and suggests that a marketer needs two of the three to succeed. Succeed raising money for the fund, that is.

To us, this tracks.

And not only that, it’s supported by data!

Using the AltView’s proprietary database of historical Greek persuasive tactics usage, we created the below chart. It shows the evolution of private equity selling strategies since the launch of KKR’s epic 1976 fund; the one with the 17.1x gross multiple.

Note: We invented the figures that that support the chart. Others may want to create their own chart using data from a rival historical Greek persuasive tactics database.

Then we can fight about it.

We like our chances.

Illustrative (more precisely, made up in this case). Past performance may not be indicative of future results, but probably will. Not investment advice.

^[1] Full credit to Ludovic Phallipou, deserving recipient of the 2026 CFA Institute Vertin Award, for highlighting this practice and his dedication to shining a light in general.

Man with a plan

In the Mike Judge classic Office Space, three job-weary Initech workers, Peter, Michael (Bolton 😊), and Samir plot a path to riches, deploying a computer virus that shaves fractions of a cent off of their employer’s transactions, funneling the money into Peter’s Initech Employee Credit Union account.

It works, but too well: after only a few days, they end up with a far larger-than-expected balance.

Oh Shit

Hamilton Lane’s Private Assets Fund (PAF) changes remind us of the Initech scam, except with bigger dollars, ostensible consent (seemingly not informed), and the imprimatur of regulatory review.

Corporate accounting is going to notice this

Before we head to the ATM to check Hamilton Lane’s account balance, let’s review:

Last May, Hamilton Lane, Inc. disclosed receipt of a large payment from its Private Assets Fund (PAF).

HLNE Conference Call, May 2025

The giant prize was unlocked by an investor vote. PAF investors took the advice of the PAF board:

Source: SEC

which resulted in investors paying fees on hundreds of millions of dollars of unrealized gains, retroactive to 2020.

Last June, the WSJ’s Jason Zweig noted that until the approval, fees paid under the old arrangement had been near zero, relatively speaking, since the fund’s inception:

Source: WSJ

The FT reported in February incentive fees totaled an additional $33.7 million through September 2025.

A table, and a chart

The fund’s recently-filed shareholder report permits a full-year update through March of 2026. We draw your attention to the circled, large number on the lower right:

The table shows the incentive fee actually paid by year, integrating the fund’s incentive fee expense from the fund’s income statement with the change in payables from the fund’s balance sheet.

‘Incentive fee paid’ subtracts the year on year change in incentive fees payable from the incentive fee expense.

The calculations reveal familiar figures: the FY 2024 figure above, $74,231, is the same as the figure discussed in the proxy:

And Jason Zwieg’s June 2025 article mentioned the inception-to-FYE 2025 actual incentive fees paid:

This also matches: the sum of the years 2021-2025 rounds to $1.6 million. Maths are mathing.

In an effort to become more modern, we tried to use datawrapper.de and AI to create an appropriate chart. Neither application was enthused about the use of a line chart, because the early year figures would look like zeros (and the case of the first two years of the fund, actually were zeros).

We persisted, with traditional Excel:

And its true, actually: the steepness of the line does not seem to do the increase justice….

We asked for confirmation/comment from Hamilton Lane on the dramatic increase in incentive fees paid, and the difficulty reconciling it with the proxy’s “investor’s best interests” language. Hamilton Lane did not respond.

There are a few offsets: as prominently featured in the PAF’s proxy, management fees were reduced by .1% per annum. Using an estimated average 2026 AUM of $4.7 billion, this would have saved investors ~$4.7 million. Yes, AltViewers, we also noticed that this number is notably smaller than $115 million.

To complete an apples-to-apples comparison, we’d need to know what incentive fee would have applied in 2026 under the pre-vote arrangement. This number cannot have been larger than ~$15 million.

The mechanics: the post-vote incentive fee is 10% of gains with no hurdle rate. Previously, a 12.5% fee was paid 1. upon the realization of a gain and 2. with an 8% hurdle rate. The requirement of a realization is the key reason why actual fees paid had been so much lower (and better for investors).

If the higher incentive fee applied to all of the 2026 fiscal year’s reported realized gains of $118 million, the incentive fee paid would have been around $15 million. We think $3 million, or twice the prior year, seems a reasonable guess. Regardless, it doesn’t change the picture; post-vote expense trends have been terrible for PAF investors.

And the trend continues: April and May 2026 fund performance, not reflected on the chart, suggests an additional incentive fee payment of ~$35 million after the June 2026 quarter-end.

Mo’ money, Mo’ problems: Crisis Strategy

Michael (Bolton): “This was all your idea, asshole!”

In Office Space, the guys recognized the problem and closed the account before it could get any bigger. So far, Hamilton Lane doesn’t seem interested in this option.

What should Hamilton Lane management do?

Let’s start with what you can’t do.

1. Sadly, the internet is forever. You can’t make the SEC filing vanish. It seems to speak on two levels: one level to get investors to yes (target audience: everyone), the other to deviously satisfy disclosure requirements (target audience: no one). Then again, maybe our government might decide we don’t need SEC filings at all (see Idiocracy, another Judge film).

The better people understand the proxy, the worse things get for Hamilton Lane. It seems challenging to show that the PAF investors are somehow better off, contradicting the proxy’s framing. So you don’t draw attention to the proxy.

2. You can’t take substantive questions about the issue in an interview. You decline interview invitations and correspond via lawyerly responses, as was the case with the FT’s Robin Wigglesworth, after he had questions. You call it ‘last year’s news’ on CNBC.

3. You can’t address the departure of the proxy filings’ overseer (and possible author), a month after the WSJ article, or the departure of his successor, last month.

What can you do? You can:

1. Hire a quality crisis management firm, like Fully Vested, to help handle yours. Maybe they can help you get a piece in Barrons….

When you host your conference call, do discuss NAV-squeezing (one-day markups) in your prepared remarks; at least you are in good company there, and it will make folks think you are addressing the elephant in the room, even if it sort of sucks to hear Marc Rowan say it “makes no sense.” Unfortunately, NAV-Squeezing was the baby elephant, this is the big Momma.

2. When asked about the PAF, you can highlight that the vote was overwhelmingly in favor (leave out the fact that 49% of shares weren’t voted), and the SEC didn’t get in the way.

How to Vote A Proxy: Pro Tips

This won’t take long, we promise.

Investors are often asked to vote on stuff. The document that describes the voting issue is called a proxy. SEC-regulated entities follow a formal process. As it turns out, one example of a voting investor is the PAF itself. Like most institutions, Hamilton Lane writes down its proxy voting guidelines.

Here is an excerpt:

Source: SEC

We’ve never seen a proxy voting policy that prioritizes anything other than voting in the long-term economic interest of investors. It’s not that complicated.

With this in mind, contrast the PAF proxy’s language with the PAF investor experience discussed above.

Informed Consent?

In May of 2026, Hamilton Lane management suggested that PAF investors knew they’d pay some performance fees, and that they desired a lower management fee:

Hamilton Lane May 2026 Earnings Conference Call

Hmmm. Assume for a moment that a long-run annual return expectation for Private Equity in general is 8%.

The PAF’s old hurdle rate—the (deal-based) return that needed to be met before any incentive fee was paid-- was 8%^[1]. And remember: until a gain was realized, no incentive fee was paid.

Post shareholder vote, this hurdle rate was eliminated. Aside from the $58 million retroactive payment, this means that prospectively if the fund returns 8%, the incentive fee paid will be 80 bps per annum (10% x 8%=.8% of assets), instead of potentially zilch.

The new math at an 8% fund return:

How does your 10bp management fee savings feel now?

New (Reduced LOL) Management Fee: 1.40%

Incentive fee expense: 0.80%

Total: 2.20%

If PAF investor-voters knew of this dynamic, then their ‘yes’ vote would seem to violate their own obligation to maximize long term economic wealth.

What’s wrong with them?

Co-CEO Hirsch also said investors were asking for this:

Source: Hamilton Lane May 2026 Earnings Conference Call

Maybe Hamilton Lane confused ‘investors, who wanted a different structure’ with the firm’s own distribution (aka sales) partners, and Hamilton Lane itself? From the proxy:

What Hamilton Lane didn’t mention: the new structure is way worse for investors. Or at least it sure has been for this fund.

In Search Of: Satisfied PAF Investors

As a financial victim, Initech did not arouse sympathy. Many PAF investors do, including:

The Peter & Carmen Lucia Buck Foundation (PCLB), which owned a stake in the PAF as of June 2025.

Source: PLCB Foundation

Founded by the late Subway founder Peter Buck and his wife Carmen Lucia, it supports many worthy causes, including charter schools. Contrast the PAF’s commercial benefits from the fund changes with the potential impact on the Bed-Stuy New Beginnings Charter School; financial support provided to the school could have been more than doubled had the fund’s changes not been approved:

Source: PLCB Foundation

Now consider the American Library Association’s Foundation. Among the ALA’s programs is a scholarship program that provides more than $300,000 annually to graduate students.

Source: American Library Association

Without the shareholder vote, an extra $20k or more could have funded another scholarship for a master’s student. We reached out to the Bhatia Group at Merrill Private Wealth Management, advisor to the ALA, but they declined to comment.

Finally, consider the Nor-easter foundation, based in Greenville, Delaware. Had more than 50% of votes gone against the PAF’s recommendation, the Foundation could have boosted its support of the Nemours Children’s hospital.

Source: ProPublica

Prefer a less heart-rending example with a bigger dollar impact?

Mass Mutual was listed as a large owner (8% of institutional shares) in the proxy). The shareholder vote cost Mass Mutual millions.

Or more likely, cost Mass Mutual clients millions. These shares likely represented the aggregation of many individual investors’ holdings. As we understand it, Mass Mutual may have retained voting responsibilities for these shares. If so, Mass Mutual would have faced a dilemma when voting time came, as the proxy explains that the changes would be “beneficial from a commercial standpoint” for distributors.

We tried, like, really hard, to talk to someone at Mass Mutual to learn more. We did not succeed.

Below is a list of various investors we found, along with our estimated incremental cost from the fund’s changes through March 2026. The estimate is based on:

$115 million in cash incentive fees paid, less:

$4.7 million in savings from lower (.1% lower per annum) management fees, less:

$3 million in assumed incentive fees under the old arrangement; twice the amount of the prior year.

=$107 million.

Links to the foundation sources are below.

In a sense, these investors and their representatives now find themselves aligned with Hamilton Lane. Public scrutiny is unwelcome. The vast majority either voted for the changes or not at all.

Our inquiries to these organizations did reach Hamilton Lane via an investment manager that works on behalf of a foundation. The message, including our questions, was run up the chain, and then a response was run back down.

We think the response wasn’t supposed to be run back down the chain to the foundation in its raw form, much less to the AltView, but anyway…

Headlined “Talking Points regarding the AltView Message” it didn’t address any questions we’d asked via the foundation representative.

Instead, it offers a general defense to decision makers like the investment manager that chose to invest with the PAF on behalf of the foundation. Our guess: the same manager has also recommended the PAF for other clients.

Our favorite bit, by far: Hamilton Lane’s characterization of the AltView:

“A blogger who writes with extreme bias and lacks credentials.”

Rather than addressing the issues, Hamilton Lane instead appears to be enlisting the support of investment manager-middlemen in defense of its fund.

Instead of defending Hamilton Lane, or getting embarrassed, we suggest that these investor-middlemen take a beat, and a deep breath.

Reconciling a ‘yes’ PAF proxy vote with the objective of maximizing investor wealth is very challenging. If these voters properly understood the proxy (near-impossible in our view), they would have known that it would cost their end-clients money. If they nonetheless voted in support, they would seem to have violated their own fiduciary responsibilities.

Is this not a problem either way?

Hamilton Lane now says, more than a year after the vote, that investors supported the changes ‘despite them knowing that that was going to result in some performance fees being paid to us.’

Really? Which investors, Hamilton Lane?

Initech, burning

Redemption…

Did you know? Do The Right Thing is not just a famous Spike Lee movie. It is also a Hamilton Lane core value.

Source: Hamilton Lane

And since 2015 it is a Brooklyn street, located not far from the Bed-Stuy New Beginnings Charter School….

Source: Brooklyn Paper

…..the school that might have received much more generous support from The Peter and Carmen Lucia Buck foundation had the PAF not managed to change its structure.

