What changed in this filing

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Item 1A. Risk Factors

2021-05-27 compared with 2020-05-28 · 184 added, 151 removed, 549 unchanged (38% of the section changed)

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Competition for access to investment funds and other investments we make for our clients is intense.

We seek to maintain excellent relationships with general partners and managers of investment funds, including those in which we have previously made investments for our clients and those in which we may in the future invest, as well as sponsors of investments that might provide co-investment opportunities in portfolio companies alongside the sponsoring fund manager.

However, because of the number of investors seeking to gain access to investment funds and co-investment opportunities managed or sponsored by the top performing fund managers, there can be no assurance that we will be able to secure the opportunity to invest on behalf of our clients in all or a substantial portion of the investments we select, or that the size of the investment opportunities available to us will be as large as we would desire.

We seek to maintain excellent relationships with general partners and managers of investment funds, including those in which we have previously made investments for our clients and those in which we may in the future invest, as well as sponsors of investments that might provide direct/co-investment opportunities in portfolio companies alongside the sponsoring fund manager.

However, because of the number of investors seeking to gain access to investment funds and direct/co-investment opportunities managed or sponsored by the top performing fund managers, there can be no assurance that we will be able to secure the opportunity to invest on behalf of our clients in all or a substantial portion of the investments we select, or that the size of the investment opportunities available to us will be as large as we would desire.

Access to secondary investment opportunities is also highly competitive and is often controlled by a limited number of general partners, fund managers and intermediaries.

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As a result, we may take actions with respect to the allocation of investments among our specialized funds and customized separate accounts (including funds and accounts that have different fee structures), the purchase or sale of investments in our specialized funds and customized separate accounts, the structuring of investment transactions for those specialized funds and customized separate accounts, the advice we provide or other actions in order to comply with these fiduciary and contractual obligations.

In addition, because our senior management and other professionals hold most of their economic interests in us through HLA, which is not subject to U.S.

In addition, because most of our senior management and other professionals hold most of their economic interests in us through HLA and certain of its affiliates, which are not subject to U.S.

federal and state entity-level income taxes, and our Class A common stockholders hold their interests through Hamilton Lane Incorporated, which is subject to entity-level taxation as a corporation in the United States, conflicts relating to the selection and structuring of investments or other matters may arise between senior management and our other professionals, on the one hand, and the Class A stockholders of Hamilton Lane Incorporated, on the other hand.

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Accordingly, the loss of any one of our senior management team could adversely affect certain client relationships or limit our ability to successfully execute our investment strategies, which, in turn, could have a material adverse effect on our business, financial condition and results of operations.

In addition, the governing agreements of our specialized funds typically require the suspension of the commitment period if, depending on the fund, between two and eight designated members of our senior management team cease to devote sufficient professional time to or cease to be employed by HLA, often called a “key man event,” or in connection with certain other events.

In addition, the governing agreements of our specialized funds typically require the suspension of the commitment period if, depending on the fund, between two and ten designated members of our senior management team cease to devote sufficient professional time to or cease to be employed by HLA, often called a “key man event,” or in connection with certain other events.

The occurrence of a key man event could also affect investment periods under our limited partnership agreements.

Any change to our senior management team could materially and adversely affect our business, financial condition and results of operations.

We intend to expand our business and may enter into new lines of business or geographic markets, which may result in additional risks and uncertainties in our business.

We intend to expand our business and may enter into new lines of business, geographic markets or strategic partnerships, which may result in additional risks and uncertainties in our business.

We currently generate substantially all of our revenue from asset management and advisory services.

However, we may grow our business by offering additional products and services, by entering into new lines of business and by entering into, or expanding our presence in, new geographic markets.

Introducing new types of investment structures, products and services could increase our operational costs and the complexities involved in managing such investments, including with respect to ensuring compliance with regulatory requirements and the terms of the investment.

For example, we have recently undertaken business initiatives to reach an increasing number of retail investors, which exposes us to greater levels of risk, including heightened litigation and regulatory enforcement risks.

To the extent we enter into new lines of business, we will face numerous risks and uncertainties, including risks associated with the possibility that we have insufficient expertise to engage in such activities profitably or without incurring inappropriate amounts of risk, the required investment of capital and other resources and the loss of clients due to the perception that we are no longer focusing on our core business.

In addition, we may from time to time explore opportunities to grow our business via acquisitions, partnerships, investments or other strategic transactions.

However, we may grow our business by offering additional products and services, by entering into new lines of business, by entering into, or expanding our presence in, new geographic markets and by entering into selected strategic partnerships.

Entry into certain lines of business or geographic markets or the introduction of new types of investment structures, products or services could increase our operational

costs and may also subject us to new laws and regulations with which we are not familiar, or from which we are currently exempt, which may lead to increased litigation and regulatory risk.

We have also launched our first SPAC, Hamilton Lane Alliance Holdings I, Inc.

(“HLAH”), with the goal of raising additional SPACs in the future, depending on market and other conditions.

HLAH is sponsored by a wholly-owned subsidiary of HLA that will assist in identifying and effectuating a merger between HLAH and a target company.

We view the sponsorship of SPACs as an extension of our pre-existing investment activities, but participation in the SPAC market exposes us and our affiliates to additional risks, including heightened litigation, regulatory enforcement and reputational risks as well as the potential loss of our investment if a suitable target company is not identified for the initial business combination within the prescribed timeframe.

To the extent we enter into new lines of business, we will face numerous risks and uncertainties, including risks associated with the possibility that we have insufficient expertise to engage in such activities profitably or without incurring inappropriate amounts of risk, that we do not have the required investment of capital and other resources and that we could potentially lose clients due to the perception that we are no longer focusing on our core business.

We also may from time to time explore opportunities to grow our business via acquisitions, partnerships, investments or other strategic transactions.

There can be no assurance that we will successfully identify, negotiate or complete such transactions, that any completed transactions will produce favorable financial results or that we will be able to successfully integrate an acquired business with ours.

Entry into certain lines of business or geographic markets or the introduction of new types of products or services may subject us to new laws and regulations with which we are not familiar, or from which we are currently exempt, and may lead to increased litigation and regulatory risk.

In addition, certain aspects of our cost structure, such as costs for compensation, occupancy leases, communication and information technology services, and depreciation and amortization are largely fixed, and we may not be able to timely adjust these costs to match fluctuations in revenue related to growing our business or entering into new lines of business.

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In addition, if we are unable to deploy capital at a pace that is sufficient to offset the pace of realizations, our fee revenues could decrease.

For our specialized funds and customized separate accounts that charge fees based on invested capital, such a decline in the pace of investments may reduce our revenue more acutely.

In addition, fees based on invested capital may create an incentive to make investments earlier in the specialized fund’s or customized separate account’s life than it otherwise would if fees were charged based purely on capital commitments, which has more predictability for revenues.

Our indebtedness may expose us to substantial risks.

We recently amended our existing Term Loan and Security Agreement (as amended, the “Term Loan Agreement”) and Revolving Loan and Security Agreement (as amended, the “Revolving Loan Agreement”) and entered into a new Multi-Draw Term Loan and Security Agreement (the “Multi-Draw Term Loan Agreement” and, together with the Term Loan Agreement and the Revolving Loan Agreement, the “Loan Agreements”) with First Republic Bank (“First Republic”).

We maintain a Term Loan and Security Agreement (as amended, the “Term Loan Agreement”), a Multi-Draw Term Loan and Security Agreement (as amended, the “Multi-Draw Term Loan Agreement”)

and a Revolving Loan and Security Agreement (as amended, the “Revolving Loan Agreement” and, together with the Term Loan Agreement and the Multi-Draw Term Loan Agreement, the “Loan Agreements”) with First Republic Bank (“First Republic”).

The Term Loan Agreement matures on July 1, 2027, the Revolving Loan Agreement matures on March 24, 2023 and the Multi-Draw Term Loan Agreement matures on July 1, 2030.

For more information on our Loan Agreements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Loan Agreements”.

We expect to continue to utilize debt to finance our operations, which will expose us to the typical risks associated with the use of leverage.

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Any substantial decrease in net operating cash flows or any substantial increase in expenses could make it difficult for us to meet our debt service requirements or force us to modify our operations.

