# Three Things Under the Surface of Private Markets: Hamilton Lane's CEO on Dispersion, Secondary Discounts, and the Unfinished Sentence

Source: Realpha Blog (blog.getrealpha.com)
Original article and charts: https://blog.getrealpha.com/en/blog/compound-2026-09-28-erik-hirsch-ceo-of-hamilton-lane-on-the-explosive-/

> Listening notes from the September 28, 2026 episode of The Compound and Friends with Hamilton Lane CEO Erik Hirsch: correlation with public equities, private credit default rates around 2%, and why a stake bought at 65 cents gets booked at a dollar. Educational and for thinking practice only — no investment advice, no individual stock views or price targets.

Published: 2026-09-29
Locale: en
Tags: private markets, private credit, secondaries, asset allocation, podcast-notes

TL;DR: Most of the argument about private markets comes from reporting lag and dispersion, not from the asset itself. Before you judge it, ask what month your price is from.


![A private banking corridor at night, one desk lamp over a stack of quarterly statements, the hallway receding into warm darkness](/covers/compound-2026-09-28-erik-hirsch-ceo-of-hamilton-lane-on-the-explosive--cover.png)

> Judging a man by his looks is worse than judging him by his mind; judging him by his mind is worse than judging him by the methods he chooses.
>
> — Xunzi, "Against Physiognomy" (Warring States period; my translation)

On September 28, 2026, Michael Batnick hosted Hamilton Lane CEO Erik Hirsch on Live from the Compound. The firm has gone from about $6 billion in assets under management in 2005 to roughly $146 billion, with more than a trillion once advisory assets are counted. Hirsch conceded the industry's most common criticisms on air: private equity is correlated with public equities, distributions are down, holding periods are up. What he argued the outside world misreads is the reporting lag and the enormous spread between the best and worst managers inside the same asset class. Everything numerical below is what he or Batnick said that day.

## Is private equity really uncorrelated with the stock market?

No. Hirsch said the claim drives him nuts, and the industry made it for years.

His mechanical explanation holds up. As a limited partner in a fund, your statements arrive at least a full quarter after the prior quarter end. So when you line up a private fund's quarterly numbers against public markets over the same window, the two series are already offset by one notch. That offset creates the appearance of something that moves differently from stocks, and once you strip it out, mathematically they are correlated. He went further: the asset class has been its own worst enemy, taking "private" to an extreme and producing spokespeople who were bad at explaining what they do.

![Two lines with identical peaks and dips, the lower one shifted right by one step, so the offset makes them look like different trends; pushed back into place, the two overlap exactly.](/figures/reporting-lag-shifts-the-line-en.svg)

Batnick's answer was the most honest stretch of the hour. He likes that these assets aren't marked daily — public markets regularly panic over things unrelated to the underlying businesses, and a layer of distance from that is fine — but "don't lie to me about it." Both statements can be true at once, and a decade of marketing blended them into one.

## Have the private credit "cockroaches" shown up?

Not as of the recording. Hirsch put default rates at roughly 2%, said bankruptcies aren't rising materially, and pointed at the large publicly traded private credit managers who have been vocal on earnings calls about portfolio quality — how much is still paying cash interest, how much has flipped to payment-in-kind. Not much has.

Worth pausing on the timeline: the cockroach talk started almost two years ago, and he says he's still looking. He didn't claim everything is clean — he can see private credit portfolios with questionable lending standards and thin diversification. His point is that across the books he reads, including his own, 99% is performing.

The origin story he told is more useful than the conclusion. Twenty years ago, if you and I wanted to expand a bagel business, we'd put on our best suits and walk into the regional bank where we kept the checking account and ask the guy we knew for a loan. Regional banks' ability and appetite to lend shrank dramatically, the companies' need for capital did not, and private credit stepped into that gap. Then 2022 hit: bonds were down 15%, floating-rate private credit paid 10% to 12%, the fuse was lit, and money poured in. Bob and Sally left the big shop to start their own; Tommy, whom they hired, left to start his. Hirsch added a parenthesis — a lot of these people have never operated through a down cycle. His forecast is that five years out we'll be looking at spectacular successes and genuine disasters side by side, and painting the category with one brush will be a mistake.