Could Hamilton Lane truly channel its core values and do the right thing? Apologize, reverse the PAF changes, and give PAF investors their money back? Aside from helping re-fund schools, scholarships, and children’s hospitals, turning off the cash machine would mean not having to worry about future profits that could also be seen as ill-gotten.

A fresh start. Leadership can go back on CNBC or Bloomberg without having to fear getting asked about “last year’s news.”

Are we optimistic? No, it would not be in our nature. But we’ve been surprised before.

Lawrence: Mustachioed, Mullet-Sporting Truth Teller

NOT INVESTMENT ADVICE. INVEST AT YOUR OWN RISK.

^[1] The old hurdle rate applied on a deal-by-deal basis; it would be calculated based on the return of each investment when realized. The new approach is based on the value of the entire fund. For simplicity, this comparison assumes that every investment’s realized return is 8%. In practice, some investments would fly, and others would be duds.

Links to Foundation Data:

American Library Association Alvin H Baum Family Fund Peter and Carmen Lucia Buck Foundation Kilrea Foundation Michael & Renee Minogue Foundation Nor’Easter Foundation Steedman Family Foundation Rhett Butler Charitable Foundation Bender West Foundation

In a sure sign of progress, Apollo CEO Marc Rowan spoke out against NAV-Squeezing on the company’s May conference call, saying it ‘makes no sense’ in an evergreen format.

Source: May 2026 Apollo (APO) Earnings Conference Call

Rowan noted that Apollo does NAV-Squeeze, but said that the overall revenue impact was less than $3 million in 2025. Comforting from the perspective of an Apollo shareholder……

One place It’s not a rounding error: Apollo’s secondary-focused S3 Private Markets Fund, a 40-Act fund launched in 2024.

Source: Apollo

Emblematic of the great alts democratization, S3 welcomes (almost) all comers: the minimum investment is just $2,500. The fund’s life has been short, but results have been--- unsurprisingly--- good, with an annualized return of 14.4% through May of 2026.

In accordance with accounting policies and defiance of common sense, the fund relies upon ASC 820’s ‘practical expedient’ approach:

Source: SEC

Seeking confirmation of NAV-Squeezing, we found that on March 31, 2025, S3 purchased an investment in Bloom I Co-Investment LP. On the same day, it rose in value by 47%. At the time, Bloom was the largest investment in the portfolio.

Aside: Taking their cue from plenty of other managers, Apollo didn’t make it easy to see the cost basis, but it’s there in the footnote:

The fund’s annual report called out the performance benefit:

We reached out to Apollo. We wondered about:

· Apollo’s plans to change its valuation approach for funds like the S3 fund;

· Whether Apollo thought retail investors, in particular might be damaged by the NAV-Squeezing that the company’s CEO clearly does not support.

· We also sought further context for Rowan’s plans to implement ‘common sense’ marks he mentioned in May.

We also reached out three of the S3 fund’s four independent directors with similar questions.

We did not receive a response. We did, however, get a new Substack subscriber, from Apollo’s comms team. Welcome to the AltView family, David!

Blooming Co-Investments

Why was Bloom I labeled as a co-investment, and not labeled as a company, or a limited partnership? Traditionally defined, a co-investment would be an investment in a specific company, say Acme Juice Co.

This generally happens when a private equity manager sees an opportunity to buy Acme Juice but can’t put up all of the capital required to do it. The co-investor takes on concentration risk but avoids fees.

Where did Bloom come from?

It was Springtime in Trenton

On a sunny, warm day in New Jersey^[1] in 2017, back when PE was still cool, The NJ Division of Investments, in collaboration with longtime partner Neuberger Berman, created the NB/NJ Custom Investment Fund III, LP and committed $200 million in Garden State bucks.

The NJ Division of Investments manages over $75 billion in funds in defined benefit plans for various Garden State pension systems: benefitting prison guards, police and firemen, teachers and the like. It is exactly the kind of organization, we are constantly reminded, which has long benefited from exposure to private equity. More on that later.

The new fund, which we will call the NB/NJ fund, had a co-investment focus. This tracks: we’ve written (and talked)

about Neuberger Berman’s suggestion that by using a co-investment strategy, PE returns might be nearly 3x that of equity markets! Wouldn’t that be awesome?

Among the co-investment fund’s eventual investments: a stake in a different co-investment fund: BC European Capital X-Aston Co-Investment (1) LP. The BC fund^[2] was registered in September 2019.

Fast forward to 2025. In January, a form D SEC filing memorializes the offering of securities of a pooled investment fund, Project Bloom Co-Invest Fund LP.

Just a few months later, a UK filing reported that a bit more than a fifth of the NB/NJ fund’s interest in BC European Capital had been transferred to Bloom I Co-Investment LP. Two other NB funds did the same.

So Annoying to have to make these disclosures!

Private Equity. So Simple!

Notably, the three NB funds, having only sold 22% of their BC holdings, remained owners.

On March 31, 2025, S3 bought the Bloom stake for $13.6 million. Sometime later the same day, Apollo’s S3 fund marked this stake at $19.9 million.

We wonder:

Did NJ/NB’s sale of Bloom at an apparently significant discount to NAV affect its opinion of the value of what remained (four fifths of the stake) in its portfolio?

Was this a distressed sale? What did all of these legal gymnastics cost? And are those costs reflected in the NJ’s pension returns?

And what were the underlying Bloom companies that got sold, anyway?

We’d really love to get answers to these questions. We reached out to Neuberger Berman, BC Capital, and the NJ Dept of Investment.

We did not get a response from any of these parties (or any new Substack subscribers, sadly).

Does it not make you wonder: If private equity is this confusing, illiquid, and expensive, is it still worth it?

Maybe, just maybe, it’s not worth it for the incremental $2,500 retail investor in Apollo’s S3 fund—the investor that just effectively paid NAV for Bloom. Still, surely it still makes sense for the old PE hands in the Garden State, right?

Stay tuned for part II to find out.

^[1] We have no idea if this is true.

^[2] BC Partners was a subsidiary of Barings Bank until it failed spectacularly in 1995. The executives of BC bought out the firm.

“If somebody interferes with your marketing, you’re not going to like that.” -David Swensen

In part one of Ernie’s Alts adventure, Ernie explored the world of Alts investing, without fear of being misled or sued.

Today we return to the real world, in which Ernie and his fellow investors’ earnest efforts are interfered with by the financial services industry.

The AltView’s take: the DOL’s proposed rule on Alternative Investments in 401(k)s is a poorly disguised marketing message from the financial services industry, aided and abetted by the U.S. government.

Here is SEC commissioner Mark Uyeda last November discussing Alts in 401(k)s:

SEC folks making speeches that say “Zero is not the answer” while the DOL says at the same time that its own proposed rule is “asset neutral”….that sends a mixed message, doesn’t it? Particularly when Alternative Investments are already allowed in 401(k) plans.

Industry players have seized upon our government’s provision of free[1] Alts marketing slogans. Here is Alts behemoth Icapital:

A particularly egregious misrepresentation of what the American masses can expect from Alts can comes from Franklin Templeton. Franklin Templeton recently quoted David Swensen, the late Yale endowment head and OG Alts investor:

Franklin Templeton suggests: accept illiquidity and reap the rewards.

Talk about out of context! Here is another quote from the same book (page 7, emphasis ours):

“While illiquid markets provide a much greater range of mispriced assets, private investors fare little better than their marketable security counterparts as the extraordinary fee burden typical of private equity funds almost guarantees delivery of disappointing risk-adjusted results. Active management strategies, whether in public markets or private, generally fail to meet investor expectations.”

This version of Swensen’s book was published seventeen years ago, and things have not gotten better for alts since.

Swensen also wrote (page 3), emphasis ours:

“Low-cost passive strategies, as outlined in Unconventional Success, suit the overwhelming number of individual and institutional investors without the time, resources, and ability to make high quality investment decisions.[2]”

Maybe Alt-free Ernie will be safe after all.

Let’s do one more Swensen quote, as a segue, this one from page 5.

“Nearly every aspect of funds management suffers from decisions made in the self-interest of the agents, at the expense of the best interest of the principals[3].”

The ‘self-interest’ bit underscores a key fact: Alts in 401ks represent a solution for investment managers, not investors:

The industry would like to solve this problem

Remember Ernie’s’ practically free stock-bond mix? On a per-dollar basis, swapping into an alt like private equity could generate 30x (conservatively) more revenue for an investment manager. While it might generate better returns for Ernie, the (financial) success of Ernie’s investment manager is locked in.

We do not propose a formula for quantifying agency conflict, but suggest that a plan-sponsor fiduciary that ignores the investment manager’s (and consultant’s) economics in this arrangement is not doing the fiduciary thing right.

This kind of conflict merits a review of Swensen’s advice, as well as at least a few paragraphs in an investment committee memo.

REMEMBER THIS. We are not viscerally anti-alt. We are pro-truth, and pro reality. Like 1. Ernie and 2. David Swensen, we can see reality and thus know that Alts are not easy.

Many people within the industry (and maybe within our regulatory agencies) don’t actually know this. Whether this reflects the Dunning-Kruger effect and/or the persuasive abilities of the alts-sellers, we can’t be sure. We are sure some of them know.

To successfully sell Alts, the industry needs to make it look easy, without seeming reckless. The industry does this in a variety of ways:

They co-sponsor ‘research’ that suggests that Alts Always Win as the Defined Contribution Alternatives Association (DCALTA) did in 2019.

Or produce a spurious report with dodgy math, like the Private Equity Growth Capital Council American Investment Council did, very clumsily arguing that the nation’s great DB plan returns got greater thanks to Private Equity;

Or collaborate, as Willis Towers Watson and the private equity lobby did, with esteemed institutions like Georgetown University to produce ‘research’ that says Alts are great.

If it works, you might get mentioned in a DOL letter in support of Alts (this one from 2020):

What sells better: Willis Towers Watson, or Georgetown University? Source: US Department of Labor

And in a full circle moment, your ‘research’ might get several mentions in the DOL draft rule itself!

17% more money at retirement, said Willis Towers Watson Georgetown. Source: US Department of Labor

Over the past few years, various investment managers and consultants (which are sometimes the same thing) have put out reports that seem targeted at softening up investors for the Alts-in-TDFs sales pitch.

A key approach is to simply assume (in the footnotes) that above-average managers are chosen. No explanation is given as to how or why this assumption makes sense. Remember Ernie’s reading about the bottom 5% of PE funds actually losing money? Just assume that outcome away.

We’ve written about this, documenting several examples of investment managers misleading, and sometimes absurd assumptions used in the service of arguing for alts in 401(k)s.

Among the highlights:

Neuberger Berman’s (illustrative, of course) capital market assumptions, which suggest a 15% return for private equity, nearly three times that of large cap stocks:

Source: Neuberger Berman

Prudential’s apparent ignorance of market dynamics and return history in its own assumptions for Real Estate returns (US REITS have a lower return expectation than Private Real Estate):

Source: Prudential

Or Blackrock’s touting of a .5% (50 basis point) per annum improvement in returns in Target Date Funds with Alts. Except that (among other things) that improvement ignores fees (38bp), meaning the mathematical argument that follows doesn’t track. Oops! Well at least it works for Blackrock, right?

Source: Wall Street Journal

Part III: Alternative Advice

In Part I, we saw how easily Ernie’s “No to Alts” decision flowed from evidence and logic.

In Part II, we contrasted Ernie’s idyll with the messy, cynical, sausage-making real world. A world in which investment managers seem to be solving their own problems, not those of the owners of capital.

Now, we offer a few additional thoughts.

Risk-Adjusted Returns=(On) Bullshit Alert!

The words risk-adjusted return appears 55 times in the DOL draft rule. This is because since raw returns are so often not better, some adjusting is required.

The heavy reliance on the risk-adjusted modifier is a tell.

The risk these returns are adjusted for is volatility. The industry wants to show how adding a new asset (in this case, alternatives) to a portfolio impacts both the portfolio’s return and its volatility.

Here is an efficient frontier chart with just stocks and bonds:

Risk, which is on the x-axis, is a misnomer, really. Here Risk means volatility, aka standard deviation. It only measures one dimension of risk; the degree to which the portfolio value fluctuates over time.

A better label might be portfolio volatility.

The elegance of the efficient frontier is that it shows that we ought to be able to get a better level of return, at the same level of portfolio volatility, by investing in a mix of stocks and bonds, as opposed to just bonds.

In this context, no one would invest in only bonds or anywhere on the black line; that would be inefficient. Anywhere along the red line would make sense.