Further, there is no guarantee that we will be able to obtain new borrowings or refinance existing borrowings on favorable terms when they mature.

Our level of indebtedness may make us more vulnerable to economic downturns and reduce our flexibility in responding to changing business, regulatory and economic conditions, which could materially and adversely affect our business, financial condition and results of operations.

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In the case of an event of default, creditors may exercise rights and remedies, including the rights and remedies of a secured party, under such agreements and applicable law, which could materially and adversely affect our business, financial condition and results of operations.

For more information on our Loan Agreements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Loan Agreements”.

Dependence on leverage by certain funds and portfolio companies subjects us to volatility and contractions in the debt financing markets and could adversely affect the ability of our specialized funds and customized separate accounts to achieve attractive rates of return on those investments.

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The absence of available sources of sufficient debt financing for extended periods of time or an increase in either the general levels of interest rates or in the risk spread demanded by sources of indebtedness would make it more expensive to finance those investments, and, in the case of rising interest rates, decrease the value of fixed-rate debt investments made by our funds.

Certain investments may also be financed through fund-level debt facilities, which may or may not be available for refinancing at the end of their respective terms.

Certain investments may also be financed through fund-level debt facilities, which may or may not be available for refinancing on favorable terms, or at all, at the end of their respective terms.

Finally, limitations on the deductibility of interest expense on indebtedness used to finance our specialized funds’ investments reduce the after-tax rates of return on the affected investments and make it more costly to use debt financing.

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Our business is exposed to the risk that clients that owe us money for our services may not pay us.

We believe that this risk could potentially increase due to the current novel coronavirus (“COVID-19”) pandemic.

We believe that this risk could potentially increase due to the coronavirus (“COVID-19”) pandemic.

Also, if investors in our specialized funds and certain customized separate accounts default on their obligations to fund commitments, there may be adverse consequences on the investment process, and we could incur losses and be unable to meet underlying capital calls.

For example, investors in most of our specialized funds make capital commitments to those funds that we are entitled to call from those investors at any time during prescribed periods.

We depend on investors fulfilling and honoring their commitments when we call capital from them for those funds to consummate investments and otherwise pay their obligations when due.

We depend on investors fulfilling and honoring their commitments when

we call capital from them for those funds to consummate investments and otherwise pay their obligations when due.

In addition, certain of our funds may utilize lines of credit to fund investments.

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There is a risk that our employees, advisors or third-party service providers could engage in misconduct that adversely affects our business.

We are subject to a number of obligations and standards arising from our advisory and investment management businesses and our discretionary authority over the assets we manage.

The violation of these obligations and standards by any of our employees, advisors or third-party service providers would adversely affect our clients and us.

Our business often requires that we deal with confidential matters of great significance to companies and funds in which we may invest for our clients.

We are subject to a number of laws, obligations and standards arising from our advisory and investment management businesses and our discretionary authority over the assets we manage.

The violation of these laws, obligations and standards by any of our employees, advisors or third-party service providers would adversely affect our clients and us.

Our business also often requires that we deal with confidential matters of great significance to companies and funds in which we may invest for our clients.

If our employees, advisors or third-party service providers were to engage in fraudulent activity, violate regulatory standards or improperly use or disclose confidential information, we could be subject to legal or regulatory action and suffer serious harm to our reputation, financial position and current and future business relationships.

The pervasiveness of social media, coupled with increased public focus on the externalities of activities unrelated to the business, could further magnify the reputational risks associated with negative publicity.

It is not always possible to detect or deter misconduct, and the extensive precautions we take that seek to detect and prevent undesirable activity may not be effective in all cases.

If one of our employees, advisors or third-party service providers were to engage in misconduct or were to be accused of misconduct, our business and our reputation could be materially and adversely affected.

Further, we are subject to the risk that our service providers may default on their contractual obligations to us, which could result in significant disruption to our operations and ability to serve our clients.

See “—Extensive government regulation, compliance failures and changes in law or regulation could adversely affect us.”

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As a result, achieving steady growth in net income and cash flow on a quarterly basis may be difficult, which could in turn lead to large adverse movements or general increased volatility in the price of our Class A common stock.

The exercise of redemption or repurchase rights by investors in our evergreen funds may adversely affect our revenues.

Certain of our specialized funds contain investor liquidity features.

While these features are subject to certain limitations, and such funds maintain multiple sources of liquidity to fund potential redemption or repurchase requests, multiple and sustained requests could exhaust these sources of liquidity and create pressure to dispose of investments by such funds sooner than anticipated to satisfy such redemption requests.

The investments of such funds are generally illiquid in nature and disposing of such investments within the necessary timeframe could reduce the price at which counterparties are willing to transact.

In most cases, transferring such investments requires the consent of a third-party sponsor, and, if such sponsors are unwilling to consent, a fund may need to liquidate a less desirable investment as an alternative.

Such accelerated disposition could reduce or eliminate our potential carried interest associated with such investment, and the reduction in such fund’s NAV resulting from the redemption or repurchase would reduce the management fees payable to us.

Valuation methodologies for certain assets in our specialized funds and customized separate accounts can be significantly subjective, and the values of assets established pursuant to such methodologies may never be realized, which could result in significant losses for our specialized funds and customized separate accounts.

There are no readily ascertainable market prices for a large number of the investments in our specialized funds, customized separate accounts, advisory accounts or the funds in which we invest.

The value of the fund investments of our specialized funds and customized separate accounts is determined periodically by us based on the fair value of such investments as reported by the underlying fund managers.

value of the fund investments of our specialized funds and customized separate accounts is determined periodically by us based on the fair value of such investments as reported by the underlying fund managers.

Our valuation of the funds in which we invest is largely dependent upon the processes employed by the managers of those funds.

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Accordingly, the private markets funds in which we invest our clients’ capital may not be able to sell securities when they desire and therefore may not be able to realize the full value of such securities.

The ability of private markets funds to dispose of investments is dependent in part on the public equity and debt markets, to the extent that the ability to dispose of an investment may depend upon the ability to complete an IPO of the portfolio company in which such investment is held or the ability of a prospective buyer of the portfolio company to raise debt financing to fund its purchase.

The ability of private markets funds to dispose of investments is dependent in part on the public equity and debt markets, to the

extent that the ability to dispose of an investment may depend upon the ability to complete an IPO of the portfolio company in which such investment is held or the ability of a prospective buyer of the portfolio company to raise debt financing to fund its purchase.

Furthermore, large holdings of publicly traded equity securities can often be disposed of only over a substantial period of time, exposing the investment returns to risks of downward movement in market prices during the disposition period.

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A general market downturn or a specific market dislocation may result in lower investment returns for the private markets funds or portfolio companies in which our specialized funds and customized separate accounts invest, which consequently would materially and adversely affect investment returns for our specialized funds and customized separate accounts.

Furthermore, if the

portfolio companies default on their indebtedness, or otherwise seek or are forced to restructure their obligations or declare bankruptcy, we could lose some or all of our investment and suffer reputational harm.

Furthermore, if the portfolio companies default on their indebtedness, or otherwise seek or are forced to restructure their obligations or declare bankruptcy, we could lose some or all of our investment and suffer reputational harm.

We may pursue investment opportunities that involve business, regulatory, legal or other complexities.

We may pursue investment opportunities that have unusually complex business, regulatory and/or legal aspects to them.

This complexity presents risks, as such transactions can be more difficult, expensive and time-consuming to finance and execute, it can be more difficult to manage or realize value from the assets acquired in such transactions and such transactions sometimes involve a higher level of regulatory scrutiny or a greater risk of contingent liabilities.

Some of our investments may be structured as an investment in which we only acquire a minority interest or in which two or more investors serve together or collectively as equity sponsors, which generally means that any governance rights must be shared with the other investors.

Accordingly, decisions relating to the investment may be made by third parties, which could have a material adverse effect on the returns achieved by us on the investment.

Complexity presents risks, as such transactions can be more difficult, expensive and time-consuming to finance and execute, it can be more difficult to manage or realize value from the assets acquired in such transactions and such transactions sometimes involve a higher level of regulatory scrutiny or a greater risk of contingent liabilities.