## Why would someone redeem a credit fund and subscribe to an equity fund the same week?

Because the person making the redemption decision and the person bearing the outcome aren't paid the same way.

The Bloomberg item read on air: Apollo's roughly $26 billion debt solutions BDC again capped withdrawals at 5% of outstanding shares after 14.7% of holders asked to get out, down from 16.8% the prior quarter. Batnick ran through the candidates for blame — sloppy underwriting as money flooded in, wholesalers who didn't educate advisors, the advisors, the end investors.

![Two tall bars show the share of redemption requests in two quarters, both far above a thin cap line below them, with the part above the line cut off and left outside the gate.](/figures/redemption-request-vs-gate-en.svg)

Hirsch said it's too early to assign fault, then laid out the advisor's position, and this is the part I recognized from my own behavior. An advisor who holds the line — tells the client to stay put — and turns out wrong gets fired. An advisor who hands the dollar back may look silly for the original recommendation but keeps the client, and depending on where the money goes next, might look like a hero. Same decision, wildly different personal cost, so redemptions moving before fundamentals isn't strange. He expects this to fade as data and experience accumulate; advisors already tell clients to sit still through public market panics.

The detail that stopped me was an aside: he watched advisors and investors line up to redeem out of a credit fund and then fill out subscription documents for an equity fund. Backwards, he said — if the debt is impaired, the equity in those same companies is worse. That one image explains how much of the current activity is information and how much is wanting to say "not me" at a cocktail party.

![A four-cell grid with the adviser's two choices down one axis and right or wrong across the other, each cell's cost shown as a bar, and only the "stayed in and was wrong" cell running all the way down.](/figures/advisor-payoff-asymmetry-en.svg)

Hamilton Lane launched a semi-liquid credit product in the eye of the headline hurricane, seeded by a pension fund. That CIO read the same headlines and the same data and went the other way. An institution owns its decisions and has no "give the money back and stay safe" exit, so its behavior looks different.

## A stake bought at 65 cents, booked at a dollar — can that be legitimate?

My first reaction was that it sounds fake. After Hirsch unpacked the two layers, I moved to "ugly but explicable."

Layer one is who sets the mark. The trades in question are purchases of a passive LP stake in a fund — the seller is a limited partner, not the general partner. Price is negotiated between LPs, valuation comes from the GP, and accounting rules require the buyer to carry it at the GP's mark. So if the GP marks it at a dollar and you buy at 65 cents, your books say a dollar. Why would the GP say a dollar while the LP takes 65? The LP may need cash rather than wait another decade, or may not believe the GP's valuation. Hirsch's other example is sharper: a pension CIO who doesn't need liquidity sells anyway, because the fund won't get a re-up and the team would rather not carry positions in a relationship that's ending.

![Two bars side by side, the left transaction price only two-thirds the height of the right booked value, with a note between them on who decides each: price is negotiated by buyer and seller, valuation is set by the fund manager.](/figures/bought-at-65-booked-at-100-en.svg)

Layer two is time. A deal priced in mid-September works off the March statement, because that's the last official quarterly record — so the terms read "92 cents on the March valuation." Closing takes months, and the position lands on the books in January against a September valuation. Two valuation updates sit between the price and the carrying basis, and the mark moves on its own.

On the discount itself: average today runs about 13%. When he did the firm's first secondary deal in 2000 as a young analyst building the model, the market was tiny and buyers were few, so discounts were deep. Today there are many buyers and brokers running competitive processes for sellers. That's what compressed alpha looks like. Set it against longer holding periods and lower distributions, and a low-teens gap between cash now and cash in ten years isn't outlandish. Batnick's takeaway was that the machinery is too complicated for an investor with a million dollars; Hirsch's answer was that it may be, and that the deficit is education. I can't argue with either sentence.