About that volatility….

Most Alternative Investments are (big h/t Cliff Asness) volatility laundered.

If Alts investment managers have broad latitude to decide what their investments are worth (unlike stocks and bonds), and they know that investors dislike volatility (and they make 30-50x more money managing alts than boring stocks and bonds), should we expect any different?

Volatility Laundering on its own is bad. But managers use it to put their fat fingers on the efficient frontier scale. A decidedly non-robust application of modern portfolio theory, it is not surprising that the industry pushes this narrative; it’s (only slightly) more surprising that our DOL seems to agree.

In what may end up being the Peak Alt moment, Apollo recently shared the below chart:

Apollo suggests that by only investing in private markets, an investor’s risk (standard deviation) would have been nearly halved, while return increased dramatically when compared to a 60/40 portfolio (yes, funny how they left out the all-stock option).

In the footnotes to the chart, Apollo’s lawyers betray a deeper understanding:

“Nothing herein is intended to imply that investments in private markets are considered “conservative,” “safe,” “risk free,” or “risk averse.””

That tracks. And it is emblematic of how Alts are sold: the distance between the marketing and the disclosure is wide.

There is more.

Let’s say an Alts investor had money invested in Apollo’s Debt Solutions Fund.

Structured as a perpetual (evergreen) fund with quarterly opportunities offered for investors to redeem, the industry expects funds of this type to be widely used in 401(k)s.

This March, the fund saw redemption requests exceed the stated 5% quarterly limit. 11.2% of the fund’s dollars wanted out. For the remaining 6.2% of the fund that wanted to redeem, the price didn’t matter.

For this and similar funds, exits only happen four times a year. This does not make their prices definitionally fraudulent. The ruse: their (vol-laundered) prices get used alongside prices (for regular stocks and bonds) that reflect real money changing hands every trading day. This facilitates favorable risk adjusted returns.

Kind of cheeky, right?

You know what’s cheekier?

That despite these complications, Apollo’s (and the industry’s, and the DOL’s) “risk-adjusted return” framework is not impacted.

Alts Always Win.

Litigation

We get it. Ours is a litigious society. In fact, some people make a habit of filing frivolous lawsuits that go nowhere….

But has nothing good ever come from a lawsuit? Annoyingly, the draft rule ignores the prospect that litigation could ever benefit investors, in particular investors in plans that don’t get sued, which is the vast majority of plans.

Yes, litigation makes at least some plan sponsors’ costs higher. But investors clearly benefit from this focus (Aside: for sure, the industry can’t like it when Acme 401(k), fearing litigation, comes back every year asking for lower prices for its employee-investors).

If plan sponsors generally fear getting sued less, which seems an objective of the draft rule, they might pay less attention to their 401(k) plan costs.

This will benefit 1. Investment managers and 2. Employers while hurting 3. Employee-investors and 4. Lawyers.

It looks like the DOL is putting the interest of investment managers and employers ahead of employee-investors. How does that help retirement security?

The best evidence that fear of lawsuits help the average DC plan member may come from 403(b) plans, where ERISA generally does not play a role/fiduciary responsibility is lower, and costs WAY higher. 403(b) investors pay absurd investment management fees; it’s as if they are in a time warp:

Instead of making it harder for 401(k) investors to sue, could we maybe talk about bringing 403(b) plans under the ERISA umbrellla?

Benchmarks

We know A LOT about benchmarks and the games that are played. We need more benchmarks that we can be proud of, that are genuinely hard to beat, and that match the strategy being pursued.

We’ve observed sophisticated state pension plans, the ones that we are told DC plans should emulate, decide (after private asset returns started to look weak) to abandon benchmarks for private assets when presenting fund performance.

Another performance measure we’d fully avoid: IRR.

The number has so many flaws, but perhaps the worst is that it cannot be compared with the time-weighted returns we use for stock market indices. Many practitioners do not know this, which allows them to remain under the private equity spell.

Other players, like Cambridge Associates, know better, but this has not stopped them from making the IRR-TWR comparison (in an SEC presentation no less!).

Objectivity

The draft rule suggests that by hiring objective advisors (investment consultants) 401(k) plan sponsors doing their performative box ticking can safely avoid getting sued.

Finding objective advice is not as easy as the draft rule suggests.

Aside from benefiting financially and directly from helping clients invest in Alts, a bigger problem is that most large consultants themselves manage Alts. This makes it near impossible for them to develop objective capital markets assumptions. It’s motivated reasoning: their job depends on them ‘understanding’ that investing in Alts is a good idea.

Plan sponsors need to consider whether advice is really objective. The simple fact that a consultant discloses a conflict tells you they are not.

The Target Date Fund (TDF) Wrapper

The (industry) appeal of inserting Alts into TDFs is obvious. First, this is where the money is flowing.

In a TDF, it will be easier for everyone to ignore underperforming Alts. Allocations will be low enough so that problems will not be as obvious. This suits consultants and asset managers just fine, and maybe Plan Sponsors, too. The same cannot be said for employee-investors.

Plan sponsors will find it easier to kick the can, particularly because (sadly) acknowledging a problem just leads to more work. Undoing Alts in a TDF will not be easy.

The benefit from Alts investing for industry vs. investors seem WAY out of whack.

Even if we assume that Alt investments work wonderfully, most of the spoils would go to industry. The chart below uses return figures from Georgetown and a (conservative) 3% expense ratio for a 10% Alts allocation as described here.

If instead, middling historical returns continue, the split will be far more skewed to industry. It is virtually certain that some investors will be worse off. Employers thinking about putting alts in their plans will want to consider this before they do anything.

[1] The AltView cannot be sure that the slogan was in fact free….

[2] From Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment, 2009

He used to do surgery

For girls in the eighties

But gravity always wins

Fake Plastic Trees, Radiohead

Hamilton Lane’s Global Private Secondary Fund was launched in September 2025.

It got off to a REALLY GREAT start.

According to the fund launch Press Release, it raised nearly twice its targeted amount. Great for HLNE shareholders...

…and then started with a bang! A 10% return in month one. Sounds good for the fund’s investors too.

Source: Hamilton Lane marketing communication

And wouldn’t you know it, great, and steady, returns continue. Every. Single. Month.

After launching with $365 million, the fund manages $653 million as of the end of April, and is up 27% since inception eight short months ago. Strong performance results in higher management and performance fees (12.5% with a 5% hurdle), and seems likely to result in inflows.

Since Secondary is in the name, we needn’t wonder how they did this. Buy stuff, mark it at a higher price. Do it diligently, and with care, of course. But definitely mark that stuff up to NAV:

Source: Hamilton Lane Global Private Secondary Fund PPM

We won’t call it NAV Squeezing. Hamilton Lane seems to prefer “NAV-uplifts” even if this sounds like an aesthetic procedure.

Which brings us to the Radiohead reference. Fake Plastic Trees, according to the fine folks at Reddit, describes a “suffocating manufactured existence where people obsess over surface level appearances rather than authentic reality.”

Might this fund’s performance eventually be revealed as superficial? And what might happen if such a fund were to find itself as seller instead of buyer?

Here is Hamilton Lane’s co-CEO (emphasis ours):

“What that (secondary market transaction) data shows is that from 2015 to 2025, average discounts by year purchased have ranged from 7% to 19%....That is the cost of an illiquid asset trading in an inefficient market.”

-Erik Hirsch, Q4 Hamilton Lane 2026 conference call, discussing Secondary PE transaction discounts

The PPM for the fund also explains the ‘surface level appearances’ risk:

Gravity might win. It’s not like they didn’t tell you.

They just didn’t tell you in the marketing part.

Questions investors might consider:

1. Do I exist in a manufactured, marketing existence, or the real world, one in in which I am guided by the Private Placement Memorandum?

2. At what point does the gap between a fund’s marketing pitch and its legal disclosures become so wide that the firm offering said fund loses credibility?

NOT INVESTMENT ADVICE

You figure adding some Private Equity to 401(k) plans would go a long way; the pool of capital is large, $10 trillion-plus.

But here’s the thing. If the AIC’s members make the argument directly, it won’t be as credible.

Here is an idea! You find a place that promotes, or at least seems to promote, the vigorous pursuit of truth. They can share your message. That might work better!

How about Georgetown University?

Fortunately for you, Georgetown has already has a history of producing *research* that says investing in Alternatives (including Private equity) is a really great idea. Going back to 2018 :

Of course, Georgetown didn’t produce this research on its own; it had help from a company that knows a lot about Alternatives:

Willis Towers Watson were themselves responsible for tens of billions of dollars in private equity investment. This would appear to position them poorly for the pursuit of truth in this area.

No matter!

Anyway, as a AIC member, you could see that the 2018 report worked. It later gets cited in an official Department of Labor information letter.

Not only that: the DOL helpfully leaves out the ‘in conjunction with’ bit:

You figure a collab with Georgetown will work: they seem to think your way already. You write them a check, and suggest the involvement of another firm, CEM Benchmarking to put together some numbers.

Naturally, you give Georgetown total freedom to publish whatever it wants:

It turns out, the research shows that investing in Private Equity is a really good idea!

This particular report is not quoted in the DOL’s draft rule on Alts in 401(k)s, but plenty of the other Georgetown work is (and the collaborators’ names are always left out. So great).

Then, you can cite this and other *Georgetown* (not WTW, not CEM Benchmarking, and definitely not peer-reviewed, in the pursuit of truth- style research) ad infinitum!

Another benefit of running research through a different organization: you don’t have to deal with pesky (but very sensible!) emails from wee Substackers like The AltView, asking questions about your methodology.

What do they know anyway?

Happy strong retirement everybody!

The AltView on Georgetown+WTW. This article, explores the madness of the Georgetown’s-WTW’s assumptions for alts returns.

It is also discussed (audio) on the Skeptic’s Guide to Investment Management, here.

Part I: An Experiment

Close your eyes and relax.

Imagine a world in which earnest, objective investor-people simply tried to do the right thing for the money entrusted to them. No litigation, no conflicts of interest.

In this world the word fiduciary might not exist. Everyone would trust everyone; no reason not to. Bringing up fiduciary concepts would confuse, like asking a fish “what is water?”

Still, it would not mean everyone would invest the same way.

Let’s imagine a focused, investor trying to navigate this world, responsible for someone else’s money.

We will call him Ernie.

Ernie knows about stocks and bonds, and the money entrusted to him is for now (passively) invested in those two things.

Below are two key questions for Ernie to answer before he does anything:

1. How do I expect different types of investments (aka asset classes, like stocks or bonds), to perform in the future?

2. Do I have skill (or can I find someone else that I decide has skills) that might get me future returns that are better than the average for any of these asset classes?

The answers will help Ernie decide:

1. Whether and how much to invest in each asset class, and

2. Whether picking individual securities (and avoiding others) within an asset class was likely to help results.

Ernie’s starting position will likely be to remain in the passively invested mix of stocks and bonds.

Why? Both asset classes have clearly demonstrated the ability to provide long-term returns in excess of inflation. Since they don’t always behave the same way, they together offer some diversification benefit.

What’s more, investing in stocks and bonds has in recent decades only gotten easier. Today’s investors get the benefit of:

· The existence of virtually free passive products[1], and

· An enormous pile of evidence showing that active investment management generally fails.[2]

Also: because the securities that comprise these asset classes are easily investible, one can gain exposure to the whole thing, if that’s your jam.[3]

But clearly, Ernie would need to do better than that.

To develop a considered view of the future, Ernie would need a rigorous, logical framework. Perhaps he’d buy a book like Expected Returns ($49.50, Amazon) by the leading authority on the topic.

For equities, Ernie’s view might look something like the table below. He wouldn’t have to do all of this himself; in this world he’d be able to find a variety of sources, all objective:[4]

Source: AQR Capital Market Assumptions

Ernie would update these (long-term) assumptions every year, taking note of how markets evolve. The numbers (especially the differences and the changes in the differences between asset classes) would be a good prompt to act.

The wrinkle

Of course, stocks and bonds are not the only available investments in the investing universe. Enter Alternatives (or, if you like, Private Investments), include Private Equity, Private Real Estate, Venture Capital, and Hedge Funds, among others.

Ernie knows that these kinds of investments cost more, and can see that this bothers some people, including certain politicians. But Ernie knows his job: to do the best thing with the money. If someone else gets rich (or richer) because he invests with them, he does not care.

And dismissing these kinds of investments for what seem like the wrong reasons seems unsatisfying. Ernie would do his research.