Any of these risks could materially and adversely affect our business, financial condition and results of operations.

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We cannot give assurance as to the degree of diversification that will be achieved in any of our specialized funds or customized separate accounts.

Difficult market conditions or slowdowns affecting a particular asset class, geographic region or other category of investment could have a significant adverse impact on a given specialized fund or customized separate account if its investments are concentrated in that area, which would result in lower investment returns.

Difficult market conditions or slowdowns affecting a particular asset class, industry, geographic region or other category of investment could have a significant adverse impact on a given specialized fund or customized separate account if its investments are concentrated in that area, which would result in lower investment returns.

Accordingly, a lack of diversification on the part of a specialized fund or customized separate account could adversely affect its investment performance and, as a result, our business, financial condition and results of operations.

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Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a company in which one or more of our specialized funds, customized separate accounts or advisory accounts hold an investment, holders of securities ranking senior to our clients’ investments would typically be entitled to receive payment in full before distributions could be made in respect of our clients’ investments.

After repaying senior security holders, the company may not have any remaining assets to use for repaying amounts owed in respect of

our clients’ investments.

After repaying senior security holders, the company may not have any remaining assets to use for repaying amounts owed in respect of our clients’ investments.

To the extent that any assets remain, holders of claims that rank equally with our clients’ investments would be entitled to share on an equal and ratable basis in distributions that are made out of those assets.

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In addition, we are required to develop continuously our infrastructure in response to the increasingly complex investment management industry and increasing sophistication of investors.

Legal and regulatory developments also contribute to the level of our expenses.

and regulatory developments also contribute to the level of our expenses.

The future growth of our business will depend, among other things, on our ability to maintain the appropriate infrastructure and staffing levels to sufficiently address our growth and may require us to incur significant additional expenses and commit additional senior management and operational resources.

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In particular, as we enter new lines of business or offer new products, our historical data may be incomplete.

Failure of our risk

management techniques could materially and adversely affect our business, financial condition and results of operations, including our right to receive incentive fees.

Failure of our risk management techniques could materially and adversely affect our business, financial condition and results of operations, including our right to receive incentive fees.

The due diligence process that we undertake in connection with investments may not reveal all facts that may be relevant in connection with an investment.

Before making or recommending investments for our clients, we conduct due diligence that we deem reasonable and appropriate based on the facts and circumstances applicable to each investment.

When conducting due diligence, we may be required to evaluate important and complex business, financial, tax, accounting, technological, environmental, social, governance and legal and regulatory issues.

When conducting due diligence, we may be required to evaluate important, complex, and sometimes evolving, business, financial, tax, accounting, technological, environmental, social, governance and legal and regulatory issues.

Outside consultants, legal advisors and accountants may be involved in the due diligence process in varying degrees depending on the type of investment and the parties involved.

Nevertheless, when conducting due diligence and making an assessment regarding an investment, we rely on the resources available to us, including information provided by the target of the investment and, in some circumstances, third-party investigations, and such an investigation will not necessarily result in the investment ultimately being successful.

some circumstances, third-party investigations, and such an investigation will not necessarily result in the investment ultimately being successful.

Moreover, the due diligence investigation that we will carry out with respect to any investment opportunity may not reveal or highlight all relevant facts (including bribery, fraud or other illegal activities) or risks that are necessary or helpful in evaluating such investment opportunity.

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Financial fraud or other deceptive practices, or failures by personnel at such companies to comply with anti-bribery, trade sanctions or other legal and regulatory requirements, could cause significant legal, reputational and business harm to us.

In addition, a substantial portion of our specialized funds are funds-of-funds, and therefore we are dependent on the due diligence investigation of the general partner or co-investment partner leading such investment.

In addition, a substantial portion of our specialized funds are funds-of-funds, and therefore we are dependent on the due diligence investigation of the general partner or direct/co-investment partner leading such investment.

We have little or no control over their due diligence process, and any shortcomings in their due diligence could be reflected in the performance of the investment we make with them on behalf of our clients.

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In recent years, we have substantially upgraded and expanded the capabilities of our data processing systems and other operating technology, and we expect that we will need to continue to upgrade and expand these capabilities in the future to avoid disruption of, or constraints on, our operations.

We may incur significant costs to further upgrade our data processing systems and other operating technology in the future.

significant costs to further upgrade our data processing systems and other operating technology in the future.

In addition, we are dependent on the effectiveness of our information security policies, procedures and capabilities designed to protect our computer, network and telecommunications systems and the data such systems contain or transmit.

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Although we take protective measures and endeavor to modify them as circumstances warrant, our computer systems, software and networks may be vulnerable to unauthorized access, theft, misuse, computer viruses or other malicious code, and other events that could have a security impact.

We and our employees have been and expect to continue to be the target of “phishing” attacks, and the subject of impersonations and fraudulent requests for money, and other forms of activities.

We, our employees and certain of our third-party service providers have been and expect to continue to be the target of “phishing” attacks, and the subject of impersonations and fraudulent requests for money, and other forms of activities.

Further, the majority of our employees globally have been working remotely in accordance with local government guidance and social distancing recommendations related to the COVID-19 pandemic, which could introduce operational risks, including heightened cybersecurity risk.

The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means.

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Many jurisdictions in which we operate have laws and regulations relating to data privacy, cybersecurity and protection of personal information, including the General Data Protection Regulation (“GDPR”) in the EU.

See “—Rapidly developing and changing privacy laws and regulations could increase compliance costs and subject us to enforcement risks and reputational damage.” Some jurisdictions have also enacted laws requiring companies to notify individuals of data security breaches involving certain types of personal data.

See “—Rapidly developing and changing privacy laws and regulations could increase compliance costs and subject us to enforcement risks and reputational damage.” Some jurisdictions have also enacted laws requiring companies to notify individuals and governmental agencies of data security breaches involving certain types of personal data.

Breaches in security could potentially jeopardize our, our employees’ or our clients’ or counterparties’ confidential, proprietary and other information processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our, our employees’, our clients’, our counterparties’ or third parties’ operations, which could result in material financial losses, increased costs, disruption of our business, liability to clients and other counterparties, regulatory intervention or reputational damage, which, in turn, could cause a decline in our earnings and/or stock price.

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In addition, insurance and other safeguards might only partially reimburse us for our losses, if at all.

Finally, we rely on third-party service providers for certain aspects of our business, including for certain information systems, technology, administration, payroll, tax, legal and compliance matters.

Their inability or failure to perform as expected or in accordance with the terms of their engagements with us could have a material adverse effect on the operation of our business.

These third-party service providers could also experience any of the above cybersecurity threats, fraudulent activities or security breaches, and as a result, unauthorized individuals could improperly gain access to our confidential data.

Any interruption or deterioration in the performance of these third parties, cybersecurity incidents involving

these third parties or failures of their information systems and technology could impair the quality of our funds’ operations, affect our reputation and adversely affect our business, financial condition and results of operations.

Any interruption or deterioration in the performance of these third parties, cybersecurity incidents involving these third parties or failures of their information systems and technology could impair the quality of our funds’ operations, affect our reputation and adversely affect our business, financial condition and results of operations.

Rapidly developing and changing privacy laws and regulations could increase compliance costs and subject us to enforcement risks and reputational damage.

We are subject to various risks and costs associated with the collection, processing, storage and transmission of personal data and other sensitive and confidential information.

Personal data is information that can be used to identify a natural person, including names, photos, email addresses, or computer IP addresses.

Personal data is information that can be used to identify a natural person, including names, photos, email addresses, or

computer IP addresses.

This data is wide ranging and relates to our clients, employees, counterparties and other third parties.

Our compliance obligations include those relating to state laws, such as the California Consumer Privacy Act (“CCPA”), which provides for enhanced privacy protections for California residents, a private right of action for data breaches and statutory fines and damages for data breaches or other CCPA violations, as well as well as a requirement of “reasonable” cybersecurity.

We are also required to comply with foreign data collection and privacy laws in various non-U.S.

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Our business is subject to many privacy laws in addition to the CCPA and GDPR.