![A timeline with four points: a March valuation, a September price, a December valuation and a January booking, with two valuation updates falling between the pricing and the booking.](/figures/two-valuation-updates-in-between-en.svg)

## Their own stocks are cut in half — what is the public market seeing?

The numbers on air: about $175 million of incentive fees so far in fiscal 2026 against $54 million in 2022, with management fees, margins and earnings pointing the same direction. The stock is down nearly half. Hirsch said the company has been buying back shares and he has been buying personally, all publicly disclosed.

![On the left the performance fee grows from a short bar to a tall one; on the right the share price drops from a full bar to half, the two sides moving in opposite directions.](/figures/fees-up-price-halved-en.svg)

His response to the public market came in two parts. First, it swings to extremes — a single day where the world implodes and nothing happened to the underlying companies. Second, what he calls finishing the sentence: people say retail investors are leaving private markets, and that's half a sentence. After they leave, every dollar of savings goes back into an increasingly correlated public market concentrated in a handful of mega-cap AI names — or under the mattress. He extends it: the number of public companies isn't growing, plenty of companies don't want to list, nobody has to go public anymore, and in something like SpaceX the money was made by private holders at a few billion in valuation, not by public holders at a trillion.

I agree with the first half and hold back on the second. "Public markets aren't the whole answer" and "therefore these managers are correctly priced today" are two claims, and he skipped the step between them while having money on the outcome. He said himself that some of the press has been well founded. What I wrote down was the question itself: when you say something is bad, what's the alternative, and did you finish the sentence.

## So what can I actually do with this episode?

My guess is that most readers see a headline like this and think it has nothing to do with them. But the three things I took from the hour have nothing to do with private markets either.

First, ask what month the price is from. The private version is extreme — your number lags two quarters — and the same disease lives elsewhere: the monthly revenue you looked up is last month's, half the trailing earnings you're using came from last year's conditions, one side of your comparison has reported and the other hasn't. I've been caught by this, excited about a cheap multiple built on a stale denominator. Writing both data dates on the same line takes ten seconds.

Second, averages are useless where dispersion is wide. Hirsch said the spread between top and bottom managers hasn't narrowed in twenty years despite the flood of capital, and he explained why with a hotel: give a hundred people full control of the same hotel and some invest in the food, some renovate the rooms, and the outcomes diverge wildly — purchase price matters far less than what you do with the asset once you own it. Transplant that to stocks: two companies in one industry, bought at similar multiples, three times apart a few years later, and the difference sits with the management team's choices. So when you hear that a sector is going to rip or a category is finished, the subject of that sentence is a mean, and you own an individual.

![A row of widely scattered dots spread across a very broad range, with the average only a thin line through the middle and the highest and lowest dots sitting far away from it.](/figures/dispersion-average-tells-you-nothing-en.svg)

Third, look at how the person talking gets paid. The advisor's asymmetry was described plainly on air; the same lens works on sell-side research, on financial television, on the friend recommending a name — and on me. If I hand you an idea and I'm wrong, what does it cost me? An opinion with no downside gets a discount.

## Worth a look

- The Compound and Friends, Live from the Compound, September 28, 2026 — Michael Batnick with Erik Hirsch
- Hamilton Lane's public quarterly filings and investor materials (source of the AUM, incentive fee and semi-liquid flow figures quoted on air)
- PitchBook's global private markets closed-end fundraising data (the fundraising chart referenced)
- Bloomberg's reporting on the Apollo debt solutions BDC withdrawal cap (quoted that morning)

## One thing worth taking with you

Where dispersion is wide, the average can't make your decision. Twenty years, thousands of managers and a flood of capital did nothing to narrow the gap between best and worst. The hotel is the same hotel; the people running it aren't. So when the subject of a sentence is "this kind of thing," its predictive power over the one thing you hold is close to zero.

Here's something I've tried that has nothing to do with investing. Pick a judgment you recently formed from what everyone says — a field of study, whether a company is a good place to work, whether to have a procedure, whether a neighborhood suits you. Write the rumor down word for word, then find two people who actually lived it and ask how it ended, and write both answers under the rumor. I did this once, and the distance between the two answers made the rumor look like it was describing something else entirely.