Being a ‘first principles’ kind of guy, the first question Ernie would ask would NOT be (for example) “Which private equity fund will I buy.” That might come later. Instead, he’d ask, for example:

Why would I want to invest in private equity?

Then he would approach each type of Alternative Investment the same way as he did stocks and bonds; consider the underpinnings of each asset class. He would use historical returns as a starting point to form his own expectation about the future.

Ernie would note the following about various alternative asset class returns:

Private Real Estate

Ernie would see that Private Real Estate returns have notably lagged those of publicly traded real estate, despite being hard to sell (aka illiquid). This might have to do with their costs being higher. He also could see that that publicly traded real estate vehicles currently offer a notably higher return prospect than suggested by private real estate valuations.

He’d note other research has shown that private real estate investors have been in effect throwing money out the window.

For Ernie this would lead to a clear and easy conclusion: he was not going to bother with private real estate. At least not right now. If he did, he would be saying that he, the responsible decision-maker, had some special capability, or could hire someone that did.

Private Equity

Ernie reviewed (peer-reviewed, academic) research on Private Equity returns. It showed that results of the typical private equity fund showed results that were about the same as the S&P 500 from 1980-2001, during a time when the industry benefited from a gale force tailwind.

Another research report that showed middling results….

And, in the spirit of openness to all (peer-reviewed) research, yet another that showed robust performance.

What would be beyond dispute: there is still (somehow) an ongoing debate about what private equity performance has actually been.

Ernie would absorb all of this, and note that in recent years, PE performance has been decidedly poor compared with public equities (Who knows? Maybe that bodes well for the future?) and then get to work developing his own expectations.

He’d of course refer again to authoritative research on the subject; research used by the alternative investment industry’s leading credentialing organization:

and try to apply current market conditions to make his forecast.

After that, he would conclude that deciding to invest money in Private Equity (for the typical investor, which he was pretty sure was him) was not worth the bother. Why? Because on average, the prices PE firms would pay to buy stuff, combined with the interest rate paid on the debt used to buy said stuff, reveals some very challenging math.

Another thing he’d note is that while the very good funds had satisfactory results, the really bad funds were REALLY REALLY BAD; with the bottom 5% of funds actually losing money for investors, as in, not even making a dollar of profit.

Source: Apollo

Ernie had read research on how many people that know very little think they know much more. The Dunning-Kruger something or other?

Maybe, thought Ernie, some Private Equity investors think their results are good when they aren’t?

Given that he’d just gotten started, how confident could Ernie be that he’d avoid such awful results? Or even that he could responsibly hire someone that could get good results? Hard pass on Private Equity, he decided.

Venture Capital

Ernie checked out historical returns for Venture Capital, whereby money is invested in newer, as yet unproven companies, but with large market opportunities. While some funds performed great, he could see that the (typical) historical result for a Venture Capital fund was worse than for Private Equity. The very best funds showed very good performance, while some funds really bombed.

Could Ernie know in advance which funds were going to perform better? And if he knew, would he be able to invest in those funds?

He found an authoritative book written by a fellow that seemed to know a lot about Alternatives. He wrote that the best VC firms, whose funds had historically produced the best results, didn’t take new investors.[4]

This feels the same as Private Equity, thought Ernie. Maybe someday I’ll know enough or have the right connections. I certainly will keep trying.

Private Debt

Ernie could not ignore research that shows that Private Debt returns have typically not been better than those of the Bloomberg High Yield index.

He would also recognize that the assets invested in this area have grown significantly since 2008 (in fact it was the post financial crisis reforms that triggered the growth), and fantastically over the past several years.

One academic report he read said that private debt issuers were doing so because they were not creditworthy enough to borrow from a bank. This would mean that higher returns from Private credit were not a hack, they just meant investors were taking on more risk.

He wondered (and noted that others have too) that since these investments had not endured a truly difficult period, how valuable was the data? Might the recent growth mean that future returns will be more muted? That had happened before in other asset classes. He could not be sure.

Hedge Funds

“What is a hedge fund, anyway?” …thought Ernie. Ernie had heard about some hedge funds promoting their product as being non-correlated with the stock market, while at the same time investing in a bunch of stocks. This didn’t seem to make sense.

Maybe one can’t generalize, he mused.

There was one famous hedge fund, Medallion, which showed remarkable returns. Ernie didn’t know how, truly, even after he bought and read a very good book about it.

He noted that not only had that fund not taken new investors since 2005 (similar to the best venture capital managers), but the fund was returning money to its investors. Unlike private debt, perhaps, the opportunity set was limited.

Other famous funds with good returns like Citadel seemed to do similar things.

Even if hedge funds were very ‘low risk’ (he was not sure if that was true, or what exactly was meant by ‘low risk’), would the typical return be interesting?

He read a paper that said the 15-year return for hedge funds was just 4.0% per year. Could it really be that low?

Well, thought Ernie, I cannot invest in Medallion. But 4% compared with a mix of stocks and bonds seems unhelpful. I’ll remain open to ideas, but this does not seem worth it right now.

An informed “No”

With all of this in mind, investors like Ernie might sensibly decide, based simply on expected returns (ignoring risk for the moment) that none of the aforementioned alternative investments are worth doing. If most of the investors don’t get returns that justify it, why not just stick to liquid, flexible, simple stuff?

Remember: Investors like Ernie would not be basing their decision on fear; for example fear of getting sued for a bad investment outcome— in Ernie’s world there is no suing. Rather, his decision would be grounded in evidence, logic, and humility.

In part II, Ernie rejoins the real world.

[1] Vanguard’s 500 index fund charged about .4% per annum in 1976. Today the fee is one tenth that amount! Vanguard Fee trend

[2] See also The Arithmetic of Active Management.

[3] Worried about index concentration? Fine. Invest in a low-cost, equal weighted ETF.

[4] Swenson, Pioneering Portfolio Management, page 239: “None of the top-tier partnerships currently accept new investors…new participants in the venture market must consider the return prospects of venture firms available for new-money investment.” Also: “even at the point of maximum return for venture capital, investors in plain-old large capitalization common stocks enjoyed higher returns with lower risks.” Page 238.

The AltView is honored to share this guest post from a friend of the AltView, Erik Lie.Erik is the head of the finance department at the University of Iowa and author of Catching Cheats, a book that uses real-world examples to help readers detect fraud. Importantly, Erik is also an Iowa resident with family members whose retirement security depends on IPERS.

Read on!

_________________________________________

Tim has spent the better part of a year picking apart what he argues is broken inside the Iowa Public Employees’ Retirement System:

· The benchmarking that lets a third of the portfolio measure itself against itself.

· The “passive alpha” you get from benchmarking against an index that pays a withholding tax you don’t.

· The hedge funds hiding in the cash allocation under the LARS label, which then lost 20% of their value in FY 2025.

· The CEM Benchmarking report that, for the seventeenth consecutive year, pronounces IPERS “the lowest cost” based on its methodology (which excludes most of what the fund actually pays).

The case is made. The Polk County district court agrees it’s not frivolous; the state’s motion to dismiss Rich Wiggins’s complaint was denied in April, and discovery is now underway. The CEO and Chief Benefits Officer have departed. The Financial Times picked up the story on May 9.

So now what?

The Investment Board has announced a nationwide search for a new CEO. That hiring decision is when the structural questions get answered. For 424,000 Iowans whose retirement security depends on this fund, the question isn’t whether IPERS needs a new leader, but rather what kind, and under what mandate.

The benchmark is the fund

Tim covered this across the Passive Alpha trilogy. The short version: IPERS’s policy benchmark is a custom blend weighted to its own asset allocation, and the private asset sleeves are benchmarked to themselves. The FY2024 disclosure shows private equity returned 6.33% against a private equity benchmark of 6.33%; real assets at −8.37% against a benchmark of −8.37%; private credit at 8.52% against a benchmark of 8.52%. Three matches to two decimal places — by design!

As Tim put it in Part 2: “IPERS’ private investments could all go to zero and its overall benchmark results would be no worse for wear.”

The FT pulled the same Wiggins quote: “a huge swath of the portfolio is benchmarked directly to itself so it is impossible to underperform.” An IPERS spokesperson told the FT the methodology was intended to “separate out excess or tracking error that is intentional and unintentional.” That’s a fair description of what the benchmark does. It is not a description of an investment performance measurement system.

What it isn’t doing shows up against a different yardstick. You don’t have to take an outside critic’s word for it; IPERS publishes the comparison itself.

From IPERS’s own FY2025 Annual Summary: over three years, IPERS returned 7.16% against a peer median of 8.06%. Over five years, 8.87% against 9.49%. Over ten years, 6.79% against 7.64%. In each window, IPERS beat the benchmark it built around its own portfolio while trailing the median large U.S. public pension. The 20-year window is the only horizon where IPERS leads its peers. Every shorter window shows the same pattern.

Costs are not what IPERS says they are

For seventeen years, CEM Benchmarking (paid by IPERS) has reported that IPERS is the lowest-cost peer in its comparison group. IPERS’s published investment costs are 13.7 basis points of average assets in 2025.

At the December 2025 Investment Board meeting, senior IPERS investment officer Keith Scholten told the board that figure would rise to approximately 70 basis points if estimated incentive fees and carried interest for private equity and private credit managers were included. If those higher estimates are correct, the implied dollar difference is hundreds of millions annually, though not fully visible in standard disclosures.

The risk function: an unprecedented vacancy

The most senior person at IPERS with an independent investment risk mandate has been gone for more than three years. The seat is still empty.

Among the twenty largest U.S. public pension funds, a multi-year vacancy in a senior investment-risk role is highly unusual. CalPERS established a Chief Risk Officer in 2010, with reporting lines to both the CEO and the Board’s Risk Committee. NYSTRS has a CRO at the executive-staff level, peer to the Executive Director, General Counsel, and CFO. CalSTRS runs its risk function through a Total Fund Management Risk team and an “Audits and Risk Management” Board committee. Texas TRS, Wisconsin Investment Board, Florida SBA — every major peer has a dedicated, independent risk function with a reporting line to a governing board.

The governance principle is structural: the CRO reports to the CEO and the Board, never solely to the CIO. A risk officer who reports only to the person taking the risk has no authority to constrain that person. The check is built into the reporting line. By leaving the seat vacant and letting the CIO narrate the risk to the board, IPERS has removed the check from the balance.

Tim has been making a version of this point since October. The Wilshire Plan Sponsor Scattergram he reproduced in Part Trois shows IPERS as the lonely dot at near-zero tracking error while every other public plan in its peer group sits in a normal range. Unfortunately, this isn’t due to superior risk management, but rather because everyone else is measuring something real.

Wiggins was hired in 2022 with the explicit charge of ensuring IPERS “did not become the next Pennsylvania Public School Employees’ Retirement System” — the 2021 scandal in which an inflated investment return triggered an FBI investigation and forced more than 100,000 school employees to pay higher contributions. The FT reported that Wiggins was “expected to monitor Lakshminarayanan, the pension fund’s chief investment officer — even though the same official had the power to fire him.” After raising concerns, he was terminated for being a “bad fit.” His suit alleges retaliation, and the Polk County court found the state’s arguments relied in part on “arguable conclusions and leaps of logic.”

The governance vacuum

The FT identifies the structural problem. Iowa lawmakers made IPERS an independent agency more than two decades ago but did not establish a governing board with authority over the CEO. The CEO is appointed by the Governor and reports through the executive branch.

Leon Schwartz, a former Chief Operating Officer at IPERS, told the FT: “Compared to most public pension systems, IPERS has a quite weak governance structure. IPERS’ current problem is simply a symptom that came up and was able to fester more because of weak governance.”

Zachary Christensen of the Reason Foundation told the FT that Iowa ranks 33rd in his organization’s pension investment risk measure and “among the riskier US state retirement systems.” A high-risk portfolio with no governing board, no investment-embedded risk officer, a state auditor whose investigative authority was curtailed in 2023, and a legislative committee that declined to act in 2026 is not a governance architecture. It’s the absence of one.

For practical purposes, the only oversight mechanism in motion at IPERS is one fired employee’s wrongful-termination lawsuit.

What the search committee should be looking for

The temptation after a turbulent period is to optimize for stability, i.e., calm the staff, reassure the existing structure, and avoid further controversy.

The harder choice is a CEO with a mandate to:

· Reconstruct the policy benchmark using investable public-market alternatives, with private assets measured against transparent public-market equivalents.