In addition, some countries and states are considering or have passed legislation implementing data protection requirements or requiring local storage and processing of data or similar requirements that could increase the cost and complexity of delivering our services.

There are currently a number of proposals pending before federal, state, and foreign legislative and regulatory bodies.

While we have taken various measures to help ensure that our policies, processes and systems are in compliance with our obligations, our potential liability remains, particularly given the continued and rapid development of privacy laws and regulations around the world, varied requirements from jurisdiction to jurisdiction, increased enforcement action and significant monetary penalties.

While we have taken various measures to help ensure that our policies, processes and systems are in compliance with our obligations, our potential liability remains, particularly given the continued and rapid development of privacy laws and regulations around the United States and the world, varied requirements from jurisdiction to jurisdiction, increased enforcement action and significant monetary penalties.

Any inability, or perceived inability, to adequately address privacy concerns, or comply with applicable laws, regulations, policies, industry standards and guidance, contractual obligations, or other legal obligations, even if unfounded, could result in significant regulatory and third-party liability, increased costs, disruption of our business and operations, and a loss of client confidence and other reputational damage.

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In recent years, the volume of claims and amount of damages claimed in litigation and regulatory proceedings against financial advisors has been increasing.

Our asset management and advisory activities may subject us to the risk of significant legal liabilities to our clients and third parties, including our

clients’ stockholders or beneficiaries, under securities or other laws and regulations for materially false or misleading statements made in connection with securities and other transactions.

In our investment management business, we make investment decisions on behalf of our clients that could result in substantial losses.

Our asset management and advisory activities may subject us to the risk of significant legal liabilities to our clients and third parties, including our clients’ stockholders or beneficiaries, under securities or other laws and regulations for materially false or misleading statements made in connection with securities and other transactions.

In our investment management business, we make investment decisions on behalf of our clients, or make investment recommendations to our clients, that could result in substantial losses.

Any such losses also may subject us to the risk of legal and regulatory liabilities or actions alleging negligent misconduct, breach of fiduciary duty or breach of contract.

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We may incur significant legal expenses in defending litigation.

In addition, negative publicity and press speculation about us, our investment activities or the private markets in general, whether or not based in truth, or litigation or regulatory action against us or any third-party managers recommended by us or involving us may tarnish our reputation and harm our ability to attract and retain clients.

In addition, negative publicity and press speculation about us, our investment activities or the private markets in general, whether or not based in truth, or litigation or

regulatory action against us or any third-party managers recommended by us or involving us may tarnish our reputation and harm our ability to attract and retain clients.

Substantial legal or regulatory liability could materially and adversely affect our business, financial condition or results of operations or cause significant reputational harm to us, which could seriously harm our business.

We are subject to increasing scrutiny from clients, investors and regulators with respect to ESG costs of investments made by our specialized funds, which may constrain investment opportunities for our specialized funds and adversely affect our ability to raise capital from such clients and investors.

In recent years, certain clients and investors have placed increasing importance on ESG implications of investments made by private equity and other funds to which they commit capital.

Certain investors have also demonstrated increased activism with respect to existing investments, including by urging asset managers to take certain actions that could adversely affect the value of an investment, or refrain from taking certain actions that could improve the value of an investment.

At times, clients and investors have conditioned future capital commitments on the taking or refraining from taking of such actions.

Clients’ and investors’ increased focus and activism related to ESG and similar matters may constrain our investment opportunities.

In addition, clients and investors may decide to not commit capital to future fundraises as a result of their assessment of our approach to and consideration of the ESG cost of investments made by our specialized funds.

To the extent our access to capital from such clients and investors is impaired, we may not be able to maintain or increase the size of our specialized funds or raise sufficient capital for new specialized funds, which may adversely affect our revenues.

In addition, ESG matters have been the subject of increased focus by certain regulators in the United States and EU.

As a result of these legislative initiatives, we may be required to provide additional disclosure to investors in our specialized funds with respect to ESG matters, and we and our specialized funds may be subject to enhanced regulatory scrutiny for compliance with any regulatory requirements.

Our international operations are subject to certain risks, which may affect our revenue.

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Such non-U.S.

investments involve certain factors

not typically associated with U.S.

investments involve certain factors not typically associated with U.S.

investments, including risks related to (i) currency exchange matters, such as exchange rate fluctuations between the U.S.

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In addition, in January 2020, the U.K.

withdrew from the European Union, with a transition period currently expected to end in December 2020.

Until that deadline, the U.K.

will effectively be treated as a member-state of the EU with respect to applicable rules and regulations.

withdrew from the European Union, and the transition period during which the U.K.

was treated as a member of the EU ended December 31, 2020.

Our business may be adversely affected by Brexit due to, among other things, disruption of the free movement of goods, services, capital, and people between the U.K.

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Furthermore, as a result of Brexit, our subsidiaries that are authorized and regulated by the U.K.

Financial Conduct Authority may no longer be able to avail themselves of passporting rights under certain EU directives (such as the AIFMD and MiFID II) to provide services and perform activities in the U.K.

Financial Conduct Authority are no longer able to avail themselves of passporting rights under certain EU directives (such as the AIFMD and MiFID II) to provide services and perform activities in the U.K.

and other parts of Europe.

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Compliance with any such new laws and regulations in the U.K.

may be difficult and/or costly to implement and could adversely impact our ability to raise capital from investors in the U.K.

may be difficult and/or costly to implement and could adversely impact our ability

to raise capital from investors in the U.K.

and the EU, which could materially reduce our revenue, earnings and cash flow and adversely affect our financial prospects and condition.

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It is unclear whether any other member states of the EU will hold such referendums, but further disruption and legal uncertainty can be expected if there are.

Our inability to obtain adequate insurance could subject us to additional risk of loss or additional expenses.

We may not be able to obtain or maintain sufficient insurance on commercially reasonable terms or with adequate coverage levels against potential liabilities we may face, which could have a material

adverse affect on our business.

We may face a risk of loss from a variety of claims, including those related to contracts, fraud, compliance with laws and various other issues, whether or not such claims are valid.

Insurance and other safeguards might only partially reimburse us for our losses, if at all, and if a claim is successful and exceeds or is not covered by our insurance policies, we may be required to pay a substantial amount in respect of such successful claim.

Certain losses of a catastrophic nature, such as wars, earthquakes, typhoons, terrorist attacks or other similar events, may be uninsurable or may only be insurable at rates that are so high that maintaining coverage would cause an adverse impact on our business, in which case we may choose not to maintain such coverage.

Risks Related to Our Industry

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This competitive pressure could adversely affect our ability to make successful investments and restrict our ability to raise future funds, either of which would materially and adversely impact our business, financial condition and results of operations.

Difficult market and geopolitical conditions can adversely affect our business in many ways, including by reducing the market value of the assets we manage, causing our clients to reduce their investments in private markets or adversely affecting our ability to conduct our business.

Our business can be materially affected by difficult financial market and economic conditions and events throughout the world that are outside our control, including rising interest rates, inflation, the availability of credit, changes in laws, trade barriers, public health crises, terrorism or political

These factors may affect the level and volatility of securities prices and the liquidity and value of investments, and we may not be able to or may choose not to manage our exposure to them.

Difficult or volatile market and geopolitical conditions can adversely affect our business and the investments made by our specialized funds, customized separate accounts and advisory accounts in many ways.

Our business and the performance of investments made by our specialized funds, customized separate accounts and advisory accounts can be materially affected by difficult or volatile financial market and geopolitical conditions and events throughout the world that are outside our control, including rising interest rates, inflation, the availability of credit, changes in laws, trade barriers, public health crises, civil unrest, trade conflicts, war or threat of war, terrorism or political uncertainty.

These factors

may affect the level and volatility of securities prices and the liquidity and value of investments, and we may not be able to or may choose not to manage our exposure to them.

Market deterioration could cause us, the specialized funds and customized separate accounts we manage or the funds in which they invest to experience tightening of liquidity, reduced earnings and cash flow and impairment charges, as well as challenges in raising and deploying capital, obtaining investment financing and making investments on attractive terms.

These market conditions can also have an impact on our ability and the ability of funds in which we and our clients invest to liquidate positions in a timely and efficient manner.