· Publish total investment costs at the line-item level with clear reconciliation between reported and estimated figures.

· Hire a Chief Risk Officer reporting to both the Investment Board and the CEO.

· Support the creation of a governing board with authority to hire and fire the CEO.

· Support the creation of an Iowa Office of Inspector General with subpoena power and public reporting authority over IPERS.

The choice

The board can hire a CEO who defends the current architecture, fights transparency requests, and preserves the system that produced the past few years. The benchmark will keep getting beaten. The costs will keep being reported as “the lowest.” The risk officer seat will remain empty.

Or the board can hire a CEO whose mandate is the opposite: to dismantle the architecture of self-validation and rebuild the system on standards that 424,000 Iowans can actually trust.

The Passive Alpha band is breaking up. The question now is what kind of music plays next.

1. People (like the AltView, maybe?) don’t understand how secondaries work. Hmm.

2. HL’s Private Asset Fund was changed at the request of PAF investors, who wanted a different structure. Really? Can we talk to these investors?

What we don’t understand: how investors would knowingly vote to pay millions and millions in incremental fees. The AltView was able to figure it out. We think the voting investors didn’t know. Because if the PAF investors did know, those investors would have their own (fiduciary) problem.

Get more from TheAltView in the Substack app

Available for iOS and Android

Get the app

Last fall, we mused that if the team from Iowa Public Employees Retirement System (IPERS) formed a band, it would be called Passive Alpha; a nod to the institution’s overly engineered, win-by-breathing approach to measuring performance and risk management.

A few weeks back, we got news that IPERS’ CEO has resigned.

It looks like the band might be breaking up.

In our view, this might not be a bad thing for accountability-seeking Iowans.

According to IPERS, a nationwide search for a new leader has commenced.

We wonder how things might look if the search committee were headed by a frustrated, investment-savvy Iowan—one fully committed to maintaining IPERS’ promises to its members, but seeking more transparency, simplicity, and accountability.

Below are some issues that such a person might cover during interviews.

Overall Benchmarking

IPERS results’ have beaten IPERS’ chosen policy benchmark for each of the past five years. Check it:

At the same time, IPERS’ results have trailed a 70/30 stock/bond mix (generous given IPERS’ risk profile) mix of stocks and bonds over the 1, 3, and 5 years ended December 2025.

Question 1: Do you think IPERS’ policy benchmark is appropriate given the way IPERS invests?

________________________________

Canada (and other) passive alpha sources

IPERS has for over 20 years invested in a passive Canadian equity product. Because the product is benchmarked to an index that assumes significant tax withholding on foreign dividends when in fact there is no withholding, IPERS shows benchmark-beating returns (aka alpha) from this investment. Year-in, year-out, it seems. A similar tailwind appears to exist for all of IPERS’ non-US equity investments.

Question 2: Do you consider this Alpha/outperformance?

________________________________________

Swedish Brothers

IPERS’ LARS (Liquid Absolute Return Strategies) program is benchmarked to short-term interest rates, but also has the objective of adding incremental return to the fund. This suggests a t-bill is the wrong bogey:

Question 3: Given LARS’ loss of 20% of its value in FY 2025,

Would you expect to continue running this strategy?

If you did, would you continue to benchmark the strategy to cash?

Also, might you consider renaming it? Perhaps SVEN (Significant Volatility Expected Normally) might make more sense?

_______________________________________________________

On tracking error ‘success’

Regarding IPERS’ self-benchmarking practices; recent (excellent!) FT reporting by Sun Yu noted a comment from an IPERS spokesperson:

IPERS, with Wilshire’s help, has in the past presented the below chart (with bubble quote courtesy of the AltView):

Question 4: Does the above chart tell you anything about IPERS relative risk (as measured by IPERS’ lower tracking error vs. other public plans)? Alternatively, could it be that IPERS’ decision to self-benchmark was the real ‘achievement’ here?

__________________________________

Costs

IPERS consistently reports, thanks to a report that IPERS paid for, for the 17^th year in a row, that its investment costs are not just low—THE LOWEST:

Except that per the FT, during the December 2025 investment board meeting, IPERS’ costs were framed very differently. If estimated incentive fees and carried interest costs were included, investment costs would rise by 5x (side note: we are expected to believe that 401(k) plans will be able to account for these costs while big DB plans seemingly can’t?):

Question 5: Does continuing to pay CEM Benchmarking for reports that say fees are low -when they are not-seem like a good use of resources?

______________________________________

Wrapping up

If hired as CEO, do you think you would:

A. Sustain IPERS’ uninterrupted ‘winning’ streak, doing stuff like adding alpha using passive investments year-in and year-out, while suggesting risk and costs are lower than they really are, or:

B. Might you take a different approach, including:

· The full implementation of appropriate benchmarks; benchmarks Iowans can be proud of;

· The abolishment of investment programs named after Swedish men, or at a minimum, changing LARS to SVEN;

· The end of arrangements whereby IPERS pays firms to say IPERS’ costs are low when they aren’t?

Note: If you take the second path, you and your team will be more likely to have results that seem weak-or at least weaker than would be the case under the current “IPERS always wins” regime.

This will require a board that is prepared to defend investment results when appropriate.

The benefit: the fund’s standards will be higher, the truth will be honored and IPERS and Iowans should be better served as a result.

Does that sound like an interesting challenge?

Resources:

AltView IPERS coverage:

FT Article:

https://www.ft.com/content/ab28b1fe-f213-4f20-830f-617359892ac3?syn-25a6b1a6=1I

IPERS 2025 ACFR:

https://www.legis.iowa.gov/docs/publications/DF/1594667.pdf

IPERS 2025 December Report

https://ipers.org/media/428/download?inline

IPERS board minutes and agendas

https://ipers.org/about/governance/investment-board/investment-board-agendas-materials-minutes

If you are looking for a secure, long-term role in the legal department of an asset manager, you might want to steer clear of Hamilton Lane. We can’t be sure, but the environment looks shaky.

It’s been nearly a year since the WSJ’s Jason Zweig published on Hamilton Lane’s Private Assets Fund (PAF) mischief.

Zweig highlighted that PAF investors had approved fund changes that cost them $58 million. Where did that money go? Hamilton Lane, Inc.

This February, with the AltView’s help, the FT wrote about it, too:

Robin Wigglesworth’s piece might have been even more comprehensive, but Hamilton Lane did not accept his invitation for an interview.

You’ll pay more, but it’s still good for you?

Certain rules apply when making changes to an SEC-registered fund, as Hamilton Lane did.

The critical issue is not whether or not crappy (in our view) funds are allowed to exist. Clearly, they are.

The issue is what Hamilton Lane had to do in order to make it’s fund crappier (again, your view may differ), and what those actions reveal.

There needed to be a shareholder vote. In advance of the PAF shareholder vote, a preliminary proxy explaining the changes was filed with the Securities and Exchange Commission. A few weeks later, on February 6, 2025, a definitive proxy was filed.

Ever since, it lives on the SEC’s servers, available to all interested readers.

The proxy explains that the Fund’s Board, including its Independent Trustees, had considered and unanimously approved the proposed changes to the fund’s fee structure.

From the proxy:

“the Board concluded it would be in the best interest of the fund and its Shareholders to approve the New Investment Management Agreement and recommend that Fund shareholders approve the same”

Lower, mollifying numbers feature prominently. Example: a 1.4% proposed management fee instead of 1.5%.

But the guts of the proxy confuses. Example: perplexing “and/or” proxy language:

Behold: the 14^th of 20 instances of and/or language

Through great effort, the AltView was able to understand it. And also to understand that it was decidedly not good for investors. At least not financially good.

Exactly one year ago, after the PAF shareholder approval but before the initial costs to PAF investors were quantified, we emailed Hamilton Lane to check on our $40-$45 million cost estimate:

This was around the time that Hamilton Lane stopped responding to AltView emails.

Our estimate of incentive fees paid was too low by about $15 million, as the fund continued to rake in new assets and show good performance in early 2025.

To date, we conservatively estimate the total incremental costs to PAF investors to be well north of $100 million. The exact figure would be easy for Hamilton Lane to calculate and share.

Someone could ask them on next week’s conference call, maybe.

Someone had to write the proxy

Since we discovered the Proxy’s true meaning last spring, we’ve wondered:

Who would write this?

Why? Properly understood, it betrays a deep understanding of the fund’s proposed changes. An understanding that conflicts with the recommendation of the fund’s board.

If the proxy’s author was not the fund’s Secretary, the Secretary would typically have oversight responsibilities. The Secretary generally also insures that the independent (i.e. non-Hamilton Lane employed) members of the fund’s board of directors have the information they need to do their job.

Those independent directors’ duty is NOT to Hamilton Lane, but to the investors in Hamilton Lane’s PAF. From ICI:

The PAF’s secretary during the proxy vote period had worked at Hamilton Lane for more than a decade before departing last July, less than two months after the WSJ article.

This person, who we will call Secretary #1 could have been the source of the proxy’s “and/or” language, but in any event should have had oversight responsibility….for a proxy that contains ‘comparisons’ that seem really contorted to us. Comparisons that suggest to the reader (if there even were any outside of the AltView) that all of this is good for investors.

Based on SEC filings, Secretary #1 was replaced last July by Secretary #2.

Secretary #2 joined Hamilton Lane in 2018.

Last Friday, an SEC filing noted that Secretary #2 of the PAF has resigned from his role. His name no longer appears on Hamilton Lane’s website.

Could both departures be a coincidence? Of course. Still, we’re curious to know more about the genesis of the proxy language, and think others (especially investors in the PAF) should be too.

We reached out to both Secretaries #1 and #2 and asked them about their role in the proxy preparation.

We also reached out to Hamilton Lane to confirm Secretary #2’s employment status.

We did not get a response to any of our inquiries.

NOT INVESTMENT ADVICE

March 2025 Proxy:

https://www.sec.gov/Archives/edgar/data/1803491/000121390025010959/ea0230203-01_def14a.htm.

June 2025 WSJ article

https://www.wsj.com/finance/investing/hamilton-lane-private-assets-alternative-funds-8862f32e?mod=author_content_page_1_pos_1

February 2026 FT article

https://www.ft.com/content/a7d54b3b-fa9a-4385-9ab8-30b905f75cb1

May 2026 SEC filing:

https://www.sec.gov/Archives/edgar/data/1803491/000121390026053944/ea0289729-02_424b3.htm

July 29, 2025 Form 3 filing:

https://www.sec.gov/Archives/edgar/data/1803491/000121390025068756/xslF345X02/ownership.xml

ICI on Registered Investment Companies’ operation

https://www.ici.org/system/files/2023-06/us-reg-funds-principles.pdf

We haven’t written enough about private real estate—too distracted by other stuff.

That’s unfortunate because:

1. It’s a big market.

Source: Franklin Templeton

2. And Returns have lagged. Over the long term, private real estate has trailed liquid, lower-cost, publicly traded REITs. We wrote about it:

Still, confoundingly, private RE remains a default option for many institutions—until you pause and reflect.

Higher fees reduce returns—and pay for seriously good propaganda.

And if you’re a consultant who recommended private real estate, you’re strongly incentivized to accept that propaganda—especially when your clients can’t sell the funds anyway.

How realistic is it for your firm to admit defeat, punt, and just buy public REITs?

C’mon. Simple, liquid, and low cost is for LOSERS!

Like the Norwegians. Or the Finns. What could they possibly know about investing?

Also: “public REITs guy”—does that sound like a full-time job?

It Rhymes with Private Credit

Public-market prices for some alternative-investment products are flashing a discomfiting truth—as seen in the WSJ, NYT, and noted by AltView friend Mark Higgins.

For most institutional dollars in private credit or private real estate, these headlines matter little: they can’t exit anyway given the fund structure.

Some can exploit the gap by buying similar assets in fully liquid structures—see Blackstone’s private BCRED versus tradable private BDCs.

You don’t need to know the full scope of any “private credit crisis.” The question is simpler: would you rather own cheaper credits in a liquid vehicle, or very similar credits that are more expensive and potentially locked up?

Party like its 2007, or 2021

This isn’t the first time. It feels like everyone should know that. Do they?

Similar arbitrage-y opportunities have shown up in real estate funds, too. A notable example was Blackstone’s BREIT (2022), though there are earlier ones: TIAA’s retail real estate account imposed restrictions after GFC outflows. And Starwood, of course.

Warmer, Fuzzier Vibes?