More costly and restrictive financing may also adversely impact the returns of our co-investments in leveraged buyout transactions and, therefore, adversely affect the results of operations and financial condition of our co-investment funds.

Our business could generate lower revenue in a general economic downturn or a tightening of global credit markets.

While our revenue continued to grow during the economic downturn beginning in 2008, we may not experience a similar outcome during subsequent downturns, including the current one triggered by the COVID-19 pandemic.

A general economic downturn or tightening of global credit markets may result in reduced opportunities to find suitable investments and make it more difficult for us, or for the funds in which we and our clients invest, to exit and realize value from existing investments, potentially resulting in a decline in the value of the investments held in our clients’ portfolios, leading to a decrease in incentive fee revenue.

A general economic downturn or tightening of global credit markets may result in reduced opportunities to find suitable investments and make it more difficult for us, or the funds in which we and our clients invest, to exit and realize value from existing investments, potentially resulting in a decline in the value of the investments held in our clients’ portfolios and a decrease in incentive fee revenue.

Any reduction in the market value of the assets we manage will not likely be reported until one or more quarters after the end of the applicable performance period due to an inherent lag in the valuation process of private markets investments.

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Further, if, due to the lag in reporting, their decision to do so is made after the initial effects of a market downturn are felt by the rest of the economy, the adverse effect we experience as a result of that decision could likewise adversely affect our results of operations on a delayed basis.

Geopolitical concerns and other global events, such as political developments, economic instability, natural disasters, civil unrest, trade conflicts, war or threat of war, terrorist attacks, pandemics or other severe public health events are examples of other conditions and events outside of our control that can materially and adversely affect our ability to conduct our business, as well as the value of our investments.

See “—The COVID-19 pandemic has caused severe disruptions in the U.S.

and global economies and may adversely impact our financial condition and results of operations.”

Our profitability may also be adversely affected by our fixed costs and the possibility that we would be unable to scale back other costs within a time frame sufficient to match any decreases in revenue relating to changes in market and economic conditions.

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Accordingly, difficult market conditions could materially and adversely affect our business, financial condition and results of operations.

Volatility and disruption in the equity and credit markets, whatever the cause, could also adversely affect the portfolio companies in which private markets funds invest, which, in turn, would adversely affect the performance of our specialized funds, customized separate accounts and advisory accounts.

For example, the lack of available credit or the increased cost of credit may materially and adversely affect the performance of funds that rely heavily on leverage such as leveraged buyout funds.

Disruptions in the debt and equity markets may make it more difficult for funds to exit and realize value from their investments, because potential buyers of portfolio companies may not be able to finance acquisitions and the equity markets may become unfavorable for IPOs.

In addition, the volatility will directly affect the market prices of securities issued by many companies for reasons unrelated to their operating performance and may adversely affect the valuation of the investments of our specialized funds, customized separate accounts and advisory accounts.

Any or all of these factors may result in lower investment returns.

The global financial markets continue to experience volatility and disruption due to the COVID-19 pandemic, and any economic recovery will likely be uneven and characterized by meaningful dispersion across sectors and regions.

There can be no assurance that initiatives taken by governmental authorities designed to strengthen and stabilize the economy and financial markets will be successful, and there is no way to predict the ultimate impact of the disruption or the effect that these initiatives will have on the performance of our specialized funds, customized separate accounts or advisory accounts.

See “—The COVID-19 pandemic has caused severe disruptions in the U.S.

and global economies and may adversely impact our financial condition and results of operations.”

The COVID-19 pandemic has caused severe disruptions in the U.S.

and global economies and may adversely impact our financial condition and results of operations.

The outbreak of the COVID-19 pandemic led much of the world to institute stay-at-home orders, restrictions on travel, bans on public gatherings, the closing of non-essential businesses or limiting their hours of operation and other restrictions on businesses and their operations, which has adversely impacted global commercial activity and contributed to significant volatility and a downturn in global financial markets.

While some of these restrictions are being relaxed or lifted in an effort to generate more economic activity, the risk of future COVID-19 outbreaks remains, and jurisdictions may reimpose them in an effort to mitigate risks to public health.

Moreover, even where restrictions are and remain lifted, the absence of viable treatment options or a vaccine could lead people to continue to self-isolate and not participate in the economy at pre-pandemic levels for a prolonged period of time.

As a result, we are

unable to predict the ultimate adverse impact of the pandemic, but it has affected, and may further affect, our business in various ways, including, but not limited to, the following:

• We operate our business globally, with clients and offices across North America, Europe, Asia-Pacific, Latin America and the Middle East.

The outbreak of the COVID-19 pandemic in early 2020 led much of the world to institute stay-at-home orders, restrictions on travel, transportation, education, production of goods, provision of services, bans on public gatherings, the closing of non-essential businesses or limiting their hours of operation and other restrictions on businesses and their operations in an effort to slow the transmission of the virus.

These restrictions have adversely impacted global commercial activity and contributed to significant disruption and uncertainty in the global financial markets.

While restrictions have been relaxed or lifted in many jurisdictions in an effort to generate more economic activity, the risk of future COVID-19 outbreaks remains, and jurisdictions may reimpose them in an effort to mitigate risks to public health, especially if more infectious strains of the virus spread.

Although a number of vaccines have been developed, the timing of widespread global vaccination is uncertain and these vaccines may be less effective against new, mutated strains of the virus, potentially leading people to continue to self-isolate and not participate in the economy at pre-pandemic levels for a prolonged period of time.

Given the amount of uncertainty regarding the scope and duration of the COVID-19 pandemic, it is currently not possible to predict the precise impact it will have on our business, but it has impacted, and may further impact, our business in various ways, including but not limited to the following:

• We operate our business and target investment opportunities globally, with clients and offices across North America, Europe, Asia-Pacific and the Middle East.

The ability to easily travel and meet with prospective and current clients in person helps build and strengthen our relationships with them in ways that telephone and video conferences may not always afford.

In addition, the ability of our employees to conduct their daily work in our offices helps to ensure a level of productivity that may not be achieved when coming to the office every day is not an option.

Further, our investment strategies target opportunities globally.

Restrictions on travel and public gatherings as well as stay-at-home orders mean that most of our client and prospect meetings are not currently taking place in person, and the vast majority of our employees are working from home.

As a consequence, our ability to market our funds and raise new business has been impeded (which may result in lower or delayed revenue growth), it has become more difficult to conduct due diligence on investments (which can impede the identification of investment risks) and an extended period of remote working by our employees could strain our technology resources and introduce operational risks, including heightened cybersecurity risk, as remote working environments can be less secure and more susceptible to hacking attacks.

Restrictions on travel and gatherings as well as stay-at-home orders mean that most of our client and prospect meetings are not currently taking place in person, and the vast majority of our employees are working from home.

As a consequence, our ability to market our funds and raise new business has been impeded (which may result in lower or delayed revenue growth), it has become more difficult to conduct due diligence on investments (which can impede the identification of investment risks) and remote working by our employees during this period could strain our technology resources and introduce operational risks, including heightened cybersecurity risk, as remote working environments can be less secure and more susceptible to hacking attacks.

• A slowdown in fundraising activity could result in delayed or decreased management fees compared to prior periods.

In addition, in light of declines in public equity markets and other components of their investment portfolios, investors may become restricted by their asset allocation policies to invest in new or successor funds that we provide, or may be prohibited by new laws or regulations from funding existing commitments.

In addition, investors may become restricted by their asset allocation policies to invest in new or successor funds that we provide, or may be prohibited by new laws or regulations from funding existing commitments.

Further, the uncertainties brought about by the pandemic may cause investors to change their investment strategies or limit the amount of capital they are willing to commit, and that may additionally and negatively affect our ability to raise funds.

We may also experience a slowdown in the deployment of our capital, which could also adversely affect our ability to raise capital for new or successor funds.

• While the market dislocation caused by COVID-19 may present attractive investment opportunities due to increased volatility in the financial markets, we may not be able to complete those investments, which could impact revenue, particularly for specialized funds and customized separate accounts that charge fees on invested capital.

• Our liquidity and cash flows may be adversely impacted by declines or delays in realized incentive fees and management fee revenues.