Each Real Estate property is unique.

Sometimes people understand this too well. Once you’re in a fund, you’ll repeatedly hear about the unique attributes of “your” properties, and you may get captured by the story (see: high-fee propaganda, above). It’s an appeal to emotion that fails with private debt.

An indoctrinated institutional RE investor might confidently muse:

It may be true that publicly traded REITs have outperformed. But we are in a differentiated portfolio blah blah blah. Ours will perform better.

And if not, it’s less risky.

And if it’s not less risky, well, we value our partnership….

Is my “differentiated” private real estate portfolio really that special? It’s a question every investor should ask—especially if you’re in a vehicle that might let you out so you can buy something meaningfully cheaper.

For anyone who wants to put numbers on it, AltView has gathered some—with help from an anonymous friend.

You might even call it evidence.

Private Real Estate Valuation 101

Business valuation outside real estate usually speaks in multiples—most basically, the price/earnings ratio.

If a stock is $50 and earns $2.50 per share, its P/E is 50/2.50 = 20×.

In real estate, the analogue is the capitalization rate, or cap rate: the unlevered yield of a property, calculated as:

Net Operating Income (NOI)/Asset Value

Using the stock example: $2.50/$50 = 5%—a 5% cap rate.

The cap rate is the expected unlevered yield of a real estate asset—so lower cap rates imply higher valuations.

Cap Rates: A Historical comparison for Public and Private Apartments

NCREIF’s Property Index (NPI) tracks private (not publicly traded) apartments.

We can compare those to publicly-traded apartment REITs tracked by NAREIT:

1. NPI: Private Assets vs.

2. NAREIT: Public Assets

For public assets, we annualize trailing-quarter NOI and divide by the equity market valuation (i.e., an annualized current income return).

For this comparison, we use:

1. NPI/Private Markets: $241 billion in apartments owned as of Q4 2025. This was accessed via the NPI database.

2. NAREIT/Public Markets: $113 billion in publicly traded REITS owned February 2026, per NAREIT’s REITWatch publication.

The chart also includes Baa bond yields (moderately risky bonds) from the FRED database.

Remember: lower cap rates= higher real estate valuations.

Baa bond yields and implied cap rates for publicly traded apartment REITs move closely together.

You can see it in the GFC—when both spiked—and again in 2022, when both rose in tandem.

One anomaly: implied apartment cap rates fell well below Baa yields in 2006–07—now widely viewed as the peak of the CRE bubble.

Private-market (NPI) apartment cap rates roughly tracked REIT implied cap rates from 2000 into early 2007, and again from 2010–2019.

But when Baa yields and REIT implied cap rates jumped in 2007 and 2022, NPI cap rates barely moved. The same pattern showed up in 2020: COVID widened the gap versus Baa yields, yet NPI cap rates were essentially unchanged.

During the GFC, it took 13 quarters for public/private cap-rate parity to return. This time it’s 16 quarters and counting, with a gap around 2%. That sounds small, but it creates large valuation differences, as we’ll show.

All NPI Apartments Cap Rate Parity

NPI tracks ~2,300 privately owned U.S. apartments worth $241B. They generated $10.5B of annualized NOI in Q4 2025, implying a 4.4% cap rate.

By comparison, the implied cap rate for apartments in publicly traded REITs was 6.2%.

If you marked NPI-tracked (private) properties to the public-market implied cap rate, asset values would drop ~30%.

Leverage makes it worse: with 50% debt, a 30% asset markdown becomes ~60% on equity.

Connecting the Cap Rate dots

These valuation gaps imply private real estate portfolios are meaningfully “better” than what public REITs own. In aggregate, that’s hard to believe.

Consider two apartment portfolio sales from publicly traded REITs to private owners.

Example 1: AvalonBay sold a 1,248-unit Washington, DC-area apartment portfolio to Foulger Pratt for $477M.

CRE Daily reported the price implied a 5.9% cap rate. That figure is forward-looking; if you assume 3% year-1 NOI growth, the prior quarter’s annualized NOI implies ~5.8%.

Washington DC Cap Rate Parity

In Washington, DC, NPI tracked 41 apartments worth $5.5B, generating $57.1M of NOI in Q4 2025—an implied 4.2% cap rate.

Marked to the AvalonBay/Foulger Pratt cap rate (5.9%), those assets would drop ~27%.

With 50% leverage, the equity markdown would be ~55%.

The transaction price suggests NPI appraised values are too high.

Chicago Portfolio Transaction

Example 2: AIMCO sold its entire 1,495-unit Chicago apartment portfolio to privately held LaTerra for $455M.

NOI in Q4 2025 was $7.763M. Annualized and divided by the purchase price, that implies a 6.8% cap rate.

How does the AIMCO-La Terra transaction cap rate (6.8%) compare with NPI cap rates?

NPI tracked 82 Chicago apartments worth $11.2B, generating $141.5M of NOI in Q4 2025—an implied 5.1% cap rate.

If one marked the NPI tracked properties were market to the AIMCO-La Terra cap rate, the value of the assets would drop by 26%.

As in the DC example, the use of leverage adds to the pain; 50% levered equity gets you double the decline in value (51%).

But yeah, lets keep going with the private stuff

Not Rounding Errors

As with private debt, the difference between public and private Real Estate investment valuations is stark.

If NPI tracked properties in the US were marked down to the implied cap-rate levels of publicly traded REITs, the value decline (unlevered) would be 30.0%.

Last time we checked, we are not in a financial crisis. Slow distributions/illiquidity have an easy explanation: the seller’s valuation methodology may not reflect reality. And not in a good way if you own a share of that asset.

Of course for levered funds, recognition of this causes other problems, making it less likely in the first place.

Other resources:

CFA blog on Real Estate:

https://blogs.cfainstitute.org/investor/2019/12/12/private-real-estate-fund-categories-a-risk-return-assessment/

NAREIT data:

https://www.reit.com/data-research/reit-indexes/ftse-nareit-us-real-estate-index-historical-values-returns

NCREIF query tool:

https://user.ncreif.org/data-products/ncreif-query-tool/

Time to Celebrate?

Hamilton Lane’s upcoming earnings call marks the first anniversary of the company’s announcement that investors in the company’s evergreen -and-ever-growing (now $5.8 billion) Private Asset Fund (PAF) had inexplicably approved certain fund changes.

Fund changes that immediately cost those investors $58 million.

Confusing, right?

A year later, the confusion continues, and Hamilton Lane comms aren’t helping. Appearing on CNBC to discuss the general market dynamics:

Or opine on private debt:

Is perfectly fine. But please please just don’t ask them specific questions about the PAF. That’s last years’ news.

One forum in which hard questions can be asked is an earnings conference call. Well, theoretically, hard questions can be asked. As a practical matter things are often semi-scripted, sadly.

To provide inspiration, we’ve penned an imaginary transcript of the upcoming call’s questions, along with some supporting context from The AltView.

Pro tip to all buy and sell side HLNE analysts:

READ THE PAF PROXY. CAREFULLY.

The AltView stands ready to help if you have any questions.

As an added incentive, anyone asking a question remotely resembling one of these gets an AltView mug, valued at $5.00 U.S.

An embarrassingly small incentive, right? Hell, you might not even have to report it to compliance!

The AltView’s Proposed HLNE conference call questions:

1. Rheeley Feelingood, Sunshine Securities

Hey guys. Good Morning!! Thanks for taking my question.

I just wanted to get a little bit more granular about how shareholder votes for SEC-registered funds work.

Specifically, I’m thinking about the vote from March of 2025, the one that was in the news. Not just wee substacks. Like real financial newspapers.

My understanding is that in order for a fund like your Private Assets Fund to propose changes like it did, it has to be in the investor’s best interest; so, like, Hamilton Lane can’t even put the issue up for a vote if the fund’s board thinks the investors will be financially worse off.

In fact, we read somewhere that if a manager wants to increase fees, its sure to get a really hard look from the SEC. It seems like the SEC didn’t take a hard look at yours.

Anyway, in the proxy you said you expected lower fees, like, six times.

Sorry. Not like six times. Six actual times. As an example:

“The advisor believes that the change to the incentive fee calculation under the high-water market basis will likely result in lower fees to the Advisor in the best interest of the Fund and its shareholders”

My question:

I’m just trying to—like, would it be ok from a regulatory standpoint for Hamilton Lane’s PAF board to recommend that fund investors vote a certain way while they also know that the fund’s investors will be, like, worse off financially if they do?

Also, I have a follow-up, but I’ll get back in the queue for that.

2. Joe Obsequiosa, JT Marlin Securities

Great quarter, guys.

I’m just trying to get a sense for the overall impact to Hamilton Lane’s revenues from the shareholder-approved changes.

We know Hamilton Lane got paid $58 million from Private Asset Fund investors last March after the shareholder vote (while Hamilton Lane says the vast majority voted in support, that’s of those that actually voted: just 50.7% of eligible shares were voted, and 50% were required for the vote to count).

Profits are gonna RIP!!!!

The $58 million related to unrealized gains on stuff owned by the private asset fund. Before the shareholder vote, these fees were accrued, but not paid. For them to get paid required that an asset be sold at a gain, which hadn’t been happening much.

And Retroactive since inception! Bruh!

It just seems, like, weird that investors in the fund would support that.

Anyway, my question is coming. Since the first $58 million was booked, things have been trending really well for Hamilton Lane Inc., fee-wise.

Great Job on the fee growth, Guys!

We are pretty sure that almost all of that $77.7 million in fee-related performance revenues for the first three quarters of the fiscal year related to the Private Asset Fund—and the shareholder-approved changes-- since it is your largest U.S. Evergreen fund by far.

So, Is the amount of incremental fees paid to Hamilton Lane, Inc. by PAF Investors (so far):

$58.4 million + $77.7 million= $136 million in additional performance revenue:

Less the management fee savings of say $3 or $4 million…

So something like $130 million? Is that in the ballpark?

And if that’s about right: are you at all concerned that the PAF’s investors might start to get, you know, upset that you told them that they’d be better off, and they were worse off?

I’m just wondering how you think about that.

3. Stanley Vacationer, Duke & Duke

Yeah this is Charlie in for Stan, he’s on holiday. Thanks for taking my question.

I was just wondering about your other big evergreen fund, the Global Private assets fund ($6.8 billion AUM), for non-U.S. investors. You mentioned last May that its fee structure would not change:

Socialized Medicine AND a Deal-by-deal format? Let’s move to Luxembourg!

And while I’m a little confused now because the last question makes it sound like PAF investors were actually worse off because of their own shareholder approval, I guess I’ll ask anyway:

If making the changes to the (SEC-regulated) PAF was in the interests of the fund’s investors, why wouldn’t you do that for investors in the Global Fund (which operates in a different regulatory environment), too?

Like, why only hook up the American investors? Thanks.

4. Steve Longandstrong, Pierce & Pierce:

Uh yeah, just a follow up on that question about the Global Private Assets fund.

I read somewhere that in Europe, unlike in the USA, they have a different process for making changes to a fund like this one. Unlike in the United States, where the SEC is being made great again, the European regulator requires that the fund manager directly and clearly explain to the regulator why the changes are being made.

Just wondering, like, if that had anything to do with why you maybe made the changes in the US but not in Europe.

Cheers!

5. Mortimer Duke, Duke & Duke: Hey guys, thanks for sneaking me in. I saw a statement from Hamilton Lane that said the PAF changes were clearly explained in the proxy, and that there was an outreach program so investors could discuss the changes.

It just seems like maybe it wasn’t that clear. Maybe it could be clarified if the company could just explain it better. Like, why didn’t you take an interview with the Financial Times’ Robin Wigglesworth to address it?

Maybe given the ongoing confusion, would you consider getting one of those supportive PAF investors, perhaps Mass Mutual (owner of 8% of the fund at the time of the proxy), to explain how they voted, and walk us through the numbers and how they are feeling, like, economically speaking, about the changes. Thanks!

6. Rheely Feelingood, Sunshine Securities

Hey guys. Thanks for letting me ask a follow-up.

I mean it’s great that you managed to get many many extra millions in profits from the PAF changes.

So growth continues, and that’s great, but we can also see that your share price is down like 40% compared with a year ago.

Some of this decline might be because of a general lack of enthusiasm for the sector, but people have been asking questions about Hamilton Lane specifically, too.