As of March 31, 2020, we have $50.1 million in available cash and $125 million in availability under our Loan Agreements.

• Our specialized funds and customized separate accounts invest in industries that have been materially impacted by the COVID-19 pandemic, including healthcare, travel, entertainment, hospitality and retail.

Companies in these industries are facing operational and financial hardships resulting from the pandemic, and if conditions do not improve, they could continue to suffer materially, become insolvent or cease operations altogether, any of which would decrease the value of the investments.

Underlying investments within our specialized funds and customized separate accounts reflect valuations determined as of December 31, 2019, which is prior to the time when the pandemic started to adversely impact global economies and, therefore, we will likely have a negative valuation adjustment in the next quarter based on March 31, 2020 valuations.

Adverse investment valuations would directly impact our unrealized carried interest, AUM and AUA.

• Incentive fee revenue, which is typically volatile and largely unpredictable, has in the past and may in the future decrease as the ability of general partners to exit existing investments may be limited due to uncertainty in the global economic markets.

• While the market dislocation caused by COVID-19 would be expected to present attractive investment opportunities due to increased volatility in the financial markets, we may not be able to complete those investments, which could impact revenue, particularly for specialized funds and customized separate accounts that charge fees on invested capital.

• Our liquidity and cash flows may be adversely impacted by declines in realized incentive fees and management fee revenues.

As of March 31, 2021, we have adequate liquidity with $87 million in available cash and $35 million in availability under our Loan Agreements.

• Our specialized funds and customized separate accounts invest in industries that have been, and continue to be, materially impacted by the COVID-19 pandemic, including healthcare, travel, entertainment, hospitality and retail.

Companies in these industries are facing operational and financial hardships resulting from the pandemic, and if conditions are volatile or do not improve, they could continue to suffer materially, become insolvent or cease operations altogether, any of which would decrease the value of the investments and/or cause significant volatility in valuations.

Underlying investments within our specialized funds and customized separate accounts reflect valuations determined as of December 31, 2020.

Decreases in public markets and credit indices as well as decreases in current or future estimated performance of underlying portfolio companies in quarters ending after that date may result in negative valuation adjustments that will be reported on a three-month lag in accordance with our accounting policy.

Adverse investment valuations directly impact our investments, equity in income of investees, unrealized carried interest, AUM and AUA for the period.

• COVID-19 presents a threat to our employees’ well-being and morale.

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In addition to any potential impact of such extended illness on our operations, we may be exposed to the risk of litigation by our employees against us for, among other things, failure to take adequate steps to protect their well-being, particularly in the event they become sick after a return to the office.

A prolonged period of remote work may also make it more difficult to integrate new employees and maintain our culture.

Further, local COVID-19-related laws can be subject to rapid change depending on public health developments, which can lead to confusion and make compliance with laws uncertain and subject us to increased risk of litigation for non-compliance.

• We anticipate that regulatory oversight and enforcement will become more rigorous for public companies in general, and for the financial services industry in particular, as a result of the recent volatility in the financial markets.

• Regulatory oversight and enforcement has become more rigorous for public companies in general, and for the financial services industry in particular, as a result of the volatility in the financial markets.

We believe COVID-19’s adverse impact on our business, financial condition and results of operations will be significantly driven by a number of factors that we are unable to predict or control, including, for example:

the severity and duration of the pandemic, including the timing of availability of a treatment or vaccine for COVID-19; the pandemic’s impact on the U.S.

and global economies; the timing, scope and effectiveness of additional governmental responses to the pandemic; the timing and path of economic recovery; and the negative impact on our clients, counterparties, vendors and other business partners that may indirectly adversely affect us.

the severity and duration of the pandemic; the pandemic’s impact on the U.S.

and global economies; the timing, scope and effectiveness of additional governmental responses to the pandemic; the timing and path of economic recovery; and the negative impact on our portfolio investments, clients, counterparties, vendors and other business partners that may indirectly adversely affect us.

The impact of COVID-19 may also exacerbate the other risks discussed in this Form 10-K.

Extensive government regulation, compliance failures and changes in law or regulation could adversely affect us.

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Any changes or potential changes in the regulatory framework applicable to our business may impose additional expenses or capital requirements on us, limit our fundraising activities, have an adverse effect on our results of operations, financial condition, reputation or prospects, impair employee retention or recruitment and require substantial attention by senior management.

It is impossible to determine the extent of the impact of any new laws, regulations, initiatives or regulatory guidance that may be proposed or may become law on our business or the markets in which we operate.

The recent change in presidential administrations increases the potential for legislative changes and regulatory reform and has led and will lead to leadership changes at a number of U.S.

federal regulatory agencies with oversight over the U.S.

financial services industry.

This poses uncertainty with respect to such agencies’ policy priorities and may lead to increased regulatory enforcement activity in the financial services industry.

Governmental authorities around the world have implemented or are implementing financial system and participant regulatory reform in reaction to volatility and disruption in the global financial markets, financial institution failures and financial frauds.

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We could also be adversely affected by changes in applicable tax laws, regulations, or administrative interpretations thereof.

For example, the U.S.

federal tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”), enacted in December 2017, resulted in fundamental changes to the Code, including, among many other things, a reduction to the federal corporate income tax rate, a partial limitation on the deductibility of business interest expense, a limitation on the deductibility of certain director and officer compensation expense, limitations on net operating loss carrybacks and carryovers and changes relating to the scope and timing of U.S.

taxation on earnings from international business operations.

Subsequent legislation, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) enacted on March 27, 2020, relaxed certain of the limitations imposed by the Tax Act for certain

taxable years, including the limitation on the use and carryback of net operating losses and the limitation on the deductibility of business interest expense.

The exact impact of the Tax Act and the CARES Act for future years is difficult to quantify, but these changes could materially affect our investors, the companies in which our funds invest, or us.

In addition, other changes could be enacted in the future to increase the corporate tax rate, limit further the deductibility of interest, subject carried interests to more onerous taxation or effect other changes that could have a material adverse effect on our business, results of operations and financial condition.

Such changes could also include increases in state taxes and other changes to state tax laws to replenish state and local government finances depleted by costs attributable to the COVID-19 pandemic and the reduction in tax revenues due to the accompanying economic downturn.

The new Biden administration has provided initial guidance on what U.S.

tax law reforms the President would support.

Among other things, the administration may pursue tax policies seeking to increase the corporate income tax rate, which could materially increase the amount of taxes we would be required to pay.

The new administration has also proposed to increase individual ordinary and capital gains tax rates, which would increase the amount of tax distributions that HLA is required to pay to its members.

See “—Risks Related to our Organizational Structure—In certain circumstances, HLA is required to make distributions to us and the direct and indirect owners of HLA, and the distributions that HLA will be required to make may be substantial.” Other changes that could be enacted in the future, including changes to tax laws enacted by state or local governments in jurisdictions in which we operate, could result in further changes to state and local taxation and materially adversely affect our financial position and results of operations.

In addition, our effective tax rate and tax liability are based on the application of current income tax laws, regulations and treaties.

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Even if a sanction imposed against us or our personnel is small in monetary amount, the adverse publicity arising from the imposition of sanctions against us by regulators could harm our reputation and cause us to lose existing clients or fail to gain new clients.

The requirements imposed by our regulators under the Investment Advisers Act are designed primarily to ensure the integrity of the financial markets and to protect our clients and are not designed to protect our stockholders.

In the wake of highly publicized financial scandals, investors exhibited concerns over the integrity of the U.S.

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The Foreign Investment Risk Review Modernization Act significantly increased the types of transactions that are subject to the jurisdiction of the Committee on Foreign Investment in the United States (“CFIUS”).

Once the reform legislation is fully implemented through the rulemaking process, CFIUS will have the authority to review and potentially recommend that the President of the United States block or impose conditions on non-controlling investments in critical infrastructure and critical technology companies and in companies collecting or storing sensitive data of U.S.

citizens, which may reduce the number of potential buyers and limit the ability of our funds to realize value from certain existing and future investments.

In the EU, the MiFID II requires, among other things, all MiFID investment firms to comply with prescriptive disclosure, transparency, reporting and recordkeeping obligations and obligations in relation to the receipt of investment research, best execution, product governance and marketing communications.

As we operate investment firms which are subject to MiFID, we have implemented policies and procedures to comply with MiFID II where relevant, including where certain rules have an extraterritorial impact on us.

Compliance with MiFID II has resulted in greater overall complexity, higher compliance, administration and operational costs, and less overall flexibility.

CFIUS has the authority to review and potentially block or impose conditions on certain foreign investments in U.S.

companies or real estate, which may reduce the number of potential buyers and limit the ability of our funds to realize value from certain existing and future investments.

Federal, state and foreign anti-corruption and sanctions laws create the potential for significant liabilities and penalties and reputational harm.

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Department of State.

The FCPA is intended to prohibit bribery of foreign governments and their officials and political parties, and requires public companies in the United States to keep books and records that accurately and fairly reflect those companies’ transactions.

those companies’ transactions.

OFAC, the U.S.

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jurisdictions, such as EU sanctions or the U.K.

Bribery Act, as well as other

applicable anti-bribery, anti-corruption, anti-money laundering, or sanction or other export control laws in the U.S.

and abroad, may also impose stricter or more onerous requirements than the FCPA, OFAC, the U.S.

Bribery Act, as well as other applicable anti-bribery, anti-corruption, anti-money laundering, or sanction or other export control laws in the United States and abroad, may also impose stricter or more onerous requirements than the FCPA, OFAC, the U.S.

Department of Commerce and the U.S.

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We provide investment advisory and other services and raise funds in a number of countries and jurisdictions outside the United States.

In many of these countries and jurisdictions, which include the EU, the EEA, the individual member states of each of the EU and EEA, the U.K., Hong Kong, Korea, Brazil and Japan, we and our operations, and in some cases our personnel, are subject to regulatory oversight and requirements.

In general, these requirements relate to registration, licenses for our personnel, periodic inspections, the provision and filing of periodic reports, and obtaining certifications and other approvals.

In many of these countries and jurisdictions, which include the U.K., the EU, the EEA, certain of the individual member states of each of the EU and EEA, Australia, Canada, Hong Kong, Israel, Singapore, South Korea and Japan, we and our operations, and in some cases our personnel, are subject to regulatory oversight and requirements.

In general, these requirements relate to registration, licenses for our personnel, periodic inspections, marketing activities, the provision and filing of periodic reports, and obtaining certifications and other approvals.

Across the EU, we are subject to the AIFMD, under which we are subject to regulatory requirements regarding, among other things, registration for marketing activities, the structure of remuneration for certain of our personnel and reporting obligations.

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Because some EEA countries have not yet incorporated the AIFMD into their agreement with the EU, we may undertake marketing activities and provide services in those EEA countries only in compliance with applicable local laws.

Outside the EEA, the regulations to which we are subject relate primarily to registration and reporting obligations.

It is expected that additional laws and regulations will come into force in the EEA, the EU, and other countries in which we operate over the coming years.

These laws and regulations may affect our costs and manner of conducting business in one or more markets, the risks of doing business, the assets that we manage or advise, and our ability to raise capital from investors.

In certain other jurisdictions, we are subject to various securities and other laws relating to fundraising and other matters.

Failure to maintain compliance with applicable laws and regulations could result in regulatory intervention, adversely affect our business or ability to provide services to our clients and harm our reputation.

In the EU, the MiFID II requires, among other things, all MiFID II investment firms to comply with prescriptive disclosure, transparency, reporting and recordkeeping obligations and obligations in relation to the receipt of investment research, best execution, product governance and marketing communications.

As we operate investment firms which are subject to MiFID II, we have implemented policies and procedures to comply with MiFID II where relevant, including where certain rules have an extraterritorial

impact on us.

Compliance with MiFID II has resulted in greater overall complexity, higher compliance, administration and operational costs, and less overall flexibility.

The complexity, operational costs and reduction in flexibility may be further compounded as a result of U.K.’s departure from the EU.

This is because the U.K.

(i) no longer generally required to transpose EU law into U.K.

law and (ii) has transposed certain EU legislation into U.K.

law subject to various amendments and subject to the U.K.

Financial Conduct Authority’s oversight rather than that of EU regulators.

Taken together, this could result in divergence between the U.K.

and EU regulatory frameworks.

Outside the U.K.

and EEA, the regulations to which we are subject relate primarily to registration and reporting obligations.

It is expected that additional laws and regulations will come into force in the U.K., EEA, the EU, and other countries in which we operate over the coming years.

Regulation (EU) 2019/2033 on the prudential requirements for investment firms (“IFR”) and Directive (EU) 2019/2034 on the prudential supervision of investment firms (“IFD”) entered into force on December 25, 2019, although many parts of the IFR and IFD will not apply until June 26, 2021.

Together, the IFR and IFD will introduce a new prudential regime for those of our EU investment firms that are subject to MiFID II, including new requirements, such as general capital requirements, liquidity requirements, remuneration requirements, requirements to conduct internal capital adequacy assessments and additional requirements on disclosures and public reporting.

The legislation could hinder our ability to deploy capital as freely as we would wish and to recruit and incentivize staff.

Different and extended internal governance, disclosure, reporting, liquidity and group “prudential” consolidation requirements (among other things) could also have a material impact on our EU-based operations.

Further, the U.K.’s departure from the EU and the potential resulting divergence between the U.K.

and EU regulatory frameworks may result in additional complexity and costs in complying with regulations across both the U.K.

is also proposing to introduce a new prudential regime for investment firms that are subject to MiFID II (as implemented in the U.K.), to take effect on January 1, 2022.

The exact impact of the new U.K.

prudential regime is currently uncertain.

In addition, there may be changes to the AIFMD regime and also further regulation adopted, which may impact those parts of our business operating within the EU.

These laws and regulations, and any changes in them, may affect our costs and manner of conducting business in one or more markets, the risks of doing business, the assets that we manage or advise, and our ability to raise capital from investors.

In addition, Brexit may have adverse economic, political and regulatory effects on the operation of our business.

Any failure by us to comply with either existing or new laws or regulations could have a material adverse effect on our business, financial condition and results of operations.

Volatile market, political and economic conditions can adversely affect investments made by our specialized funds, customized separate accounts and advisory accounts.

The global financial markets are currently experiencing volatility and disruption due to the COVID-19 pandemic.

Volatility and disruption in the equity and credit markets, whatever the cause, could adversely affect the portfolio companies in which the private markets funds invest, which, in turn, would adversely affect the performance of our specialized funds, customized separate accounts and advisory accounts.

For example, the lack of available credit or the increased cost of credit may materially

and adversely affect the performance of funds that rely heavily on leverage such as leveraged buyout funds.

Any or all of these factors may result in lower investment returns.

Governmental authorities have undertaken, and may continue to undertake, a variety of initiatives designed to strengthen and stabilize the economy and the financial markets.

However, there can be no assurance that these initiatives will be successful, and there is no way to predict the ultimate impact of the disruption or the effect that these initiatives will have on the performance of our specialized funds, customized separate accounts or advisory accounts.

Investments in many industries have experienced significant volatility over the last several years.

The ability to realize investments depends not only on our investments and the investments made by the private markets funds and portfolio companies in which we invest and their respective results and prospects, but also on political and economic conditions, which are out of our control.

Continued volatility in political or economic conditions, including an outbreak or escalation of major hostilities, public health crises, declarations of war, terrorist actions or other substantial national or international calamities or emergencies, could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Organizational Structure

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When evaluating our internal control over financial reporting, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404.

If we identify any material weaknesses in our internal control over financial reporting or are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is ineffective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, we could fail to meet our reporting obligations or be required to restate our financial statements for prior periods.

identify any material weaknesses in our internal control over financial reporting or are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is ineffective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, we could fail to meet our reporting obligations or be required to restate our financial statements for prior periods.

Investors may also lose confidence in the accuracy and completeness of our financial reports, the market price of our Class A common stock could be negatively affected, and we could become subject to investigations by Nasdaq, the SEC or other regulatory authorities, which would require additional financial and management resources.