Anyway, my question:

On one hand, you’ve been growing earnings from, maybe, sketchy sources and arguably ripping off your own fund investors, but on the other hand, there is this idea that the market might put a much lower earnings multiple on, errr, differently-sourced earnings?

Like, maybe you guys got out over your skis a little?

So kind of tagging on Steves Longandstrong’s question; even if you could get regulatory approval to change the Global Private Assets fund’s format in such a way to make the fund’s investors pay more in fees and thereby increase Hamilton Lane Inc.’s profits….

Do you think that kind of growth would help Hamilton Lane’s share price?

Just wondering how you think about that.

source: Hamilton Lane website

NOT INVESTMENT ADVICE.

EXCEPT FOR THE “READ THE PROXY” PART.

Resources:

Previous AltView coverage of Hamilton Lane:

Accredited Investor Insights

How Hamilton Lane's PAF Turned Unrealized Gains Into Real Fees

“Show me the incentive, and I’ll show you the outcome” - Charlie Munger…

Read more

6 months ago · 41 likes · 1 comment · Leyla Kunimoto and TheAltView

PAF Proxy Statement:

https://www.sec.gov/Archives/edgar/data/0001803491/000121390025010959/ea0230203-01_def14a.htm

FTAV Wigglesworth Article

https://www.ft.com/content/a7d54b3b-fa9a-4385-9ab8-30b905f75cb1

WSJ Zweig Article

https://www.wsj.com/finance/investing/hamilton-lane-private-assets-alternative-funds-8862f32e

No, it’s not about IPERS’ CEO, Greg Samorajski, and Chief Benefit Officer Steven Herbert, both of whom were placed on administrative leave recently.

Instead, we got news a few days ago that the State of Iowa’s motion to dismiss Rich Wiggins’ complaint has been DENIED. On both counts.

For Iowans, it might not feel like good news, but it is.

Wiggins was hired to serve as IPERS (Iowa Public Employees Retirement System) risk officer. Soon thereafter, he was fired. Wiggins later sued, alleging that IPERS used misleading benchmarks to inflate performance and wrongly frame the risk profile of the portfolio.

The case now proceeds to discovery. Some springtime Iowa sun will surely help disinfect things.

Yet we can already see that IPERS has problems. Public documents have a way of making this easier.

Some examples we noted in our prior articles:

1. Self-Benchmarking: IPERS benchmarks its private portfolio (30% of the total) against….those same returns. And with the collaboration of Wilshire, they then conclude (delude?) that the fund is less risky. When 30% of the portfolio has zero tracking error, then overall tracking error is likely to be very low..

Great job IPERS (and Wilshire!)

2. IPERS Generates Alpha from passive investments! Thanks to cheeky benchmarking, IPERS’ passive Canadian equity strategy outperforms EVERY. SINGLE. YEAR. Seemingly since 2000! Incredible! The same dynamic applies to all non-US equities.

3. IPERS Benchmarks hedge funds, and other risky exposures against (risk-free) U.S. treasury bills. This makes no sense if you are trying to pick an appropriate benchmark, and makes great sense if you are trying to make performance look better than it really is.

IPERS’ ‘LARS’ program consists of a bunch of hedge funds. Yet LARS investments are considered part of the fund’s cash allocation. The LARS strategy seems to have worked until FY 2025 wrapped up (after our series was published). The shxt hit the fan, and the LARS investments lost 20% of their value:

What kind of t-bills were these LARS guys buying?

4. IPERS financial statements discuss a ‘beta management overlay’ which also appears to lack a benchmark. Gains/losses from this activity are included in each respective asset class. This can provide a nice tailwind, even if your (equity in this case) returns lag equity indexes:

Synthetic Domestic Equity Lacks a Benchmark. Convenient.

5. Finally, IPERS uses CEM Benchmarking to annually tout IPERS’ low costs (the lowest!). For the 17th consecutive year! Helpfully for IPERS, CEM Benchmarking’s approach excludes many of IPERS’ actual costs:

Hall of Fame Low-Cost Streak!

Hmmm. Did CEM get a nice raise in 2025, or were additional services included?

We do detect that The AltView’s work may be making a difference, however. From IPERS’ December 2025 meeting minutes:

We will call this progress, but realized costs could be higher than the assumptions realized? How about are higher?

Also: why did Iowans pay $103,000 for this?

To summarize:

1. The purpose of the CEM Benchmarking report seems to be to make IPERS look good. Figure a million dollars in total paid to CEM, plus or minus, back to something like 2010.

2. The CEM report does its job. Except, problematically…

3. CEM’s assumptions about costs might not apply, according to IPERS. IPERS’ costs seem higher.

A soft suggestion to IPERS’ board: maybe stop commissioning that report?

The million bucks or so paid out to CEM Benchmarking, of course, is not the real problem. The problem is the second-order effects that flow from thinking that your investment costs are low when they aren’t. IPERS’ board seems to see this and is setting down the right path:

Please please don’t hire CEM for this

Summary:

IPERS has long pursued a strategy to engineer outperformance by:

1. Obscuring risks and

2. Applying easy-to-beat, engineered benchmarks.

IPERS wants us to be all ‘zoomed in.’ To view results in the way that suits them. Below is a look at IPERS’ annual returns vs. its chosen benchmark.

Consistently solid results

IPERS’ consistent, modest outperformance vs. its chosen, BS benchmark suggests it is consistently winning a game of inches.

Let’s zoom out.

A fair representation of IPERS’ portfolio risks suggests a 75/25 or 80/20 stock bond mix. But let’s be generous, and use a 70/30 mix (MSCI AWCI/Bloomberg Agg):

Consistently Less Solid Results

What’s to stop IPERS from making changes to this nonsense right now?

Oh yeah, the fact that the CEO is on administrative leave. Get on with it, IPERS!

_________________________________________________________________________

Note: This criticism is not about bashing DB plans or reducing anyone’s hard-earned benefits. It is about good governance and best practices.

IPERS’ more than 400,000 members and millions of taxpaying Iowans deserve better. The AltView will keep advocating for them.

Finally, a reminder: when we prepared our article in the fall of 2025, we reached out to IPERS, more than once, with a series of questions related to benchmarking, risk practices, and the CEM Benchmarking work.

IPERS did not respond to our questions. Let’s get some sunlight, shall we?

Resources:

The AltView’s series on IPERS:

Note: MSCI and Bloomberg returns sourced from index factsheets via google gemini

IPERS 2025 ACFR:

https://www.legis.iowa.gov/docs/publications/DF/1594667.pdf

IPERS 2025 December Report

https://ipers.org/media/428/download?inline

IPERS board minutes and agendas

https://ipers.org/about/governance/investment-board/investment-board-agendas-materials-minutes

Jefferies’ reported prices on secondary sales of private equity stakes—where a private equity fund investor sells to another investor—have historically been a price lower than the General Partners (GP’s) assigned value (NAV). This is not news.

But also: secondary transactions in more mature funds typically have higher discounts to NAV.

The older the fund, the bigger the discount to NAV. The chart below (from Jefferies) is from 2023 , but the trend continues.

At the same time, the GPs that manage private equity funds apply ASC 820.

The language of ASC 820 is clear. The stuff the GPs own should be valued at the price at which they could sell said stuff.

On the evidence, that’s not true. Or if there is a continuum of truthiness, you could say that it is much truer for funds of a recent vintage than for older funds.

It seems to us that the Private Equity managers should say: 1. Actually, we aren’t observing ASC 820, or 2. Those managers need to adjust the values of their long-dated funds downward.

What are we missing?

__________________________________________

As a reminder, all of the secondary buyers get to immediately make those discounts vanish (i.e. mark the stuff they bought up to NAV). We don’t think they should, which is why we asked the FASB to have a look.

How tempting might those long-dated, heavily discounted funds be? Hard to resist for the NAV-Squeezers, no? Last year, Evercore reported $120 billion in LP secondary volume, up 34% year-on-year.

This was supported by Evergreen Capital (much of it from retail investors). These funds are willing to pay up for stuff that others don’t want!

And so what if they pay 75% of NAV instead of say, 70%? You still get a giant day one mark-up, right!

Retail investors “helping maintain competitive pricing” Source: Evercore

Then, you use your awesome ‘performance’ to gather assets. The returns are so real, and it can go on forever……

The Cynical Secondary Circle of Life

Sources:

Evercore

https://www.evercore.com/wp-content/uploads/2026/01/Evercore-2025-Secondary-Market-Survey_Highlights.pdf

Jefferies:

https://www.jefferies.com/wp-content/uploads/sites/4/2024/01/Jefferies-Global-Secondary-Market-Review-January-2024_1cb2e6.pdf

People freaking love evergreen funds.

Recently, however, there have been some stumbles.

Fund managers struggling to return investor capital stand ready to assuage. Things are working exactly as they should when requests are not met.

Balancing high levels of investor requests to redeem against the obligation to remaining investors is positioned as a fiduciary challenge. Thank goodness we have {insert firm of your choosing here} to steer us through these troubled waters.

And like so much we hear from Alts-peddlers, it is true in a narrow sense.

But let’s zoom out.

Ask yourself: how much retail, or retail-ish money would Alts managers like Blackstone, Blackrock, Apollo and the like have raised if they just marketed traditional private debt and equity funds, the kind that offered no liquidity at all?

Hmmm.

Investor dollars in evergreen funds, increasingly from the so-called wealth channel are the raw materials needed for the asset managers to make gobs of money (for the asset managers, with 100% certainty) and also provide alpha for investors (maybe).

Speaking of challenges: How did asset managers meet the fiduciary challenge of responsibly investing this torrent of cash?

Another aside: remember when private debt solved systemic problems? Private lenders, unlike commercial banks, could match the duration of their liabilities (capital provided by investors) with their maturity of their assets (loans made to borrowers). What a great innovation!

For a while, anyway. Until private debt asset managers realized that system bugs were welcome, so long as they could make heaps more money.

The genius idea: use the flaw (the redemption feature) to sell the product!

Inside Scoop

Industry players that don’t offer these funds have liberty to say it out loud. A great recent example: Alan Waxman, CEO of Sixth Street, who appeared on Patrick O’Shaugnessy’s “Invest like the Best” podcast recently.

In Waxman’s telling, a “Factory Model” for alternative investments emerged in 2018. This tracks (see chart above).

Paraphrasing: the asset manager owns the factory. Capital provided by investors is the raw material. The factory has no choice but to use the raw material to make stuff (invest). The output is the returns gotten from the capital.

Waxman suggests that the best way to get a lot of money (raw material) quickly is to make it more enticing for the providers of said raw material (around 21 minutes in):

“You are also willing to, let’s say, make concessions on the type of capital you raise, meaning, maybe it (the fund) has a term where they can ask for their money back.”

He also notes:

“Some of the factory models that are out there have raised monies from the wealth channel in irresponsible ways….there is no such thing as ‘semi-liquid’.

And comments on the motivations of the asset management factories:

“Maybe you’re willing to start to not have perfectly matched asset and liabilities because you want to raise (money) as fast as possible”

Don’t make us barf

The dynamic Waxman deftly illustrates explains why we get sick when we hear mega-managers use the words “fiduciary” and “redemption limit” in the same sentence. Paragraph, even.

Whose interests were prioritized on the way up? Was there a reduction in fees after AUM reached $10 billion? How about $15 billion? How many funds throttled inflows in favor of due diligence and quality control?

Clearly, many asset gatherers prioritized their own bottom line. And you know what, respect to all gangsters.

Just spare us the self-righteousness when you gate.

Also not on our sympathy list: “top advisors” (brokers who have client money—maybe too much money-- in challenged funds) that have been active in the internet ether, decrying fear-mongering among the private debt bears.

Puh-leeze. The annual reports of these funds tell us the story: brokers getting paid up to 85 basis points per year, on top of already insanely high fees, to do stuff like:

provide ongoing services in respect to clients with whom they have distributed shares of the Fund.

Could complaining online about private debt fears being overdone qualify as a broker’s ‘ongoing service’?

A good chance to prove their worth, maybe.

Be careful out there, investors!

Other info:

Below is from Blackrock’s HPS Corporate Lending Fund’s Annual Report. This fund ended 2024 with investments valued at $16 billion, and 2025 with investments valued at $25 billion. Note the increase in Shareholder servicing fees:

Invest like the best podcast with Alan Waxman:

https://colossus.com/episode/clarity-of-purpose/

HLEND annual report:

https://www.hlend.com/shareholders/sec-filings/content/0001628280-26-020206/hps-20251231.htm#i75a4bdbba29a40058bf2fa96e5219268_79

Morningstar/Pitchbook on evergreen funds:

https://www.morningstar.com/business/insights/research/evergreen-fund-market-trends

Altviewers! As promised, we’ve found some real-life investors in the Hamilton Lane Private Assets fund (HLPAF).

Today we explore the not-so-awesome investor experience of the PAF through the lens of the Dynamic Alternatives Fund (DAF).

The DAF, investor in Hamilton Lane’s PAF since January 2025, is itself an SEC-registered (closed-end, tender) fund. Managed by Hamilton Capital (HC), an Ohio based asset manager, HC is unrelated to Hamilton Lane.

The Dynamic Alternatives Fund bought its stake in the Hamilton Lane PAF last January and was thus eligible to participate in HLPAF’s infamous shareholder vote last March, so ably covered by both the WSJ and the FT.

_________________________________________

A wee reminder: Hamilton Lane’s PAF proxy said—SIX TIMES-- that Hamilton Lane believed that the changes would be good for investors and thus in their best interest:

Hamilton Lane somehow held this belief even though the proxy’s opaque disclosures (once properly understood) also said that Hamilton Lane would make so so so so much MORE money, and that therefore the fund’s investors would have LESS money.

Two months after the vote, Hamilton Lane discussed a certain very large amount of extra income with investors in its own common stock; money that came straight from PAF investors:

Source: Hamilton Lane Conference Call Transcript

The DAF investor experience

Investing in Hamilton Lane’s PAF wouldn’t exactly be our jam. Even without the proxy fun-and-games.

Still, we forgive HLPAF investors that voted in support; after all, Hamilton Lane clearly said it was all good in the proxy. Also: our understanding is that SEC rules would make it hard for a manager to even put something up for a shareholder vote that was obviously bad for investors.

After we discovered Hamilton Capital’s DAF was a HLPAF investor, we approached Hamilton Capital with a more generous spirit. Our posture was less “Why would you invest in this?” and more “Hey, do you know what just happened to you?’

Hamilton Capital’s response did not inspire. Only after our third email, to the firm’s founder, did we get a response.

Hamilton Capital noted that the proxy vote was for shareholders as of January 15, 2025, and that HC uses ISS (a third-party service) to vote proxies, and having asked ISS, HC was told that it was not a shareholder as of January 15.

We then sent HC a snapshot of its own SEC filing, which showed they were:

HC then confirmed that yes, the effective ownership date was January 2 but said that neither ISS nor HC got the proxy. The shares were thus owned but not voted.

The DAF was not alone: a very significant minority (49.3% of shares) that did not vote (Hamilton Lane needed 50%+ of shares voted for the vote to matter).

If Hamilton Capital (or any other investor) had voted, knowledgably, on behalf of the DAF, they should have voted against the proposal. Not to have done so would seem a violation. From Hamilton Capital’s Proxy Guidelines:

“The guiding principle by which the Adviser votes on all matters submitted to security holder is the maximization of the ultimate economic value of the Fund’s holdings.”

Not certain that DAF’s managers were tracking these things, The AltView also noted in communications to Hamilton Capital that DAF investors were worse off to the tune of ~$250,000 (and running) since the changes were made; more than 2% of the value of the DAF’s initial investment.

We asked:

· How did this impact their level of trust in Hamilton Lane?

· How did higher fees alter their view of HLPAF’s return prospects?

HC declined to comment. HC did note that they were aware of the news surrounding the HLPAF.

Yesterday’s News. And Today’s. And Tomorrows.

This news would include the February 2026 FT Alphaville article. The one that noted Hamilton Lane declined to meet with or directly answer questions from the FT’s Robin Wigglesworth.

Hamilton Lane instead asserted that the proxy contained “clear and comprehensive information.”

One might think that if:

1. The changes were good for investors, and

2. Clearly and comprehensively disclosed,

…then a straightforward sit‑down with Wigglesworth would have resolved the matter.

Why hasn’t that happened?

Shortly thereafter, Hamilton Lane Co‑CEO Juan Delgado‑Moreira dismissed the FT article as “yesterday’s news” in a CNBC interview—deploying a series of red herrings while avoiding the central issue:

What the proxy says. And doesn’t say.

CNBC Interview: Juan Delgado Moreira & CNBC's Morgan Brennan

Start watching at 4:50

But TBH, nice job, Juan! Good smile at the end, there.

Allocating, Dynamically, with the Dynamic Alternatives Fund

Hamilton Capital’s DAF, launched in 2022, had $334 million in AUM as of YE 2025. The DAF touts its low volatility:

And consistent performance:

The fund’s investment management fee is 1% of assets. Expenses in total (including expenses other than the investment management fee) were 1.25% during the last fiscal year.

The vast majority of the DAF is invested in other funds. This adds an additional level of fees.

Here is a partial list, including Hamilton Lane’s PAF (and yes, Cliffwater’s Corporate Lending Fund….)

Partial list of Dynamic Alternatives Fund Holdings (as of 9/30/2025) Source: SEC

The FOFone (fund of funds of funds)

Focusing more closely on Hamilton Lane’s PAF: SEC filings disclose that 46% of the PAF is invested in other funds.

One example: an investment in Roark Capital, made in 2022.

Now we have a fund of funds of funds; a FOFone! If the typical fees were applied to the Roark fund the applicable fees last year would have been:

*-Roark fees are estimated using 2% fee, 20% incentive fee, 10% return

To be fair, the DAF does not pay this level of fees on ALL OF ITS dollars. Just a lot of them.

Might one ask whether it seems fair for even a few of them? Probably not what Ayn Rand had in mind.

Retroactive Fees: A Masterclass

Purchased by the HLPAF in 2022, the Roark Capital Partners CF L.P. investment had a cost basis of $5.6 million as of September 2025, and a fair value of $8.8 million.

The DAF entered Roark indirectly in January 2025 at or near that higher valuation.

Two months later, as a direct result of the PAF shareholder vote, Hamilton Lane PAF investors, were charged an incentive fee on the entire unrealized gain, including gains earned before DAF ever invested.

This also applied to all assets in the fund, retroactive to the Hamilton Lane fund’s inception in 2021. Gangster!

Here is how this looks through the lens of a single PAF investment. Note that because of Hamilton Lane’s gobbledygook disclosures, we are forced to use the purchase price as shown in the Sept 30, 2025 schedule of investments (thank you to Jonathan Weil of the WSJ for publicly shaming them).

While the above is an estimate, we know from Hamilton Lane’s FY 2025 Q4 conference call that the entire thing rolled up to $58 million. The incremental amount (i.e. actual fees paid vs. had there been no changes) has now risen to over $100 million.

The Hamilton Lane PAF continues to take in new capital ($142 million in February 2026). Inflows, of course, facilitate continued performance benefits from NAV-Squeezing (or as Hamilton Lane prefers it, “NAV uplifts”).

On Compassion

We used to allocate capital ourselves, so we bring a bit of compassion to our scrutiny (of Hamilton Capital, at least).

Still, HC’s response to being misled—and to the ongoing harm suffered by their own investors- has been disappointing.

Inertia, and maybe hoping that others aren’t looking, are powerful forces.

For this reason, we reserve our deepest compassion for the nameless investors in both:

· Hamilton Capital’s Dynamic Alternatives Fund

· Hamilton Lane’s PAF.

Not all of them are nameless, though. We have identified others who may be more receptive to this message.

Stay tuned.

Resources:

Dynamic Allocations Fund:

https://www.dynamicalternativesfund.com/

Hamilton Capital Form ADV

https://hamiltoncapital.com/form-adv-crs/

Hamilton Capital’s SEC filings:

https://www.sec.gov/Archives/edgar/data/1854919/000158064225007729/dynamicalts_ncsr.htm

Hamilton Lane PAF SEC filings

https://www.sec.gov/edgar/browse/?CIK=1803491

Hamilton Lane PAF Data

https://www.hamiltonlane.com/en-us/strategies/evergreen/us-private-wealth/private-assets-fund

CNBC Interview

https://www.cnbc.com/video/2026/02/27/hamilton-lane-co-ceo-concerns-about-private-credit-are-overstated.html

Jason Zwieg on Hamilton Lane

https://www.wsj.com/finance/investing/hamilton-lane-private-assets-alternative-funds-8862f32e?mod=author_content_page_1_pos_1

FTAV on Hamilton Lane

https://www.ft.com/content/a7d54b3b-fa9a-4385-9ab8-30b905f75cb1

Here is a pro tip for right-leaning but otherwise truth-seeking readers of WSJ Op-ed pages:

When commentary leads by saying the left is against something, resist the temptation to viscerally be for said something.

You could be getting played.

Todays example: Charles Millard’s commentary “Trump May Turn Your 401(k) Into an Old-Fashioned Pension.”

Beware this language

The WSJ bio accompanying the commentary refers to Millard as a ‘consultant in asset management and retirement policy.’ An alternative way is to describe it is below, (as described by a different bio, presumably approved by Millard, just a few short weeks ago):

We did not hear him sing

In addition to his duties at Ares, which describes itself as “a leading alternative investment manager,” Millard serves on the board of Georgetown University’s Center for Retirement Initiatives, the comically-conflicted-and-reputation-of-its-namesake-destroying organization that regularly produces industry-sponsored, non-peer reviewed, non-academic research. All in support of Alts in 401(k)s.

The AltView wrote about it, and everyone should read it:

The acknowledgements below are from a 2023 Georgetown report that says Private Equity returns are great. Note: The American Investment Council is the patriotic rebrand of the Private Equity Growth Capital Council.

If the report’s conclusions did not support the AIC’s aims, would it see the light of day?

Back to the Op-Ed. Millard cites absurd Georgetown ‘research’ that says adding Alts to 401(k) plans could add 11%-17% to retirement balances. We note that the report was produced with the generous corporate support of Willis Towers Watson.

Perhaps since reasonable assumptions about future Alts returns don’t give you attractive looking results, the report’s authors simply assumed investors in Alts get above average results. For 40 years. Alts Always Win. And everyone is above average.

Invest-or we’ll SUE!

Last year Bloomberg reported on a big industry strategy meeting.

Millard featured prominently.

This is the same guy who the WSJ today calls “a consultant in asset management and retirement policy.”

The industry’s agreed goal: turn the tables on employers, to basically force them to consider Alts:

Obviously.

Would the industry try to craft regulations that would have employers fearing lawsuits from the other direction, i.e. for NOT investing in alts?

Yes. Franklin Templeton’s Alternative Allocations podcast from last year is revealing. The Head of the Defined Contribution Alternatives Association (DCALTA), Jonathan Epstein, said:

“The story is changing on diversification. The litigation may come to those plans that don’t diversify enough.”

Later in the podcast he added:

“I would want to come back and find out if there were any lawsuits to defined contribution plan sponsors for not properly diversifying their menu of options.”

So much for addressing the industry’s litigation problem, right?

But also: this is pretty funny. We understand that of the relatively small amount of Alt investments that exist in DC plans, most are in real estate. If the performance of these investments is representative, they have underperformed lower-cost, liquid, publicly traded REITs (could their low cost have something to do with their better performance)?

Right-Leaners: Stay Focused!

We will say it until we are blue in the face.

This is not criticism from the left.

If Alts could reliably- or even semi-reliably- be expected to improve results for investors, then employers wouldn’t need more legal protection to put them in plans. Good fiduciaries would already have done it.

If you stay logical, focus on evidence, and don’t let yourself get drawn down partisan rabbit holes, you’ll see that Alternative Investments generally aren’t worth the bother.

WSJ Commentary:

https://www.wsj.com/opinion/trump-may-turn-your-401-k-into-an-old-fashioned-pension-a36b0e42?mod=commentary_article_pos2

Georgetown ‘research’:

https://cri.georgetown.edu/wp-content/uploads/2023/06/GeorgetownCRI-CEm-Benchmarking_Lack-of-Asset-Diversification-CRI-paper.pdf

P&I online feat. Charles Millard, “Ares Advisor”

https://www.pionline.com/institutional-investors/defined-contribution/pi-private-markets-dol-defined-contribution-ares-deferred-compensation/

Alternative Allocations Podcast feat. Jonathan Epstein, DCALTA

https://www.franklintempleton.com/private-markets/alternative-allocations-podcast/episode-21

Bloomberg on 401(k)s":

https://www.bloomberg.com/news/articles/2025-03-25/retirement-saving-private-equity-comes-for-america-s-401-k