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Under these rules, a listed company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirement that (i) a majority of our board of directors consist of independent directors, (ii) director nominees be selected or recommended to the board by independent directors and (iii) we have a compensation committee that is composed entirely of independent directors.

We have elected to rely on these exemptions and expect to continue to do so.

As a result, we do not have a majority of independent directors, our compensation committee does not consist entirely of independent directors and our directors are not nominated or selected by independent directors.

Although the majority of our board of directors consists of independent directors, we have elected to rely on these exemptions and expect to continue to do so.

As a result, our directors are not nominated or selected by independent directors and our compensation committee does not consist entirely of independent directors.

Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of Nasdaq.

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These exchanges are likely to result in increases in our share of the tax basis of the assets of HLA that otherwise would not have been available.

The increases in tax basis may reduce the amount of tax that we would otherwise be required to pay in the future, although it is possible that the IRS might challenge all or part of that tax basis increase, and a court might sustain such a challenge.

might sustain such a challenge.

Our ability to achieve benefits from any tax basis increase will depend upon a number of factors, as discussed below, including the timing and amount of our future income.

We are required to pay over to legacy direct or indirect members of HLA most of the tax benefits we receive from tax basis step-ups attributable to our acquisition of membership units of HLA, and the amount of those payments could be substantial.

As part of our Reorganization, we entered into a tax receivable agreement for the benefit of the direct and indirect members of HLA other than us, pursuant to which we will pay them 85% of the amount of the tax savings, if any, that we realize (or, under certain circumstances, are deemed to realize) as a result of increases in tax basis (and certain other tax benefits) resulting from our acquisition of membership units or as a result of certain items of loss being specially allocated to us for tax purposes in connection

with dispositions by HLA of certain investment assets.

HLI will retain the benefit of the remaining 15% of these tax savings.

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Moreover, as a result of an elective early termination, a change of control or our material breach of our obligations under the tax receivable agreement, we could be required to make payments under the tax receivable agreement that exceed our actual cash savings under the tax receivable agreement.

Thus, our obligations under the tax receivable agreement could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, or other forms of business combinations or changes of control.

of business combinations or changes of control.

There can be no assurance that we will be able to finance any such early termination payment.

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Instead, taxable income is allocated to members, including us.

Pursuant to the HLA Operating Agreement, HLA makes pro rata cash distributions, or tax distributions, to the members, including us, calculated using an assumed tax rate, to help each of the members to pay taxes on such member’s allocable share of the cumulative taxable income, reduced by cumulative taxable losses.

Under applicable tax rules, HLA is required to allocate net taxable income disproportionately to its members in certain circumstances.

Because tax distributions are determined based on the member who is allocated the largest amount of taxable income on a per unit basis and on an assumed tax rate that is the highest possible rate applicable to any member, but are made pro rata based on ownership, HLA is required to make tax distributions that, in the aggregate, will likely exceed the amount of taxes that HLA would have paid if it were taxed on its net income at the assumed rate.

Because tax distributions are based on an assumed tax rate that is the highest possible rate applicable to any member, HLA is required to make tax distributions that, in the aggregate, will likely exceed the amount of taxes that HLA would have paid if it were taxed on its net income at the assumed rate.

The pro rata distribution amounts will also be increased if and to the extent necessary to ensure that the amount distributed to HLI is sufficient to enable HLI to pay its actual tax liabilities and its other expenses and costs (including amounts payable under the tax receivable agreement).

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Accordingly, we do not believe that either Hamilton Lane Incorporated or HLA is an “orthodox” investment company as defined in section 3(a)(1)(A) of the Investment Company Act and described in the first bullet point above.

does not have significant assets other than its equity interests in certain wholly owned subsidiaries, which in turn have no significant assets other than general partner interests in the specialized funds we sponsor.

HLA does not have significant assets other than its equity interests in certain wholly owned subsidiaries, which in turn have no significant assets other than general partner interests in the specialized funds we sponsor.

These wholly owned subsidiaries are the sole general partners of the funds and are vested with all management and control over the funds.

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If such an assignment occurs, we cannot be certain that HLA will be able to obtain the necessary consents from our funds and other clients, which could cause us to lose the management fees and performance fees we earn from such funds and other clients.

Because members of our senior management team hold most of their economic interest in HLA through other entities, conflicts of interest may arise between them and holders of shares of our Class A common stock or us.

Because members of our senior management team hold most of their economic interest in HLA directly through holding companies rather than through ownership of shares of our Class A common stock, they may have interests that do not align with, or conflict with, those of the holders of Class A common stock or with us.

For example, members of our senior management team have different tax

positions from Class A common stockholders, which could influence their decisions regarding whether and when to dispose of assets, whether and when to incur new or refinance existing indebtedness, and whether and when we should terminate the tax receivable agreement and accelerate the obligations thereunder.

Because most members of our senior management team hold most of their economic interest in HLA through other entities, conflicts of interest may arise between them and holders of shares of our Class A common stock or us.

Because most members of our senior management team hold most of their economic interest in HLA directly through holding companies and other vehicles rather than through ownership of shares of our Class A common stock, they may have interests that do not align with, or conflict with, those of the holders of Class A common stock or with us.

For example, members of our senior management team have different tax positions from Class A common stockholders, which could influence their decisions regarding whether and when to dispose of assets, whether and when to incur new or refinance existing indebtedness, and whether and when we should terminate the tax receivable agreement and accelerate the obligations thereunder.

In addition, the structuring of future transactions and investments may take into consideration the members’ tax considerations even where no similar benefit would accrue to us.

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Although we expect to continue to pay cash dividends to our stockholders, our board of directors may, in its discretion, increase or decrease the level of dividends or discontinue the payment of dividends entirely.

In addition, as a holding company, we are dependent upon the ability of HLA to

generate earnings and cash flows and distribute them to us so that we may pay our obligations and expenses (including our taxes and payments under the tax receivable agreement) and pay dividends to our stockholders.

In addition, as a holding company, we are dependent upon the ability of HLA to generate earnings and cash flows and distribute them to us so that we may pay our obligations and expenses (including our taxes and payments under the tax receivable agreement) and pay dividends to our stockholders.

We expect to cause HLA to make distributions to its members, including us.

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If, as a consequence of these various limitations and restrictions, we are unable to generate sufficient distributions from our business, we may not be able to make, or may be required to reduce or eliminate, the payment of dividends on our Class A common stock.

The market price of our Class A common stock may be volatile, which could cause the value of your investment to decline.

Securities markets worldwide experience significant price and volume fluctuations.

This market volatility, as well as general economic, market or political conditions, could reduce the market price of our Class A common stock in spite of our operating performance.

In addition, our operating results could be below the expectations of public market analysts and investors, and in response, the market price of our Class A common stock could decrease significantly.

In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation.

We may be the target of this type of litigation in the future.

Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could harm our business.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and may negatively affect the market price of our Class A common stock.

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These and other provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.

Also, the tax receivable agreement provides that, in the event of a change of control, we will be required to make a

payment equal to the present value of estimated future payments under the tax receivable agreement, which would result in a significant payment becoming due in the event of a change of control.

Also, the tax receivable agreement provides that, in the event of a change of control, we will be required to make a payment equal to the present value of estimated future payments under the tax receivable agreement, which would result in a significant payment becoming due in the event of a change of control.

In addition, we are a Delaware corporation and governed by the Delaware General Corporation Law (the “DGCL”).

Section 203 of the DGCL generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder, in particular those owning 15% or more of our outstanding voting stock, for a period of three years following the date on which the stockholder became an “interested” stockholder.

Section 203 of the DGCL generally prohibits a Delaware corporation from engaging in any of a broad

range of business combinations with any “interested” stockholder, in particular those owning 15% or more of our outstanding voting stock, for a period of three years following the date on which the stockholder became an “interested” stockholder.

While we have elected in our certificate of incorporation not to be subject to Section 203 of the DGCL, our certificate of incorporation contains provisions that have the same effect as Section 203 of the DGCL, except that they provide that HLAI, its affiliates, groups that include HLAI and certain of their direct and indirect transferees will not be deemed to be “interested stockholders,” regardless of the percentage of our voting stock owned by them, and accordingly will not be subject to such restrictions.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors